<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 19, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CHILES OFFSHORE LLC
(Exact Name of Co-Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
DELAWARE 76-0547408
(State or Other Jurisdiction (I.R.S. Employer
of Identification No.)
Incorporation or Organization)
</TABLE>
<TABLE>
<S> <C> <C>
Reg. No. 333- -01 Reg. No. 333- -02 Reg. No. 333- -03
CHILES OFFSHORE FINANCE CORP. CHILES COLUMBUS LLC CHILES MAGELLAN LLC
(Exact Name of Co-Registrant as (Exact Name of Co-Registrant as (Exact Name of Co-Registrant as
Specified in its Charter) Specified in its Charter) Specified in its Charter)
DELAWARE DELAWARE DELAWARE
(State or other jurisdiction of (State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization) incorporation or organization)
76-0568691 76-0568690 76-0568689
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
1381
(Primary Standard Industrial
Classification Code Number)
</TABLE>
<TABLE>
<S> <C>
WILLIAM E. CHILES
11200 WESTHEIMER, SUITE 410 11200 WESTHEIMER, SUITE 410
HOUSTON, TEXAS 77042 HOUSTON, TEXAS 77042
(713) 339-3777 (713) 339-3777
(Address, including Zip Code, and Telephone Number, (Name, Address, including Zip Code, and Telephone Number,
including Area Code, of Co-Registrants' Principal Executive including Area Code, of Agent for Service)
Offices)
</TABLE>
COPY TO:
JAMES L. RICE III
WEIL, GOTSHAL & MANGES LLP
700 LOUISIANA, SUITE 1600
HOUSTON, TEXAS 77002
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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 same offering. / / __________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED UNIT(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
10% Senior Notes due 2008............. $110,000,000 100% $110,000,000 $32,450.00
Guarantees of 10% Senior Notes due
2008(2)............................. -- -- -- --
</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) The 10% Senior Notes due 2008 are guaranteed by Chiles Columbus LLC and
Chiles Magellan LLC. No separate consideration will be paid in respect of
the guarantees. Pursuant to Rule 457(n), no separate filing fee is required
for the guarantees.
------------------------------
THE CO-REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE CO-REGISTRANTS
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 19, 1998
PRELIMINARY PROSPECTUS
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION AND AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
OFFER FOR ALL OUTSTANDING
10% SENIOR NOTES DUE 2008
IN EXCHANGE FOR
[LOGO]
10% SENIOR NOTES DUE 2008
OF
CHILES OFFSHORE LLC
CHILES OFFSHORE FINANCE CORP.
---------------
Chiles Offshore LLC, a Delaware limited liability company (the "Company"),
and Chiles Offshore Finance Corp., a special purpose Delaware corporation and a
wholly owned subsidiary of the Company ("Finance" and, together with the
Company, the "Issuers") and the Guarantors (as hereinafter defined) hereby
offer, upon the terms and subject to the conditions set forth in this Prospectus
and the accompanying Letter of Transmittal (which together constitute the
"Exchange Offer"), to exchange $1,000 principal amount of registered 10% Senior
Notes Due 2008 (the "New Notes") issued by the Issuers, for each $1,000
principal amount of unregistered 10% Senior Notes Due 2008 (the "Old Notes")
issued by the Issuers of which an aggregate principal amount of $110,000,000 is
outstanding. The form and terms of the New Notes are identical to the form and
terms of the Old Notes except that the New Notes are being registered under the
Securities Act of 1933, as amended (the "Securities Act"), and will not bear any
legends restricting their transfer. The New Notes will evidence the same debt as
the Old Notes and will be issued pursuant to, and entitled to the benefits of,
the indenture governing the Old Notes. Interest on the New Notes shall accrue
from the date of issuance of the Old Notes. The Exchange Offer is being made in
order to satisfy certain contractual obligations of the Issuers. See "The
Exchange Offer" and "Description of New Notes." The New Notes and the Old Notes
are sometimes collectively referred to herein as the "Notes."
Interest on the New Notes will be payable semi-annually on May 1 and
November 1 of each year, commencing November 1, 1998. The Company will not be
required to make any sinking fund payment with respect to the New Notes. The New
Notes will not be redeemable at the option of the Issuers prior to May 1, 2003,
except that until May 1, 2001, the Issuers may redeem, at their option, in the
aggregate up to 35% of the original principal amount of the Notes, on a pro rata
basis, at the redemption price set forth herein with the net proceeds of one or
more Public Equity Offerings (as defined) if at least $71.5 million aggregate
principal amount of the Notes remains outstanding after each such redemption. On
and after May 1, 2003, the Notes may be redeemed at the option of the Issuers,
in whole or in part, at the redemption prices set forth herein, plus accrued and
unpaid interest to the date of redemption. See "Description of New
Notes--Optional Redemption."
The net proceeds to the Issuers from the sale of the Old Notes (the
"Original Offering") were placed in escrow to be used to (a) partially fund the
construction of two premium jackup offshore drilling rigs (the "Rigs"), (b) pay
interest on the Notes through the first two semi-annual interest payment dates
(see "Description of New Notes--Escrow of Proceeds") and (c) provide working
capital. One of the Rigs will be wholly owned and operated by Chiles Columbus
LLC and the other by Chiles Magellan LLC, each a Delaware limited liability
company and a wholly owned subsidiary of the Company (each, an "Owner" and,
collectively, the "Owners").
In the event that a Construction Contract (as defined) with respect to a Rig
is terminated prior to delivery of such Rig, or in certain circumstances,
following an Event of Loss (as defined), after delivery of a Rig, each Holder
(as defined) shall have the right to require the Issuers to purchase the
Allocated Principal Amount (as defined) of such Holder's Notes for such Rig at a
purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest to the date of purchase. See "Description of New Notes--Right to
Require Repurchase Upon Contract Termination." Upon a Change of Control (as
defined), each Holder shall have the right to require the Issuers to purchase
such Holder's Notes, in whole or in part, at a purchase price equal to 101% of
the principal amount thereof, plus accrued and unpaid interest to the date of
purchase. See "Description of New Notes--Change of Control."
The New Notes will be senior obligations of the Issuers, will rank PARI
PASSU with all existing and future senior indebtedness of the Issuers and will
be senior in right of payment to all future subordinated indebtedness. Except as
described herein with respect to the Collateral under the Escrow Security
Agreement (each as defined), the New Notes will be unsecured, and effectively
subordinated to the claims of secured creditors to the extent of the collateral
securing such claims. Concurrently with, and as a condition to, the closing of
the Original Offering, the Company entered into a $25.0 million bank credit
agreement (the "Bank Facility"), which is secured by substantially all the
assets of the Company and its subsidiaries, including the Rigs, other than the
Collateral under the Escrow Security Agreement. See "Description of New
Notes--Ranking" and "Description of Bank Facility." Payment of the principal of,
premium, if any, and interest on the New Notes will be guaranteed, jointly and
severally, on an unsecured basis by the Company's Restricted Subsidiaries (as
defined), which includes the Owners, both of which have also guaranteed, jointly
and severally, the Bank Facility on a secured basis. The guarantees of the
Company's Restricted Subsidiaries will be irrevocable and unconditional, but
limited in amount to the extent required by laws relating to fraudulent transfer
or similar laws. See "Risk Factors--Effective Subordination of the Notes;
Dependence on Subsidiaries" and "Description of New Notes--
Guarantees." (CONTINUED ON NEXT PAGE)
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN
INFORMATION THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE
NEW NOTES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1998.
<PAGE>
(CONTINUED FROM FRONT COVER)
The Company is a recently formed entity with no significant prior operating
history. Finance was formed to consummate the Original Offering as a co-issuer
of the Notes, and will conduct no other business. Certain institutional
investors that might otherwise be limited in their ability to invest in
securities issued by limited liability companies, by reason of the legal
investment laws of their states of incorporation or their charter documents, may
be able to invest in the Notes because Finance is a co-obligor. Certain of the
Company's subsidiaries (the "Guarantors") will guarantee, jointly and severally
on an unsecured basis, the New Notes (collectively, the "Subsidiary
Guarantees"). The Company and the Guarantors will accept for exchange any and
all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on , 1998, unless extended (as so extended, the "Expiration
Date"). Tenders of Old Notes may be withdrawn at any time prior to the
Expiration Date. The Exchange Offer is subject to certain customary conditions.
See "The Exchange Offer."
In order for a holder of Old Notes to participate in the Exchange Offer,
such holder must represent to the Issuers that, among other things, (i) the New
Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving New Notes, whether or not such person
is the holder of the Old Notes, (ii) neither the holder nor any such other
person is engaging in or intends to engage in a distribution of such New Notes,
(iii) neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such New
Notes and (iv) neither the holder nor any such other person is an "affiliate,"
as defined under Rule 405 promulgated under the Securities Act, of either of the
Issuers. See "The Exchange Offer--Purpose and Effect."
Each broker-dealer that receives New 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 New Notes. The letter of transmittal
accompanying this Prospectus (the "Letter of Transmittal") states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities. The Issuers
have agreed that, for a period of 180 days after the Expiration Date (as defined
herein), they will make this Prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of Distribution."
No public market has existed for the Old Notes before the Exchange Offer.
The Company and the Guarantors currently do not intend to list the New Notes on
any securities exchange or to seek approval for quotation through any automated
quotation system, and no active public market for the New Notes is currently
anticipated. The Issuers and the Guarantors will pay all the expenses incident
to the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange pursuant to the Exchange Offer.
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
OTHER UNCERTAINTIES. WHEN INCLUDED IN THIS PROSPECTUS, THE WORDS "EXPECTS,"
"INTENDS," "ANTICIPATES," "ESTIMATES" AND ANALOGOUS EXPRESSIONS ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS INHERENTLY ARE SUBJECT TO A
VARIETY OF RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE PROJECTED. SUCH RISKS AND UNCERTAINTIES INCLUDE, AMONG
OTHERS, GENERAL ECONOMIC AND BUSINESS CONDITIONS, INDUSTRY FLEET CAPACITY,
CHANGES IN FOREIGN AND DOMESTIC OIL AND GAS EXPLORATION AND PRODUCTION ACTIVITY,
COMPETITION, CHANGES IN FOREIGN POLITICAL, SOCIAL AND ECONOMIC CONDITIONS,
REGULATORY INITIATIVES AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS, CUSTOMER
PREFERENCES AND VARIOUS OTHER MATTERS, INCLUDING FACTORS SET FORTH UNDER "RISK
FACTORS," "CERTAIN FINANCIAL FORECAST INFORMATION" AND "BUSINESS," MANY OF WHICH
ARE BEYOND THE COMPANY'S CONTROL. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS
OF THE DATE OF THIS PROSPECTUS. THE COMPANY EXPRESSLY DISCLAIMS ANY OBLIGATION
OR UNDERTAKING TO RELEASE PUBLICLY ANY UPDATES OR REVISIONS TO ANY
FORWARD-LOOKING STATEMENT OR FINANCIAL FORECAST CONTAINED HEREIN TO REFLECT ANY
CHANGE IN THE COMPANY'S EXPECTATIONS WITH REGARD THERETO OR ANY CHANGE IN
EVENTS, CONDITIONS OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT OR FORECAST IS
BASED.
THE INFORMATION SET FORTH UNDER "CERTAIN FINANCIAL FORECAST INFORMATION" WAS
PREPARED BY THE COMPANY SOLELY FOR USE IN CONNECTION WITH THE PRIVATE PLACEMENT
OF THE OLD NOTES AND NOT FOR PUBLICATION OR WITH A VIEW TO COMPLYING WITH THE
PUBLISHED GUIDELINES OF THE COMMISSION (AS DEFINED) REGARDING PROJECTIONS OR
WITH THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANTS AND IS INCLUDED IN THIS PROSPECTUS ONLY BECAUSE IT WAS FURNISHED TO
PURCHASERS OF OLD NOTES. THE INCLUSION OF THIS INFORMATION SHOULD NOT BE
REGARDED AS AN INDICATION THAT THE COMPANY OR ANYONE WHO RECEIVED THIS
INFORMATION CONSIDERED IT A RELIABLE PREDICTOR OF FUTURE EVENTS, AND THIS
INFORMATION SHOULD NOT BE RELIED ON AS SUCH. THIS INFORMATION HAS NOT BEEN
UPDATED SUBSEQUENT TO CONSUMMATION OF THE ORIGINAL OFFERING AND WILL NOT BE
UPDATED IN THIS PROSPECTUS, IN ANY SUPPLEMENT OR AMENDMENT HERETO OR OTHERWISE
IN ANY MANNER.
ii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND THE
NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED, EACH REFERENCE TO THE "COMPANY" MEANS CHILES OFFSHORE LLC, A DELAWARE
LIMITED LIABILITY COMPANY ("CHILES"), OR CHILES TOGETHER WITH ITS SUBSIDIARIES
CHILES OFFSHORE FINANCE CORP. ("FINANCE"), A SPECIAL PURPOSE DELAWARE
CORPORATION AND A WHOLLY OWNED SUBSIDIARY OF CHILES, AND CHILES COLUMBUS LLC AND
CHILES MAGELLAN LLC (EACH AN "OWNER" AND, COLLECTIVELY, THE "OWNERS"), EACH A
DELAWARE LIMITED LIABILITY COMPANY AND A WHOLLY OWNED SUBSIDIARY OF CHILES, AS
THE CONTEXT REQUIRES. DATA RELATING TO INDUSTRY FLEET UTILIZATION LEVELS,
AVERAGE DAYRATES AND OTHER INDUSTRY FLEET STATISTICS CONTAINED HEREIN, UNLESS
OTHERWISE INDICATED, ARE DERIVED FROM INFORMATION PROVIDED BY OFFSHORE DATA
SERVICES.
THE COMPANY
The Company was formed in 1997 for the purpose of constructing, owning and
operating a fleet of state-of-the-art premium jackup offshore drilling rigs. In
1997, the Company commenced construction of the first two such rigs at the
AMFELS, Inc. ("AMFELS") shipyard in Brownsville, Texas under fixed-price
contracts. The first rig, the CHILES COLUMBUS, is a LeTourneau Enhanced 116-C
design, and the second, the CHILES MAGELLAN, is a LeTourneau Super 116 design
(together, the "Rigs"). The Company expects that it will pay, net of capitalized
interest, $83.5 million and $87.8 million, respectively, in total construction
and outfitting costs for the Rigs. The Company and AMFELS have scheduled the
Rigs for delivery in April and September 1999, respectively.
SEACOR SMIT Inc. ("SEACOR"), operator of the second largest fleet of
offshore service vessels in the world, has invested $35.0 million for
approximately 55.4% of the outstanding equity interests in the Company. SEACOR
is a Delaware corporation whose common stock is listed for trading on the New
York Stock Exchange under the symbol "CKH." The remaining equity interests in
the Company are held by private investors, including the original founders and
senior management.
The Company's management team has extensive experience in the offshore
contract drilling industry. William E. Chiles, the President and CEO of the
Company, has over 25 years of experience in the industry. During his career, Mr.
Chiles founded or co-founded three offshore contract drilling companies and
supervised the construction of four jackup rigs at the Brownsville, Texas
shipyard facility where the Rigs are being constructed. The Company's operating
and engineering personnel have substantial experience operating, marketing,
building, refurbishing and upgrading premium jackup rigs, including the
LeTourneau 116-C design.
THE RIGS
Jackup rigs are the largest category of mobile offshore drilling units,
representing approximately 60% of such units. Oil and gas exploration companies
use jackup rigs extensively for offshore drilling in water depths from 20 feet
to 350 feet. Jackup rigs are mobile, self-elevating drilling platforms equipped
with legs that are lowered to the ocean floor until a foundation is established
to support the drilling platform. A jackup rig consists of the hull, jacking
system, drilling equipment, crew quarters, loading and unloading facilities,
storage areas, heliport and other related equipment. A jackup rig is towed to
the drillsite with its hull riding in the sea and its legs retracted. At the
drillsite, the legs are jacked down to the ocean floor until the hull has been
elevated a sufficient distance above the water to allow storm waves to pass
beneath. Jackup rigs vary a great deal in size and capability. Premium jackup
drilling rigs are distinguished by their technological features, which generally
allow for increased productivity, flexibility and safety of operation. Most
premium jackup rigs have a drillstring cantilevering feature that enables the
drilling of multiple exploratory or development wells from the same location
over an existing fixed production platform. The Company defines premium jackup
rigs as cantilevered jackup rigs capable of operating in water depths of 300
feet or greater, excluding (due to their substantially higher construction cost)
the class of jackup rigs built for service in "harsh environments," such as the
North Sea and Eastern Canada.
1
<PAGE>
The Rigs will be state-of-the-art premium jackup drilling rigs capable of
operating at a water depth of 360 feet. Both Rigs incorporate the LeTourneau
Super 116's hull design and enhanced design features together with a
technologically advanced equipment package, which the Company believes provide
greater versatility and production efficiency compared to other rigs of similar
class. Each of the Rigs will feature 70-foot cantilevering capability, the
maximum reach currently available in the premium jackup rig market. The Rigs
will have capabilities that substantially exceed those of typical existing
premium jackup rigs, including increased engine horsepower, increased hydraulic
horsepower and enlarged mud handling and solids control systems. The Rigs will
also incorporate such features as digital drilling controls, dual pipe handling,
pipe handling robotics and drillpipe identification and tracking systems. The
Company expects that the Rigs will differentiate themselves in particular by
their increased productivity, mainly resulting from their superior engine and
hydraulic horsepower.
The Company expects to operate the Rigs initially in the Gulf of Mexico, but
with certain modifications, the Rigs are capable of operating in essentially all
markets for jackup rigs, except for "harsh environment" drilling areas. Other
non-"harsh environment" markets include West Africa, Southeast Asia, Latin
America, the Middle East/Persian Gulf and the southern sector of the North Sea.
The Company believes that the superior operating performance of the Rigs will
enable it to enter into attractive drilling contracts with high quality
customers at the appropriate time.
MARKET OVERVIEW
The world's jackup rig fleet currently consists of 380 rigs, which vary
significantly in terms of technological advancement, water depth capability and
age. A total of 117 are premium jackup rigs and as of March 1998, 29 such rigs
were employed in the Gulf of Mexico, the largest single market for jackup rigs.
The current average age of the world's jackup rig fleet is 17.5 years with
premium jackup rigs having an average age of 16.4 years, which compares to an
expected original useful life for such units of approximately 25 years. In
addition to the Company's Rigs, seven other jackup rig newbuildings are on order
with shipyards around the world (collectively representing 2.4% of the existing
fleet), of which six are jackup rigs designed for work in "harsh environment"
areas.
Based on published industry data, the Company estimates that as of March 31,
1998, the average dayrate for premium jackup rigs worldwide was $73,000 and that
it averaged $62,000 in 1997 and $39,000 in 1996. (1997 and 1996 dayrate data
include a small number of "harsh environment" jackup rigs, which increases
slightly the average historical dayrate information for premium jackup rigs.)
Based on published industry data, the Company estimates that premium jackup rig
utilization levels have averaged 93% over the last ten years and that as of
March 31, 1998, average utilization exceeded 96%. Major factors underlying these
improvements include an increase in demand due to greater offshore exploration
and development expenditures by the world's oil and gas companies, and a
reduction in rig supply, due to the advancing age of the existing fleet and the
small number of newbuildings. Growth in offshore expenditures by oil and gas
companies has been due in part to substantial technological advances in
exploration and production (including 3-D seismic, horizontal drilling and
subsea completion procedures), which have reduced the overall cost of finding
and producing oil and gas. In addition, the offshore drilling industry has
experienced a worldwide consolidation during the last ten years which has
substantially reduced the number of drilling contractors.
BUSINESS STRATEGY
The Company intends to become a leading provider of state-of-the-art premium
jackup rigs and to maximize dayrates and rig utilization by offering its
customers the most productive premium jackup rigs available. The Company will
focus on establishing a reputation for customer service, higher productivity and
safety of operation in the offshore contract drilling market. The key elements
of the Company's strategy are as follows:
- FOCUS ON PREMIUM JACKUP RIG MARKET. The Company will focus on premium
jackup rigs, which the Company believes enjoy strong and growing worldwide
demand, have the versatility to work in a
2
<PAGE>
variety of different markets, represent a relatively low investment
compared to new semisubmersibles, drillships and "harsh environment"
jackup rigs, possess a favorable relationship between potential revenues
and operating costs, and are familiar to the management of the Company
through prior operations and newbuildings.
- OWN AND OPERATE HIGH QUALITY ASSETS. The Rigs will represent a new
generation of premium jackup rigs with significantly enhanced capabilities
incorporating the latest technologies. Such capabilities will assist the
Company in offering its customers equipment with superior productivity and
safety features.
- BUILD TO MEET STRONG DEMAND GROWTH. The Company intends to be among the
first offshore drilling contractors to provide new generation premium
jackup rigs to the industry. The Company believes that this is the early
stage of a period of strong growth in the demand for, and utilization of,
premium jackup rigs. The Company believes that it has been able to secure
favorable contract terms by placing orders during this early stage, at a
time when relatively few new premium jackup rigs are being built.
- EXPAND RIG FLEET. The Company expects to expand its rig fleet prudently
over time. The Company may achieve this growth through the exercise of
three sequential options (the "Construction Options") that the Company
holds to construct additional LeTourneau Super 116 design premium jackup
rigs at a total delivered cost of approximately $100.0 million per rig.
- FOCUS ON THE GULF OF MEXICO. The Company will focus its operations
initially on the Gulf of Mexico market, which is the largest single market
for jackup rigs in the world. Furthermore, the presence of an established
pipeline and production infrastructure makes the Gulf of Mexico an
economically attractive market for continued exploration and production
activity.
- UTILIZE SEACOR EXPERTISE. SEACOR will directly advise the Company
concerning strategic, financial and marketing matters through
representation on the Company's Management Committee (I.E., its board of
directors). Additionally, pursuant to the Services Agreement (as defined),
SEACOR has made available its Vice President, Finance to serve as the
Company's Senior Vice President and Chief Financial Officer. The Company
believes that SEACOR's marketing expertise and its extensive oil and gas
company client base will greatly assist the Company in the marketing of
the Rigs.
- EMPLOY, RETAIN AND MOTIVATE EXPERIENCED AND INCENTIVIZED MANAGEMENT. The
Company will seek to employ, retain and motivate experienced senior
management and key employees through the implementation of an equity
participation and performance incentive program.
THE FINANCING
The Company intends to finance construction of the Rigs and the start-up
phase of its operations through aggregate capital contributions of $63.9 million
(of which $55.4 million has been received in cash) from SEACOR, the original
founders and other equity investors (the "Equity Financing"), $110.0 million in
gross proceeds from the Original Offering and borrowings under its $25.0 million
Bank Facility. The Company consummated the final phase of the Equity Financing
on December 16, 1997 and the Original Offering on April 29, 1998, the date of
original issuance of the Notes (the "Issue Date"). As of March 31, 1998, a total
of approximately $36.6 million of the cash proceeds of the Equity Financing had
been spent on construction of the Rigs, offering costs associated with the
Equity Financing and supporting activities and at such date the Company had
approximately $18.8 million cash on hand. The Company anticipates that less than
half of the Bank Facility will be drawn at the time the second Rig is scheduled
to be delivered, and therefore the undrawn portion thereof would be available
for debt service and other general corporate purposes.
3
<PAGE>
The sources and uses of funds on the Issue Date, were as follows, assuming
an Issue Date of March 31, 1998:
<TABLE>
<CAPTION>
AMOUNTS
(IN MILLIONS)
-------------
<S> <C>
SOURCES OF FUNDS:
Bank Facility(1)................................................................. $ 0.0
Notes Offering................................................................... 110.0
Equity Financing (available balance)(2).......................................... 18.8
------
Total.......................................................................... $ 128.8
------
------
USES OF FUNDS:
Deposit to Escrow Accounts
Pre-Funded Rig Construction Costs.............................................. $ 95.2
Pre-Funded Capitalized Interest................................................ 11.1
Notes Issuance Costs............................................................. 3.7
Bank Facility Fees and Expenses.................................................. 0.2
Available Cash................................................................... 18.6
------
Total............................................................................ $ 128.8
------
------
</TABLE>
- ------------------------
(1) The Bank Facility provides a $25.0 million revolving credit commitment,
which is not permitted to be drawn until delivery of the first of the two
Rigs.
(2) Represents the balance of the $55.4 million cash component of the Equity
Financing as of March 31, 1998.
THE CONSTRUCTION PROJECTS
The scheduled delivery dates (each, a "Scheduled Delivery Date") of the Rigs
will be April 30, 1999 for the CHILES COLUMBUS and September 10, 1999 for the
CHILES MAGELLAN. The Company expects the total construction cost of the CHILES
COLUMBUS to be approximately $83.5 million and the total construction cost of
the CHILES MAGELLAN to be approximately $87.8 million, in each case net of
capitalized interest. The major components of the construction costs are the
fixed contract prices payable to AMFELS pursuant to the respective Platform
Construction Agreement (the "Construction Contract") for each Rig, the cost of
owner furnished equipment ("OFE"), which includes the major components of the
drilling and power system (including engines, generators, draw works and top
drives), and the Company's internal expenditures during the construction period.
The Company currently has contracted for over 95% of the total cost of OFE on a
fixed-price basis. The total amount of these expenditures is summarized in the
following table:
<TABLE>
<CAPTION>
CHILES CHILES
COLUMBUS MAGELLAN TOTAL
----------- --------- ----------
<S> <C> <C> <C>
(IN THOUSANDS)
Construction Contracts(1)...................................................... $ 61,032 $ 64,684 $ 125,716
OFE(2)......................................................................... 17,189 17,189 34,378
Internal Expenditures(3)....................................................... 5,259 5,957 11,216
----------- --------- ----------
Total...................................................................... $ 83,480 $ 87,830 $ 171,310
</TABLE>
- ------------------------
(1) The Construction Contracts are fixed-price contracts.
(2) The Company currently has contracted for over 95% of the total cost of OFE
on a fixed-price basis.
(3) Internal expenditures are costs associated with Company personnel overseeing
construction which are capitalized and general and administrative costs
which are expensed.
The AMFELS shipyard, originally built and operated by Marathon LeTourneau,
Inc., has a long-term commitment to the offshore drilling industry and many of
the key personnel who designed and built LeTourneau jackup rigs in the past are
currently working there. The shipyard's newbuilding construction
4
<PAGE>
experience includes 24 jackup rigs and two semisubmersibles. AMFELS is 100%
owned by Keppel FELS, Ltd., an established international shipyard and
engineering group based in Singapore. To mitigate the risk of a delay in
construction, the Company has procured standard "delay-in-delivery" insurance
that provides for coverage of $30,000 per day per Rig up to a maximum of 360
days for certain delays in excess of 30 days up to a total combined limit of
$21.6 million for both Rigs.
THE EXCHANGE OFFER
The Exchange Offer applies to $110.0 million aggregate principal amount of
the Old Notes. The form and terms of the New Notes are the same as the form and
terms of the Old Notes except that the New Notes are being registered under the
Securities Act and, therefore, will not bear legends restricting their transfer.
The New Notes will evidence the same debt as the Old Notes and will be entitled
to the benefits of the Indenture pursuant to which the Old Notes were issued.
Interest on the New Notes shall accrue from the date of issuance of the Old
Notes. The Old Notes and the New Notes are sometimes referred to collectively
herein as the "Notes." See "Description of New Notes" and "The Exchange Offer."
<TABLE>
<S> <C>
The Exchange Offer................ $1,000 principal amount of New Notes in exchange for
each $1,000 principal amount of Old Notes. As of the
date hereof, Old Notes representing $110.0 million
aggregate principal amount are outstanding. The terms of
the New Notes and the Old Notes are substantially
identical.
Based on an interpretation by the Commission's staff set
forth in no-action letters issued to third parties
unrelated to the Issuers and the Guarantors, the Issuers
and the Guarantors believe that New Notes issued
pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise
transferred by any person receiving the New Notes,
whether or not that person is the Holder (other than any
such holder or such other person that is an "affiliate"
of either of the Issuers or either of the Guarantors
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 (i) the New Notes are acquired in the
ordinary course of business of that Holder or such other
person, (ii) neither the Holder nor such other person is
engaging in or intends to engage in a distribution of
the New Notes and (iii) neither the Holder nor such
other person has an arrangement or understanding with
any person to participate in the distribution of the New
Notes. See "The Exchange Offer--Purpose and Effect."
Each broker-dealer that receives New Notes for its own
account in exchange for Old Notes, where those Old Notes
were acquired by the broker-dealer as a result of its
market-making activities or other trading activities,
must acknowledge that it will deliver a prospectus in
connection with any resale of these New Notes. See "The
Exchange Offer--Purpose and Effect" and "--Procedures
for Tenders," and "Plan of Distribution."
Registration Rights Agreement..... The Old Notes were sold by the Issuers on April 29, 1998
in a private placement. In connection with the sale, the
Issuers entered into a Registration Rights Agreement
with the purchasers (the "Registration Rights
Agreement") providing for
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
the Exchange Offer. See "The Exchange Offer--Purpose and
Effect."
Expiration Date................... The Exchange Offer will expire at 5:00 p.m., New York
City time, , 1998, or such later date and
time to which it is extended.
Withdrawal........................ The tender of Old Notes pursuant to the Exchange Offer
may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date. Any Old Notes
not accepted for exchange for any reason will be
returned without expense to the tendering Holder thereof
as promptly as practicable after the expiration or
termination of the Exchange Offer.
Interest on the New Notes and
Old Notes....................... Interest on the New Notes will accrue from the Issue
Date, which is April 29, 1998.
Conditions to the Exchange The Exchange Offer is subject to certain customary
Offer........................... conditions, certain of which may be waived by the
Company. See "The Exchange Offer--Certain Conditions to
Exchange Offer."
Procedures for Tendering Old Each Holder of Old Notes wishing to accept the Exchange
Notes........................... Offer must complete, sign and date the Letter of
Transmittal, or a copy thereof, in accordance with the
instructions contained herein and therein, and mail or
otherwise deliver the Letter of Transmittal, or the
copy, together with the Old Notes and any other required
documentation, to the Exchange Agent at the address set
forth in the Letter of Transmittal. Persons holding Old
Notes through The Depository Trust Company ("DTC") and
wishing to accept the Exchange Offer must do so pursuant
to DTC's Automated Tender Offer Program, by which each
tendering Participant will agree to be bound by the
Letter of Transmittal. By executing or agreeing to be
bound by the Letter of Transmittal, each Holder will
represent to the Company that, among other things, (i)
the New Notes acquired pursuant to the Exchange Offer
are being obtained in the ordinary course of business of
the person receiving such New Notes, whether or not such
person is the Holder of the Old Notes, (ii) neither the
Holder nor any such other person is engaging in or
intends to engage in a distribution of such New Notes,
(iii) neither the Holder nor any such other person has
an arrangement or understanding with any person to
participate in the distribution of such New Notes and
(iv) neither the Holder nor any such other person is an
"affiliate," as defined under Rule 405 promulgated under
the Securities Act, of either of the Issuers or either
of the Guarantors. Pursuant to the Registration Rights
Agreement, the Issuers and the Guarantors are required
to file a "shelf" registration statement for a
continuous offering pursuant to Rule 415 under the
Securities Act in respect of the Old Notes (and use
their reasonable best efforts to cause such shelf
registration statement to be declared effective by the
Commission and keep it continuously effective,
supplemented and amended for prescribed periods) if (i)
because of any
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
change in law or in applicable interpretations of the
staff of the Commission, the Issuers are not permitted
to effect the Exchange Offer, or (ii) if for any other
reason the Exchange Offer is not consummated within 150
days of date of the Original Offering, or (iii) if
Credit Suisse First Boston Corporation or Wasserstein
Perella Securities, Inc., the initial purchasers in the
Original Offering (the "Initial Purchasers"), so
requests with respect to Old Notes not eligible to be
exchanged for New Notes in the Exchange Offer, and held
by it following consummation of the Exchange Offer or
(iv) if any Holder of Old Notes (other than a
broker-dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes
were acquired by such broker-dealer as a result of
market-making or other trading activities (a
"Participating Dealer") is not eligible to participate
in the Exchange Offer or any such Holder (other than a
Participating Dealer) does not receive freely tradeable
New Notes in the Exchange Offer.
Acceptance of Old Notes and
Delivery of New Notes........... The Company will accept for exchange any and all Old
Notes that are properly tendered in the Exchange Offer
prior to 5:00 p.m., New York City time, on the
Expiration Date. The New Notes issued pursuant to the
Exchange Offer will be delivered promptly following the
Expiration Date. See "The Exchange Offer--Terms of the
Exchange Offer."
Exchange Agent.................... U.S. Bank Trust National Association is serving as
Exchange Agent in connection with the Exchange Offer.
Federal Income Tax The exchange pursuant to the Exchange Offer should not
Considerations.................. be a taxable event for federal income tax purposes. See
"Certain Federal Income Tax Considerations."
Effect of Not Tendering........... Old Notes that are not tendered or that are tendered but
not accepted will, following the completion of the
Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof. Except as described
in "The Exchange Offer-- Procedures for Tenders," the
Issuers will have no further obligation to provide for
the registration under the Securities Act of such Old
Notes.
</TABLE>
7
<PAGE>
TERMS OF NEW NOTES
CERTAIN CAPITALIZED TERMS USED IN THIS PROSPECTUS WITH RESPECT TO THE NOTES,
AND NOT OTHERWISE DEFINED HEREIN, HAVE THE MEANINGS SET FORTH UNDER "DESCRIPTION
OF NEW NOTES--CERTAIN DEFINITIONS."
<TABLE>
<S> <C>
Issuers...................... Chiles Offshore LLC and Chiles Offshore Finance Corp.
Securities Offered........... $110.0 million principal amount of 10% Senior Notes Due
2008.
Maturity Date................ May 1, 2008.
Interest Payment Dates....... May 1 and November 1, commencing November 1, 1998.
Use of Proceeds; Escrow...... Concurrently with the closing of the Original Offering, the
Issuers deposited the net proceeds of the Original Offering
with the Escrow Agent. Such funds will be used to pay
interest on the Notes through the first two semi-annual
interest payment dates, pay a portion of the construction
costs of the Rigs and provide working capital. See
"Description of New Notes--Escrow of Proceeds."
Optional Redemption.......... The New Notes are not redeemable at the option of the
Issuers prior to May 1, 2003, except that until May 1, 2001,
the Issuers may redeem, at their option, in the aggregate up
to 35% of the original principal amount of the New Notes, on
a pro rata basis, at the redemption price set forth herein
with the net proceeds of one or more Public Equity Offerings
if at least $71.5 million aggregate principal amount of the
New Notes remains outstanding after each such redemption. On
and after May 1, 2003, the Notes may be redeemed at the
option of the Issuers, in whole or in part, at the
redemption prices set forth herein, plus accrued and unpaid
interest to the date of redemption. See "Description of New
Notes--Optional Redemption."
Right to Require Repurchase
Upon Contract In the event that a Construction Contract is terminated
Termination................ prior to delivery of the Rig, each Holder will have the
right to require the Issuers to purchase the Allocated
Principal Amount of such Holder's New Notes for such Rig at
a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest to the date of
purchase. See "Description of New Notes--Right to Require
Repurchase Upon Contract Termination."
Event of Loss of a Rig....... Upon the occurrence of an Event of Loss of a Rig after the
delivery of such Rig, the Issuers will be required to apply
the insurance and other proceeds either to repay
indebtedness outstanding under the Bank Facility or other
secured debt (and permanently reduce the commitments
thereunder) or to acquire a Qualified Substitute Rig (as
defined), and to apply the balance to purchase the Allocated
Principal Amount of Notes tendered by Holders at a purchase
price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest to the date of purchase. See
"Description of New
Notes--Certain Covenants."
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Change of Control............ Upon a Change of Control, each Holder will have the right to
require the Issuers to purchase such Holder's Notes, in
whole or in part, at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest
to the date of purchase. See "Description of New
Notes--Change of Control."
Ranking...................... The New Notes will be senior obligations of the Issuers,
will rank PARI PASSU with all existing and future senior
indebtedness of the Issuers and will be senior in right of
payment to all future subordinated indebtedness. Except as
described herein with respect to the Escrowed Property, the
New Notes will be unsecured, and effectively subordinated to
the claims of secured creditors to the extent of the
collateral securing such claims. The Bank Facility is
secured by substantially all the assets of the Company and
its subsidiaries, including the Rigs, other than the
Escrowed Property. See "Description of New Notes--Ranking."
Guarantees................... Payment of the principal of, premium, if any, and interest
on the New Notes will be guaranteed, jointly and severally,
on an unsecured basis, by the Company's Restricted
Subsidiaries (as defined), which includes the Owners, which
have also guaranteed, jointly and severally, the Bank
Facility on a secured basis. The guarantees of the Company's
Restricted Subsidiaries will be irrevocable and
unconditional, but limited in amount to the extent required
by laws relating to fraudulent transfer or similar laws. See
"Description of New Notes--Subsidiary Guarantees."
Security..................... The New Notes will initially be secured by the Escrow
Accounts and all funds and investments contained therein,
the Escrow Agreement and all proceeds of the foregoing to
the extent provided in the Escrow Security Agreement. Upon
the release of the Escrowed Property, the New Notes will be
unsecured. See "Description of New Notes-- Escrow of
Proceeds."
Covenants.................... The Indenture will contain certain covenants that, among
other things, limit the ability of the Company and its
Restricted Subsidiaries to (i) incur any additional
indebtedness, (ii) pay dividends or make certain other
Restricted Payments, (iii) restrict distributions from
Restricted Subsidiaries, (iv) sell assets, (v) enter into
transactions with affiliates, (vi) sell or issue capital
stock of Restricted Subsidiaries, (vii) incur liens other
than permitted liens, (viii) enter into sale/leaseback
transactions, (ix) enter into certain mergers and
consolidations, (x) conduct certain business activities,
(xi) impair the security interest in the Collateral and
(xii) amend the Escrow Agreement or the Escrow Security
Agreement. The Indenture will also contain a covenant
requiring the Company to maintain certain levels of
insurance on the Rigs. In addition, the Indenture will limit
the business activities of Finance, including its ability to
incur indebtedness. See "Description of New Notes--Certain
Covenants."
</TABLE>
9
<PAGE>
RISK FACTORS
Prospective investors in the New Notes should carefully consider the factors
discussed in detail elsewhere in this Prospectus under the caption "Risk
Factors."
SUMMARY FINANCIAL DATA
The following summary financial data are derived from the financial
statements of the Company as of and for the periods presented. The summary
financial data for the three-month period ended March 31, 1998 is derived from
financial statements that are unaudited but include all adjustments, consisting
of normal recurring accruals, that the Company considers necessary for a fair
presentation of its financial position and results of operations for these
periods. 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
(AUGUST 5, 1997)
TO DECEMBER 31, 1997
THREE MONTHS ENDED --------------------
MARCH 31, 1998
-------------------
(UNAUDITED)
<S> <C> <C>
INCOME STATEMENT DATA:
Total revenues........................................................ $ -- $ --
Operating expenses:
Contract drilling................................................... -- --
General and administrative.......................................... 82,290 376,089
Depreciation........................................................ 2,565 5,953
Operating loss........................................................ 84,855 382,042
Interest income....................................................... 363,086 72,930
Net income (loss)..................................................... 278,231 (309,112)
OTHER FINANCIAL DATA:
Capital expenditures.................................................. $ 9,878,354 $ 5,215,116
Cash provided by (used in) operating activities....................... (3,618,017) 3,571,349
Ratio of earnings to fixed charges (1) -- --
<CAPTION>
DECEMBER 31, 1997
--------------------
MARCH 31, 1998
-------------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital....................................................... $ 18,769,174 $ 28,401,504
Rigs under construction and equipment, net............................ 44,895,880 35,020,091
Total assets.......................................................... 63,781,861 67,398,320
Members' equity....................................................... 63,699,826 63,421,595
</TABLE>
- ------------------------
(1) The Company is a development stage company with no significant operations to
the date of this Prospectus other than constructing the Rigs and, therefore,
no ratio of earnings to fixed charges has been presented.
10
<PAGE>
RISK FACTORS
HOLDERS OF OLD NOTES SHOULD CONSIDER CAREFULLY THE RISK FACTORS SET FORTH
BELOW, AS WELL AS THE OTHER INFORMATION SET FORTH HEREIN, BEFORE DECIDING TO
TENDER OLD NOTES IN THE EXCHANGE OFFER. THE RISK FACTORS SET FORTH BELOW ARE
GENERALLY APPLICABLE TO THE OLD NOTES AS WELL AS THE NEW NOTES.
THIS PROSPECTUS CONTAINS STATEMENTS THAT CONSTITUTE FORWARD-LOOKING
STATEMENTS. THOSE STATEMENTS ARE SUBJECT TO A NUMBER OF RISKS AND UNCERTAINTIES,
INCLUDING, WITHOUT LIMITATION, THE FACTORS SET FORTH BELOW, MANY OF WHICH ARE
BEYOND THE COMPANY'S CONTROL. SEE "DISCLOSURE REGARDING FORWARD-LOOKING
STATEMENTS."
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon. In general,
Old Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and applicable state securities
laws. The Company does not currently intend to register the Old Notes under the
Securities Act. Based on interpretations by the staff of the Commission, the
Company believes that New Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold or otherwise
transferred by Holders thereof (other than any such Holder which is an
"affiliate" of either of the Issuers or either of the Guarantors 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 Old Notes were acquired in the ordinary course of such Holders'
business and such Holders have no arrangement with any person to participate in
the distribution of such New Notes. Each broker-dealer that receives New Notes
for its own account in exchange for Old Notes, where such Old 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 New Notes. See "Plan of Distribution." To the
extent that Old Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Old Notes will be
adversely affected.
DEPENDENCE ON OIL AND NATURAL GAS INDUSTRY; INDUSTRY CONDITIONS; MARKET
VOLATILITY
The Company's business and operations are materially dependent upon the
condition of the oil and natural gas industry and, specifically, the exploration
and production expenditures of oil and gas companies. Due to the Company's
initial focus on the Gulf of Mexico, the Company's business and operations will
be particularly dependent upon the condition of the oil and natural gas industry
in the Gulf of Mexico and on the exploration and production expenditures of oil
and gas companies there. Historically, the offshore contract drilling industry
has been highly competitive and cyclical, with periods of high demand, short rig
supply and high dayrates followed by periods of low demand, excess rig supply
and low dayrates. The offshore contract drilling business is influenced by a
number of factors, including the current and anticipated prices of oil and
natural gas, the expenditures by oil and gas companies for exploration and
production and the availability of drilling rigs. Throughout the 1980s and early
1990s, depressed oil and natural gas prices and an oversupply of rigs adversely
affected the offshore drilling market, particularly in the U.S. Gulf of Mexico,
where the prolonged weakness and uncertainty in the demand for and price of
natural gas resulted in a significant decline in exploration and production
activities and, accordingly, a decline in dayrates. The Company cannot predict
the future level of demand for its services or future conditions of the oil and
natural gas industry. Any decrease in exploratory and production expenditures by
oil and gas companies could have a material adverse effect on the Company's
business and results of operations.
11
<PAGE>
LIMITED LIABILITY OF AMFELS; CONSEQUENCES OF DELAY OR NONCOMPLETION OF RIGS;
NON-PERFORMANCE BY AMFELS
As with any major construction undertaking, completion of the Rigs could be
delayed or prevented, or cost overruns could be incurred, as a result of
numerous factors including shortages of materials, failure or delay of
LeTourneau, Inc. ("LeTourneau") or other third party providers, labor disputes,
weather interferences, difficulties in obtaining necessary permits or in meeting
permit conditions or unforeseen engineering problems. No representation or
assurance can be made that the Rigs will be successfully constructed or, if
constructed, completed on time. If the Rigs are not completed on time or are not
capable of operating according to their respective design specifications, in
certain circumstances, the applicable Scheduled Delivery Date may be extended
and, in certain other circumstances, termination of the applicable Construction
Contract may be the Company's sole remedy for such failure. The Company will
maintain insurance to protect against certain delays in delivery caused by
specified events, including physical loss or damage to the Rigs in the shipyard
during construction as a result of named perils, including labor disturbances,
delays in delivery of materials required for construction as a result of such
events and delays resulting from restricted access to the shipyard as a result
of such events. However, the coverage provided under such insurance is subject
to significant exceptions and would not provide protection against certain
delays in delivery.
If completion of one or both of the Rigs is delayed or prevented due to (i)
any act or omission of the Company, including failure to timely deliver to
AMFELS any equipment to be furnished by the Company, or (ii) delays caused by
the American Bureau of Shipping or any governmental agency, changes, any of a
wide variety of events of FORCE MAJEURE under the applicable Construction
Contract, or inability or failure of LeTourneau to perform its obligations under
the applicable LeTourneau Agreement (as defined), or if all subjects and
conditions under the applicable LeTourneau Agreements are not fully and timely
met by LeTourneau, the applicable Scheduled Delivery Date(s) will be extended by
the applicable period. In the event of the occurrence of any of the foregoing,
or if the Rigs cannot achieve operation in accordance with their respective
design specifications, AMFELS would not be obligated to pay liquidated damages.
AMFELS would be excused from performance and would not be in default under the
applicable Construction Contract. In addition, the date for achievement of
substantial completion and the Scheduled Delivery Date, as defined in the
respective Construction Contract, would be subject to adjustment as a result
thereof. See "Business--The Construction Contracts--Scheduled Delivery Dates."
If AMFELS does not achieve substantial completion by the Scheduled Delivery
Date, or if a Rig does not perform in accordance with its design specifications,
or if after achieving substantial completion a failure of a Rig to perform in
accordance with its design specifications causes a suspension or curtailment of
operations of such Rig after the applicable Scheduled Delivery Date, the
Company's ability to make payments of principal and interest on the Notes may be
materially adversely affected.
Under the Construction Contracts, the Company is responsible for a number of
matters in connection with the construction and completion of the Rigs. While
the Company believes that it has made adequate arrangements to assure timely
performance of such responsibilities, the Company is relying on the other
parties to certain contracts to enable it to perform its responsibilities under
the Construction Contracts and there can be no assurance that such other parties
will meet their obligations under such contracts.
If completion of one or both of the Rigs is delayed or prevented due to the
failure by AMFELS to perform, or the breach by AMFELS of, any of its covenants,
agreements or undertakings under the applicable Construction Contract beyond the
applicable cure period, the Company's sole remedy may be to terminate the
related Construction Contract. Under the Construction Contracts, the Company may
terminate the Construction Contracts upon the occurrence of an event of default
by AMFELS, including such a failure by AMFELS to perform, or the breach by
AMFELS of, any of its covenants, agreements or undertakings under the applicable
Construction Contract, which AMFELS has failed to commence diligently to cure
within thirty (30) days or which remains uncured for ninety (90) days, in each
case, after notice thereof by the Company. In addition, each of the Construction
Contracts provides for its automatic
12
<PAGE>
termination if, prior to delivery, an actual or constructive total loss occurs
with respect to a Rig. See "Business--The Construction Contracts." In the event
of any such termination, the Company's ability to make payments of principal and
interest on the Notes may be materially adversely affected.
COMPANY DEPENDENCE ON RIGS' PERFORMANCE FOR REVENUES; CONSTRUCTION AND MARKETING
RISKS
Until the first Rig to be delivered from the shipyard commences operation,
debt service on the Notes will be payable solely from the Escrowed Property (as
defined) in the Interest Escrow Account (as defined). Thus, in the event of a
prolonged delay beyond the Rigs' respective Scheduled Delivery Dates, no
assurance can be given that sufficient sources of funds will be available to
make payments of principal and interest on the Notes. See "--Limited Liability
of AMFELS; Consequences of Delay or Noncompletion of Rigs; Non-Performance by
AMFELS." Thereafter, payments pursuant to drilling contracts are expected to
provide substantially all of the Company's revenues. Any material failure by the
Rigs to maintain anticipated utilization levels and to receive anticipated
average dayrates would therefore have a material adverse effect on the Company's
revenues and the Company's ability to make payments of principal of and interest
on the Notes. Moreover, the recent improvement in the current results of
operations and prospects for the offshore contract drilling industry as a whole
may lead to increased rig construction and enhancement programs by the Company's
competitors. A significant increase in the supply of premium jackup rigs could
have an adverse effect on the average utilization and average dayrates for the
Rigs. In such case, the Company's results of operations would be adversely
affected. Profitability of the Company in the future will depend upon the
utilization and dayrates for the Rigs and the Company's ability to control
operating costs. There is no assurance that current utilization and dayrates
will not decline, or that current average operating costs will not escalate, or
that the Company will be able to meet its debt service obligations in the
future.
The Company at present is constructing only the two Rigs. If either of the
Rigs suffers an actual or total casualty loss or significant damage or suffers
mechanical or other difficulties, or if for any other reason such Rig is not
capable of normal operations for any extended period, the Company's results of
operations would be, and its ability to meet its debt service obligations could
be, materially and adversely affected.
The Rigs currently are under construction and the Company will not receive
any material revenues unless and until the Rigs achieve commercial operation.
The Company has not executed a drilling contract for either of the Rigs. In
addition, there is no assurance that any drilling contract that may be signed
will be a term contract, I.E., any such contract or contracts may be
"well-to-well," and the Company may market the Rigs on that basis at any time
and from time to time. Thus, there may be periods in the future when one or both
of the Rigs are not under contract and thus, not producing revenues. Moreover,
during any such period, the Company will continue incurring the expense of
maintaining the affected Rig in the "stacked" mode pending execution of a
contract. Finally, if a Rig is not working because of adverse demand conditions
in the local market, the Company may incur unreimbursed expenses to mobilize the
Rig from that market to another where demand conditions are more favorable.
EARLY STAGE OF DEVELOPMENT; OPERATING LOSSES
The Company is at an early stage of development. The Company has no
significant operating history for periods prior to the Original Offering.
Finance and the Owners have no operating history or financial statements for any
periods prior to the Original Offering. Consequently, the Company has no
substantial commercial operating history for investors to evaluate in making an
investment decision.
The Company is subject to all of the risks inherent in the establishment of
a new business enterprise. Since its inception, the Company has recognized no
operating revenue, has incurred losses and has had a negative cash flow from
operations, exclusive of accounts payable. The Company reported a loss from
operations of approximately $0.08 million and $0.38 million for the three months
ended March 31, 1998
13
<PAGE>
and for the period from inception to December 31, 1997, respectively. There can
be no assurance that the Company will generate significant revenues or achieve
or sustain profitability in the future. In addition, there can be no assurance
that the Company will successfully complete the transition from a development
stage company to successful operations. As a result of the aforementioned
factors and the related uncertainties, there can be no assurance of the
Company's future success.
The development of the Company's business, including construction of the
Rigs, will require significant capital expenditures, virtually all of which will
be incurred before the realization of revenue. The Company expects that the
expenditures required to complete construction of the Rigs, together with the
associated early operating expenses, will result in negative cash flow until at
least one of the Rigs has been deployed. There can be no assurance that the
Company's estimates of its future losses or of its expected negative cash flow
will be accurate or that the Company's need for additional capital to fund
operating losses or capital needs will not continue substantially longer than
expected.
The Company is currently pursuing a business strategy that includes
obtaining drilling contracts with oil and gas operators, employment of rig
personnel, obtaining additional financing to complete the construction of the
Rigs and fund the purchase of drilling equipment, and overseeing the
construction of the Rigs and installation of the drilling equipment. There are
no assurances that this business strategy will be achieved. While pursuing this
business strategy, the Company will experience cash flow deficits until the
Rigs' construction is completed and the Rigs are placed in operation. As a
result of the aforementioned factors and related uncertainties, the Company's
auditors have raised a substantial doubt as to the Company's ability, in their
audit report to the Members of Chiles Offshore LLC dated February 11, 1998, to
continue as a going concern. The Company's financial statements included
elsewhere herein do not include any adjustments relating to the recoverability
and classification of asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to continue as a
going concern.
FINANCIAL FORECAST
The financial forecast set forth under "Certain Financial Forecast
Information" (the "Forecast") is based upon certain assumptions and estimates,
some of which may not materialize, and unanticipated events may occur that could
materially adversely affect the actual results achieved by the Company during
the forecast period. Consequently, the Company's actual results of operations
during the forecast period will vary from the Forecast and such variations may
be material. In addition, prospective investors should understand that the
degree of uncertainty increases with each successive period presented. The
Company's independent public accountants have not examined, compiled, reviewed,
or applied agreed-upon procedures to the Forecast, and consequently, assume no
responsibility for the Forecast. The Forecast has not been prepared in
compliance with the published guidelines of the American Institute of Certified
Public Accountants. The Forecast has been prepared by the Company as of March
31, 1998 and presents management's best estimate as of such date of the
Company's revenue, operating expenses and net income for each of the years in
the three-year period ending December 31, 2001. The Company does not intend to
update or otherwise revise the Forecast to reflect events or circumstances
existing or arising after March 31, 1998 or to reflect the occurrence of
unanticipated events. Prospective investors should make their own independent
assessment of the ability of the Company to make principal and interest payments
on the Notes. The Forecast should not be relied upon for any purpose following
the consummation of the Original Offering. No assurance can be given that the
Company's cash flow from operations will be sufficient to pay, when due, the
principal of and interest on the Notes. See "Disclosure Regarding
Forward-Looking Statements."
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
The Company is highly leveraged following consummation of the Original
Offering. Upon consummation of the Original Offering, the Company's outstanding
total long-term debt was comprised of
14
<PAGE>
$110.0 million of Notes. In addition, the Company has $25.0 million of unused
senior secured borrowing capacity under the Bank Facility. The degree to which
the Company is leveraged could have important consequences to holders of the
Notes, including (i) the Company's ability to obtain additional financing in the
future for working capital, capital expenditures, acquisitions, general
corporate purposes or other purposes may be impaired; (ii) a substantial portion
of the Company's cash flow from operations will be dedicated to the payment of
principal and interest on its indebtedness, thereby reducing the funds available
to the Company for its operations and expansion plans; and (iii) the Company may
be more vulnerable to a downturn in general economic conditions or its business.
The Company's borrowings under the Bank Facility are at floating rates of
interest, which could result in a higher interest expense in the event of an
increase in interest rates.
The Company's ability to make scheduled payments or to refinance its
obligations with respect to its indebtedness depends on its financial and
operating performance, which, in turn, is subject to prevailing economic
conditions and to financial, business and other factors beyond its control and
to the ability of Chiles to access payments and advances from its subsidiaries
in amounts and at times sufficient to fund its debt obligations. Further, there
can be no assurance that the Company's operating results or Chiles's access to
payments and advances from its subsidiaries will be sufficient for payment of
the Company's indebtedness, including the Notes. See "--Effective Subordination
of the Notes; Dependence on Subsidiaries."
EFFECTIVE SUBORDINATION OF THE NOTES; DEPENDENCE ON SUBSIDIARIES
The Notes will be effectively subordinated to all current and future secured
indebtedness of the Company and of any future subsidiaries of Chiles, including
indebtedness under the Bank Facility, to the extent of any mortgaged or pledged
assets. The Company's obligations under the Bank Facility will be secured by
first priority mortgages on the Rigs and by a pledge of substantially all of the
Owners' other assets. Therefore, in the event of a bankruptcy, liquidation or
reorganization of the Company, the assets of the Company would be available to
pay obligations on the Notes only after all such indebtedness has been paid in
full, and in such event there may not be sufficient assets remaining to pay
amounts due on any or all of the Notes then outstanding. The indebtedness under
the Bank Facility will become due prior to the time the principal obligations
under the Notes become due. Upon consummation of the Original Offering, there
was (and upon consummation of the Exchange Offer, there will be) $25.0 million
of unused senior secured borrowing capacity under the Bank Facility.
In addition, the operations of the Company will be conducted primarily
through the Owners and any future Chiles subsidiaries. Therefore, the Company's
ability to make required principal and interest payments with respect to the
Notes will depend on the earnings of such subsidiaries and on its ability to
receive funds from such subsidiaries through dividends or other payments.
RESTRICTIVE COVENANTS
Among other things, the covenants contained in the Indenture restrict,
condition or prohibit the Company from incurring additional indebtedness,
creating certain liens on its assets, making certain asset dispositions,
entering into transactions with affiliates, merging or consolidating with any
other person or selling, assigning, transferring, leasing, conveying or
otherwise disposing of substantially all the assets of the Company. In addition,
the Bank Facility contains certain financial and operating covenants and
prohibitions. There can be no assurance that the Company's leverage and such
restrictions will not materially and adversely affect the Company's ability to
finance its future operations or capital needs or to engage in other business
activities. Moreover, a failure to comply with the obligations contained in the
Indenture governing the Notes or any other agreements with respect to additional
financing (including the Bank Facility or any replacement facility) could result
in an event of default under such agreements, which could permit acceleration of
the related debt and acceleration of debt under future debt agreements that
15
<PAGE>
may contain cross-acceleration or cross-default provisions. See "Description of
Bank Facility" and "Description of New Notes."
DEPENDENCE ON KEY PERSONNEL
While the Company's senior management has worked together extensively in the
past, the complete management team has not yet been fully assembled. The
Company's success depends to a large extent upon the continued services of its
senior management including, in particular, William E. Chiles, the President and
Chief Executive Officer of the Company, and its ability to attract and retain
key operating personnel. The loss of the services of any such employee could
have a material adverse effect on the Company. The Company does not maintain
"key man" insurance with respect to any such individuals. While the success of
the Company depends in large part upon such personnel, the Company believes that
there are other qualified managers in the offshore drilling industry whom the
Company might retain to fill such positions, if needed. However, there can be no
assurance that the Company would be able to engage such qualified managers and,
if so, on what terms. See "Management."
DEPENDENCE ON SKILLED LABOR
The Company's financial performance is affected by the availability of
qualified personnel and the cost of labor. In recent years, unemployment rates
in the offshore contract drilling industry have reached unusually low levels
leading to lower availability of skilled labor and increased labor costs. While
the Company does not believe that contraction of the labor market will have a
material adverse effect on its financial performance, there can be no assurance
that sufficient labor will be available in the future or that the cost of labor
will not rise, either of which could have an adverse effect on the Company.
COMPETITION
The contract drilling industry is highly competitive. Customers sometimes
award contracts on a competitive bid basis, and although a customer selecting a
rig may consider, among other things, a contractor's safety record, crew quality
and quality of service and equipment, price is the major factor in determining
the selection of a drilling contractor. The Company believes that competition
for drilling contracts will continue to be intense for the foreseeable future
because of the ability of contractors to move rigs from areas of low utilization
and dayrates to areas of greater activity and relatively higher dayrates. Such
movement or a decrease in drilling activity in any major market could depress
dayrates and could adversely affect utilization of the Company's Rigs. Most of
the Company's competitors are much larger and more established companies with
greater financial resources than the Company. See "Business-- Offshore Contract
Drilling Services."
In addition, the current favorable conditions in the premium jackup rig
market may lead to additional newbuildings of rigs of this class. A significant
increase in the supply of state-of-the-art, technologically advanced premium
jackup rigs capable of competing with the Rigs may have an adverse effect on the
average operating dayrates for the Rigs, and on their average utilization
levels. In such case, the Company's results of operations would be adversely
affected.
RISKS IN INTERNATIONAL OPERATIONS
All or a portion of the revenues from operation of the Rigs may be derived
from foreign operations and be subject, in varying degrees, to risks inherent in
doing business abroad. The Company's non-U.S. operations will be subject to
certain political, economic and other uncertainties not encountered in U.S.
operations, including risks of war and civil disturbances (or other risks that
may limit or disrupt markets), expropriation and the general hazards associated
with the assertion of national sovereignty over certain areas in which
operations are conducted. The Company's operations outside the United States may
face the additional risk of fluctuating currency values, hard currency
shortages, controls of currency exchange
16
<PAGE>
and repatriation of income or capital. No prediction can be made as to what
governmental regulations may be enacted in the future that could adversely
affect the international drilling industry.
OPERATIONAL RISKS; INDEMNIFICATION AND INSURANCE
The Company's operations will be subject to the many hazards inherent in the
offshore drilling business, including blowouts, craterings, fires, collisions
and groundings of drilling equipment, which could cause substantial damage to
the environment, and damage or loss from adverse weather and sea conditions.
These hazards could also cause personal injury and loss of life, suspend
drilling operations or seriously damage or destroy the property and equipment
involved and, in addition to environmental damage, could cause substantial
damage to producing formations and surrounding areas. The Company's offshore
drilling equipment will also be subject to hazards inherent in marine
operations, such as capsizing, grounding, collision, damage from weather or sea
conditions or unsound location. In addition, the Company may be subject to
liability for oil spills, reservoir damage and other accidents that could cause
substantial damages.
The Company generally expects to be able to obtain contractual
indemnification pursuant to which the Company's customers would agree to protect
and indemnify the Company to some degree from liability for reservoir, pollution
and environmental damages, but there can be no assurance that the Company can
obtain such indemnities in all of its contracts, that the level of
indemnification that can be obtained will be meaningful, that such
indemnification agreements will be enforceable or that the customer will be
financially able to comply with its indemnity obligations. In addition, the
Company expects to maintain insurance coverage against loss of hire, property
damage, war risk (in the case of certain operations outside the U.S.), general
liability and environmental liabilities, including pollution caused by sudden
and accidental oil spills, but there can be no assurance that such insurance
will continue to be available or carried by the Company or if available and
carried will be adequate to cover the Company's loss or liability in many
circumstances. Moreover, any such insurance is expected to be subject to
substantial deductibles and to provide for premium adjustments based on claims.
ENVIRONMENTAL AND OTHER REGULATIONS
The Rigs and the operation of the Rigs must comply with extensive
environmental protection laws and regulations. Compliance with these laws and
regulations may entail significant expenses, including expenses for rig
modifications and changes in operating procedures. These laws and regulations
could have a material adverse effect on the business and the operations of the
Owners and the Company. Additional laws and regulations may be adopted in the
future which would have a material adverse effect on the business and the
operations of the Company. See "Business--Governmental Regulation."
POSSIBLE INABILITY TO REPURCHASE NOTES UPON CERTAIN EVENTS
Upon the occurrence of a Change of Control, Contract Termination or, under
certain circumstances, an Event of Loss (each as defined), each holder of the
Notes will have the right to require the Company to repurchase any or all of the
Notes owned by such holder at a price equal to 101% of the principal amount
thereof, together with accrued and unpaid interest. However, the Company expects
that its ability to repurchase the Notes upon the occurrence of any such event
will be limited by the Bank Facility and by the terms of any other then existing
contractual obligations of the Company. In addition, the Company may not have
adequate financial resources to effect such a repurchase, and there can be no
assurance that the Company would be able to obtain such resources through a
refinancing of the Notes to be repurchased or otherwise. If the Company fails to
repurchase all of the Notes tendered for purchase upon the occurrence of any
such event, such failure will constitute an Event of Default (as defined) under
the Indenture. See "Description of New Notes--Change of Control," "--Right to
Require Repurchase Upon Contract Termination" and "--Certain
Covenants--Application of Event of Loss Proceeds."
17
<PAGE>
With respect to the sale of assets referred to in the definition of "Change
of Control," the phrase "all or substantially all" as used in such definition
varies according to the facts and circumstances of the subject transaction, has
no clearly established meaning under the relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of a person and
therefore it may be unclear whether a Change of Control has occurred and whether
the Notes are subject to an offer to purchase.
Except as described under "Description of New Notes--Change of Control," the
Indenture does not contain provisions that permit the holders of the Notes to
require the Company to repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction.
FRAUDULENT CONVEYANCE CONSIDERATIONS RELATING TO SUBSIDIARY GUARANTEES
The obligations of Chiles and Finance under the Notes will be guaranteed
(the "Subsidiary Guarantees") on an unsecured basis by the Owners. Various
fraudulent conveyance laws have been enacted for the protection of creditors and
may be utilized by a court of competent jurisdiction to subordinate or avoid the
Subsidiary Guarantees issued by the Owners. It is also possible that under
certain circumstances a court could hold that the direct obligations of the
Owners could be superior to the obligations under the Subsidiary Guarantees.
To the extent that a court were to find that (x) a Subsidiary Guarantee was
incurred by an Owner with the intent to hinder, delay or defraud any present or
future creditor or that such Owner contemplated insolvency with a design to
favor one or more creditors to the exclusion in whole or in part of others or
(y) an Owner did not receive fair consideration or reasonably equivalent value
for issuing its Subsidiary Guarantee and at the time it issued such Subsidiary
Guarantee, such Owner (i) was insolvent by reason of the issuance of the
Subsidiary Guarantee, (ii) was engaged or about to engage in a business or
transaction for which the remaining assets of such Owner constituted
unreasonably small capital or (iii) intended to incur, or believed that it would
incur, debts beyond its ability to pay such debts as they matured, the court
could avoid or subordinate the Subsidiary Guarantee in favor of the Owner's
other creditors. Among other things, a legal challenge of the Subsidiary
Guarantee issued by an Owner on fraudulent conveyance grounds may focus on the
benefits, if any, realized by the Owner as a result of the issuance by Chiles
and Finance of the Notes. To the extent a Subsidiary Guarantee is avoided as a
fraudulent conveyance or held unenforceable for any other reason, the holders of
the Notes would cease to have any claim in respect of such Owner and would be
creditors solely of Chiles and Finance and the other Owner, assuming its
Subsidiary Guarantee was not also avoided or held unenforceable.
On the basis of financial information and other information currently
available to it, the Company believes that the Old Notes and the Subsidiary
Guarantees issued concurrently with the issuance of the Old Notes were incurred
for proper purposes and in good faith and that, after giving effect to
indebtedness incurred in connection with the issuance of the Old Notes and the
issuance of the Subsidiary Guarantees, the Company (including each Owner) was
and is solvent and will continue to be solvent, will have sufficient capital for
carrying on their respective business and will be able to pay their debts as
such debts become absolute and mature. There can be no assurance, however, that
a court passing on such questions would reach the same conclusions.
ABSENCE OF PUBLIC MARKET
The New Notes will constitute a new issue of securities for which there is
no established trading market. The Company does not intend to list the New Notes
on any national securities exchange or to seek the admission of the New Notes
for quotation through the National Association of Securities Dealers Automated
Quotation System. Although the Initial Purchasers have advised the Company that
they currently intend to make a market in the New Notes, they are not obligated
to do so and may discontinue
18
<PAGE>
such market making activity at any time without notice. In addition, such market
making activity will be subject to the limits imposed by the Securities Act and
the Exchange Act, and may be limited during the Exchange Offer and the pendency
of any shelf registration statement. Although the Old Notes have been designated
for trading in the PORTAL market, there can be no assurance as to the
development or liquidity of any market for the New Notes, the ability of the
Holders of the New Notes to sell their New Notes or the price at which the
Holders would be able to sell their New Notes. Future trading prices of the New
Notes will depend on many factors, including, among other things, prevailing
interest rates, the Company's operating results and the market for similar
securities.
19
<PAGE>
USE OF PROCEEDS
There will be no proceeds to the Company from the exchange of Old Notes
pursuant to the Exchange Offer.
The net proceeds from the sale of the Old Notes in the Original Offering
were approximately $106.3 million, which the Company expects to use to (a)
partially fund the construction of the Rigs, (b) pay interest on the Notes
through the first two semi-annual interest payment dates and (c) provide working
capital. Pursuant to the Escrow Agreement, the Company deposited with the Escrow
Agent an amount in cash equal to the net proceeds of the Original Offering,
together with approximately $0.2 million for additional Notes issuance costs, as
follows: (i) into the Interest Escrow Account, approximately $11.1 million,
representing the amount sufficient to provide for payment in full of the first
two scheduled semi-annual interest payments on the Notes and (ii) into the
Construction Escrow Account (as defined), the balance of approximately $95.4
million. See "Description of New Notes--Escrow of Proceeds."
As of May 31, 1998, the Company had no outstanding indebtedness under the
Bank Facility and had $25.0 million of undrawn availability thereunder. See
"Description of Bank Facility."
CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
as of March 31, 1998, and as adjusted to give effect to consummation of the
Original Offering, and the application of the proceeds therefrom. The
information presented below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere herein.
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED
--------- -----------
<S> <C> <C>
(IN THOUSANDS)
Debt:
Bank Facility........................................................................... $ -- $ --
Notes................................................................................... -- 110,000
--------- -----------
Total debt............................................................................ $ -- $ 110,000
--------- -----------
Members' equity:
Total Members' equity................................................................. $ 63,670 $ 63,670
--------- -----------
Total capitalization................................................................ $ 63,670 $ 173,670
--------- -----------
--------- -----------
</TABLE>
20
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data are derived from the financial
statements of the Company as of and for the periods presented. The selected
financial data for the three-month period ended March 31, 1998 is derived from
financial statements that are unaudited but include all adjustments, consisting
of normal recurring accruals, that the Company considers necessary for a fair
presentation of its financial position and results of operations for these
periods. The selected 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
THREE MONTHS ENDED (AUGUST 5, 1997)
MARCH 31, 1998 TO DECEMBER 31, 1997
------------------- --------------------
<S> <C> <C>
(UNAUDITED)
INCOME STATEMENT DATA:
Total revenues........................................................ $ -- $ --
Operating expenses:
Contract drilling................................................... -- --
General and administrative.......................................... 82,290 376,089
Depreciation........................................................ 2,565 5,953
Operating loss........................................................ 84,855 382,042
Interest income....................................................... 363,086 72,930
Net income (loss)..................................................... 278,231 (309,112)
OTHER FINANCIAL DATA:
Capital expenditures.................................................. $ 9,878,354 $ 5,215,116
Cash provided by (used in) operating activities....................... (3,618,017) 3,571,349
Ratio of earnings to fixed charges (1)................................ -- --
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
------------------- --------------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital....................................................... $ 18,769,174 $ 28,401,504
Rigs under construction and equipment, net............................ 44,895,880 35,020,091
Total assets.......................................................... 63,781,861 67,398,320
Members' equity....................................................... 63,699,826 63,421,595
</TABLE>
- ------------------------
(1) The Company is a development stage company with no significant operations to
the date of this Prospectus other than constructing the Rigs and, therefore,
no ratio of earnings to fixed charges has been presented.
21
<PAGE>
CERTAIN FINANCIAL FORECAST INFORMATION
GENERAL
The Forecast represents the Company's best assumptions and estimates as of
March 31, 1998, of its anticipated results of operations for each of the years
in the three-year period ended December 31, 2001. The Forecast was not prepared
with a view toward compliance with published guidelines of the American
Institute of Certified Public Accounts or generally accepted accounting
principles ("GAAP"). In addition, Arthur Andersen LLP, independent accountants
for the Company, have not examined, reviewed, compiled or applied agreed-upon
procedures to the Forecast and, accordingly, assume no responsibility for and
disclaim any association with such Forecast, and no other independent expert has
reviewed the Forecast. The Forecast should be read together with the information
contained in "Disclosure Regarding Forward-Looking Statements," "Risk Factors,"
"Use of Proceeds," "Selected Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business."
The Company will not update or otherwise revise the Forecast, including any
revisions to reflect circumstances existing after March 31, 1998, or to reflect
the occurrence of unanticipated events, even if any or all of the underlying
assumptions do not materialize. Furthermore, the Company will not update or
revise the Forecast to reflect changes in general economic or industry
conditions. The Forecast should not be relied upon for any purpose following
consummation of the Original Offering.
For additional assumptions on which the Forecast information is based, see
"--Summary of Significant Assumptions for the Financial Forecast Information."
All assumptions and the Company's current and future businesses and operations
are subject to a number of uncertainties. See "Risk Factors."
LIMITATIONS OF FORECAST INFORMATION
The Forecast is based upon a number of estimates and assumptions that, while
presented with numerical specificity and, as of March 31, 1998, considered
reasonable by management of the Company, are inherently subject to significant
business, economic, competitive, regulatory and other uncertainties and
contingencies, all of which are difficult to predict and many of which are
beyond the control of the Company. The assumptions disclosed herein are those
that the Company believes are significant to the Forecast and reflect
management's judgment as of March 31, 1998. The Forecast is necessarily
speculative in nature, and it is usually the case that one or more of the
assumptions do not materialize. Not all assumptions used in the preparation of
the Forecast have been set forth herein.
The actual results achieved during the forecasted periods will vary from
those set forth in the Forecast, and those variations may be material. As
disclosed elsewhere in this Prospectus under "Risk Factors," the business and
operations of the Company are subject to substantial risks that increase the
uncertainty inherent in the Forecast. Many of the factors disclosed under "Risk
Factors" in this Prospectus could cause actual results to differ materially from
those expressed in the Forecast. The Forecast assumes the successful
implementation of the Company's business strategy, including the completion of
the construction of the Rigs on their respective Scheduled Delivery Dates with
the proceeds from the Original Offering and cash on hand. No assurance can be
given that the Company's strategy will be effective, that such construction will
be completed at the assumed construction costs or at the Rigs' respective
Scheduled Delivery Dates or at all, or that the anticipated income from the Rigs
or benefits from the Company's strategy will be realized in the period from
which the Forecast has been prepared, if ever.
THE INCLUSION OF THE FORECAST HEREIN SHOULD NOT BE REGARDED AS A
REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON THAT THE FORECAST WILL BE
ACHIEVED. PROSPECTIVE INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE
FORECAST AND SHOULD MAKE THEIR OWN INDEPENDENT ASSESSMENT OF THE COMPANY'S
FUTURE RESULTS OF OPERATIONS, CASH FLOWS AND FINANCIAL CONDITION.
The Forecast in general also assumes that, among other things, the Company
will not be negatively or positively affected by legal proceedings (see
"Business--Legal Proceedings"); the Company will not be
22
<PAGE>
negatively affected by any material proceedings with respect to compliance with
environmental laws and rules; there will be no material changes in the United
States, foreign state or local tax, environmental or regulatory laws, rules or
interpretations thereof that would materially affect the Company, including, but
not limited to, those with respect to OPA '90 (as defined) (in each case, see
"Risk Factors--Environmental and Other Regulations" and "Business--Governmental
Regulations"); there will be no material change in any of the Construction
Contracts or other material contracts of the Company, and the parties thereto
will perform their obligations thereunder; there will be adequate trained
personnel available to man the Rigs at costs commensurate with the costs paid by
the Company's competitors, and no labor or industrial disputes, political unrest
or other disturbances that would materially affect the operations or revenues of
the Company, nor any disputes affecting the Company's suppliers or customers,
will occur; the Company will not make any material acquisitions or dispositions;
the Company will be able to employ the Rigs at the dayrates and at the
utilization levels assumed in the Forecast and that the Rigs can be operated at
the level of expense assumed in the Forecast; the Company will collect its
accounts receivable in a timely manner; key members of management will continue
to be employed by the Company (see "Management" and "Certain Relationships and
Related Transactions"); the Company will be able to comply with covenants under
agreements under which it will have indebtedness outstanding (see "Risk
Factors--Substantial Leverage; Ability to Service Debt"); the Company's business
will not be subject to materially adverse changes in the oil and gas industry
and the market for oil and gas production, or other macroeconomic trends; and
there will be no developments having a material adverse impact on the Company's
business.
PROJECTED FINANCIAL AND OPERATING DATA
The Forecast set forth in the table below is derived from the forecasted
results of the Rigs, which are expected to be completed in substantial part with
the proceeds of the Original Offering. The Forecast has been developed by the
Company for the years 1999 through 2001 with the CHILES COLUMBUS assumed to
begin operations in May 1999 and the CHILES MAGELLAN assumed to begin operations
in October 1999. The Forecast has been prepared by the Company as of March 31,
1998 and represents the Company's best estimate as of such date of the Company's
projected revenues, operating expenses, net income and certain operating data
for each of the years in the three-year period ending December 31, 2001.
The Forecast was prepared by the Company solely for use in connection with
the private placement of the Old Notes and not for publication or with a view to
complying with the published guidelines of the Commission regarding projections
or with the guidelines established by the American Institute of Certified Public
Accountants and is included in this Prospectus only because it was furnished to
purchasers of Old Notes. The inclusion of this information should not be
regarded as an indication that the Company or anyone who received this
information considered it a reliable predictor of future events, and this
information should not be relied on as such. This information has not been
updated subsequent to consummation of the Original Offering and will not be
updated in this Prospectus, in any supplement or amendment hereto or otherwise
in any manner.
23
<PAGE>
<TABLE>
<CAPTION>
FORECAST FOR YEARS ENDED
DECEMBER 31,
-------------------------------
1999 2000 2001
--------- --------- ---------
<S> <C> <C> <C>
(IN THOUSANDS EXCEPT RATIOS AND
OPERATING DATA)
INCOME STATEMENT DATA:
Revenues:
Contract drilling revenues................................................... $ 24,592 $ 53,655 53,655
Operating expenses:
Rig operating expense........................................................ 5,682 12,688 13,069
Drydocking and maintenance expense........................................... 231 517 532
Depreciation and amortization expense........................................ 5,085 7,987 7,987
General and administrative expenses.......................................... 663 1,478 1,523
--------- --------- ---------
Total operating expenses................................................... 11,661 22,670 23,111
--------- --------- ---------
--------- --------- ---------
Income from Rig operations................................................. $ 12,931 $ 30,985 $ 30,544
Other income (expense)
Interest income.............................................................. 909 249 1,540
Interest expense............................................................. (3,187 (1) (11,286) (11,125)
--------- --------- ---------
--------- --------- ---------
Net income (2)............................................................. $ 10,653 $ 19,948 20,959
OTHER FINANCIAL DATA:
Total debt outstanding (end of period) (3)..................................... $ 119,768 $ 110,000 $ 110,000
Notes outstanding (end of period).............................................. 110,000 110,000 110,000
Bank Facility borrowings (end of period)....................................... 9,768 -- --
Total Members' equity.......................................................... 76,317 96,265 117,224
Total capitalization (4)....................................................... 196,085 206,265 227,224
Total debt as a percentage of total capitalization............................. 61.1% 53.3% 48.4%
Capital expenditures........................................................... -- -- --
EBITDA (5)..................................................................... 18,016 38,972 38,531
Ratio of EBITDA to interest expense............................................ 5.7x 3.5x 3.5x
Ratio of total debt to EBITDA.................................................. 6.6x 2.8x 2.9x
OPERATING DATA:
Revenues per Rig per day....................................................... $ 75,000 $ 75,000 $ 75,000
Operating expenses per Rig per day............................................. 17,150 17,381 17,903
Average utilization............................................................ 98% 98% 98%
</TABLE>
- ------------------------
(1) Interest is capitalized through April 1999 for the CHILES COLUMBUS and
through September 1999 for the CHILES MAGELLAN.
(2) The Company is not subject of U.S. corporate income taxes because as a
limited liability company, it is treated as a partnership for tax purposes,
and such taxes are liabilities of the individual equity members. The Company
is permitted under the Indenture to make Permitted Quarterly Tax
Distributions (as defined) to its Members. The Company estimates that,
during the period covered by the Forecast, it will not be required to make
any significant Permitted Quarterly Tax Distributions. Thereafter, the
Company may be required to make such Permitted Quarterly Tax Distributions
pursuant to, and subject to the terms of, the Operating Agreement (as
defined).
(3) Total debt is assumed to include only the Notes and borrowings under the
Bank Facility.
(4) Total debt plus total Members' equity.
(5) EBITDA consists of income prior to deductions for net interest expense,
income taxes, depreciation, amortization and noncash items. However, the
Company is not subject to U.S. corporate income taxes because as a limited
liability company, it is treated as a partnership for tax purposes, and such
taxes are liabilities of the individual equity members. EBITDA is not
intended to represent cash flows from operations, as defined by GAAP, and
should not be considered as an alternative to net income as an indicator of
the Company's operating performance or to cash flows from operations as a
measure of liquidity. EBITDA is included in this Prospectus as it is one
basis on which the Company assesses and will assess its financial
performance.
SUMMARY OF SIGNIFICANT ASSUMPTIONS FOR THE FINANCIAL FORECAST INFORMATION
CONTRACT DRILLING REVENUES. Contract drilling revenues are calculated based
on both Rigs operating under daywork contracts at dayrates of $75,000 per day,
which is not escalated over the period covered by
24
<PAGE>
the Forecast. Such assumption represents the Company's estimate as of March 31,
1998 of expected average dayrates over the period covered by the Forecast based
on recent contract fixings for comparable rigs of which the Company was aware as
of March 31, 1998.
RIG OPERATING EXPENSES. The Forecast assumes daily drilling operating
expenses of $17,150 per Rig. Such expenses include, among other things, amounts
payable for crew costs, maintenance, insurance, inventory, medical costs and
catering. In the Forecast, costs are assumed to escalate at a rate of 3% per
year but revenues are assumed to remain flat. The Forecast assumes that the Rigs
will operate in the Gulf of Mexico during the period covered thereby.
GENERAL AND ADMINISTRATIVE EXPENSE. The Forecast includes general and
administrative expenses of approximately $2,000 per Rig per day, which
represents the Company's estimate of likely general and administrative expenses
based on its management's past experience in the offshore contract drilling
industry. In the Forecast, costs are assumed to escalate at a rate of 3% per
year but revenues are assumed to remain flat. This amount includes expected
payments under the Services Agreement with SEACOR based on expected utilization
of SEACOR services and employees and incorporates the Company's estimate of
expenses associated with the issuance of publicly traded securities and related
securities laws reporting obligations.
UTILIZATION The Forecast assumes that the utilization rate for the Rigs
during the period covered by the Forecast will equal 98%. Over the past ten
years, the average utilization rate for comparable premium jackup rigs equalled
93% and as of March 31, 1998 it exceeded 96%. The Company's assumption of a 98%
utilization rate during the period covered by the Forecast is based on such
historical utilization rates and the Company's belief that the Rigs will be the
newest, most productive and versatile units available during such period in the
premium jackup rig segment.
WORKING CAPITAL ASSUMPTIONS. The Forecast assumes that the Company will be
required to carry unpaid contract drilling accounts payable for an average of 45
days, resulting in an average working capital requirement during the period
covered by the Forecast of $6.1 million when both Rigs are operational.
DEPRECIATION AND AMORTIZATION. Under the Forecast, the assumed construction
and outfitting cost for the Rigs of $171.3 million has been depreciated on a
straight line basis over 25 years. Depreciation is recorded based on the month
the Rig is assumed to be placed in service. As of March 31, 1998, the Company
anticipated no significant capital expenditures during the period covered by the
Forecast, which, if incurred, would increase depreciation expense and therefore
reduce operating income.
INTEREST INCOME. The Forecast assumes interest income of $0.91 million in
1999, substantially all of which is attributable to interest accruing on the
Construction Escrow Account at an assumed rate of 5% per annum. Thereafter, the
Forecast assumes interest income of $0.25 million in 2000 and $1.5 million in
2001, consisting of interest earned on cash balances maintained by the Company,
accruing in each case at an annual rate of 5%.
INTEREST EXPENSE. The Forecast assumes that the entire aggregate original
principal amount of the Old Notes will remain issued and outstanding throughout
the periods presented and that during such time the Notes will accrue interest
at a rate of 10% per annum, payable semi-annually on May 1 and November 1 of
each year. In addition, the Forecast anticipates that an initial borrowing under
the Bank Facility of $6.1 million will occur during the second quarter of 1999
and that a subsequent borrowing of $4.6 million will occur during the third
quarter of 1999. At year-end 1999, the Forecast assumes total borrowings
outstanding under the Bank Facility of $9.8 million, declining to $0.18 million
by the end of the first quarter of 2000 and fully retired during the second
quarter of 2000. All borrowings under the Bank Facility are projected to bear
interest at an annual rate of 6.95%.
At maximum expected usage of the Bank Facility, the Company anticipates that
it would have unused borrowing capacity of at least half of the committed amount
thereunder. The Company's projected interest expense includes commitment fees
payable under the Bank Facility on the undrawn portion of the commitment
thereunder, which fees are payable quarterly in arrears on such undrawn amount,
at a rate of 0.25% per annum until delivery by AMFELS of the first Rig and at a
rate of 0.50% per annum thereafter.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
The Company was formed in August 1997 for the purpose of constructing,
owning and operating a fleet of state-of-the-art premium jackup offshore
drilling rigs. At formation, SEACOR contributed $8.85 million in cash to the
capital of the Company (which amount was paid directly to third parties on
behalf of the Company) and COI, LLC (an entity formed by William E. Chiles
(30%), Donald B. Gregg (7.5%), Bassoe Rig Partners Ltd. ("Bassoe") (37.5%) and
Richard and Shannon Fairbanks (25%)) ("COI") contributed $0.36 million in cash
to the capital of the Company, together with the Construction Contracts,
construction in progress, certain office equipment and other rights, properties
and liabilities with an agreed-upon value of $8.49 million. The historic cost of
such assets contributed by COI was $2.26 million. The difference between the
$8.49 million agreed-upon value and the historic cost of COI's contributed
assets, $6.23 million, has been recorded in the accompanying balance sheet as
rigs under construction and equipment. COI and a predecessor (formed in March
1997) had been organized by Mr. Chiles and its other owners for the purpose of
entering into the Construction Contracts, engaging in related rig design,
engineering, procurement and financing activities and preparing for commencement
of business operations. Pursuant to the final phase of the Equity Financing,
SEACOR contributed an additional $12.15 million in cash to the Company and $14.0
million in cash advances previously made to the Company by SEACOR, and the
Company accepted cash subscriptions for the purchase of equity interests from
institutional and individual accredited investors aggregating $20.0 million. At
March 31, 1998, the Company had cash on hand of approximately $18.8 million and
no indebtedness for borrowed money.
Finance has been recently formed by the Company as a Delaware corporation
for the sole purpose of acting as co-issuer of the Notes. Finance has nominal
assets, no liabilities and does not conduct any operations. Finance will not
receive any proceeds of the Notes as such proceeds are distributed from time to
time from the Construction Escrow Account. Each Owner has been recently formed
as a Delaware limited liability company for the purpose of owning and operating
one of the Rigs. As of the date of this Prospectus, neither Finance nor either
of the Owners has any operating history. Prior to the date of the Original
Offering, the Owners and Finance each had nominal capitalization.
The Company previously succeeded to all rights and obligations of COI under
the Construction Contracts and Chiles has assigned to each Owner the
Construction Contract for such Owner's Rig. In addition, the Company entered
into the Services Agreement with SEACOR. See "Certain Relationships and Related
Transactions--Services Agreement."
RESULTS OF OPERATIONS
Since inception, the Company has engaged in no operations other than
managing construction of the Rigs and related matters. To date, the Company has
not generated any operating revenues. The Company had a net loss of
approximately $0.31 million in 1997 as a result of general and administrative
expenses and depreciation in excess of interest income. For the three months
ended March 31, 1998, the Company had net income of approximately $0.28 million
as a result of interest income in excess of general and administrative expenses.
Owing to the Company's lack of significant operating history, the Company's
historical financial data may not be meaningful or indicative of future results.
The Company's results of operations in the future will depend on the earnings
from the Rigs and its level of operating expenses.
26
<PAGE>
DEVELOPMENT STAGE COMPANY
The Company has operated as a development stage company since inception by
devoting substantially all of its efforts to designing, engineering and
contracting with shipyards and vendors for the Rigs, raising capital and
securing contracts for the Rigs. The Company has not generated revenues, nor is
there any assurance that the Company will generate significant revenues in the
future. In addition, there can be no assurance that the Company will
successfully complete the transition from a development stage company to
successful operations. Additional risk factors associated with the Company's
operations include, but are not limited to, oil and gas prices, capital
expenditure plans of oil and gas operators, access to capital, completion of
construction of the Rigs and competition. As a result of the aforementioned
factors and the related uncertainties, there can be no assurance of the
Company's future success. See "Risk Factors."
The Company has a loss from operations of $0.08 million and $0.38 million
for the three months ended March 31, 1998 and for the period from inception to
December 31, 1997, respectively. The Company's management is currently pursuing
a business strategy that includes obtaining drilling contracts with oil and gas
operators, employment of rig personnel, obtaining additional financing to
complete the construction of the Rigs and fund the purchase of drilling
equipment, and overseeing the construction of the Rigs and installation of the
drilling equipment. There can be no assurances that this business strategy will
be achieved. While pursuing this business strategy, the Company will experience
cash flow deficits until construction is completed and the Rigs are placed in
operation. As a result of the aforementioned factors and related uncertainties,
there is substantial doubt as to the Company's ability to continue as a going
concern. The Company's financial statements included elsewhere herein do not
include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might result should be the Company be unable to continue as a going concern.
CAPITAL RESOURCES AND LIQUIDITY
Exclusive of increases in accounts payable, the Company has had negative
operating cash flow since inception, and has financed its operations with a
combination of Member advances, the sale of equity interests in the Company and
accounts payable.
From January 1, 1998 through the April 1999 Scheduled Delivery Date of the
CHILES COLUMBUS, the Company expects to incur approximately $73.0 million in
aggregate costs to complete construction and outfitting this Rig, including
internal construction costs and excluding net capitalized interest. From January
1, 1998 through the September 1999 Scheduled Delivery Date of the CHILES
MAGELLAN, the Company expects to incur approximately $73.5 million in aggregate
costs to complete construction and outfitting of this Rig, including internal
construction costs and excluding net capitalized interest. The related
Construction Contracts are fixed-price contracts and approximately 95% of the
aggregate OFE cost is fixed under firm delivery contracts with the various
vendors. The Company expects to finance these costs with the net cash proceeds
of the Equity Financing and with the net proceeds of the Original Offering and
the Bank Facility. At March 31, 1998, the Company had cash on hand of
approximately $18.8 million and no indebtedness for borrowed money.
Additionally, upon delivery of the first Rig under construction, cash flow from
operations generated by this Rig and borrowings under the Bank Facility would be
available to cover remaining construction, outfitting and overhead costs
associated with the second Rig.
As of June 19, 1998, the balance of funds in the Construction Escrow Account
was $84.4 million.
Because the Rigs are newbuildings, the Company does not expect to incur
material additional capital expenditures associated with the Rigs for the
foreseeable future. The Company has budgeted $0.23 million, $0.52 million and
$0.53 million for the three years ended December 31, 1999, 2000 and 2001,
respectively, for routine inspection and maintenance requirements for its Rigs,
and expects to fund these expenditures with cash flow from operations.
Additionally, the Company has not budgeted for any mobilization of either Rig
from the Gulf of Mexico to another market, which if it occurs could materially
increase rig operating expense levels, and reduce revenues while the Rig is in
transit and not working. Any unanticipated capital
27
<PAGE>
expenditure or Rig mobilization could adversely affect cash flow from operations
and operating income in the period incurred, although the Company believes that
borrowings under the Bank Facility would be adequate to address any short-term
capital or liquidity needs created as a result of any such event.
In addition to capital requirements associated with Rig construction, the
Company has significant debt service obligations, principally with respect to
the Notes. As the Notes bear interest at a rate of 10% per annum, the Company
will require $11.0 million per year to cover interest on the Notes as long as
all of the Notes are outstanding. Interest on the Notes through the first two
semi-annual interest payment dates will be paid from amounts on deposit in the
Interest Escrow Account. Thereafter, the Company expects to finance debt service
on the Notes and on borrowings outstanding under the Bank Facility from cash
flow from operations and, if necessary, additional borrowings under the Bank
Facility. At the September 1999 Scheduled Delivery Date of the CHILES MAGELLAN,
the Company anticipates that it will have undrawn committed availability under
the Bank Facility of at least half of the $25.0 million commitment thereunder.
The Company projects a borrowing of approximately $6.1 million under the
Bank Facility in connection with the delivery of the CHILES COLUMBUS, scheduled
for April 1999. Proceeds of this borrowing together with a portion of the
proceeds of the Original Offering and cash flow from operations would be used to
cover start-up working capital needs in connection with commencement of
operations of this Rig. Although the Bank Facility is a committed facility, no
amounts may be borrowed thereunder until and upon the delivery of the first of
the two Rigs by AMFELS and the acceptance thereof by the Company. The entire
committed facility amount of $25.0 million would be available at delivery by
AMFELS of the first Rig, subject to satisfaction of certain other conditions
precedent provided for under the Bank Facility. See "Description of Bank
Facility."
The Company believes that cash flow from operations will be sufficient to
retire all indebtedness under the Bank Facility by the second quarter of 2000,
assuming that the Rigs are delivered at their respective Scheduled Delivery
Dates and promptly commence working at expected dayrate and operating expense
levels. The Company expects to finance start-up working capital needs associated
with commencement of operations of the second Rig to be delivered out of cash
flow from operations and, if necessary, additional borrowings under the Bank
Facility.
RECENT DEVELOPMENTS
The Original Offering was consummated on April 29, 1998. See "Prospectus
Summary--The Financing" and "Use of Proceeds." In addition, the Company entered
into the Bank Facility on the Issue Date. See "Description of Bank Facility."
28
<PAGE>
BUSINESS
THE COMPANY
The Company was formed in 1997 for the purpose of constructing, owning and
operating a fleet of state-of-the-art premium jackup offshore rigs. In 1997, the
Company commenced construction of the first two such rigs at the AMFELS shipyard
in Brownsville, Texas under fixed-price contracts. The first Rig, the CHILES
COLUMBUS, is a LeTourneau Enhanced 116-C design and the second, the CHILES
MAGELLAN, is a LeTourneau Super 116 design. The Company expects that it will
pay, net of capitalized interest, $83.5 million and $87.8 million, respectively,
in total construction and outfitting costs for the Rigs. The Company and AMFELS
have scheduled the Rigs for delivery in April and September 1999, respectively.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operation--Overview." Chiles also holds three sequential Construction Options to
construct additional LeTourneau Super 116 design jackup rigs at a total cost of
approximately $100.0 million per rig. See "--The Construction Options."
SEACOR, operator of the second largest fleet of offshore service vessels in
the world, has invested $35.0 million for approximately 55.4% of the outstanding
equity interests in the Company. SEACOR is a Delaware corporation whose common
stock is listed for trading on the New York Stock Exchange under the symbol
"CKH." The remaining equity interests in the Company are held by private
investors, including the original founders and senior management. See "Principal
Members" and "Certain Relationships and Related Transactions--Brokerage Fee."
The Company's management team has extensive experience in the offshore
contract drilling industry. William E. Chiles, the President and CEO of the
Company, has over 25 years of experience in the industry. During his career Mr.
Chiles founded or co-founded three offshore contract drilling companies and
supervised the construction of four jackup rigs at the Brownsville, Texas
shipyard facility where the two Rigs are being constructed. The Company's
operating and engineering personnel have substantial experience operating,
marketing, building, refurbishing and upgrading premium jackup rigs, including
the LeTourneau 116-C design.
THE RIGS
Jackup rigs are the largest category of mobile offshore drilling units,
representing approximately 60% of such units. A mobile offshore drilling unit
consists of a drilling package mounted on a hull, which is maintained at a
specific location during drilling operations. The drilling package typically
consists of a power plant, hoisting equipment, a rotary system, tubulars and
systems for mud treating and pumping, well control and the handling of bulk
materials. The specifications of the drilling package determine the capability
of the rig to drill to various depths and penetrate certain sub-surface
environments. The drilling unit also includes the living quarters, heliport,
cranes and tensioning and compensation systems of the drilling package. The
design of the particular drilling unit determines the marine environment in
which it can operate.
Several factors determine the type of rig most suitable for a particular
project, the more significant of which are the marine environment, water depth
and seabed conditions at the proposed drilling location, whether the drilling is
being done over a platform or other structure, the intended well depth and
variable deck load and well control requirements. Considerable variation in
utilization and dayrates often exists for different types of rigs, primarily as
a function of their capabilities and location.
Jackup rigs are mobile, self-elevating drilling platforms equipped with legs
that are lowered to the ocean floor until a foundation is established to support
the drilling platform. A jackup rig consists of the hull, jacking system,
drilling equipment, crew quarters, loading and unloading facilities, storage
areas, heliport and other related equipment. Oil and gas exploration companies
use jackup rigs extensively for offshore drilling in water depths from 20 feet
to 350 feet. A jackup rig is towed to the drillsite with its hull
29
<PAGE>
riding in the sea and its legs retracted. At the drillsite, the legs are jacked
down to the ocean floor until the hull has been elevated a sufficient distance
above the water to allow storm waves to pass beneath. After completion of
drilling operations, the hull is lowered until it rests in the water and then
the legs are retracted for relocation to another drillsite.
The nature of the seabed at a particular drilling location dictates the
appropriate rig-leg configuration of the jackup rig to be used. Some jackup rigs
have a lower hull (mat) attached to the bottom of the rig legs, while others
have independent legs. A mat-supported rig provides a stable foundation in flat
soft-bottom areas, while independent-leg rigs are better suited for harder or
uneven seabed conditions.
Jackup rigs can be generally characterized as either slot jackup rigs or
cantilevered jackup rigs. Slot-design rigs are configured for drilling
operations to take place through a slot in the hull. A slot design is
appropriate for drilling exploratory wells in the absence of any existing
permanent structure, such as a production platform, although some slot design
rigs are capable of drilling over certain production platforms. A cantilevered
jackup rig can extend its drill floor and derrick over an existing, fixed
structure, thereby permitting the rig to drill or work over a well located on
such a structure.
Jackup rigs vary a great deal in size and capability. The Company defines
premium jackup rigs as cantilevered jackup rigs capable of operating in water
depths of 300 feet or greater, excluding (due to their substantially higher
construction cost) the class of jackup rigs built for service in "harsh
environments," such as the North Sea and Eastern Canada.
WORLDWIDE JACKUP RIG UTILIZATION
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
0-200'C 0-200'S 250'-299'C 250-299'S 300'+C
<S> <C> <C> <C> <C> <C>
Mar-89 52.7% 52.9% 76.2% 59.5% 88.3%
Apr-89 53.8% 52.9% 76.2% 59.5% 91.7%
May-89 56.0% 54.5% 69.8% 64.3% 90.0%
Jun-89 61.5% 62.5% 74.6% 57.1% 90.0%
Jul-89 62.6% 64.5% 79.4% 64.3% 92.4%
Aug-89 62.6% 70.0% 84.1% 59.5% 95.8%
Sep-89 61.8% 72.4% 84.1% 57.1% 94.1%
Oct-89 60.7% 69.0% 90.5% 52.4% 89.9%
Nov-89 66.3% 67.9% 91.9% 76.2% 93.3%
Dec-89 65.2% 64.3% 95.2% 78.6% 91.6%
Jan-90 65.2% 64.3% 98.4% 76.2% 94.1%
Feb-90 62.9% 64.3% 98.4% 66.7% 96.6%
Mar-90 64.0% 60.7% 95.2% 73.8% 96.7%
Apr-90 64.0% 64.3% 88.7% 71.4% 96.7%
May-90 65.2% 74.1% 98.4% 66.7% 94.3%
Jun-90 67.4% 69.2% 98.3% 67.4% 96.0%
Jul-90 66.3% 69.2% 95.1% 67.4% 96.7%
Aug-90 62.9% 69.2% 93.4% 67.4% 95.9%
Sep-90 62.9% 65.4% 98.4% 69.8% 95.9%
Oct-90 69.2% 64.0% 95.1% 59.1% 94.3%
Nov-90 70.0% 64.0% 96.7% 63.6% 96.0%
Dec-90 72.2% 72.0% 98.4% 68.2% 95.9%
Jan-91 68.9% 68.0% 95.2% 65.9% 95.9%
Feb-91 63.3% 68.0% 95.2% 61.4% 92.7%
Mar-91 64.0% 63.0% 92.3% 62.8% 93.4%
Apr-91 69.7% 65.4% 92.2% 65.1% 95.0%
May-91 67.4% 65.4% 93.7% 60.5% 97.5%
Jun-91 64.0% 65.4% 92.2% 69.8% 95.1%
Jul-91 66.7% 69.2% 92.2% 70.5% 92.6%
Aug-91 59.1% 68.0% 85.9% 63.6% 91.7%
Sep-91 62.5% 68.0% 85.9% 63.6% 93.4%
Oct-91 64.4% 69.6% 90.6% 63.6% 92.6%
Nov-91 65.1% 70.8% 92.3% 59.1% 92.6%
Dec-91 71.3% 66.7% 89.2% 61.4% 95.0%
Jan-92 69.4% 62.5% 89.2% 56.8% 91.6%
Feb-92 61.2% 66.7% 81.5% 47.7% 89.1%
Mar-92 63.5% 68.2% 84.6% 40.5% 86.7%
Apr-92 62.7% 68.2% 86.2% 40.5% 89.3%
May-92 56.0% 63.6% 84.4% 38.1% 90.9%
Jun-92 59.5% 63.6% 79.7% 39.5% 90.9%
Jul-92 58.3% 63.6% 84.4% 39.5% 87.6%
Aug-92 63.5% 66.7% 81.3% 41.9% 85.1%
Sep-92 68.2% 66.7% 89.1% 44.2% 84.4%
Oct-92 71.8% 66.7% 95.3% 52.4% 86.9%
Nov-92 77.6% 61.9% 95.3% 64.3% 91.0%
Dec-92 76.5% 66.7% 96.9% 64.3% 92.6%
Jan-93 79.5% 65.2% 96.8% 68.3% 88.6%
Feb-93 78.6% 65.0% 93.8% 68.3% 88.6%
Mar-93 78.6% 60.0% 93.8% 65.0% 87.0%
Apr-93 77.4% 70.0% 92.2% 72.5% 88.7%
May-93 77.4% 70.0% 96.9% 72.5% 91.1%
Jun-93 78.6% 70.0% 96.9% 72.5% 93.5%
Jul-93 76.2% 70.0% 93.8% 76.7% 92.7%
Aug-93 76.7% 64.7% 90.8% 74.4% 91.1%
Sep-93 76.7% 64.7% 90.8% 76.7% 90.4%
Oct-93 75.3% 70.6% 95.4% 74.4% 92.8%
Nov-93 77.6% 70.6% 96.9% 74.4% 90.4%
Dec-93 77.6% 64.7% 95.4% 73.8% 93.6%
Jan-94 76.2% 61.1% 92.1% 65.0% 91.2%
Feb-94 76.2% 55.6% 92.1% 50.0% 92.0%
Mar-94 77.4% 50.0% 92.1% 62.5% 90.4%
Apr-94 77.4% 55.6% 86.9% 67.5% 88.1%
May-94 81.0% 55.6% 90.2% 70.0% 84.9%
Jun-94 81.2% 61.1% 90.2% 75.0% 85.7%
Jul-94 81.2% 55.6% 88.5% 72.5% 84.9%
Aug-94 76.5% 58.8% 82.0% 70.0% 86.5%
Sep-94 76.5% 58.8% 88.7% 65.0% 89.7%
Oct-94 80.0% 58.8% 85.5% 67.5% 91.3%
Nov-94 75.3% 64.7% 87.1% 72.5% 87.3%
Dec-94 72.9% 64.7% 88.7% 75.0% 89.7%
Jan-95 69.4% 64.7% 88.7% 67.5% 89.5%
Feb-95 65.9% 58.8% 93.5% 70.0% 89.5%
Mar-95 61.9% 58.8% 93.5% 62.5% 89.8%
Apr-95 69.0% 58.8% 92.1% 55.0% 91.3%
May-95 72.6% 62.5% 95.2% 52.5% 93.7%
Jun-95 76.2% 64.3% 95.2% 67.5% 95.3%
Jul-95 74.7% 64.3% 93.7% 67.5% 96.1%
Aug-95 75.9% 64.3% 95.2% 68.3% 96.1%
Sep-95 75.9% 64.3% 96.8% 70.0% 98.4%
Oct-95 71.4% 64.3% 96.8% 72.5% 98.4%
Nov-95 73.5% 64.3% 96.8% 70.7% 98.4%
Dec-95 74.7% 64.3% 96.8% 72.5% 96.9%
Jan-96 76.5% 64.3% 96.8% 63.4% 96.9%
Feb-96 80.0% 66.7% 93.4% 69.6% 96.9%
Mar-96 81.3% 66.7% 93.4% 71.7% 96.9%
Apr-96 82.5% 66.7% 93.4% 78.3% 98.4%
May-96 87.5% 66.7% 95.1% 80.4% 97.6%
Jun-96 87.5% 66.7% 95.1% 82.6% 97.6%
Jul-96 87.5% 66.7% 95.1% 82.6% 99.2%
Aug-96 90.0% 66.7% 96.8% 80.4% 96.9%
Sep-96 91.1% 66.7% 96.8% 86.4% 95.4%
Oct-96 92.4% 73.3% 96.8% 85.4% 96.2%
Nov-96 91.1% 73.3% 96.8% 90.2% 97.7%
Dec-96 92.3% 80.0% 96.8% 90.0% 96.9%
Jan-97 88.5% 80.0% 98.3% 87.5% 95.5%
Feb-97 90.9% 80.0% 98.4% 92.5% 95.5%
Mar-97 92.3% 80.0% 98.4% 94.9% 97.0%
Apr-97 93.6% 80.0% 98.4% 97.4% 97.7%
May-97 92.3% 86.7% 98.4% 97.4% 97.7%
Jun-97 93.6% 86.7% 98.4% 95.0% 97.7%
Jul-97 93.6% 86.7% 98.4% 95.0% 97.0%
Aug-97 94.8% 86.7% 98.4% 95.0% 97.7%
Sep-97 94.8% 86.7% 98.4% 92.5% 97.0%
Oct-97 96.1% 86.7% 98.4% 92.5% 97.7%
Nov-97 96.1% 86.7% 98.4% 95.0% 97.0%
Dec-97 96.2% 93.3% 96.8% 95.1% 97.7%
Jan-98 94.9% 93.3% 95.2% 97.5% 97.0%
Feb-98 96.2% 93.8% 96.8% 97.4% 97.0%
Mar-98 94.9% 100.0% 98.5% 97.5% 96.3%
</TABLE>
SOURCE: Offshore Data Services.
The Rigs to be constructed by the Company consist of one LeTourneau Enhanced
116-C jackup rig and one LeTourneau Super 116 jackup rig, both of which are
improved versions of the most versatile and popular design in the worldwide
jackup rig fleet (the LeTourneau 116-C). The hulls, machinery and outfitting are
identical on the two Rigs and are based on the larger LeTourneau Super 116
design. The only difference is that the LeTourneau Super 116 design has a leg
that has been designed to a higher specification while the LeTourneau Enhanced
116-C design is based on a LeTourneau 116-C design that has subsequently been
strengthened to carry the larger LeTourneau Super 116 hull and longer legs. The
Rigs will have capabilities that substantially exceed those of typical existing
premium jackup rigs, including increased engine horsepower, increased hydraulic
horsepower and an enlarged mud handling and solids control system. The Rigs will
also incorporate such features as digital drilling controls, dual pipe handling,
pipe handling robotics, and a drillpipe identification and tracking system. The
Rigs will further differentiate themselves by their increased productivity, due
mainly to their superior engine and hydraulic horsepower.
30
<PAGE>
It is anticipated that the Rigs will fly the Panamanian flag, with an
"A1--Self Elevating Drilling Unit" certification from the American Bureau of
Shipping.
RIG PRODUCTIVITY ENHANCEMENTS
The Rigs contain numerous productivity-enhancing features that the Company
believes make their capabilities superior to those of existing premium jackup
rigs. A hydraulic horsepower of two times the typical premium jackup rig (6,600
hp vs. 3,200 hp) increases drilling performance. The higher horsepower increases
pressure at the drill bit, leading to faster drilling. The larger mud pump
system capacity (three mud pumps versus a standard of two) coupled with
increased solids control capacity allows for faster circulation of cuttings and
a quicker cleaning of mud resulting in more productive drilling. The extended
cantilevering capability permits the drilling package to extend up to 70 feet
from the hull without moving the Rig.
The Company expects that the technological sophistication of the systems
available on the Rigs will result in improved performance. Fiber optics wiring
and an internet connection will provide customers timely information about Rig,
well and equipment performance, and also enable equipment vendors and other
service providers to diagnose equipment problems remotely. The drillpipe
identification and tracking system tracks the number of feet drilled by each
section of drillpipe and identifies the joints that require inspection rather
than the entire drillstring, thus decreasing the cost and frequency of mandatory
inspections of drillpipe. The "Iron Roughneck" robot performs the work of three
people in connecting and disconnecting new joints of drillpipe, increasing the
speed of drilling and improving safety. Powerslips replace the need for crew to
manually set slips to hold the drillstem in place. The dual pipehandling system
allows for the assemblage of the 90-foot "stands" of drillpipe (made up of three
individual 30-foot joints) that are required for the Rigs' top-drive drilling
systems as drilling is taking place. When moving to a new drilling location,
higher capacity water pumps fill the hull with water faster to settle the legs
into the sea bottom, expediting the preparation for the drilling process. The
new design of the blowout preventers, which must be installed three or four
times for a typical Gulf of Mexico well, reduces their installation time from
approximately 10 to 12 hours to three to four hours.
The Company believes that its focus on construction utilizing the proven
LeTourneau 116-C design, but with the addition of an enhanced equipment package
compared to existing rigs of this design, should provide the Company with a
competitive advantage, particularly in bidding for horizontal and extended reach
drilling projects. The Company expects that the increased drilling efficiencies
attributable to these enhancements may enable the Company to bid more
aggressively on incentive-based contracts, as opposed to standard dayrate
contracts, where profit potential may be greater.
MARKET OVERVIEW
The demand for offshore drilling services is substantially dependent upon
the continued exploration for and development of hydrocarbons in geological
formations offshore. In the early 1980s, in the aftermath of the second oil
price shock, it was anticipated that oil prices would rise substantially. This
was the basis for the dramatic newbuilding activity that followed, which
resulted in the construction of 236 rigs between 1980 and 1983. Oversupply of
rigs caused worldwide rig utilization to decline rapidly thereafter and
substantially depressed the offshore contract drilling market until the
beginning of the 1990s. During the last two to three years, global demand for
offshore drilling equipment has increased to the point of finally absorbing the
excess capacity created out of the substantial newbuilding activity of the early
1980s.
31
<PAGE>
WORLDWIDE JACKUP RIG SUPPLY AND DEMAND
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Competitive Supply Demand
<S> <C> <C>
Jan-84 449 364
Feb-84 448 361
Mar-84 450 364
Apr-84 450 361
May-84 451 368
Jun-84 451 368
Jul-84 451 382
Aug-84 451 380
Sep-84 451 389
Oct-84 449 398
Nov-84 449 395
Dec-84 450 396
Jan-85 451 402
Feb-85 451 386
Mar-85 453 369
Apr-85 454 362
May-85 455 363
Jun-85 455 369
Jul-85 456 367
Aug-85 455 353
Sep-85 454 352
Oct-85 455 361
Nov-85 456 367
Dec-85 454 376
Jan-86 454 357
Feb-86 455 342
Mar-86 451 305
Apr-86 451 279
May-86 452 258
Jun-86 452 248
Jul-86 449 237
Aug-86 450 235
Sep-86 450 231
Oct-86 450 237
Nov-86 448 249
Dec-86 447 264
Jan-87 446 265
Feb-87 446 243
Mar-87 446 237
Apr-87 445 238
May-87 446 237
Jun-87 446 246
Jul-87 447 259
Aug-87 446 272
Sep-87 445 287
Oct-87 445 295
Nov-87 442 304
Dec-87 440 312
Jan-88 438 316
Feb-88 436 318
Mar-88 436 308
Apr-88 435 310
May-88 435 310
Jun-88 435 305
Jul-88 435 319
Aug-88 434 314
Sep-88 434 307
Oct-88 436 318
Nov-88 436 325
Dec-88 435 328
Jan-89 435 315
Feb-89 433 290
Mar-89 428 296
Apr-89 428 306
May-89 427 302
Jun-89 426 309
Jul-89 424 320
Aug-89 421 324
Sep-89 418 318
Oct-89 418 315
Nov-89 417 340
Dec-89 417 342
Jan-90 416 344
Feb-90 416 336
Mar-90 416 338
Apr-90 416 331
May-90 415 338
Jun-90 416 342
Jul-90 415 339
Aug-90 415 337
Sep-90 414 341
Oct-90 415 339
Nov-90 415 344
Dec-90 415 352
Jan-91 415 344
Feb-91 416 328
Mar-91 415 330
Apr-91 414 332
May-91 414 335
Jun-91 414 333
Jul-91 410 332
Aug-91 410 316
Sep-91 411 319
Oct-91 408 321
Nov-91 408 321
Dec-91 405 323
Jan-92 405 320
Feb-92 405 301
Mar-92 401 292
Apr-92 399 294
May-92 399 288
Jun-92 399 291
Jul-92 399 290
Aug-92 398 291
Sep-92 398 298
Oct-92 397 312
Nov-92 397 327
Dec-92 397 332
Jan-93 396 329
Feb-93 395 327
Mar-93 394 321
Apr-93 395 327
May-93 395 335
Jun-93 394 339
Jul-93 395 338
Aug-93 393 327
Sep-93 394 330
Oct-93 393 337
Nov-93 393 337
Dec-93 392 337
Jan-94 391 324
Feb-94 391 317
Mar-94 391 325
Apr-94 391 323
May-94 391 324
Jun-94 392 325
Jul-94 392 322
Aug-94 391 315
Sep-94 392 320
Oct-94 392 326
Nov-94 392 322
Dec-94 392 324
Jan-95 391 314
Feb-95 391 312
Mar-95 390 306
Apr-95 390 312
May-95 389 320
Jun-95 387 333
Jul-95 386 331
Aug-95 386 333
Sep-95 385 338
Oct-95 387 337
Nov-95 387 337
Dec-95 386 337
Jan-96 385 333
Feb-96 384 333
Mar-96 384 335
Apr-96 384 342
May-96 384 348
Jun-96 384 349
Jul-96 383 350
Aug-96 383 350
Sep-96 382 353
Oct-96 380 354
Nov-96 380 357
Dec-96 379 356
Jan-97 378 350
Feb-97 378 355
Mar-97 378 360
Apr-97 378 363
May-97 378 363
Jun-97 379 364
Jul-97 379 364
Aug-97 378 365
Sep-97 378 363
Oct-97 378 365
Nov-97 378 364
Dec-97 379 367
Jan-98 379 365
Feb-98 381 369
Mar-98 380 369
</TABLE>
(1) Competitive supply is composed of jackup rigs that are actively marketed and
in a condition to accept work and begin operations.
SOURCE: Offshore Data Services.
Based on published industry data, the Company estimates that, as of March
31, 1998, the average dayrate for premium jackup rigs worldwide was $73,000 and
that it averaged $62,000 in 1997 and $39,000 in 1996. (1997 and 1996 dayrate
data include a small number of "harsh environment" jackup rigs, which increases
slightly the average historical dayrate information for premium jackup rigs.)
Based on published industry data, the Company estimates that premium jackup rig
utilization levels have averaged 93% over the last ten years and that, as of
March 31, 1998, average utilization exceeded 96%. The major factors underlying
these improvements are an increase in demand, due to greater offshore
exploration and development expenditures by the world's oil and gas companies,
and a reduction in rig supply, due to the advancing age of the existing fleet
and the small number of newbuildings. Growth in offshore expenditures by oil and
gas companies has been due in part to substantial technological advances in
exploration and production (including 3-D seismic, horizontal drilling and
subsea completion procedures), which have reduced the overall cost of finding
and producing oil and gas. In addition, the offshore drilling industry has
experienced a worldwide consolidation during the last ten years which has
substantially reduced the number of drilling contractors. See "Risk
Factors--Dependence on Oil and Natural Gas Industry; Industry Conditions; Market
Volatility."
The world's offshore drilling rig fleet has declined in size to the point at
which current demand yields high utilization, and consequently high dayrates,
which creates the conditions necessary to support a demand-driven renewal of the
fleet. In addition, structural changes in the worldwide exploration and
production industry have brought the offshore contract drilling market to the
beginning of a cycle that the Company believes justifies the economics of
building new premium jackup rigs to serve the industry into the next century.
The world's jackup rig fleet currently consists of 380 rigs, which vary
significantly in terms of technological advancement, water depth capability and
age. A total of 117 are premium jackup rigs and as of March 1998, 29 such rigs
were employed in the Gulf of Mexico, the largest single market for jackup rigs.
The current average age of the world's jackup rig fleet is 17.5 years with
premium jackup rigs having an average age of 16.4 years, which compares to an
expected original useful life for such units of approximately 25 years. In
addition to the Company's Rigs, seven other jackup rig newbuildings are on order
with shipyards around the world (collectively representing 2.4% of the existing
fleet), of which six are jackup rigs designed for work in "harsh environment"
areas.
32
<PAGE>
WORLDWIDE JACKUP RIG FLEET
<TABLE>
<CAPTION>
WATER NO. OF AVERAGE NEWBUILDINGS
DEPTH UNITS (%) AGE ON ORDER
------------------ ----------- --------- --------- -------------------
<S> <C> <C> <C> <C> <C>
"Harsh Environment" Jackup Rigs............. 300' and greater 18 4.7% 11.3 yrs 6
Premium Jackup Rigs (IC).................... 300' and greater 117 30.8% 16.4 yrs 3
Jackup Rigs (IS)............................ 300' and greater 25 6.6% 19.7 yrs 0
Jackup Rigs (IC)............................ 250'-299' 64 16.8% 17.3 yrs 0
Jackup Rigs (IS)............................ 250'-299' 40 10.5% 20.8 yrs 0
Jackup Rigs................................. 0-249' 116 30.6% 18.9 yrs 0
-
--- --------- ---------
Total....................................... 380 100.0% 17.5 yrs 9
<CAPTION>
PERCENT OF
EXISTING
FLEET
-----------
<S> <C>
"Harsh Environment" Jackup Rigs............. 33.3%
Premium Jackup Rigs (IC).................... 2.6%
Jackup Rigs (IS)............................ 0.0%
Jackup Rigs (IC)............................ 0.0%
Jackup Rigs (IS)............................ 0.0%
Jackup Rigs................................. 0.0%
-----------
Total....................................... 2.4%
</TABLE>
- ------------------------
Attributes:
(IC)=independent-leg cantilevered rig.
(IS)=independent-leg slot rig.
BUSINESS STRATEGY
The Company intends to become a leading provider of state-of-the-art premium
jackup rigs and to maximize dayrates and rig utilization by offering its
customers the most productive premium jackup rigs available. The Company will
focus on establishing a reputation for customer service, higher productivity and
safety of operation in the offshore contract drilling market. The key elements
of the Company's strategy are as follows:
- FOCUS ON PREMIUM JACKUP RIG MARKET. The Company will focus on premium
jackup rigs, which the Company believes enjoy strong and growing worldwide
demand, have the versatility to work in a variety of different markets,
represent a relatively low investment compared to new semisubmersibles,
drillships and "harsh environment" jackup rigs, possess a favorable
relationship between potential revenues and operating costs, and are
familiar to the management of the Company through prior operations and
newbuildings.
- OWN AND OPERATE HIGH QUALITY ASSETS. The Rigs will represent a new
generation of premium jackup rigs with significantly enhanced capabilities
incorporating the latest technologies. Such capabilities will assist the
Company in offering its customers equipment with superior productivity and
safety features.
- BUILD TO MEET STRONG DEMAND GROWTH. The Company intends to be among the
first offshore drilling contractors to provide new generation premium
jackup rigs to the industry. The Company believes that this is the early
stage of a period of strong growth in the demand for, and utilization of,
premium jackup rigs. The Company believes that it has been able to secure
favorable contract terms by placing orders during this early stage, at a
time when relatively few new premium jackup rigs are being built.
- EXPAND RIG FLEET. The Company expects to expand its rig fleet prudently
over time. The Company may achieve this growth through the exercise of
three Construction Options that the Company holds to construct additional
LeTourneau Super 116 design premium jackup rigs at a total delivered cost
of approximately $100.0 million per rig.
- FOCUS ON THE GULF OF MEXICO. The Company will focus its operations
initially on the Gulf of Mexico market, which is the largest single market
for jackup rigs in the world. Furthermore, the presence of an established
pipeline and production infrastructure makes the Gulf of Mexico an
economically attractive market for continued exploration and production
activity.
33
<PAGE>
- UTILIZE SEACOR EXPERTISE. SEACOR will directly advise the Company
concerning strategic, financial and marketing matters through
representation on the Company's Management Committee (I.E., its board of
directors). Additionally, pursuant to the Services Agreement, SEACOR has
made available its Vice President, Finance to serve as the Company's
Senior Vice President and Chief Financial Officer. The Company believes
that SEACOR's marketing expertise and its extensive oil and gas company
client base will greatly assist the Company in the marketing of the Rigs.
- EMPLOY, RETAIN AND MOTIVATE EXPERIENCED AND INCENTIVIZED MANAGEMENT. The
Company will seek to employ, retain and motivate experienced senior
management and key employees through the implementation of an equity
participation and performance incentive program.
THE CONSTRUCTION CONTRACTS
SHIPYARD. The AMFELS shipyard, originally built and operated by Marathon
LeTourneau, Inc., has a long-term commitment to the offshore drilling industry
and many of the key personnel who designed and built LeTourneau jackup rigs in
the past are currently working there. The shipyard's newbuilding construction
experience includes 24 jackup rigs and two semisubmersibles. AMFELS is 100%
owned by Keppel FELS, Ltd., an established international shipyard and
engineering group based in Singapore.
SCHEDULED DELIVERY DATES. The Scheduled Delivery Dates of the Rigs will be
staggered. The Scheduled Delivery Date of the CHILES COLUMBUS is April 30, 1999
and the Scheduled Delivery Date of the CHILES MAGELLAN is September 10, 1999;
PROVIDED, HOWEVER, that the Scheduled Delivery Date will be extended by the
applicable period in the event of any delay caused by act or omission of the
Company, including failure to timely deliver to AMFELS any equipment to be
furnished by the Company, delays caused by the American Bureau of Shipping or
any governmental agency, changes, events of FORCE MAJEURE under the applicable
Construction Contract, or inability or failure of LeTourneau to perform its
obligations under the applicable (i) License Agreement or (ii) Kit Construction
Agreement, in each case between AMFELS and LeTourneau and dated April 30, 1997
(with respect to the CHILES COLUMBUS) and August 1, 1997 (with respect to the
CHILES MAGELLAN) (collectively, the "LeTourneau Agreements"), or if all subjects
and conditions under the applicable LeTourneau Agreements are not fully and
timely met. In addition, the Company has procured "delay-in-delivery" insurance
that provides for coverage of $30,000 per day per Rig up to a maximum of 360
days for delays in excess of 30 days up to a total combined limit of $21.6
million for both Rigs. Generally, such insurance provides coverage in the event
of delays resulting from certain events, including physical loss or damage to
the Rigs or the AMFELS shipyard during construction as a result of named perils,
including labor disturbances; delays in delivery of materials required for
construction as a result of such events; and delays resulting from restricted
access to the shipyard as a result of such events. However, the coverage
provided under such insurance is subject to significant exceptions and would not
provide protection against certain delays in delivery.
PURCHASE PRICE. The construction costs for the CHILES COLUMBUS are expected
to be approximately $83.5 million and the construction costs for the CHILES
MAGELLAN are expected to be approximately $87.8 million, in each case net of
capitalized interest.
TERMINATION OF THE CONSTRUCTION CONTRACTS. The Company may terminate a
Construction Contract upon the occurrence of certain events of default by
AMFELS. The events of default include the failure by AMFELS to perform, or the
breach by AMFELS of, any of its covenants, agreements or undertakings under the
applicable Construction Contract which AMFELS has failed to commence diligently
to cure within thirty (30) days or which remains uncured for ninety (90) days,
in each case after notice thereof by the Company to AMFELS, including such a
failure to deliver the respective Rig by its Scheduled Delivery Date.
In addition, a Construction Contract will be automatically terminated if,
prior to delivery of the related Rig, an actual or constructive total loss
occurs with respect to such Rig.
34
<PAGE>
WARRANTY OF QUALITY. For a period of 12 months following the date of
delivery of a Rig, AMFELS warrants to the Company that (i) AMFELS's workmanship
and materials shall be free from material defects, (ii) that systems designed,
supplied and installed by AMFELS will perform the functions intended by the
applicable Construction Contract and the specifications thereunder, and (iii)
that the components of the equipment manufactured by LeTourneau shall be free
from material defects in LeTourneau's workmanship and material and shall perform
in accordance with the applicable LeTourneau Agreement and the related
specifications (the "Warranty"). The Warranty commences on the date of delivery
of the applicable Rig to the Company and expires 12 months thereafter (provided,
however, that if any of the equipment of the Rig is put into service prior to
such delivery, the Warranty period begins with the commencement of such service
or operation insofar as such equipment is concerned) and is subject to certain
limitations set forth in the applicable Construction Contract.
The Warranty does not apply to any part of a Rig which has been misused, or
structurally repaired or altered by anyone other than AMFELS or its duly
authorized representative, or has been damaged because of its use, or the use of
any other materials or equipment, after the Company (or any other person or firm
operating the Rig or its equipment) has knowledge of such defect. Except for
certain components of the equipment manufactured by LeTourneau, equipment or
other components of the Rig sold to the Company pursuant to the Construction
Contract but not manufactured by AMFELS are not warranted to any extent by
AMFELS.
Pursuant to the Assignment, Assumption, Acknowledgement and Consent
Agreement, dated as of April 23, 1998, among the Company, the Owners and AMFELS,
the Company assigned to each Owner the Construction Contract for such Owner's
Rig.
THE CONSTRUCTION OPTIONS
The Company holds three sequential Construction Options for the following
rigs (collectively, the "Option Rigs") pursuant to an agreement, dated December
18, 1997 (the "Option Agreement"), with AMFELS: (i) a LeTourneau Super 116
("Option Rig No. 1"), which option will expire on July 31, 1998; (ii) contingent
upon the Company's entering into a construction contract for Option Rig No. 1,
one sister rig ("Option Rig No. 2"), which option must be exercised prior to
December 15, 1998; and (iii) contingent upon the Company's entering into a
construction contract for Option Rig No. 2, one sister rig, which option must be
exercised prior to March 31, 1999.
In the Option Agreement, AMFELS and the Company agreed to enter into an
amendment of the Construction Contract for the CHILES MAGELLAN to reflect the
terms of the Option Agreement to, among other things, provide for the ability to
provide a construction lender with a first preferred security interest in the
Option Rigs during the construction period.
In the Option Agreement, the Company agreed that as long as any Construction
Option remains outstanding and in effect, the Company will not order any similar
premium jackup rigs at a competing shipyard without first having received
AMFELS's approval in writing and that AMFELS will supply the requirements of the
Company for LeTourneau premium jackup rigs as contemplated by the Option
Agreement.
The Company estimates that it would incur total average costs of
approximately $100.0 million to construct and outfit each rig pursuant to the
exercise of any Construction Option, which includes construction costs payable
to AMFELS, the expected price of the required LeTourneau "Kit," costs of related
OFE, construction overhead and capitalized interest.
COMPETITION
The contract drilling industry is highly competitive. Customers sometimes
award contracts on a competitive bid basis, and although a customer selecting a
rig may consider, among other things, a
35
<PAGE>
contractor's safety record, crew quality and quality of service and equipment,
price is the major factor in determining the selection of a drilling contractor.
The Company believes that competition for drilling contracts will continue to be
intense for the foreseeable future because of the ability of contractors to move
rigs from areas of low utilization and dayrates to areas of greater activity and
relatively higher dayrates. Such movement or a decrease in drilling activity in
any major market could depress dayrates and could adversely affect utilization
of the Company's Rigs. See "--Offshore Contract Drilling Services."
OFFSHORE CONTRACT DRILLING SERVICES
The Company's contracts to provide offshore drilling services are expected
to vary in their terms and provisions. The Company expects that it may obtain
contracts through competitive bidding, although the Company may also be awarded
drilling contracts without competitive bidding. Drilling contracts generally
provide for a basic drilling rate on a fixed dayrate basis regardless of whether
such drilling results in a successful well. Drilling contracts may also provide
for lower rates during periods when the rig is being moved or when drilling
operations are interrupted or restricted by equipment breakdowns, adverse
weather or water conditions or other conditions beyond the control of the
Company. Under dayrate contracts, the Company would generally expect to pay the
operating expenses of the rig, including wages and the cost of incidental
supplies. Revenues from dayrate contracts are expected to account for a
substantial portion of the Company's revenues. In addition, the Company may work
a Rig under dayrate contracts pursuant to which the customer also agrees to pay
the Company an incentive bonus based upon performance.
A dayrate drilling contract generally extends over a period of time covering
either the drilling of a single well, a group of wells (a "well-to-well
contract") or a stated term (a "term contract") and may be terminated by the
customer in the event the drilling unit is destroyed or lost or if drilling
operations are suspended for a specified period of time as a result of a
breakdown of major equipment or in some cases due to other events beyond the
control of either party. In addition, it is expected that certain of the
Company's contracts may permit the customer to terminate the contract early by
giving notice and in some circumstances may require the payment of an early
termination fee by the customer. The contract term in many instances may be
extended by the customer exercising options for the drilling of additional wells
at fixed or mutually agreed terms, including dayrates.
The duration of offshore drilling contracts is generally determined by
market demand and the respective management strategy of the offshore drilling
contractor and its customers. In periods of rising demand for offshore rigs,
contractors typically prefer well-to-well contracts that give contractors the
flexibility to profit from increasing dayrates. In contrast, during these
periods customers with reasonably definite drilling programs typically prefer
longer term contracts to maintain drilling prices at the lowest level possible.
Conversely, in periods of decreasing demand for offshore rigs, contractors
generally prefer longer term contracts to preserve dayrates at existing levels
and ensure utilization, while the customers prefer well-to-well contracts that
allow them to obtain the benefit of lower dayrates. In general, the Company
expects to seek to have a reasonable balance of single well, well-to-well and
term contracts to minimize the downside impact of a decline in the market while
still participating in the benefit of increasing dayrates in a rising market.
QUALITY
The Company expects to maintain a program to continuously improve quality
and safety on the Rigs and to foster a commitment to quality of service, safety
and the environment. It is expected that the Company's quality system will
provide for formal procedures to assist in continuous improvement in the
Company's efforts to exceed customer expectations in safety, environmental
concerns, equipment maintenance, rig enhancements, material handling and
personnel training and performance.
36
<PAGE>
GOVERNMENTAL REGULATION
The Company's operations will be subject to numerous federal, state and
local environmental laws and regulations that relate directly or indirectly to
its operations, including certain regulations controlling the discharge of
materials into the environment, requiring removal and clean-up under certain
circumstances, or otherwise relating to the protection of the environment. For
example, the Company may be liable for damages and costs incurred in connection
with oil spills for which it is held responsible. Laws and regulations
protecting the environment have become increasingly stringent in recent years
and may in certain circumstances impose "strict liability" and render a company
liable for environmental damage without regard to negligence or fault on the
part of such company. Such laws and regulations may expose the Company to
liability for the conduct of or conditions caused by others, or for acts of the
Company that were in compliance with all applicable laws at the time such acts
were performed. The application of these requirements or the adoption of new
requirements could have a material adverse effect on the Company.
The United States Oil Pollution Act of 1990 ("OPA '90") and similar
legislation enacted in Texas, Louisiana and other coastal states address oil
spill prevention and control and significantly expand liability exposure across
all segments of the oil and gas industry. OPA '90, such similar legislation and
related regulations impose a variety of obligations on the Company related to
the prevention of oil spills and liability for damages resulting from such
spills. OPA '90 imposes strict, and with limited exceptions, joint and several
liability upon each responsible party for oil removal costs and a variety of
public and private damages. OPA '90 also imposes ongoing financial
responsibility requirements on a responsible party. A failure to comply with
such ongoing requirements or inadequate cooperation in a spill may subject a
responsible party, including in some cases the Company, to civil or criminal
enforcement action. OPA '90 also requires the U.S. Minerals Management Service
to promulgate regulations to implement the financial responsibility requirements
for offshore facilities. If implemented as written, the financial responsibility
requirements of OPA '90 could have the effect of significantly increasing the
amount of financial responsibility that oil and gas operators must demonstrate
to comply with OPA '90. While industry groups and marine insurance carriers are
seeking modification of these requirements, implementation of these requirements
in their current form could adversely affect the ability of some of the
Company's prospective customers to operate in U.S. waters, which could have a
material adverse effect on the Company.
The Federal Water Pollution Control Act of 1972, commonly referred to as the
Clean Water Act ("CWA"), prohibits the discharge of certain substances into the
navigable waters of the U.S. without a permit. The regulations implementing the
CWA require permits to be obtained by an operator before certain exploration or
drilling activities occur. Violations of monitoring, reporting and permitting
requirements can result in the imposition of civil and criminal penalties. The
provisions of the CWA can also be enforced by citizens' groups. Many states have
similar laws and regulations.
The Outer Continental Shelf Lands Act authorizes regulations relating to
safety and environmental protection applicable to lessees and permittees
operating on the Outer Continental Shelf. Specific design and operational
standards may apply to Outer Continental Shelf vessels, rigs, platforms,
vehicles and structures. Violation of lease terms relating to environmental
matters or regulations issued pursuant to the Outer Continental Shelf Lands Act
can result in substantial civil and criminal penalties as well as potential
court injunctions curtailing operations and the cancellation of leases. Such
enforcement liabilities can result from either governmental or citizen
prosecution.
The Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), currently exempts crude oil, and the Resource
Conservation and Recovery Act, as amended ("RCRA"), currently exempts certain
drilling materials, such as drilling fluids and production waters, from the
definitions of hazardous substances and hazardous wastes. However, the Company's
operations may involve the use or handling of other materials, such as
fracturing fluids or acids, that may be classified as environmentally hazardous
substances or wastes. There can be no assurance that such exemption will be
preserved in future amendments of such acts, if any, or that more stringent laws
and regulations protecting
37
<PAGE>
the environment will not be adopted. CERCLA assigns strict liability to each
responsible party, as defined, for all response and remediation costs, as well
as natural resource damages. Few defenses exist to the liability imposed by
CERCLA.
The Company's operations may involve the generation, use or handling of
materials, such as unused fracturing fluids or acids, that may be classified as
hazardous waste, and that are subject to RCRA and comparable state statutes. The
Environmental Protection Agency ("EPA") and various state agencies have limited
the disposal options for certain hazardous and nonhazardous wastes and are
considering the adoption of stricter handling and disposal standards for
nonhazardous wastes. RCRA currently exempts certain drilling materials, such as
drilling fluids and production waters, from the definitions of hazardous wastes.
There can be no assurance that such exemption will be preserved in future
amendments of such acts, if any, or that more stringent laws and regulations
protecting the environment will not be adopted.
The operations of the Company are subject to the Clean Air Act, as amended,
and comparable state statutes. Traditional air quality programs relating to the
prevention of significant deterioration of air quality in areas with
unacceptable pollution levels ("nonattainment areas") restrict drilling in
affected areas. Amendments to the Clean Air Act were adopted in 1990 and contain
provisions that may result in the imposition over the next decade of certain
requirements with respect to air emissions, which requirements may require
capital expenditures by the Company. The EPA is currently developing regulations
to implement these requirements. Pursuant to a mandate of the Clean Air Act, the
EPA, together with other agencies of the federal government, is conducting a
study of the effects of emissions from drilling activities in nonattainment
areas on the Outer Continental Shelf. Upon completion of the study, these
agencies will determine whether additional regulatory requirements are necessary
for these nonattainment areas. Any greater degree of regulation in nonattainment
areas would increase the cost associated with operation in those areas.
INDEMNIFICATION AND INSURANCE
The Company generally expects to be able to obtain contractual
indemnification pursuant to which the Company's customers would agree to protect
and indemnify the Company to some degree from liability for reservoir, pollution
and environmental damages, but there can be no assurance that the Company can
obtain such indemnities in all of its contracts, that the level of
indemnification that can be obtained will be meaningful, that such
indemnification agreements will be enforceable or that the customer will be
financially able to comply with its indemnity obligations. In addition, the
Company expects to maintain insurance coverage against "loss-of-hire," property
damage, war risk (in the case of certain operations outside the U.S.), general
liability and environmental liabilities, including pollution caused by sudden
and accidental oil spills, but there can be no assurance that such insurance
will continue to be available or carried by the Company or if available and
carried will be adequate to cover the Company's loss or liability in many
circumstances. Moreover, any such insurance is expected to be subject to
substantial deductibles and to provide for premium adjustments based on claims.
PROPERTY
The Company leases approximately 4,500 square feet of office space located
at 11200 Westheimer, Suite 410, Houston, Texas 77042-3227, where its telephone
number is (713) 339-3777.
EMPLOYEES
As of March 31, 1998, the Company had 11 employees. The Company believes
that its employee relations are good.
LEGAL PROCEEDINGS
The Company is not a party to any litigation as of the date of this
Prospectus.
38
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS
The executive officers of the Company are elected by its Management
Committee (as defined) to serve until their successors are duly elected and
qualified, or until their earlier death, resignation, disqualification or
removal from office. Information with respect to the current executive officers
of the Company is set forth below.
<TABLE>
<CAPTION>
AGE AS OF
NAME MARCH 1, 1998 POSITION
- ------------------------------------ ------------------- ------------------------------------------------------------
<S> <C> <C>
William E. Chiles................... 49 President and Chief Executive Officer
Dick H. Fagerstal................... 37 Senior Vice President, Chief Financial Officer and Secretary
Donald B. Gregg..................... 59 Senior Vice President--Operations and Engineering
William H. Hopkins.................. 56 Vice President--Human Resources
William A. Thorogood................ 53 Vice President--Controller and Assistant Secretary
</TABLE>
WILLIAM E. CHILES is the President and Chief Executive Officer and a Manager
of the Company. In March 1997, Mr. Chiles and Donald B. Gregg led the formation
of COI. Mr. Chiles has extensive management experience in offshore drilling
operations and until March 1997, was Senior Vice President-- Drilling Operations
of Cliffs Drilling Company, responsible for the operation of its worldwide
fleet, and President and CEO of Southwestern Offshore Corporation, its wholly
owned subsidiary. From 1992 to May 1996, Mr. Chiles was President and Chief
Executive Officer of Southwestern Offshore Corporation, a company he founded in
1992 and which was acquired by Cliffs Drilling Company in 1996. Mr. Chiles co-
founded Chiles Offshore Corporation in 1987 and in 1977 he co-founded Chiles
Drilling Company, each of which was an offshore contract drilling company.
DICK H. FAGERSTAL is the Senior Vice President, Chief Financial Officer and
Secretary and a Manager of the Company. Mr. Fagerstal also serves as Vice
President, Finance of SEACOR but devotes a substantial portion of his time to
the financial affairs of the Company. Until the end of July 1997 and for the
previous 12 years, Mr. Fagerstal worked as a bank officer with Den norske Bank
ASA, New York Branch (and its predecessor Den norske Creditbank AS), which is
one of the world's largest lenders to companies involved in the offshore service
industry. During the last seven years in such position, Mr. Fagerstal had
primary responsibility for offshore and shipping client relationships in the
North American market covering many of the offshore drilling rig and offshore
supply vessel companies.
DONALD B. GREGG is the Senior Vice President--Operations and Engineering the
Company. He joined with Mr. Chiles in the formation of COI in March 1997. In
1994, Mr. Gregg formed and served as the President of International Renovators,
Inc., a company which provided technical assistance, engineering and regulatory
consulting services to the offshore drilling industry, until March 1997. Until
May 1994, Mr. Gregg was employed in various positions at Chiles Drilling Company
and its successors, including Vice President Engineering, Vice President
Operations and Vice President Marketing.
WILLIAM H. HOPKINS is the Vice President--Human Resources of the Company.
Mr. Hopkins joined the Company in 1997 after serving three years as an area
executive and senior consultant for Right Management Consultants, an
international human resources management consulting firm providing services to
the contract drilling and other oilfield service industries. From 1992 to 1995,
Mr. Hopkins was Director of Safety, Training and Environmental Management of
Tidewater, Inc., a major oilfield service company.
WILLIAM A. THOROGOOD is the Vice President and Controller the Company. From
1993 until May 1996, Mr. Thorogood served as Vice President--Finance of
Southwestern Offshore Corporation and thereafter until March 1997, served as
Vice President--Finance of Southwestern Offshore Corporation, which became a
subsidiary of Cliffs Drilling Company in May 1996. Mr. Thorogood is a certified
public accountant.
39
<PAGE>
EXECUTIVE COMPENSATION
The following table shows for the fiscal year ended December 31, 1997 the
cash compensation paid by the Company, and a summary of certain other
compensation paid or accrued for such year, to its Chief Executive Officer (the
"Named Executive Officer") for service in all capacities with the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(2)
----------------------- ALL OTHER
NAME AND PRINCIPAL POSITION(1) SALARY COMPENSATION(3)
- ----------------------------------------------------------------------- ----------------------- -------------------
<S> <C> <C>
William E. Chiles...................................................... $ 97,984 $ 639
President and Chief Executive Officer
</TABLE>
- ------------------------
(1) Pursuant to Instruction 1 to Item 402(a)(3) of Regulation S-K, no disclosure
is provided for any other executive officer of the Company because no other
executive officer of the Company had total annual salary and bonus in excess
of $100,000 for the fiscal year ended December 31, 1997.
(2) Amounts exclude perquisites and other personal benefits because such
compensation did not exceed the lesser of $50,000 or 10% of the total annual
salary reported for the Named Executive Officer.
(3) The amount shown was paid for life insurance.
Effective May 1, 1998, the Company adopted a defined contribution plan (the
"Retirement Plan"), designed to qualify under Section 401(k) of the Code,
covering substantially all of its employees. Pursuant to the Retirement Plan,
the Company will match employees' contributions to the Retirement Plan in an
amount equal to 50% of such contributions, up to 6% of the participant's
eligible compensation.
EMPLOYMENT AGREEMENT
William E. Chiles is presently serving as President and Chief Executive
Officer of the Company under an Employment Agreement, effective as of November
1, 1997, between Mr. Chiles and the Company (the "Employment Agreement"),
pursuant to which Mr. Chiles will continue to serve in such capacity until
November 2000 at his current base salary of $200,000 per annum. The Employment
Agreement also provides Mr. Chiles with severance benefits, disability and
health insurance, approximately $1.2 million in term life insurance,
reimbursement for various expenses and such other compensation, including
bonuses, that may be agreed to by the Management Committee of Chiles, in its
sole discretion. Under the Employment Agreement, Mr. Chiles's salary will be
reviewed for adjustment annually in accordance with industry standards, taking
into account his performance, the Company's scope of operations, industry
conditions and the overall performance of the Company relative to its peers.
MEMBERSHIP INTEREST OPTION PLAN
The Company recently adopted the Chiles Offshore LLC 1998 Equity Option Plan
(the "Option Plan"). The objectives of the Option Plan are (i) to attract and
retain management personnel with the training, experience and ability to enable
them to make a substantial contribution to the success of the Company's
business, (ii) to motivate management personnel by means of growth-related
incentives to achieve long range goals and (iii) to further the alignment of
interests of participants with those of the Company's equity holders through
opportunities for increased equity or equity-based ownership in the Company.
The Option Plan authorizes the issuance of options to acquire up to 5.0% of
the then outstanding Membership Interests on a fully diluted basis, without
triggering pre-emptive rights under the Operating Agreement, so long as such
options are exercisable at a price that is not less than the price per
percentage Membership Interest paid in the Equity Financing. The Option Plan is
administered by an Option Committee of the Management Committee of Chiles (the
"Option Committee"). Pursuant to the Option Plan, the Company may grant to key
employees and consultants of the Company or any of the Company's subsidiaries
options to acquire Group D Membership Interests. Such options are not considered
incentive stock options under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"). The terms of any such grant will be determined by the
Option Committee and set forth in a separate grant agreement except for such
options that were granted to employees under an Initial Grant (as defined in
40
<PAGE>
the Option Plan). The Option Plan sets forth the exercise price and maximum
amount of the Initial Grant. Other than the Initial Grant, the exercise price
will be at least equal to 100% of the fair market value of the Membership
Interests on the date of grant.
The Option Committee may provide that an optionee may pay for shares upon
exercise of an option: (i) in cash; (ii) by certified bank check; (iii) by
immediately available federal funds delivered to an account designated by the
Company; or (iv) by personal check of the optionee, provided that such check
will not be deemed to have been received until the Company shall have collected
thereon. The options expire ten years after the date of grant. No options
granted under the Option Plan may be transferred except under limited exceptions
to family members or trusts for the benefit of family members. See "Certain
Relationships and Related Transactions--Option Repurchase Obligation."
The following table sets forth the options to acquire Membership Interests
in the Company that were outstanding as of March 31, 1998, all of which
constitute Initial Grants under the Option Plan:
<TABLE>
<CAPTION>
OPTION GRANTS
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NUMBER OF UNITS PERCENT OF TOTAL
UNDERLYING OPTIONS AVAILABLE
OPTIONS FOR GRANT EXERCISE PRICE EXPIRATION
NAME GRANTED(1) TO EMPLOYEES(2) ($/UNIT)(3) DATE(4)
- ------------------------------------------ ----------------- ----------------- --------------- -------------------
William E. Chiles......................... 630 12.60% $ 650 March 31, 2008
George Bruce Brumley...................... 440 8.80% $ 650 March 31, 2008
Dick H. Fagerstal......................... 630 12.60% $ 650 March 31, 2008
Donald B. Gregg........................... 630 12.60% $ 650 March 31, 2008
William H. Hopkins........................ 440 8.80% $ 650 March 31, 2008
Gabriel Padilla........................... 440 8.80% $ 650 March 31, 2008
Adonis A. Rials........................... 113 2.26% $ 650 March 31, 2008
William A. Thorogood...................... 440 8.80% $ 650 March 31, 2008
Lester G. Tingle.......................... 190 3.80% $ 650 March 31, 2008
----- -----
Total..................................... 3,953 79.06%
</TABLE>
- ------------------------
(1) One "unit" is equivalent to a .001 Membership Interest in the Company on a
fully diluted basis. The Option Plan authorizes the issuance of options to
acquire up to 5,000 such "units" which, in the aggregate, are equivalent to
5.0% of the Membership Interests in the Company on a fully diluted basis. As
of March 31, 1998, options for 947 "units" were reserved for future Rig
supervisors and options for 100 "units" were reserved for other future
personnel.
(2) The percentage is based on the total of 5,000 "units" for which options may
be granted under the Option Plan. As of March 31, 1998, the options for 947
"units" reserved for issuance to future Rig supervisors constitute 18.94% of
such total number of "units" and the options for 100 "units" reserved for
issuance to other future personnel constitute 2.00% of such total number of
"units"
(3) The exercise price is approximately equivalent to the price per "unit" paid
by investors on December 16, 1997 in connection with the final phase of the
Equity Financing.
(4) The options vest at a rate of 1/3 of the "units" granted per year, beginning
on the first anniversary of the date of grant. No option may be exercised
unless and until both of the Rigs are delivered by AMFELS and accepted by
the Company.
MANAGEMENT COMMITTEE
The Management Committee of Chiles presently consists of seven Managers.
Other than Messrs. Chiles and Fagerstal, none of the Managers is an officer or
employee of the Company. Up to four Managers may be designated by a majority in
interest of the Group A Members (at the date hereof, SEACOR), up to two Managers
may be designated by a majority in interest of the Group B Members and up to one
Manager may be designated by a majority in interest of the Group C Members. See
"Principal Members" and "Certain Relationships and Related
Transactions--Operating Agreement--Governance." Managers are elected by the
respective Group A, B or C Members to serve until their successors are duly
41
<PAGE>
elected and qualified, or until their earlier death, resignation,
disqualification or removal from office. Information with respect to the current
Managers of Chiles is set forth below. For biographical information concerning
Messrs. Chiles and Fagerstal, see "--Executive Officers."
<TABLE>
<CAPTION>
AGE AS OF
NAME MARCH 1, 1998 POSITION
- ------------------------------------ ------------------- ------------------------------------------------------------
<S> <C> <C>
Charles Fabrikant................... 53 Chairman of the Management Committee
Randall Blank....................... 47 Manager
Timothy J. McKeand.................. 48 Manager
Dick H. Fagerstal................... 37 Manager, Senior Vice President, Chief Financial Officer and
Secretary
William E. Chiles................... 49 Manager, President and Chief Executive Officer
Robert Pierot, Jr................... 39 Manager
Jonathan B. Fairbanks............... 31 Manager
</TABLE>
CHARLES FABRIKANT has been Chairman of the Board and Chief Executive Officer
of SEACOR since December 1989, and has served as a director of SEACOR's
subsidiaries since December 1989. He has been President of SEACOR since October
1992. For more than the past five years, Mr. Fabrikant has been the Chairman of
the Board and Chief Executive Officer of SCF Corporation and President of
Fabrikant International Corporation, each a privately owned corporation engaged
in marine operations and investments. Since January 1992, Mr. Fabrikant has been
Chairman of the Board and Chief Executive Officer of National Response
Corporation, which, since March 1995, has been a wholly-owned subsidiary of
SEACOR. Mr. Fabrikant is a licensed attorney admitted to practice in the State
of New York and in the District of Columbia.
RANDALL BLANK has been a Manager of Chiles since August 1997 and serves as
Vice President, Treasurer of the Company. Mr. Blank has been Executive Vice
President and Chief Financial Officer of SEACOR since December 1989 and has been
its Secretary since October 1992. From December 1989 to October 1992, Mr. Blank
was Treasurer of SEACOR. In addition, Mr. Blank has been a director of certain
of SEACOR's subsidiaries since January 1990. Mr. Blank has served as Vice
President of SEACOR Rigs (as defined) since August 1997.
TIMOTHY J. MCKEAND has been Vice President-Marketing of SEACOR since 1989
and has been Vice President of certain of SEACOR's subsidiaries that are active
in domestic operations.
ROBERT PIEROT, JR. has been a Manager of Chiles since December 1997. Mr.
Pierot is a director of Jacq. Pierot Jr. & Sons, Inc., a private corporation
engaged in marine brokerage and marine appraisals. Mr. Pierot also serves as
President of Pierot Enterprises, Inc., a closely held corporation engaged in
marine and other investments.
JONATHAN B. FAIRBANKS has been a Manager of Chiles since December 1997. Mr.
Fairbanks has been a partner in Bassoe Offshore A/S, a brokerage firm serving
the offshore drilling and service industry, since 1990.
MANAGER COMPENSATION
Managers of the Company currently are not paid any fees or additional
compensation for service as members of the Management Committee or any committee
thereof, irrespective of whether or not they are employees of the Company or any
of its subsidiaries or of SEACOR or any other affiliated companies. Each Manager
of the Company who is not an employee of the Company or any of its subsidiaries
is paid the reasonable costs and expenses incurred by such Manager in relation
to his services as such.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the Company's fiscal year ended December 31, 1997, the Company had no
compensation committee, although the Management Committee performed certain
similar functions with respect to the compensation of the Company's Chief
Executive Officer. Decisions concerning compensation of executive officers were
made during such fiscal year by persons who were members of the Company's
Management Committee, including William E. Chiles and Dick H. Fagerstal, who
were executive officers of the Company at such time.
42
<PAGE>
PRINCIPAL MEMBERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The table below sets forth certain information with respect to each
beneficial owner, directly or indirectly, of more than five percent of the
outstanding equity interests of the Company as of the date of this Prospectus.
<TABLE>
<CAPTION>
PERCENTAGE OF BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP
- -------------------------------------------------------------------------------- ---------------------------------
<S> <C>
SEACOR Offshore Rigs Inc.(1).................................................... 55.38%
1370 Avenue of the Americas
25th Floor
New York, NY 10019-4602
COI, LLC........................................................................ 13.85%
11200 Westheimer
Suite 410
Houston, TX 77042-3227
</TABLE>
- ------------------------
(1) SEACOR Offshore Rigs Inc. is a wholly owned subsidiary of SEACOR.
SECURITY OWNERSHIP OF MANAGEMENT AND MANAGERS
The following table shows the amount and nature of beneficial ownership of
the equity interests of the Company beneficially owned by each Manager of the
Company, each Named Executive Officer of the Company and all Managers and
executive officers of the Company as a group, as of the date of this Prospectus.
Except as otherwise noted, the named beneficial owner has sole voting power and
sole investment power, except to the extent that authority is shared by a spouse
under applicable law, with respect to the equity interests shown below.
<TABLE>
<CAPTION>
PERCENTAGE OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP
- --------------------------------------------------------------------------------- ---------------------------------
<S> <C>
William E. Chiles................................................................ -- (1)
Dick H. Fagerstal................................................................ --
Charles Fabrikant................................................................ *
Randall Blank.................................................................... *
Timothy J. McKeand............................................................... *
Jonathan B. Fairbanks............................................................ 1.54%(2)
Robert Pierot, Jr................................................................ 4.62%(3)
All Managers and Executive Officers as a Group................................... 7.08%
</TABLE>
- ------------------------
* Less than one percent.
(1) Mr. Chiles owns 22.5% of the equity interests of COI, which owns 13.85% of
the equity interests of the Company.
(2) All of such interest is held by Bassoe Rig Partners Ltd., an entity with
respect to which control is shared by Mr. Fairbanks.
(3) All of such interest is held by Pierot Enterprises, Inc., an entity
controlled by Mr. Pierot.
OPERATING AGREEMENT
Chiles is managed pursuant to an Amended and Restated Operating Agreement
among its Members. See "Certain Relationships and Related
Transactions--Operating Agreement."
43
<PAGE>
THE EQUITY FINANCING
The Company was formed in August 1997 for the purpose of constructing,
owning and operating a fleet of state-of-the-art premium jackup offshore
drilling rigs. At formation, SEACOR contributed $8.85 million in cash to the
capital of the Company (which amount was paid directly to third parties on
behalf of the Company) and COI contributed $0.36 million in cash to the capital
of the Company, together with the Construction Contracts, construction in
progress, certain office equipment and other rights, properties and liabilities
with an agreed-upon value of $8.49 million. The historic cost of such assets
contributed by COI was $2.26 million. The difference between the $8.49 million
agreed-upon value and the historic cost of COI's contributed assets, $6.23
million, has been recorded in the accompanying balance sheet as rigs under
construction and equipment. COI and a predecessor (formed in March 1997) had
been organized by Mr. Chiles and its other owners for the purpose of entering
into the Construction Contracts, engaging in related rig design, engineering,
procurement and financing activities and preparing for commencement of business
operations. Pursuant to the final phase of the Equity Financing, SEACOR
contributed an additional $12.15 million in cash to the Company and $14.0
million in cash advances previously made to the Company by SEACOR, and the
Company accepted cash subscriptions for the purchase of equity interests from
institutional and individual accredited investors aggregating $20.0 million. At
March 31, 1998, the Company had cash on hand of approximately $18.8 million and
no indebtedness for borrowed money.
CONTROLLING MEMBER
As of March 31, 1998, SEACOR Offshore Rigs Inc., a Delaware corporation
("SEACOR Rigs") and a wholly-owned subsidiary of SEACOR, beneficially owns
55.38% of the Membership Interests in Chiles. By virtue of its ownership of a
majority of the Membership Interests in Chiles, SEACOR Rigs, which is controlled
by SEACOR, will be in a position to control actions that require consent of a
Majority in Interest (as defined in the Operating Agreement) of the Members of
Chiles, and, by virtue of the terms of the Operating Agreement, SEACOR Rigs has
the right to designate the Group A Managers, and thus a majority of the members
of the Management Committee of Chiles. In addition, certain officers, directors
or employees of SEACOR serve on the Management Committee of Chiles. See
"Management--Management Committee" and "--Executive Officers."
SEACOR is a major provider of offshore marine services to the oil and gas
exploration and production industry and is one of the leading providers of oil
spill response services to owners of tank vessels and oil storage, processing
and handling facilities. As of December 31, 1997, SEACOR operated a diversified
fleet of 306 vessels primarily dedicated to servicing offshore oil and gas
exploration and production facilities in the U.S. Gulf of Mexico, the North Sea,
offshore West Africa, Mexico, the Far East, Latin America and the Mediterranean.
SEACOR's offshore service vessels deliver cargo and personnel to offshore
installments, handle anchors for drilling rigs and other marine equipment,
support offshore construction and maintenance work and provide standby support.
SEACOR also furnishes vessels for special projects such as well stimulation,
seismic data gathering, freight hauling and line handling. In connection with
its offshore marine services, SEACOR, through Energy Logistics, Inc., a joint
venture with Baker Energy, a unit of the Michael Baker Corporation, a U.S.
public company, also offers logistics services for the offshore industry,
including the coordination and provision of marine, air and land transportation,
materials handling and storage, inventory control and "just-in-time"
procurement. In 1997, the consolidated revenues of SEACOR were approximately
$347.0 million. The principal executive offices of SEACOR are located at 11200
Westheimer, Suite 850, Houston, Texas 77042, where its telephone number is (713)
782-5990.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Senior Vice President and Chief Financial Officer of the Company, Dick
H. Fagerstal, serves as Vice President, Finance of SEACOR. Mr. Fagerstal has
extensive experience in arranging and structuring financing for companies in the
offshore industry. Mr. Fagerstal will be primarily responsible for managing
44
<PAGE>
the capitalization of the Company and the Company will pay SEACOR a management
fee for the value of Mr. Fagerstal's services (together with reimbursement of
all related out-of-pocket expenses) based on a formula which will, among other
things, take into account the typical compensation for this position and the
percentage of Mr. Fagerstal's time which is allocated to activities related to
the Company.
Charles Fabrikant, the Chairman and CEO of SEACOR, serves as the Chairman of
the Management Committee of the Company. Randall Blank, Executive Vice President
and Chief Financial Officer of SEACOR, is a member of the Management Committee
of the Company.
In addition to the management fee to be paid as described above with respect
to the services of Mr. Fagerstal, in the event SEACOR or any of its consolidated
subsidiaries, including SEACOR Rigs, provides management, administrative,
financial or investment banking-type services to the Company or services in
connection with any future rig transactions, such SEACOR entities shall be
entitled to receive reasonable fees and reimbursement of expenses not in excess
of fees charged by unrelated third parties for comparable services.
SERVICES AGREEMENT
The Company and SEACOR have entered into a Management and Administrative
Services Agreement, dated as of February 27, 1998 (the "Services Agreement"),
pursuant to which SEACOR agreed to continue to provide the services of Dick H.
Fagerstal to assist in the management of the Company and SEACOR agreed to
perform certain administrative and technical services on behalf of the Company.
Such services include general management and financial services, including
periodic advice and consultation in connection with corporate, legal, finance,
accounting, tax, marketing, operations and other matters that may be required
for the Company's day-to-day operations. Under the Services Agreement, the
Company agreed to pay a fee to SEACOR for Mr. Fagerstal's services not to exceed
$15,000 per month and such other fees for services of others not to exceed the
reasonable value thereof and to reimburse SEACOR for all out-of-pocket expenses
related to the provision of such services. The Services Agreement may be
terminated at either party's option upon 60 days' notice to the other party. In
addition, the Company has agreed to indemnify and hold harmless SEACOR for all
claims and damages arising from the provision of services by SEACOR under the
Services Agreement, unless due to the gross negligence or willful misconduct of
SEACOR.
OPERATING AGREEMENT
SEACOR Rigs, COI and the investors pursuant to the Equity Financing
(together with SEACOR Rigs and COI, herein referred to collectively as the
"Members" and individually as a "Member") have entered into an Amended and
Restated Operating Agreement, dated as of December 16, 1997 (as amended by
Amendment No. 1 thereto, dated effective as of April 28, 1998, the "Operating
Agreement"), providing for the management of the Company and certain limitations
on the transferability of the membership interests in the Company held by them
(the "Membership Interests"). The following is a description of certain material
terms of the Operating Agreement of the Company, which sets forth matters
related to the conduct of the Company's business and the purpose and powers of
the Company, its Management Committee and officers and the rights, privileges
and preferences of its Members.
ORGANIZATION AND DURATION. The Company was organized as a limited liability
company under the Delaware Limited Liability Company Act (the "Delaware Act") on
August 5, 1997. The term of the Company will continue until the close of
business on August 1, 2032 or until an earlier dissolution pursuant to the
Operating Agreement. The existence of the Company as a separate legal entity
will continue until cancellation of the Certificate of Formation of the Company
in the manner required by the Delaware Act.
PURPOSE. The purposes of the Company, and the nature of the business to be
conducted and promoted by the Company, are (a) to manage and supervise either
directly or through one or more other entities owned and controlled directly or
indirectly by the Company, all aspects of the construction of premium jackup
rigs, and, upon their completion, manage all aspects of their operation and
receive
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therefor certain construction supervision fees and management fees, (b) to form
and act as managing general partner of any such entity that is a partnership,
(c) to engage in any other lawful act or activity for which limited liability
companies may be formed under the Delaware Act and (d) to engage in any and all
activities necessary, advisable, convenient or incidental to the foregoing.
RESTRICTIONS ON TRANSFERABILITY. Generally, the Members may not sell,
transfer, hypothecate or pledge any of their Membership Interests.
Notwithstanding the foregoing, a Member that is a natural person may freely
transfer its Membership Interest to certain immediate family members and a
Member that is not a natural person may freely transfer its Membership Interests
to certain affiliates. Members may also transfer Membership Interests pursuant
to the Right of First Offer, Tag-Along Rights and Drag-Along Rights described
below.
RIGHT OF FIRST OFFER. In the event a Member proposes to transfer its
Membership Interest to a proposed purchaser, in whole or part, each other Member
will have the option to purchase a portion of such Membership Interest on a pro
rata basis at the same price and on the same terms as such proposed purchaser
(provided that the current Members, taken as a whole, purchase the entire
interest offered for sale).
TAG-ALONG RIGHTS. Generally, no Member or group of Members may sell, in one
transaction or a series of related transactions, 20% or more of all the
Membership Interests, unless the terms of such sale require that the proposed
purchaser offer to each other Member the right to participate in the sale on a
pro rata basis.
DRAG-ALONG RIGHTS. Generally, any Member or group of Members selling all of
their holdings aggregating more than a majority of all the Membership Interests
may require all of the other Members to sell all their Membership Interests to
the proposed purchaser on the same terms and conditions.
PRE-EMPTIVE RIGHTS. Generally, each Member will have a right to purchase
all or a portion of its pro rata share of additional Membership Interests to be
sold by the Company. Members have no pre-emptive rights with respect to
Membership Interests granted pursuant to the Option Plan.
"PIGGYBACK" REGISTRATION RIGHTS. Generally, if the Company seeks to
register any class of its equity securities in a primary public offering under
the Securities Act pursuant to an effective registration statement, each Member
will have the right to "piggy back" or sell its Membership Interest, or shares
received in exchange therefor, as part of the registered offering.
GOVERNANCE. The Company will be managed by a Management Committee comprised
of up to seven Managers. SEACOR Rigs (together with its permitted successors or
assigns, the "Group A Members") shall designate up to four Managers and COI
(together with its permitted successors or assigns, the "Group B Members") shall
designate up to two Managers, of which one will be William E. Chiles so long as
he is President and Chief Executive Officer of the Company. In addition, the new
investors pursuant to the Equity Financing (together with their respective
permitted successors or assigns, the "Group C Members"), by vote of the holders
of a majority of Membership Interests held by such investors, will have the
right to designate one Manager. The Managers initially designated by SEACOR Rigs
were Charles Fabrikant, Randall Blank, Timothy J. McKeand and Dick H. Fagerstal.
The Managers initially designated by COI were William E. Chiles and Jonathan B.
Fairbanks. The initial designee of the new investors was Robert Pierot, Jr. The
Management Committee acts by majority vote. A quorum for taking action at any
meeting of the Management Committee requires the presence of at least four
Managers. Charles Fabrikant, Chairman and CEO of SEACOR, serves as the Chairman
of the Management Committee of the Company.
OFFICERS. The Management Committee has the authority to appoint the
officers of the Company. The Management Committee may appoint such officers as
it deems appropriate, which may include a President and Chief Executive Officer,
Senior Vice President, Vice President, Chief Operating Officer, Chief Financial
Officer, Treasurer, Controller or Secretary.
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MEMBERSHIP INTEREST OPTION PLAN. The Company may issue up to five (5%)
percent, on a fully-diluted basis, of additional Membership Interests in the
Company in the form of options to employees, directors, advisors or consultants
to the Company or its subsidiaries, without triggering pre-emptive rights under
the Operating Agreement, so long as such options are exercisable at a price that
is not less than the price per percentage Membership Interest paid in the Equity
Financing. The Option Committee will control the granting and vesting terms of
any such options. See "Management--Membership Interest Option Plan" and
"--Option Repurchase Obligation."
LIMITED LIABILITY. Generally, the debts, obligations and liabilities of a
Delaware limited liability company, whether arising in contract, tort or
otherwise, are solely the debts, obligations and liabilities of the limited
liability company, and no owner of an equity interest therein is obligated
personally for any such debt, obligation or liability of the limited liability
company solely by reason of being an owner thereof.
INDEMNIFICATION. The Operating Agreement provides that the Company will
indemnify the Members, members of the Management Committee and the officers of
the Company, and certain other persons, from liabilities arising in the course
of such persons' service to the Company, provided that (i) the indemnitee acted
in good faith and in a manner which such indemnitee believed to be in or not
opposed to the interests of the Company and, with respect to any criminal
proceeding, had no reasonable cause to believe such indemnitee's conduct was
unlawful and (ii) the indemnitee's conduct did not constitute actual fraud,
gross negligence or willful or wanton misconduct. Such liabilities include all
losses, claims, demands, costs, damages, liabilities, expenses of any nature
(including reasonable attorneys' fees and disbursements), judgments, fines,
settlements and other amounts arising from any and all claims, demands, actions,
suits or proceedings, whether civil, criminal, administrative or investigative,
in which an indemnitee may be involved, or threatened to be involved, as a party
or otherwise, arising out of or incidental to the business of the Company,
including, without limitation, liabilities under the Federal and state
securities laws.
BROKERAGE FEE
Bassoe will be paid a brokerage fee of $505,000 upon delivery of each Rig
presently under construction at AMFELS. Such brokerage fees and commissions will
be included in the cost of the Rigs paid to AMFELS. Bassoe also has an exclusive
right to broker future sale, purchase and charter transactions with respect to
the Rigs, provided that its rates are not in excess of rates charged by
unrelated third parties in similar transactions.
OPTION REPURCHASE OBLIGATION
Pursuant to the Option Plan, the Company has agreed to repurchase any
options granted under the Option Plan that have vested and are exercisable at
their expiration if there has been no initial public offering of the Company's
Membership Interests prior to such time. The value attributed to such options
under such repurchase shall be determined by reference to the last sale price of
the Membership Interests on such date on a national securities exchange or
inter-dealer quotation system, or, if no such Membership Interests are so listed
or traded, then by reference to the fair market value of such Membership
Interests. The determination of fair market value by the Option Committee shall
be conclusive. For a description of other terms of the Option Plan, see
"Management--Membership Interest Option Plan."
GUARANTEE OF OFFICE LEASE
On October 1, 1997, SEACOR Marine, Inc. ("SEACOR Marine"), a subsidiary of
SEACOR, agreed to guarantee the Company's lease (the "Lease Guarantee") of its
principal office space. The Lease Guarantee obligates SEACOR Marine as if it
were the lessee of the office space, but it also allows the Company and the
lessor to modify, extend or amend such lease without notice to SEACOR Marine.
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DESCRIPTION OF BANK FACILITY
The following description of certain material provisions of certain
indebtedness of the Company does not purport to be complete, and is subject to,
and is qualified in its entirety by reference to, the forms of such instruments,
copies of which may be obtained as described under "Available Information."
The Company entered into the Bank Facility, which was arranged by
Nederlandse Scheepshypotheek Bank N.V. and MeesPierson Capital Corp., effective
as of the closing date of the Original Offering. The Bank Facility provides for
a $25.0 million revolving credit facility maturing December 31, 2004. Borrowings
under the Bank Facility may be repaid and reborrowed during the term thereof and
will bear interest at a per annum rate equal to LIBOR plus a margin of 1.25%.
Subject to satisfaction of customary conditions precedent, including that there
shall have occurred no material adverse change with respect to the Company or
its business, assets, properties or prospects since the date of execution of the
Bank Facility, availability under the Bank Facility will commence upon the first
delivery of a Rig. Until the commencement of availability, the Company will be
required to pay quarterly in arrears a commitment fee equal to 0.25% per annum
on the undrawn amount of the facility, thereafter increased to 0.50% per annum.
The Bank Facility is guaranteed by the Owners and such guarantees are
secured by first priority mortgages on the Rigs, assignments of earnings of the
Rigs (which may continue to be collected by the Company unless there occurs an
event of default) and assignments of insurance proceeds.
The Bank Facility contains customary affirmative covenants, representations
and warranties and is cross-defaulted to the Notes; PROVIDED, HOWEVER, should
there occur an event of default under the Bank Facility (other than arising from
enforcement actions undertaken by a holder of other indebtedness of the Company,
enforcement actions arising from IN REM claims against either of the Rigs or
bankruptcy events with respect to the Company or an Owner), the lenders under
the Bank Facility have agreed on a one-time basis not to enforce remedies for a
period of 60 days during which the Noteholders or the Company may cure such
event of default or prepay all of the indebtedness outstanding under the
facility. In addition, the Bank Facility requires that the fair market value of
the Rigs, as determined by appraisers appointed by the lenders thereunder, at
all times equals or exceeds an amount equal to 130% of outstanding indebtedness
under the facility.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were sold by the Issuers on April 29, 1998, in a private
placement. In connection with that placement, the Issuers entered into the
Registration Rights Agreement, which requires that the Issuers file a
registration statement under the Securities Act with respect to the New Notes
and, upon the effectiveness of that registration statement, offer to the Holders
of the Old Notes the opportunity to exchange their Old Notes for a like
principal amount of New Notes, which will be issued without a restrictive legend
and may be reoffered and resold by the Holder without registration under the
Securities Act. The Registration Rights Agreement further provides that the
Company must use its reasonable best efforts to cause the Registration Statement
with respect to the Exchange Offer to be declared effective on or before August
27, 1998 and the Exchange Offer consummated on or before , 1998.
Except as provided below, upon the completion of the Exchange Offer, the
Company's obligations with respect to the registration of the Old Notes and the
New Notes will terminate. A copy of the Registration Rights Agreement has been
filed as an exhibit to the Registration Statement of which this Prospectus is a
part and although the Issuers believe that the summary herein of certain
provisions thereof describes all material elements of the Registration Rights
Agreement, such summary does not purport to be complete and is subject thereto,
and is qualified in its entirety by reference thereto. As a result of the filing
and the effectiveness of the Registration Statement, certain additional interest
provided for in the Registration Rights Agreement will not become payable by the
Company. Following the completion of the Exchange Offer (except as set forth in
the paragraph immediately below), holders of Old Notes not tendered will not
have any further registration rights and those Old Notes will continue to be
subject to certain restrictions on transfer. Accordingly, any liquidity of the
market for the Old Notes could be adversely affected upon completion of the
Exchange Offer.
In order to participate in the Exchange Offer, a holder must represent to
the Issuers, among other things, that (i) the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of business of the
person receiving the New Notes, whether or not such person is the Holder of the
Old Notes, (ii) neither the Holder nor any such other person is engaging in or
intends to engage in a distribution of the New Notes, (iii) neither the Holder
nor any such other person has an arrangement or understanding with any person to
participate in the distribution of the New Notes and (iv) neither the Holder nor
any such other person is an "affiliate," as defined under Rule 405 promulgated
under the Securities Act, of either of the Issuers or either of the Guarantors.
In the event that (i) because of any change of law or in applicable
interpretations of the staff of the Commission, the Issuers are not permitted to
effect the Exchange Offer, or (ii) if for any other reason the Exchange Offer is
not consummated within 150 days of the date of the Original Offering, or (iii)
if any Initial Purchaser in the Original Offering so requests with respect to
Old Notes not eligible to be exchanged for New Notes in the Exchange Offer and
held by it following consummation of the Exchange Offer, or (iv) if any Holder
of Old Notes (other than a broker-dealer that receives New Notes for its own
account in exchange for Old Notes, where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (a "Participating Broker-Dealer") is not eligible to participate in
the Exchange Offer or any such Holder (other than a Participating Broker-Dealer)
does not receive freely tradeable New Notes in the Exchange Offer, the Issuers
are required, pursuant to the Registration Rights Agreement, to file a "shelf"
registration statement for a continuous offering pursuant to Rule 415 under the
Securities Act in respect of the Old Notes (and use their reasonable best
efforts to cause such shelf registration statement to be declared effective by
the Commission and keep it continuously effective, supplemented and amended for
prescribed periods). See "--Procedures for Tenders."
Based on an interpretation by the Commission's staff set forth in no-action
letters issued to third parties unrelated to the Issuers, the Issuers believe
that, with the exceptions set forth below, New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for resale, resold and
otherwise transferred by any person receiving such New Notes, whether or not
such person is the Holder (other than any such holder or such other person that
is an "affiliate" of either of the Issuers or either of
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the Guarantors 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 the New Notes are
acquired in the ordinary course of business of the Holder or such other person
and neither the Holder nor such other person has an arrangement or understanding
with any person to participate in the distribution of such New Notes. Any Holder
who tenders in the Exchange Offer for the purpose of participating in a
distribution of the New Notes cannot rely on this interpretation by the
Commission's staff and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction. Each Participating Broker-Dealer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes. See "Plan
of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
Following the completion of the Exchange Offer, (except as set forth in the
second paragraph under "--Purpose and Effect" above), holders of Old Notes not
tendered will not have any further registration rights and those Old Notes will
continue to be subject to certain restrictions on transfer. Accordingly, any
liquidity of the market for a holder's Old Notes could be adversely affected
upon completion of the Exchange Offer if the holder does not participate in the
Exchange Offer.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of New Notes
in exchange for each $1,000 principal amount of outstanding Old Notes accepted
in the Exchange Offer. Holders may tender some or all of their Old Notes
pursuant to the Exchange Offer. However, Old Notes may be tendered only in
integral multiples of $1,000 in principal amount.
The form and terms of the New Notes are substantially the same as the form
and terms of the Old Notes except that the New Notes will have been registered
under the Securities Act and will not bear legends restricting their transfer.
The New Notes will evidence the same debt as the Old Notes and will be issued
pursuant to, and entitled to the benefits of, the Indenture pursuant to which
the Old Notes were issued. Interest on the New Notes shall accrue from the date
of issuance of the Old Notes
As of May 31, 1998, Old Notes representing $110,000,000 aggregate principal
amount were outstanding. This Prospectus, together with the Letter of
Transmittal, is being sent to each registered Holder and to others believed to
have beneficial interests in the Old Notes. Holders of Old Notes do not have any
appraisal or dissenters' rights under the General Corporation Law of the State
of Delaware or the Indenture in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the Commission
promulgated thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as, and if the Company has given oral or written notice thereof to U.S.
Bank Trust National Association, the Exchange Agent. The Exchange Agent will act
as agent for the tendering Holders for the purpose of receiving the New Notes
from the Company. If any tendered Old Notes are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Old Notes will be
returned, without expense, to the tendering Holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"The Exchange Offer--Fees and Expenses."
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EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
September , 1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended. In order to extend the
Exchange Offer, the Company will notify the Exchange Agent and each registered
Holder of any extension by oral or written notice prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or, if any of the
conditions set forth under "The Exchange Offer--Conditions to Exchange Offer"
shall not have been satisfied, to terminate the Exchange Offer, by giving oral
or written notice of such delay, extension or termination to the Exchange Agent,
or (ii) to amend the terms of the Exchange Offer in any manner.
PROCEDURES FOR TENDERS
Only a Holder of Old Notes may tender the Old Notes in the Exchange Offer.
Except as set forth under "The Exchange Offer--Book Entry Transfer," to tender
in the Exchange Offer a Holder must complete, sign and date the Letter of
Transmittal, or a copy thereof, have the signatures thereon guaranteed if
required by the Letter of Transmittal, and mail or otherwise deliver the Letter
of Transmittal or a copy thereof to the Exchange Agent prior to the Expiration
Date. In addition, either (i) certificates for such Old Notes must be received
by the Exchange Agent along with the Letter of Transmittal, or (ii) a timely
confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old
Notes, if that procedure is available, into the Exchange Agent's account at DTC
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the Holder must comply with the guaranteed delivery
procedures described below. To be tendered effectively, the Letter of
Transmittal and other required documents must be received by the Exchange Agent
at the address set forth under "The Exchange Offer-- Exchange Agent" prior to
the Expiration Date.
The tender by a Holder that is not withdrawn before the Expiration Date will
constitute an agreement between that Holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR
NOMINEES TO EFFECT THESE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered Holder promptly and instruct the registered Holder
to tender on the beneficial owner's behalf. If the beneficial owner wishes to
tender on the owner's own behalf, the owner must, prior to completing and
executing the Letter of Transmittal and delivering the owner's Old Notes, either
make appropriate arrangements to register ownership of the Old Notes in the
beneficial owner's name or obtain a properly completed bond power from the
registered Holder. The transfer of registered ownership may take considerable
time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined) unless Old
Notes tendered pursuant thereto are tendered (i) by a registered Holder who has
not completed the box entitled "Special Delivery Instructions" on the Letter of
Transmittal or (ii) for the account of an Eligible Institution. If signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, the guarantee
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must be made by any eligible guarantor institution that is a member of or
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program, the Stock Exchange Medallion
Program, or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
Holder of any Old Notes listed therein, the Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by the registered Holder
as that registered Holder's name appears on the Old Notes.
If the Letter of Transmittal or any Old Notes 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 evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal unless waived by the Company.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes the Company's acceptance of which would,
in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to particular Old Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends to
notify Holders of defects or irregularities with respect to tenders of Old
Notes, neither the Company, the Exchange Agent, nor any other person shall incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered or as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering Holders,
unless otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to
purchase or make offers for any Old Notes that remain outstanding after the
Expiration Date or, as set forth under "The Exchange Offer-- Conditions to the
Exchange Offer," to terminate the Exchange Offer and, to the extent permitted by
applicable law, purchase Old Notes in the open market, in privately negotiated
transactions, or otherwise. The terms of any such purchases or offers could
differ from the terms of the Exchange Offer.
By tendering, each Holder will represent to the Company that, among other
things, (i) the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the Holder, (ii) neither the Holder nor any
such other person is engaging in or intends to engage in a distribution of such
New Notes, (iii) neither the Holder nor any such other person has an arrangement
or understanding with any person to participate in the distribution of such New
Notes and (iv) neither the Holder nor any such other person is an "affiliate" as
defined under Rule 405 of the Securities Act, of the Company, Finance or either
Guarantor.
In the event that (i) because of any change of law or in applicable
interpretations of the staff of the Commission, the Issuers are not permitted to
effect the Exchange Offer, or (ii) if for any other reason the Exchange Offer is
not consummated within 150 days of the date of the Original Offering, or (iii)
if any Initial Purchaser in the Original Offering so requests with respect to
Old Notes not eligible to be exchanged for New Notes in the Exchange Offer and
held by it following consummation of the Exchange Offer, or (iv) if any Holder
of Old Notes (other than a Participting Broker-Dealer) is not eligible to
participate in the Exchange Offer or any such Holder (other than a Participating
Broker-Dealer) does not receive freely tradeable New Notes in the Exchange
Offer, the Issuers are required, pursuant to the Registration Rights Agreement,
to file a "shelf" registration statement for a continuous offering pursuant
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to Rule 415 under the Securities Act in respect of the Old Notes (and use their
reasonable best efforts to cause such shelf registration statement to be
declared effective by the Commission and keep it continuously effective,
supplemented and amended for prescribed periods).
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal (or, with respect to the DTC and its participants, electronic
instructions in which the tendering Holder acknowledges its receipt of and
agreement to be bound by the Letter of Transmittal) and all other required
documents. If any tendered Old Notes are not accepted for any reason set forth
in the terms and conditions of the Exchange Offer or if Old Notes are submitted
for a greater principal amount than the Holder desires to exchange, such
unaccepted or non-exchanged Old Notes will be returned without expense to the
tendering Holder thereof (or, in the case of Old Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described below, such
non-exchanged Old Notes will be credited to an account maintained with such
Book-Entry Transfer Facility) as promptly as practicable after the expiration or
termination of the Exchange Offer.
Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes, where such Old 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 New
Notes. See "Plan of Distribution."
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes being tendered by
causing the Book-Entry Transfer Facility to transfer such Old Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or a copy thereof, with
any required signature guarantees and any other required documents, must, in any
case other than as set forth in the following paragraph, be transmitted to and
received by the Exchange Agent at the address set forth under "The Exchange
Offer--Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing exchange offers through DTC. To accept the Exchange Offer through
ATOP, participants in DTC must send electronic instructions to DTC through DTC's
communication system in place of sending a signed, hard copy Letter of
Transmittal. DTC is obligated to communicate those electronic instructions to
the Exchange Agent. To tender Old Notes through ATOP, the electronic
instructions sent to DTC and transmitted by DTC to the Exchange Agent must
contain the character by which the participant acknowledges its receipt of and
agrees to be bound by the Letter of Transmittal.
GUARANTEED DELIVERY PROCEDURES
If a registered Holder of the Old Notes desires to tender such Old Notes and
the Old Notes are not immediately available, or time will not permit such
Holder's Old 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 (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent received from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a copy thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by telegram, telex,
facsimile transmission,
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mail or hand delivery), setting forth the name and address of the holder of Old
Notes and the amount of Old Notes tendered, stating that the tender is being
made thereby and guaranteeing that within three New York Stock Exchange ("NYSE")
trading days after the date of execution of the Notice of Guaranteed Delivery,
the certificates for all physically tendered Old 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 (iii) the certificates for all
physically tendered Old 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, are received by the Exchange Agent within three NYSE trading
days after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written or (for
DTC participants) electronic ATOP transmission notice of withdrawal must be
received by the Exchange Agent at its address set forth in this Prospectus prior
to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Old
Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be
withdrawn (including the certificate number or numbers and principal amount of
such Old Notes), (iii) be signed by the Holder in the same manner as the
original signature on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee register the transfer of
such Old Notes into the name of the person withdrawing the tender, and (iv)
specify the name in which any such Old Notes are to be registered, if different
from that of the Depositor. All questions as to the validity, form, and
eligibility (including time of receipt) of such notices will be determined by
the Company, whose determination shall be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Old 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 as soon as
practicable after withdrawal, rejection of tender, or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following one
of the procedures under "The Exchange Offer--Procedures for Tendering" at any
time on or prior to the Expiration Date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer if at any time
before the acceptance of such Old Notes for exchange or the exchange of the New
Notes for such Old Notes, the Company determines that the Exchange Offer
violates applicable law, any applicable interpretation of the staff of the
Commission or any order of any governmental agency or court of competent
jurisdiction.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its reasonable discretion. The failure by the Company at
any time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture
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Act"). In any such event the Company is required to use every reasonable
commercial effort to obtain the withdrawal of any stop order at the earliest
possible time.
EXCHANGE AGENT
All executed Letters of Transmittal should be directed to the Exchange
Agent. U.S. Bank Trust National Association has been appointed as Exchange Agent
for the Exchange Offer. Questions, requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
U.S. BANK TRUST NATIONAL ASSOCIATION
<TABLE>
<S> <C>
BY FACSIMILE TRANSMISSION BY HAND, MAIL OR OVERNIGHT DELIVERY:
(FOR ELIGIBLE INSTITUTIONS ONLY): U.S. Bank Trust National Association
(612) 244-1537 100 Wall Street
FOR INFORMATION OR New York, New York 10041
CONFIRMATION BY TELEPHONE: or
(612) 180 East Fifth Street
St. Paul, MN 55101
Attn: Specialized Finance Department
</TABLE>
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
approximately $ , which includes fees and expenses of the Trustee,
accounting, legal, printing, and related fees and expenses.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection with the Exchange Offer except that Holders who
instruct the Company to register New Notes in the name of, or request that Old
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.
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DESCRIPTION OF NEW NOTES
GENERAL
The Notes will be issued under the Indenture, dated as of April 29, 1998
(the "Indenture"), among the Company, Finance, the Subsidiary Guarantors and
U.S. Bank Trust National Association, as Trustee (the "Trustee"). Upon the
issuance of the New Notes, the Indenture will be subject to and governed by the
Trust Indenture Act. The New Notes are subject to all such terms, and Holders of
New Notes are referred to the Indenture and the Trust Indenture Act for a
statement thereof. The following summary of certain provisions of the Indenture
and the New Notes does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Indenture
and the Notes, including the definitions of certain terms therein and those
terms made a part thereof by the Trust Indenture Act. As used in this
"Description of New Notes" section, references to the "Company" include only
Chiles Offshore LLC and not its Subsidiaries.
Principal of, premium, if any, and interest on the New Notes will be
payable, and the New Notes may be exchanged or transferred, at the office or
agency of the Issuers in the Borough of Manhattan, The City of New York, which
initially shall be the corporate trust office of the Trustee's agent, at 100
Wall Street, New York, New York 10041, except that, at the option of the
Issuers, payment of interest may be made by check mailed to the address of the
Holders as such address appears in the Note register; PROVIDED that all payments
with respect to Global Notes and certificated Notes the Holders of which have
given wire transfer instructions to the Company and its paying agent prior to
the applicable record date for such payment will be required to be made by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof.
The New Notes will be issued only in fully registered form, without coupons,
in denominations of $1,000 and any integral multiple of $1,000. See "--Book
Entry, Delivery and Form." No service charge shall be made for any registration
or exchange of the Notes, but the Company may require payment of a sum
sufficient to cover any transfer tax or other similar governmental charge
payable in connection therewith.
TERMS OF THE NOTES
The New Notes will be joint and several senior obligations of the Issuers,
and will be unsecured except with respect to the Escrowed Property. See
"--Escrow of Proceeds." The Indenture provides for the issuance of the $110.0
million principal amount of Old Notes pursuant to the Original Offering and, in
exchange therefor, a like principal amount of New Notes being offered hereby and
additional Notes, subject to compliance with the covenant described below under
the caption "--Certain Covenants-- Limitation on Indebtedness"; PROVIDED,
HOWEVER, that no Default or Event of Default exists under the Indenture at the
time of issuance or would result therefrom and that the aggregate principal
amount of Notes issued under the Indenture does not exceed $250.0 million. All
New Notes will be substantially identical in all material respects other than
issuance dates. The Notes will mature on May 1, 2008. The Notes will bear
interest at the rate per annum shown on the cover page hereof from April 29,
1998, or from the most recent date to which interest has been paid or provided
for, payable semiannually to Holders of record at the close of business on the
April 15 or October 15 immediately preceding the interest payment date on May 1
and November 1 of each year, commencing November 1, 1998. The Issuers will pay
interest on overdue principal at 1.0% per annum in excess of such rate and, to
the extent permitted by applicable law, on overdue installments of interest at
such higher rate. Interest on the Notes will be computed on the basis of a
360-day year of twelve 30-day months.
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ESCROW OF PROCEEDS
Concurrently with the closing of the Original Offering, the Company entered
into an escrow agreement (the "Escrow Agreement") with U.S. Bank Trust National
Association, as Escrow Agent, pursuant to which the Company initially deposited
with the Escrow Agent an aggregate amount equal to the net cash proceeds of the
Original Offering, together with approximately $0.2 million for additional Notes
issuance costs, as follows: (i) into the Interest Escrow Account, approximately
$11.1 million in cash, being the amount as will be sufficient to provide for
payment in full of the first two scheduled interest payments on the Notes and
(ii) into the Construction Escrow Account, approximately $95.4 million in cash,
representing the balance. The Interest Escrow Account and the Construction
Escrow Account are sometimes referred to herein together as the "Escrow
Accounts," and the cash and Temporary Cash Investments deposited therein,
together with the interest, dividends and distributions thereon are sometimes
referred to herein as the "Escrowed Property." Pursuant to a related escrow
security agreement (the "Escrow Security Agreement") with U.S. Bank Trust
National Association, as Collateral Agent, the Company granted a security
interest in the Escrow Accounts and all funds and investments contained therein,
the Escrow Agreement and all proceeds of the foregoing to the Collateral Agent
for the benefit of the Holders pursuant to the Indenture.
The Escrow Agent will make payments from the Interest Escrow Account as
follows: (i) on each of the first two Interest Payment Dates, an amount equal to
the installment then due, to be remitted to the Paying Agent for the Notes, and
(ii) in the event the Company is required to repurchase Notes pursuant to the
Indenture, on the repurchase date, an amount equal to the aggregate amount of
accrued interest paid to the Holders whose Notes were repurchased. A failure to
pay interest on the Notes in a timely manner through the first two scheduled
Interest Payment Dates will constitute an immediate Event of Default under the
Indenture, with no grace or cure period. The Escrowed Property in the Interest
Escrow Account also will secure the repayment of the principal amount of, and
premium, if any, on, the Notes.
The Escrow Agent will make payments from the Construction Escrow Account as
follows: On the first Business Day of each calendar month beginning after the
date that the Company shall have paid to the Builder an aggregate of at least
$50.0 million in installment payments to AMFELS of the Purchase Price of the
Rigs and payments for OFE and Construction Overhead (each as defined in the
Escrow Agreement) (or, in the case of the first calendar month in which the
Company shall have so paid such amount, on any Business Day thereafter during
such calendar month), an amount equal to the sum of (i) each installment payment
of the Purchase Price of the Rigs required to be paid on each Rig Purchase
Installment Date in such calendar month pursuant to the Construction Contracts,
as adjusted for any change orders provided pursuant to the Construction
Contracts, (ii) the aggregate amount estimated in good faith by the Company to
be required in such calendar month to pay for the purchase price of OFE and
Construction Overhead, up to an aggregate amount not to exceed $55.0 million and
(iii) with respect to any calendar month beginning on or after the Delivery Date
of the first Rig to be completed (the "First Completed Rig") and prior to the
Delivery Date of the second Rig to be completed, an aggregate amount estimated
by the Company to be required to fund the working capital in such calendar month
for the operation of the First Completed Rig, up to an aggregate amount not to
exceed $10.0 million; PROVIDED, HOWEVER, that at least three Business Days prior
thereto, the Company shall have delivered to the Trustee and the Escrow Agent an
Officers' Certificate setting forth in reasonable detail (i) the amount,
category and purpose of each requested payment, (ii) in the case of any payments
other than installment payments of the Purchase Prices of the Rigs, the amount
available for payment, after giving effect to all previous payments, and (iii) a
reconciliation of payments made from the Construction Escrow Account to actual
expenditures, which reconciliation shall be made on a cumulative basis through
the end of the second calendar month preceding the month in which such Officers'
Certificate is delivered. Notwithstanding the foregoing, in the event the
Company is required to repurchase Notes upon a Contract Termination, the Escrow
Agent will make a payment on the repurchase date, in an amount equal to the
Allocated Portion of the remaining funds in the Construction Escrow Account, to
be deposited with the Paying Agent for application to pay
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the purchase price of Notes accepted for repurchase. See "--Right to Require
Repurchase Upon Contract Termination." Pending application of the Escrowed
Property so released from the Construction Escrow Account pursuant to the Escrow
Agreement, such Escrowed Property shall be invested in Temporary Cash
Investments.
Upon receipt by the Escrow Agent of an Officers' Certificate of the Company
that the Company has made the first two scheduled interest payments on the
Notes, the Escrowed Property in the Interest Escrow Account shall be released
from the Interest Escrow Account. Upon receipt by the Escrow Agent of an
Officers' Certificate of the Company that the Company has made the final
installment of the Purchase Price for each of the Rigs in accordance with the
related Construction Contracts, the Escrowed Property in the Construction Escrow
Account will be released from the Construction Escrow Account. Upon release of
all the Escrowed Property from the Escrow Accounts, the Notes will be unsecured.
REDEMPTION
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Notes will not be
redeemable at the option of the Issuers prior to May 1, 2003. Thereafter, the
Notes will be redeemable, at the Issuers' 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 interest 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 May
1 of the years set forth below:
<TABLE>
<CAPTION>
PERIOD REDEMPTION PRICE
- -------------------------------------------------------------------------------- -----------------
<S> <C>
2003............................................................................ 105.00%
2004............................................................................ 103.33%
2005............................................................................ 101.67%
2006 and thereafter............................................................. 100.00%
</TABLE>
In addition, at any time and from time to time prior to May 1, 2001, the
Issuers may redeem in the aggregate up to 35% of the original principal amount
of the Notes with the proceeds of one or more Public Equity Offerings, at a
redemption price (expressed as a percentage of principal amount) of 110% plus
accrued interest 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); PROVIDED, HOWEVER, that at least $71.5 million aggregate
principal amount of the Notes must remain outstanding after each such redemption
and, PROVIDED FURTHER, that such redemption shall occur within 90 days following
the closing of such Public Equity Offering.
SELECTION AND NOTICE
In the case of any partial redemption, 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 original 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.
RIGHT TO REQUIRE REPURCHASE UPON CONTRACT TERMINATION
In the event a Construction Contract is terminated (a "Contract
Termination") prior to the Delivery Date of the related Rig, each Holder shall
have the right to require that the Issuers repurchase the Allocated Principal
Amount of such Holder's Notes at a purchase price equal to 101% of the principal
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amount thereof, plus accrued and unpaid interest to and including the date of
repurchase (subject to the right of a Holder of record on the relevant record
date to receive interest due on the relevant Interest Payment Date), on a
payment date no later than 90 days after the termination of such Construction
Contract(s).
Within 30 days following any Contract Termination, unless notice of
redemption of the Notes has been given pursuant to the provisions of the
Indenture described under "--Optional Redemption" above, the Company shall mail
a notice to the Trustee and to each Holder stating: (1) that a Contract
Termination has occurred and that such Holder has the right to require the
Issuers to repurchase such Holder's Notes at a purchase price in cash equal to
101% of the principal amount thereof plus accrued and unpaid interest, if any,
to the date of purchase (subject to the right of holders of record on the
relevant record date to receive interest on the relevant Interest Payment Date);
(2) the circumstances and relevant facts regarding such Contract Termination;
(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 the Company, consistent with the covenant described hereunder,
that a Holder must follow in order to have its Notes repurchased.
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 repurchase of Notes pursuant to the covenant described
hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the covenant
described hereunder by virtue thereof.
SUBSIDIARY GUARANTEES
Each of the Company's Restricted Subsidiaries that is organized and existing
under the laws of any State of the United States or the District of Columbia and
that is an obligor or guarantor with respect to the Bank Facility will
irrevocably and unconditionally Guarantee, as a primary obligor and not merely
as a surety, on an unsecured senior basis the performance and punctual payment
when due, whether at Stated Maturity, by acceleration or otherwise, of all
obligations of the Company under the Indenture and the Notes, whether for
payment of principal of or interest on the Notes, expenses, indemnification or
otherwise (all such obligations guaranteed by the Subsidiary Guarantors being
herein called the "Guaranteed Obligations"). The Subsidiary Guarantors will
agree to pay, in addition to the amount stated above, any and all expenses
(including reasonable counsel fees and expenses) incurred by the Trustee or the
Holders in enforcing any rights under the Subsidiary Guarantees. 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 such Subsidiary Guarantee voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally. After the Issue Date, the Company will cause each
Restricted Subsidiary that is organized and existing under the laws of any State
of the United States or the District of Columbia and that becomes an obligor or
guarantor with respect to any of the obligations under the Bank Facility to
execute and deliver to the Trustee a supplemental indenture pursuant to which
such Restricted Subsidiary will Guarantee on an unsecured senior basis the
payment of the Notes. See "Certain Covenants--Future Subsidiary Guarantors"
below.
Each Subsidiary Guarantee is a continuing guarantee and shall (a) remain in
full force and effect until payment in full of all the Guaranteed Obligations,
(b) be binding upon each Subsidiary Guarantor and (c) inure to the benefit of
and be enforceable by the Trustee, the Holders and the respective successors,
transferees and assigns thereof.
Each Subsidiary Guarantor may consolidate with or merge into or sell its
assets to the Company or another Subsidiary Guarantor without limitation. Each
Subsidiary Guarantor may consolidate with or merge into or sell all or
substantially all its assets to a Person other than the Company or another
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Subsidiary Guarantor (whether or not affiliated with the Guarantor). Upon the
sale or disposition (by merger or otherwise) of a Subsidiary Guarantor (or all
or substantially all of its assets) to a Person (whether or not an Affiliate of
the Subsidiary Guarantor) which is not a Subsidiary of the Company, which sale
or disposition is otherwise in compliance with the Indenture (including the
covenant described under "--Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock"), such Subsidiary Guarantor shall be deemed released from all
its obligations under the Indenture and its Subsidiary Guarantee and such
Subsidiary Guarantee shall terminate; PROVIDED, HOWEVER, that any such
termination shall occur only to the extent that all obligations of such
Subsidiary Guarantor under the Bank Facility and all of its Guarantees of, and
under all of its pledges of assets or other security interests which secure, any
other Indebtedness of the Company shall also terminate upon such release, sale
or transfer.
RANKING
The indebtedness evidenced by the New Notes and the Subsidiary Guarantees
will be senior obligations of the Company and the Subsidiary Guarantors,
respectively, will be unsecured (except with respect to the Escrowed Property)
and will rank PARI PASSU with the Old Notes, if any, and all other senior
unsecured Indebtedness of the Company and the Subsidiary Guarantors,
respectively, and senior to all Subordinated Obligations. Except with respect to
the Escrowed Property, the Notes and the Subsidiary Guarantees will also be
effectively subordinated to all Secured Indebtedness of the Company and the
Subsidiary Guarantors, respectively, to the extent of the value of the assets
securing such Secured Indebtedness and to all Indebtedness and other obligations
(including trade payables) of the Company's Subsidiaries other than the
Subsidiary Guarantors. The Indebtedness under the Company's Bank Facility will
be secured by substantially all the assets of the Company and its subsidiaries,
including the Rigs, other than the Escrowed Property.
As of March 31, 1998, after giving pro forma effect to the Original Offering
and the application of the net proceeds therefrom, as if they had occurred on
such date, the Company and the Subsidiary Guarantors would have had no
outstanding Secured Indebtedness. However, the Bank Facility provides for
borrowing availability of $25.0 million of Secured Indebtedness of the Company
guaranteed on a secured basis by the Subsidiary Guarantors. Although the
Indenture contains limitations on the amount of additional Indebtedness that the
Company and its Restricted Subsidiaries may incur, under certain circumstances
the amount of such Indebtedness could be substantial and, under such
circumstances, such Indebtedness may be Secured Indebtedness. See "--Certain
Covenants--Limitation on Indebtedness."
BOOK-ENTRY, DELIVERY AND FORM
The New Notes will be issued in the form of a Global Note. The Global Note
will be deposited with, or on behalf of, the Depository and registered in the
name of the Depository or its nominee. Except as set forth below, the Global
Note may be transferred, in whole and not in part, only to the Depository or
another nominee of the Depository. Investors may hold their beneficial interests
in the Global Note directly through the Depository if they have an account with
the Depository or indirectly through organizations that have accounts with the
Depository.
New Notes that are issued as described below under "Certificated Notes" will
be issued in definitive certificated form. Upon the transfer of a New Note in
definitive certificated form, such New Note will, unless the Global Note has
previously been exchanged for Notes in definitive certificated form, be
exchanged for an interest in the Global Note representing the principal amount
of Notes being transferred.
The Depository has advised the Company as follows: The Depository is a
limited purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and "a clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. The
Depository was created to hold securities of institutions that have accounts
with the Depository ("participants") and to
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facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. The Depository's participants include securities
brokers and dealers (which may include the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to the
Depository's book-entry system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, whether directly or indirectly.
Upon the issuance of the Global Note, the Depository will credit, on its
book-entry registration and transfer system, the principal amount of the New
Notes represented by such Global Note to the accounts of participants. The
accounts to be credited initially shall be designated by or on behalf of the
Initial Purchasers. Ownership of beneficial interests in the Global Note will be
limited to participants or persons that may hold interests through participants.
Ownership of beneficial interests in the Global Note will be shown on, and the
transfer of those ownership interests will be effected only through, records
maintained by the Depository (with respect to participants' interests) and such
participants (with respect to the owners of beneficial interests in the Global
Note other than participants). The laws of some jurisdictions may require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and laws may impair the ability to transfer or
pledge beneficial interests in the Global Note.
So long as the Depository, or its nominee, is the registered Holder and
owner of the Global Note, the Depository or such nominee, as the case may be,
will be considered the sole legal owner and holder of the related New Notes for
all purposes of such New Notes and the Indenture. Except as set forth below,
owners of beneficial interests in the Global Note will not be entitled to have
the New Notes represented by the Global Note registered in their names, will not
receive or be entitled to receive physical delivery of certificated New Notes in
definitive form and will not be considered to be the owners or holders of any
New Notes under the Global Note. The Company understands that under existing
industry practice, in the event an owner of a beneficial interest in the Global
Note desires to take any action that the Depository, as the holder of the Global
Note, is entitled to take, the Depository would authorize the participants to
take such action, and that the participants would authorize beneficial owners
owning through such participants to take such action or would otherwise act upon
the instructions of beneficial owners owning through them.
Payment of principal of and interest on New Notes represented by the Global
Note registered in the name of and held by the Depository or its nominee will be
made to the Depository or its nominee, as the case may be, as the registered
owner and holder of the Global Note.
The Company expects that the Depository or its nominee, upon receipt of any
payment of principal of or interest on the Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Note as
shown on the records of the Depository or its nominee. The Company also expects
that payments by participants to owners of beneficial interests in the Global
Note held through such participants will be governed by standing instructions
and customary practices and will be the responsibility of such participants. The
Company will not have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the Global Note for any New Note or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests or for any
other aspect of the relationship between the Depository and its participants or
the relationship between such participants and the owners of beneficial
interests in the Global Note owning through such participants.
Unless and until it is exchanged in whole or in part for certificated New
Notes in definitive form, the Global Note may not be transferred except as a
whole by the Depository to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository.
Although the Depository has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of the
Depository, it is under no obligation to perform or
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continue to perform such procedures, and such procedures may be discontinued at
any time. Neither the Trustee nor the Company will have any responsibility for
the performance by the Depository or its participants or indirect participants
of their respective obligations under the rules and procedures governing their
operations.
CERTIFICATED NOTES
The New Notes represented by the Global Note are exchangeable for
certificated New Notes in definitive form of like tenor as such New Notes in
denominations of $1,000 and integral multiples thereof if (i) the Depository
notifies the Company that it is unwilling or unable to continue as Depository
for the Global Note or if at any time the Depository ceases to be a clearing
agency registered under the Exchange Act or (ii) the Company in its discretion
at any time determines not to have all of the New Notes represented by the
Global Note. Any New Note that is exchangeable pursuant to the preceding
sentence is exchangeable for certificated New Notes issuable in authorized
denominations and registered in such names as the Depository shall direct.
Subject to the foregoing, the Global Note is not exchangeable, except for a
Global Note of the same aggregate denomination to be registered in the name of
the Depository or its nominee.
Neither the Company nor the Trustee will be liable for any delay by the
Depository or its nominee in indemnifying the beneficial owners of the Notes,
and the Company and the Trustee may conclusively rely on, and will be protected
in relying on, instructions from the Depository or its nominee for all purposes.
REGISTERED EXCHANGE OFFER; REGISTRATION RIGHTS
The Issuers and the Subsidiary Guarantors have agreed pursuant to a
registration rights agreement (the "Registration Rights Agreement") with the
Initial Purchasers, for the benefit of the Holders of the Notes, that the
Issuers would, at their cost, (i) within 60 days after the Issue Date, file the
registration statement of which this Prospectus is a part (the "Exchange Offer
Registration Statement") with the SEC with respect to the Exchange Offer; and
(ii) use their reasonable best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act within 120 days
after the Issue Date. The Issuers have agreed to 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 was mailed to the Holders of the Old Notes.
For each Old Note surrendered to the Issuers pursuant to the Exchange Offer, the
Holder of such Old Note will receive a New Note having a principal amount equal
to that of the surrendered Old Note. Interest on each New Note will accrue from
the Issue Date. Under existing SEC interpretations, the New Notes would be
freely transferable by Holders other than affiliates of the Issuer after the
Exchange Offer without further registration under the Securities Act if the
Holder of the New Notes represents that it is acquiring the New 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 New Notes and that it
is not an affiliate of the Issuer, as such terms are interpreted by the SEC;
PROVIDED, HOWEVER, that broker-dealers ("Participating Broker-Dealers")
receiving New Notes in the Registered Exchange Offer will have a prospectus
delivery requirement with respect to resales of such New Notes. The SEC has
taken the position that Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to New Notes (other than a resale
of an unsold allotment from the original sale of the Old Notes) with this
Prospectus. Under the Registration Rights Agreement, the Issuers 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 New Notes.
A Holder of Old Notes who wishes to exchange such Old Notes for New Notes in
the Exchange Offer will be required to represent (i) that any New Notes to be
received by it will be acquired in the ordinary course of its business; (ii)
that at the time of the commencement of the Exchange Offer it had no arrangement
or understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the New Notes; (iii) that it is not an
"affiliate" of the Issuers, 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
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requirements of the Securities Act to the extent applicable; (iv) if such Holder
is not a broker-dealer, that it is not engaged in, and does not intend to engage
in, the distribution of the New Notes; and (v) if such Holder is a
broker-dealer, that it will receive New Notes for its own account in exchange
for Old Notes that were acquired as a result of market-making activities or
other trading activities and that it will be required to acknowledge that it
will deliver a Prospectus in connection with any resale of such New Notes.
In the event that because of any change in law or in applicable
interpretations thereof by the staff of the Commission, the Issuers are not
permitted to effect the Exchange Offer, or the Exchange Offer is not consummated
within 150 days of the Issue Date, or if the Initial Purchasers so request with
respect to Old Notes not eligible to be exchanged for New Notes in the Exchange
Offer, or if any Initial Purchaser so requests with respect to the Old Notes not
eligible to be exchanged for New Notes and held by it following consummation of
the Exchange Offer, or if any Holder of Old Notes (other than a Participating
Broker-Dealer) is not eligible to participate in the Exchange Offer or does not
receive freely tradeable New Notes in the Exchange Offer, the Issuers will, at
their cost, (a) as promptly as practicable, file a shelf registration statement
covering resales of the Old Notes or the New Notes, as the case may be (a "Shelf
Registration Statement"), (b) use their reasonable best efforts to cause the
Shelf Registration Statement to be declared effective under the Securities Act
and (c) use their reasonable best efforts to keep the Shelf Registration
Statement continuously effective for a period of two years or such shorter
period that will terminate when all Notes covered by the Shelf Registration
Statement have been sold pursuant thereto or are no longer restricted securities
(as defined in Rule 144 under the Securities Act, or any successor rule
thereof). In the event a Shelf Registration Statement is filed, the Issuers
will, among other things, provide to each Holder for whom such Shelf
Registration Statement was filed copies of the prospectus which is a part of the
Shelf Registration Statement, notify each such Holder when the Shelf
Registration Statement has become effective and take certain other actions as
are required to permit unrestricted resales of the Notes. A Holder selling such
Notes pursuant to 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 certain of the civil
liability provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the Registration Rights Agreement which are
applicable to such Holder (including certain indemnification obligations).
If after either the Exchange Offer Registration Statement or the Shelf
Registration Statement is declared effective, such Registration Statement
thereafter ceases to be effective or usable (subject to certain exceptions) in
connection with resales of Old Notes or New Notes in accordance with and during
the periods specified in the Registration Rights Agreement (a "Registration
Default"), additional interest will accrue on the Notes at the rate of 0.50% per
annum from and including the date on which any such Registration Default shall
occur to but excluding the date on which all Registration Defaults have been
cured. Such interest is payable in addition to, and at the same times as, any
other interest payable from time to time with respect to the Notes.
The Issuers are entitled to close the Exchange Offer 30 days after the
commencement thereof; PROVIDED, HOWEVER, that they have accepted all Old Notes
theretofore validly tendered in accordance with the terms of the Exchange Offer.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which is available as set forth under "Available
Information."
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CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder shall have the right to require that the Issuers
repurchase such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of holders of record on the relevant record
date to receive interest 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), other than one or more Permitted Holders, 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 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 45% of the total
voting power of the then outstanding Voting Stock of the Company; PROVIDED,
HOWEVER, that the Permitted Holders beneficially own (as defined above),
directly or indirectly, in the aggregate a lesser percentage of the total
voting power of the Voting Stock of the Company than such other person and
do not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the Board of Directors (for
the purposes of this clause (i), such other person shall be deemed to
beneficially own any Voting Stock of a specified corporation held by a
parent corporation, if such other person is the beneficial owner (as defined
in this clause (i)), directly or indirectly, of more than 45% of the voting
power of the Voting Stock of such parent corporation and the Permitted
Holders beneficially own (as defined above), directly or indirectly, in the
aggregate a lesser percentage of the voting power of the Voting Stock of
such parent corporation and do not have the right or ability by voting
power, contract or otherwise to elect or designate for elect on a majority
of the board of directors of such parent corporation);
(ii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together with
any new directors whose election by such Board of Directors or whose
nomination for election by the shareholders (or members, as applicable) of
the Company was approved by a vote of 66 2/3% of the directors of the
Company (or the Company's managers, as applicable) 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; or
(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 to another Person (in
each case other than a Person that is controlled by the Permitted Holders),
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 or a parent corporation that owns all of the capital
stock of such corporation that represent immediately after such transaction,
at least a majority of the aggregate voting power of the Voting Stock of the
surviving corporation or such parent corporation, as the case may be.
Within 30 days following any Change of Control, unless notice of redemption
of the Notes has been given pursuant to the provisions of the Indenture
described under "--Optional Redemption" above, the Company shall mail a notice
to the Trustee and to each Holder stating: (1) that a Change of Control has
occurred and that such Holder has the right to require the Company 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, if any, to the date of purchase
(subject to the right of holders of record on the relevant record date to
receive interest on the relevant Interest Payment Date); (2) the circumstances
and relevant facts regarding such
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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 the Company, consistent with the covenant described
hereunder, that a Holder must follow in order to have its Notes repurchased.
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 repurchase of Notes pursuant to the covenant described
hereunder. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the covenant
described hereunder by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company would decide to do so in the future. Subject to the limitations
discussed below, the Company could, in the future, enter into certain
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 the Company's capital structure or credit ratings. Restrictions on the
ability of the Company and its Restricted Subsidiaries to incur additional
Indebtedness are contained in the covenant described under "--Certain
Covenants--Limitation on Indebtedness." Such restrictions can only be waived
with the consent of the Holders of a majority in principal amount of the Notes
then outstanding. Except for the limitations contained in such covenants,
however, the Indenture does not contain any covenants or provisions that may
afford Holders protection in the event of a highly leveraged transaction.
If a Change of Control offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
of the Notes that might be delivered by Holders seeking to accept the Change of
Control offer. The failure of the Company to make or consummate the Change of
Control offer or pay the purchase price when due will give the Trustee and the
Holders the rights described under "--Defaults."
The existence of a Holder's right to require the Company to offer to
repurchase such Holder's Notes upon a Change of Control may deter a third party
from acquiring the Company in a transaction which constitutes a Change of
Control.
The Bank Facility contains, and future indebtedness of the Company may
contain, prohibitions on the occurrence of certain events that would constitute
a Change of Control or require such indebtedness to be repaid or repurchased
upon a Change of Control. Moreover, the exercise by the Holders of their right
to require the Company to repurchase the Notes will cause a default under the
Bank Facility, and could cause a default under such other indebtedness, even if
the Change of Control itself does not, due to the financial effect of such
repurchase on the Company. Finally, the Company's ability to pay cash to the
Holders following the occurrence of a Change of Control may be limited by the
Company's then existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any required
repurchases. The provisions under the Indenture relating to the Company's
obligation to make an offer to repurchase the Notes as a result of a Change of
Control may be waived or modified with the written consent of the Holders of a
majority in principal amount of the Notes.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
LIMITATION ON INDEBTEDNESS. (a) The Company shall not, and shall not permit
any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness
unless, after giving effect to such Incurrence, the Consolidated Coverage Ratio
would exceed 2.0 to 1.0.
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(b) Notwithstanding the foregoing paragraph (a), the Company and the
Restricted Subsidiaries may Incur any or all of the following Indebtedness:
(1) Indebtedness (including reimbursement obligations in respect of
letters of credit outstanding under the Bank Facility that are Indebtedness)
of the Company Incurred pursuant to the Bank Facility or any other credit or
loan agreement (and any Guarantees in respect thereof by Restricted
Subsidiaries that are Subsidiary Guarantors in accordance with the
Indenture) in an aggregate principal amount which, when taken together with
the principal amount of all other Indebtedness Incurred pursuant to this
clause (1) and then outstanding, does not exceed $25.0 million;
(2) Indebtedness of the Company or any Restricted Subsidiary owed to and
held by the Company or any Wholly Owned Restricted Subsidiary; PROVIDED,
HOWEVER, that any subsequent issuance or transfer of any Capital Stock which
results in any such Wholly Owned Restricted Subsidiary ceasing to be a
Wholly Owned Restricted Subsidiary or any subsequent transfer of such
Indebtedness (other than to another Wholly Owned Restricted Subsidiary)
shall be deemed, in each case, to constitute the Incurrence of such
Indebtedness by the Company or such Restricted Subsidiary;
(3) the Notes and the Subsidiary Guarantees;
(4) Indebtedness outstanding on the Issue Date (other than Indebtedness
described in clause (1), (2), or (3) of this covenant);
(5) Refinancing Indebtedness in respect of Indebtedness Incurred
pursuant to paragraph (a) or pursuant to clause (3) or (4) or this clause
(5);
(6) Hedging Obligations consisting of Interest Rate Agreements directly
related to Indebtedness permitted to be Incurred by the Company or any
Restricted Subsidiary pursuant to the Indenture;
(7) Indebtedness of the Company or any Restricted Subsidiary consisting
of obligations in respect of purchase price adjustments in connection with
the acquisition or disposition of assets by the Company or any Restricted
Subsidiary permitted under the Indenture; and
(8) Indebtedness in an aggregate principal amount which, together with
all other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the date of such Incurrence (other than Indebtedness
permitted by clauses (1) through (7) above or paragraph (a)), does not
exceed $10.0 million at any one time outstanding.
(c) Notwithstanding the foregoing, neither the Company nor any Restricted
Subsidiary shall Incur any Indebtedness pursuant to the foregoing paragraph (b)
if the proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations unless such Indebtedness shall be subordinated to the
Notes or the Subsidiary Guarantees, as applicable, to at least the same extent
as such Subordinated Obligations.
(d) For purposes of determining compliance with the covenant entitled
"--Limitation on Indebtedness," (i) in the event that an item of Indebtedness
meets the criteria of more than one of the types of Indebtedness described
above, the Company, 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.
LIMITATION ON LIENS. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, create or permit to exist any
Lien upon any of its property or assets, now owned or hereafter acquired,
securing any obligation unless concurrently with the creation of such Lien
effective provision is made to secure the Notes and the Subsidiary Guarantees
equally and ratably with such obligation for so long as such obligation is so
secured; PROVIDED, HOWEVER, that, if such obligation is a Subordinated
Obligation, the Lien securing such obligation shall be subordinated and junior
to the Lien
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securing the Notes and the Subsidiary Guarantees with the same or lesser
relative priority as such Subordinated Obligation shall have been with respect
to the Notes and the Subsidiary Guarantees. The preceding restriction shall not
require the Company or any Restricted Subsidiary to secure the Notes or the
Subsidiary Guarantees if the Lien consists of the following:
(a) Liens created by the Indenture and the Escrow Security Agreement;
(b) Liens under the Bank Facility;
(c) Liens existing as of the Issue Date;
(d) Permitted Liens;
(e) Liens to secure Indebtedness issued by the Company or a Restricted
Subsidiary for the purpose of financing all or a part of the purchase price
of assets or property acquired or constructed in the ordinary course of
business after the Issue Date; PROVIDED, HOWEVER, that (i) the aggregate
principal amount (or accreted value in the case of Indebtedness issued at a
discount) of Indebtedness so issued shall not exceed the lesser of the cost
or fair market value, as determined in good faith by the Board of Directors
of the Company, of the assets or property so acquired or constructed, (ii)
the Indebtedness secured by such Liens shall have been permitted to be
Incurred under the "--Limitation on Indebtedness" covenant and (iii) such
Liens shall not encumber any other assets or property of the Company or any
of its Restricted Subsidiaries other than such assets or property or any
improvement on such assets or property and shall attach to such assets or
property within 90 days of the construction or acquisition of such assets or
property;
(f) Liens on the assets or property of a Restricted Subsidiary existing
at the time such Restricted Subsidiary becomes a Restricted Subsidiary and
not issued as a result of (or in connection with or in anticipation of) such
Restricted Subsidiary becoming a Restricted Subsidiary; PROVIDED, HOWEVER,
that such Liens do not extend to or cover any other property or assets of
the Company or any of its other Restricted Subsidiaries; or
(g) Liens securing Indebtedness issued to Refinance Indebtedness which
has been secured by a Lien permitted under the Indenture and is permitted to
be Refinanced under the Indenture; PROVIDED, HOWEVER, that such Liens do not
extend to or cover any property or assets of the Company or any of its
Restricted Subsidiaries not securing the Indebtedness so Refinanced.
LIMITATION ON SALE/LEASEBACK TRANSACTIONS. The Company shall not, and shall
not permit any Restricted Subsidiary to, enter into any Sale/Leaseback
Transaction with respect to any property unless (i) the Company or such
Restricted Subsidiary would be (A) in compliance with the covenants described
under "--Limitation on Indebtedness" immediately after giving effect to such
Sale/Leaseback Transaction and (B) entitled to create a Lien on such property
securing the Attributable Debt with respect to such Sale/ Leaseback Transaction
without securing the Notes pursuant to the covenant described under
"--Limitation on Liens," (ii) the net proceeds received by the Company or any
Restricted Subsidiary in connection with such Sale/Leaseback Transaction are at
least equal to the fair market value (as determined by the Board of Directors of
the Company) of such property and (iii) the Company or such Restricted
Subsidiary applies the proceeds of such transaction in compliance with the
covenant described under "--Limitation on Sales of Assets and Subsidiary Stock."
LIMITATION ON RESTRICTED PAYMENTS. (a) The Company shall not, and shall not
permit any Restricted Subsidiary to, directly or indirectly, make a Restricted
Payment if at the time the Company or such Restricted Subsidiary makes, and
after giving effect to, the proposed Restricted Payment: (i) a Default shall
have occurred and be continuing (or would result therefrom); (ii) the Company or
such Restricted Subsidiary, as applicable, is not able to Incur an additional
$1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under
"--Limitation on Indebtedness"; or (iii) the aggregate amount of such Restricted
Payment and all other Restricted Payments since the Issue Date would exceed the
sum of:
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(A) 50% of the Consolidated Net Income accrued during the period (treated as one
accounting period) from the beginning of the fiscal quarter immediately
following the fiscal quarter during which the Old Notes were originally issued
to the end of the most recently ended fiscal quarter for which financial
statements are available at the time of such Restricted Payment (or, in case
such Consolidated Net Income shall be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Company from capital
contributions or the issuance or sale of its Capital Stock (other than
Disqualified Stock) subsequent to the Issue Date (other than an issuance or sale
to a Subsidiary of the Company); (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 Subsidiary of the Company) subsequent to the Issue
Date, of any Indebtedness of the Company or a Restricted Subsidiary for Capital
Stock (other than Disqualified Stock) of the Company (less the amount of any
cash, or the fair value of any other property, distributed by the Company upon
such conversion or exchange), whether pursuant to the terms of such Indebtedness
or pursuant to an agreement with a creditor to engage in an equity for debt
exchange; and (D) an amount equal to the sum of (i) the net reduction in
Investments in Unrestricted Subsidiaries resulting from the receipt of
dividends, repayments of loans or advances or other transfers of assets or
proceeds from the disposition of Capital Stock or other distributions or
payments, in each case to the Company or any Restricted Subsidiary from, or with
respect to, interests in Unrestricted Subsidiaries, and (ii) the portion
(proportionate to the Company's equity interest in such Subsidiary) of the fair
market value of the net assets of an Unrestricted Subsidiary at the time such
Unrestricted Subsidiary is designated a Restricted Subsidiary; PROVIDED,
HOWEVER, that the foregoing sum shall not exceed, in the case of any
Unrestricted Subsidiary, the amount of Investments previously made (and treated
as a Restricted Payment) by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary subsequent to the Issue Date.
(b) The provisions of the foregoing paragraph (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 (A) Disqualified
Stock or (B) Capital Stock issued or sold to a Subsidiary of the Company) or out
of the proceeds of a substantially concurrent capital contribution to the
Company; PROVIDED, HOWEVER, that (x) such purchase, capital contribution or
redemption shall be excluded in the calculation of the amount of Restricted
Payments and (y) the Net Cash Proceeds from such sale of Capital Stock or
capital contribution shall be excluded from clause (iii)(B) of paragraph (a)
above; (ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by exchange
for, or out of the proceeds of the substantially concurrent sale of,
Indebtedness of the Company which is permitted to be Incurred pursuant to the
covenant described under "--Limitation on Indebtedness"; PROVIDED, HOWEVER, that
such purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value shall be excluded in the calculation of the amount of
Restricted Payments; (iii) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would have
complied with this covenant; PROVIDED, HOWEVER, that such dividend shall be
included in the calculation of the amount of Restricted Payments; (iv) for so
long as the Company is a partnership or substantially similar pass-through
entity for Federal income tax purposes, the making of Permitted Quarterly Tax
Distributions in compliance with this covenant; PROVIDED, HOWEVER, that such
distributions shall be excluded in the calculation of the amount of Restricted
Payments; and (v) the repurchase of Capital Stock of the Company from directors,
officers or employees of the Company pursuant to the terms of an employee
benefit plan or employment or other agreement; provided that the aggregate
amount of all such repurchases shall not exceed $1.0 million in any fiscal year
and $5.0 million in the aggregate.
(c) For so long as the Company is a partnership or substantially similar
pass-through entity for Federal income tax purposes, the Company may make cash
distributions to its members, during each Quarterly Payment Period, in an
aggregate amount not to exceed the Permitted Quarterly Tax Distribution in
respect of the related Estimation Period. If any portion of a Permitted
Quarterly Tax Distribution is not distributed during such Quarterly Payment
Period, the Permitted Quarterly Tax Distribution payable
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during the immediately following Quarterly Payment Period shall be increased by
such undistributed portion.
Within 10 days following the Company's filing of Internal Revenue Service
Form 1065 for the immediately preceding taxable year, the Tax Amounts CPA shall
file with the Trustee a written statement indicating in reasonable detail the
calculation of the True-Up Amount. Is the case of a True-Up Amount due to the
members, the Permitted Quarterly Tax Distribution payable during the immediately
following Quarterly Payment Period shall be increased by such True-Up Amount. In
the case of a True-Up Amount due to the Company, the Permitted Quarterly Tax
Distribution payable during the immediately following Quarterly Payment Period
shall be reduced by such True-Up Amount and the excess, if any, of the True-Up
Amount over such Permitted Quarterly Tax Distribution shall be applied to reduce
the immediately following Permitted Quarterly Tax Distributions until such
True-Up Amount is entirely offset.
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 on its Capital
Stock to the Company or a Restricted Subsidiary or pay any Indebtedness owed to
the Company, (b) make any loans or advances to the Company or (c) transfer any
of its property or assets to the Company, except: (i) any encumbrance or
restriction pursuant to the Bank Facility or any other agreement in effect at 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 Indebtedness
Incurred by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Company (other than Indebtedness
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) and outstanding on such date; (iii)
any encumbrance or restriction pursuant to an agreement effecting Refinancing
Indebtedness Incurred pursuant to an agreement referred to in clause (i) or (ii)
of this covenant or this clause (iii) or contained in any amendment to an
agreement referred to in clause (i) or (ii) of this covenant or this clause
(iii); PROVIDED, HOWEVER, that the encumbrances and restrictions with respect to
any such Restricted Subsidiary contained in any such refinancing agreement or
amendment are no less favorable to the Holders than encumbrances and
restrictions with respect to such Restricted Subsidiary contained in such
agreements; (iv) any such encumbrance or restriction consisting of customary
non-assignment provisions in leases to the extent such provisions restrict the
subletting, assignment or transfer of the lease or the property leased
thereunder or in purchase money financings; (v) in the case of clause (c) 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; (vi)
encumbrances or restrictions imposed by operation of any applicable law, rule,
regulation or order; and (vii) any 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.
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK. (a) The Company shall
not, and shall not permit any Restricted Subsidiary to, directly or indirectly,
sell, lease, transfer or otherwise dispose of the Escrowed Property other than
in accordance with the Escrow Agreement. The Company shall not, and shall not
permit any Restricted Subsidiary to, directly or indirectly, consummate any
Asset Disposition of property other than the Escrowed Property, unless (i) the
Company or such Restricted Subsidiary receives consideration at the time of such
Asset Disposition at least equal to the fair market value (including the value
of all non-cash consideration), as determined in good faith by the Board of
Directors, of the shares and assets subject to such Asset Disposition, and at
least 85% of the consideration thereof received by the Company or such
Restricted Subsidiary is in the form of cash or cash equivalents and (ii) an
amount equal to 100% of the Net Available Cash from such Asset Disposition is
applied by the Company (or such
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Restricted Subsidiary, as the case may be) (A) First, to either (i) prepay,
repay, redeem or purchase (and permanently reduce the commitments under)
Indebtedness under the Bank Facility or that is otherwise secured by its assets
subject to such Asset Disposition within 180 days from the date of the receipt
of such Net Available Cash (the "Receipt Date") or (ii) to the extent the
Company elects, to acquire Additional Assets within 180 days from the Receipt
Date; (B) Second, to the extent of the balance of such Net Available Cash after
application in accordance with clause (A), to make an offer pursuant to
paragraph (b) below to the Holders to purchase Notes pursuant to and subject to
the conditions contained in the Indenture; and (C) Third, to the extent of the
balance of such Net Available Cash after application in accordance with clauses
(A) or (B) to any other application or use not prohibited by the Indenture.
Notwithstanding the foregoing provisions of this paragraph, the Company and the
Restricted Subsidiaries shall not be required to apply the Net Available Cash in
accordance with this paragraph except to the extent that the aggregate Net
Available Cash from all Asset Dispositions which is not applied in accordance
with this paragraph exceeds $5.0 million (at which time, the entire unutilized
Net Available Cash, and not just the amount in excess of $5.0 million, shall be
applied pursuant to this paragraph). Pending application of Net Available Cash
pursuant to this covenant, such Net Available Cash shall be invested in
Permitted Investments.
For the purposes of this covenant, the following are deemed to be cash or
cash equivalents: (x) the express assumption of Indebtedness of the Company or
any Restricted Subsidiary and the release of the Company or such Restricted
Subsidiary from all liability on such Indebtedness in connection with such Asset
Disposition and (y) securities received by the Company or any Restricted
Subsidiary from the transferee that are converted by the Company or such
Restricted Subsidiary into cash within 90 days of closing the transaction.
(b) In the event of an Asset Disposition that requires the purchase of the
Notes pursuant to clause (a)(ii)(B) above, the Company will be required to
purchase Notes tendered pursuant to an offer by the Company for the Notes at a
purchase price of 100% of their principal amount plus accrued but unpaid
interest in accordance with the procedures (including prorating in the event of
oversubscription) set forth in the Indenture. If the aggregate purchase price of
Notes tendered pursuant to such offer is less than the Net Available Cash
allotted to the purchase thereof, the Company will be required to apply the
remaining Net Available Cash in accordance with clause (a)(ii)(C) above. The
Company shall not be required to make such an offer to purchase Notes pursuant
to this covenant if the Net Available Cash available therefor is less than $5.0
million (which lesser amount shall be carried forward for purposes of
determining whether such an offer is required with respect to any subsequent
Asset Disposition).
(c) 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 repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this clause by virtue thereof.
APPLICATION OF EVENT OF LOSS PROCEEDS. (a) If an Event of Loss occurs at
any time with respect to a Rig (the Rig suffering such Event of Loss being the
"Lost Rig"), the Company shall apply an amount equal to 100% of the Event of
Loss Proceeds from such Event of Loss received by the Company (or such
Restricted Subsidiary, as the case may be) (i) FIRST, to either (A) prepay,
repay, redeem or purchase (and permanently reduce the commitments under)
Indebtedness under the Bank Facility or that is otherwise secured by the Rig
subject to such Event of Loss within 180 days from the date of the receipt of
such Event of Loss Proceeds (the "Loss Receipt Date") or (B) to the extent the
Company elects, to acquire a Qualified Substitute Rig within 180 days from the
Loss Receipt Date; (ii) SECOND, to the extent of the balance of such Event of
Loss Proceeds after application in accordance with clause (i), to make an offer
pursuant to paragraph (b) below to the Holders to purchase Notes pursuant to and
subject to the conditions contained in the Indenture; and (iii) THIRD, to the
extent of the balance of such Event of Loss Proceeds after application in
accordance with clauses (i) or (ii) to any other application or use not
prohibited by the
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Indenture. Pending application of Event of Loss Proceeds pursuant to this
covenant, such Event of Loss Proceeds shall be invested in Permitted
Investments.
(b) In the event of an Event of Loss that requires the purchase of the Notes
pursuant to clause (a)(ii) above, the Company will be required to purchase Notes
tendered pursuant to an offer by the Company for the Notes at a purchase price
of 101% of their principal amount plus accrued but unpaid interest in accordance
with the procedures (including prorating in the event of oversubscription) set
forth in the Indenture. If the aggregate purchase price of Notes tendered
pursuant to such offer is less than the Event of Loss Proceeds allotted to the
purchase thereof, the Company will be required to apply the remaining Event of
Loss Proceeds in accordance with clause (a)(iii) above.
(c) 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 repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this clause by virtue thereof.
INSURANCE. The Company shall, or shall cause the Restricted Subsidiary
owning a drilling rig or drilling rigs to, carry and maintain with respect to
each Rig owned by it insurance payable in United States Dollars in amounts,
against risks (including marine hull and machinery (including excess value)
insurance, marine protection and indemnity insurance, war risks insurance and
liability insurance and liability arising out of pollution and the spillage or
leakage of cargo and cargo liability insurance) 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 similar to the
Rigs and with insurance companies, underwriters, funds, mutual insurance
associations or clubs of recognized standing. No insurance shall provide for a
deductible in excess of $1.0 million per occurrence. No insurance policy shall
be subject to lapse without at least seven Business Days' prior notice to the
Trustee.
For purposes of insurance against total loss, each drilling rig is to be
insured for an amount not less than the fair market value (as determined in good
faith by the Board of Directors of the Company) and not less, when aggregated
with the insurance on the other drilling rigs, than the outstanding principal
amount of the Notes, Indebtedness under the Bank Facility and any other PARI
PASSU Indebtedness, in each case together with premium, if any, and accrued
interest thereon.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. (a) The Company shall not, and
shall not permit any Restricted Subsidiary to, enter into any transaction
(including the purchase, sale, lease or exchange of any property or the
rendering of any service) with any Affiliate of the Company other than the
Company or a Restricted Subsidiary (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 a
comparable 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
$1.0 million, (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 or such
Restricted Subsidiary as the case may be, having no material personal financial
stake in such Affiliate Transaction and (3) if such Affiliate Transaction
involves an amount in excess of $5.0 million, have been determined by a
nationally recognized investment banking firm to be fair, from a financial
standpoint, to the Company or its Restricted Subsidiary, as the case may be.
(b) The provisions of the foregoing paragraph (a) shall not prohibit (i) any
Permitted Investment or Restricted Payment permitted to be made pursuant to the
covenant described under "--Limitation on Restricted Payments," or any payment
or transaction specifically excepted from the definition of Restricted Payment,
(ii) any issuance of securities, or other payments, awards or grants in cash,
securities or otherwise pursuant to, or the funding of, employment arrangements,
stock options, stock ownership or other employee benefit plans approved by the
Board of Directors of the Company, (iii) the grant of stock options or similar
rights to employees and directors pursuant to plans approved by the Board of
Directors of the
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Company, (iv) loans or advances to officers, directors or employees in the
ordinary course of business or pursuant to compensation plans or employment
agreements approved by the Board of Directors of the Company, in an aggregate
amount not to exceed $1.0 million in any calendar year, (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, (vi) any
transaction between the Company and a Wholly Owned Restricted Subsidiary or
between Wholly Owned Restricted Subsidiaries and (vii) management and
administrative services agreements in effect on the Issue Date that were
disclosed in the Offering Circular relating to the Notes under the caption
"Certain Relationships and Related Transactions" and any amendments thereto (so
long as any such amendment is not more disadvantageous to the holders of the
Notes in any material respect than the original agreement as in effect on the
Issue Date and complies with clause (a)(1) above).
LIMITATION ON THE SALE OR ISSUANCE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES. The Company shall not sell or otherwise dispose of any shares of
Capital Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any
shares of its Capital Stock to any person (other than to the Company or a Wholly
Owned Subsidiary) or permit any Person (other than the Company or a Wholly Owned
Subsidiary) to own any Capital Stock of a Restricted Subsidiary, if in either
case as a result thereof such Restricted Subsidiary would no longer be a
Restricted Subsidiary; PROVIDED, HOWEVER, this provision shall not prohibit (x)
the Company or any Restricted Subsidiary from selling, leasing or otherwise
disposing of all of the Capital Stock of any Restricted Subsidiary or (y) the
designation of a Restricted Subsidiary as an Unrestricted Subsidiary in
compliance with the Indenture. The foregoing shall not apply to any Lien granted
on the Capital Stock of a Restricted Subsidiary.
MERGER AND CONSOLIDATION. Neither of the Issuers shall consolidate with or
merge with or into, or convey, transfer or lease, in one transaction or a series
of transactions, its assets substantially as an entirety to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor Company")
shall be a Person organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia, and the Successor
Company (if not the Company or Finance, as the case may be) shall expressly
assume, by a supplemental indenture, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the obligations of the Company or Finance,
as the case may be, under the Notes, the Indenture and the Escrow Agreement;
(ii) immediately after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Company or any
Subsidiary as a result of such transaction as having been Incurred by such
Successor Company or such Subsidiary at the time of such transaction), no
Default shall have occurred and be continuing; (iii) in the case of the Company,
immediately after giving effect to such transaction, the Successor Company would
be able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a)
of the covenant described under "--Limitation on Indebtedness"; (iv) in the case
of the Company, immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount that is not
less than the Consolidated Net Worth of the Company prior to such transaction,
minus any costs incurred in connection with such transaction; and (v) the
Company or Finance, as the case may be, shall have delivered to the Trustee an
officer's certificate and an opinion of counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with the Indenture.
The Successor Company shall be the successor to the Company or Finance, as
the case may be, and shall succeed to, and be substituted for, and may exercise
every right and power of, the Company or Finance, as the case may be, under the
Indenture, but the predecessor company, only in the case of a conveyance,
transfer or lease, shall not be released from the obligation to pay the
principal of and interest on the Notes.
Notwithstanding the foregoing, (i) any Restricted Subsidiary may consolidate
or merge with, or transfer its assets substantially as an entirety to, the
Company and (ii) the Company may consolidate or merge with, or transfer its
assets substantially as an entirety to, an Affiliate solely for the purpose of
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effecting a Corporate Conversion, PROVIDED, HOWEVER, that, in either case, the
requirements set forth in
clauses (i) and (v) of the first paragraph under "--Merger and Consolidation"
are complied with.
LIMITATION ON BUSINESS ACTIVITIES. The Company shall not, and shall not
permit any of its Restricted Subsidiaries to, engage to any material extent in
any business other than a Related Business.
FUTURE SUBSIDIARY GUARANTORS. The Company shall cause each Restricted
Subsidiary that is organized and existing under the laws of any State of the
United States or the District of Columbia and that at any time becomes an
obligor or guarantor with respect to any obligations under the Bank Facility to
execute and deliver to the Trustee a supplemental indenture pursuant to which
such Restricted Subsidiary will Guarantee payment of the Notes on the same terms
and conditions as those set forth in the Indenture. 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 such
Subsidiary Guarantee voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally.
LIMITATION ON FINANCE. In addition to the restrictions set forth under
"--Limitation on Indebtedness" above, Finance may not incur any Indebtedness
unless (a) the Company is a co-obligor and guarantor of such Indebtedness or (b)
the net proceeds of such Indebtedness are lent to the Company, used to acquire
outstanding debt securities issued by the Company or used directly or indirectly
to refinance or discharge Indebtedness permitted under the limitation of this
paragraph. Finance may not engage in any business not related directly or
indirectly to obtaining money or arranging financing for the Company.
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 the SEC (unless the SEC will not accept such a
filing) and provide within 15 days to the Trustee and Holders such annual
reports and such information, documents and other reports as are specified in
Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. company
subject to such Sections, such information, documents and other reports to be so
filed and provided at the times specified for the filing of such information,
documents and reports under such Sections. 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 Company
shall furnish to the Holders and to prospective investors, upon the request of
such Holders, any information required to be delivered pursuant to Rule 144A (d)
(4) under the Securities Act so long as the Old Notes are not freely
transferable under the Securities Act.
IMPAIRMENT OF SECURITY INTEREST IN COLLATERAL. The Company shall not, and
shall not permit any Restricted Subsidiary to, take or knowingly omit to take,
any action which action or omission might or would have the result of materially
impairing the security interest with respect to the Collateral (as defined in
the Escrow Security Agreement) for the benefit of the Collateral Agent, the
Trustee and the Holders of the Notes, and the Company shall not, and shall not
permit any Restricted Subsidiary to, grant to any Person other than the
Collateral Agent, for the benefit of the Collateral Agent, the Trustee and the
Holders of the Notes, any interest whatsoever in any of the Collateral.
AMENDMENTS TO ESCROW AGREEMENT AND ESCROW SECURITY AGREEMENT. The Company
shall not, and shall not permit any Restricted Subsidiary to, amend, modify or
supplement, or permit or consent to any amendment, modification or supplement
of, the Escrow Agreement or the Escrow Security Agreement in any way that would
be adverse to the Holders of the Notes.
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DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in the
payment of interest on the Notes when due, continued for 30 days, (ii) a default
in the payment of principal on any Note when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon acceleration or otherwise,
(iii) the failure by the Company to comply with its obligations under "--Certain
Covenants--Merger and Consolidation" above, (iv) the failure by the Company to
comply for 30 days after notice with any of its obligations in the covenants
described above under "Right to Require Repurchase Upon Contract Termination" or
"Change of Control" (in either case, other than a failure to purchase Notes) or
under "--Certain Covenants--Limitation on Indebtedness," "--Limitation on
Restricted Payments," "--Limitation on Restrictions on Distributions from
Restricted Subsidiaries," "--Limitation on Sales of Assets and Subsidiary
Stock," "--Insurance," "--Limitations on Transactions with Affiliates,"
"--Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries," "--Limitation on Business Activities," "-- Future Subsidiary
Guarantors," "--Limitation on Finance," "--Impairment of Security Interest in
Collateral" and "--Amendments to Escrow Agreement and Escrow Security
Agreement," (v) the failure by the Company to comply for 60 days after the
Company receives written notice with its other agreements contained in the
Indenture, (vi) Indebtedness of the Company or any Restricted Subsidiary is not
paid within any applicable grace period after final maturity or is accelerated
by the Holders thereof because of a default and the total amount of such
Indebtedness unpaid or accelerated exceeds $10.0 million (the "cross
acceleration provision"), (vii) certain events of bankruptcy, insolvency or
reorganization of the Company or any Restricted Subsidiary that is a Significant
Subsidiary (the "bankruptcy provisions"), (viii) any judgment or decree for the
payment of money in excess of $10.0 million is entered against the Company or
any Restricted Subsidiary, remains outstanding for a period of 60 days following
entry of such judgment and is not discharged, bonded, waived or stayed within 30
days after notice (the "judgment default provision"), (ix) a Subsidiary
Guarantee ceases to be in full force and effect (other than in accordance with
the terms of such Subsidiary Guarantee or the Indenture) or a Subsidiary
Guarantor denies or disaffirms its obligations under its Subsidiary Guarantee
(the "guarantee default provision"), or (x) the security interest under the
Escrow Security Agreement 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 Escrow Security Agreement), or any security interest created
thereunder shall be declared invalid or unenforceable, or the Company or any
Restricted Subsidiary shall assert, in any pleading in any court of competent
jurisdiction that any such security interest is invalid or unenforceable (the
"security default provision"). However, a default under clause (iv) or (v) will
not constitute an Event of Default until the Trustee or the Holders of 25% in
principal amount of the outstanding Notes notify the Company of the default and
the Company does not cure such default within the time specified after receipt
of such notice.
If an Event of Default (other than the bankruptcy provisions relating to the
Company) occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the outstanding Notes may declare the principal of and
accrued but unpaid interest on all the Notes to be due and payable. Upon such a
declaration, such principal and interest shall be due and payable immediately.
If an Event of Default relating to the bankruptcy provisions relating to the
Company occurs and is continuing, the principal of and interest on all the Notes
will IPSO FACTO become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holders. The Holders
of a majority in principal amount of the outstanding Notes may by notice to the
Trustee rescind any acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
have been cured or waived except non-payment of principal or interest that has
become due solely because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
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 unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to
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enforce the right to receive payment of principal, premium (if any) or interest
when due, no Holder of a Note may pursue any remedy with respect to the
Indenture or the Notes unless (i) such Holder has previously given the Trustee
notice that an Event of Default is continuing, (ii) Holders of at least 25% in
principal amount of the outstanding Notes have requested the Trustee to pursue
the remedy, (iii) such Holders have offered the Trustee reasonable security or
indemnity against any loss, liability or expense, (iv) the Trustee has not
complied with such request within 60 days after the receipt thereof and the
offer of security or indemnity and (v) the Holders of a majority in principal
amount of the outstanding Notes have not given the Trustee a direction
inconsistent with such request within such 60-day period. Subject to certain
restrictions, the Holders of a majority in 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. 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 or that would
involve the Trustee in personal liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder 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 notice if and
so long as the board of directors, the executive committee or a committee of its
trust officers determines that withholding notice is not opposed to the interest
of the Holders. In addition, the Company is required to deliver to the Trustee,
within 120 days after the end of each fiscal year, a certificate indicating
whether the signers thereof know of any Default that occurred during the
previous year. The Company also is required to deliver to the Trustee, within 30
days after the occurrence thereof, written notice of any event that would
constitute certain Defaults, their status and what action the Company is taking
or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the Holders of a majority in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for the Notes) and any past default or compliance with any provisions may also
be waived with the consent of the Holders of a majority in principal amount of
the Notes then outstanding.
Without the consent of each Holder of an outstanding Note affected thereby,
no amendment may (i) reduce the amount of Notes whose Holders must consent to an
amendment, (ii) reduce the rate of or extend the time for payment of interest on
any Note, (iii) reduce the principal of or extend the Stated Maturity of any
Note, (iv) reduce the premium payable upon the redemption of any Note or change
the time at which any Note may be redeemed as described under "--Redemption"
above, (v) make any Note payable in money other than that stated in the Note,
(vi) impair the right of any Holder to receive payment of principal of and
interest on such Holder's 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 Notes, (vii) make any change in the amendment provisions which require
each Holder's consent or in the waiver provisions, (viii) affect the ranking of
the Notes in any material respect or (ix) make any change in any Subsidiary
Guarantee or the Escrow Security Agreement that would adversely affect the
Holders or terminate the Lien of the Indenture or the Escrow Security Agreement
on the Collateral or deprive the Holders of the security afforded by such Lien.
Without the consent of any Holder, the Company and the Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation of the obligations of the Company
under the Indenture, 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 guarantees with respect to the Notes, to secure the Notes, to add
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to the covenants of the Company for the benefit of the Holders or to surrender
any right or power conferred upon the Company, to make any change that does not
adversely affect the rights of any Holder 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 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 becomes effective, the Company is
required to mail to Holders a notice briefly describing such amendment. However,
the failure to give such notice to all Holders, or any defect therein, will not
impair or affect the validity of the amendment.
TRANSFER
The New Notes will be issued in registered form and will be transferable
only upon the surrender of the New Notes being transferred for registration of
transfer. The Company may require payment of a sum sufficient to cover any tax,
assessment or other governmental charge payable in connection with certain
transfers and exchanges. The Company is not required to transfer or exchange any
Note selected for redemption or repurchase or to transfer or exchange any Note
for a period of 15 days prior to selection of Notes to be redeemed or
repurchased.
DEFEASANCE
The Issuers at their option at any time may terminate all of their
obligations under the Notes and the Indenture ("legal defeasance"), except for
certain obligations, including those respecting the defeasance 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. In addition, the Issuers at their option
at any time may terminate their obligations under "--Change of Control" and
under the covenants described under "--Certain Covenants" (other than the
covenant described under "--Merger and Consolidation") (and any omission to
comply with such obligations shall not constitute a Default or Event of Default
with respect to the Notes), the operation of the cross acceleration provision,
the bankruptcy provisions with respect to Significant Subsidiaries and the
judgment default provision, the guarantee default provision and the security
default provision described under "--Defaults" above and the limitations
contained in clauses (iii) and (iv) of the first paragraph under "--Certain
Covenants--Merger and Consolidation" above ("covenant defeasance").
The Issuers may exercise their legal defeasance option notwithstanding their
prior exercise of their covenant defeasance option. If the Issuers exercise
their legal defeasance option, payment of the Notes may not be accelerated
because of an Event of Default with respect thereto. If the Issuers exercise
their covenant defeasance option, payment of the Notes may not be accelerated
because of an Event of Default specified in clause (iv), (vi), (vii) (with
respect only to Significant Subsidiaries) or (viii), (ix) and (x) under
"--Defaults" above or because of the failure of the Company to comply with
clause (iii) or (iv) of the first paragraph under "--Certain Covenants--Merger
and Consolidation" above. If the Issuers exercise their legal defeasance option
or their covenant defeasance option, each Subsidiary Guarantor will be released
from all its obligations with respect to its Subsidiary Guarantee.
In order to exercise either defeasance option, the Issuers must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal of and interest on the Notes
to redemption or maturity, as the case may be, and must comply with certain
other conditions, including delivery to the Trustee of an Opinion of Counsel to
the effect that Holders 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 amount 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).
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SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of the Notes, as expressly
provided for in the Indenture) as to all outstanding Notes when: (i) either (a)
all the Notes theretofore authenticated and delivered (except lost, stolen or
destroyed Notes which have been replaced or paid) have been delivered to the
Trustee for cancellation or (b) all Notes not theretofore delivered to the
Trustee for cancellation have become due and payable and the Issuers have
irrevocably deposited or caused to be deposited with the Trustee an amount in
United States dollars sufficient to pay and discharge the entire indebtedness on
the Notes not theretofore delivered to the Trustee for cancellation, for the
principal of, premium, if any, and interest to the date of deposit; (ii) the
Issuers have paid or caused to be paid all other sums payable under the
Indenture by the Issuers; and (iii) the Issuers have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel each stating that all conditions
precedent under the Indenture relating to the satisfaction and discharge of the
Indenture have been complied with.
NO PERSONAL LIABILITY
The Indenture provides that no recourse for the payment of the principal of,
premium, if any, or interest on any of the Notes or for any claim based thereon
or otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of the Issuers in the Indenture, or in any of the Notes or
because of the creation of any Indebtedness represented thereby, shall be had
against any incorporator, stockholder, member, officer, director, manager,
employee or controlling person of the Issuers or any successor Person thereof.
Each Holder, by accepting the Notes, waives and releases all such liability.
Such waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the SEC that such waiver is against public
policy.
CONCERNING THE TRUSTEE
U.S. Bank Trust National Association is the Trustee under the Indenture, the
Escrow Agent under the Escrow Agreement and the Collateral Agent under the
Escrow Security Agreement and has been appointed by the Company as Registrar and
Paying Agent with regard to the Notes. Such bank may also act as a depository of
funds for, or make loans to and perform other services for, the Company or its
affiliates in the ordinary course of business in the future. The corporate trust
office of the Trustee is located at 100 Wall Street, New York, New York 10041.
The Holders of a majority in 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 certain
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 man in the conduct of his 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. The Trustee may resign at any
time or may be removed by the Company. If the Trustee resigns, is removed or
becomes incapable of acting as Trustee or if a vacancy occurs in the office of
the Trustee for any cause, a successor Trustee shall be appointed in accordance
with the provisions of the Indenture.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and the Indenture. The Indenture also
contains certain limitations on the right of the Trustee, as a creditor of the
Company, to obtain payment of claims in certain cases, or to realize on certain
property received by it in respect of any such claims, as security or otherwise.
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GOVERNING LAW
The Indenture provides that it and the Notes will be 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 to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"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 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.
"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 securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"ALLOCATED PORTION" means, with respect to any Rig, a fraction, the
numerator of which is the Purchase Price of such Rig and the denominator is the
sum of the Purchase Prices of both Rigs.
"ALLOCATED PRINCIPAL AMOUNT" means, with respect to the principal amount of
any Note and any Rig, an amount equal to the product of (a) the principal amount
of such Note and (b) the Allocated Portion.
"ASSET DISPOSITION" means any sale, lease, transfer or other disposition (or
series of related sales, leases, transfers or dispositions) by the Company or
any Restricted Subsidiary, including any disposition by means of a merger or
consolidation (each referred to for the purposes of this definition as a
"disposition"), 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) all
or substantially all the assets (other than Capital Stock of an Unrestricted
Subsidiary) of any division or line of business of the Company or any Restricted
Subsidiary or (iii) any other assets (other than Capital Stock of an
Unrestricted Subsidiary) 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, (x) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Restricted Subsidiary, (y) for purposes of the covenant
described under "--Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock" only, a disposition that constitutes a Restricted Payment
permitted by the covenant described under "--Certain Covenants-- Limitation on
Restricted Payments" or a disposition specifically excepted from the definition
of Restricted Payment and (z) a disposition by the Company or a Restricted
Subsidiary of a Construction Option to an Unrestricted Subsidiary or other
Affiliate of the Company); PROVIDED, HOWEVER, that Asset Disposition shall not
include (a) a transaction or series of related transactions for which the
Company or its Restricted Subsidiaries receive aggregate consideration less than
or equal to $1.0 million or (b) the sale, lease, conveyance, disposition or
other transfer of all or substantially all of the assets of the Company as
permitted under "--Certain Covenants--Merger and Consolidation."
"ATTRIBUTABLE DEBT" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
borne by the Notes, compounded annually) of the total obligations of the lessee
for rental payments 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 the numbers of years from the date
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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.
"BANK FACILITY" means the credit agreement, dated as of the Issue Date,
among the Company, one or more commercial banks, as agent or agents, and the
other financial institutions party thereto, as such agreement, in whole or in
part, may be amended, renewed, extended, refunded, replaced or refinanced from
time to time.
"BOARD OF DIRECTORS" means (i) in the case of a Person that is a
corporation, the board of directors of such Person and (ii) in the case of any
other Person, the board of directors, board of managers, management committee or
similar governing body of such Person (or in the case of a limited partnership,
of such Person's general partner, or in the case of a limited liability company,
of such Person's manager if such manager(s) is not an individual), or any
authorized committee thereof responsible for the management of the business and
affairs of such Person.
"BUSINESS DAY" means each day which is not a Legal Holiday.
"BUILDER" means AMFELS, Inc., a Texas corporation.
"CAPITAL LEASE OBLIGATIONS" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"CAPITAL STOCK" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations, membership interests or other
equivalents of or interests in (however designated) equity of such Person,
including any Preferred Stock, but excluding any debt securities convertible
into such equity.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSOLIDATED COVERAGE RATIO" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days (or, if less than 45
days after the end of such fiscal quarter, ending as of the date the
consolidated financial statements of the Company shall be available) prior to
the date of such determination to (ii) Consolidated Interest Expense for such
four fiscal quarters; PROVIDED, HOWEVER, that (1) if the Company or any
Restricted Subsidiary (x) has Incurred any Indebtedness (other than Indebtedness
Incurred for working capital purposes under the Bank Facility) since the
beginning of such period that remains outstanding or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence
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 Incurred 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 or (y) has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of the period that is no longer outstanding on such date of
determination, or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio involves a discharge of Indebtedness, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
effect to such discharge of such Indebtedness, including with the proceeds of
such new Indebtedness, as if such discharge had occurred on the first day of
such period (except that, in making such computation, the amount of Indebtedness
under any revolving credit facility shall be computed based upon the average
daily balance of such Indebtedness during such four quarter period), (2) if
since the beginning of such period the Company or any Restricted Subsidiary
shall have made any Asset Disposition, EBITDA for such period shall be reduced
by an amount equal to EBITDA (if positive) directly
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attributable to the assets which are the subject of such Asset Disposition for
such period, or increased by an amount equal to the EBITDA (if negative)
directly attributable thereto for such period and Consolidated Interest Expense
for such period shall be reduced by an amount equal to the Consolidated Interest
Expense directly attributable to any Indebtedness of the Company or any
Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to the Company and its continuing Restricted Subsidiaries in connection
with such Asset Disposition 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 Restricted 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 requiring a
calculation to be made hereunder, which constitutes all or substantially all of
an operating unit of a business, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving pro forma effect thereto (including
the Incurrence of any Indebtedness) as if such Investment or acquisition
occurred on the first day of such period or (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, Investment or acquisition
of assets 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, Investment
or acquisition 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 Incurred 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 on 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 Agreement applicable to such
Indebtedness if such Interest Rate 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 a Restricted Subsidiary
owning a rig) by the Company or by a Restricted Subsidiary pursuant to a binding
purchase agreement or the delivery since the beginning of such period of a
drilling rig to the Company or a Restricted Subsidiary pursuant to a drilling
rig construction contract, if such drilling rig is subject to a binding drilling
contract, the Company shall give pro forma effect to the earnings (losses) of
such drilling rig as if such drilling rig was acquired on the first day of such
period by basing such earnings (losses) on (A) (x) revenues to be earned from
any binding drilling contract of at least one year's duration that will be
applicable to any such drilling rig (including a drilling rig owned by a
Restricted Subsidiary) and in effect during such period and (y) a good faith
estimate of the operating costs of such drilling rig (as determined in the
reasonable judgment of a responsible financial officer of the Company) or (B)
with respect to any such drilling rig subject to a drilling contract of less
than one year's duration, the earnings (losses) for such period based on
industry average earning (losses) for comparable drilling rigs (as determined in
the reasonable judgment of a responsible financial officer of the Company).
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"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 total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, (i) interest expense
attributable to Capital Lease Obligations, (ii) amortization of debt discount
and debt issuance costs, (iii) capitalized interest, (iv) non-cash interest
expense, (v) commissions, discounts and other fees and charges owed with respect
to letters of credit and bankers' acceptance financing, (vi) net costs
associated with Hedging Obligations (including amortization of fees), (vii)
dividends paid or payable in respect of any Disqualified Stock of the Company,
(viii) cash dividends paid or payable by the Company and all dividends paid or
payable by Restricted Subsidiaries, in each case in respect of all Preferred
Stock held by Persons other than the Company or a Wholly Owned Subsidiary, (ix)
interest incurred in connection with Investments in discontinued operations and
(x) interest accruing on any Indebtedness of any other Person to the extent such
Indebtedness is Guaranteed by the Company or any Restricted Subsidiary.
"CONSOLIDATED NET INCOME" means, for any period, the net income of the
Company and its consolidated Subsidiaries; PROVIDED, HOWEVER, that there shall
not be included in such Consolidated Net Income: (i) any net income of any
Person if such Person is not a Restricted Subsidiary, except that (A) subject to
the exclusion contained in clause (iv) below, 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 paid to a Restricted Subsidiary, to the limitations contained in
clause (iii) below) and (B) with respect to the calculation of EBITDA only, the
Company's equity in a net loss of any such Person for such period shall be
included in determining such Consolidated Net Income up to the aggregate amount
invested by the Company or any Restricted Subsidiary in such Person during such
period; (ii) any net income (or loss) of any Person acquired by the Company or a
Subsidiary of the Company in a pooling of interests transaction for any period
prior to the date of such acquisition; (iii) any net income of any Restricted
Subsidiary to the extent that such Restricted Subsidiary is subject to
restrictions, directly or indirectly, prohibiting the payment of dividends, the
repayment of intercompany debt and the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Company, except that (A)
subject to the exclusion contained in clause (iv) below, 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 paid to another
Restricted Subsidiary, to the limitation contained in this clause) and (B) 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 up to the
aggregate amount invested by the Company or any Restricted Subsidiary in such
Person during such period; (iv) any gain or loss realized upon the sale or other
disposition of any assets 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 or loss
realized upon the sale or other disposition of any Capital Stock of any Person;
(v) extraordinary gains or losses; and (vi) the cumulative effect of a change in
accounting principles. Prior to a Corporate Conversion, the calculation of
Consolidated Net Income shall be adjusted by imputing to the Company as an
expense the amount of all Permitted Quarterly Tax Distributions.
"CONSOLIDATED NET WORTH" means the total of the amounts shown on the balance
sheet of the Company and its Restricted Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the most recent fiscal quarter
of the Company for which financial statements are available, as (i) the par or
stated value of all outstanding Capital Stock of the Company plus (ii) paid-in
capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B) any
amounts attributable to Disqualified Stock.
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"CONSTRUCTION CONTRACT" means either of (i) the Platform Construction
Agreement, dated April 30, 1997, between the Company and the Builder relating to
the Rig referred to therein or (ii) the Platform Construction Agreement, dated
August 5, 1997, between the Company and the Builder relating to the Rig referred
to therein, in either case together with all exhibits and schedules thereto and
as either may be amended or supplemented from time to time.
"CONSTRUCTION OPTION" means any contractual option, existing on the Issue
Date or any date thereafter, exercisable by the Company or any of its
Subsidiaries with the Builder or another shipyard for the construction of a
drilling rig.
"CORPORATE CONVERSION" shall mean the conversion of the Company to a
corporation, whether pursuant to a merger, consolidation, conversion by filing,
assignment of assets, or similar transaction or series of transactions, in each
case resulting in a corporation substantially all of the assets of which consist
of substantially all of the assets that were held directly or indirectly by the
Company immediately prior to such transaction and substantially all of the
Capital Stock of which corporation is held by Persons who were members of the
Company immediately prior to such transaction or Permitted Transferees of such
Persons in substantially the same proportions.
"CURRENCY AGREEMENT" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or a beneficiary.
"DEFAULT" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"DELIVERY DATE" means, with respect to a Rig, the date such Rig is accepted
by the related Owner pursuant to the terms of the related Construction Contract.
"DEPOSITORY" means The Depository Trust Company, its nominees and their
respective successors.
"DISQUALIFIED STOCK" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (other than
as a result of a Change of Control) (i) matures or is mandatorily redeemable
pursuant to a sinking fund obligation or otherwise, (ii) is convertible or
exchangeable for Indebtedness or Disqualified Stock or (iii) is redeemable at
the option of the holder thereof, in whole or in part, in each case on or prior
to the Stated Maturity of the Notes; PROVIDED, HOWEVER, that any Capital Stock
that would not constitute Disqualified Stock but for provisions thereof giving
holders thereof the right to require such Person to repurchase or redeem such
Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more favorable to the holders of such
Capital Stock than the provisions described under "--Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock" and "--Change of
Control."
"EBITDA" for any period means the sum of Consolidated Net Income plus
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) prior to a Corporate Conversion,
all Permitted Quarterly Tax Distributions made by the Company and, thereafter,
all income tax expense of the Company, (b) depreciation expense, (c)
amortization expense and (d) all other non-cash items reducing such Consolidated
Net Income (excluding any non-cash item to the extent it represents an accrual
of, or reserve for, cash disbursement for any subsequent period) less all non-
cash items increasing such Consolidated Net Income (such amount calculated
pursuant to this clause (d) not to be less than zero), in each case for such
period. Notwithstanding the foregoing, the provision for taxes based on the
income or profits of, and the depreciation and amortization of, a Subsidiary of
the Company shall be added to Consolidated Net Income to compute EBITDA only to
the extent (and in the same proportion) that the net income of such Subsidiary
was included in calculating Consolidated Net Income.
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"ESTIMATION PERIOD" means the period for which a partner who is an
individual is required to estimate for federal income tax purposes his
allocation of taxable income from a calendar year partnership in connection with
determining his estimated federal income tax liability for such period.
"EVENT OF LOSS" is defined to mean any of the following events: (a) the
actual or constructive total loss of a Rig or the agreed or compromised total
loss of a Rig, (b) the destruction of a Rig, (c) damage to a 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 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 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 Rig, on the date of
such loss; (ii) in the event of a constructive, agreed or compromised total loss
of a 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" is defined to mean all compensation, damages and
other payments (including insurance proceeds) received by the Company or any
Subsidiary Guarantor, 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.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth (i) in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) in statements and
pronouncements of the Financial Accounting Standards Board, (iii) in such other
statements by such other entity as approved by a significant segment of the
accounting profession, and (iv) in the rules and regulations of the SEC
governing the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the SEC.
"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 of such Person (whether arising by virtue of 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 obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"HOLDER" or "NOTEHOLDER" means the Person in whose name a Note is registered
on the Registrar's books.
"INCUR" means issue, assume, Guarantee, incur or otherwise become liable for
Indebtedness; provided, however, that any Indebtedness 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
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correlative meaning. The accretion of principal of a non-interest bearing or
other discount security shall be deemed the Incurrence of Indebtedness.
"INDEBTEDNESS" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of (A) indebtedness of such Person 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; (ii) all Capital
Lease Obligations of such Person and all Attributable Debt in respect of
Sale/Leaseback Transactions entered into by such Person; (iii) all obligations
of such Person issued or assumed as the deferred purchase price of property
(which purchase price is due more than one year after taking title of such
property), all conditional sale obligations of such Person and all obligations
of such Person under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business); (iv) all obligations of
such Person for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction (other than obligations with
respect to letters of credit securing obligations (other than obligations
described in clauses (i) through (iii) above) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon, or, if and to the extent drawn upon, such drawing is reimbursed no
later than the third Business Day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit); (v) the amount of
all obligations of such Person with respect to the redemption, repayment or
other repurchase of any Disqualified Stock or, with respect to any Subsidiary of
such Person, any Preferred Stock (but excluding, in each case, any accrued
dividends); (vi) all obligations of the type referred to in clauses (i) through
(v) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by means of any
Subsidiary Guaranty (but only to the extent of the amount actually guaranteed);
(vii) all obligations of the type referred to in clauses (i) through (vi) of
other Persons secured by any Lien on any property or asset of such Person
(whether or not such obligation is assumed by such Person), the amount of such
obligation being deemed to be the lesser of the value of such property or assets
or the amount of the obligation so secured; and (viii) to the extent not
otherwise included in this definition, Hedging Obligations of such Person. 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. For purposes of
clarification, (i) Indebtedness shall not include undrawn commitments under the
Bank Facility or otherwise and (ii) any Guarantee of Indebtedness shall not be
deemed to be an Incurrence of Indebtedness to the extent that the Indebtedness
so Guaranteed is Incurred by the Company or any Restricted Subsidiary as
permitted pursuant to the terms of the Indenture.
"INTEREST RATE AGREEMENT" means any interest rate swap agreement, interest
rate cap agreement or other financial agreement or arrangement designed solely
to protect the Company or any Restricted Subsidiary against fluctuations in
interest rates.
"INVESTMENT" in any Person means any direct or indirect advance or loan
(including guarantees of Indebtedness or other obligations, but excluding
advances to customers in the ordinary course of business that are recorded as
accounts receivable on the balance sheet of the Person making the advance or
loan) 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 "--Certain Covenants--Limitation on Restricted
Payments," (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 if such
designation is made in connection with the acquisition of such Subsidiary or the
assets owned by such Subsidiary, the "Investment" in such Subsidiary shall be
deemed to
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be the consideration paid in connection with such acquisition; PROVIDED FURTHER,
HOWEVER, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Company shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to
(x) the
Company's "Investment" in such Subsidiary at the time of such redesignation less
(y) the portion (proportionate to the Company's equity interest in such
Subsidiary) of the fair market value of the net assets of such Subsidiary at the
time of such redesignation, and (ii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer, in each case as determined in good faith by the Board of
Directors.
"ISSUE DATE" means the date of original issuance of the Old Notes.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or required by law to
close. If a payment date is a Legal Holiday, payment shall be made on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period. If a regular record date is a Legal Holiday, the record
shall not be affected.
"LIEN" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"MOODY'S" means Moody's Investors Service, Inc.
"NET AVAILABLE CASH" from an Asset Disposition means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, 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, brokerage commissions,
underwriting discounts or commissions or sales commissions and other reasonable
fees and expenses (including, without limitation, fees and expenses of counsel,
accountants and investment bankers) related to such Asset Disposition or
converting to cash any other proceeds received, and any relocation and severance
expenses as a result thereof, and all Federal, state, provincial, foreign and
local taxes required to be accrued or paid as a liability under GAAP, as a
consequence of such Asset Disposition, (ii) all payments made on any
Indebtedness which is secured by any assets subject to such Asset Disposition or
made in order to obtain a necessary consent to such Asset Disposition or to
comply with applicable law, (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 Disposition and (iv) appropriate amounts provided by the
seller as a reserve, in accordance with GAAP, against any liabilities associated
with the property or other assets disposed of in such Asset Disposition and
retained by the Company or any Restricted Subsidiary after such Asset
Disposition, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Disposition. Further, with respect to an Asset Disposition by a Subsidiary which
is not a Wholly Owned Subsidiary, Net Available Cash shall be reduced pro rata
for the portion of the equity of such Subsidiary which is not owned by the
Company.
"NET CASH PROCEEDS," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), pursuant to the instrument governing such Indebtedness or (c)
constitutes the lender; and (ii) no default with respect to which (including any
rights that the holders thereof may have to take
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enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any Indebtedness (other than the
Notes being offered hereby) of the Company or any of its Restricted Subsidiaries
to declare a default on such other Indebtedness or cause the payment thereof to
be accelerated or payable prior to its stated maturity.
"OWNERS" means the following Restricted Subsidiaries, each of which owns a
Rig: (i) Chiles Columbus LLC, a Delaware limited liability company, and (ii)
Chiles Magellan LLC, a Delaware limited liability company, and their respective
successors.
"PERMITTED HOLDERS" means SEACOR SMIT Inc., William E. Chiles and their
respective Affiliates.
"PERMITTED INVESTMENT" means an Investment by the Company or any Wholly
Owned Restricted Subsidiary in (i) a Restricted Subsidiary or a Person that
will, upon the making of such Investment, become a Wholly Owned Restricted
Subsidiary; PROVIDED, HOWEVER, that the primary business of such Restricted
Subsidiary is a Related Business; (ii) another Person if as a result of such
Investment such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all its assets to, the Company or a
Wholly Owned Restricted Subsidiary; PROVIDED, HOWEVER, that such Person's
primary business is a Related Business; (iii) Temporary Cash Investments; (iv)
receivables owing to the Company or any Restricted Subsidiary if created or
acquired in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; provided, however, that such trade terms
may include such concessionary trade terms as the Company or any such Restricted
Subsidiary deems reasonable under the circumstances; (v) payroll, travel and
similar advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and that are made
in the ordinary course of business; (vi) loans or advances to employees
permitted under "--Certain Covenants-- Limitation on Affiliate Transactions";
(vii) stock, obligations or securities received in settlement of debts created
in the ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; (viii) any Person to the extent such
Investment represents the non-cash portion of the consideration received for an
Asset Disposition as permitted pursuant to the covenant described under
"--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock" and as
described in clause (c) of the definition of Asset Disposition; (ix) an
Unrestricted Subsidiary or an Affiliate of the Company in consideration of the
transfer to such Person of a Construction Option; (x) an Unrestricted Subsidiary
or an Affiliate of the Company of the aggregate Net Cash Proceeds received by
the Company from capital contributions or the issuance or sale of its Capital
Stock (other than Disqualified Stock) subsequent to the Issue Date (other than
an issuance or sale to a Subsidiary of the Company), to the extent such
aggregate Net Cash Proceeds are applied by such Person to fund the payment of
all or a portion of the purchase price or cost of construction of a drilling
rig; PROVIDED, HOWEVER, that such Net Cash Proceeds shall be excluded from
clause (a)(iii)(B) of the covenant described under "--Certain Covenants--
Limitation on Restricted Payments"; and (xi) an Unrestricted Subsidiary or an
Affiliate of the Company to fund the payment of, or provide credit support for,
all or a portion of the purchase price or cost of construction of a drilling
rig, in an aggregate principal amount not to exceed $10 million.
"PERMITTED LIENS" means, with respect to any Person, (a) pledges or deposits
by such Person under workers' compensation laws, unemployment insurance laws or
similar legislation, or good faith deposits in connection with bids, tenders,
contracts (other than for the payment of Indebtedness) or leases to which such
Person is a party, or deposits to secure public or statutory obligations of such
Person or deposits or cash or United States government bonds to secure surety or
appeal bonds to which such Person is a party, or deposits as security for
contested taxes or import duties or for the payment of rent, in each case
incurred in the ordinary course of business; (b) Liens imposed by law, such as
carriers', warehousemen's and mechanics' Liens, in each case for sums not yet
due or being contested in good faith by appropriate proceedings; (c) Liens
arising out of judgments or awards against such Person with respect to which
such Person shall then be proceeding with an appeal or other proceedings for
review or the time for appeal has not yet expired; (d) Liens for taxes,
assessments or other governmental charges not yet subject to penalties for
non-payment or which are being contested in good faith by appropriate
proceedings; (e) Liens in favor
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of issuers of surety bonds or letters of credit issued pursuant to the request
of, and for the account of such Person in the ordinary course of its business;
PROVIDED, HOWEVER, that such letters of credit do not constitute Indebtedness;
(f) survey exceptions, encumbrances, easements or reservations of or rights of
others for licenses, rights of way, sewers, electric lines, telegraph and
telephone lines and other similar purposes, or zoning or other restrictions as
to the use of real properties or Liens incidental to the conduct of the business
of such Person or to the ownership of its properties which were not incurred in
connection with Indebtedness and which do not in the aggregate materially
adversely affect the value of said properties or materially impair their use in
the operation of the business of such Person; (g) Liens securing an Interest
Rate Agreement so long as the related Indebtedness is, and is permitted to be
under the Indenture, secured by a Lien on the same property securing the
Interest Rate Agreement; and (h) leases and subleases of real property which do
not interfere with the ordinary conduct of the business of such Person, and
which are made on customary and usual terms applicable to similar properties.
"PERMITTED QUARTERLY TAX DISTRIBUTIONS" means quarterly distributions of Tax
Amounts determined on the basis of the estimated taxable income of the Company,
for the related Estimation Period, as determined by the Tax Amounts CPA in a
statement filed with the Trustee; PROVIDED, HOWEVER, that prior to any
distributions of Tax Amounts the Company shall deliver to the Trustee an
Officers' Certificate stating to the effect that the Company qualifies as a
partnership or substantially similar pass-through entity for Federal income tax
purposes for the period covered by such financial statements.
"PERMITTED TRANSFEREE" means, with respect to any Person: (a) in the case of
any Person who is a natural person, such individual's spouse or children, any
trust for such individual's benefit or the benefit of such individual's spouse
or children, or any corporation, limited liability company or partnership in
which the direct and beneficial owner of all of the equity interest is such
Person or individual's spouse or children or any trust for the benefit of such
persons; (b) in the case of any Person who is a natural person, the heirs,
executors, administrators or personal representatives upon the death of such
Person or upon the incompetency or disability of such Person for purposes of the
protection and management of such individual's assets; and (c) in the case of
any Person who is not a natural person, any Affiliate of such Person.
"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 corporation, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"PRINCIPAL" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"PUBLIC EQUITY OFFERING" means an underwritten primary public offering of
common stock of the Company pursuant to an effective registration statement
(other than on Form S-8) under the Securities Act.
"PURCHASE PRICE" means, with respect to a Rig, the amount specified under
the related Construction Contract as the total purchase price to be paid to the
Builder of such Rig.
"QUALIFIED SUBSTITUTE RIG" is defined to mean, as of any date, a
cantilevered jackup drilling rig which (i) is capable of operating in water
depths of 300 feet or greater, (ii) is in good operating condition and (iii)
will be owned by the Company or a Wholly Owned Restricted Subsidiary of the
Company.
"QUARTERLY PAYMENT PERIOD" means the period commencing on the tenth day and
ending on and including the twentieth day of each month in which Federal
individual estimated tax payments are due
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(PROVIDED, HOWEVER, that payments in respect of estimated state income taxes due
in January may instead, at the option of the Company, be paid during the last
five days of the immediately preceding December).
"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.
"REFINANCING INDEBTEDNESS" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; PROVIDED FURTHER,
HOWEVER, that Refinancing Indebtedness shall not include (x) Indebtedness of a
Restricted Subsidiary that Refinances Indebtedness of the Company or (y)
Indebtedness of the Company or a Restricted Subsidiary that Refinances
Indebtedness of an Unrestricted Subsidiary.
"RELATED BUSINESS" means the ownership, management and operation of offshore
drilling rigs and any business related, ancillary or complementary thereto.
"RESTRICTED PAYMENT" with respect to any Person means (i) the declaration or
payment of any dividends or any other distributions of any sort in respect of
its Capital Stock (including any payment in connection with any merger or
consolidation involving such Person), other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and
dividends or distributions payable solely to the Company or a Restricted
Subsidiary, and other than pro rata dividends or other distributions made by a
Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or
owners of an equivalent interest in the case of a Subsidiary that is an entity
other than a corporation), (ii) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock of the Company held by any Person or
of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the
Company (other than a Restricted Subsidiary), including the exercise of any
option to exchange any Capital Stock (other than into Capital Stock of the
Company that is not Disqualified Stock), (iii) the purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment of any
Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation of satisfying
of a sinking fund obligation, principal installment or final maturity, in each
case due within one year of the date of acquisition) or (iv) the making of any
Investment in any Person (other than a Permitted Investment).
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"RIG" means either of the two LeTourneau premium jackup rigs built pursuant
to a Construction Contract.
"RIG PURCHASE INSTALLMENT DATE" means, with respect to a Construction
Contract, each date on which an installment of the Purchase Price is payable by
the related Owner pursuant to the terms of such Construction Contract.
"SALE/LEASEBACK TRANSACTION" means an arrangement relating to property now
owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
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"SECURED INDEBTEDNESS" means any Indebtedness of the Company secured by a
Lien. "Secured Indebtedness" of any Subsidiary Guarantor has a correlative
meaning.
"SIGNIFICANT SUBSIDIARY" means any 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.
"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 Company (whether
outstanding on the Issue Date or thereafter Incurred) which is subordinate or
junior in right of payment to the Notes pursuant to a written agreement to that
effect. "Subordinated Obligation" of any Subsidiary Guarantor has a correlative
meaning.
"SUBSIDIARY" means, in respect of any Person, any corporation, association,
limited liability company, limited or general partnership or other business
entity (x) of which more than 50% of the total voting power of shares of Capital
Stock or other interests (including partnership interests) entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers, general partners or trustees thereof is at the time owned
or controlled, directly or indirectly, by (i) such Person, (ii) such Person and
one or more Subsidiaries of such Person or (iii) one or more Subsidiaries of
such Person, or (y) that is consolidated for purposes of the Company's
consolidated financial statements.
"SUBSIDIARY GUARANTOR" means each Restricted Subsidiary designated as such
on the signature pages of the Indenture and any other Restricted Subsidiary that
has issued a Subsidiary Guarantee.
"SUBSIDIARY GUARANTEE" means the Guarantee by a Subsidiary Guarantor of the
Company's obligations with respect to the Notes.
"S&P" means Standard & Poor's Ratings Service.
"TAX AMOUNTS" with respect to any taxable period shall not exceed an amount
equal to (A) the product of (x) the taxable income of the Company for such
period as determined by the Tax Amounts CPA and (y) the Tax Percentage reduced
by (B) to the extent not previously taken into account, any income tax benefit
attributable to the Company which could be realized (without regard to the
actual realization) by its members in the current or any prior taxable year, or
portion thereof, commencing on or after the Issue Date (including any tax losses
or tax credits), computed at the applicable Tax Percentage for the year that
such benefit is taken into account for purposes of this computation.
"TAX AMOUNTS CPA" means a nationally recognized certified public accounting
firm.
"TAX PERCENTAGE" means, for a particular taxable year, the highest effective
marginal combined rate of Federal, state and city income tax, imposed on an
individual taxpayer, as certified by the Tax Amounts CPA in a certificate filed
with the Trustee. The rate of "state and city income tax" to be taken into
account for purposes of determining the Tax Percentage for a particular taxable
year shall be deemed to be the highest combined New York State and New York City
income tax rate imposed on individuals for such year.
"TEMPORARY CASH INVESTMENTS" means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or
obligations guaranteed by the United States of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $10.0 million (or the foreign
currency equivalent thereof) and
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has outstanding debt which is rated "A" (or such similar equivalent rating) or
higher by at least one nationally recognized statistical rating organization (as
defined in Rule 436 under the Securities Act) or any money-market fund sponsored
by a registered broker dealer or mutual fund distributor, (iii) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (i) above entered into with a bank meeting the
qualifications described in clause (ii) above, (iv) investments in commercial
paper, maturing not more than 180 days after the date of acquisition, issued by
a corporation (other than an Affiliate of the Company) organized and in
existence under the laws of the United States of America or any foreign country
recognized by the United States of America with a rating at the time as of which
any investment therein is made of "P-1" (or higher) according to Moody's or
"A-1" (or higher) according to S&P, and (v) investments in securities with
maturities of six months or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority thereof, and rated
at least "A" by S&P or "A" by Moody's.
"TRUE-UP AMOUNT" means, in respect of a particular taxable year, an amount
determined by the Tax Amounts CPA equal to the difference between (i) the
aggregate Permitted Quarterly Tax Distributions actually distributed in respect
of such year and (ii) the aggregate amount permitted to be distributed in
respect of such year as determined by reference to the Company's Internal
Revenue Service Form 1065 filed for such year. For purposes of the Indenture,
the amount equal to the excess, if any, of the amount described in clause (i)
above over the amount described in clause (ii) above shall be referred to as the
"True-Up Amount due to the Company" and the excess, if any, of the amount
described in clause (ii) over the amount described in clause (i) shall be
referred to as the "True-Up Amount due to the Members."
"TRUE-UP DETERMINATION DATE" means the date on which the Tax Amounts CPA
delivers a statement to the Trustee indicating the True-Up Amount.
"TRUE-UP PAYMENT PERIOD" means, in respect of any immediately preceding
taxable year of the Company, the later of (i) the period commencing on the tenth
day and ending on and including the twentieth day of April or (ii) the period
commencing on the tenth day following the True-Up Determination Date and ending
on and including the twentieth day following the True-Up Determination Date.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless (A) such Subsidiary or any of its Subsidiaries
owns any Capital Stock or Indebtedness of, or holds any Lien on any property of,
the Company or any other Restricted Subsidiary of the Company or (B) such
Subsidiary or any of its Subsidiaries has any Indebtedness other than
Non-Recourse Debt; PROVIDED, HOWEVER, that either (I) the Subsidiary to be so
designated has total assets of $1,000 or less or (II) if such Subsidiary has
assets greater than $1,000, such designation would be permitted under the
covenant described under "--Certain Covenants--Limitation on Restricted
Payments." The Board of Directors may designate any Unrestricted Subsidiary to
be a Restricted Subsidiary; PROVIDED, HOWEVER, that immediately after giving
effect to such designation (x) if such Unrestricted Subsidiary at such time has
Indebtedness, the Company could Incur $1.00 of additional Indebtedness under
paragraph (a) of the covenant described under "--Certain Covenants--Limitation
on Indebtedness" and (y) no Default shall have occurred and be continuing. Any
such designation by the Board of Directors shall be evidenced by the Company to
the Trustee by promptly filing with the Trustee a copy of the board resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing provisions. Notwithstanding the
foregoing, Finance may not be designated as an Unrestricted Subsidiary.
"U.S. GOVERNMENT OBLIGATIONS" means securities that are (x) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the
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timely payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof.
"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 SUBSIDIARY" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares and shares held by other
Persons to the extent such shares are required by applicable law to be held by a
Person other than the Company or a Restricted Subsidiary) is owned by the
Company or one or more Wholly Owned Subsidiaries.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain federal income tax
considerations relevant to the exchange of Old Notes for New Notes, but does not
purport to be a complete analysis of all potential tax effects. The analysis is
based upon the Code, Treasury regulations, Internal Revenue Service rulings and
pronouncements, and judicial decisions now in effect, all of which are subject
to change at any time by legislative, judicial or administrative action. Any
such changes may be applied retroactively in a manner that could adversely
affect a Holder of the New Notes. The description does not consider the effect
of any applicable foreign, state, local or other tax laws or estate or gift tax
considerations.
EACH HOLDER SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES TO IT OF EXCHANGING OLD NOTES FOR NEW NOTES, INCLUDING THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS.
EXCHANGE OF OLD NOTES FOR NEW NOTES
The exchange of Old Notes for New Notes pursuant to the Exchange Offer
should not constitute a material modification of the terms of the Old Notes and,
therefore, such exchange should not constitute an exchange for federal income
tax purposes. Accordingly, such exchange should have no federal income tax
consequences to Holders of Old Notes.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New 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 New 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 New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Issuers have agreed that, for a period of 180 days after
the Expiration Date, they will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until November , 1998, all dealers effecting transactions in the
New Notes may be required to deliver a prospectus.
The Issuers will not receive any proceeds from any sale of New Notes by
broker-dealers. New 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 New 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 or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New 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.
For a period of 180 days after the Expiration Date the Issuers will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. The Issuers have agreed to pay all expenses incident to the
Exchange Offer (including the expenses of one counsel for the Holders of the
Notes) other than commissions or concessions of any brokers or dealers and will
indemnify the Holders of the Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
92
<PAGE>
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Notes in Canada is being made only on a private
placement basis exempt from the requirement that the Issuers prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of Notes are effected. Accordingly, any resale of the Notes in Canada
must be made in accordance with applicable securities laws which will vary
depending on the relevant jurisdiction, and which may require resales to be made
in accordance with available statutory exemptions or pursuant to a discretionary
exemption granted by the applicable Canadian securities regulatory authority.
Purchasers are advised to seek legal advice prior to any resale of the Notes.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Notes in Canada who receives a purchase confirmation will
be deemed to represent to the Issuers and the dealer from whom such purchase
confirmation is received that (i) such purchaser is entitled under applicable
provincial securities laws to purchase such Notes without the benefit of a
prospectus qualified under such securities laws, (ii) where required by law,
that such purchaser is purchasing as principal and not as agent and (iii) such
purchaser has reviewed the text above under "Resale Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Section 32 of the Regulation under the SECURITIES ACT (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws. Following a
decision of the U.S. Supreme Court, it is possible that Ontario purchasers will
not be able to rely upon the remedies set out in Section 12(2) of the United
States Securities Act of 1933 where securities are being offered under a U.S.
private placement memorandum such as this document.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Notes to whom the SECURITIES ACT (British Columbia) applies
is advised that such purchaser is required to file with the British Columbia
Securities Commission a report within ten days of the sale of any Notes acquired
by such purchaser pursuant to the Offering. Such report must be in the form
attached to British Columbia Securities Commission Blanket Order BOR #95/17, a
copy of which may be obtained from the Company. Only one such report must be
filed in respect of Notes acquired on the same date and under the same
prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of Notes should consult their own legal and tax advisors
with respect to the tax consequences of an investment in the Notes in their
particular circumstance and with respect to the eligibility of the Notes for
investment by the purchaser under the relevant Canadian legislation.
93
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the New Notes and Subsidiary
Guarantees offered hereby will be passed upon for the Company by Weil, Gotshal &
Manges LLP, 700 Louisiana, Suite 1600, Houston, Texas 77002.
EXPERTS
The financial statements of the Company as of December 31, 1997, and for the
period from inception (August 5, 1997) to December 31, 1997, 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 (which contains an explanatory paragraph describing
conditions that raise substantial doubt about the Company's ability to continue
as a going concern as described in Note 1 to the financial statements), and are
included herein in reliance upon the authority of said firm as experts in giving
said report.
AVAILABLE INFORMATION
As a result of the filing of their Registration Statement with the
Securities and Exchange Commission (the "Commission"), the Issuers and the
Guarantors will become subject to the informational reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, will be required to file reports and other information
with the Commission. Such reports and other information can be inspected and
copied at the principal office of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and the following Regional Offices of the
Commission: Chicago Regional Office, Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60611 and New York Regional
Office, 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of
such material may also be obtained at prescribed rates from the Public Reference
Section of the Commission at its principal office at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission also maintains a Web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission at
http://www.sec.gov.
The Issuers and the Guarantors have filed with the Commission a Registration
Statement (which term shall encompass any amendments thereto) on Form S-4 under
the Securities Act with respect to the securities offered hereby. This
Prospectus does not contain all information set forth in the Registration
Statement and the exhibits thereto, to which reference is hereby made. Although
the Company believes that statements made in this Prospectus as to the contents
of any contract, agreement or other document describe all material elements of
such documents, such statements are not necessarily complete. With respect to
each such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is hereby made to such exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
The Company will furnish holders of the securities offered hereby with
annual reports containing, among other information, audited financial statements
certified by an independent public accounting firm and quarterly reports
containing unaudited financial information for the first three quarters of each
fiscal year. The Company will also furnish such other reports as it may
determine or as may be required by law or by the Indenture, in each case from
and after the effective date of the Registration Statement. Based upon certain
provisions of the Staff Accounting Bulletins of the Commission and
interpretations of the staff of the Commission set forth in no-action letters
issued to third parties unrelated to the Issuers and the Guarantors, Finance and
the Guarantors do not intend to file separate periodic and other reports with
the Commission under the Exchange Act because (i) the Company is a holding
company with no independent operations, (ii) the Guarantors are direct
wholly-owned consolidated subsidiaries of the Company that will fully and
unconditionally guarantee the New Notes on a joint and several basis and (iii)
Finance and the Guarantors comprise all of the Company's direct and indirect
subsidiaries.
94
<PAGE>
CHILES OFFSHORE LLC
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Balance Sheets--as of March 31, 1998 (unaudited) and December 31, 1997................ F-3
Statements of Operations for the Period from Inception (August 5, 1997) to March 31,
1998 (unaudited), for the three months ended March 31, 1998 (unaudited) and for the
Period from Inception (August 5, 1997) to December 31, 1997.......................... F-4
Statements of Members' Equity for the Period from Inception (August 5, 1997) to
December 31, 1997 and for the three months ended March 31, 1998 (unaudited).......... F-5
Statements of Cash Flows for the Period from Inception (August 5, 1997) to March 1,
1998 (unaudited), for the three months ended March 31, 1998 (unaudited) and for the
Period from Inception (August 5, 1997) to December 31, 1997.......................... F-6
Notes to Financial Statements......................................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Members of
Chiles Offshore LLC:
We have audited the accompanying balance sheet of Chiles Offshore LLC (a
Delaware limited liability company in the development stage) as of December 31,
1997, and the related statements of operations, members' equity and cash flows
for the period from inception (August 5, 1997) to December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 Chiles Offshore LLC as of
December 31, 1997, and the results of its operations and its cash flows for the
period from inception (August 5, 1997) to December 31, 1997, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the accompanying financial
statements, the Company is a development-stage enterprise with no significant
operating results to date. The factors discussed in Note 1 to the financial
statements raise a substantial doubt about the ability of the Company to
continue as a going concern. Management's plans in regards to those matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/S/ ARTHUR ANDERSEN LLP
Houston, Texas
February 11, 1998
F-2
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................................. $ 18,844,746 $ 32,341,117
Prepaid expenses.......................................................... 6,463 37,112
-------------- -----------------
Total current assets.................................................. 18,851,209 32,378,229
RIGS UNDER CONSTRUCTION AND EQUIPMENT......................................... 44,904,398 35,026,044
Less accumulated depreciation............................................. (8,518) (5,953)
-------------- -----------------
Net rigs under construction and equipment............................. 44,895,880 35,020,091
-------------- -----------------
OTHER ASSETS.................................................................. 34,772 --
-------------- -----------------
TOTAL ASSETS.......................................................... $ 63,781,861 $ 67,398,320
-------------- -----------------
-------------- -----------------
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................................... -- $ 3,950,236
Accrued liabilities....................................................... 82,035 26,489
-------------- -----------------
Total current liabilities............................................. 82,035 3,976,725
MEMBERS' EQUITY:
Capital contributions, net of offering costs.............................. 63,730,707 63,730,707
Cumulative losses since inception......................................... (30,881) (309,112)
-------------- -----------------
Total members' equity................................................. 63,699,826 63,421,595
-------------- -----------------
Total Liabilities and Members' Equity................................. $ 63,781,861 $ 67,398,320
-------------- -----------------
-------------- -----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(AUGUST 5, 1997)
TO DECEMBER 31,
1997
FOR THE PERIOD FOR THE THREE -----------------
FROM INCEPTION MONTHS ENDED
(AUGUST 5, 1997) MARCH 31, 1998
TO MARCH 31, 1998 -----------------
----------------- (UNAUDITED)
(UNAUDITED)
<S> <C> <C> <C>
OPERATING EXPENSES:
General and administrative expenses................. $ (458,379) $ (82,290) $ (376,089)
Depreciation........................................ (8,518) (2,565) (5,953)
----------------- -------- -----------------
Operating loss.................................. (466,897) (84,855) (382,042)
INTEREST INCOME......................................... 436,016 363,086 72,930
----------------- -------- -----------------
NET INCOME (LOSS)....................................... $ (30,881) $ 278,231 $ (309,112)
----------------- -------- -----------------
----------------- -------- -----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF MEMBERS' EQUITY
<TABLE>
<CAPTION>
GROUP A GROUP B GROUP C
MEMBERS MEMBERS MEMBERS TOTAL
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
INITIAL CAPITAL CONTRIBUTIONS,
August 5, 1997.................................... $ 8,850,000 $ 8,850,000 $ -- $ 17,700,000
CAPITAL CONTRIBUTIONS,
December 16, 1997................................. 26,150,000 -- 20,000,000 46,150,000
OFFERING COSTS........................................ (66,065) (16,522) (36,706) (119,293)
NET LOSS.............................................. (158,733) (126,491) (23,888) (309,112)
------------- ------------ ------------- -------------
BALANCE, December 31, 1997............................ 34,775,202 8,706,987 19,939,406 63,421,595
NET INCOME (UNAUDITED)................................ 154,084 38,535 85,612 278,231
------------- ------------ ------------- -------------
BALANCE, MARCH 31, 1998 (UNAUDITED)................... $ 34,929,286 $ 8,745,522 $ 20,025,018 $ 63,699,826
------------- ------------ ------------- -------------
------------- ------------ ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM INCEPTION
(AUGUST 5, 1997)
TO DECEMBER 31, 1997
FOR THE PERIOD FOR THE --------------------
FROM INCEPTION THREE MONTHS ENDED
(AUGUST 5, 1997) MARCH 31, 1998
TO MARCH 31, 1998 -------------------
----------------- (UNAUDITED)
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).............................. $ (30,881) $ 278,231 $ (309,112)
Adjustments to reconcile net loss to net cash
provided by operating activities--
Depreciation................................. 8,518 2,565 5,953
Increase (decrease) in operating cash flows
resulting from--
Accounts payable........................... (67,602) (3,950,236) 3,882,634
Accrued liabilities........................ 82,035 55,546 26,489
Prepaid expenses and other................. (38,738) (4,123) (34,615)
----------------- ------------------- --------------------
Net cash provided by (used in)
operating activities................. (46,668) (3,618,017) 3,571,349
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............ (15,093,470) (9,878,354) (5,215,116)
----------------- ------------------- --------------------
Net cash used in investing
activities........................... (15,093,470) (9,878,354) (5,215,116)
----------------- ------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Membership capital contributions, net.......... 33,984,884 -- 33,984,884
----------------- ------------------- --------------------
Net cash provided by financing
activities........................... 33,984,884 -- 33,984,884
----------------- ------------------- --------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS...................................... 18,844,746 (13,496,371) 32,341,117
CASH AND CASH EQUIVALENTS, beginning of period..... -- 32,341,117 --
----------------- ------------------- --------------------
CASH AND CASH EQUIVALENTS, end of period........... $ 18,844,746 $ 18,844,746 $ 32,341,117
----------------- ------------------- --------------------
----------------- ------------------- --------------------
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Noncash investing activities--
Purchase of property in exchange for
membership interest.......................... $ 21,260,000 -- $ 21,260,000
Noncash financing activities--
Receipt of net assets in exchange for
membership interest.......................... $ 8,486,000 -- 8,486,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS:
Chiles Offshore LLC (Chiles or the Company) is engaged in the construction
of offshore drilling rigs which will be contracted to oil and gas operators upon
completion of construction. The Company was formed under the laws of the state
of Delaware on August 5, 1997. The duration of the Company is 35 years from the
date of formation.
On August 5, 1997, two members, Group A and Group B, entered into the
Operating Agreement of Chiles Offshore LLC (the Operating Agreement) for the
purpose of forming the Company. Group A and Group B each made capital
contributions of $8,850,000 and received a 50 percent percentage interest, as
defined in the Operating Agreement, in the Company. Additionally, the president
of Group B was hired as president of the Company.
Group A's capital contribution consisted of $8,850,000 in cash, which was
paid directly to third parties on behalf of the Company. Group B's capital
contribution consisted of $364,000 in cash and net assets with an agreed-upon
value of $8,486,000. The value of Group B's net assets was mutually agreed upon
by Group A and Group B based upon Group B's construction contract rights,
construction in progress and shipyard slots secured through such construction
contracts. The historical cost of such net assets contributed by Group B was
$2,256,000. Accordingly, the difference between the agreed-upon value and
historical cost of Group B's net assets, $6,230,000, has been recorded in the
accompanying balance sheet as rigs under construction and equipment.
On December 16, 1997, in accordance with the Amended and Restated Agreement
of Chiles Offshore LLC (the Agreement) another member group, Group C contributed
capital of $20,000,000 in cash for a percentage interest in the Company. Also on
December 16, 1997, Group A contributed additional capital of $26,150,000
consisting of $12,158,284 in cash and advances Group A had made to the Company
in the amount of $13,991,716. In accordance with the Agreement and effective
December 16, 1997, the percentage interests in the Company were 55.38 percent,
13.85 percent and 30.77 percent for Group A, Group B and Group C, respectively.
The contributions of Groups A, B and C resulted in the issuance to these
members of membership interests in the Company. Membership interest is the
member's limited liability company interest in the Company which refers to all
of a member's rights and interest in the Company in such member's capacity as a
member, all as provided in the Agreement and the Delaware Limited Liability
Company Act. In conjunction with the issuance of the membership interest to a
member, the member received a percentage interest in the Company. The percentage
interest of a member means the aggregate limited liability company percentage
interest set forth in the Agreement, as modified from time to time.
The Company has operated as a development stage company since its inception
by devoting substantially all of its efforts to designing, engineering and
contracting with shipyards and vendors for two offshore drilling rigs, raising
capital and securing contracts for the rigs. The Company has not generated
revenues, nor is there any assurance that the Company will generate significant
revenues in the future. In addition, there can be no assurance that the Company
will successfully complete the transition from a development stage company to
successful operations. Additional risk factors associated with the Company's
operations include, but are not limited to, oil and gas prices, capital
expenditure plans of oil and gas operators, access to capital, completion of
construction of the rigs and competition. As a result of the aforementioned
factors and the related uncertainties, there can be no assurance of the
Company's future success.
F-7
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND BUSINESS: (CONTINUED)
The Company has a loss from operations of $382,042 for the period from
inception to December 31, 1997. Management is currently pursuing a business
strategy which includes obtaining drilling contracts with oil and gas operators,
employment of rig personnel, obtaining additional financing to complete the
construction of the rigs and fund the purchase of drilling equipment, and
overseeing the construction of the rigs and installation of the drilling
equipment. There are no assurances that this business strategy will be achieved.
While pursuing this business strategy, the Company will experience cash flow
deficits until the rig construction is completed and the rigs are placed in
operation. As a result of the aforementioned factors and related uncertainties,
there is substantial doubt as to the Company's ability to continue as a going
concern. The financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company be unable to
continue as a going concern.
2. SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, all liquid investments with maturities
at the date of purchase of three months or less are considered cash equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PROPERTY, EQUIPMENT AND REALIZATION OF LONG-LIVED ASSETS
Property and equipment includes costs incurred for the construction of the
rigs, including internal expenditures relating to construction support. All
expenditures not related to construction are expensed in the accompanying
Statements of Operations. Disposals are removed at cost less accumulated
depreciation, and any resulting gain or loss is reflected in the accompanying
statement of operations. Depreciation is calculated from the date the asset is
placed in service, using the straight-line method over the estimated useful
lives of the depreciable assets, which range from three to 25 years. The Company
capitalizes interest applicable to the construction of the rigs as a cost of
such assets. The Company has included in the property and equipment account all
costs incurred to support the construction of the rigs. Depreciation expense for
the period ended December 31, 1997, was $5,953.
In March 1995, Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," was issued. SFAS No. 121, which became effective in 1996,
requires that certain long-lived assets be reviewed for impairment whenever
events indicate that the carrying amount of an asset may not be recoverable and
that an impairment loss be recognized under certain circumstances in the amount
by which the carrying value
F-8
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
exceeds the fair value of the asset. The Company adopted SFAS No. 121 in 1996,
and the adoption had no effect on the Company's results of operations or
consolidated financial position.
INCOME TAXES
No provision for income taxes is made since the Company is treated as a
partnership for tax purposes, and such taxes are liabilities of the individual
equity members, and the amounts thereof depend on their respective income tax
situations.
Capital accounts included in the accompanying financial statements differ
from amounts in the Company's federal income tax return primarily because of
differences in accounting policies adopted for financial and tax reporting
purposes.
The tax returns, the qualification of the Company as a partnership for tax
purposes and the amount of distributable partnership income or loss are subject
to examination by federal taxing authorities. If such examinations result in
changes with respect to the partnership qualification or in changes to
distributable partnership income or loss, the tax liability of the partners
could be changed accordingly.
3. RELATED-PARTY TRANSACTIONS:
The Company paid the Group A Members $50,000 in connection with assistance
in obtaining $20,000,000 of members' equity and other legal, financial and
administrative matters. As of December 31, 1997, no agreement exists between the
Company and Group A for Group A to provide any additional services; however, the
Company intends to enter into such an agreement with Group A to provide similar
services in 1998.
4. RIGS UNDER CONSTRUCTION AND EQUIPMENT:
Rigs under construction and equipment at December 31, 1997, consists of the
following:
<TABLE>
<S> <C>
Rigs under construction and rig equipment...................... $34,861,269
Furniture and fixtures......................................... 164,775
----------
35,026,044
Less-Accumulated depreciation.................................. (5,953)
----------
Net rigs under construction and equipment.............. $35,020,091
----------
----------
</TABLE>
5. COMMITMENTS AND CONTINGENCIES:
The Company has entered into agreements with a shipyard and various
equipment vendors for delivery of two mobile offshore drilling rigs, the Chiles
Columbus and Chiles Magellan, for a total estimated cost of approximately $175
million. At December 31, 1997, the Company had purchase commitments of
approximately $128 million with respect to these rigs and equipment. These
amounts will become payable in future periods in accordance with terms of the
construction contract and vendor agreements, and management is currently
negotiating to obtain additional financing to meet these terms. The Chiles
Columbus is scheduled for delivery during the second quarter of 1999, and Chiles
Magellan is scheduled for delivery during the third quarter of 1999.
F-9
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
The Company occupies an administrative office and leases certain equipment
under operating leases from unaffiliated third parties. Rent expense for 1997
was $9,800. Lease terms range in length from one to five years. Aggregate
minimum future annual rental commitments under the operating leases with lease
terms in excess of one year as of December 31, 1997, are as follows:
<TABLE>
<S> <C>
1998............................................................... $ 64,261
1999............................................................... 64,967
2000............................................................... 64,967
2001............................................................... 62,589
Thereafter......................................................... 45,380
</TABLE>
As of December 31, 1997, the Company has no commitments to provide any
executives with severance benefits; however, the Company expects to enter into
an employment contract with one of its executives in 1998.
6. MEMBERS' EQUITY:
ALLOCATION OF NET INCOME OR LOSS
In accordance with the Operating Agreement and the Agreement (collectively
referred to herein as the Agreements), profits or losses for any taxable year
were allocated in proportion to percentage interests, on a monthly basis and
after giving effect to special allocations set forth in the Agreements.
The special allocations primarily result from the effect of U.S. federal
income tax rules for certain types of events that may occur to the Company. If
there is a Minimum Gain or Member Nonrecourse Debt Minimum Gain, as defined in
the IRS code, then the Agreements provide specific allocations to members in
order to comply with the IRS regulations. The Agreements provide that in the
event a member unexpectedly receives any adjustments, allocations or
distributions resulting from the special allocation rules of IRS regulations as
noted in the Agreements, then Company income and losses shall be specifically
allocated to such member, in an amount and manner sufficient to eliminate, to
the extent provided by the IRS regulations, the adjusted capital account deficit
of the member. The Agreements provide that, in the event any member has a
deficit capital account at the end of any taxable year, which is in excess of
the sum of the amount such member is obligated to restore pursuant to any
provision of the Agreements and the amount such member is obligated to restore
pursuant to the IRS code sections noted in the Agreements, each such member
shall be specially allocated items of the Company income and gain in the amount
of such excess as quickly as possible and to the extent allowed in the
Agreements. The Agreements provide that Nonrecourse Deductions, as defined in
the Agreements, for any taxable year shall be specially allocated to the members
in proportion to their respective percentage interests and that any member
Nonrecourse Deductions for any taxable year shall be specially allocated to the
member who bears the economic loss with respect to the member nonrecourse debt
to which such member Nonrecourse Deductions are attributable in accordance with
the regulations. In the event some, but not all, of the members would have
adjusted capital account deficits as a consequence of the special allocation
rules, then losses not allocable to any member due to such limitation shall be
allocated to other members pro rata in accordance with the balance of such
members' capital accounts.
F-10
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. MEMBERS' EQUITY: (CONTINUED)
DISTRIBUTIONS
The Agreements provide for quarterly cash distribution of Net Cash Flow, as
defined in the Agreements, to members in proportion to, and to the extent of,
their relative percentage interests, an amount not in excess of the Tax
Distribution, as defined in the Agreements, for the taxable year, and upon the
approval by the Management Committee, as defined in the Agreements.
7. SUBSEQUENT EVENTS (UNAUDITED)
MANAGEMENT AGREEMENT
The Company and Group A entered into a Management and Administrative
Services Agreement, dated as of February 27, 1998 (the Services Agreement),
pursuant to which Group A agreed to continue to perform certain administrative
and technical services on behalf of the Company. Such services include general
management and financial services, including periodic advice and consultation in
connection with corporate, legal, finance, accounting, tax, marketing,
operations and other matters that may be required for the Company's day-to-day
operations. Under the Services Agreement, the Company agreed to pay a fee to
Group A not to exceed $15,000 per month and such other fees for services of
others not to exceed the reasonable value thereof and to reimburse Group A for
all out-of-pocket expenses related to the provision of such services. The
Services Agreement may be terminated at either party's option upon 60 days'
notice to the other party.
OPTIONS PLAN
Subsequent to year-end, the Company adopted the Chiles Offshore LLC 1998
Equity Option Plan (the Option Plan). The Option Plan authorizes the issuance of
Options to acquire up to 5.0% of the then outstanding membership interests on a
fully diluted basis. As of March 31, 1998, 3,953 units have been issued under
the Option Plan with an exercise price per unit of $650, which the Management
Committee believes approximates the fair market value per unit on the date of
grant based on recent transactions.
DEBT OFFERING
In April, 1998, the Company formed three wholly owned subsidiaries, Chiles
Magellan LLC, Chiles Columbus LLC and Chiles Offshore Finance Corp. The Company
and Chiles Offshore Finance Corp. (Issuers) co-issued Senior Notes with a
principal amount of $110 million (Notes) on April 29, 1998. Prior to the
issuance of the Notes, the Company's three wholly owned subsidiaries were
nominally capitalized. The rig construction contracts, formerly owned by Chiles
Offshore LLC, for the Chiles Magellan and Chiles Columbus have been assigned to
Chiles Magellan LLC and Chiles Columbus LLC (Rig Owners), respectively.
As a result, the Issuers received net proceeds of approximately $106.3
million after deducting estimated offering-related expenses. The Notes bear an
interest rate of 10%, payable semiannually on May 1 and November 1, commencing
on November 1, 1998 and mature in full in the year 2008. The net proceeds of the
Notes have been placed in escrow for use to partially fund the construction of
the two rigs and pay the first two semi-annual interest installments. The Notes
are redeemable in May, 2003, except that until May, 2001, up to 35% of the notes
may be redeemable with the proceeds of a public equity offering, both at the
option of the Issuers. The Notes are guaranteed by the Rig Owners, jointly and
F-11
<PAGE>
CHILES OFFSHORE LLC
(A DELAWARE LIMITED LIABILITY COMPANY IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
severally, on an unsecured basis. Debt issuance costs related to the Notes are
being deferred and will be amortized over the life of the Notes.
BANK FACILITY
The Company has entered into an agreement with two banks to provide a
revolving credit facility up to $25 million. The facility will be available to
the Company upon delivery of the first of the the two rigs. The facility will
bear interest at the rate of LIBOR plus 1.25% and matures on December 31, 2004,
at which time the outstanding principal amount will be due. The facility is
guaranteed by the Rig Owners.
EMPLOYMENT AGREEMENT
The Company has entered into an employment agreement with its President for
a three year period. The Agreement provides, among other things, the amount of
compensation and other benefits to be provided to the President as well as other
conditions of the employment term.
EMPLOYEE 401(K) AND PROFIT SHARING PLAN
Effective May 1, 1998, the Company adopted a 401(k) Profit Sharing Plan
(Plan), covering substantially all of its employees. The Company will match
employees' contributions to the Plan in an amount equal to 50%, up to 6% of
eligible compensation.
NEWLY ISSUED ACCOUNTING STANDARD
In June 1997, Statement of Financial Accounting Standards No. 130, REPORTING
COMPREHENSIVE INCOME ("SFAS 130") was issued. SFAS 130 establishes standards for
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. Comprehensive income is the total of
net income and all other non-owner changes in equity. The Company has no
non-owner changes in equity during the three months ended March 31, 1998 and
therefore, no reporting and display of comprehensive income was required.
F-12
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE ISSUERS OR ANY OTHER PERSON. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
ISSUERS SINCE SUCH DATE.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 11
Use of Proceeds........................................................... 20
Capitalization............................................................ 20
Selected Financial Data................................................... 21
Certain Financial Forecast Information.................................... 22
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 26
Business.................................................................. 29
Management................................................................ 39
Principal Members......................................................... 43
Controlling Member........................................................ 44
Certain Relationships and Related Transactions............................ 44
Description of Bank Facility.............................................. 48
The Exchange Offer........................................................ 49
Description of New Notes.................................................. 56
Certain Federal Income Tax Considerations................................. 92
Plan of Distribution...................................................... 92
Notice to Canadian Residents.............................................. 93
Legal Matters............................................................. 94
Experts................................................................... 94
Available Information..................................................... 94
Index to Financial Statements............................................. F-1
</TABLE>
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT PARTICIPATING IN
THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION
TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
[LOGO]
CHILES OFFSHORE LLC
CHILES OFFSHORE FINANCE CORP.
OFFER FOR ALL OUTSTANDING
10% SENIOR NOTES DUE 2008
IN EXCHANGE FOR
10% SENIOR NOTES DUE 2008
---------------------
PROSPECTUS
---------------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Chiles Offshore LLC and both of the Owners are Delaware limited liability
companies.
Section 18-108 of the Delaware Limited Liability Company Act (the "Delaware
Act") grants a Delaware limited liability company the power, subject to such
standards and restrictions, if any, as are set forth in its limited liability
company agreement, to indemnify and hold harmless any member or manager or other
person from and against any and all claims and demands whatsoever. The Company's
Amended and Restated Operating Agreement, as amended, provides that the Company
will indemnify its Members, members of the Management Committee and the officers
of the Company, and certain other persons, from liabilities arising in the
course of such persons' service to the Company, provided that (i) the indemnitee
acted in good faith and in a manner which such indemnitee believed to be in or
not opposed to the interests of the Company and, with respect to any criminal
proceeding, had no reasonable cause to believe such indemnitee's conduct was
unlawful and (ii) the indemnitee's conduct did not constitute actual fraud,
gross negligence or willful or wanton misconduct. Such liabilities include all
losses, claims, demands, costs, damages, liabilities, expenses of any nature
(including reasonable attorneys' fees and disbursements), judgments, fines,
settlements and other amounts arising from any and all claims, demands, actions,
suits or proceedings, whether civil, criminal, administrative or investigative,
in which an indemnitee may be involved, or threatened to be involved, as a party
or otherwise, arising out of or incidental to the business of the Company,
including, without limitation, liabilities under the Federal and state
securities laws. The limited liability company agreements of the Owners provide
that, except as otherwise provided by the Delaware Act, the debts, obligations
and liabilities of the Owners, whether arising in contract, tort or otherwise,
shall be the debts, obligations and liabilities solely of the respective Owner,
and the Company, as sole member, shall not be obligated personally for any of
such debts, obligations or liabilities solely by reason of being a member.
Finance is a Delaware corporation.
Section 102 of the Delaware General Corporation Law ("DGCL") allows a
corporation to eliminate the personal liability of directors of a corporation to
the corporation or to its stockholders for monetary damages for a breach of his
fiduciary duty as a director, except in the case where the director breached his
duty of loyalty, failed to act in good faith, engaged in intentional misconduct
or knowingly violated a law, authorized the payment of a dividend or approved a
stock repurchase in violation of the DGCL or obtained an improper personal
benefit. Finance's Certificate of Incorporation contains a provision which, in
substance, eliminates directors' personal liability as set forth above.
Section 145 of the DGCL allows a corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation), by
reason of the fact that he is or was a director or officer of the corporation,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Finance's Certificate of
Incorporation contains a provision which, in substance, provides for
indemnification as set forth above to the fullest extent and in the manner set
forth in and permitted by the DGCL, and any other applicable law, as from time
to time in effect.
Under Section 12.10 of the Indenture, the Holders of the Notes have agreed
to waive all liability for any obligations incurred by the Issuers under the
Notes or the Indenture or for any claim based on, in respect of or by reason of
such obligations or their creation, against any incorporator, director, officer,
II-1
<PAGE>
employee, stockholder or controlling person, as such, of the Issuers or any
successor person thereof, and have agreed to the release of such persons from
any such liability.
Under Section 5 of the Registration Rights Agreement, the Holders of the
Notes have agreed, severally and not jointly, to indemnify and hold harmless the
Issuers and controlling persons (within the meaning of the Securities Act and
the Exchange Act) of the Issuers from and against any losses, claims, damages or
liabilities, or any actions in respect thereof, to which the Issuers or any such
controlling person may become subject under the Securities Act, the Exchange Act
or otherwise, arising out of or based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in any exchange offer registration
statement or shelf registration statement for the Notes or any prospectus
forming part thereof or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state therein a material fact necessary to make
the statements therein not misleading, in each case to the extent that such
untrue statement or omission or alleged untrue statement or omission was made in
reliance upon and in conformity with written information provided by such
Holders for inclusion therein.
The Company does not currently maintain directors and officers liability
insurance, although it may consider obtaining such insurance upon commencement
of operation of one or both of the Rigs.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
*3.1 Limited Liability Company Certificate of Chiles Offshore LLC
*3.2 Amended and Restated Operating Agreement, dated as of December 16, 1997,
among the Members of Chiles Offshore LLC
*3.3 Amendment No. 1, dated effective as of April 28, 1998, to Amended and
Restated Operating Agreement of Chiles Offshore LLC, among the Members
of Chiles Offshore LLC
*3.4 Certificate of Incorporation of Chiles Offshore Finance Corp.
*3.5 Bylaws of Chiles Offshore Finance Corp.
*3.6 Certificate of Formation of Chiles Columbus LLC
*3.7 Limited Liability Company Agreement of Chiles Columbus LLC
*3.8 Certificate of Formation of Chiles Magellan LLC
*3.9 Limited Liability Company Agreement of Chiles Magellan LLC
*4.1 Indenture, dated as of April 29, 1998, among the Issuers, the Owners and
U.S. Bank Trust National Association, as Trustee
*4.2 Form of Old Note (included in Exhibit 4.1 as Exhibit A thereto)
*4.3 Form of New Note (included in Exhibit 4.1 as Exhibit B thereto)
*4.4 Registration Rights Agreement, dated as of April 29, 1998, among the
Issuers, the Owners and the Initial Purchasers
*4.5 Purchase Agreement, dated April 24, 1998, among the Issuers, the Owners
and the Initial Purchasers, relating to the Old Notes
+5.1 Opinion and consent of Weil, Gotshal & Manges LLP, counsel for the
Company, as to certain securities registered hereby
*10.1 Credit Agreement, dated as of April 29, 1998, by and among the Company,
Nederlandse Scheepshypotheek Bank N.V. ("Nedship") and MeesPierson
Capital Corp. ("MeesPierson"), as co-arrangers, the banks and financial
institutions named therein, Nedship, as documentation agent and security
trustee, and MeesPierson, as administrative agent and paying agent
*10.2 Platform Construction Agreement, dated April 30, 1997, between Chiles
Offshore Inc. and AMFELS, Inc., relating to the CHILES COLUMBUS
*10.3 Assignment and Assumption and Consent to Assignment, dated as of August 5,
1997, among the Company, COI, LLC and AMFELS, Inc.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
*10.4 Platform Construction Agreement, dated August 5, 1997, between Chiles
Offshore LLC and AMFELS, Inc., relating to the CHILES MAGELLAN
*10.5 Assignment, Assumption, Acknowledgement and Consent Agreement, dated as of
April 23, 1998, among the Company, the Owners and AMFELS, Inc.
*10.6 Agreement, dated December 18, 1997, between the Company and AMFELS, Inc.
concerning Construction Options for the Option Rigs
*10.7 Chiles Offshore LLC 1998 Equity Option Plan
*10.8 Escrow Agreement, dated as of April 29, 1998, among U.S. Bank Trust
National Association, as Escrow Agent, Trustee and Collateral Agent, and
the Issuers
*10.9 Escrow Security Agreement, dated as of April 29, 1998, among U.S. Bank
Trust National Association, as Collateral Agent, and the Issuers
*10.10 Securities Intermediary and Account Agreement, dated as of April 29, 1998,
among U.S. Bank Trust National Association, as Securities Intermediary,
Trustee and Collateral Agent, and the Issuers
*10.11 Employment Agreement, dated as of November 1, 1997, between the Company
and William E. Chiles
*10.12 Management and Administrative Services Agreement, dated as of February 27,
1998, between the Company and SEACOR SMIT Inc.
*21.1 Subsidiaries of the Company
*23.1 Consent of Arthur Andersen LLP
+23.2 Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5.1)
*24.1 Powers of Attorney (included on signature pages)
*25.1 Form T-1 of U.S. Bank Trust National Association, as Trustee under the
Indenture filed as Exhibit 4.1
*99.1 Form of Letter of Transmittal
*99.2 Form of Notice of Guaranteed Delivery
</TABLE>
- ------------------------
* Filed herewith.
+ To be filed by amendment.
(b) Financial Statement Schedules
All schedules have been omitted since the required information is either not
present or not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or the notes thereto.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the
co-registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities 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 co-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
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-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 the 19th day of June, 1998.
<TABLE>
<S> <C> <C>
CHILES OFFSHORE LLC
By: /s/ DICK H. FAGERSTAL
-----------------------------------------
Dick H. Fagerstal
SENIOR VICE PRESIDENT, CHIEF FINANCIAL
OFFICER AND SECRETARY
</TABLE>
Each person whose signature to this Registration Statement appears below
hereby appoints William E. Chiles and Dick H. Fagerstal, and each individually,
each of whom may act without the joinder of the other, as his agent and
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all pre- and post-effective amendments to this Registration
Statement (and, in addition, any registration statement filed pursuit to Rule
462(b) under the Securities Act of 1933, as amended, for the offering to which
this Registration Statement relates), which may make such changes and additions
to this Registration Statement as such agent and attorney-in-fact may deem
necessary or appropriate.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed on the 19th day of June, 1998 by the
following persons in the capacities indicated:
SIGNATURE TITLE
- ------------------------------ --------------------------
President and Chief
/s/ WILLIAM E. CHILES Executive Officer
- ------------------------------ (Principal Executive
William E. Chiles Officer) and Manager
Senior Vice President,
/s/ DICK H. FAGERSTAL Chief Financial Officer
- ------------------------------ and Secretary (Principal
Dick H. Fagerstal Financial Officer) and
Manager
Vice President--Controller
/s/ WILLIAM A. THOROGOOD and Assistant Secretary
- ------------------------------ (Principal Accounting
William A. Thorogood Officer)
/s/ CHARLES FABRIKANT
- ------------------------------ Chairman of the Management
Charles Fabrikant Committee
/s/ RANDALL BLANK
- ------------------------------ Manager
Randall Blank
/s/ TIMOTHY J. MCKEAND
- ------------------------------ Manager
Timothy J. McKeand
/s/ ROBERT PIEROT, JR.
- ------------------------------ Manager
Robert Pierot, Jr.
/s/ JONATHAN B. FAIRBANKS
- ------------------------------ Manager
Jonathan B. Fairbanks
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-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 the 19th day of June, 1998.
<TABLE>
<S> <C> <C>
CHILES OFFSHORE FINANCE CORP.
By: /s/ DICK H. FAGERSTAL
-----------------------------------------
Dick H. Fagerstal
SENIOR VICE PRESIDENT, CHIEF FINANCIAL
OFFICER AND SECRETARY
</TABLE>
Each person whose signature to this Registration Statement appears below
hereby appoints William E. Chiles and Dick H. Fagerstal, and each individually,
each of whom may act without the joinder of the other, as his agent and
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all pre- and post-effective amendments to this Registration
Statement (and, in addition, any registration statement filed pursuit to Rule
462(b) under the Securities Act of 1933, as amended, for the offering to which
this Registration Statement relates), which may make such changes and additions
to this Registration Statement as such agent and attorney-in-fact may deem
necessary or appropriate.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed on the 19th day of June, 1998 by the
following persons in the capacities indicated:
SIGNATURE TITLE
- ------------------------------ --------------------------
President and Chief
/s/ WILLIAM E. CHILES Executive Officer
- ------------------------------ (Principal Executive
William E. Chiles Officer) and Director
Senior Vice President,
/s/ DICK H. FAGERSTAL Chief Financial Officer
- ------------------------------ and Secretary (Principal
Dick H. Fagerstal Financial Officer) and
Director
Vice President--Controller
/s/ WILLIAM A. THOROGOOD and Assistant Secretary
- ------------------------------ (Principal Accounting
William A. Thorogood Officer)
/s/ CHARLES FABRIKANT
- ------------------------------ Director
Charles Fabrikant
/s/ RANDALL BLANK
- ------------------------------ Director
Randall Blank
/s/ TIMOTHY J. MCKEAND
- ------------------------------ Director
Timothy J. McKeand
/s/ ROBERT PIEROT, JR.
- ------------------------------ Director
Robert Pierot, Jr.
/s/ JONATHAN B. FAIRBANKS
- ------------------------------ Director
Jonathan B. Fairbanks
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-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 the 19th day of June, 1998.
<TABLE>
<S> <C> <C>
CHILES COLUMBUS LLC
By: /s/ DICK H. FAGERSTAL
-----------------------------------------
Dick H. Fagerstal
SENIOR VICE PRESIDENT, CHIEF FINANCIAL
OFFICER AND SECRETARY
</TABLE>
Each person whose signature to this Registration Statement appears below
hereby appoints William E. Chiles and Dick H. Fagerstal, and each individually,
each of whom may act without the joinder of the other, as his agent and
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all pre- and post-effective amendments to this Registration
Statement (and, in addition, any registration statement filed pursuit to Rule
462(b) under the Securities Act of 1933, as amended, for the offering to which
this Registration Statement relates), which may make such changes and additions
to this Registration Statement as such agent and attorney-in-fact may deem
necessary or appropriate.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed on the 19th day of June, 1998 by the
following persons in the capacities indicated:
SIGNATURE TITLE
- ------------------------------ --------------------------
President and Chief
Executive Officer
(Principal Executive
/s/ WILLIAM E. CHILES Officer) and President
- ------------------------------ and Chief Executive
William E. Chiles Officer of Chiles
Offshore LLC, the sole
Manager
Senior Vice President,
/s/ DICK H. FAGERSTAL Chief Financial Officer
- ------------------------------ and Secretary (Principal
Dick H. Fagerstal Financial Officer)
Vice President--Controller
/s/ WILLIAM A. THOROGOOD and Assistant Secretary
- ------------------------------ (Principal Accounting
William A. Thorogood Officer)
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-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 the 19th day of June, 1998.
<TABLE>
<S> <C> <C>
CHILES MAGELLAN LLC
By: /s/ DICK H. FAGERSTAL
-----------------------------------------
Dick H. Fagerstal
SENIOR VICE PRESIDENT, CHIEF FINANCIAL
OFFICER AND SECRETARY
</TABLE>
Each person whose signature to this Registration Statement appears below
hereby appoints William E. Chiles and Dick H. Fagerstal, and each individually,
each of whom may act without the joinder of the other, as his agent and
attorney-in-fact to sign on his behalf individually and in the capacity stated
below and to file all pre- and post-effective amendments to this Registration
Statement (and, in addition, any registration statement filed pursuit to Rule
462(b) under the Securities Act of 1933, as amended, for the offering to which
this Registration Statement relates), which may make such changes and additions
to this Registration Statement as such agent and attorney-in-fact may deem
necessary or appropriate.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed on the 19th day of June, 1998 by the
following persons in the capacities indicated:
SIGNATURE TITLE
- ------------------------------ --------------------------
President and Chief
Executive Officer
(Principal Executive
/s/ WILLIAM E. CHILES Officer) and President
- ------------------------------ and Chief Executive
William E. Chiles Officer of Chiles
Offshore LLC, the sole
Manager
Senior Vice President,
/s/ DICK H. FAGERSTAL Chief Financial Officer
- ------------------------------ and Secretary (Principal
Dick H. Fagerstal Financial Officer)
Vice President--Controller
/s/ WILLIAM A. THOROGOOD and Assistant Secretary
- ------------------------------ (Principal Accounting
William A. Thorogood Officer)
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
*3.1 Limited Liability Company Certificate of Chiles Offshore LLC
*3.2 Amended and Restated Operating Agreement, dated as of December 16, 1997,
among the Members of Chiles Offshore LLC
*3.3 Amendment No. 1, dated effective as of April 28, 1998, to Amended and
Restated Operating Agreement of Chiles Offshore LLC, among the Members
of Chiles Offshore LLC
*3.4 Certificate of Incorporation of Chiles Offshore Finance Corp.
*3.5 Bylaws of Chiles Offshore Finance Corp.
*3.6 Certificate of Formation of Chiles Columbus LLC
*3.7 Limited Liability Company Agreement of Chiles Columbus LLC
*3.8 Certificate of Formation of Chiles Magellan LLC
*3.9 Limited Liability Company Agreement of Chiles Magellan LLC
*4.1 Indenture, dated as of April 29, 1998, among the Issuers, the Owners and
U.S. Bank Trust National Association, as Trustee
*4.2 Form of Old Note (included in Exhibit 4.1 as Exhibit A thereto)
*4.3 Form of New Note (included in Exhibit 4.1 as Exhibit B thereto)
*4.4 Registration Rights Agreement, dated as of April 29, 1998, among the
Issuers, the Owners and the Initial Purchasers
*4.5 Purchase Agreement, dated April 24, 1998, among the Issuers, the Owners
and the Initial Purchasers, relating to the Old Notes
+5.1 Opinion and consent of Weil, Gotshal & Manges LLP, counsel for the
Company, as to certain securities registered hereby
*10.1 Credit Agreement, dated as of April 29, 1998, by and among the Company,
Nederlandse Scheepshypotheek Bank N.V. ("Nedship") and MeesPierson
Capital Corp. ("MeesPierson"), as co-arrangers, the banks and financial
institutions named therein, Nedship, as documentation agent and security
trustee, and MeesPierson, as administrative agent and paying agent
*10.2 Platform Construction Agreement, dated April 30, 1997, between Chiles
Offshore Inc. and AMFELS, Inc., relating to the CHILES COLUMBUS
*10.3 Assignment and Assumption and Consent to Assignment, dated as of August 5,
1997, among the Company, COI, LLC and AMFELS, Inc.
*10.4 Platform Construction Agreement, dated August 5, 1997, between Chiles
Offshore LLC and AMFELS, Inc., relating to the CHILES MAGELLAN
*10.5 Assignment, Assumption, Acknowledgement and Consent Agreement, dated as of
April 23, 1998, among the Company, the Owners and AMFELS, Inc.
*10.6 Agreement, dated December 18, 1997, between the Company and AMFELS, Inc.
concerning Construction Options for the Option Rigs
*10.7 Chiles Offshore LLC 1998 Equity Option Plan
*10.8 Escrow Agreement, dated as of April 29, 1998, among U.S. Bank Trust
National Association, as Escrow Agent, Trustee and Collateral Agent, and
the Issuers
*10.9 Escrow Security Agreement, dated as of April 29, 1998, among U.S. Bank
Trust National Association, as Collateral Agent, and the Issuers
*10.10 Securities Intermediary and Account Agreement, dated as of April 29, 1998,
among U.S. Bank Trust National Association, as Securities Intermediary,
Trustee and Collateral Agent, and the Issuers
*10.11 Employment Agreement, dated as of November 1, 1997, between the Company
and William E. Chiles
*10.12 Management and Administrative Services Agreement, dated as of February 27,
1998, between the Company and SEACOR SMIT Inc.
*21.1 Subsidiaries of the Company
*23.1 Consent of Arthur Andersen LLP
+23.2 Consent of Weil, Gotshal & Manges LLP (included in Exhibit 5.1)
*24.1 Powers of Attorney (included on signature pages)
*25.1 Form T-1 of U.S. Bank Trust National Association, as Trustee under the
Indenture filed as Exhibit 4.1
*99.1 Form of Letter of Transmittal
*99.2 Form of Notice of Guaranteed Delivery
</TABLE>
- ------------------------
* Filed herewith.
+ To be filed by amendment.
<PAGE>
Exhibit 3.1
CERTIFICATE OF FORMATION
OF
CHILES OFFSHORE LLC
This Certificate of Formation of Chiles Offshore LLC (the "LLC") is
being duly executed and filed by David E. Zeltner, as an authorized person, to
form a limited liability company under the Delaware Limited Liability Company
Act (6 Del. C. Section 18-101, et seq.).
FIRST: The name of the limited liability company formed hereby is
Chiles Offshore LLC.
SECOND: The address of the registered office of the LLC in the
State of Delaware and the name and address of the registered agent for service
of process on the LLC in the State of Delaware is: The Corporation Trust
Company, 1209 Orange Street, Wilmington, New Castle County, Delaware.
THIRD: This Certificate of Formation shall be effective on the date
of filing.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Formation this 31th day of July, 1997.
By: /s/David E. Zeltner
-------------------------
David E. Zeltner
Authorized Person
<PAGE>
Exhibit 3.2
CONFORMED COPY
- --------------------------------------------------------------------------------
AMENDED AND RESTATED OPERATING AGREEMENT
OF
CHILES OFFSHORE LLC
dated as of December 16, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
"ARTICLE 1
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2
FORMATION AND OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . 11
2.2 Principal Office. . . . . . . . . . . . . . . . . . . . . 11
2.3 Registered Office and Registered Agent. . . . . . . . . . 11
2.4 Purpose of Company. . . . . . . . . . . . . . . . . . . . 11
2.5 Date of Dissolution . . . . . . . . . . . . . . . . . . . 11
2.6 Qualification . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 3
CAPITALIZATION OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . 12
3.1 Certain Additional and Initial Capital Contributions. . . 12
3.2 Additional Capital Contributions. . . . . . . . . . . . . 12
3.3 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.4 Maintenance of Capital Accounts.. . . . . . . . . . . . . 14
3.5 Capital Withdrawal Rights, Interest and Priority. . . . . 15
3.6 Preemptive Rights . . . . . . . . . . . . . . . . . . . . 15
3.7 Certain SEACOR Transactions . . . . . . . . . . . . . . . 17
ARTICLE 4
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.1 Distributions of Net Cash Flow. . . . . . . . . . . . . . 18
4.2 Persons Entitled to Distributions . . . . . . . . . . . . 18
4.3 Limitations on Distributions. . . . . . . . . . . . . . . 19
ARTICLE 5
ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1 Profits . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.2 Losses. . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.3 Special Allocations . . . . . . . . . . . . . . . . . . . 19
5.4 Curative Allocations. . . . . . . . . . . . . . . . . . . 21
5.5 Loss Limitation . . . . . . . . . . . . . . . . . . . . . 21
5.6 Tax Allocations: Code Section 704(c) . . . . . . . . . . 22
5.7 Change in Percentage Interests. . . . . . . . . . . . . . 23
5.8 Withholding . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 6
MEMBERS' MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.1 Meetings of Members; Place of Meetings. . . . . . . . . . 23
6.2 Quorum; Voting Requirement. . . . . . . . . . . . . . . . 24
6.3 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.4 Action Without Meeting. . . . . . . . . . . . . . . . . . 24
6.5 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.6 Waiver of Notice. . . . . . . . . . . . . . . . . . . . . 24
6.7 No Authority. . . . . . . . . . . . . . . . . . . . . . . 25
i
<PAGE>
ARTICLE 7
MANAGEMENT AND CONTROL . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.1 Management Committee. . . . . . . . . . . . . . . . . . . 25
7.2 Management Committee Meetings; Quorum; Proxies. . . . . . 26
7.3 Management Committee's Authority; Certain Limitations . . 27
7.4 Officers; Agents. . . . . . . . . . . . . . . . . . . . . 28
7.5 Resignation of a Manager. . . . . . . . . . . . . . . . . 28
7.6 Compensation. . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 8
LIABILITY AND INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . 29
8.1 Liability of Members. . . . . . . . . . . . . . . . . . . 29
8.2 Indemnification.. . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 9
TRANSFERS OF MEMBERSHIP INTERESTS. . . . . . . . . . . . . . . . . . . . 31
9.1 General Restrictions. . . . . . . . . . . . . . . . . . . 31
9.2 Permitted Transferees . . . . . . . . . . . . . . . . . . 32
9.3 Substitute Members. . . . . . . . . . . . . . . . . . . . 33
9.4 Effect of Admission as a Substitute Member. . . . . . . . 34
9.5 Consent . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.6 No Dissolution. . . . . . . . . . . . . . . . . . . . . . 34
9.7 Additional Members; Certain Representations of Members. . 34
9.8 Right of First Offer. . . . . . . . . . . . . . . . . . . 34
9.9 Tag-Along Rights. . . . . . . . . . . . . . . . . . . . . 36
9.10 Drag-Along Rights . . . . . . . . . . . . . . . . . . . . 38
9.11 Piggyback Registration. . . . . . . . . . . . . . . . . . 40
9.12 Additional Members; Certain Representations of Members. . 42
ARTICLE 10
DISSOLUTION AND TERMINATION. . . . . . . . . . . . . . . . . . . . . . . 43
10.1 Events Causing Dissolution. . . . . . . . . . . . . . . . 43
10.2 Notices to Secretary of State . . . . . . . . . . . . . . 43
10.3 Cash Distributions Upon Dissolution . . . . . . . . . . . 43
10.4 In-Kind . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.5 No Action for Dissolution . . . . . . . . . . . . . . . . 44
ARTICLE 11
TAX MATTERS MEMBER . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.1 Tax Matters Member. . . . . . . . . . . . . . . . . . . . 45
11.2 Certain Authorizations. . . . . . . . . . . . . . . . . . 45
11.3 Indemnity of Tax Matters Member . . . . . . . . . . . . . 46
11.4 Information Furnished . . . . . . . . . . . . . . . . . . 46
11.5 Notice of Proceedings, etc. . . . . . . . . . . . . . . . 47
11.6 Notices to Tax Matters Member . . . . . . . . . . . . . . 47
11.7 Preparation of Tax Returns. . . . . . . . . . . . . . . . 47
11.8 Tax Elections . . . . . . . . . . . . . . . . . . . . . . 47
11.9 Taxation as a Partnership . . . . . . . . . . . . . . . . 47
ii
<PAGE>
ARTICLE 12
ACCOUNTING AND BANK ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . 48
12.1 Fiscal Year and Accounting Method . . . . . . . . . . . . 48
12.2 Books and Records . . . . . . . . . . . . . . . . . . . . 48
12.3 Delivery to Members; Inspection . . . . . . . . . . . . . 49
12.4 Financial Statements. . . . . . . . . . . . . . . . . . . 49
12.5 Filings . . . . . . . . . . . . . . . . . . . . . . . . . 49
12.6 Non-Disclosure. . . . . . . . . . . . . . . . . . . . . . 50
12.7 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE 13
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
13.1 Title to Property . . . . . . . . . . . . . . . . . . . . 50
13.2 Waiver of Default . . . . . . . . . . . . . . . . . . . . 51
13.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . 51
13.4 No Third Party Rights . . . . . . . . . . . . . . . . . . 51
13.5 Severability. . . . . . . . . . . . . . . . . . . . . . . 51
13.6 Nature of Interest in the Company . . . . . . . . . . . . 52
13.7 Binding Agreement . . . . . . . . . . . . . . . . . . . . 52
13.8 Headings. . . . . . . . . . . . . . . . . . . . . . . . . 52
13.9 Word Meanings . . . . . . . . . . . . . . . . . . . . . . 52
13.10 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 52
13.11 Entire Agreement. . . . . . . . . . . . . . . . . . . . . 52
13.12 Partition . . . . . . . . . . . . . . . . . . . . . . . . 52
13.13 Governing Law; Consent to Jurisdiction and Venue. . . . . 53
13.14 Discretion. . . . . . . . . . . . . . . . . . . . . . . . 53
SCHEDULE 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SCHEDULE 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SCHEDULE 7.4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
iii
<PAGE>
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
CHILES OFFSHORE LLC
THIS AMENDED AND RESTATED OPERATING AGREEMENT (this "Agreement") of CHILES
OFFSHORE LLC (the "Company"), is made and entered into as of the 16th day of
December, 1997 by and among the Persons executing this Agreement on the
signature pages hereto as a member (together with such other Persons that may
hereafter become members as provided herein, referred to collectively as the
"Members" or, individually, as a "Member").
WHEREAS, the Company was formed as a limited liability company under the
Delaware Limited Liability Company Act (the "Act") by the filing on August 1,
1997 of a certificate of formation of the Company with the Delaware Secretary of
State and, thereafter, on August 5, 1997, SEACOR Offshore Rigs Inc., a Delaware
corporation ("SEACOR"), as the Group A Member, and COI, LLC, a Delaware limited
liability company ("COI"), as the Group B Member, adopted an Operating Agreement
of Chiles Offshore LLC (the "Original Operating Agreement") as the limited
liability company agreement of the Company pursuant to Section 18-201(d) of the
Act effective as of such date; and
WHEREAS, as the date hereof, each of the Members (other than SEACOR and
COI) are parties to a Subscription Agreement dated as of December 11, 1997 (the
"Subscription Agreement") among the Company and such Members pursuant to which
each such Member has subscribed for and agreed to purchase certain membership
interests in the Company in exchange for the making by such Member of certain
cash capital contributions to the Company; and
WHEREAS, effective as of the date hereof, SEACOR, COI and the other Members
desire to adopt this Agreement as the amended and restated limited liability
company agreement of the Company in order to provide for (i) the waiver by
SEACOR and COI of certain of their rights under the Original Operating Agreement
relating to the sale of additional membership interests by the Company pursuant
to the Subscription Agreement, (ii) the making of certain additional
contributions by SEACOR to the Company, (iii) the admission of the Members
(other than SEACOR and COI) upon the making of certain capital contributions,
and (iv) the restatement and amendment of the Original Operating
<PAGE>
Agreement in its entirety, all subject to the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
Waiver; Amendment and Restatement. Each of SEACOR and COI hereby expressly
waive any and all rights it may have under the Original Operating Agreement
relating to, or arising out of, the admission of the other Members and the sale
of Membership Interests to such Members pursuant to the Subscription Agreement,
including, without limitation, any rights under Section 3.7 of the Original
Operating Agreement. SEACOR and COI hereby agree to amend and restate the
Original Operating Agreement in its entirety and adopt this Agreement, and the
other Members hereby agree to adopt this Agreement, as the limited liability
company agreement of the Company, which Agreement will henceforth be substituted
in its entirety for the Original Operating Agreement by deleting in its entirety
the Original Operating Agreement and substituting therefor the above preambles
and the following:
"ARTICLE 1
DEFINITIONS
As used herein, the following terms shall have the following meanings,
unless the context otherwise requires:
"Act" means the Delaware Limited Liability Company Act, 6 Del. L. Section
18-101, et seq., as amended from time to time.
"Adjusted Capital Account Deficit" means, with respect to a Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
relevant Taxable Year, after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts which such Member is
obligated to restore pursuant to any provision of this Agreement or is
deemed to be obligated to restore pursuant to the penultimate sentences of
Regulation Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in Regulation
Sections
2
<PAGE>
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Regulation Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.
"Affiliate" of a specified Person means any Person who directly or
indirectly controls, is controlled by, or is under common control with, such
Person.
"Agreement" means this Amended and Restated Operating Agreement, which
shall constitute the limited liability company agreement of the Company for
purposes of the Act, as amended from time to time.
"Business Day" means any day (other than a day which is a Saturday, Sunday
or legal holiday in the state of New York) on which banks are open for business
in New York City.
"Capital Account" means, with respect to any Member, a separate account
established by the Company and maintained for each Member in accordance with
Section 3.4 hereof.
"Capital Contribution" means, with respect to any Member, the amount of
money and the initial Gross Asset Value of any Property (other than money)
contributed to the Company with respect to the interests purchased by such
Member pursuant to the terms of this Agreement, in return for which the Member
contributing such capital shall receive a Membership Interest.
"Certificate" means the Certificate of Formation of the Company as filed on
August 1, 1997 with the Secretary of State of Delaware, as amended or restated
from time to time.
"Code" means the United States Internal Revenue Code of 1986, as amended.
"COI" means COI, LLC, a Delaware limited liability company.
"Company" means Chiles Offshore LLC.
"Company Affiliate" shall have the meaning set forth in Section 8.2.
3
<PAGE>
"Company Minimum Gain" shall have the meaning set forth for "partnership
minimum gain" in Regulation Section 1.704-2(b)(2) and shall be determined in
accordance with the provisions of Regulation Section 1.704-2(d).
"Depreciation" means, for each Taxable Year or other period, an amount
equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such Taxable Year, except that if the
Gross Asset Value of an asset differs from its adjusted basis for federal income
tax purposes at the beginning of such Taxable Year, Depreciation shall be an
amount which bears the same ratio to such beginning Gross Asset Value as the
federal income tax depreciation, amortization or other cost recovery deduction
for such Taxable Year bears to such beginning adjusted tax basis; provided,
however, that if the adjusted basis for federal income tax purposes of an asset
at the beginning of such Taxable Year is zero, Depreciation shall be determined
with reference to such beginning Gross Asset Value using any reasonable method
selected by the Management Committee.
"Gross Asset Value" means with respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows and as otherwise
provided in clause (ii) of Section 3.2(b):
(a) The initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the gross fair market value of such asset,
as reasonably determined by the Management Committee; provided, however,
that the initial Gross Asset Values of the assets contributed to the
Company pursuant to, or as described in, Section 3.1 hereof shall be as set
forth in such section or the schedule referred to therein;
(b) The Gross Asset Values of all Company assets shall be adjusted to
equal their respective gross fair market values (taking Code Section
7701(g) into account), as reasonably determined by the Management Committee
as of the following times: (i) the acquisition of an additional interest
in the Company by any new or existing Member in exchange for more than a de
minimis Capital Contribution; (ii) the distribution by the Company to a
Member of more than a de minimis amount of Company property as
consideration for an interest in the Company; and (iii) the liquidation of
the Company within the
4
<PAGE>
meaning of Regulation Section 1.704-1(b)(2)(ii)(g); provided, however, that
an adjustment described in clauses (i) and (ii) of this paragraph shall be
made only if the Management Committee reasonably determines that such
adjustment is necessary to reflect the relative economic interests of the
Members in the Company; and
(c) The Gross Asset Value of any item of Company assets distributed
to any Member shall be adjusted to equal the gross fair market value
(taking Code Section 7701(g) into account) of such asset on the date of
distribution as reasonably determined by the Management Committee.
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraph (b), such Gross Asset Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset, for purposes of
computing Profits and Losses.
"Group A Members" means the Persons listed on Schedule 1 as Group A members
and their respective permitted successors or assigns.
"Group B Members" means, the Persons listed on Schedule 1 as Group B
members and their respective permitted successors or assigns.
"Group C Members" means, the Persons listed on Schedule 1 as Group C
members and their respective permitted successors or assigns.
"Immediate Family Member" shall mean with respect to any Member that is a
natural Person, such Member's spouse, mother, father, brother, sister or child,
a trust established solely for the benefit of one or more Immediate Family
Members or the estate or personal representative of a deceased Member.
"Initial Tag-Along Notice" shall have the meaning set forth in Section
9.9(a).
"Losses" has the meaning set forth in the definition of "Profits" and
"Losses".
"Majority in Interest" means, with respect to the Members or to any
specified group or class of Members, Members owning more than fifty percent
(50%) of the total
5
<PAGE>
Percentage Interests held by all Members or such specified group or class of
Members, as applicable.
"Management Committee" means the management committee of the Company
established pursuant to Section 7.1.
"Managers" means, collectively, the Persons designated and serving in
accordance with Article 7 as members of the Management Committee.
"Member" or "Members" shall have the meaning set forth in the preamble
hereof.
"Member Nonrecourse Debt" has the meaning set forth for "partner
nonrecourse debt" in Regulation Section 1.704-2(i)(4).
"Member Nonrecourse Debt Minimum Gain" means an amount, with respect to
each Member Nonrecourse Debt, equal to the Company Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulation Section 1.704-2(i)(3).
"Member Nonrecourse Deductions" has the meaning set forth for "partner
nonrecourse deductions" in Regulation Sections 1.704-2(i)(1) and 1.704-2(i)(2).
"Membership Interest" means a Member's limited liability company interest
in the Company which refers to all of a Member's rights and interests in the
Company in such Member's capacity as a Member, all as provided in this Agreement
and the Act.
"Net Cash Flow" shall mean the gross cash proceeds from the Company's
operations and any distributions received from its subsidiaries (excluding the
proceeds of Company borrowings and capital contributions) and from all sales and
other dispositions of the Company's Property and any amount released by the
Management Committee from Reserves, less the portion of gross proceeds (other
than the proceeds of the Company's borrowings and capital contributions) used to
pay or establish Reserves for all the Company's expenses, debt payments
(including principal, interest and required redemption payments), capital
improvements, replacements and contingencies, all as reasonably determined by
the Management Committee. Net Cash Flow shall not be reduced by Depreciation or
similar allowances and shall include the net cash proceeds of all principal and
interest payments
6
<PAGE>
actually received by the Company with respect to any promissory note or other
deferred payment obligation held by the Company in connection with sales and
other dispositions of the Company's Property.
"Nonrecourse Deductions" has the meaning set forth in Regulation Section
1.704-2(b)(1).
"Nonrecourse Liability" has the meaning set forth in Regulation Section
1.704-2(b)(3).
"Notice" means a writing, containing the information required by this
Agreement to be communicated to a party, and shall be deemed to have been
received (a) when personally delivered or sent by telecopy, (b) one day
following delivery by overnight delivery courier, with all delivery charges
pre-paid, or (c) on the third Business Day following the date on which it was
sent by United States mail, postage prepaid, to such party at the address or fax
number, as the case may be, of such party as shown on the records of the
Company.
"Percentage Interest" of a Member means the aggregate limited liability
company percentage interest set forth on Schedule 1 hereto, as the same may be
modified from time to time as provided herein.
"Permitted Transferee" means a Person who becomes a transferee in
accordance with Section 9.2.
"Person" means any individual, partnership, limited liability company,
corporation, cooperative, trust, estate or other entity.
"Profits" and "Losses" means, for each Taxable Year, an amount equal to the
Company's taxable income or loss for a taxable year, determined in accordance
with Section 703(a) of the Code (for this purpose, all items of income, gain,
loss or deduction required to be stated separately pursuant to Section 703(a)(1)
of the Code shall be included in taxable income or loss), with the following
adjustments:
(a) Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Profits or Losses shall
be added to such taxable income or loss;
(b) Any expenditures of the Company described in Section 705(a)(2)(B)
of the Code or
7
<PAGE>
treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulation
Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Profits or Losses, shall be subtracted from such taxable income
or loss;
(c) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to subparagraphs (b) or (c) of the definition of Gross
Asset Value, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the Gross Asset Value of the asset) or an
item of loss (if the adjustment decreases the Gross Asset Value of the
asset) from the disposition of such asset and shall be taken into account
for purposes of computing Profits or Losses;
(d) Gain or loss resulting from any disposition of Property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the Property
disposed of, notwithstanding that the adjusted tax basis of such Property
differs from its Gross Asset Value;
(e) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation for such Taxable Year,
computed in accordance with the definition of Depreciation; and
(f) Notwithstanding any other provision of this definition, any items
which are specially allocated pursuant to Section 5.3 or Section 5.4 hereof
shall not be taken into account in computing Profits or Losses. The
amounts of the items of the Company income, gain, loss or deduction
available to be specially allocated pursuant to Sections 5.3 and 5.4 hereof
shall be determined by applying rules analogous to those set forth in
subparagraphs (a) through (e) above.
"Property" means all assets, real or intangible, that the Company may own
or otherwise have an interest in from time to time.
"Regulations" means the regulations, including temporary regulations,
promulgated by the United States Department of
8
<PAGE>
Treasury with respect to the Code, as such regulations are amended from time to
time, or corresponding provisions of future regulations.
"Reserves" means the cash reserves established by the Management Committee
to provide for working capital, future investments, debt service and such other
purposes as may be deemed reasonably necessary or advisable by the Management
Committee.
"SEACOR" means SEACOR Offshore Rigs Inc., a Delaware corporation.
"SEACOR Group" shall have the meaning set forth in Section 3.7(a).
"SEACOR SMIT" means SEACOR SMIT Inc., a Delaware corporation and, as of the
date hereof, the parent of SEACOR.
"SEC" means the Securities and Exchange Commission.
"Secretary" shall mean the Secretary of the Treasury or his/her delegate or
the Internal Revenue Service.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Section 9.8 Offeree" shall have the meaning set forth in Section 9.8(a).
"Section 9.8 Proposed Purchaser" shall have the meaning set forth in
Section 9.8(a).
"Section 9.8 Selling Member" shall have the meaning set forth in Section
9.8(a).
"Section 9.9 Participating Tagged Members" shall have the meaning set forth
in Section 9.9(a).
"Section 9.9 Proposed Purchaser" shall have the meaning set forth in
Section 9.9(a).
"Section 9.9 Tag-Along Membership Interest" shall have the meaning set
forth in Section 9.9(a).
"Section 9.9 Tagged Members" shall have the meaning set forth in Section
9.9(a).
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"Section 9.10 Drag-Along Membership Interest" shall have the meaning set
forth in Section 9.10(a).
"Section 9.10 Dragged Members" shall have the meaning set forth in Section
9.10(a).
"Section 9.10 Proposed Purchaser" shall have the meaning set forth in
Section 9.10(a).
"Section 9.10 Selling Member" shall have the meaning set forth in Section
9.10(a).
"Tag-Along Right" shall have the meaning set forth in Section 9.9(a).
"Tag-Along Notice" shall have the meaning set forth in Section 9.9(a).
"Taxable Year" shall mean the taxable year of the Company in accordance
with the provisions of Section 706 of the Code.
"Tax Distribution" means an amount equal (i) to the taxable income of the
Company allocated to the Members for a Taxable Year multiplied by the sum of (x)
the highest federal income tax rate applicable to individuals for such Taxable
Year and (y) 6%, divided by (ii) the lowest aggregate Percentage Interests held
by the Group B Members during such Taxable Year. Cash Distributions in respect
of the Tax Distribution shall be made quarterly as provided in Section 4.1
hereof, based on a reasonable estimate of the amount of Tax Distribution for
such Taxable Year. The amount of Tax Distribution shall be computed by the
Company's regular independent public accounting firm.
"Tax Matters Member" shall have the meaning set forth in Article 11.
"Transfer" or "Transferred" means (a) when used as a verb, to give, sell,
exchange, assign, transfer, pledge, hypothecate, bequeath, devise or otherwise
dispose of or encumber, and (b) when used as a noun, the nouns corresponding to
such verbs, in either case voluntarily or involuntarily, by operation of law or
otherwise. When referring to a Membership Interest, "Transfer" shall mean the
Transfer of such Membership Interest whether of record, beneficially, by
participation or otherwise.
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"Unaffiliated Members" shall have the meaning set forth in Section 3.2.
ARTICLE 2
FORMATION AND OFFICES
2.1 Formation. Pursuant to the Act, the Company has been formed as a
Delaware limited liability company effective upon the filing of the
Certificate of the Company with the Secretary of State of Delaware. To the
extent that the rights or obligations of any Member are different by reason of
any provision of this Agreement than they would be in the absence of such
provision, to the extent permitted by the Act, this Agreement shall control.
2.2 Principal Office. The principal office of the Company shall be
located at 11200 Westheimer, Suite 410, Houston, Texas 77042-3227 or at such
other place(s) as the Management Committee may determine from time to time.
2.3 Registered Office and Registered Agent. The location of the
registered office and the name of the registered agent of the Company in the
State of Delaware shall be as stated in the Certificate, as determined from
time to time by the Management Committee.
2.4 Purpose of Company. The Company's purposes, and the nature of the
business to be conducted and promoted by the Company are (a) to manage and
supervise either directly or through one or more other Persons owned and
controlled directly or indirectly by the Company, all aspects of the
construction of premium jackup rigs, and, upon their completion, manage all
aspects of their operation and receive therefor certain construction
supervision fees and management fees, (b) to form and act as managing general
partner of any such Person that is a partnership, (c) to engage in any other
lawful act or activity for which limited liability companies may be formed
under the Act, and (d) to engage in any and all activities necessary,
advisable, convenient or incidental to the foregoing.
2.5 Date of Dissolution. The term of the Company shall continue until
the close of business on August 1, 2032 or until the earlier dissolution under
Article 10 hereof. The existence of the Company as a separate legal entity
shall continue until cancellation of the Certificate in the manner required by
the Act.
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2.6 Qualification. The execution, delivery and filing of the
Certificate on August 1, 1997 by David E. Zeltner, in his capacity as an
authorized person, within the meaning of the Act, is hereby ratified, approved
and confirmed in all respects. The President and Chief Executive Officer, any
Vice President, the Secretary and any Assistant Secretary of the Company are
hereby authorized to qualify the Company to do business as a foreign limited
liability company in any state or territory in the United States in which the
Company may wish to conduct business and each is hereby designated as an
authorized person, within the meaning of the Act, to execute, deliver and file
any amendments or restatements of the Certificate and any other certificates
and any amendments or restatements thereof necessary for the Company to so
qualify to do business in any such state or territory.
ARTICLE 3
CAPITALIZATION OF THE COMPANY
3.1 Certain Additional and Initial Capital Contributions. Each of the
Members hereby acknowledges that each of SEACOR and COI made certain Capital
Contributions to the Company on August 5, 1997 as specified and as set forth
opposite its respective name on Schedule 1. On the date hereof, (i) SEACOR
shall make additional Capital Contributions to the capital of the Company
consisting of cash or the contribution of certain indebtedness as set forth on
Schedule 1, (ii) each Member (other than SEACOR and COI) shall make initial
Capital Contributions to the capital of the Company consisting of cash, all as
specified and as set forth opposite such Member's name (including SEACOR) on
Schedule 1 hereto. The Percentage Interest of each Member following such
Capital Contributions on the date hereof, is likewise set forth on Schedule 1.
3.2 Additional Capital Contributions.
(a) Except as otherwise expressly provided in this Agreement, no Member
shall be required to make any additional Capital Contribution. No Member
shall be permitted to make any additional Capital Contribution without the
approval of the Management Committee.
(b) Subject to the rights of each Member to purchase its proportionate
share of additional Membership Interests issued by the Company in accordance
with Section 3.6, the Company may offer additional Membership Interests to:
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(i) any Person that is not an Affiliate or Immediate Family Member
of a Member, as the case may be, with the approval of the Management
Committee; or
(ii) any Person that is a Member or is an Affiliate of a Member or
Immediate Family Member of a Member, as the case may be, with the approval of
(A) the Management Committee, and (B) a Majority in Interest of the Members
other than (1) any Member purchasing such additional Membership Interests and
(2) any Member whose Affiliate(s) or Immediate Family Member(s) is purchasing
such additional Membership Interests (such Members, other than those referred
to in clauses (1) and (2) above being referred to as the "Unaffiliated
Members"), it being expressly understood that such approval of the Members
shall also include their approval of any related valuations of Gross Asset
Value by the Management Committee and, if such Members approve the Transfer
without approving said valuation, Gross Asset Value shall be determined by a
third Person familiar with the valuation of such transactions selected jointly
by the Management Committee and a Majority in Interest of the Unaffiliated
Members not later than ten (10) days after their approval of the Transfer or,
if the Management Committee and such Members fail to so select a third Person,
then such third Person will be selected in accordance with the rules and
procedures of the American Arbitration Association in New York, New York.
If after the date hereof, any additional Capital Contributions are
made by Members but not in proportion to their respective Percentage
Interests, the Percentage Interest of each Member shall be adjusted such that
each Member's revised Percentage Interest determined immediately following the
additional Capital Contributions shall be equal to a fraction (1) the
numerator of which is the sum of (a) the positive Capital Account balance of
the Member determined immediately preceding the date the additional Capital
Contribution is made (such Capital Account to be computed by adjusting the
book value for Capital Account purposes of each Company asset to equal its
Gross Asset Value as of such date, as provided in subparagraph (b) of the
definition herein of "Gross Asset Value"), and (b) the additional Capital
Contribution, if any, made by such Member, and (2) the denominator of which is
the sum of the positive Capital Account balances and additional Capital
Contributions of all Members, including any new Members (in each case
calculated as provided in Section 3.2(b)(ii)(l)). The names, addresses and
Capital Contributions of the
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Members shall be reflected in the books and records of the Company.
3.3 Loans. (a) No Member shall be obligated to loan funds to the
Company. Loans by a Member to the Company shall not be considered Capital
Contributions. The amount of any such loans shall be a debt of the Company
owed to such Member in accordance with the terms and conditions upon which
such loans are made.
(b) A Member may (but shall not be obligated to) guarantee a loan made
to the Company. If a Member guarantees a loan made to the Company and is
required to make payment pursuant to such guarantee to the maker of the loan,
then the amounts so paid to the maker of the loan shall be treated as a loan
by such Member to the Company and not as an additional capital contribution.
3.4 Maintenance of Capital Accounts.
(a) The Company shall maintain for each Member, a separate Capital
Account with respect to the Membership Interest owned by such Member in
accordance with the following provisions:
(i) To each Member's Capital Account there shall be credited (A)
such Member's Capital Contributions, (B) such Member's distributive share
of Profits and any items in the nature of income or gain which are
specially allocated pursuant to Section 5.3 or Section 5.4 hereof, and
(C) the amount of any Company liabilities assumed by such Member or which
are secured by any Property distributed to such Member. The principal
amount of a promissory note which is not readily traded on an established
securities market and which is contributed to the Company by the maker of
the note (or a Member related to the maker of the note within the meaning
of Regulation Section 1.704-1(b)(2)(ii)(c)) shall not be included in the
Capital Account of any Member until the Company makes a taxable
disposition of the note or until (and only to the extent) principal
payments are made on the note, all in accordance with Regulation Section
1.704-1(b)(2)(iv)(d)(2);
(ii) To each Member's Capital Account there shall be debited (A) the
amount of money and the Gross Asset Value of any Property distributed or
treated as an advance distribution to such Member pursuant to any
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provision of this Agreement (including without limitation any
distributions pursuant to Section 4.1(a)), (B) such Member's distributive
share of Losses and any items in the nature of expenses or losses which
are specially allocated pursuant to Section 5.3 or Section 5.4 hereof,
and (C) the amount of any liabilities of such Member assumed by the
Company or which are secured by any Property contributed by such Member
to the Company;
(iii) In the event Membership Interests are Transferred in
accordance with the terms of this Agreement, the transferee shall succeed
to the Capital Account of the transferor to the extent it relates to the
Transferred Membership Interests; and
(iv) In determining the amount of any liability for purposes of
Sections 3.4(a)(i) and 3.4(a)(ii) there shall be taken into account Code
Section 752(c) and any other applicable provisions of the Code and
Regulations.
(b) The foregoing Section 3.4(a) and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to
comply with Regulation Section 1.704-1(b) and, to the greatest extent
practicable, shall be interpreted and applied in a manner consistent with such
Regulation. The Management Committee in its discretion and to the extent
otherwise consistent with this Agreement shall (i) make any adjustments that
are necessary or appropriate to maintain equality between the Capital Accounts
of the Members and the amount of capital reflected on the Company's balance
sheet, as computed for book purposes, in accordance with Regulation Section
1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with
Regulation Section 1.704-1(b).
3.5 Capital Withdrawal Rights, Interest and Priority. Except as
expressly provided in this Agreement, no Member shall be entitled (a) to
withdraw or reduce such Member's Capital Contribution or to receive any
distributions from the Company, or (b) to receive or be credited with any
interest on the balance of such Member's Capital Contribution at any time.
3.6 Preemptive Rights. Subject to Section 3.2, if the Company elects to
offer and sell Membership Interests other than the Membership Interests set
forth on Schedule 1 and
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Excluded Sales (as hereinafter defined), such additional Membership Interests
shall be in the form of Membership Interests having such Percentage Interest,
designations and such rights and provisions, including, but not limited to,
provisions relating to distributions and allocations of Profits and Losses, as
shall be reasonably determined by the Management Committee to be in the best
interest of the Company; provided, however, that the Company may not offer and
sell any Membership Interests having preferences to the rights of the Members
with respect to distributions, allocations or rights upon liquidation, without
the prior written consent of Members owning more than two-thirds of the total
percentage interest held by all Members (it being understood that no such
consent shall be required for the offering or sale of Membership Interests
that are entitled to distributions, allocations and rights upon liquidation
that are pari passu to the rights of the existing Members). Prior to the
consummation of any sale of additional Membership Interests (other than
Excluded Sales), the Company shall offer the additional Membership Interests
to the Members, on the terms and conditions set forth below:
(a) The Company shall give Notice to each Member, setting forth the
price, terms and conditions of the proposed sale of the additional
Membership Interests.
(b) Each Member shall have the option to acquire all or a portion
of such Member's pro rata portion (which shall be in proportion to the
Percentage Interest of all the Members) at the time of the offering of
the additional Membership Interests proposed to be sold, on the same
terms and conditions as are set forth in the Notice. The option of
Members to purchase all or a portion of their pro rata portions of the
additional Membership Interests shall be exercised by delivery of a
Notice to the Company of exercise within ten (10) Business Days following
receipt of the Company's Notice of the price, terms and conditions of the
sale of the additional Membership Interests. If less than all the
Membership Interests to be sold by the Company are purchased by the
Members, the Company may within sixty (60) calendar days from the
expiration of said option, sell such Membership Interests as shall not
have been purchased by the Members upon terms and conditions no less
favorable to the Company than those set forth in the Notice.
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(c) The sale of additional Membership Interests to Members who
exercise their options to purchase additional Membership Interests shall
occur on the date set forth in a Notice from the Company to such Members,
which date shall not be earlier than thirty (30) days after the date of
expiration of the offer to Members under Section 3.6(b).
(d) For purposes of this Section 3.6, the term "Excluded Sales"
shall mean (i) any shares of the capital stock of the Company issued upon
conversion of the Company into a corporation, (ii) following any such
conversion, any shares of the capital stock of the Company issued
pursuant to a public offering and sale of equity securities of the
Company pursuant to an effective registration statement under the
Securities Act, (iii) membership interests issued pursuant to the
acquisition of another Person by the Company, by merger, purchase of all
or substantially all of such other Person's securities or assets or
otherwise pursuant to which the Company shall become the owner of more
than fifty percent (50%) of the voting power of such other Person, and
(iv) Membership Interests Transferred to or options to purchase
Membership Interest granted to, employees, directors, advisors or
consultants to the Company under a Company membership interest option or
similar equity incentive plan; provided however, that the Company will
not Transfer Membership Interests, or grant options, under any such plan,
aggregating more than five percent (5%) of the Membership Interests of
the Company on a fully diluted basis (assuming the exercise of such
options); and, provided further, the exercise price for Membership
Interests under each such option shall not be less than the price for an
equivalent percentage Membership Interest acquired on the date hereof by
the Group C Members.
3.7 Certain SEACOR Transactions.
(a) Except as otherwise provided in Section 3.7(b), in the event
SEACOR or its parent SEACOR SMIT, or any other consolidated subsidiary of
SEACOR SMIT (collectively, the "SEACOR Group") provides management,
administrative, financial or investment-banking type services to the
Company or any of its subsidiaries with the respect to any rig
transactions or otherwise, such member of the SEACOR Group shall be
entitled to receive reasonable fees and reimbursement for expenses
incurred
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in connection with the provision of such services so long as such fees
are not in excess of fees charged by unrelated Persons for comparable
services.
(b) The Company shall pay SEACOR SMIT a management fee for
financial and other services provided to the Company and its subsidiaries
by Dick H. Fagerstal, Vice President, Finance of SEACOR SMIT. Such
management fee to be determined based on the value of the services
provided by Mr. Fagerstal to the Company and its subsidiaries, including
reimbursement of any related out-of-pocket expenses incurred by SEACOR
SMIT, after taking into account the compensation typically paid for such
services and the percentage of Mr. Fagerstal's time allocated to
activities relating to the Company and its subsidiaries.
ARTICLE 4
DISTRIBUTIONS
4.1 Distributions of Net Cash Flow. Distributions of Net Cash Flow to
the Members shall be made as follows:
(a) quarterly, to the Members in proportion to and to the extent of
their relative Percentage Interests, an amount not in excess of the Tax
Distribution for the Taxable Year; provided, however, that distributions
under this Section 4.1(a) shall be treated as advance distributions under
Section 4.1(b), with the result that distributions otherwise made under
Section 4.1(b) to such Member shall be reduced by the amount of advances
made pursuant to this Section 4.1(a); and
(b) upon the approval of and in the amount so approved by the
Management Committee acting in its sole discretion, to the Members in
proportion to their relative Percentage Interests.
4.2 Persons Entitled to Distributions. All distributions of Net Cash
Flow to the Members under this Article 4 shall be made to the Persons shown on
the records of the Company to be entitled thereto as of the last day of the
fiscal period prior to the time for which such distribution is to be made,
unless the transferor and transferee of any Membership Interest otherwise
agree in writing to a different distribution and such distribution is
consented to in writing by the Management Committee.
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4.3 Limitations on Distributions. Notwithstanding anything to the
contrary herein provided, no distribution hereunder shall be permitted to the
extent prohibited by Section 18-607 of the Act.
ARTICLE 5
ALLOCATIONS
5.1 Profits. After giving effect to the special allocations set forth
in Sections 5.3 and 5.4 hereof and subject to Section 5.7 hereof, Profits for
any Taxable Year shall be allocated to the Members in proportion to their
Percentage Interests.
5.2 Losses. After giving effect to the special allocations set forth in
Sections 5.3 and 5.4, subject to the limitation in Section 5.5 hereof and
subject to Section 5.7 hereof, Losses for any Taxable Year shall be allocated
to the Members in proportion to their Percentage Interests.
5.3 Special Allocations. The following special allocations shall be
made in the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(f) of the Regulations, notwithstanding any other
provision of this Article 5, if there is a net decrease in Company
Minimum Gain during any Taxable Year, each Member shall be specially
allocated items of Company income and gain for such year (and, if
necessary for subsequent years) in proportion to, and to the extent of,
an amount equal to each Member's share of the net decrease in Company
Minimum Gain during such taxable year as determined in accordance with
the provisions of Regulation Section 1.704-2(g). Allocations pursuant to
the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant thereto. The
items to be so allocated shall be determined in accordance with Sections
1.704-2(f) (6) and 1.704-2(j) (2) of the Regulations. This Section
5.3(a) is intended to comply with the minimum gain chargeback requirement
in Section 1.704-2(f) of the Regulations and shall be interpreted
consistently therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise provided
in Section 1.704-2(i) (4) of the Regulations, notwithstanding any other
provision of
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this Section 5, if there is a net decrease in Member Nonrecourse Debt
Minimum Gain attributable to a Member Nonrecourse Debt during any Taxable
Year, each Member who has a share of the Member Nonrecourse Debt Minimum
Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Section 1.704-2(i) (5) of the Regulations, shall be
specially allocated items of Company income and gain for such Taxable
Year (and, if necessary, subsequent Taxable Years) in an amount equal to
such Member's share of the net decrease in Member Nonrecourse Debt,
determined in accordance with Regulation Section 1.704-2(i) (4).
Allocations pursuant to the previous sentence shall be made in proportion
to the respective amounts required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be determined in
accordance with Sections 1.704-2(i) (4) and 1.704-2(j) (2) of the
Regulations. This Section 5.3(b) is intended to comply with the minimum
gain chargeback requirement in Section 1.704-2(i) (4) of the Regulations
and shall be interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Company income and
gain shall be specially allocated to such Member in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, the
Adjusted Capital Account Deficit of the Member as quickly as possible,
provided that an allocation pursuant to this Section 5.3(c) shall be made
only if and to the extent that the Member would have an Adjusted Capital
Account Deficit after all other allocations provided for in this Section
5 have been tentatively made.
(d) Gross Income Allocation. In the event any Member has a deficit
Capital Account at the end of any Taxable Year which is in excess of the
sum of (i) the amount such Member is obligated to restore pursuant to any
provision of this Agreement and (ii) the amount such Member is obligated
to restore pursuant to the penultimate sentences of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5), each such Member shall be specially
allocated items of Company income and gain in the amount of such excess
as quickly as possible; provided, however, that an allocation pursuant to
this
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Section 5.3(d) shall be made only if and to the extent that such Member
would have a deficit Capital Account in excess of such sum after all
other allocations provided for in this Section 5 have been made other
than those allocations pursuant to Section 5.3(c) and this Section
5.3(d).
(e) Nonrecourse Deductions. Nonrecourse Deductions for any Taxable
Year shall be specially allocated to the Members in proportion to their
respective Percentage Interests.
(f) Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any Taxable Year shall be specially allocated to the
Member who bears the economic risk of loss with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are
attributable in accordance with Regulation Section 1.704-2(i) (1).
5.4 Curative Allocations. The allocations set forth in Sections 5.3(a),
5.3(b), 5.3(c), 5.3(d), 5.3(e), 5.3(f) and 5.5 (the "Regulatory Allocations")
are intended to comply with certain requirements of the Regulations. It is
the intent of the Members that, to the extent possible, all Regulatory
Allocations shall be offset either with other Regulatory Allocations or with
special allocations of other items of Company income, gain, loss or deduction
pursuant to this Section 5.4. Therefore, notwithstanding any other provision
of this Section 5 (other than the Regulatory Allocations), following any
Regulatory Allocation, the Management Committee shall use its best efforts to
make such offsetting special allocations of Company income, gain, loss or
deduction in whatever reasonable manner it determines so that, after such
offsetting allocations are made, each Member's Capital Account balance is, to
the extent possible, equal to the Capital Account balance such Member would
have had if the Regulatory Allocations had not been made and all Company items
were allocated pursuant to Sections 5.1 and 5.2.
5.5 Loss Limitation. Losses allocated pursuant to Section 5.2 hereof
shall not exceed the maximum amount of Losses that can be allocated without
causing any Member to have an Adjusted Capital Account Deficit at the end of
any Taxable Year. In the event some but not all the Members would have
Adjusted Capital Account Deficits as a consequence of an allocation of Losses
pursuant to Section 5.2 hereof, the limitation set forth in this Section 5.5
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shall be applied on a Member by Member basis and Losses not allocable to any
Member as a result of such limitation shall be allocated to the other Members
pro rata in accordance with the positive balances in such Members' Capital
Accounts so as to allocate the maximum permissible Losses to each Member under
Section 1.704-1(b)(2)(ii)(d) of the Regulations.
5.6 Tax Allocations: Code Section 704(c).
(a) In accordance with Code Section 704(c) and the Regulations
thereunder, income, gain, loss and deduction with respect to any Property
contributed to the capital of the Company shall, solely for tax purposes, be
allocated among the Members so as to take account of any variation between the
adjusted basis of such Property to the Company for federal income tax purposes
and its initial Gross Asset Value (computed in accordance with the definition
of Gross Asset Value).
(b) In the event the Gross Asset Value of any Company asset is adjusted
pursuant to subparagraph (b) of the definition of Gross Asset Value,
subsequent allocations of income, gain, loss and deduction with respect to
such asset shall take account of any variation between the adjusted basis of
such asset for federal income tax purposes and its Gross Asset Value in the
same manner as under Code Section 704(c) and the Regulations thereunder.
(c) Any elections or other decisions relating to such allocations shall
be made by the Management Committee in any manner that reasonably reflects the
purpose and intention of this Agreement; provided, that the Company, in the
discretion of the Management Committee, may make, or not make, "curative" or
"remedial" allocations (within the meaning of the Regulations under Code
Section 704(c)) including, but not limited to, "curative" allocations which
offset the effect of the "ceiling rule" for a prior Taxable Year (within the
meaning of Regulation Section 1.704-3(c)(3)(ii) and "curative" allocations
from disposition of contributed property (within the meaning of Regulation
Section 1.704-3(c)(3)(iii)(B). Allocations pursuant to this Section 5.6 are
solely for purposes of federal, state, and local taxes and shall not affect,
or in any way be taken into account in computing, any Member's Capital Account
or share of Profits, Losses, other items, or distributions (other than Tax
Distributions) pursuant to any provision of this Agreement.
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5.7 Change in Percentage Interests. In the event that the Members'
Percentage Interests change during a Taxable Year, Profits and Losses shall be
allocated taking into account the Members' varying Percentage Interests for
such Taxable Year, determined on a daily, monthly or other basis as determined
by the Management Committee, using any permissible method under Code Section
706 and the Regulations thereunder.
5.8 Withholding. Each Member hereby authorizes the Company to withhold
and to pay over any taxes payable by the Company or any of its Affiliates as a
result of such Member's participation in the Company; if and to the extent
that the Company shall be required to withhold any such taxes, such Member
shall be deemed for all purposes of this Agreement to have received a payment
from the Membership as of the time such withholding is required to be paid,
which payment shall be deemed to be a distribution to such Member to the
extent that the Member is then entitled to receive a distribution. To the
extent that the aggregate of such payments in respect of a Member for any
period exceeds the distributions to which such Member is entitled for such
period, the amount of such excess shall be considered a demand loan from the
Company to such Member, with interest at 8% per annum, which interest shall be
treated as an item of Company income, until discharged by such Member by
repayment, which may be made in the sole discretion of the Management
Committee out of distributions to which such Member would otherwise be
subsequently entitled. The withholdings referred to in this Section 5.8 shall
be made at the maximum applicable statutory rate under the applicable tax law
unless the Management Committee shall have received an opinion of counsel or
other evidence, satisfactory to the Management Committee, to the effect that a
lower rate is applicable, or that no withholding is applicable.
ARTICLE 6
MEMBERS' MEETINGS
6.1 Meetings of Members; Place of Meetings. Regular meetings of the
Members may be held on an annual basis or more frequently as determined by a
Majority in Interest of the Members. All meetings of the Members shall be
held in New York, New York or Houston, Texas as designated from time to time
by the Management Committee and stated in the Notice of the meeting or in a
duly executed waiver of the Notice thereof. Special meetings of the Members
may be held for
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any purpose or purposes, unless otherwise prohibited by law, and may be called
by the Management Committee or by Members owning not less than twenty-five
percent (25%) of the Percentage Interests. Members may participate in a
meeting of the Members by means of conference telephone or other similar
communication equipment whereby all Members participating in the meeting can
hear each other. Participation in a meeting in this manner shall constitute
presence in person at the meeting.
6.2 Quorum; Voting Requirement. The presence, in person, by telephone
or by proxy, of a Majority in Interest of the Members shall constitute a
quorum for the transaction of business by the Members. The affirmative vote
of a Majority in Interest of the Members present, in person, by telephone or
by proxy, at any meeting shall constitute a valid decision of the Members,
except where a larger vote is required by the Act.
6.3 Proxies. At any meeting of the Members, every Member having the
right to vote thereat shall be entitled to vote in person or by proxy
appointed by an instrument in writing signed by such Member and bearing a date
not more than one year prior to such meeting.
6.4 Action Without Meeting. Any action required or permitted to be
taken at any meeting of Members of the Company may be taken without a meeting,
without prior notice and without a vote if a consent in writing setting forth
the action so taken is signed by Members having not less than the minimum
Percentage Interests that would be necessary to authorize or take such action
at a meeting of the Members. Prompt Notice of the taking of any action taken
pursuant to this Section 6.4 by less than the unanimous written consent of the
Members shall be given to those Members who have not consented in writing.
6.5 Notice. Notice stating the place, day and hour of the meeting and
the purpose for which the meeting is called shall be delivered personally or
sent by mail or by telecopier not less than five (5) days nor more than sixty
(60) days before the date of the meeting by or at the direction of the
Management Committee or other persons calling the meeting, to each Member
entitled to vote at such meeting.
6.6 Waiver of Notice. When any Notice is required to be given to any
Member hereunder, a waiver thereof in writing signed by the Member, whether
before, at or after
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the time stated therein, shall be equivalent to the giving of such Notice.
6.7 No Authority. Unless expressly authorized herein or by action of
the Members or the Management Committee in accordance herewith and the Act, no
Member shall have any authority to act on behalf of the Company or bind the
Company in any manner whatsoever, including, without limitation, entering into
any agreement on behalf of the Company.
ARTICLE 7
MANAGEMENT AND CONTROL
7.1 Management Committee; Managers.
(a) Except as otherwise provided hereunder, the business and affairs of
the Company shall be managed by a Management Committee comprised of up to a
total of up to seven (7) Managers, (i) up to four (4) of whom shall be
designated in writing by a Majority in Interest of the Group A Members (the
four individuals designated pursuant to this clause (i) being referred to
herein collectively as the "Group A Managers" and, individually, as a "Group A
Manager", (ii) up to two (2) individuals designated in writing by a Majority
in Interest of the Group B Members (the two individuals designated pursuant to
this clause (ii) being referred to herein collectively as the "Group B
Managers" and individually as a "Group B Manager, and (iii) one (1) individual
designated in writing by a Majority in Interest of the Group C Members (the
one individual designated by a Majority in Interest of the Group C Members
pursuant to this clause (iii) being referred to as a "Group C Manager"). As
of the date hereof, (i) the Group A Managers designated by the Group A Member
are Charles Fabrikant, Randall Bank, Dick H. Fagerstal and Timothy J. McKeand,
(ii) the Group B Managers designated by the Group B Member are William E.
Chiles and Jonathan B. Fairbanks and (iii) the Group C Manager designated by
the Group C Members is Robert Pierot, Jr. Anything herein to the contrary
notwithstanding, so long as William E. Chiles continues to be employed as the
Chief Executive Officer of the Company, one of the Managers designated by the
Group B Members as provided in clause (ii) of the first sentence of this
Section 7.1(a) shall be deemed to be William E. Chiles.
(b) After the date hereof, (i) a Majority in Interest of the Group A
Members shall be entitled at any time, with
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or without cause, to designate any Group A Manager for removal as a Manager,
(ii) a Majority in Interest of the Group B Members shall be entitled at any
time with or without cause to designate any Group B Manager for removal as a
Manager except that if William E. Chiles is serving as Chief Executive Officer
of the Company, the Group B Members shall only be entitled at any time with or
without cause to designate the other Group B Manager for removal as a Manager,
and (iii) a Majority in Interest of the Group C Members shall be entitled at
any time, with or without cause to designate the Group C Manager as removal as
a Manager. Any Manager designated for removal pursuant to this Section 7.1(b)
shall be deemed removed as a Manager upon receipt by the Company of the Notice
from the appropriate Member or Members designating said Manager for removal.
(c) If at any time a vacancy is created on the Management Committee by
reason of the death, removal or resignation of any Manager, the person to fill
such vacancy, shall be designated as a Manager (i) by a Majority in Interest
of the Group A Members, if the person who has ceased to be a Manager was a
Group A Manager, (ii) by a Majority in Interest of the Group B Members, if the
person who has ceased to be a Manager was a Group B Manager or (iii) by a
Majority in Interest of the Group C Managers, if the person who has ceased to
be a Manager was the Group C Manager.
(d) Except as otherwise expressly provided herein, the power and
authority granted to the Management Committee hereunder shall include all
those necessary or convenient for the furtherance of the purposes of the
Company and shall include the power to make all decisions with regard to the
management, operations, assets, financing and capitalization of the Company.
(e) Anything to the contrary herein notwithstanding, no Manager shall
have any authority to bind the Company or the Management Committee in his
individual capacity in any manner whatsoever, except for such authority as
shall be expressly delegated to a Manager in this Agreement or by the
Management Committee.
(f) The board of directors (or similar governing body) of any subsidiary
of the Company shall be comprised of such members as may be approved by the
Management Committee of the Company.
7.2 Management Committee Meetings; Quorum; Proxies.
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(a) The Management Committee will establish a regular meeting schedule,
and will use its reasonable best efforts to meet at least once every quarter.
Unless otherwise agreed by a majority of the Managers, meetings of the
Management Committee shall be held in New York, New York or Houston, Texas.
Meetings may be conducted in person, by telephone or in any other manner
agreed to by the Management Committee. Any two (2) Managers may call a
meeting of the Management Committee upon delivery of written or telephonic
Notice at least three (3) Business Days prior to the date of such meeting,
which Notice shall be accompanied by a proposed agenda or statement of purpose
and by copies of all documents, agreements and information to be considered at
such meeting; provided, however, at any such meeting, the Managers may address
any and all business matters which may come before it, whether or not such
items were provided for in the proposed agenda.
(b) A quorum shall exist when at least four (4) of the Managers are
present in person, by telephone or by proxy. Each Manager is entitled to vote
at any meeting of the Management Committee. The vote of a majority of the
Managers present in person, by telephone or by proxy at any meeting of the
Management Committee shall be required for action by the Management Committee.
(c) At each meeting of the Management Committee, every Manager shall be
entitled to vote in person, by telephone or by proxy appointed by instrument
in writing, subscribed by such Manager.
7.3 Management Committee's Authority; Certain Limitations. (a) Except as
expressly set forth herein, the Management Committee shall have the maximum
power and authority with respect to the business and operations of the Company
permitted by law, including, without limitation, the right to cause the
Company to merge or consolidate with, or sell all, or substantially all, of
its asset to any Person.
(b) Notwithstanding the grant of authority to the Management Committee
pursuant to Section 7.3(a) and except as otherwise contemplated in Sections
10.1(a), (b) and (c), the Management Committee shall not authorize the Company
to merge or consolidate with, or sell all, or substantially all, of its assets
to, a Member or an Affiliate or Immediate Family Member of a Member without
the prior written consent of a Majority in Interest of the Members other than
the Member or the Member whose Affiliate(s) or Immediate Family Member(s) is a
party to such transaction.
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7.4 Officers; Agents. The Management Committee shall have the power to
appoint any Person or Persons as agents (who may be referred to as officers)
to act for the Company with such titles, if any, as the Management Committee
deems appropriate and to delegate to such officers or agents such of the
powers as are granted to the Management Committee hereunder, provided,
however, that without the express approval of the Management Committee, no
officer or agent shall have the authority to take any action (i) outside the
ordinary course of business of the Company or (ii) material to the Company and
its subsidiaries taken as a whole. Any decision or act of an officer
appointed under this Section 7.4 within the scope of the officer's designated
or delegated authority shall control and shall bind the Company. The officers
or agents so appointed may have such titles as the Management Committee shall
deem appropriate, which may include (but need not be limited to) President and
Chief Executive Officer, Senior Vice President, Vice President, Chief
Operating Officer, Chief Financial Officer, Treasurer, Controller or
Secretary. The officers of the Company as of the date hereof are set forth on
Schedule 7.4. Unless the authority of the agent designated as the officer in
question is limited by the Management Committee, any officer so appointed
shall have the same authority to act for the Company as a corresponding
officer of a Delaware corporation would have to act for a Delaware corporation
in the absence of a specific delegation of authority; provided, however, that
without the express approval of the Management Committee, no officer or agent
shall have the authority to take any action (i) outside the ordinary course of
business of the Company or (ii) material to the Company and its subsidiaries
taken as a whole. The Management Committee, in its sole discretion, may by
vote, resolution or otherwise ratify any act previously taken by an officer or
agent acting on behalf of the Company.
7.5 Resignation of a Manager. A Manager may resign from such position
at any time upon giving Notice to the Management Committee.
7.6 Compensation Except as otherwise provided herein, each Manager
shall be entitled to reimbursement from the Company for all reasonable direct
out-of-pocket expenses incurred on behalf of the Company, including
reimbursement for such expenses incurred by such Manager in connection with
attending meetings of the Management Committee, and shall not be entitled to
further compensation except as may be approved by the Management Committee.
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ARTICLE 8
LIABILITY AND INDEMNIFICATION
8.1 Liability of Members. A Member shall only be liable to make the
payment of its Capital Contribution. No Member, except as otherwise
specifically provided in the Act, shall be obligated to pay any distribution
to or for the account of the Company or any creditor of the Company.
8.2 Indemnification.
(a) The Company shall indemnify and hold harmless each Manager and
Member and their respective Affiliates and all officers, directors, members,
partners, stockholders, managers and employees thereof, and each officer of
the Company and any Person serving in any similar capacity for another Person
affiliated with the Company at the request of the Company (solely for purposes
of this Section 8.2, each such Person being referred to as, a "Company
Affiliate"), from and against any and all losses, claims, demands, costs,
damages, liabilities, expenses of any nature (including reasonable attorneys'
fees and disbursements), judgments, fines, settlements and other amounts
arising from any and all claims, demands, actions, suits or proceedings,
whether civil, criminal, administrative or investigative, in which a Company
Affiliate may be involved, or threatened to be involved, as a party or
otherwise, arising out of or incidental to the business of the Company,
including, without limitation, liabilities under the Federal and state
securities laws, regardless of whether a Company Affiliate continues to be a
Company Affiliate, at the time any such liability or expense is paid or
incurred, if (i) the Company Affiliate acted in good faith and in a manner it
or he reasonably believed to be in, or not opposed to, the interests of the
Company and, with respect to any criminal proceeding, had no reason to believe
its or his conduct was unlawful, and (ii) the Company Affiliate's conduct did
not constitute actual fraud, gross negligence or willful or wanton misconduct.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere, or its equivalent,
shall not, in and of itself, create a presumption or otherwise constitute
evidence that the Company Affiliate acted in a manner contrary to that
specified in (i) or (ii) above.
(b) Expenses (including reasonable legal fees and expenses) incurred in
defending any proceeding subject to subsection (a) of this Section 8.2 shall
be paid by the Company in advance of the final disposition of such
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proceeding upon receipt of a written affirmation by the Company Affiliate of
his or its good faith belief that he or it has met the standard of conduct
necessary for indemnification under this Section 8.2 and a written undertaking
(which need not be secured) by or on behalf of the Company Affiliate to repay
such amount if it shall ultimately be determined, by a court of competent
jurisdiction or otherwise, that the Company Affiliate is not entitled to be
indemnified by the Company as authorized hereunder.
(c) The indemnification provided by this Section 8.2 shall be in
addition to any other rights to which each Company Affiliate may be entitled
under any agreement or vote of the Management Committee by the vote of
Managers that are disinterested and unaffiliated with such Company Affiliate,
as a matter of law or otherwise, both as to action in the Company Affiliate's
capacity as a Company Affiliate or as a Person serving at the request of the
Company and shall continue as to a Company Affiliate who has ceased to serve
in such capacity and shall inure to the benefit of the heirs, successors,
assigns, administrators and personal representatives of such Company
Affiliate.
(d) The Company may purchase and maintain directors and officers
insurance or, similar coverage, for its Managers and its officers in such
amounts and with such deductibles or self-insured retentions as are customary
for Persons engaged in businesses similar in size and type to those engaged in
by the Company.
(e) Except as provided in Section 3.4, any indemnification hereunder
shall be satisfied only out of the assets of the Company and the Members shall
not be subject to personal liability by reason of these indemnification
provisions. To the extent the Company does not have adequate cash available
to satisfy its obligations under this Article 8, the Company shall pay its
obligations under this Article 8 out of Net Cash Flow prior to making any
distributions (other than distributions under Section 4.1(a) hereof) to the
Members.
(f) A Company Affiliate shall not be denied indemnification in whole or
in part under this Section 8.2 because the Company Affiliate had an interest
in the transaction with respect to which the indemnification applies if the
transaction was otherwise permitted by the terms of this Agreement and all
material facts relating to such indemnitee's interest were adequately
disclosed to the
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Management Committee at the time the transaction was consummated.
(g) The provisions of this Section 8.2 are for the benefit of the
Company Affiliates and the heirs, successors, assigns, administrators and
personal representatives of the Company Affiliates and shall not be deemed to
create any rights for the benefit of any other Persons.
(h) Any repeal or amendment of any provisions of this Section 8.2 shall
be prospective only and shall not adversely affect any Company Affiliates's
right existing at the time of such repeal or amendment.
ARTICLE 9
TRANSFERS OF MEMBERSHIP INTERESTS
9.1 General Restrictions.
(a) No Member may Transfer all or any part of such Member's Membership
Interest, except as provided in this Agreement. Any purported Transfer or
purported purchase of a Membership Interest or a portion thereof in violation
of the terms of this Agreement shall be null and void and of no effect. A
permitted Transfer shall be effective as of the date specified in the
instruments relating thereto. Any transferee desiring to make a further
Transfer shall become subject to all the provisions of this Article 9 to the
same extent and in the same manner as any Member desiring to make any
Transfer. No Member shall have the right to withdraw as a Member of the
Company.
(b) In the event that the Membership Interests (or securities issued in
exchange for Membership Interests upon conversion of the Company into a
corporation) are registered under the Securities Act, the Transfer
restrictions set forth in this Article 9 shall terminate.
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9.2 Permitted Transferees.
(a) Notwithstanding the provisions of Section 9.8 and 9.9, each Member
that is a natural person shall have the right to Transfer (but not to
substitute the transferee as a substitute Member in such Member's place,
except in accordance with Section 9.3), by a written instrument, all or any
part of such Member's Membership Interest, to an Immediate Family Member; it
being understood that any such Permitted Transferee shall be deemed to be an
additional or substitute Member as of the date of such Transfer and each
Member agrees to take such action and execute such documents as such
transferee may deem reasonably necessary and appropriate for such transferee
to become a substitute or additional Member.
(b) Notwithstanding the provisions of Sections 9.8 and 9.9, each Member
that is not a natural Person (other than COI) shall have the right to Transfer
(but not to substitute the transferee as a substitute Member in such Member's
place, except in accordance with Section 9.3), by a written instrument, all or
any part of a Member's Membership Interest, to any of its Affiliates; it being
understood that any such Permitted Transferee shall be deemed to be an
additional or substitute Member as of the date of such Transfer and each
Member agrees to take such action and execute such documents as such
transferee may deem reasonably necessary and appropriate for such transferee
to become a substitute or additional Member.
(c) Notwithstanding the provisions of Sections 9.8 and 9.9, COI shall
have the right to Transfer (but not to substitute the transferee as a
substitute Member in COI's place, except in accordance with Section 9.3), by a
written instrument, all of its Membership Interest, to its members pro rata in
accordance with their percentages of membership interests set forth on
Schedule 2; it being understood that each such Permitted Transferee shall be
deemed an additional or substitute Member as of the date of such Transfer and
each Member agrees to take such action and execute such documents as such
transferee may deem reasonably necessary and appropriate for such transferee
to become a substitute or additional Member.
(d) Notwithstanding the provisions of Sections 9.8 and 9.9, a Member
shall have the right to pledge such Member's Membership Interest, in whole or
in part, to a financial institution as collateral security for a loan to such
Member by such financial institution so long as the Management
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Committee has given its prior written consent to said pledge, which consent
shall not be unreasonably withheld; provided, however, that no such pledge
shall be made for the purpose of effecting a disguised sale to the pledgee
and; provided further, that any such pledgee or a transferee of such pledgee,
as appropriate, shall agree in a writing delivered to the Company to be bound
by all of the terms and conditions of this Agreement.
(e) Unless and until admitted as a substitute Member pursuant to
Section 9.3, a transferee of a Member's Membership Interest in whole or in
part shall be an assignee with respect to such Transferred Membership Interest
and shall not be entitled to participate in the management of the business and
affairs of the Company or to become or to exercise the rights of a Member,
including the right to vote, the right to require any information or
accounting of the Company's business or the right to inspect the Company's
books and records. Such transferee shall only be entitled to receive, to the
extent of the Membership Interest transferred to such transferee, the share of
distributions and profits, including distributions representing the return of
Capital Contributions, to which the transferor would otherwise be entitled
with respect to the Transferred Interest. The transferror shall have the
right to vote such Transferred Interest until the transferee is admitted to
the Company as a substituted Member with respect to the Transferred Interest.
9.3 Substitute Members. No transferee of all or part of a Member's
Membership Interest shall become a substitute Member in place of the
transferor unless and until:
(a) the transferee has executed an instrument in form and substance
reasonably satisfactory to the Management Committee accepting and
adopting the terms and provisions of the Certificate and this Agreement;
and
(b) the transferee has caused to be paid all reasonable expenses of
the Company in connection with the admission of the transferee as a
substitute Member.
Upon satisfaction of all the foregoing conditions with respect to a
particular transferee, the President and Chief Executive Officer shall cause
the books and records of the Company to reflect the admission of the
transferee as a substitute Member to the extent of the Transferred Interest
held by the transferee.
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9.4 Effect of Admission as a Substitute Member. A transferee who has
become a substitute Member has, to the extent of the transferred Membership
Interest, all the rights, powers and benefits of, and is subject to the
restrictions and liabilities of a Member under the Certificate, this Agreement
and the Act. Upon admission of a transferee as a substitute Member, the
transferor of the Membership Interest so held by the substitute Member shall
cease to be a Member of the Company to the extent of such transferred
Membership Interest.
9.5 Consent. Each Member hereby agrees that upon satisfaction of the
terms and conditions of this Article 9 with respect to any proposed Transfer,
the Person proposed to be such transferee may be admitted as a Member.
9.6 No Dissolution. If a Member transfers all of its Membership
Interest pursuant to this Article 9 and the transferee of such Membership
Interest is admitted as a Member pursuant to Section 9.3, such Person shall be
admitted to the Company as a Member effective on the effective date of the
Transfer or such other date as may be specified when the Member is admitted.
In such event, the Company shall not dissolve if the business of the Company
is continued without dissolution in accordance with clause (c) of Section 10.1
hereof.
9.7 Additional Members; Certain Representations of Members. Subject to
Section 3.6, from and after the date hereof, any Person acceptable to the
Management Committee may become an additional Member of the Company for such
consideration as the Management Committee shall determine, provided that such
additional Member complies with all the requirements of a transferee under
Sections 9.3(a) and (b).
9.8 Right of First Offer.
(a) If at any time any Member (hereinafter for purposes of this Section
9.8, the "Section 9.8 Selling Members") proposes to Transfer to any Person
other than a Permitted Transferee (hereinafter for purposes of this Section
9.8, the "Section 9.8 Proposed Purchaser") its Membership Interest (or any
portion thereof), such Section 9.8 Selling Member shall provide Notice of the
proposed Transfer to the other Members (hereinafter for purposes of Section
9.8, the "Section 9.8 Offerees") setting forth the price, terms and conditions
of the proposed sale of the Membership Interest. Each of the Section 9.8
Offerees shall have the option to acquire such Member's pro rata portion
(which shall be in
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proportion to the Percentage Interests of all Section 9.8 Offerees) at the
time of such Notice on the terms and conditions set forth in such Notice. The
option of Section 9.8 Offerees to purchase their pro rata portions of the
Membership Interest shall be exercised by delivery of a Notice to the Section
9.8 Selling Member and the Company of exercise within twenty (20) days
following receipt of the Section 9.8 Selling Member's Notice of the price,
terms and conditions of the sale. A Section 9.8 Offeree may exercise such
Member's option to purchase such Membership Interest only as to the entire
portion thereof that such Member is entitled to purchase. If any Section 9.8
Offeree fails or declines to purchase such Member's pro rata portion of such
Membership Interest, then such Member's portion of such Membership Interest
shall be offered to the Section 9.8 Offerees who have exercised their options
to purchase their pro rata portions. This procedure shall continue until such
time as the entire Membership Interest offered hereby has been purchased by
such Section 9.8 Offerees or until no such Member desires to purchase any
additional Membership Interest hereunder. Each Section 9.8 Offeree shall have
the right to offer to acquire such Membership Interest by delivering to the
Section 9.8 Selling Member and the Company such Member's Notice of acceptance
within five (5) Business Days following receipt of the Company's Notice that
additional portions are available. If less than the entire Membership
Interest to be sold by the Section 9.8 Selling Member is to be purchased by
the Section 9.8 Offerees, the Section 9.8 Selling Member may sell the entire
Membership Interest to be sold within sixty (60) days from the Notice referred
in the preceding sentence, upon terms and conditions no less favorable to the
Section 9.8 Selling Member than were set forth in the initial Notice (it being
understood that such terms may include the receipt by the Selling Member of
consideration consisting of only cash and/or securities with a readily
ascertainable market value).
(b) The sale of any Membership Interest to Section 9.8 Offerees who
exercise their options to purchase any Membership Interest shall occur twenty-
one (21) days after the expiration of the last option to expire under Section
9.8(a) above. At the closing, each of the Section 9.8 Offerees shall deliver
a certified or bank cashier's check in, or wire transfer immediately available
funds in the appropriate amount to the Section 9.8 Selling Member against the
simultaneous delivery of an assignment in form and substance reasonably
satisfactory to each Section 9.8 Offeree of the Member Interest (or portion
thereof) being
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transferred to such Section 9.8 Offeree, such assignment shall be made free
and clear of all liens, claims and encumbrances, except as provided by this
Agreement or as otherwise agreed to by such Section 9.8 Offeree; provided,
however, that each such Section 9.8 Selling Member shall not be required to
make any other representations or warranties in connection with such sale
except that it has the authority to sell its Membership Interest, is the sole
owner of such Membership Interest and has good and valid title to such
Membership Interest and that the sale of its Membership Interest does not
violate any agreement to which it is a party or by which it is bound.
9.9 Tag-Along Rights. (a) In the event of any proposed Transfer in any
one transaction or in a series of related transactions by any Member or
Members (hereinafter for purposes of this Section 9.9, collectively, the
"Section 9.9 Selling Member") of its or their Membership Interests
constituting in the aggregate twenty percent (20%) or more of all the
Membership Interests to any Person (such Person being hereinafter referred to
as the "Section 9.9 Proposed Purchaser"), other than to a Permitted Transferee
or in a bona fide public distribution pursuant to an effective Registration
Statement under the Securities Act, each of the other Members (hereinafter for
purposes of this Section 9.9, the "Section 9.9 Tagged Members") shall have the
irrevocable and exclusive right, but not the obligation (the "Tag-Along
Right"), to require the Section 9.9 Proposed Purchaser to purchase from each
of them such Section 9.9 Tagged Member's pro rata portion (i.e., such Tagged
Member's Percentage Interest) of the Membership Interests proposed to be sold
by the Section 9.9 Selling Members to the Section 9.9 Proposed Purchaser
(collectively, the "Section 9.9 Tag-Along Membership Interest"). The Section
9.9 Selling Members shall give Notice (the "Initial Tag-Along Notice") to the
Section 9.9 Tagged Members at least thirty (30) days prior to the date of the
proposed Transfer and at least three (3) Business Days after the expiration of
the last option to expire under Section 9.8(a) above, stating:
(i) the name and address of the Section 9.9 Proposed Purchaser;
(ii) the proposed amount of consideration and terms and conditions
of payment offered by such Section 9.9 Proposed Purchaser (if the
proposed consideration is not cash, the Notice shall describe the terms
of the proposed consideration) and any other material terms and
conditions of the Section 9.9 Proposed Purchaser's offer;
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(iii) the Membership Interest proposed to be transferred; and
(iv) that the Section 9.9 Proposed Purchaser has been informed of
the Tag-Along Right and has agreed to purchase Membership Interests in
accordance with the terms hereof.
The Tag-Along Right shall be exercised by any or all of the Section 9.9
Tagged Members by giving Notice to the Company ("Tag-Along Notice") with a
copy to each Section 9.9 Selling Member, within five (5) days following
receipt of the Initial Tag-Along Notice, indicating its election to exercise
the Tag-Along Right (hereinafter referred to for purposes of this Section 9.9,
the "Section 9.9 Participating Tagged Members"). The Tag-Along Notice shall
state the amount of Membership Interests that such Section 9.9 Participating
Tagged Member proposes to include in such transfer to the Section 9.9 Proposed
Purchaser. Failure by any Section 9.9 Tagged Member to give such Tag-Along
Notice within such 5 day period shall be deemed an election by such Section
9.9 Tagged Member not to sell its Membership Interests pursuant to the Initial
Tag-Along Notice. The closing with respect to any sale to a Section 9.9
Proposed Purchaser pursuant to this Section shall be held at the time and
place specified in the Initial Tag-Along Notice but in any event within sixty
(60) days of the date the Initial Tag-Along Notice is given. Consummation of
the sale of Membership Interests by any Section 9.9 Selling Member to a
Section 9.9 Proposed Purchaser shall be conditioned upon consummation of the
sale by each Section 9.9 Participating Tagged Member to such Section 9.9
Proposed Purchaser of the Section 9.9 Tag-Along Membership Interest, if any.
(b) In the event that the Section 9.9 Proposed Purchaser does not
purchase the Section 9.9 Tag-Along Membership Interest from the Section 9.9
Participating Tagged Members on the same terms and conditions as purchased
from the Section 9.9 Selling Member, then the Section 9.9 Selling Member
making such Transfer shall purchase on such terms and conditions such Section
9.9 Tag-Along Membership Interest if the Transfer occurs.
(c) The Section 9.9 Selling Members who are parties to a sale to a
Section 9.9 Proposed Purchaser shall arrange for payment (by bank cashier's
check or certified check or by wire transfer of immediately available funds)
directly by the Section 9.9 Proposed Purchaser to each Section 9.9
Participating Tagged Member, upon delivery of an appropriate
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assignment in form and substance reasonably satisfactory to the Section 9.9
Proposed Purchaser, which assignment shall be made free and clear of all
liens, claims and encumbrances except as provided by this Agreement or as
otherwise agreed to by such Section 9.9 Proposed Purchaser; provided, however,
that each such Section 9.9 Participating Tagged Member shall not be required
to make any other representations or warranties in connection with such sale
except that it has the authority to sell its Membership Interest, is the sole
owner of such Membership Interest and has good and valid title to such
Membership Interest and that the sale of its Membership Interest does not
violate any agreement to which it is a party or by which it is bound.
(d) If at the end of 60 days following the date on which an Initial Tag-
Along Notice was given, the sale of Membership Interests by the Section 9.9
Selling Members and the sale of the Section 9.9 Tag-Along Membership Interests
have not been completed in accordance with the terms of the Section 9.9
Proposed Purchaser's offer, all the restrictions on sale, transfer or
assignment contained in this Agreement with respect to Membership Interests
owned by the Members shall again be in effect.
9.10 Drag-Along Rights.
(a) In the event of any proposed Transfer of Membership Interest
constituting a majority of all Membership Interests by any Member or Members
(hereinafter for purposes of this Section 9.10, collectively a "Section 9.10
Selling Members") of all of its or their Membership Interest to a Person (such
Person being hereinafter referred to as the "Section 9.10 Proposed
Purchaser"), other than a Permitted Transferee or in a bona fide public
distribution pursuant to an effective Registration Statement under the
Securities Act, such Section 9.10 Selling Members shall have the right (the
"Drag-Along Right"), to require each other Member (hereinafter for purposes of
this Section 9.10, the "Section 9.10 Dragged Members") to Transfer to the
Section 9.10 Proposed Purchaser each such Section 9.10 Dragged Member's entire
Membership Interest (such Membership Interests as may be required to be so
Transferred being hereinafter referred to as the "Section 9.10 Drag-Along
Membership Interests"). The Section 9.10 Selling Members shall exercise their
Drag-Along Right by giving Notice (the "Drag-Along Notice") to each Section
9.10 Dragged Member at least twenty (20) days prior to the date of the
proposed Transfer and at least
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three (3) Business Days after the expiration of the last option to expire
under Section 9.8(a) above, stating:
(i) the name and address of the Section 9.10 Proposed Purchaser;
(ii) the proposed amount of consideration and terms and conditions
of payment offered by such Section 9.10 Proposed Purchaser (if the
proposed consideration is not cash, the notice shall describe the terms
of the proposed consideration);
(iii) the Membership Interests proposed to be transferred; and
(iv) that the Section 9.10 Proposed Purchaser has been informed of
the Drag-Along Right and has agreed to purchase Membership Interests in
accordance with the terms hereof.
The closing with respect to any sale to a Section 9.10 Proposed Purchaser
pursuant to this Section shall be held at the time and place specified in the
Drag-Along Notice but in any event within sixty (60) days of the date the
Drag-Along Notice is given. Consummation of the sale of Membership Interests
by any Member to a Section 9.10 Proposed Purchaser shall be conditioned upon
consummation of the sale by each Section 9.10 Selling Member to such Section
9.10 Proposed Purchaser of the Membership Interests proposed to be sold by the
Section 9.10 Selling Members.
(b) In the event that the Section 9.10 Proposed Purchaser does not
purchase the Section 9.10 Drag-Along Membership Interests from the Section
9.10 Dragged Members on the same terms and conditions as purchased from the
Section 9.10 Selling Members, then such Section 9.10 Dragged Members shall
have the right to require the Company to cause the Section 9.10 Selling
Members making such Transfer to purchase on such terms and conditions such
Section 9.10 Drag-Along Membership Interests if the Transfer occurs.
(c) The Section 9.10 Selling Members who are parties to a sale to a
Section 9.10 Proposed Purchaser shall arrange for payment directly by the
Section 9.10 Proposed Purchaser to each Section 9.10 Dragged Member, upon
delivery of the an appropriate assignment in form and substance reasonably
satisfactory to the Section 9.10 Proposed Purchaser, which assignment shall be
made free and clear of all liens, claims and encumbrances, except as provided
by this Agreement or as
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otherwise agreed to by such Section 9.10 Proposed Purchaser; provided,
however, that each such Dragged Stockholder shall not be required to make any
other representations or warranties in connection with such sale except that
it has the authority to sell its Membership Interest, is the sole owner of
such Shares and has good and valid title to such Membership Interest, and that
the sale of such Membership Interest does not violate any agreement to which
it is a party or by which it is bound.
(d) If at the end of 60 days following the date on which a Drag-Along
Notice was given, the sale of Membership Interests by the Section 9.10 Selling
Members and the sale of the Section 9.10 Drag-Along Membership Interests have
not been completed in accordance with the terms of the Drag-Along Notice, all
the restrictions on sale, transfer or assignment contained in this Agreement
with respect to Membership Interests owned by the Section 9.10 Selling Members
shall again be in effect.
9.11 Piggyback Registration.
(a) For the purposes of this Section 9.11, the following capitalized
terms shall have the following meanings:
(i) "Common Stock" shall mean the common stock of the Company
issued upon conversion of the Company to a corporation;
(ii) "Other Shares" shall mean at any time those shares of Common
Stock or other securities of the Company which do not constitute Primary
Shares or Registrable Shares;
(iii) "Primary Shares" shall mean at any time authorized but
unissued shares of Common Stock or shares of Common Stock held by the
Company in its treasury;
(iv) "Registrable Shares" shall mean the shares of Common Stock held
by the Members in the Company which constitute Restricted Shares and
which are not then eligible for sale to the public pursuant to Rule 144
(other than Rule 144(k)) in a single transaction (and including
Membership Interests held by Members prior to the conversion of the
Company to a corporation).
(v) "Restricted Shares" shall mean any Membership Interests, shares
of Common Stock or other securities
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received in respect thereof held or which may be acquired from the
Company by the Members as of the applicable date, and which theretofore
have not been sold to the public pursuant to a registration statement
under the Securities Act or pursuant to Rule 144; and
(vi) "Rule 144" shall mean Rule 144 promulgated under the Securities
Act or any successor rule thereto or any complementary rule thereto (such
as Rule 144A).
(b) If the Company at any time proposes for any reason to register
Primary Shares or Other Shares under the Securities Act (other than on Form S-
4 or Form S-8 promulgated under the Securities Act or any successor forms
thereto), it shall promptly give Notice to the Members of its intention so to
register the Primary Shares or Other Shares and, upon the written request,
given within 30 days after delivery of any such Notice by the Company, of the
Members to include in such registration Registrable Shares (which request
shall specify the number of Registrable Shares proposed to be included in such
registration), the Company shall use its best efforts to cause all such
Registrable Shares to be included in such registration on the same terms and
conditions as the securities otherwise being sold in such registration;
provided, however, that if the managing underwriter advises the Company that
the inclusion of all Registrable Shares or Other Shares proposed to be
included in such registration would interfere with the successful marketing
(including pricing) of Primary Shares proposed to be registered by the
Company, then the number of Primary Shares, Registrable Shares and Other
Shares proposed to be included in such registration shall be included in the
following order:
(i) first, the Primary Shares; and
(ii) second, the Registrable Shares and Other Shares requested to be
included in such registration pro rata, based upon the respective numbers
of Restricted Shares owned at the time by each Member and the respective
numbers of Other Shares owned at the time by each holder of Other Shares.
(c) If at any time after giving Notice pursuant to this Section 9.11 of
its intention to register any securities and prior to the effective date of
the registration statement filed in connection with such registration, the
Company shall determine for any reason either not to register or to delay
registration of such
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securities, the Company may, at its election, give Notice of such
determination to the Members and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its obligation to register
any Registrable Securities in connection with such registration and (ii) in
the case of a determination to delay registering, shall be permitted to delay
registering any Registerable Securities, for the same period as the delay in
registering such other securities.
(d) If a registration under this Section 9.11 involves an underwritten
offering, the underwriter or underwriters and any additional investment
bankers and managers to be used in connection with such registration shall be
selected by the Company, and any Member desiring to have Registrable Shares
included in such registration, and any such Investor shall be required to sign
an underwriting agreement in customary form with such underwriter or
underwriters.
9.12 Additional Members; Certain Representations of Members.
(a) Subject to Section 3.6, any Person acceptable to the Management
Committee may become an additional Member of the Company for such
consideration as the Management Committee shall determine, provided that such
additional Member complies with all the requirements of a transferee under
Section 9.3.
(b) Each of COI and SEACOR hereby represents to the Company that, as of
the date hereof, its outstanding membership interests or issued and
outstanding shares of capital stock, as the case may be, are as set forth on
Schedule 2 and such membership interests or shares, as the case may be, are
owned beneficially and of record by the Persons identified on such Schedule.
(c) In order to prevent any direct transfer of interests in the Company,
each of COI and SEACOR acknowledge and confirms that each of its members or
stockholders, as the case may be, agreed to certain transfer restrictions with
respect to the transfer of such Person's membership interests or shares of COI
or SEACOR, as the case may be, by executing and delivering to the Company a
letter agreement dated August 5, 1997.
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ARTICLE 10
DISSOLUTION AND TERMINATION
10.1 Events Causing Dissolution. The Company shall be dissolved and its
affairs wound up upon the first to occur of the following events:
(a) The vote to dissolve Members holding not less than ninety
percent (90%) of the Membership Interests;
(b) The sale, Transfer or other disposition of substantially all of
the assets of the Company and the receipt and distribution of all the
proceeds therefrom;
(c) The death, retirement, resignation, insanity, expulsion,
bankruptcy or dissolution of a Member, or any other event which
terminates the continued membership of a Member in the Company, unless
there is at least one remaining Member;
(d) The entry of a decree of judicial dissolution pursuant to
Section 18-802 of the Act; or
(e) The expiration of the term of the Company as provided in Section
2.5.
10.2 Notices to Secretary of State. When all the remaining property and
assets of the Company have been distributed, the Certificate shall be
cancelled by filing a certificate of cancellation with the Secretary of State
of Delaware.
10.3 Cash Distributions Upon Dissolution. Upon the dissolution of the
Company as a result of the occurrence of any of the events set forth in
Section 10.1, the Management Committee shall proceed to wind up the affairs of
and liquidate the Company and any cash and proceeds therefrom shall be applied
and distributed in the following order of priority:
(a) First, to the payment (or the making of reasonable provision
for payment) of debts and liabilities of the Company in the order of
priority as provided by law (including any loans or advances that may
have been made by any of the Members to the Company) and the expenses of
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liquidation including the establishment of any Reserves which the
Management Committee may reasonably deem necessary for any contingent,
conditional or unasserted claims or obligations of the Company. Such
Reserves may be paid over by the Company to an escrow agent to be held
for disbursement in payment of any of the aforementioned liabilities and,
at the expiration of such period as shall be reasonably deemed advisable
by the Management Committee, for distribution of the balance in the
manner provided in this Article 10;
(b) Finally, the remaining balance, if any, to the Members in
proportion to their respective positive Capital Accounts, after giving
effect to all contributions, distributions and allocations for all
periods, in accordance with the requirements of Regulation Section
1.704-1(b)(2)(ii)(b)(2).
10.4 In-Kind. Notwithstanding the foregoing but subject to Section 18-
804(a)(1) of the Act, in the event the Management Committee shall determine
that an immediate sale of part of or all the Property would cause undue loss
to the Members, or the Management Committee determines that it would be in the
best interest of the Members to distribute the Property to the Members in-kind
(which distributions do not, as to the in-kind portions, have to be in the
same proportions as they would be if cash were distributed, but all such in-
kind distributions shall be equalized, to the extent necessary, with cash),
then the Management Committee may either defer liquidation of, and withhold
from distribution for a reasonable time, any of the Property except that
necessary to satisfy the Company's debts and obligations, or distribute the
Property to the Members in-kind.
10.5 No Action for Dissolution. The Members acknowledge that irreparable
damage would be done to the goodwill and reputation of the Company if any
Member should bring an action in court to dissolve the Company under
circumstances where dissolution is not required by Section 10.1. Accordingly,
except where the Managers have failed to liquidate the Company as required by
Section 10.1 and except as specifically provided in Section 18-802 and Section
18-803(a) of the Act, each Member hereby to the fullest extent permitted by
law waives and renounces his right to initiate legal action to seek
dissolution of the Company or
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to seek the appointment of a receiver or trustee to wind up the affairs of the
Company, except in the cases of fraud, violation of law, bad faith, gross
negligence, willful misconduct or willful violation of this Agreement.
ARTICLE 11
TAX MATTERS MEMBER
11.1 Tax Matters Member. SEACOR shall be the initial Tax Matters Member
of the Company as provided in the Regulations under Section 6231 of the Code
and analogous provisions of state law. The Management Committee shall have
the authority to remove or replace (following death or resignation) the Tax
Matters Member of the Company and designate its successor.
11.2 Certain Authorizations. The Tax Matters Member shall represent the
Company, at the Company's expense, in connection with all examinations of the
Company's affairs by tax authorities including any resulting administrative or
judicial proceedings. Without limiting the generality of the foregoing, and
subject to the restrictions set forth herein, the Tax Matters Member, but only
with the consent or approval or at the director of the Management Committee,
is hereby authorized:
(a) to enter into any settlement with the Secretary with respect to
any tax audit or judicial review, in which agreement the Tax Matters
Member may expressly state that such agreement shall bind the other
Members except that such settlement agreement shall not bind any Member
that has not approved such settlement agreement in writing;
(b) if a notice of a final administrative adjustment at the Company
level of any item required to be taken into account by a Member for tax
purposes is mailed to the Tax Matters Member, to seek judicial review of
such final adjustment, including the filing of a petition for
readjustment with the Tax Court, the District Court of the United States
for the district in which the Company's principal place of business is
located, or elsewhere as allowed by law, or the United States Claims
Court;
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(c) to intervene in any action brought by any other Member for
judicial review of a final adjustment;
(d) to file a request for an administrative adjustment with the
Secretary at any time and, if any part of such request is not allowed by
the Secretary, to file a petition for judicial review with respect to
such request;
(e) to enter into an agreement with the Internal Revenue Service to
extend the period for assessing any tax that is attributable to any item
required to be taken into account by a Member for tax purposes, or an
item affected by such item; and
(f) to take any other action on behalf of the Members (with respect
to the Company) or the Company in connection with any administrative or
judicial tax proceeding to the extent permitted by applicable law or the
Regulations.
Each Member shall have the right to participate in any such actions and
proceedings to the extent provided for under the Code and Regulations.
11.3 Indemnity of Tax Matters Member. To the maximum extent permitted by
applicable law and without limiting Article 8, the Company shall indemnify and
reimburse the Tax Matters Member for all expenses (including reasonable legal
and accounting fees) incurred as Tax Matters Member pursuant to this Article
11 in connection with any administrative or judicial proceeding with respect
to the tax liability of the Members as long as the Tax Matters Member has
determined in good faith that the Tax Matters Member's course of conduct was
in, or not opposed to, the best interest of the Company. The taking of any
action and the incurring of any expense by the Tax Matters Member in
connection with any such proceeding, except to the extent provided herein or
required by law, is a matter in the sole discretion of the Tax Matters Member.
11.4 Information Furnished. To the extent and in the manner provided by
applicable law and Regulations, the Tax Matters Member shall furnish the name,
address, profits and loss interest, and taxpayer identification number of each
Member to the Internal Revenue Service.
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11.5 Notice of Proceedings, etc. The Tax Matters Member shall use best
efforts to keep each Member informed of any administrative and judicial
proceedings for the adjustment at the Company level of any item required to be
taken into account by a Member for income tax purposes or any extension of the
period of limitations for making assessments of any tax against a Member with
respect to any Company item, or of any agreement with the Internal Revenue
Service that would result in any material change either in Income or Loss as
previously reported.
11.6 Notices to Tax Matters Member. Any Member that receives a notice of
an administrative proceeding under Section 6233 of the Code relating to the
Company shall promptly provide Notice to the Tax Matters Member of the
treatment of any Company item on such Member's Federal income tax return that
is or may be inconsistent with the treatment of that item on the Company's
return. Any Member that enters into a settlement agreement with the Internal
Revenue Service or any other government agency or official with respect to any
Company item shall provide Notice to the Tax Matters Member of such agreement
and its terms within sixty (60) days after its date.
11.7 Preparation of Tax Returns. The Tax Matters Member shall arrange
for the preparation and timely filing of all returns of Company income, gains,
deductions, losses and other items necessary for Federal, state and local
income tax purposes and shall use all reasonable efforts to furnish to the
Members within ninety (90) days of the close of the taxable year a Schedule K-
1 and such other tax information reasonably required for Federal, state and
local income tax reporting purposes. The classification, realization and
recognition of income, gain, losses and deductions and other items shall be on
the cash or accrual method of accounting for Federal income tax purposes, as
the Management Committee shall determine in its sole discretion in accordance
with applicable law.
11.8 Tax Elections. The Management Committee shall, in its sole
discretion, determine whether to make any available election.
11.9 Taxation as a Partnership. The Members hereby agree that the
Company shall be treated as a partnership for tax purposes under United States
federal, state and local income tax laws or other laws, and further agree not
to take any position or take any action inconsistent therewith, in a tax
return or otherwise. No
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election shall be made by the Company or any Member for the Company to be
excluded from the application of any of the provisions of Subchapter K,
Chapter I of Subtitle A of the Code or from any similar provisions of any
state tax laws or to be treated as a corporation for federal tax purposes.
ARTICLE 12
ACCOUNTING AND BANK ACCOUNTS
12.1 Fiscal Year and Accounting Method. The fiscal year and taxable year
of the Company shall be as designated by the Management Committee in
accordance with the Code. The Company shall use an accrual method of
accounting.
12.2 Books and Records. The Company shall maintain at its principal
office, or such other office as may be determined by the Management Committee,
all the following:
(a) A current list of the full name and last known business or
residence address of each Member together with information regarding the
amount of cash and a description and statement of the agreed value of any
other property or services contributed by each Member and which each
Member has agreed to contribute in the future, and the date on which each
Member became a Member of the Company;
(b) A copy of the Certificate and this Agreement, including any and
all amendments to either thereof, together with executed copies of any
powers of attorney pursuant to which the Certificate, this Agreement, or
any amendments have been executed;
(c) Copies of the Company's Federal, state, and local income tax or
information returns and reports, if any, which shall be retained for at
least six fiscal years;
(d) The financial statements of the Company, which shall be
retained for at least six fiscal years; and
(e) The Company's books and records, which shall be retained for at
least six fiscal years.
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12.3 Delivery to Members; Inspection. Upon the request of any Member,
for any purpose reasonably related to such Member's interest as a member of
the Company, the Management Committee shall cause to be made available to the
requesting Member the information required to be maintained by clauses (a)
through (d) of Section 12.2 and such other information regarding the business
and affairs of the Company as any Member may reasonably request. Upon the
giving of ten (10) days' prior Notice to the Company, any Member or its
authorized representatives and advisors shall have the right to inspect the
books and records of the Company at the offices of the Company during normal
business hours.
12.4 Financial Statements. The Management Committee shall cause to be
prepared for the Members at least annually, at the Company's expense,
financial statements of the Company, and its subsidiaries, prepared in
accordance with generally accepted accounting principles and audited by Arthur
Andersen & Co., LLP, or another nationally recognized accounting firm. The
financial statements so furnished shall include a balance sheet, statement of
income or loss, statement of cash flows, and statement of Members' equity. In
addition, the Management Committee shall provide on a timely basis to the
Members quarterly financials, statements of cash flow, any available internal
budgets or forecast or other available financial reports, as well as any
reports or notices as are provided by the Company, or any of its subsidiaries
to any financial institution.
12.5 Filings. At the Company's expense, the Management Committee shall
cause the income tax returns for the Company to be prepared and timely filed
with the appropriate authorities and to have prepared and to furnish to each
Member such information with respect to the Company as is necessary (or as may
be reasonably requested by a Member) to enable the Members to prepare their
Federal, state and local income tax returns. The Management Committee, at the
Company's expense, shall also cause to be prepared and timely filed, with
appropriate Federal, state and local regulatory and administrative bodies, all
reports required to be filed by the Company with those entities under then
current applicable laws, rules, and regulations. The reports shall be
prepared on the accounting or reporting basis required by the regulatory
bodies.
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12.6 Non-Disclosure. Each Member agrees that, except as otherwise
consented to by the Management Committee in writing, all non-public and
confidential information furnished to it pursuant to this Agreement will be
kept confidential and will not be disclosed by such Member, or by any of its
agents, representatives, or employees, in any manner whatsoever, in whole or
in part, except that (a) each Member shall be permitted to disclose such
information to those of its agents, representatives, and employees who need to
be familiar with such information in connection with such Member's investment
in the Company, so long as such agents, representatives and employees agree to
keep such information confidential on the terms set forth herein, (b) each
Member shall be permitted to disclose such information to its partners,
stockholders and affiliates so long as they agree to keep such information
confidential on the terms set forth herein, (c) each Member shall be permitted
to disclose information to the extent required by law, legal process or
regulatory requirements, so long as such Member shall have used its reasonable
efforts to first afford the Company with a reasonable opportunity to contest
the necessity of disclosing such information, (d) each Member shall be
permitted to disclose such information to possible purchasers of all or a
portion of the Member's Interest, provided that such prospective purchaser
shall execute a suitable confidentiality agreement containing terms not less
restrictive than the terms set forth herein, and (e) each Member shall be
permitted to disclose information to the extent necessary for the enforcement
of any right of such Member arising under this Agreement.
12.7 Bank Accounts. All funds of the Company shall be deposited in a
separate bank, money market or similar account(s) approved by the Management
Committee and in the Company's name. Withdrawals therefrom shall be made only
by Persons authorized to do so by the Management Committee.
ARTICLE 13
MISCELLANEOUS
13.1 Title to Property. Title to the Property shall be held in the name
of the Company. No Member shall individually have any ownership interest or
rights in the Property except indirectly by virtue of such Member's ownership
of a Membership Interest.
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13.2 Waiver of Default. No consent or waiver, express or implied, by the
Company or a Member with respect to any breach or default by the Company or a
Member hereunder shall be deemed or construed to be a consent or waiver with
respect to any other breach or default by any party of the same provision or
any other provision of this Agreement. Failure on the part of the Company or
a Member to complain of any act or failure to act of the Company or a Member
or to declare such party in default shall not be deemed or constitute a waiver
by the Company or the Member of any rights hereunder.
13.3 Amendment.
(a) Except as otherwise expressly provided elsewhere in this Agreement,
this Agreement shall not be altered, modified or changed except by an
amendment approved by Members holding not less than ninety percent (90%) of
the Membership Interests.
(b) In addition to any amendments otherwise authorized herein, the
Manager or Management Committee may make any amendments to any of the
Schedules to this Agreement from time to time to reflect transfers of
Membership Interests and issuances of additional Membership Interests. Copies
of such amendments shall be delivered to the Members upon execution thereof.
(c) The Managers shall cause to be prepared and filed any amendment to
the Certificate that may be required to be filed under the Act as a
consequence of any amendment to this Agreement.
(d) Any modification or amendment to this Agreement or the Certificate
made in accordance with this Section 13.3 shall be binding on all Members and
the Managers.
13.4 No Third Party Rights. Except as provided in Article 8, none of the
provisions contained in this Agreement shall be for the benefit of or
enforceable by any third parties, including creditors of the Company. Subject
to Article 8, the parties to this Agreement expressly retain any and all
rights to amend this Agreement as herein provided, notwithstanding any
interest in this Agreement or in any party to this Agreement held by any other
Person.
13.5 Severability. In the event any provision of this Agreement is held
to be illegal, invalid or unenforceable to any extent, the legality, validity
and
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enforceability of the remainder of this Agreement shall not be affected
thereby and shall remain in full force and effect and shall be enforced to the
greatest extent permitted by law.
13.6 Nature of Interest in the Company. A Member's Membership Interest
shall be personal property for all purposes.
13.7 Binding Agreement. Subject to the restrictions on the disposition
of Membership Interests herein contained, the provisions of this Agreement
shall be binding upon, and inure to the benefit of, the parties hereto and
their respective heirs, personal representatives, successors and permitted
assigns.
13.8 Headings. The headings of the Certificate and sections of this
Agreement are for convenience only and shall not be considered in construing
or interpreting any of the terms or provisions hereof.
13.9 Word Meanings. The words such as "herein", "hereinafter", "hereof",
and "hereunder" refer to this Agreement as a whole and not merely to a
subdivision in which such words appear unless the context otherwise requires.
The singular shall include the plural, and vice versa, unless the context
otherwise requires.
13.10 Counterparts. This Agreement may be executed in several
counterparts, all of which together shall constitute one agreement binding on
all parties hereto, notwithstanding that all the parties have not signed the
same counterpart.
13.11 Entire Agreement. This Agreement contains the entire agreement
between the parties hereto and thereto and supersedes all prior writings or
agreements with respect to the subject matter hereof.
13.12 Partition. The Members agree that the Property is not and will
not be suitable for partition. Accordingly, each of the Members hereby
irrevocably waives any and all right such Member may have to maintain any
action for partition of any of the Property. No Member shall have any right
to any specific assets of the Company upon the liquidation of, or any
distribution from, the Company.
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13.13 Governing Law; Consent to Jurisdiction and Venue. This
Agreement shall be construed according to and governed by the laws of the
State of Delaware without regard to principles of conflict of laws. The
parties hereby submit to the exclusive jurisdiction and venue of the state
courts of New York County, New York or to the Court of Chancery of the State
of Delaware and the United States District Court for the Southern District of
New York and of the United States District Court for the District of Delaware,
as the case may be, and agree that the Company or Members may, at their
option, enforce their rights hereunder in such courts.
13.14 Discretion. Whenever a Manager shall have discretion to act
hereunder, such Person agrees to act in a reasonable manner on behalf of the
Company and its Affiliates."
[INTENTIONALLY LEFT BLANK]
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[Signature page to Operating Agreement of
Chiles Offshore LLC]
GROUP A MEMBERS
SEACOR OFFSHORE RIGS INC.
By:/s/RANDALL BLANK
-----------------------------------
Name: Randall Blank
Title: Vice-President
GROUP B MEMBERS
COI, LLC
By:/s/WILLIAM E. CHILES
-----------------------------------
Name: William E. Chiles
Title: President
54
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
GROUP C MEMBERS
/s/IRA ALPERT
----------------------------------
Name: Ira Alpert
ASHTON GROUP INC.
By:/s/GEORGE ASCH
-------------------------------
Name: George Asch
Title: President
/s/ALLEN J. BECKER
----------------------------------
Name: Allen J. Becker
/s/JACK BENJAMIN/EMILY S. BENJAMIN
----------------------------------
Name: Jack and Emily S. Benjamin,
as tenants in common
/s/JOHN U. BEUSCH
----------------------------------
Name: John U. Beusch
/s/GAY BLOCK
----------------------------------
Name: Gay Block
55
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
/s/ALLEN H. BRILL
----------------------------------
Name: Allen H. Brill
/s/JESSE BRILL/LAREN BRILL
----------------------------------
Name: Jesse and Laren Brill, as
tenants in common
/s/JOHN L. COLTON
----------------------------------
Name: John L. Colton
/s/ROBERT E. ETTLE/MARY VANDERGRIFT ETTLE
-----------------------------------------
Name: Robert E. and Mary Vandergrift Ettle,
as joint tenants with rights of
survivorship
/s/CHARLES FABRIKANT
----------------------------------
Name: Charles Fabrikant
/s/MARY FACCIO
----------------------------------
Name: Mary Faccio
/s/MARTHA M. FARKOUH
----------------------------------
Name: Martha M. Farkouh
56
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
/s/BROOKE FINGERHUT
----------------------------------
Name: Brooke Fingerhut
/s/ANDREW FINGERHUT
----------------------------------
Name: Andrew Fingerhut
/s/KAREN FLEISS
----------------------------------
Name: Karen Fleiss
/s/CHARLENE FURMAN
----------------------------------
Name: Charlene Furman
/s/GORDON T. HALL
----------------------------------
Name: Gordon T. Hall
/s/JOHN M. HENNESSEY
----------------------------------
Name: John M. Hennessey
/s/BARRY LEWIS
----------------------------------
Name: Barry Lewis
/s/SETH A. LIEBER
----------------------------------
Name: Seth A. Lieber
57
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
/s/IRWIN LIEBER
----------------------------------
Name: Irwin Lieber
/s/JONATHAN C. LIEBER
----------------------------------
Name: Jonathan C. Lieber
/s/JAN LOEB
----------------------------------
Name: Jan Loeb
/s/NORMAN McCALL
----------------------------------
Name: Norman McCall
/s/ITZHAK PERLMAN
----------------------------------
Name: Itzhak Perlman
/s/TOBY PERLMAN
----------------------------------
Name: Toby Perlman
/s/ALBERT SIBONY/JENNIFER SIBONY
----------------------------------
Name: Albert and Jennifer Sibony,
as joint tenants with rights
of survivorship
58
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
/s/JOSEPH STEIN, JR.
----------------------------------
Name: Joseph Stein, Jr.
/s/JAY STEIN
----------------------------------
Name: Jay Stein
/s/WALTER WEADOCK
----------------------------------
Name: Walter Weadock
A.R.E. INVESTMENT PARTNERSHIP
By:/s/LARRY ROCHLIN
----------------------------------
Name: Larry Rochlin
Title: Partner
ABRAHAM ROCHLIN ENTERPRISES
By:/s/LARRY ROCHLIN
----------------------------------
Name: Larry Rochlin
Title: President
/s/BARRY K. FINGERHUT
----------------------------------
Name: Barry K. Fingerhut
59
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
BARRY K. FINGERHUT FOR JOINT
ACCOUNT OF BARRY K. FINGERHUT/
MIKE MAROCCO AND ANDREW SENCHAK
By:/s/BARRY K. FINGERHUT
----------------------------------
Name: Barry K. Fingerhut
Title: Authorized Signatory
BASSOE RIG PARTNERS, LTD.
By:/s/JONATHAN B. FAIRBANKS
----------------------------------
Name: Jonathan B. Fairbanks
Title: Vice President
/s/RICHARD FAIRBANKS III/SHANNON FAIRBANKS
-------------------------------------------
Name: Richard and Shannon Fairbanks III,
as joint tenants with rights of
survivorship
/s/ALAN N. LOCKER
----------------------------------
Name: Alan N. Locker
BOSCHWITZ FAMILTY TRUST
By:/s/FRANZ L. BOSCHWITZ
----------------------------------
Name: Franz L. Boschwitz
Title: Trustee
60
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
/s/ROME ARNOLD
----------------------------------
Name: Rome Arnold
BOVA TRADING, INC.
By:/s/CHARLES H. BAUDOIN
----------------------------------
Name: Charles H. Baudoin
Title: President
/s/NORMAN BENZAQUEN
----------------------------------
Name: Norman Benzaquen
/s/MARTIN R. GOLD
----------------------------------
Name: Martin R. Gold
/s/SUSAN W. COHEN
----------------------------------
Name: Susan W. Cohen
LARRY ROCHLIN REVOCABLE TRUST,
DATED 11/3/89
By:/s/LARRY ROCHLIN
----------------------------------
Name: Larry Rochlin
Title: Trustee
61
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
OPPENHEIMER-CLOSE INVESTMENT
PARTNERSHIP, LP
By:/s/PHILIP V. OPPENHEIMER
----------------------------------
Name: Philip V. Oppenheimer
Title: Managing Member
P. OPPENHEIMER INVESTMENT
PARTNERSHIP, L.P.
By:/s/PHILIP V. OPPENHEIMER
----------------------------------
Name: Philip V. Oppenheimer
Title: Managing Member
PIEROT ENTERPRISES, INC.
By:/s/ROBERT J. PIEROT, JR.
----------------------------------
Name: Robert J. Pierot, Jr.
Title: President
RUBENSTEIN FAMILY LTD. PARTNERSHIP
By:/s/BARRY RUBENSTEIN
----------------------------------
Name: Barry Rubenstein
Title: General Partner
62
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
/s/ANTHONY R. JONES/SUSAN F. JONES
-----------------------------------
Name: Anthony R and Susan F. Jones,
as joint tenants with rights
of survivorship
/s/TIMOTHY J. McKEAND/FREDA B. McKEAND
----------------------------------------
Name: Timothy J. and Freda B. McKeand,
as tenants in common
/s/ANDREW H. RICHARDS
----------------------------------
Name: Andrew H. Richards
/s/MILTON R. ROSE/JILL O. ROSE
----------------------------------
Name: Milton R. and Jill O. Rose,
as tenants in common
/s/ANDREW STRACHAN
----------------------------------
Name: Andrew Strachan
/s/RANDALL BLANK
----------------------------------
Name: Randall Blank
/s/CHRISTINE BLANK
----------------------------------
Name: Christine Blank
63
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
SOUTH STREET CAPITAL, L.P.
By SOUTH STREET INVESTMENTS, INC.,
as General Partner
By:/s/CHRISTINE W. JENKINS
----------------------------------
Name: Christine W. Jenkins
Title: Secretary
/s/MATTHEW WEBER
----------------------------------
Name: Matthew Weber
WHEATLEY FOREIGN PARTNERS L.P.
By WHEATLEY PARTNERS, LLC, as
General Partner
By:/s/BARRY K. FINGERHUT
----------------------------------
Name: Barry K. Fingerhut
Title: Executive Vice President
WHEATLEY PARTNERS L.P.
By WHEATLEY PARTNERS, LLC, as
General Partner
By:/s/BARRY K. FINGERHUT
----------------------------------
Name: Barry K. Fingerhut
Title: Executive Vice President
64
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
WINDCREST PARTNERS
By:/s/ROBERT J. GELLERT
----------------------------------
Name: Robert J. Gellert
Title: General Partner
WOODLAND PARTNERS
By:/s/BARRY RUBENSTEIN
----------------------------------
Name: Barry Rubenstein
Title: General Partner
/s/LEO ARNABOLDI JR.
----------------------------------
Name: Leo Arnaboldi, by Leo
Arnaboldi Jr. as Attorney-
in-fact
65
<PAGE>
SCHEDULE 1
A. Group A Members
<TABLE>
<CAPTION>
Value of Capital
Total Account for Purposes Percentage
Capital of Determining Interest of
Name and Address Cash Contributed Contribution Percentage Interest Company
- ---------------- ---------------- ------------ --------------------- -----------
<S> <C> <C> <C> <C>
SEACOR Offshore Rigs Inc. $35,000,000 consisting of (i) $35,000,000 $36,000,000 55.38%
1370 Avenue of the Americas $8,850,000 in cash contributed on
25th Floor August 5, 1997, (ii) $13,991,716.41 in
New York, N.Y. 10019-4602 the aggregate consisting of various
bridge loans to the Company contributed
Attn: Randall Blank to the Company as of December 16, 1997,
and (iii) $12,158,283.86 in cash
contributed on December 16, 1997.
</TABLE>
66
<PAGE>
SCHEDULE 1 (cont'd)
B. Group B Members
<TABLE>
<CAPTION>
Value of Capital
Cash and/or Total Account for Purposes Percentage
Property Gross Asset Capital of Determining Interest of
Name and Address Contributed Value Contribution Percentage Interest Company
- ---------------- ----------- ----------- ------------ ------------------- -----------
<S> <C> <C> <C> <C> <C>
COI, LLC The properties, assets and $8,486,000 $8,850,000 $9,000,000 13.85%
11200 Westheimer rights assigned by COI to
Suite 410 the Company pursuant to the
Houston, TX 77042-3227 Assignment and Assumption
Agreement dated August 5,
1997 between COI and the
Company
$364,000 in cash
contributed on August 5, 1997 N/A
</TABLE>
67
<PAGE>
SCHEDULE 1 (cont'd)
C. Group C Members
<TABLE>
<CAPTION>
Percentage
Interest of
Names and Addresses Cash Capital Contribution Company
- ------------------- ------------------------- -----------
<S> <C> <C>
Ira Alpert $250,000 0.3846%
630 Birdsall Dr.
Yorktown, NY 10598
Ashton Group Inc. $100,000 0.1539%
380 Madison Avenue
New York, NY 10017
Attn.: George Asch
Allen J. Becker $100,000 0.1539%
515 Post Oak Blvd. #900
Houston, TX 77027
Jack and Emily S. Benjamin $100,000 0.1539%
7900 Nelson Street
New Orleans, LA 70125
John U. Beusch $ 25,000 0.0385%
416 Taylor Road
Stow, MA 01775
Gay Block $100,000 0.1539%
203 West 86th Street, Apt. 808
New York, NY 10024
Allen H. Brill $275,000 0.4231%
c/o Brill & Meisel
488 Madison Avenue
New York, New York 10022
Jesse and Laren Brill $275,000 0.4231%
c/o Allen H. Brill
Brill & Meisel
488 Madison Avenue
New York, New York 10022
</TABLE>
68
<PAGE>
SCHEDULE 1 (cont'd)
<TABLE>
<CAPTION>
Percentage
Interest of
Names and Addresses Cash Capital Contribution Company
- ------------------- ------------------------- -----------
<S> <C> <C>
John L. Colton $250,000 0.3846%
c/o Gilder, Gagnon, Howe and Co.
1775 Broadway
New York, NY 10019
Robert E. and Mary Vandergrift Ettle $ 50,000 0.0769%
14459 Still Meadow Dr.
Houston, TX 77079
Charles Fabrikant $500,000 0.7693%
c/o SEACOR SMIT Inc.
1370 Avenue of the Americas
25th Floor
New York, NY 10019
Mary Faccio $ 50,000 0.0769%
c/o Farkouh, Furman & Faccio
1370 Avenue of the Americas
25th Floor
New York, NY 10019
Martha M. Farkouh $150,000 0.2308%
481 Contant Ave.
Haworth, NJ 07641
Brooke Fingerhut $100,000 0.1539%
c/o GeoCapital Corporation
767 Fifth Avenue, 45th Floor
New York, NY 10153
Attn.: Mr. Barry Fingerhut
Andrew Fingerhut $100,000 0.1539%
c/o GeoCapital Corporation
767 Fifth Avenue, 45th Floor
New York, NY 10153
Attn.: Mr. Barry Fingerhut
Karen Fleiss $100,000 0.1539%
1030 Fifth Avenue
New York, NY 10020-0136
</TABLE>
69
<PAGE>
SCHEDULE 1 (cont'd)
<TABLE>
<CAPTION>
Percentage
Interest of
Names and Addresses Cash Capital Contribution Company
- ------------------- ------------------------- ----------
<S> <C> <C>
Charlene Furman $ 50,000 0.0769%
c/o Farkouh, Furman & Faccio
1370 Avenue of the Americas
25th Floor
New York, NY 10019
Gordon T. Hall $ 50,000 0.0769%
c/o Credit Suisse First Boston
Corporation
11 Madison Avenue
New York, NY 10010
Attn: Mr. Rome Arnold
John M. Hennessey $100,000 0.1539%
435 E. 52nd Street
11 Madison Avenue
New York, NY 10022
Barry Lewis $100,000 0.1539%
515 Post Oak Blvd., Suite 310
Houston, TX 77027
Seth A. Lieber $ 50,000 0.0769%
c/o GeoCapital Corporation
767 Fifth Avenue, 45th Floor
New York, NY 10153
Attn.: Mr. Barry Fingerhut
Irwin Lieber $300,000 0.4616%
c/o GeoCapital Corporation
767 Fifth Avenue, 45th Floor
New York, NY 10153
Attn.: Mr. Barry Fingerhut
Jonathan C. Lieber $ 50,000 0.0769%
c/o GeoCapital Corporation
767 Fifth Avenue, 45th Floor
New York, NY 10153
Attn.: Mr. Barry Fingerhut
Jan Loeb $150,000 0.2308%
6610 Cross Country Blvd.
Baltimore, MD 21215
</TABLE>
70
<PAGE>
SCHEDULE 1 (cont'd)
<TABLE>
<CAPTION>
Percentage
Interest of
Names and Addresses Cash Capital Contribution Company
- ------------------- ------------------------- -----------
<S> <C> <C>
Norman McCall $ 50,000 0.0769%
432 Marshall Street
P.O. Box 102
Cameron, LA 70631
Itzhak Perlman $ 50,000 0.0769%
21 West 70th Street
New York, NY 10023
Toby Perlman $ 50,000 0.0769%
21 West 70th Street
New York, NY 10023
Albert and Jennifer Sibony $150,000 0.2308%
48 East 82nd Street, Apt. #3
New York, NY 10028
Joseph Stein, Jr. $200,000 0.3077%
960 Park Avenue
New York, NY 10028
Jay Stein $100,000 0.1539%
c/o Stein Mart, Inc.
120 Riverplace Boulevard
Jacksonville, FL 32207
Walter Weadock $250,000 0.3846%
c/o Gilder, Gagnon, Howe and Co.
1775 Broadway
New York, NY 10019
A.R.E. Investment Partnership $100,000 0.1539%
c/o Navicom
275 Hill Street, Suite 250
Reno, NV 89501
Attn.: Larry Rochlin
Abraham Rochlin Enterprises $100,000 0.1539%
c/o Navicom
275 Hill Street, Suite 250
Reno, NV 89501
Attn.: Larry Rochlin
</TABLE>
71
<PAGE>
SCHEDULE 1 (cont'd)
<TABLE>
<CAPTION>
Percentage
Interest of
Names and Addresses Cash Capital Contribution Company
- ------------------- ------------------------- -----------
<S> <C> <C>
Barry K. Fingerhut $300,000 0.4616%
c/o GeoCapital Corporation
767 Fifth Avenue, 45th Floor
New York, NY 10153
Barry K. Fingerhut for joint account of
Barry K. Fingerhut/Mike Marocco and
Andrew Senchak $ 50,000 0.0769%
c/o GeoCapital Corporation
767 Fifth Avenue, 45th Floor
New York, NY 10153
Bassoe Rig Partners Ltd. $1,000,000 1.5385%
c/o AS&K Services Ltd.,
Cedar House
41 Cedar Avenue
Hamilton HM 12
Bermuda
Richard and Shannon Fairbanks III $1,000,000 1.5385%
c/o Center for Strategic & International
Studies
1800 K. Street, N.W.
Suite 400
Washington, D.C. 20006
Alan N. Locker $500,000 0.7693%
c/o Bonafide Estates Inc.
630 Fifth Avenue, #3165
New York, NY 10111
Boschwitz Family Trust $100,000 0.1539%
c/o Navicom
275 Hill Street, Suite 250
Reno, NV 89501
Attn.: Larry Rochlin
Rome Arnold $100,000 0.1539%
115 E. 9th Street
New York, NY 10003
Bova Trading, Inc. $ 50,000 0.0769%
805 Third Avenue
New York, NY 10022
Attn.: Charles Baudoin
</TABLE>
72
<PAGE>
SCHEDULE 1 (cont'd)
<TABLE>
<CAPTION>
Percentage
Interest of
Names and Addresses Cash Capital Contribution Company
- ------------------- ------------------------- -----------
<S> <C> <C>
Norman Benzaquen $250,000 0.3846%
c/o Gilder, Gagnon, Howe and Co.
1775 Broadway
New York, NY 10019
Martin R. Gold $500,000 0.7693%
c/o Gold, Farrell & Marks
Forty-One Madison Ave., 33rd Floor
New York, NY 10010
Susan W. Cohen $100,000 0.1539%
186 Kemah Rd.
Ridgewood, NJ 07450
Larry Rochlin Revocable Trust, $100,000 0.1539%
Dated 11/3/89
c/o Navicom
275 Hill Street, Suite 250
Reno, NV 89501
Attn.: Larry Rochlin
Oppenheimer-Close Investment Partnership, LP $200,000 0.3077%
119 West 57th Street, Room 1515
New York, NY 10019
Attn.: Philip V. Oppenheimer
P. Oppenheimer Investment Partnership, LP $800,000 1.2308%
119 West 57th Street, Room 1515
New York, NY 10019
Attn.: Philip V. Oppenheimer
Pierot Enterprises, Inc. $3,000,000 4.6155%
29 Broadway, Room 1825
New York, NY 10006
Attn.: Robert Pierot, Jr.
Rubenstein Family Ltd. Partnership $100,000 0.1539%
c/o GeoCapital Corporation
767 Fifth Avenue, 45th Floor
New York, NY 10153
Attn.: Mr. Barry Fingerhut
Anthony R. and Susan F. Jones $ 30,000 0.0462%
11191 Westheimer, # 369
Houston, TX 77042
</TABLE>
73
<PAGE>
SCHEDULE 1 (cont'd)
<TABLE>
<CAPTION>
Percentage
Interest of
Names and Addresses Cash Capital Contribution Company
- ------------------- ------------------------- -----------
<S> <C> <C>
Timothy J. and Freda B. McKeand $ 20,000 0.0308%
22319 Morning Lake Drive
Katy, TX 77450
Andrew H. Richards $ 50,000 0.0769%
c/o Swander Pace Capital
345 California Street
Suite 2500
San Francisco, CA 94104
Milton R. and Jill O. Rose $ 50,000 0.0769%
12722 Pebblebrook
Houston, TX 77024
Andrew Strachan $ 50,000 0.0769%
c/o SEACOR Marine (Europe) B.V.
Zalmstraat 2
Rotterdam
Netherlands 3016DS
Randall Blank $ 37,500 0.05769%
400 Pelham Manor Rd.
Pelham Manor, NY 10803
Christine Blank $ 37,500 0.05769%
400 Pelham Manor Rd.
Pelham Manor, NY 10803
South Street Capital, L.P. $3,000,000 4.6155%
c/o William E. Simon & Sons, Inc.
310 South Street
Morristown, NJ 07962
Attn.: Christine Jenkins
Matthew Weber $100,000 0.1539%
c/o The Gorton Group
88 Rogers Street
Gloucester, MA 01931-0433
</TABLE>
74
<PAGE>
SCHEDULE 1 (cont'd)
<TABLE>
<CAPTION>
Percentage
Interest of
Names and Addresses Cash Capital Contribution Company
- ------------------- ------------------------- -----------
<S> <C> <C>
Wheatley Foreign Partners L.P. $300,000 0.4616%
c/o GeoCapital Corporation
767 Fifth Avenue, 45th Floor
New York, NY 10153
Attn.: Barry Fingerhut
Wheatley Partners L.P. $2,850,000 4.3847%
c/o GeoCapital Corporation
767 Fifth Avenue, 45th Floor
New York, NY 10153
Attn.: Barry Fingerhut
Windcrest Partners $500,000 0.7693%
122 East 42nd Street, 34th Floor
New York, NY 10168-0127
Attn.: Robert J. Gellert
Woodland Partners
c/o GeoCapital Corporation $300,000 0.4616%
767 Fifth Avenue, 45th Floor
New York, NY 10153
Attn.: Barry Fingerhut
Leo Arnaboldi $100,000 0.1539%
11104 Turtle Beach Road
N. Palm Beach, FL 33408
</TABLE>
75
<PAGE>
SCHEDULE 1 (cont'd)
SCHEDULE 2
<TABLE>
<CAPTION>
Total
Authorized Number Percentage of
Shares of of Shares Outstanding
Capital Name of Held by Stock Held by
Stock Shareholder Stockholder Stockholder
---------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
A. SEACOR Offshore
Rigs Inc. 1,000 SEACOR SMIT Inc. 100 100%
</TABLE>
<TABLE>
<CAPTION>
Percentage of
Outstanding
Membership
Interests Held
Names of Members by Member
---------------- --------------
<S> <C> <C>
B. COI, LLC Bassoe Rig 37.5%
Partners Ltd.
William E. Chiles 30.0%
Richard M. 25.0%
Fairbanks III and
Shannon Fairbanks,
jointly
Donald B. Gregg 7.5%
</TABLE>
76
<PAGE>
SCHEDULE 7.4
Slate of Officers
William E. Chiles, President and Chief Executive Officer
Dick H. Fagerstal, Senior Vice President and Chief Financial Officer
Donald B. Gregg, Senior Vice President of Engineering and Operations
George Bruce Brumley, Vice President of Operations
William Hopkins, Vice President of Human Resources
William A. Thorogood, Vice President and Controller
Randall Blank, Vice President
Jonathan B. Fairbanks, Secretary
Edward Washecka, Assistant Secretary
77
<PAGE>
Exhibit 3.3
AMENDMENT NO. 1
TO
AMENDED AND RESTATED OPERATING AGREEMENT
OF
CHILES OFFSHORE LLC
This Amendment No. 1 ("this Amendment") to the Amended and Restated
Operating Agreement dated as of December 16, 1997 (the "Operating Agreement") of
Chiles Offshore LLC, a Delaware limited liability company (the "Company") is
adopted by the Members signatory hereto, which in the aggregate hold not less
than 90% of the Membership Interests.
WHEREAS, the Managers have unanimously proposed and recommended to the
Members that the Operating Agreement be amended as set forth in this Amendment;
NOW THEREFORE, the Members signatory hereto, which in the aggregate
hold not less than 90% of the Membership Interests, agree as follows:
1. Capitalized Terms. All capitalized terms used and not otherwise
defined herein are used with the meanings ascribed thereto in the Operating
Agreement.
2. Amendment. The Operating Agreement is hereby amended by deleting
therefrom in its entirety the definition of "Tax Distribution" and replacing the
following therefor:
"Tax Distribution" means an amount equal to (i) the product of (x)
the taxable income of the Company and (y) the highest effective marginal
combined rate of Federal, state and city income tax, imposed on an
individual taxpayer (taking into account for purposes of determining the
rate of "state and city income tax" the highest combined New York State and
New York City income tax rate imposed upon individuals) reduced by (ii) to
the extent not previously taken into account, any income tax benefit
attributable to the Company which could be realized (without regard to the
actual realization) by its Members in the current or any prior Taxable Year
or a portion thereof, commencing on or after April 28, 1998 (including any
tax losses or tax credits) computed at the applicable percentage calculated
pursuant to
<PAGE>
subclause (y) of clause (i) above for the Taxable Year that such benefit is
taken into account for purposes of this computation. Cash Distributions in
respect of the Tax Distribution shall be made quarterly as provided in
Section 4.1 hereof, based on a reasonable estimate of the amount of Tax
Distribution for such Taxable Year. The amount of Tax Distribution shall
be computed by the accountants that regularly prepare the Company's tax
returns and related information.
3. Miscellaneous. From and after the Effective Date (as defined
below), all references in the Operating Agreement to "this Agreement" shall be
deemed references to the Amended and Restated Operating Agreement of Chiles
Offshore LLC, as amended by this Amendment No. 1. Except as specifically
amended by this Amendment, the Operating Agreement remains in full force and
effect. The section and other headings contained in this Amendment are for
reference purposes only and shall not affect the meaning or interpretation of
this Amendment. This Amendment may be executed in several counterparts, all of
which together shall constitute one instrument binding on all Members,
notwithstanding that all the Members have not signed the same counterpart, or
any counterpart hereof; provided, however, this Amendment shall not become
effective unless and until Members that in the aggregate hold not less than 90%
of the Membership Interests shall have executed a counterpart hereof. This
Amendment shall be construed according to and governed by the laws of the State
of Delaware without regard to principles and conflict of laws.
IN WITNESS WHEREOF, this Amendment is executed by the Members
signatory hereto, which in the aggregate hold not less than 90% of the
Membership Interests, to be effective April 28, 1998 (the "Effective Date").
2
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
of
GROUP A MEMBERS
SEACOR OFFSHORE RIGS INC.
By: /s/ RANDALL BLANK
---------------------------------
Name: Randall Blank
Title: Vice-President
GROUP B MEMBERS
COI, LLC
By: /s/ WILLIAM E. CHILES
---------------------------------
Name: William E. Chiles
Title: President
3
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
GROUP C MEMBERS
/s/ IRA ALPERT
---------------------------------
Name: Ira Alpert
ASHTON GROUP INC.
By: /s/ GEORGE ASCH
---------------------------------
Name: George Asch
Title: President
/s/ ALLEN J. BECKER
---------------------------------
Name: Allen J. Becker
/s/ JACK BENJAMIN/EMILY S. BENJAMIN
---------------------------------
Name: Jack and Emily S. Benjamin,
as tenants in common
/s/ JOHN U. BEUSCH
---------------------------------
Name: John U. Beusch
4
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
/s/ GAY BLOCK
---------------------------------
Name: Gay Block
/s/ ALLEN H. BRILL
---------------------------------
Name: Allen H. Brill
/s/ JESSE BRILL/LAREN BRILL
---------------------------------
Name: Jesse and Laren Brill, as
tenants in common
/s/ JOHN L. COLTON
---------------------------------
Name: John L. Colton
/s/ ROBERT E. ETTLE/MARY VANDERGRIFT ETTLE
----------------------------------------
Name: Robert E. and Mary Vandergrift Ettle,
as joint tenants with rights of
survivorship
/s/ CHARLES FABRIKANT
---------------------------------
Name: Charles Fabrikant
/s/ MARY FACCIO
---------------------------------
Name: Mary Faccio
5
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
/s/MARTHA M. FARKOUH
---------------------------------
Name: Martha M. Farkouh
/s/BROOKE FINGERHUT
---------------------------------
Name: Brooke Fingerhut
/s/ANDREW FINGERHUT
---------------------------------
Name: Andrew Fingerhut
/s/KAREN FLEISS
---------------------------------
Name: Karen Fleiss
/s/CHARLENE FURMAN
---------------------------------
Name: Charlene Furman
/s/GORDON T. HALL
---------------------------------
Name: Gordon T. Hall
/s/JOHN M. HENNESSEY
---------------------------------
Name: John M. Hennessey
6
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
/s/BARRY LEWIS
---------------------------------
Name: Barry Lewis
/s/SETH A. LIEBER
---------------------------------
Name: Seth A. Lieber
/s/IRWIN LIEBER
---------------------------------
Name: Irwin Lieber
/s/JONATHAN C. LIEBER
---------------------------------
Name: Jonathan C. Lieber
/s/JAN LOEB
---------------------------------
Name: Jan Loeb
/s/NORMAN McCALL
---------------------------------
Name: Norman McCall
/s/ITZHAK PERLMAN
---------------------------------
Name: Itzhak Perlman
7
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
/s/TOBY PERLMAN
---------------------------------
Name: Toby Perlman
/s/ALBERT SIBONY/JENNIFER SIBONY
---------------------------------
Name: Albert and Jennifer Sibony,
as joint tenants with rights
of survivorship
/s/JOSEPH STEIN, JR.
---------------------------------
Name: Joseph Stein, Jr.
/s/JAY STEIN
---------------------------------
Name: Jay Stein
/s/WALTER WEADOCK
---------------------------------
Name: Walter Weadock
A.R.E. INVESTMENT PARTNERSHIP
By:/s/LARRY ROCHLIN
---------------------------------
Name: Larry Rochlin
Title: Partner
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
ABRAHAM ROCHLIN ENTERPRISES
By:/s/LARRY ROCHLIN
---------------------------------
Name: Larry Rochlin
Title: President
/s/BARRY K. FINGERHUT
---------------------------------
Name: Barry K. Fingerhut
BARRY K. FINGERHUT FOR JOINT
ACCOUNT OF BARRY K. FINGERHUT/
MIKE MAROCCO AND ANDREW SENCHAK
By:/s/BARRY K. FINGERHUT
---------------------------------
Name: Barry K. Fingerhut
Title: Authorized Signatory
BASSOE RIG PARTNERS, LTD.
By:/s/JONATHAN B. FAIRBANKS
---------------------------------
Name: Jonathan B. Fairbanks
Title: Vice President
9
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
/s/RICHARD FAIRBANKS III/SHANNON FAIRBANKS
---------------------------------
Name: Richard and Shannon Fairbanks III,
as joint tenants with rights of
survivorship
/s/ALAN N. LOCKER
---------------------------------
Name: Alan N. Locker
BOSCHWITZ FAMILTY TRUST
By:/s/FRANZ L. BOSCHWITZ
---------------------------------
Name: Franz L. Boschwitz
Title: Trustee
/s/ROME ARNOLD
---------------------------------
Name: Rome Arnold
BOVA TRADING, INC.
By:/s/CHARLES H. BAUDOIN
---------------------------------
Name: Charles H. Baudoin
Title: President
/s/NORMAN BENZAQUEN
---------------------------------
Name: Norman Benzaquen
10
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
/s/MARTIN R. GOLD
---------------------------------
Name: Martin R. Gold
/s/SUSAN W. COHEN
---------------------------------
Name: Susan W. Cohen
LARRY ROCHLIN REVOCABLE TRUST,
DATED 11/3/89
By:/s/LARRY ROCHLIN
---------------------------------
Name: Larry Rochlin
Title: Trustee
OPPENHEIMER-CLOSE INVESTMENT
PARTNERSHIP, LP
By:/s/PHILIP V. OPPENHEIMER
---------------------------------
Name: Philip V. Oppenheimer
Title: Managing Member
11
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
P. OPPENHEIMER INVESTMENT
PARTNERSHIP, L.P.
By:/s/PHILIP V. OPPENHEIMER
---------------------------------
Name: Philip V. Oppenheimer
Title: Managing Member
PIEROT ENTERPRISES, INC.
By:/s/ROBERT J. PIEROT, JR.
---------------------------------
Name: Robert J. Pierot, Jr.
Title: President
RUBENSTEIN FAMILY LTD. PARTNERSHIP
By:/s/BARRY RUBENSTEIN
---------------------------------
Name: Barry Rubenstein
Title: General Partner
/s/ANTHONY R. JONES/SUSAN F. JONES
---------------------------------
Name: Anthony R and Susan F. Jones,
as joint tenants with rights
of survivorship
/s/TIMOTHY J. McKEAND/FREDA B. McKEAND
---------------------------------
Name: Timothy J. and Freda B. McKeand,
as tenants in common
12
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
/s/ANDREW H. RICHARDS
---------------------------------
Name: Andrew H. Richards
/s/MILTON R. ROSE/JILL O. ROSE
---------------------------------
Name: Milton R. and Jill O. Rose,
as tenants in common
/s/ANDREW STRACHAN
---------------------------------
Name: Andrew Strachan
/s/RANDALL BLANK
---------------------------------
Name: Randall Blank
/s/CHRISTINE BLANK
---------------------------------
Name: Christine Blank
SOUTH STREET CAPITAL, L.P.
13
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
By SOUTH STREET INVESTMENTS, INC.,
as General Partner
By:/s/CHRISTINE W. JENKINS
---------------------------------
Name: Christine W. Jenkins
Title: Secretary
/s/MATTHEW WEBER
---------------------------------
Name: Matthew Weber
WHEATLEY FOREIGN PARTNERS L.P.
By WHEATLEY PARTNERS, LLC, as
General Partner
By:/s/BARRY K. FINGERHUT
---------------------------------
Name: Barry K. Fingerhut
Title: Executive Vice President
WHEATLEY PARTNERS L.P.
By WHEATLEY PARTNERS, LLC, as
General Partner
By:/s/BARRY K. FINGERHUT
---------------------------------
Name: Barry K. Fingerhut
Title: Executive Vice President
14
<PAGE>
[Signature page to Operating Agreement of
Chiles Offshore LLC]
WINDCREST PARTNERS
By:/s/ROBERT J. GELLERT
---------------------------------
Name: Robert J. Gellert
Title: General Partner
WOODLAND PARTNERS
By:/s/BARRY RUBENSTEIN
---------------------------------
Name: Barry Rubenstein
Title: General Partner
/s/LEO ARNABOLDI JR.
---------------------------------
Name: Leo Arnaboldi, by Leo
Arnaboldi Jr. as Attorney-
in-fact
15
<PAGE>
Exhibit 3.4
CERTIFICATE OF INCORPORATION
OF
CHILES OFFSHORE FINANCE CORP.
THE UNDERSIGNED, being a natural person for the purpose of organizing a
corporation under the General Corporation Law of the State of Delaware, hereby
certifies that:
FIRST: The name of the Corporation is Chiles Offshore Finance Corp. (the
"Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, City of
Wilmington, County of New Castle, State of Delaware 19801. The name of the
registered agent of the Corporation in the State of Delaware at such address is
The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware, as from time to time amended.
FOURTH: The total number of shares of capital stock which the Corporation
shall have authority to issue is 3,000, all of which shares shall be Common
Stock having a par value of $0.01 per share.
FIFTH: The name and mailing address of the incorporator are Shelton M.
Vaughan, Weil, Gotshal & Manges LLP, 700 Louisiana, Suite 1600, Houston, Texas
77002.
SIXTH: Upon filing this Certificate of Incorporation, the names and
mailing addresses of the persons who are to serve as the directors of the
Corporation until the first annual meeting of stockholders or until their
respective successors are elected and qualify are as follows:
NAME MAILING ADDRESS
---- ---------------
Charles Fabrikant 1370 Avenue of the Americas
25th Floor
New York, New York 10019
Randall Blank 1370 Avenue of the Americas
25th Floor
New York, New York 10019
<PAGE>
Timothy J. McKeand 11200 Westheimer, Suite 850
Houston, Texas 77042
Dick H. Fagerstal 1370 Avenue of the Americas
25th Floor
New York, New York 10019
William E. Chiles 11200 Westheimer, Suite 410
Houston, Texas 77042
Robert Pierot, Jr. 29 Broadway, Suite 1825
New York, New York 10006
Jonathan B. Fairbanks 2000 West Loop South, Suite 2110
Houston, Texas 77027
SEVENTH: In furtherance and not in limitation of the powers conferred by
law, subject to any limitations contained elsewhere in this Certificate of
Incorporation, by-laws of the Corporation may be adopted, amended or repealed by
a majority of the board of directors of the Corporation, but any by-laws adopted
by the board of directors may be amended or repealed by the stockholders
entitled to vote thereon. Election of directors need not be by written ballot.
EIGHTH: (a) A director of the Corporation shall not be personally
liable either to the Corporation or to any stockholder for monetary damages
for breach of fiduciary duty as a director, except (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, or (ii)
for acts or omissions which are not in good faith or which involve
intentional misconduct or knowing violation of the law, or (iii) for any
matter in respect of which such director shall be liable under Section 174 of
Title 8 of the General Corporation Law of the State of Delaware or any
amendment thereto or successor provision thereto, or (iv) for any transaction
from which the director shall have derived an improper personal benefit.
Neither amendment nor repeal of this paragraph (a) nor the adoption of any
provision of the Certificate of Incorporation inconsistent with this
paragraph (a) shall eliminate or reduce the effect of this paragraph (a) in
respect of any matter occurring, or any cause of action, suit or claim that,
but for this paragraph (a) of this Article EIGHTH, would accrue or arise,
prior to such amendment, repeal or adoption of an inconsistent provision.
(b) The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to, or testifies in, any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative in nature, by reason of the fact that such
person
2
<PAGE>
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, employee benefit
plan, trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding to the full
extent permitted by law, and the Corporation may adopt by-laws or enter into
agreements with any such person for the purpose of providing for such
indemnification.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate of
Incorporation on this 17th day of April, 1998.
/s/ Shelton M. Vaughan
----------------------
Shelton M. Vaughan
Sole Incorporator
3
<PAGE>
Exhibit 3.5
BY-LAWS
OF
CHILES OFFSHORE FINANCE CORP.
(a Delaware corporation)
ARTICLE I
Stockholders
SECTION 1. Annual Meetings. The annual meeting of stockholders
for the election of directors and for the transaction of such other business
as may properly come before the meeting shall be held each year at such date
and time, within or without the State of Delaware, as the Board of Directors
shall determine.
SECTION 2. Special Meetings. Special meetings of stockholders for
the transaction of such business as may properly come before the meeting may
be called by order of the Board of Directors or by stockholders holding
together at least a majority of all the shares of the Corporation entitled to
vote at the meeting, and shall be held at such date and time, within or
without the State of Delaware, as may be specified by such order. Whenever
the directors shall fail to fix such place, the meeting shall be held at the
principal executive office of the Corporation.
SECTION 3. Notice of Meetings. Written notice of all meetings of
the stockholders, stating the place, date and hour of the meeting and the
place within the city or other municipality or community at which the list of
stockholders may be examined, shall be mailed or delivered to each
stockholder not less than 10 nor more than 60 days prior to the meeting.
Notice of any special meeting shall state in general terms the purpose or
purposes for which the meeting is to be held.
SECTION 4. Stockholder Lists. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least 10 days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the
name of each stockholder. Such
<PAGE>
list shall be open to the examination of any stockholder, for any purpose
germane 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
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.
The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the Corporation, or to vote in person or by proxy at
any meeting of stockholders.
SECTION 5. Quorum. Except as otherwise provided by law or the
Corporation's Certificate of Incorporation, a quorum for the transaction of
business at any meeting of stockholders shall consist of the holders of
record of a majority of the issued and outstanding shares of the capital
stock of the Corporation entitled to vote at the meeting, present in person
or by proxy. At all meetings of the stockholders at which a quorum is
present, all matters, except as otherwise provided by law or the Certificate
of Incorporation, shall be decided by the vote of the holders of a majority
of the shares entitled to vote thereat present in person or by proxy. If
there be no such quorum, the holders of a majority of such shares so present
or represented may adjourn the meeting from time to time, without further
notice, until a quorum shall have been obtained. When a quorum is once
present it is not broken by the subsequent withdrawal of any stockholder.
SECTION 6. Organization. Meetings of stockholders shall be
presided over by the Chairman, if any, or if none or in the Chairman's
absence the Vice-Chairman, if any, or if none or in the Vice-Chairman's
absence the President, if any, or if none or in the President's absence a
Vice-President, or, if none of the foregoing is present, by a chairman to be
chosen by the stockholders entitled to vote who are present in person or by
proxy at the meeting. The Secretary of the Corporation, or in the
Secretary's absence an Assistant Secretary, shall act as secretary of every
meeting, but if neither the Secretary nor an Assistant Secretary is present,
the presiding officer of the meeting shall appoint any person present to act
as secretary of the meeting.
2
<PAGE>
SECTION 7. Voting; Proxies; Required Vote. (a) At each meeting of
stockholders, every stockholder shall be entitled to vote in person or by
proxy appointed by instrument in writing, subscribed by such stockholder or
by such stockholder's duly authorized attorney-in-fact (but no such proxy
shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period), and, unless the Certificate of
Incorporation provides otherwise, shall have one vote for each share of stock
entitled to vote registered in the name of such stockholder on the books of
the Corporation on the applicable record date fixed pursuant to these
By-laws. At all elections of directors the voting may but need not be by
ballot and a plurality of the votes cast there shall elect. Except as
otherwise required by law or the Certificate of Incorporation, any other
action shall be authorized by a majority of the votes cast.
(b) Any action required or permitted to be taken at any meeting of
stockholders may, except as otherwise required by law or the Certificate of
Incorporation, 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 record of the issued and outstanding capital stock
of the Corporation having a majority 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, and the writing or writings are filed
with the permanent records of the Corporation. Prompt notice of the taking
of corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
SECTION 8. Inspectors. The Board of Directors, in advance of any
meeting, may, but need not, appoint one or more inspectors of election to act
at the meeting or any adjournment thereof. If an inspector or inspectors are
not so appointed, the person presiding at the meeting may, but need not,
appoint one or more inspectors. In case any person who may be appointed as
an inspector fails to appear or act, the vacancy may be filled by appointment
made by the directors in advance of the meeting or at the meeting by the
person presiding thereat. Each inspector, if any, before entering upon the
discharge of his or her duties, shall take and sign an oath faithfully to
execute the duties of inspector at such meeting with strict impartiality and
according to the best of his ability. The inspectors, if
3
<PAGE>
any, shall determine the number of shares of stock outstanding and the voting
power of each, the shares of stock represented at the meeting, the existence
of a quorum, and the validity and effect of proxies, and shall receive votes,
ballots or consents, hear and determine all challenges and questions arising
in connection with the right to vote, count and tabulate all votes, ballots
or consents, determine the result, and do such acts as are proper to conduct
the election or vote with fairness to all stockholders. On request of the
person presiding at the meeting, the inspector or inspectors, if any, shall
make a report in writing of any challenge, question or matter determined by
such inspector or inspectors and execute a certificate of any fact found by
such inspector or inspectors.
ARTICLE II
Board of Directors
SECTION 1. General Powers. The business, property and affairs of
the Corporation shall be managed by, or under the direction of, the Board of
Directors.
SECTION 2. Qualification; Number; Term; Remuneration. (a) Each
director shall be at least 18 years of age. A director need not be a
stockholder, a citizen of the United States, or a resident of the State of
Delaware. The number of directors constituting the entire Board shall
initially be seven (7) and at any time thereafter shall be no fewer than one
(1) and no more than twelve (12), or such other number as may be fixed from
time to time by action of the stockholders or Board of Directors, one of whom
may be selected by the Board of Directors to be its Chairman. The use of the
phrase "entire Board" herein refers to the total number of directors which
the Corporation would have if there were no vacancies.
(b) Directors who are elected at an annual meeting of
stockholders, and directors who are elected in the interim to fill vacancies
and newly created directorships, shall hold office until the next annual
meeting of stockholders and until their successors are elected and qualified
or until their earlier resignation or removal.
(c) Directors may be paid their expenses, if any, of attendance at
each meeting of the Board of Directors and
4
<PAGE>
may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be
allowed like compensation for attending committee meetings.
SECTION 3. Quorum and Manner of Voting. Except as otherwise
provided by law, a majority of the entire Board shall constitute a quorum. A
majority of the directors present, whether or not a quorum is present, may
adjourn a meeting from time to time to another time and place without notice.
The vote of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
SECTION 4. Places of Meetings. Meetings of the Board of Directors
may be held at any place within or without the State of Delaware, as may from
time to time be fixed by resolution of the Board of Directors, or as may be
specified in the notice of meeting.
SECTION 5. Annual Meeting. Following the annual meeting of
stockholders, the newly elected Board of Directors shall meet for the purpose
of the election of officers and the transaction of such other business as may
properly come before the meeting. Such meeting may be held without notice
immediately after the annual meeting of stockholders at the same place at
which such stockholders' meeting is held.
SECTION 6. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as the Board of Directors
shall from time to time by resolution determine. Notice need not be given of
regular meetings of the Board of Directors held at times and places fixed by
resolution of the Board of Directors.
SECTION 7. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board,
President or by a majority of the directors then in office.
SECTION 8. Notice of Meetings. A notice of the place, date and
time and the purpose or purposes of each meeting of the Board of Directors
shall be given to each director by mailing the same at least two days before
the special meeting, or by telegraphing or telephoning the same
5
<PAGE>
or by delivering the same personally not later than the day before the day of
the meeting.
SECTION 9. Organization. At all meetings of the Board of
Directors, the Chairman, if any, or if none or in the Chairman's absence or
inability to act the President, or in the President's absence or inability to
act any Vice-President who is a member of the Board of Directors, or in such
Vice-President's absence or inability to act a chairman chosen by the
directors, shall preside. The Secretary of the Corporation shall act as
secretary at all meetings of the Board of Directors when present, and, in the
Secretary's absence, the presiding officer may appoint any person to act as
secretary.
SECTION 10. Resignation. Any director may resign at any time upon
written notice to the Corporation and such resignation shall take effect upon
receipt thereof by the President or Secretary, unless otherwise specified in
the resignation. Any or all of the directors may be removed, with or without
cause, by the holders of a majority of the shares of stock outstanding and
entitled to vote for the election of directors.
SECTION 11. Vacancies. Unless otherwise provided in these
By-laws, vacancies on the Board of Directors, whether caused by resignation,
death, disqualification, removal, an increase in the authorized number of
directors or otherwise, may be filled by the affirmative vote of a majority
of the remaining directors, although less than a quorum, or by a sole
remaining director, or at a special meeting of the stockholders, by the
holders of shares entitled to vote for the election of directors.
SECTION 12. Action by Written Consent. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all the directors consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors.
ARTICLE III
Committees
SECTION 1. Appointment. From time to time the Board of Directors
by a resolution adopted by a majority of
6
<PAGE>
the entire Board may appoint any committee or committees for any purpose or
purposes, to the extent lawful, which shall have powers as shall be
determined and specified by the Board of Directors in the resolution of
appointment.
SECTION 2. Procedures, Quorum and Manner of Acting. Each
committee shall fix its own rules of procedure, and shall meet where and as
provided by such rules or by resolution of the Board of Directors. Except as
otherwise provided by law, the presence of a majority of the then appointed
members of a committee shall constitute a quorum for the transaction of
business by that committee, and in every case where a quorum is present the
affirmative vote of a majority of the members of the committee present shall
be the act of the committee. Each committee shall keep minutes of its
proceedings, and actions taken by a committee shall be reported to the Board
of Directors.
SECTION 3. Action by Written Consent. Any action required or
permitted to be taken at any meeting of any committee of the Board of
Directors may be taken without a meeting if all the members of the committee
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the committee.
SECTION 4. Term; Termination. In the event any person shall cease
to be a director of the Corporation, such person shall simultaneously
therewith cease to be a member of any committee appointed by the Board of
Directors.
ARTICLE IV
Officers
SECTION 1. Election and Qualifications. The Board of Directors
shall elect the officers of the Corporation, which shall include a President,
a Chief Executive Officer (which may be the President) and a Secretary, and
may include, by election or appointment, one or more Vice-Presidents (any one
or more of whom may be given an additional designation of rank or function),
a Chief Financial Officer, a Controller and such assistant secretaries, a
Treasurer and such Assistant Treasurers and such other officers as the Board
may from time to time deem proper. Each officer shall have such powers and
duties as may be prescribed by these By-laws and as may be assigned by the
Board of Directors or the President.
7
<PAGE>
SECTION 2. Term of Office and Remuneration. The term of office of
all officers shall be one year and until their respective successors have
been elected and qualified, but any officer may be removed from office,
either with or without cause, at any time by the Board of Directors. Any
vacancy in any office arising from any cause may be filled for the unexpired
portion of the term by the Board of Directors. The remuneration of all
officers of the Corporation may be fixed by the Board of Directors or in such
manner as the Board of Directors shall provide.
SECTION 3. Resignation; Removal. Any officer may resign at any
time upon written notice to the Corporation and such resignation shall take
effect upon receipt thereof by the President or Secretary, unless otherwise
specified in the resignation. Any officer shall be subject to removal, with
or without cause, at any time by vote of a majority of the entire Board.
SECTION 4. Chairman of the Board. The Chairman of the Board of
Directors, if there be one, shall preside at all meetings of the Board of
Directors and shall have such other powers and duties as may from time to
time be assigned by the Board of Directors.
SECTION 5. President and Chief Executive Officer. The President
shall be the chief executive officer of the Corporation, and shall have such
duties as customarily pertain to that office. The President shall have
general management and supervision of the property, business and affairs of
the Corporation and over its other officers; may appoint and remove assistant
officers and other agents and employees, other than officers referred to in
Section 1 of this Article IV; and may execute and deliver in the name of the
Corporation powers of attorney, contracts, bonds and other obligations and
instruments.
SECTION 6. Vice-President. A Vice-President may execute and
deliver in the name of the Corporation contracts and other obligations and
instruments pertaining to the regular course of the duties of said office,
and shall have such other authority as from time to time may be assigned by
the Board of Directors or the President.
SECTION 7. Chief Financial Officer. The Chief Financial Officer,
if any, shall be the primary financial officer and in general have all duties
incident to such position, including, without limitation, the organization
8
<PAGE>
and review of all accounting, tax and related financial matters involving the
Corporation, the implementation of appropriate Corporation financial controls
and procedures, and the supervision and assignment of the duties of all other
financial officers and personnel employed by the Corporation, and shall have
such other duties as from time to time may be assigned by the Board of
Directors or the President.
SECTION 8. Controller. The Controller, if any, shall in general
have all the duties incident to the office of Controller and such other
duties as from time to time may be assigned by the Board of Directors or the
Chief Financial Officer.
SECTION 9. Treasurer. The Treasurer, if any, shall in general
have all duties incident to the position of Treasurer and such other duties
as may be assigned by the Board of Directors or the President.
SECTION 10. Secretary. The Secretary shall in general have all
the duties incident to the office of Secretary and such other duties as may
be assigned by the Board of Directors or the President.
SECTION 11. Assistant Officers. Any assistant officer shall have
such powers and duties of the officer such assistant officer assists as such
officer or the Board of Directors shall from time to time prescribe.
ARTICLE V
Books and Records
SECTION 1. Location. The books and records of the Corporation may
be kept at such place or places within or outside the State of Delaware as
the Board of Directors or the respective officers in charge thereof may from
time to time determine. The record books containing the names and addresses
of all stockholders, the number and class of shares of stock held by each and
the dates when they respectively became the owners of record thereof shall be
kept by the Secretary as prescribed in the By-laws and by such officer or
agent as shall be designated by the Board of Directors.
9
<PAGE>
SECTION 2. Addresses of Stockholders. Notices of meetings and all
other corporate notices may be delivered personally or mailed to each
stockholder at the stockholder's address as it appears on the records of the
Corporation.
SECTION 3. Fixing Date for Determination of Stockholders of
Record. (a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix a record date, which
record date shall not be more than 60 nor less than 10 days before the date
of such meeting. If no record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at
a meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. 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.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the
Board of Directors may fix a record date, which date shall not be more than
10 days after the date upon which the resolution fixing the record date is
adopted by the Board of Directors. If no record date has been fixed by the
Board of Directors, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is required, shall be the first date on
which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the Corporation by delivery to its registered office
in this State, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the Board of Directors and
prior action by the Board of Directors is required by this chapter, the
record date for determining stockholders entitled to consent to corporate
action in writing without a meeting shall be at the close of
10
<PAGE>
business on the day on which the Board of Directors adopts the resolution
taking such prior action.
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or
allotment of any rights or the stockholders 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 may fix a record date,
which record date shall be not more than 60 days prior to such action. If no
record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board
of Directors adopts the resolution relating thereto.
ARTICLE VI
Certificates Representing Stock
SECTION 1. Certificates; Signatures. The shares of the
Corporation shall be represented by certificates, provided that the Board of
Directors of the Corporation may provide by resolution or resolutions that
some or all of any or all classes or series of its stock shall be
uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the Board
of Directors, every holder of stock represented by certificates and upon
request every holder of uncertificated shares shall be entitled to have a
certificate, signed by or in the name of the Corporation by the Chairman or
Vice-Chairman of the Board of Directors, or the President or Vice-President,
and by the Treasurer, if any, or an Assistant Treasurer, or the Secretary or
an Assistant Secretary of the Corporation, representing the number of shares
registered in certificate form. Any and all signatures on any such
certificate may be facsimiles. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with
the same effect as if he were such officer, transfer agent or registrar at
the date of issue. The name of the holder of record of the shares represented
thereby, with the number of such shares and the
11
<PAGE>
date of issue, shall be entered on the books of the Corporation.
SECTION 2. Transfers of Stock. Upon compliance with provisions
restricting the transfer or registration of transfer of shares of stock, if
any, shares of capital stock shall be transferable on the books of the
Corporation only by the holder of record thereof in person, or by duly
authorized attorney, upon surrender and cancellation of certificates for a
like number of shares, properly endorsed, and the payment of all taxes due
thereon.
SECTION 3. Fractional Shares. The Corporation may, but shall not
be required to, issue certificates for fractions of a share where necessary
to effect authorized transactions, or the Corporation may pay in cash the
fair value of fractions of a share as of the time when those entitled to
receive such fractions are determined, or it may issue scrip in registered or
bearer form over the manual or facsimile signature of an officer of the
Corporation or of its agent, exchangeable as therein provided for full
shares, but such scrip shall not entitle the holder to any rights of a
stockholder except as therein provided.
The Board of Directors shall have power and authority to make all
such rules and regulations as it may deem expedient concerning the issue,
transfer and registration of certificates representing shares of the
Corporation.
SECTION 4. Lost, Stolen or Destroyed Certificates. The
Corporation may issue a new certificate of stock in place of any certificate,
theretofore issued by it, alleged to have been lost, stolen or destroyed, and
the Board of Directors may require the owner of any lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond
sufficient to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of any such new certificate.
ARTICLE VII
Dividends
Subject always to the provisions of law and the Certificate of
Incorporation, the Board of Directors shall
12
<PAGE>
have full power to determine whether any, and, if any, what part of any,
funds legally available for the payment of dividends shall be declared as
dividends and paid to stockholders; the division of the whole or any part of
such funds of the Corporation shall rest wholly within the lawful discretion
of the Board of Directors, and it shall not be required at any time, against
such discretion, to divide or pay any part of such funds among or to the
stockholders as dividends or otherwise; and before payment of any dividend,
there may be set aside out of any funds of the Corporation available for
dividends such sum or sums as the Board of Directors from time to time, in
its absolute discretion, thinks proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining
any property of the Corporation, or for such other purpose as the Board of
Directors shall think conducive to the interest of the Corporation, and the
Board of Directors may modify or abolish any such reserve in the manner in
which it was created.
ARTICLE VIII
Ratification
Any transaction, questioned in any lawsuit on the ground of lack of
authority, defective or irregular execution, adverse interest of director,
officer or stockholder, non-disclosure, miscomputation, or the application of
improper principles or practices of accounting, may be ratified before or
after judgment, by the Board of Directors or by the stockholders, and if so
ratified shall have the same force and effect as if the questioned
transaction had been originally duly authorized. Such ratification shall be
binding upon the Corporation and its stockholders and shall constitute a bar
to any claim or execution of any judgment in respect of such questioned
transaction.
ARTICLE IX
Corporate Seal
The corporate seal shall have inscribed thereon the name of the
Corporation, and shall be in such form and contain such other words and/or
figures as the Board of Directors shall determine. The corporate seal may be
used by printing, engraving, lithographing, stamping or otherwise
13
<PAGE>
making, placing or affixing, or causing to be printed, engraved,
lithographed, stamped or otherwise made, placed or affixed, upon any paper or
document, by any process whatsoever, an impression, facsimile or other
reproduction of said corporate seal.
ARTICLE X
Fiscal Year
The fiscal year of the Corporation shall be fixed, and shall be
subject to change, by the Board of Directors. Unless otherwise fixed by the
Board of Directors, the fiscal year of the Corporation shall be the calendar
year.
ARTICLE XI
Waiver of Notice
Whenever notice is required to be given by these By-laws or by the
Certificate of Incorporation or by law, a written waiver thereof, signed by
the person or persons entitled to said notice, whether before or after the
time stated therein, shall be deemed equivalent to notice.
ARTICLE XII
Bank Accounts, Drafts, Contracts, Etc.
SECTION 1. Bank Accounts and Drafts. In addition to such bank
accounts as may be authorized by the Board of Directors, the primary
financial officer or any person designated by said primary financial officer,
whether or not an employee of the Corporation, may authorize such bank
accounts to be opened or maintained in the name and on behalf of the
Corporation as he may deem necessary or appropriate, payments from such bank
accounts to be made upon and according to the check of the Corporation in
accordance with the written instructions of said primary financial officer,
or other person so designated by the Treasurer, if any.
SECTION 2. Contracts. The Board of Directors may authorize any
person or persons, in the name and on behalf of the Corporation, to enter
into or execute and deliver any
14
<PAGE>
and all deeds, bonds, mortgages, contracts and other obligations or
instruments, and such authority may be general or confined to specific
instances.
SECTION 3. Proxies; Powers of Attorney; Other Instruments. The
Chairman, the President or any other person designated by either of them
shall have the power and authority to execute and deliver proxies, powers of
attorney and other instruments on behalf of the Corporation in connection
with the rights and powers incident to the ownership of stock by the
Corporation. The Chairman, the President or any other person authorized by
proxy or power of attorney executed and delivered by either of them on behalf
of the Corporation may attend and vote at any meeting of stockholders of any
company in which the Corporation may hold stock, and may exercise on behalf
of the Corporation any and all of the rights and powers incident to the
ownership of such stock at any such meeting, or otherwise as specified in the
proxy or power of attorney so authorizing any such person. The Board of
Directors, from time to time, may confer like powers upon any other person.
SECTION 4. Financial Reports. The Board of Directors may appoint
the primary financial officer or other fiscal officer or any other officer to
cause to be prepared and furnished to stockholders entitled thereto any
special financial notice and/or financial statement, as the case may be,
which may be required by any provision of law.
ARTICLE XIII
Amendments
The Board of Directors shall have power to adopt, amend or repeal
By-laws. By-laws adopted by the Board of Directors may be repealed or
changed, and new By-laws made, by the stockholders, and the stockholders may
prescribe that any By-law made by them shall not be altered, amended or
repealed by the Board of Directors.
15
<PAGE>
Exhibit 3.6
CERTIFICATE OF FORMATION
OF
CHILES COLUMBUS LLC
This Certificate of Formation of Chiles Columbus LLC (the "LLC") is
being duly executed and filed by Paul Aubert, as an authorized person, to form a
limited liability company under the Delaware Limited Liability Company Act (6
Del.C. Section 18-101, et seq.).
FIRST: The name of the limited liability company formed hereby is
Chiles Columbus LLC.
SECOND: The address of the registered office of the LLC in the State
of Delaware and the name and address of the registered agent for service of
process on the LLC in the State of Delaware is: The Corporation Trust Company,
1209 Orange Street, Wilmington, New Castle County, Delaware.
THIRD: This Certificate of Formation shall be effective on the date
of filing.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Formation this 31st day of March, 1998.
By: /s/ Paul Aubert
-------------------------
Name: Paul Aubert
Title: Authorized Person
<PAGE>
Exhibit 3.7
LIMITED LIABILITY COMPANY AGREEMENT
OF
CHILES COLUMBUS LLC
LIMITED LIABILITY COMPANY AGREEMENT of CHILES COLUMBUS LLC (the
"Company") dated as of April 1, 1998 by Chiles Offshore LLC, a Delaware limited
liability company (the "Member").
W I T N E S S E T H :
WHEREAS, the Company was formed as a limited liability company
pursuant to the Delaware Limited Liability Company Act (6 Del.C. Section
18-101, et seq.), as it may be amended from time to time (the "Act");
WHEREAS, the Member desires to establish herein its rights and
obligations in connection with the business and operations of the Company;
NOW, THEREFORE, in consideration of the premises and the covenants and
provisions hereinafter contained, the Member hereby agrees as follows:
ARTICLE I.
ORGANIZATIONAL AND OTHER MATTERS
SECTION 1.01. Formation. The Company was formed as a limited
liability company under the provisions of the Act by the filing on April 1, 1998
of a Certificate of Formation (the "Certificate of Formation") with the
Secretary of State of the State of Delaware. The rights and liabilities of the
Member shall be as provided in the Act, except as is otherwise expressly
provided herein.
SECTION 1.02. Name. The name of the Company shall be Chiles Columbus
LLC and the business of the Company shall be conducted under such name.
SECTION 1.03. Principal Office. The principal office of the Company
shall be 11200 Westheimer, Suite 410, Houston, Texas 77042-3227, or such other
place as the Member may from time to time determine.
<PAGE>
SECTION 1.04. Term. The Company shall commence on the date of filing
of the Certificate of Formation, and the term of the Company shall continue
until the dissolution of the Company as provided by law.
SECTION 1.05. Limited Liability. Except as otherwise provided by the
Act, the debts, obligations and liabilities of the Company, whether arising in
contract, tort or otherwise, shall be the debts, obligations and liabilities
solely of the Company, and the Member shall not be obligated personally for any
of such debts, obligations or liabilities solely by reason of being a Member.
ARTICLE II.
PURPOSE AND POWERS
SECTION 2.01. Purpose of the Company. The Company may carry on any
lawful business, purpose or activity permitted by the Act.
SECTION 2.02. Powers of the Company. The Company shall have the
power to do any and all acts reasonably necessary, appropriate, proper,
advisable, incidental or convenient to or for the furtherance of the purpose and
business described herein and for the protection and benefit of the Company.
ARTICLE III.
CAPITAL CONTRIBUTIONS
Section 3.01. Capital Contributions. The Member has made, or will
make promptly following the date hereof, a capital contribution of US $100 in
cash to the Company.
ARTICLE IV.
MANAGEMENT OF THE COMPANY
SECTION 4.01. Management. The management of the Company shall be
vested in Chiles Offshore LLC (the "Member"). The Member shall have complete
and exclusive discretion in the management and control of the affairs and
business of the Company, and shall possess all powers necessary, convenient or
appropriate to carrying out the purposes and business of the Company, including,
without limitation, doing all things and taking all actions necessary to carry
out the terms and provisions of this Agreement and delegating any or all of its
powers, rights and obligations under this Agreement and appointing such officers
of the Company to perform acts or services for the Company pursuant to
Section 4.02 hereof.
2
<PAGE>
SECTION 4.02. Officers; Agents. The Member shall have the power to
appoint any person or persons as agents (who may be referred to as officers) to
act for the Company with such titles, if any, as the Member deems appropriate
and to delegate to such officers or agents such of the powers as are granted to
the Member hereunder. Any decision or act of an officer appointed under this
Section 4.02 within the scope of the officer's designated or delegated authority
shall control and shall bind the Company. The officers or agents so appointed
may have such titles as the Member shall deem appropriate, which may include
(but need not be limited to) President and Chief Executive Officer, Executive
Vice President, Vice President, Chief Operating Officer, Chief Financial
Officer, Treasurer or Controller. The initial officers of the Company are set
forth on Schedule 4.02. Unless the authority of the agent designated as the
officer in question is limited by the Member, any officer so appointed shall
have the same authority to act for the Company as a corresponding officer of a
Delaware corporation would have to act for a Delaware corporation in the absence
of a specific delegation of authority. The Member, in its sole discretion, may
by vote, resolution or otherwise ratify any act previously taken by an officer
or agent acting on behalf of the Company.
SECTION 4.03. Bank Accounts. The Member shall have the power to
establish a bank account or accounts in the name of the Company with such
banking institution or institutions as the Member shall deem advisable for the
expeditious handling of the Company's funds.
ARTICLE V.
DISSOLUTION AND LIQUIDATION
SECTION 5.01. Effect of Dissolution. Upon dissolution, the Company
shall cease carrying on its business but shall not terminate until the winding
up of the affairs of the Company is completed, the assets of the Company shall
have been distributed as provided below and a Certificate of Cancellation of the
Company under the Act has been filed with the Secretary of State of the State of
Delaware.
SECTION 5.02. Liquidation Upon Dissolution. Upon the dissolution of
the Company, sole and plenary authority to effectuate the liquidation of the
assets of the Company shall be vested in the Member, which shall have full power
and authority to sell, assign and encumber any and all of the Company's assets
and to wind up and liquidate the affairs of the Company in an orderly and
business-like manner. The proceeds of liquidation of the assets of the Company
distributable upon a dissolution and winding up of the Company shall be applied
in the following order of priority:
3
<PAGE>
a. first, to the creditors of the Company, including creditors
that are Members, in the order of priority provided by law, in
satisfaction of all liabilities and obligations of the Company (of any
nature whatsoever, including, without limitation, fixed or contingent,
matured or unmatured, legal or equitable, secured or unsecured),
whether by payment or the making of reasonable provision for payment
thereof; and
b. thereafter, to the Member.
SECTION 5.03. Winding Up and Certificate of Cancellation. The
winding up of the Company shall be completed when all of its debts, liabilities,
and obligations have been paid and discharged or reasonably adequate provision
therefor has been made, and all of the remaining property and assets of the
Company have been distributed to the Member. Upon the completion of the winding
up of the Company, a Certificate of Cancellation of the Company shall be filed
with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement as of the date first written above.
CHILES OFFSHORE LLC
By:/s/ Dick H. Fagerstal
-----------------------------
Dick H. Fagerstal
Senior Vice President, Chief Financial
Officer and Secretary
4
<PAGE>
SCHEDULE 4.02
Initial State of Officers
1. William E. Chiles: President and Chief Executive Officer
2. Dick H. Fagerstal: Senior Vice President, Chief Financial Officer and
Secretary
3. Donald B. Gregg: Senior Vice President - Operations and Engineering
4. William H. Hopkins: Vice President - Human Resources
5. William A. Thorogood: Vice President - Controller and Assistant Secretary
5
<PAGE>
Exhibit 3.8
CERTIFICATE OF FORMATION
OF
CHILES MAGELLAN LLC
This Certificate of Formation of Chiles Magellan LLC (the "LLC") is
being duly executed and filed by Paul Aubert, as an authorized person, to form a
limited liability company under the Delaware Limited Liability Company Act (6
Del.C. Section 18-101, et seq.).
FIRST: The name of the limited liability company formed hereby is
Chiles Magellan LLC.
SECOND: The address of the registered office of the LLC in the State
of Delaware and the name and address of the registered agent for service of
process on the LLC in the State of Delaware is: The Corporation Trust Company,
1209 Orange Street, Wilmington, New Castle County, Delaware.
THIRD: This Certificate of Formation shall be effective on the date
of filing.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Formation this 31st day of March, 1998.
By: /s/ Paul Aubert
----------------------------
Name: Paul Aubert
Title: Authorized Person
<PAGE>
Exhibit 3.9
LIMITED LIABILITY COMPANY AGREEMENT
OF
CHILES MAGELLAN LLC
LIMITED LIABILITY COMPANY AGREEMENT of CHILES MAGELLAN LLC (the
"Company") dated as of April 1, 1998 by Chiles Offshore LLC, a Delaware limited
liability company (the "Member").
W I T N E S S E T H :
WHEREAS, the Company was formed as a limited liability company
pursuant to the Delaware Limited Liability Company Act (6 Del.C. Section
18-101, et seq.), as it may be amended from time to time (the "Act");
WHEREAS, the Member desires to establish herein its rights and
obligations in connection with the business and operations of the Company;
NOW, THEREFORE, in consideration of the premises and the covenants and
provisions hereinafter contained, the Member hereby agrees as follows:
ARTICLE I.
ORGANIZATIONAL AND OTHER MATTERS
SECTION 1.01. Formation. The Company was formed as a limited
liability company under the provisions of the Act by the filing on April 1, 1998
of a Certificate of Formation (the "Certificate of Formation") with the
Secretary of State of the State of Delaware. The rights and liabilities of the
Member shall be as provided in the Act, except as is otherwise expressly
provided herein.
SECTION 1.02. Name. The name of the Company shall be Chiles Magellan
LLC and the business of the Company shall be conducted under such name.
SECTION 1.03. Principal Office. The principal office of the Company
shall be 11200 Westheimer, Suite 410, Houston, Texas 77042-3227, or such other
place as the Member may from time to time determine.
<PAGE>
SECTION 1.04. Term. The Company shall commence on the date of filing
of the Certificate of Formation, and the term of the Company shall continue
until the dissolution of the Company as provided by law.
SECTION 1.05. Limited Liability. Except as otherwise provided by the
Act, the debts, obligations and liabilities of the Company, whether arising in
contract, tort or otherwise, shall be the debts, obligations and liabilities
solely of the Company, and the Member shall not be obligated personally for any
of such debts, obligations or liabilities solely by reason of being a Member.
ARTICLE II.
PURPOSE AND POWERS
SECTION 2.01. Purpose of the Company. The Company may carry on any
lawful business, purpose or activity permitted by the Act.
SECTION 2.02. Powers of the Company. The Company shall have the
power to do any and all acts reasonably necessary, appropriate, proper,
advisable, incidental or convenient to or for the furtherance of the purpose and
business described herein and for the protection and benefit of the Company.
ARTICLE III.
CAPITAL CONTRIBUTIONS
Section 3.01. Capital Contributions. The Member has made, or will
make promptly following the date hereof, a capital contribution of US $100 in
cash to the Company.
ARTICLE IV.
MANAGEMENT OF THE COMPANY
SECTION 4.01. Management. The management of the Company shall be
vested in Chiles Offshore LLC (the "Member"). The Member shall have complete
and exclusive discretion in the management and control of the affairs and
business of the Company, and shall possess all powers necessary, convenient or
appropriate to carrying out the purposes and business of the Company, including,
without limitation, doing all things and taking all actions necessary to carry
out the terms and provisions of this Agreement and delegating any or all of its
powers, rights and obligations under this Agreement and appointing such officers
of the Company to perform acts or services for the Company pursuant to
Section 4.02 hereof.
2
<PAGE>
SECTION 4.02. Officers; Agents. The Member shall have the power to
appoint any person or persons as agents (who may be referred to as officers) to
act for the Company with such titles, if any, as the Member deems appropriate
and to delegate to such officers or agents such of the powers as are granted to
the Member hereunder. Any decision or act of an officer appointed under this
Section 4.02 within the scope of the officer's designated or delegated authority
shall control and shall bind the Company. The officers or agents so appointed
may have such titles as the Member shall deem appropriate, which may include
(but need not be limited to) President and Chief Executive Officer, Executive
Vice President, Vice President, Chief Operating Officer, Chief Financial
Officer, Treasurer or Controller. The initial officers of the Company are set
forth on Schedule 4.02. Unless the authority of the agent designated as the
officer in question is limited by the Member, any officer so appointed shall
have the same authority to act for the Company as a corresponding officer of a
Delaware corporation would have to act for a Delaware corporation in the absence
of a specific delegation of authority. The Member, in its sole discretion, may
by vote, resolution or otherwise ratify any act previously taken by an officer
or agent acting on behalf of the Company.
SECTION 4.03. Bank Accounts. The Member shall have the power to
establish a bank account or accounts in the name of the Company with such
banking institution or institutions as the Member shall deem advisable for the
expeditious handling of the Company's funds.
ARTICLE V.
DISSOLUTION AND LIQUIDATION
SECTION 5.01. Effect of Dissolution. Upon dissolution, the Company
shall cease carrying on its business but shall not terminate until the winding
up of the affairs of the Company is completed, the assets of the Company shall
have been distributed as provided below and a Certificate of Cancellation of the
Company under the Act has been filed with the Secretary of State of the State of
Delaware.
SECTION 5.02. Liquidation Upon Dissolution. Upon the dissolution of
the Company, sole and plenary authority to effectuate the liquidation of the
assets of the Company shall be vested in the Member, which shall have full power
and authority to sell, assign and encumber any and all of the Company's assets
and to wind up and liquidate the affairs of the Company in an orderly and
business-like manner. The proceeds of liquidation of the assets of the Company
distributable upon a dissolution and winding up of the Company shall be applied
in the following order of priority:
3
<PAGE>
a. first, to the creditors of the Company, including creditors that
are Members, in the order of priority provided by law, in satisfaction of
all liabilities and obligations of the Company (of any nature whatsoever,
including, without limitation, fixed or contingent, matured or unmatured,
legal or equitable, secured or unsecured), whether by payment or the making
of reasonable provision for payment thereof; and
b. thereafter, to the Member.
SECTION 5.03. Winding Up and Certificate of Cancellation. The
winding up of the Company shall be completed when all of its debts, liabilities,
and obligations have been paid and discharged or reasonably adequate provision
therefor has been made, and all of the remaining property and assets of the
Company have been distributed to the Member. Upon the completion of the winding
up of the Company, a Certificate of Cancellation of the Company shall be filed
with the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement as of the date first written above.
CHILES OFFSHORE LLC
By:/s/ Dick H. Fagerstal
--------------------------
Dick H. Fagerstal
Senior Vice President,
Chief Financial
Officer and Secretary
4
<PAGE>
SCHEDULE 4.02
Initial State of Officers
1. William E. Chiles: President and Chief Executive Officer
2. Dick H. Fagerstal: Senior Vice President, Chief Financial Officer and
Secretary
3. Donald B. Gregg: Senior Vice President, Operations and Engineering
4. William H. Hopkins: Vice President - Human Resources
5. William A. Thorogood: Vice President - Controller and Assistant Secretary
5
<PAGE>
Exhibit 4.1
- --------------------------------------------------------------------------------
CHILES OFFSHORE LLC
CHILES OFFSHORE FINANCE CORP.
as Issuers
and
THE GUARANTORS NAMED HEREIN
and
U.S. BANK TRUST NATIONAL ASSOCIATION
as Trustee
------------------
INDENTURE
Dated as of April 29, 1998
------------------
10% Senior Notes Due 2008
------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Section Indenture Section
------------ ------------------
<S> <C>
310(a)(1).............................................................................. 7.10
(a)(2).............................................................................. 7.10
(a)(3).............................................................................. N.A.
(a)(4).............................................................................. N.A.
(b)................................................................................. 7.8; 7.10
(c)................................................................................. N.A.
311(a)................................................................................. 7.11
(b)................................................................................. 7.11
(c)................................................................................. N.A.
312(a)................................................................................. 2.5
(b)................................................................................. 2.5; 10.3
(c)................................................................................. 10.3
313(a)................................................................................. 10.3
(b)(1).............................................................................. 7.6
(b)(2).............................................................................. N.A.
(c)................................................................................. 10.2
(d)................................................................................. 7.6
314(a)................................................................................. 4.2; 4.25; 10.2
(b)................................................................................. N.A.
(c)(1).............................................................................. 10.4
(c)(2).............................................................................. 10.4
(c)(3).............................................................................. N.A.
(d)................................................................................. 11.3(d), 11.4
(e)................................................................................. 10.5
(f)................................................................................. 4.25
315(a)................................................................................. 7.1
(b)................................................................................. 7.5; 10.2
(c)................................................................................. 7.1
(d)................................................................................. 7.1
(e)................................................................................. 6.11
316 (a)(last sentence).................................................................. 10.6
(a)(1)(A)........................................................................... 6.5
(a)(1)(B)........................................................................... 6.4
(a)(2).............................................................................. N.A.
(b)................................................................................. 6.7
317(a)(1).............................................................................. 6.9
(a)(2).............................................................................. 6.9
(b)................................................................................. 2.4
318(a)................................................................................. 10.1
</TABLE>
N.A. means Not Applicable
- -------------
Note: This Cross Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1.1 Definitions..................................................................................1
SECTION 1.2 Other Definitions...........................................................................21
SECTION 1.3 Incorporation by Reference of Trust Indenture Act...........................................22
SECTION 1.4 Rules of Construction.......................................................................22
ARTICLE II
THE SECURITIES
SECTION 2.1 Form and Dating.............................................................................23
SECTION 2.2 Execution and Authentication................................................................23
SECTION 2.3 Registrar and Paying Agent..................................................................24
SECTION 2.4 Paying Agent to Hold Money in Trust.........................................................24
SECTION 2.5 Noteholder Lists............................................................................24
SECTION 2.6 Replacement Notes...........................................................................25
SECTION 2.7 Outstanding Notes...........................................................................25
SECTION 2.8 Temporary Notes.............................................................................25
SECTION 2.9 Cancellation................................................................................26
SECTION 2.10 Defaulted Interest..........................................................................26
SECTION 2.11 CUSIP Numbers...............................................................................26
ARTICLE III
REDEMPTION
SECTION 3.1 Optional Redemption.........................................................................26
SECTION 3.2 Selection of Notes to Be Redeemed...........................................................27
SECTION 3.3 Notice of Redemption........................................................................27
SECTION 3.4 Effect of Notice of Redemption..............................................................28
SECTION 3.5 Deposit of Redemption Price.................................................................28
SECTION 3.6 Notes Redeemed in Part......................................................................28
</TABLE>
<PAGE>
ARTICLE IV
COVENANTS
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 4.1 Payment of Notes............................................................................29
SECTION 4.2 SEC Reports.................................................................................29
SECTION 4.3 Limitation on Indebtedness..................................................................29
SECTION 4.4 Limitation on Restricted Payments...........................................................31
SECTION 4.5 Limitation on Restrictions on Distributions from Restricted Subsidiaries....................33
SECTION 4.6 Limitation on Sales of Assets and Subsidiary Stock..........................................34
SECTION 4.7 Limitation on Transactions with Affiliates..................................................37
SECTION 4.8 Right to Require Repurchase upon Change of Control..........................................38
SECTION 4.9 Compliance Certificate......................................................................39
SECTION 4.10 Right to Require Repurchase Upon Contract Termination.......................................40
SECTION 4.11 Limitation on Liens.........................................................................41
SECTION 4.12 Limitation on Sale/Leaseback Transactions...................................................42
SECTION 4.13 Limitation on Sale or Issuance of Capital Stock of Restricted Subsidiaries..................42
SECTION 4.14 Payment of Taxes and Other Claims...........................................................42
SECTION 4.15 Maintenance of Office or Agency.............................................................43
SECTION 4.16 Corporate Existence.........................................................................43
SECTION 4.17 Future Subsidiary Guarantors................................................................43
SECTION 4.18 Application of Event of Loss Proceeds.......................................................44
SECTION 4.19 Insurance...................................................................................46
SECTION 4.20 Impairment of Security Interest in Collateral...............................................47
SECTION 4.21 Deposit of Funds with Escrow Agent..........................................................47
SECTION 4.22 Amendments to Escrow Agreement and Escrow Security Agreement................................47
SECTION 4.23 Limitation on Business Activities...........................................................47
SECTION 4.24 Limitation on Finance.......................................................................47
SECTION 4.25 Further Instruments and Acts................................................................48
ARTICLE V
MERGER AND CONSOLIDATION
SECTION 5.1 Merger and Consolidation....................................................................48
</TABLE>
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ARTICLE VI
DEFAULTS AND REMEDIES
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SECTION 6.1 Events of Default...........................................................................49
SECTION 6.2 Acceleration................................................................................51
SECTION 6.3 Other Remedies..............................................................................51
SECTION 6.4 Waiver of Past Defaults.....................................................................52
SECTION 6.5 Control by Majority.........................................................................52
SECTION 6.6 Limitation on Suits.........................................................................52
SECTION 6.7 Rights of Holders to Receive Payment........................................................53
SECTION 6.8 Collection Suit by Trustee..................................................................53
SECTION 6.9 Trustee May File Proofs of Claim............................................................53
SECTION 6.10 Priorities..................................................................................54
SECTION 6.11 Undertaking for Costs.......................................................................54
SECTION 6.12 Waiver of Stay or Extension Laws............................................................54
ARTICLE VII
TRUSTEE
SECTION 7.1 Duties of Trustee...........................................................................55
SECTION 7.2 Rights of Trustee...........................................................................56
SECTION 7.3 Individual Rights of Trustee................................................................57
SECTION 7.4 Trustee's Disclaimer........................................................................57
SECTION 7.5 Notice of Defaults..........................................................................57
SECTION 7.6 Reports by Trustee to Holders...............................................................57
SECTION 7.7 Compensation and Indemnity..................................................................57
SECTION 7.8 Replacement of Trustee......................................................................58
SECTION 7.9 Successor Trustee by Merger.................................................................59
SECTION 7.10 Eligibility; Disqualification...............................................................59
SECTION 7.11 Preferential Collection of Claims Against Issuers...........................................60
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1 Discharge of Liability on Notes; Defeasance.................................................60
SECTION 8.2 Conditions to Defeasance....................................................................61
SECTION 8.3 Application of Trust Money..................................................................62
SECTION 8.4 Repayment to Issuers........................................................................63
SECTION 8.5 Indemnity for Government Obligations........................................................63
SECTION 8.6 Reinstatement...............................................................................63
</TABLE>
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ARTICLE IX
AMENDMENTS
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SECTION 9.1 Without Consent of Holders..................................................................64
SECTION 9.2 With Consent of Holders.....................................................................64
SECTION 9.3 Compliance with Trust Indenture Act.........................................................65
SECTION 9.4 Revocation and Effect of Consents and Waivers...............................................65
SECTION 9.5 Notation on or Exchange of Notes............................................................66
SECTION 9.6 Trustee to Sign Amendments..................................................................66
ARTICLE X
SUBSIDIARY GUARANTEES
SECTION 10.1 Guarantees..................................................................................66
SECTION 10.2 Limitation on Liability.....................................................................68
SECTION 10.3 Successors and Assigns......................................................................69
SECTION 10.4 No Waiver...................................................................................69
SECTION 10.5 Modification................................................................................69
SECTION 10.6 Release of Subsidiary Guarantor.............................................................69
ARTICLE XI
COLLATERAL AND SECURITY
SECTION 11.1 Escrow Agreement and Escrow Security Agreement..............................................70
SECTION 11.2 Recording and Opinions......................................................................71
SECTION 11.3 Release of Collateral.......................................................................71
SECTION 11.4 Certificates of the Issuers.................................................................72
SECTION 11.5 Authorization of Actions to Be Taken by the Trustee Under the
Escrow Agreement and the Escrow Security Agreement..........................................72
SECTION 11.6 Authorization of Receipt of Funds by the Trustee Under the Escrow
Agreement...................................................................................73
SECTION 11.7 Termination of Security Interest............................................................73
</TABLE>
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ARTICLE XII
MISCELLANEOUS
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SECTION 12.1 Trust Indenture Act Controls................................................................73
SECTION 12.2 Notices.....................................................................................74
SECTION 12.3 Communication by Holders with Other Holders.................................................75
SECTION 12.4 Certificate and Opinion as to Conditions Precedent..........................................75
SECTION 12.5 Statements Required in Certificate or Opinion...............................................75
SECTION 12.6 When Notes Disregarded......................................................................76
SECTION 12.7 Rules by Trustee, Paying Agent and Registrar................................................76
SECTION 12.8 Legal Holidays..............................................................................76
SECTION 12.9 Governing Law...............................................................................76
SECTION 12.10 No Recourse Against Others..................................................................76
SECTION 12.11 Successors..................................................................................77
SECTION 12.12 Multiple Originals..........................................................................77
SECTION 12.13 Table of Contents; Headings.................................................................77
SECTION 12.14 Severability Clause.........................................................................77
SIGNATURES
APPENDIX 1 -- Rule 144A/Regulation S Appendix
EXHIBIT A -- Form of Initial Security
EXHIBIT B -- Form of Exchange Security
</TABLE>
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of the Indenture.
<PAGE>
INDENTURE dated as of April 29, 1998 among CHILES OFFSHORE LLC, a
Delaware limited liability company (the "Company"), CHILES OFFSHORE FINANCE
CORP., a Delaware corporation ("Finance" and, together with the Company, the
"Issuers"), the GUARANTORS listed on the signature pages hereto and U.S. BANK
TRUST NATIONAL ASSOCIATION, a national banking corporation, as trustee (the
"Trustee").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the 10% Senior Notes Due 2008
(the "Notes") of the Issuers, as joint and several obligors:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions.
"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 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.
"Additional Interest" has the meaning provided in Section 6 of the
Registration Rights Agreement.
"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 securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Allocated Portion" means, with respect to any Rig, a fraction, the
numerator of which is the Purchase Price of such Rig and the denominator is the
sum of the Purchase Prices of both Rigs.
"Allocated Principal Amount" means, with respect to the principal
amount of any Note and any Rig, an amount equal to the product of (i) the
principal amount of such Note and (ii) the Allocated Portion.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
the Company or any Restricted Subsidiary, including any
<PAGE>
disposition by means of a merger or consolidation (each referred to for the
purposes of this definition as a "disposition"), 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) all or substantially all the assets (other
than Capital Stock of an Unrestricted Subsidiary) of any division or line of
business of the Company or any Restricted Subsidiary or (iii) any other assets
(other than Capital Stock of an Unrestricted Subsidiary) 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, (A) a disposition by a Restricted Subsidiary to the Company or by the
Company or a Restricted Subsidiary to a Restricted Subsidiary, (B) for purposes
of Section 4.6 only, a disposition that constitutes a Restricted Payment
permitted by Section 4.4 or a disposition specifically excepted from the
definition of Restricted Payment and (C) a disposition by the Company or a
Restricted Subsidiary of a Construction Option to an Unrestricted Subsidiary or
other Affiliate of the Company); provided, however, that Asset Disposition shall
not include (x) a transaction or series of related transactions for which the
Company or its Restricted Subsidiaries receive aggregate consideration less than
or equal to $1 million or (y) the sale, lease, conveyance, disposition or other
transfer of all or substantially all of the assets of the Company as permitted
by Section 5.1 and Section 4.6.
"Attributable Debt" in respect of a Sale/Leaseback Transaction means,
as at the time of determination, the present value (discounted at the interest
rate borne by the Notes, compounded annually) of the total obligations of the
lessee for rental payments 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 the 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.
"Bank Facility" means the credit agreement, dated as of the Issue Date,
among the Company, one or more commercial banks, as agent or agents, and the
other financial institutions party thereto, as such agreement, in whole or in
part, may be amended, renewed, extended, refunded, replaced or refinanced from
time to time.
"Board of Directors" means (i) in the case of a Person that is a
corporation, the board of directors of such Person and (ii) in the case of any
other Person, the board of directors, board of managers, management committee or
similar governing body of such Person (or in the case of a limited partnership,
of such Person's general partner, or in the case of a limited liability company,
of such Person's manager if such manager(s) is not an individual), or any
authorized committee thereof responsible for the management of the business and
affairs of such Person.
"Builder" means AMFELS, Inc., a Texas corporation.
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"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligation" means an obligation that is required to be
classified and accounted for as a capital lease for financial reporting purposes
in accordance with GAAP, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date upon which such lease may be terminated by the lessee without payment of a
penalty.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations, membership interests or
other equivalents of or interests in (however designated) equity of such Person,
including any Preferred Stock, but excluding any debt securities convertible
into such equity.
"Change of Control" means the occurrence of any of the following events
with respect to the Company: (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders,
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 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 45% of the total
voting power of the then outstanding Voting Stock of the Company; provided,
however, that for purposes of this clause (i), the Permitted Holders
beneficially own (as defined above), directly or indirectly, in the aggregate a
lesser percentage of the total voting power of the Voting Stock of the Company
than such other person and do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the Board
of Directors (for the purposes of this clause (i), such other person shall be
deemed to beneficially own any Voting Stock of a specified corporation held by a
parent corporation, if such other person is the beneficial owner (as defined in
this clause (i)), directly or indirectly, of more than 45% of the voting power
of the Voting Stock of such parent corporation and the Permitted Holders
beneficially own (as defined above), directly or indirectly, in the aggregate a
lesser percentage of the voting power of the Voting Stock of such parent
corporation and do not have the right or ability by voting power, contract or
otherwise to elect or designate for elect on a majority of the board of
directors of such parent corporation); (ii) during any period of two consecutive
years, individuals who at the beginning of such period constituted the Board of
Directors (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders (or members, as
applicable) of the Company was approved by a vote of 66 2/3% of the directors of
the Company (or the Company's managers, as applicable) 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; or (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 to another Person (in each case other than a
Person that is controlled by the Permitted Holders), and, in the case of any
such merger or consolidation, the securities of the
3
<PAGE>
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 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
or a parent corporation that owns all of the capital stock of such corporation
that represent immediately after such transaction, at least a majority of the
aggregate voting power of the Voting Stock of the surviving corporation or such
parent corporation, as the case may be.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Agent" means U.S. Bank Trust National Association.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of: (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days (or, if less than 45
days after the end of such fiscal quarter, ending as of the date the
consolidated financial statements of the Company shall be available) prior to
the date of such determination to (ii) Consolidated Interest Expense for such
four fiscal quarters; provided, however, that (A) if the Company or any
Restricted Subsidiary (x) has Incurred any Indebtedness (other than Indebtedness
Incurred for working capital purposes under the Bank Facility) since the
beginning of such period that remains outstanding or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence
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 Incurred 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 or (y) has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of the period that is no longer outstanding on such date of
determination, or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio involves a discharge of Indebtedness, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
effect to such discharge of such Indebtedness, including with the proceeds of
such new Indebtedness, as if such discharge had occurred on the first day of
such period (except that, in making such computation, the amount of Indebtedness
under any revolving credit facility shall be computed based upon the average
daily balance of such Indebtedness during such four quarter period), (B) if
since the beginning of such period the Company or any Restricted Subsidiary
shall have made any Asset Disposition, EBITDA for such period shall be reduced
by an amount equal to EBITDA (if positive) directly attributable to the assets
which are the subject of such Asset Disposition for such period, or increased by
an amount equal to the EBITDA (if negative) directly attributable thereto for
such period and Consolidated Interest Expense for such period shall be reduced
by an amount equal to the Consolidated Interest Expense directly attributable to
any Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to the Company and
its continuing Restricted Subsidiaries in connection with such Asset Disposition
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
4
<PAGE>
Indebtedness of such Restricted Subsidiary to the extent the Company and
its continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale), (C) 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 requiring a calculation to be
made hereunder, which constitutes all or substantially all of an operating unit
of a business, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the Incurrence of
any Indebtedness) as if such Investment or acquisition occurred on the first day
of such period or (D) 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, Investment or acquisition of assets that would
have required an adjustment pursuant to clause (B) or (C) 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, Investment or acquisition 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 Incurred 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 on 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 Agreement applicable to such Indebtedness if such Interest Rate 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 a Restricted Subsidiary owning a rig) by the Company or by a Restricted
Subsidiary pursuant to a binding purchase agreement or the delivery since the
beginning of such period of a drilling rig to the Company or a Restricted
Subsidiary pursuant to a drilling rig construction contract, if such drilling
rig is subject to a binding drilling contract, the Company shall give pro forma
effect to the earnings (losses) of such drilling rig as if such drilling rig was
acquired on the first day of such period by basing such earnings (losses) on
(x)(a) revenues to be earned from any binding drilling contract of at least one
year's duration that will be applicable to any such drilling rig (including a
drilling rig owned by a Restricted Subsidiary) and in effect during such period
and (b) a good faith estimate of the operating costs of such drilling rig (as
determined in the reasonable judgment of a responsible financial officer of the
Company) or (y) with respect to any such drilling rig subject to a drilling
contract of less than one year's duration, the earnings (losses) for such period
based on industry average earnings (losses) for comparable drilling rigs (as
determined in the reasonable judgment of a responsible financial officer of the
Company).
"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 total interest expense, and to the
extent incurred by the Company or its Restricted Subsidiaries, (i) interest
expense attributable to Capital Lease Obligations, (ii) amortization of debt
discount and debt
5
<PAGE>
issuance costs, (iii) capitalized interest, (iv) non-cash interest expense,
(v) commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing, (vi) net costs associated
with Hedging Obligations (including amortization of fees), (vii) dividends paid
or payable in respect of any Disqualified Stock of the Company, (viii) cash
dividends paid or payable by the Company and all dividends paid or payable by
Restricted Subsidiaries, in each case in respect of all Preferred Stock held by
Persons other than the Company or a Wholly Owned Subsidiary, (ix) interest
incurred in connection with Investments in discontinued operations and (x)
interest accruing on any Indebtedness of any other Person to the extent such
Indebtedness is Guaranteed by the Company or any Restricted Subsidiary.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income: (i) any net income of any
Person if such Person is not a Restricted Subsidiary, except that (A) subject to
the exclusion contained in clause (iv) below, 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 paid to a Restricted Subsidiary, to the limitations contained in
clause (iii) below) and (B) with respect to the calculation of EBITDA only, the
Company's equity in a net loss of any such Person for such period shall be
included in determining such Consolidated Net Income up to the aggregate amount
invested by the Company or any Restricted Subsidiary in such Person during such
period; (ii) any net income (or loss) of any Person acquired by the Company or a
Subsidiary of the Company in a pooling of interests transaction for any period
prior to the date of such acquisition; (iii) any net income of any Restricted
Subsidiary to the extent that such Restricted Subsidiary is subject to
restrictions, directly or indirectly, prohibiting the payment of dividends, the
repayment of intercompany debt and the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Company, except that (A)
subject to the exclusion contained in clause (iv) below, 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 paid to another
Restricted Subsidiary, to the limitation contained in this clause) and (B) 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 up to the
aggregate amount invested by the Company or any Restricted Subsidiary in such
Person during such period; (iv) any gain or loss realized upon the sale or other
disposition of any assets 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 or loss
realized upon the sale or other disposition of any Capital Stock of any Person;
(v) extraordinary gains or losses; and (vi) the cumulative effect of a change in
accounting principles. Prior to a Corporate Conversion, the calculation of
Consolidated Net Income shall be adjusted by imputing to the Company as an
expense the amount of all Permitted Quarterly Tax Distributions.
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<PAGE>
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its Restricted Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the most recent fiscal quarter
of the Company for which financial statements are available, as (i) the par or
stated value of all outstanding Capital Stock of the Company plus (ii) paid-in
capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (B) any
amounts attributable to Disqualified Stock.
"Construction Contract" means either of (i) the Platform Construction
Agreement, dated April 30, 1997, between the Company and the Builder, relating
to the Rig referred to therein, as assigned to Chiles Columbus LLC pursuant to
an instrument of Assignment, Assumption, Acknowledgment and Consent among the
Issuers, the Owners and Builders dated April 23, 1998 or (ii) the Platform
Construction Agreement, dated August 5, 1997, between the Company and the
Builder, relating to the Rig referred to therein, as assigned to Chiles Magellan
LLC pursuant to an instrument of Assignment, Assumption, Acknowledgment and
Consent among the Issuers, the Owners and Builders dated April 23, 1998, in
either case together with all exhibits and schedules thereto and as either may
be amended or supplemented from time to time.
"Construction Escrow Account" means the account established by the
Escrow Agent, pursuant to the Escrow Agreement, consisting of the balance of the
proceeds of the Offering after the Interest Escrow Account has been funded.
"Construction Option" means any contractual option, existing on the
Issue Date or at any time thereafter, exercisable by the Company or any of its
Subsidiaries with the Builder or another shipyard for the construction of a
drilling rig.
"Corporate Conversion" shall mean the conversion of the Company to a
corporation, whether pursuant to a merger, consolidation, conversion by filing,
assignment of assets, or similar transaction or series of transactions, in each
case resulting in a corporation substantially all of the assets of which consist
of substantially all of the assets that were held directly or indirectly by the
Company immediately prior to such transaction and substantially all of the
Capital Stock of which corporation is held by Persons who were members of the
Company immediately prior to such transaction or Permitted Transferees of such
Persons in substantially the same proportions.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Delivery Date" means, with respect to a Rig, the date such Rig is
accepted by the related Owner pursuant to the terms of the related Construction
Contract.
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"Depository" means The Depository Trust Company, its nominees and their
respective successors.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(other than as a result of a Change of Control) (i) matures or is mandatorily
redeemable pursuant to a sinking fund obligation or otherwise, (ii) is
convertible or exchangeable for Indebtedness or Disqualified Stock or (iii) is
redeemable at the option of the holder thereof, in whole or in part, in each
case on or prior to the Stated Maturity of the Notes; provided, however, that
any Capital Stock that would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require such Person to
repurchase or redeem such Capital Stock upon the occurrence of an "asset sale"
or "change of control" occurring prior to the Stated Maturity of the Notes shall
not constitute Disqualified Stock if the "asset sale" or "change of control"
provisions applicable to such Capital Stock are not more favorable to the
holders of such Capital Stock than the provisions described under Section 4.6
and Section 4.8.
"EBITDA" for any period means the sum of Consolidated Net Income plus
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (i) prior to a Corporate Conversion,
all Permitted Quarterly Tax Distributions made by the Company and, thereafter,
all income tax expense of the Company, (ii) depreciation expense, (iii)
amortization expense, and (iv) all other non-cash items reducing such
Consolidated Net Income (excluding any non-cash item to the extent it represents
an accrual of, or reserve for, cash disbursement for any subsequent period) less
all non-cash items increasing such Consolidated Net Income (such amount
calculated pursuant to this clause (iv) not to be less than zero), in each case
for such period. Notwithstanding the foregoing, the provision for taxes based on
the income or profits of, and the depreciation and amortization of, a Subsidiary
of the Company shall be added to Consolidated Net Income to compute EBITDA only
to the extent (and in the same proportion) that the net income of such
Subsidiary was included in calculating Consolidated Net Income.
"Escrow Accounts" means the Interest Escrow Account and the Construction
Escrow Account.
"Escrow Agent" means U.S. Bank Trust National Association or any
substitute escrow agent appointed pursuant to Section 6(a) of the Escrow
Agreement.
"Escrow Agreement" means the Escrow Agreement dated as of April 29,
1998 among the Issuers and U.S. Bank Trust National Association, dated as of
April 29, 1998.
"Escrow Security Agreement" means the Escrow Security Agreement dated
as of April 29, 1998 among the Issuers and U.S. Bank Trust National Association,
and the related Securities Intermediary and Account Agreement, of even date
therewith, among the Issuers and U.S. Bank Trust National Association, dated as
of April 29, 1998.
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"Escrowed Property" means the cash and Temporary Cash Investments
deposited with the Escrow Agent pursuant to the Escrow Agreement.
"Estimation Period" means the period for which a partner who is an
individual is required to estimate for Federal income tax purposes his
allocation of taxable income from a calendar year partnership in connection with
determining his estimated Federal income tax liability for such period.
"Event of Loss" is defined to mean any of the following events: (i) the
actual or constructive total loss of a Rig or the agreed or compromised total
loss of a Rig, (ii) the destruction of a Rig, (iii) damage to a 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 unecomonical or shall render such Rig permanently unfit for
normal use (other than obsolescence) or (iv) the condemnation, confiscation,
requisition, seizure, forfeiture or other taking of title to or use of a Rig
that shall not be revoked within six months. An Event of Loss shall be deemed to
have occurred: (A) in the event of the destruction or other actual total loss of
a Rig, on the date of such loss; (B) in the event of a constructive, agreed or
compromised total loss of a Rig, on the date of the determination of such total
loss pursuant to the relevant insurance policy; (C) in the case of any event
referred to in clause (iii) above, upon the delivery of the Officers'
Certificate to the Trustee; or (D) in the case of any event referred to in
clause (iv) 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 Company or any
Subsidiary Guarantor, 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 Note" shall have the meaning set forth in Appendix 1.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set forth
(i) in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) in statements and
pronouncements of the Financial Accounting Standards Board, (iii) in such other
statements by such other entity as approved by a significant segment of the
accounting profession, and (iv) in the rules and regulations of the SEC
governing the inclusion of financial statements (including pro forma financial
statements) in periodic reports required to be filed pursuant to Section 13 of
the Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of the SEC.
"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,
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<PAGE>
contingent or otherwise, of such Person (i) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Indebtedness of such Person
(whether arising by virtue of 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 obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for Indebtedness; provided, however, that any Indebtedness 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. The accretion of principal of a
non-interest bearing or other discount security shall be deemed the Incurrence
of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of (A) indebtedness of such Person 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; (ii) all Capital
Lease Obligations of such Person and all Attributable Debt in respect of
Sale/Leaseback Transactions entered into by such Person; (iii) all obligations
of such Person issued or assumed as the deferred purchase price of property
(which purchase price is due more than one year after taking title of such
property), all conditional sale obligations of such Person and all obligations
of such Person under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business); (iv) all obligations of
such Person for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction (other than obligations with
respect to letters of credit securing obligations (other than obligations
described in clauses (i) through (iii) above) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon, or, if and to the extent drawn upon, such drawing is reimbursed no
later than the third Business Day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit); (v) the amount of
all obligations of such Person with respect to the redemption, repayment or
other repurchase of any Disqualified Stock or, with respect to any Subsidiary of
such Person, any Preferred Stock (but excluding, in each case, any accrued
dividends); (vi) all obligations of the type referred to in clauses (i) through
(v) of other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible
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<PAGE>
or liable, directly or indirectly, as obligor, guarantor or otherwise,
including by means of any Subsidiary Guaranty (but only to the extent of the
amount actually guaranteed); (vii) all obligations of the type referred to in
clauses (i) through (vi) of other Persons secured by any Lien on any property or
asset of such Person (whether or not such obligation is assumed by such Person),
the amount of such obligation being deemed to be the lesser of the value of such
property or assets or the amount of the obligation so secured; and (viii) to the
extent not otherwise included in this definition, Hedging Obligations of such
Person. 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. For purposes
of clarification, (i) Indebtedness shall not include undrawn commitments under
the Bank Facility or otherwise and (ii) any Guarantee of Indebtedness shall not
be deemed to be an Incurrence of Indebtedness to the extent that the
Indebtedness so Guaranteed is Incurred by the Company or any Restricted
Subsidiary as permitted pursuant to the terms of this Indenture.
"Indenture" means this Indenture as amended or supplemented from time
to time by one or more supplemental indentures entered into pursuant to the
applicable provisions hereof or otherwise in accordance with the terms hereof.
"Initial Notes" means the 10% Senior Notes Due 2008, issued under this
Indenture.
"Interest Escrow Account" means the account established by the Escrow
Agent, pursuant to the Escrow Agreement, in cash and/or Temporary Cash
Investments as will be sufficient, upon receipt of scheduled interest and
principal payments of such Temporary Cash Investments, to provide for payment in
full of the first two scheduled interest payments on the Notes.
"Interest Payment Dates" means May 1 and November 1 of each year,
commencing on November 1, 1998 until May 1, 2008, (or if any such day is not a
Business Day the next succeeding Business Day).
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement or other financial agreement or arrangement designed
solely to protect the Company or any Restricted Subsidiary against fluctuations
in interest rates.
"Investment" in any Person means any direct or indirect advance or loan
(including guarantees of Indebtedness or other obligations, but excluding
advances to customers in the ordinary course of business that are recorded as
accounts receivable on the balance sheet of the Person making the advance or
loan) or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition of Capital Stock, Indebtedness or
other similar instruments issued by such Person. For purposes of the definition
of "Unrestricted Subsidiary," the definition of "Restricted Payment" and Section
4.4, (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
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Company at the time that such Subsidiary is designated an Unrestricted
Subsidiary; provided, however, that if such designation is made in connection
with the acquisition of such Subsidiary or the assets owned by such Subsidiary,
the "Investment" in such Subsidiary shall be deemed to be the
consideration paid in connection with such acquisition; provided further,
however, that upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Company shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to
(A) the Company's "Investment" in such Subsidiary at the time of such
redesignation less (B) the portion (proportionate to the Company's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation, and (ii) any property transferred
to or from an Unrestricted Subsidiary shall be valued at its fair market value
at the time of such transfer, in each case as determined in good faith by the
Board of Directors.
"Issue Date" means the date of original issuance of the Notes.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or required by law to
close. If a payment date is a Legal Holiday, payment shall be made on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period. If a regular record date is a Legal Holiday, the record
shall not be affected.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Moody's" means Moody's Investors Service, Inc.
"Net Available Cash" from an Asset Disposition means cash payments
received therefrom (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise,
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, brokerage commissions, underwriting discounts or commissions or sales
commissions and other reasonable fees and expenses (including, without
limitation, fees and expenses of counsel, accountants and investment bankers)
related to such Asset Disposition or converting to cash any other proceeds
received, and any relocation and severance expenses as a result thereof, and all
Federal, state, provincial, foreign and local taxes required to be accrued or
paid as a liability under GAAP, as a consequence of such Asset Disposition, (ii)
all payments made on any Indebtedness which is secured by any assets subject to
such Asset Disposition or made in order to obtain a necessary consent to such
Asset Disposition or to comply with applicable law, (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 Disposition and (iv) appropriate
amounts provided by the seller as a reserve, in accordance with GAAP, against
any liabilities associated with the property or other assets disposed of in such
Asset Disposition and retained by the Company or any Restricted Subsidiary after
such Asset Disposition, including, without
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<PAGE>
limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Disposition. Further,
with respect to an Asset Disposition by a Subsidiary which is not a Wholly Owned
Subsidiary, Net Available Cash shall be reduced pro rata for the portion of the
equity of such Subsidiary which is not owned by the Company.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock, means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (A) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (B) is directly or indirectly liable (as a guarantor
or otherwise), pursuant to the instrument governing such Indebtedness or (C)
constitutes the lender; and (ii) no default with respect to which (including any
rights that the holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any
holder of any Indebtedness (other than the Notes being offered hereby) of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity.
"Offering" means the issuance of the Notes by the Issuers in the
offering commenced on April 24, 1998.
"Officer" means the Chairman of the Board of Directors, the Chief
Executive Officer, the Chief Financial Officer, the President, any Executive
Vice President, Vice President -- Finance (or any such other officer that
performs similar duties), or the Secretary of the Issuers.
"Officers' Certificate" means a certificate signed by two Officers, one
of which is the Chairman of the Board of Directors, the Chief Executive Officer,
the Chief Financial Officer, the President, any Executive Vice President (or any
such other officer that performs similar duties).
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Issuers or the Trustee.
"Owners" means the following Restricted Subsidiaries, each of which
will own a Rig: (i) Chiles Columbus LLC, a Delaware limited liability company,
and (ii) Chiles Magellan LLC, a Delaware limited liability company, and their
respective successors.
"Permitted Holders" means SEACOR SMIT Inc., William E. Chiles and their
respective Affiliates.
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"Permitted Investment" means an Investment by the Company or any Wholly
Owned Restricted Subsidiary in (i) a Restricted Subsidiary or a Person that
will, upon the making of such Investment, become a Wholly Owned Restricted
Subsidiary; provided, however, that the primary business of such Restricted
Subsidiary is a Related Business; (ii) another Person if as a result of such
Investment such other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all of its assets to, the Company or a
Wholly Owned Restricted Subsidiary; provided, however, that such Person's
primary business is a Related Business; (iii) Temporary Cash Investments; (iv)
receivables owing to the Company or any Restricted Subsidiary if created or
acquired in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms; provided, however, that such trade terms
may include such concessionary trade terms as the Company or any such Restricted
Subsidiary deems reasonable under the circumstances; (v) payroll, travel and
similar advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and that are made
in the ordinary course of business; (vi) loans or advances to employees
permitted under Section 4.7; (vii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to the
Company or any Restricted Subsidiary or in satisfaction of judgments; (viii) any
Person to the extent such Investment represents the non-cash portion of the
consideration received for an Asset Disposition as permitted pursuant to Section
4.6; (ix) an Unrestricted Subsidiary or an Affiliate of the Company in
consideration of the transfer to such Person of a Construction Option; (x) an
Unrestricted Subsidiary or an Affiliate of the Company of the aggregate Net Cash
Proceeds received by the Company from capital contributions or the issuance or
sale of its Capital Stock (other than Disqualified Stock) subsequent to the
Issue Date (other than an issuance or sale to a Subsidiary of the Company), to
the extent such aggregate Net Cash Proceeds are applied by such Person to fund
the payment of all or a portion of the purchase price or cost of construction of
a drilling rig; provided, however, that such Net Cash Proceeds shall be excluded
from clause (a)(iii)(B) of Section 4.4; and (xi) an Unrestricted Subsidiary or
an Affiliate of the Company to fund the payment of, or provide credit support
for, all or a portion of the purchase price or cost of construction of a
drilling rig, in an aggregate principal amount not to exceed $10 million.
"Permitted Liens" means, with respect to any Person, (i) pledges or
deposits by such Person under workers' compensation laws, unemployment insurance
laws or similar legislation, or good faith deposits in connection with bids,
tenders, contracts (other than for the payment of Indebtedness) or leases to
which such Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or United States government bonds
to secure surety or appeal bonds to which such Person is a party, or deposits as
security for contested taxes or import duties or for the payment of rent, in
each case incurred in the ordinary course of business; (ii) Liens imposed by
law, such as carriers', warehousemen's and mechanics' Liens, in each case for
sums not yet due or being contested in good faith by appropriate proceedings;
(iii) Liens arising out of judgments or awards against such Person with respect
to which such Person shall then be proceeding with an appeal or other
proceedings for review or time for appeal has not yet expired; (iv) Liens for
taxes, assessments or other governmental charges not yet subject to penalties
for non-payment or which are being contested in good faith by appropriate
proceedings; (v) Liens in favor of issuers of surety bonds or letters of credit
issued pursuant to the request of and for the account of such Person in the
ordinary
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<PAGE>
course of its business; provided, however, that such letters of credit do
not constitute Indebtedness; (vi) survey exceptions, encumbrances, easements or
reservations of, or rights of others for licenses, rights of way, sewers,
electric lines, telegraph and telephone lines and other similar purposes, or
zoning or other restrictions as to the use of real properties or Liens
incidental to the conduct of the business of such Person or to the ownership of
its properties which were not incurred in connection with Indebtedness and which
do not in the aggregate materially adversely affect the value of said properties
or materially impair their use in the operation of the business of such Person;
(vi) Liens securing an Interest Rate Agreement so long as the related
Indebtedness is, and is permitted to be under this Indenture, secured by a Lien
on the same property securing the Interest Rate Agreement; and (vii) leases and
subleases of real property which do not interfere with the ordinary conduct of
the business of such Person, and which are made on customary and usual terms
applicable to similar properties.
"Permitted Quarterly Tax Distributions" means quarterly distributions
of Tax Amounts determined on the basis of the estimated taxable income of the
Company, for the related Estimation Period, as determined by the Tax Amounts CPA
in a statement filed with the Trustee; provided, however, that prior to any
distributions of Tax Amounts the Company shall deliver to the Trustee an
Officers' Certificate stating to the effect that the Company qualifies as a
partnership or substantially similar pass-through entity for Federal income tax
purposes for the period covered by such financial statements.
"Permitted Transferee" means, with respect to any Person: (i) in the
case of any Person who is a natural person, such individual's spouse or
children, any trust for such individual's benefit or the benefit of such
individual's spouse or children, or any corporation, limited liability company
or partnership in which the direct and beneficial owner of all of the equity
interest is such Person or individual's spouse or children or any trust for the
benefit of such Persons; (ii) in the case of any Person who is a natural person,
the heirs, executors, administrators or personal representatives upon the death
of such Person or upon the incompetency or disability of such Person for
purposes of the protection and management of such individual's assets; and (iii)
in the case of any Person who is not a natural person, any Affiliate of such
Person.
"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 corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Principal" of a Note means the principal of the Note plus the premium,
if any, payable on the Note which is due or overdue or is to become due at the
relevant time.
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"Private Exchange Note" shall have the meaning set forth in Appendix 1.
"Public Equity Offering" means an underwritten primary public offering
of common stock of the Company pursuant to an effective registration statement
(other than on Form S-8) under the Securities Act.
"Purchase Price" means, with respect to a Rig, the amount specified
under the related Construction Contract as the total purchase price to be paid
to the Builder of such Rig.
"Qualified Substitute Rig" is defined to mean, as of any date, a
cantilevered jackup drilling rig which (i) is capable of operating in water
depths of 300 feet or greater, (ii) is in good operating condition and (iii)
will be owned by the Company or a Wholly Owned Restricted Subsidiary of the
Company.
"Quarterly Payment Period" means the period commencing on the tenth day
and ending on and including the twentieth day of each month in which Federal
individual estimated tax payments are due (provided, however that payments in
respect of estimated state income taxes due in January may instead, at the
option of the Company, be paid during the last five days of the immediately
preceding December).
"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.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness of the Company or any Restricted Subsidiary existing on the Issue
Date or Incurred in compliance with this Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided, however, that (i) such
Refinancing Indebtedness has a Stated Maturity no earlier than the Stated
Maturity of the Indebtedness being Refinanced, (ii) such Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being Refinanced and (iii) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount, an aggregate
issue price) that is equal to or less than the aggregate principal amount (or if
Incurred with original issue discount, the aggregate accreted value) then
outstanding or committed (plus fees and expenses, including any premium and
defeasance costs) under the Indebtedness being Refinanced; provided, further,
however, that Refinancing Indebtedness shall not include (A) Indebtedness of a
Restricted Subsidiary that Refinances Indebtedness of the Company or (B)
Indebtedness of the Company or a Restricted Subsidiary that Refinances
Indebtedness of an Unrestricted Subsidiary.
"Registered Exchange Offer" means the offer by the Issuers, pursuant to
the Registration Rights Agreement, to certain Holders of Initial Notes, to issue
and deliver to such Holders, in exchange for the Initial Notes, a like aggregate
principal amount of Exchange Notes registered under the Securities Act.
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"Registration Rights Agreement" means the Registration Rights Agreement
dated April 29, 1998, among the Issuers, the Subsidiary Guarantors and the
Initial Purchasers.
"Registration Statement" means the registration statement(s) as defined
and described in the Registration Rights Agreement.
"Related Business" means the ownership, management and operations of
offshore drilling rigs and any business related, ancillary or complementary
thereto.
"Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person), other than dividends or
distributions payable solely in its Capital Stock (other than Disqualified
Stock) and dividends or distributions payable solely to the Company or a
Restricted Subsidiary, and other than pro rata dividends or other distributions
made by a Subsidiary that is not a Wholly Owned Subsidiary to minority
stockholders (or owners of an equivalent interest in the case of a Subsidiary
that is an entity other than a corporation), (ii) the purchase, redemption or
other acquisition or retirement for value of any Capital Stock of the Company
held by any Person or of any Capital Stock of a Restricted Subsidiary held by
any Affiliate of the Company (other than a Restricted Subsidiary), including the
exercise of any option to exchange any Capital Stock (other than into Capital
Stock of the Company that is not Disqualified Stock), (iii) the purchase,
repurchase, redemption, defeasance or other acquisition or retirement for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment of any Subordinated Obligations (other than the purchase, repurchase or
other acquisition of Subordinated Obligations purchased in anticipation of
satisfying of a sinking fund obligation, principal installment or final
maturity, in each case due within one year of the date of acquisition) or (iv)
the making of any Investment in any Person (other than a Permitted Investment).
"Restricted Subsidiary" means any Subsidiary of the Company that is not
an Unrestricted Subsidiary.
"Rig" means either of the two LeTourneau premium jackup drilling rigs
built pursuant to a Construction Contract.
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by
a Lien. "Secured Indebtedness" of any Subsidiary Guarantor has a correlative
meaning.
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"Significant Subsidiary" means any 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.
"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 Company
(whether outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Notes pursuant to a written
agreement to that effect. "Subordinated Obligation" of any Subsidiary Guarantor
has a correlative meaning.
"Subsidiary" means, in respect of any Person, any corporation,
association, limited liability company, limited or general partnership or other
business entity (i) of which more than 50% of the total voting power of shares
of Capital Stock or other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers, general partners or trustees thereof is at the time owned
or controlled, directly or indirectly, by (A) such Person, (B) such Person and
one or more Subsidiaries of such Person or (C) one or more Subsidiaries of such
Person, or (ii) that is consolidated for purposes of the Company's consolidated
financial statements.
"Subsidiary Guarantor" means each Restricted Subsidiary designated as
such on the signature pages of this Indenture and any other Restricted
Subsidiary that has issued a Subsidiary Guaranty.
"Subsidiary Guaranty" means the Guarantee by a Subsidiary Guarantor of
the Company's obligations with respect to the Notes.
"S&P" means Standard and Poor's Ratings Service.
"Tax Amounts" with respect to any taxable period shall not exceed an
amount equal to (i) the product of (A) the taxable income of the Company for
such period as determined by the Tax Amounts CPA and (B) the Tax Percentage
reduced by (ii) to the extent not previously taken into account, any income tax
benefit attributable to the Company which could be realized (without regard to
the actual realization) by its members in the current or any prior taxable year,
or portion thereof, commencing on or after the Issue Date (including any tax
losses or tax credits), computed at the applicable Tax Percentage for the year
that such benefit is taken into account for purposes of this computation.
"Tax Amounts CPA" means a nationally recognized certified public
accounting firm.
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"Tax Percentage" means, for a particular taxable year, the highest
effective marginal combined rate of Federal, state and city income tax, imposed
on an individual taxpayer, as certified by the Tax Amounts CPA in a certificate
filed with the Trustee. The rate of "state and city income tax" to be taken into
account for purposes of determining the Tax Percentage for a particular taxable
year shall be deemed to be the highest combined New York State and New York City
income tax rate imposed on individuals for such year.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America or any agency
thereof, (ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $10 million (or the
foreign currency equivalent thereof) and has outstanding debt which is rated "A"
(or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker dealer
or mutual fund distributor, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) investments in commercial paper, maturing not more than 180
days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United States
of America with a rating at the time as of which any investment therein is made
of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P
and (v) investments in securities with maturities of six months or less from the
date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date of this Indenture, except as provided in
Section 9.3.
"True-Up Amount" means, in respect of a particular taxable year, an
amount determined by the Tax Amounts CPA equal to the difference between (i) the
aggregate Permitted Quarterly Tax Distributions actually distributed in respect
of such year and (ii) the aggregate amount permitted to be distributed in
respect of such year as determined by reference to the Company's Internal
Revenue Service Form 1065 filed for such year. For purposes of this Indenture
the amount equal to the excess, if any, of the amount described in clause (i)
above over the amount described in clause (ii) above shall be referred to as the
"True-Up Amount due to the Company" and the excess, if any, of the amount
described in clause (ii) over the amount described in clause (i) shall be
referred to as the "True-Up Amount due to the Members."
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"True-Up Determination Date" means the date on which the Tax Amounts
CPA delivers a statement to the Trustee indicating the True-Up Amount.
"True-Up Payment Period" means, in respect of any immediately preceding
taxable year of the Company, the later of (i) the period commencing on the tenth
day and ending on and including the twentieth day of April or (ii) the period
commencing on the tenth day following the True-Up Determination Date and ending
on and including the twentieth day following the True-Up Determination Date.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board of Directors, the
President or any other officer or assistant officer of the Trustee assigned by
the Trustee to administer its corporate trust matters.
"Uniform Commercial Code" means the New York Uniform Commercial Code as
in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary
of the Company (including any newly acquired or newly formed Subsidiary) to be
an Unrestricted Subsidiary unless (A) such Subsidiary or any of its Subsidiaries
owns any Capital Stock or Indebtedness of, or holds any Lien on any property of,
the Company or any other Restricted Subsidiary of the Company or (B) such
Subsidiary or any of its Subsidiaries has any Indebtedness other than
Non-Recourse Debt; provided, however, that either (x) the Subsidiary to be so
designated has total assets of $1,000 or less or (y) if such Subsidiary has
assets greater than $1,000, such designation would be permitted under Section
4.4. The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided, however, that immediately after giving effect
to such designation (a) if such Unrestricted Subsidiary at such time has
Indebtedness, the Company could Incur $1.00 of additional Indebtedness under
Section 4.3(a) and (b) no Default shall have occurred and be continuing. Any
such designation by the Board of Directors shall be evidenced by the Company to
the Trustee by promptly filing with the Trustee a copy of the board resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing provisions. Notwithstanding the
foregoing, Finance may not be designated as an Unrestricted Subsidiary.
"U.S. Government Obligations" means securities that are (x) direct
obligations of the United States of America for the timely payment of which its
full faith and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the timely payment of which is unconditionally guaranteed as a full
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faith and credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer thereof.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including membership interests or 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 Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares and shares held by other
Persons to the extent such shares are required by applicable law to be held by a
Person other than the Company or a Restricted Subsidiary) is owned by the
Company or one or more Wholly Owned Subsidiaries.
SECTION 1.2 Other Definitions.
<TABLE>
<CAPTION>
Term Defined in Section
------------------------------------------------------------------- ------------------
<S> <C>
"Affiliate Transaction" ........................................... 4.7
"Asset Disposition Amount"......................................... 4.8
"Asset Disposition Offer".......................................... 4.8
"Asset Disposition Offer Period"................................... 4.8
"Asset Disposition Purchase Date".................................. 4.8
"Bankruptcy Law"................................................... 6.1
"Contract Termination"............................................. 4.10
"covenant defeasance option"....................................... 8.1(b)
"Custodian"........................................................ 6.1
"Event of Default"................................................. 6.1
"Event of Loss Amount"............................................. 4.18
"Event of Loss Offer".............................................. 4.18
"Event of Loss Offer Period"....................................... 4.18
"Event of Loss Purchase Date"...................................... 4.18
"legal defeasance option".......................................... 8.1(b)
"Legal Holiday".................................................... 10.8
"Loss Receipt Date"................................................ 4.18
"Lost Rig"......................................................... 4.18
"Notice of Default"................................................ 6.1
"Paying Agent"..................................................... 2.3
"Receipt Date" .................................................... 4.6(a)
"Registrar"........................................................ 2.3
"Notes Register"................................................... 2.3
"Successor Company"................................................ 5.1
</TABLE>
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SECTION 1.3 Incorporation by Reference of Trust Indenture Act.
This Indenture is subject to the mandatory provisions of the TIA, which
are incorporated by reference in and made a part of this Indenture. The
following TIA terms have the following meanings:
"Commission" means the SEC.
"indenture notes" means the Notes.
"indenture noteholder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the Notes means the Issuers and any other obligor on the
indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.4 Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and
words in the plural include the singular;
(6) 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 GAAP;
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(7) all references to $, US$, dollars or United
States dollars shall refer to the lawful currency of the United States;
and
(8) "herein", "hereof" and other words of similar
import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
ARTICLE II
THE SECURITIES
SECTION 2.1 Form and Dating.
Provisions relating to the Initial Notes, the Private Exchange Notes
and the Exchange Notes are set forth in Appendix 1, the Rule 144A/ Regulation S
Appendix, attached hereto (the "Appendix") which is hereby incorporated in and
expressly made part of this Indenture. The Initial Notes and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit A to
the Appendix which is hereby incorporated in and expressly made a part of this
Indenture. The Exchange Notes, the Private Exchange Notes and the Trustee's
certificate of authentication shall be substantially in the form of Exhibit B,
which is hereby incorporated in and expressly made a part of this Indenture. The
Notes may have notations, legends or endorsements requirement by law, stock
exchange rule, agreements to which the Issuers are subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Issuers). Each Note shall be dated the date of its authentication. The
terms of the Notes set forth in the Appendix, Exhibit A and Exhibit B are part
of the terms of this Indenture.
SECTION 2.2 Execution and Authentication.
An officer of each of the Company and Finance shall sign the Notes for
the Issuers by manual or facsimile signature. If an Officer whose signature is
on a Note no longer holds that office at the time the Trustee authenticates the
Note, the Note shall be valid nevertheless. A Note shall not be valid until an
authorized signatory of the Trustee manually signs the certificate of
authentication on the Note. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture. The Trustee shall authenticate
and make available for delivery Notes for original issue in an aggregate
principal amount of $110 million, upon a written order signed by each of the
Company and Finance. Such order shall specify the amount of the Notes to be
authenticated and the date on which the original issue of Notes is to be
authenticated. The aggregate principal amount of Notes outstanding at any time
may not exceed that amount except as provided in Section 2.6. The Trustee may
appoint an authenticating agent acceptable to the Issuers to authenticate the
Notes, upon the consent of the Issuers to such appointment. Unless limited by
the terms of such appointment, an authenticating agent may authenticate 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 any Registrar, Paying Agent or agent
for service of notices and demands.
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SECTION 2.3 Registrar and Paying Agent.
The Issuers shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange (the "Registrar") and an
office or agency where Notes may be presented for payment (the "Paying Agent").
The Registrar, acting on behalf of and as agent for the Issuers, shall keep a
register (the "Notes Register") of the Notes and of their transfer and exchange.
The Issuers may have one or more co-registrars and one or more additional paying
agents.
The term "Paying Agent" includes any additional paying agent. The
Issuers shall enter into an appropriate agency agreement with any Registrar,
Paying Agent or co-registrar not a party to this Indenture, which shall
incorporate the terms of the TIA. The agreement shall implement the provisions
of this Indenture that relate to such agent. The Issuers shall notify the
Trustee of the name and address of any such agent. If the Issuers fail to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be
entitled to appropriate compensation therefor pursuant to Section 7.7. The
Issuers may act as Paying Agent, Registrar, co-Registrar or transfer agent.
The Issuers initially appoint the Trustee as Registrar and Paying Agent
in connection with the Notes.
SECTION 2.4 Paying Agent to Hold Money in Trust.
On or prior to each due date of the principal and interest on any Note,
the Issuers shall deposit or shall cause to be deposited with the Paying Agent a
sum sufficient to pay such principal and interest when so becoming due. The
Issuers shall require each Paying Agent (other than the Trustee) to agree in
writing that the Paying Agent shall hold in trust for the benefit of the
Noteholders or the Trustee all money held by the Paying Agent for the payment of
principal of or interest on the Notes and shall notify the Trustee of any
default by the Issuers in making any such payment. The Issuers at any time may
require a Paying Agent to pay all money held by it to the Trustee and to account
for any funds disbursed by the Paying Agent. Upon complying with this Section,
the Paying Agent shall have no further liability for the money delivered to the
Trustee.
SECTION 2.5 Noteholder 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
the Noteholders. If the Trustee is not the Registrar, the Issuers shall furnish
to the Trustee, in writing at least five 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 Noteholders; provided that as long as the Trustee
is the Registrar, no such list need be furnished.
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SECTION 2.6 Replacement Notes.
If a mutilated Note is surrendered to the Trustee or Registrar or if
the Holder of a Note claims that the Note has been lost, destroyed or wrongfully
taken, the Issuers shall issue, and the Trustee shall authenticate, a
replacement Note, if the requirements of Section 8-405 of the Uniform Commercial
Code are met and the Holder satisfies any other reasonable requirements of the
Trustee and the Issuers. Such Holder shall furnish an indemnity bond sufficient
in the judgment of the Issuers and the Trustee to protect the Issuers, the
Trustee, the Paying Agent, the Registrar and any co-registrar from any loss
which any of them may suffer if a security is replaced. The Issuers and the
Trustee may charge the Holder for their expenses in replacing a Note.
Every replacement Note issued pursuant to the terms of this Section is
an obligation of the Issuers under this Indenture.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.7 Outstanding Notes.
Notes outstanding at any time are all Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation
and those described in this Section as not outstanding. Subject to the
provisions of Section 12.6, a Note does not cease to be outstanding because the
Issuers or an Affiliate of the Issuers holds the security.
If a Note is replaced pursuant to Section 2.6, it ceases to be
outstanding unless the Trustee and the Issuers receive proof satisfactory to
them that the replaced Note is held by a bona fide purchaser.
If the Paying Agent (other than the Issuers, a Subsidiary or an
Affiliate of any thereof) segregates and holds in trust, in accordance with this
Indenture, on a redemption date or maturity date or, pursuant to Section 8.1(a),
within 91 days prior thereto, money sufficient to pay all principal and interest
payable on that redemption or maturity date with respect to the Notes (or
portions thereof) to be redeemed or maturing, as the case may be, then on and
after such date such Notes (or portions thereof) cease to be outstanding and on
and after such redemption or maturity date interest on them ceases to accrue.
SECTION 2.8 Temporary Notes.
Until definitive Notes are ready for delivery, the Issuers may prepare and
the Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Issuers consider appropriate for temporary Notes. Without
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<PAGE>
unreasonable delay, the Issuers shall prepare and the Trustee shall authenticate
definitive Notes and deliver them in exchange for temporary securities.
SECTION 2.9 Cancellation.
The Issuers at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee, and no one else, shall cancel all Notes surrendered for
registration of transfer, exchange, payment or cancellation and destroy such
canceled Notes and provide a destruction certificate to the Issuers in respect
of such canceled Notes. The Trustee shall from time to time provide the Issuers
a list of all Notes that have been canceled as requested by the Issuers. The
Issuers may not issue new Notes to replace Notes it has redeemed, paid or
delivered to the Trustee for cancellation.
SECTION 2.10 Defaulted Interest.
If the Issuers default in a payment of interest on the Notes, the
Issuers shall pay defaulted interest (plus 1.0% per annum in excess of such rate
on such defaulted interest to the extent lawful) in any lawful manner. The
Issuers may pay the defaulted interest to the persons who are Noteholders on a
subsequent special record date. The Issuers shall fix or cause to be fixed any
such special record date and payment date to the reasonable satisfaction of the
Trustee and shall promptly mail to each Noteholder a notice that states the
special record date, the payment date and the amount of defaulted interest to be
paid.
SECTION 2.11 CUSIP Numbers.
The Issuers in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers,
either as printed on the Notes or as contained in any notice of a redemption,
and that reliance may be placed only on the other identification numbers printed
on the Notes, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Issuers will promptly notify the Trustee of any
change in the CUSIP numbers.
ARTICLE III
REDEMPTION
SECTION 3.1 Optional Redemption.
If the Issuers elect to redeem Notes pursuant to paragraph 5 of the
Notes, they shall notify the Trustee in writing of the redemption date, the
principal amount of Notes to be redeemed and the paragraph of the Notes pursuant
to which the redemption will occur. The Issuers shall give each
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<PAGE>
notice to the Trustee provided for in this Section not less than 45 and not more
than 60 days before the redemption date unless the Trustee consents to a shorter
period. Such notice shall be accompanied by an Officers' Certificate from the
Issuers to the effect that such redemption will comply with the provisions
herein.
SECTION 3.2 Selection of Notes to Be Redeemed.
If fewer than all the Notes are to be redeemed, the Trustee shall
select the Notes to be redeemed pro rata or by lot or by a method that complies
with applicable legal and securities exchange requirements, if any, and that the
Trustee considers fair and appropriate and in accordance with methods generally
used at the time of selection by fiduciaries in similar circumstances. The
Trustee shall make the selection from outstanding Notes not previously called
for redemption. The Trustee may select for redemption portions of the principal
of Notes that have denominations larger than $1,000. Notes and portions of Notes
the Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption. The Trustee shall notify the
Issuers promptly of the Notes or portions of Notes to be redeemed. In the event
the Issuers are required to make an offer to repurchase Notes pursuant to
Sections 4.8, 4.10 or 4.18 and the amount available for such offer is not evenly
divisible by $1,000, the Trustee shall promptly refund to the Issuers any
remaining funds, which in no event will exceed $1,000.
SECTION 3.3 Notice of Redemption.
At least 30 days but not more than 60 days before a date for redemption
of Notes, the Issuers shall mail a notice of redemption by first-class mail to
the registered address appearing in the Note Register of each Holder of Notes to
be redeemed. The notice shall identify the Notes (including CUSIP numbers, if
any) to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Notes are
to be redeemed, the identification and principal amounts of the
particular Notes to be redeemed;
(6) that, unless the Issuers defaults in making
such redemption payment, interest on Notes (or portion thereof) called
for redemption ceases to accrue on and after the redemption date;
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<PAGE>
(7) the paragraph of the Notes pursuant to which the
Notes called for redemption are being redeemed;
(8) the CUSIP number, if any, printed on the
Notes being redeemed; and
(9) 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 Notes.
At the Issuers's request, the Trustee shall give the notice of
redemption in the Issuers's names and at the Issuers's expense. In such event,
the Issuers shall provide the Trustee with the information required by this
Section.
SECTION 3.4 Effect of Notice of Redemption.
Once notice of redemption is mailed, Notes called for redemption become
due and payable on the redemption date and at the redemption price stated in the
notice. Upon surrender to the Paying Agent, such Notes shall be paid at the
redemption price stated in the notice, plus accrued interest to the redemption
date. Such notice if mailed in the manner herein provided shall be conclusively
presumed to have been given, whether or not the Holder receives 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.
SECTION 3.5 Deposit of Redemption Price.
Prior to 11:00 a.m. (New York City time) on the redemption date, the
Issuers shall deposit with the Trustee or Paying Agent (or, if either of the
Issuers or a Subsidiary is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest (if any) on
all Notes or portions thereof to be redeemed on that date other than Notes or
portions of Notes called for redemption which have been delivered by the Issuers
to the Trustee for cancellation.
SECTION 3.6 Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part (with, if the Issuers
or the Trustee so require, due endorsement by, or a written instrument of
transfer in form satisfactory to the Issuers and the Trustee duly executed by,
the Holder thereof or his attorney duly authorized in writing), the Issuers
shall execute, and the Trustee shall authenticate and deliver to the Holder of
such Note without service charge, a new Note or Notes of any authorized
denomination as requested by such Holder, in aggregate principal amount equal to
and in exchange for the unredeemed portion of the principal of the Note so
surrendered.
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ARTICLE IV
COVENANTS
SECTION 4.1 Payment of Notes.
The Issuers shall promptly pay the principal of and interest on the
Notes on the dates and in the manner provided in the Notes and in this
Indenture. Principal and interest shall be considered paid on the date due if on
such date the Trustee or the Paying Agent holds in accordance with this
Indenture money sufficient to pay all principal and interest then due. The
Issuers shall pay interest on overdue principal at 1.0% per annum in excess of
the rate specified therefor in the Notes, and it shall pay interest on overdue
installments of interest at 1.0% per annum in excess of such rate to the extent
lawful.
SECTION 4.2 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 the SEC (unless the SEC will not accept such a filing)
and provide within 15 days to the Trustee and the Noteholders such annual
reports and such information, documents and other reports as are specified in
Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. company
subject to such Sections, such information, documents and other reports to be so
filed and provided at the times specified for the filing of such information,
documents and reports under such Sections. In addition, whether or not required
by the rules and regulations of the SEC, the Company will file a copy of all
such information and reports with the SEC for public availability (unless the
SEC will not accept such filing). In addition, the Company shall furnish to the
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 Notes are not freely transferable under the
Securities Act. The Company also shall comply with the other provisions of TIA
Section 314(a).
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Issuers's
compliance with any of their covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 4.3 Limitation on Indebtedness.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, Incur, directly or indirectly, any Indebtedness unless, after
giving effect to such Incurrence, the Consolidated Coverage Ratio would exceed
2.0 to 1.0.
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(b) Notwithstanding the foregoing paragraph (a), the Company and
the Restricted Subsidiaries may Incur any or all of the following
Indebtedness:
(1) Indebtedness (including reimbursement obligations in
respect of letters of credit outstanding under the Bank Facility that
are Indebtedness) of the Company Incurred pursuant to the Bank Facility
or any other credit or loan agreement (and any Guarantees in respect
thereof by Restricted Subsidiaries that are Subsidiary Guarantors in
accordance with this Indenture) in an aggregate principal amount which,
when taken together with the principal amount of all other Indebtedness
Incurred pursuant to this clause (1) and then outstanding, does not
exceed $25 million;
(2) Indebtedness of the Company or any Restricted Subsidiary
owed to and held by the Company or any Wholly Owned Restricted
Subsidiary; provided, however, that any subsequent issuance or transfer
of any Capital Stock which results in any such Wholly Owned Restricted
Subsidiary ceasing to be a Wholly Owned Restricted Subsidiary or any
subsequent transfer of such Indebtedness (other than to another Wholly
Owned Restricted Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the Company or such
Restricted Subsidiary;
(3) the Notes and the Subsidiary Guarantees;
(4) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2), or (3) of this Section);
(5) Refinancing Indebtedness in respect of Indebtedness
Incurred pursuant to paragraph (a) or pursuant to clause (3) or (4) or
this clause (5);
(6) Hedging Obligations consisting of Interest Rate Agreements
directly related to Indebtedness permitted to be Incurred by the Company
or any Restricted Subsidiary pursuant to this Indenture;
(7) Indebtedness of the Company or any Restricted Subsidiary
consisting of obligations in respect of purchase price adjustments in
connection with the acquisition or disposition of assets by the Company
or any Restricted Subsidiary permitted under this Indenture; and
(8) Indebtedness in an aggregate principal amount which,
together with all other Indebtedness of the Company and its Restricted
Subsidiaries outstanding on the date of such Incurrence (other than
Indebtedness permitted by clauses (1) through (7) above or paragraph
(a)), does not exceed $10 million at any one time outstanding.
(c) Notwithstanding the foregoing, neither the Company nor any
Restricted Subsidiary shall Incur any Indebtedness pursuant to the foregoing
paragraph (b) if the proceeds
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thereof are used, directly or indirectly, to Refinance any Subordinated
Obligations unless such Indebtedness shall be subordinated to the Notes or
the Subsidiary Guarantees, as applicable, to at least the same extent as such
Subordinated Obligations.
(d) For purposes of determining compliance with this Section 4.3,
(i) in the event that an item of Indebtedness meets the criteria of more than
one of the types of Indebtedness described above, the Company, 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 4.4 Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, make a Restricted Payment if at the
time the Company or such Restricted Subsidiary makes, and after giving effect
to, the proposed Restricted Payment:
(i) a Default shall have occurred and be continuing (or would
result therefrom);
(ii) the Company, or such Restricted Subsidiary, as
applicable, are not able to Incur an additional $1.00 of Indebtedness
under Section 4.3(a); 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 immediately following the fiscal quarter during
which the Notes are originally issued to the end of the most
recently ended fiscal quarter for which financial statements are
available at the time of such Restricted Payment (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such
deficit);
(B) the aggregate Net Cash Proceeds received by the
Company from capital contributions or the issuance or sale of its
Capital Stock (other than Disqualified Stock) subsequent to the
Issue Date (other than an issuance or sale to a Subsidiary of the
Company);
(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 Subsidiary of the Company) subsequent to
the Issue Date, of any Indebtedness of the Company or a Restricted
Subsidiary for Capital Stock (other than Disqualified Stock) of the
Company (less the amount of any cash, or the fair value of any
other property,
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distributed by the Company upon such conversion or exchange),
whether pursuant to the terms of such Indebtedness or pursuant to
an agreement with a creditor to engage in an equity for debt
exchange; and
(D) an amount equal to the sum of (x) the net reduction
in Investments in Unrestricted Subsidiaries resulting from the
receipt of dividends, repayments of loans or advances or other
transfers of assets or proceeds from the disposition of Capital
Stock or other distributions or payments, in each case to the
Company or any Restricted Subsidiary from, or with respect to,
interests in Unrestricted Subsidiaries, and (y) the portion
(proportionate to the Company's equity interest in such Subsidiary)
of the fair market value of the net assets of an Unrestricted
Subsidiary at the time such Unrestricted Subsidiary is designated a
Restricted Subsidiary; provided, however, that the foregoing sum
shall not exceed, in the case of any Unrestricted Subsidiary, the
amount of Investments previously made (and treated as a Restricted
Payment) by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary subsequent to the Issue Date.
(b) The provisions of Section 4.4(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 (A) Disqualified Stock or (B) Capital Stock
issued or sold to a Subsidiary of the Company) or out of the proceeds of
a substantially concurrent capital contribution to the Company;
provided, however, that (x) such purchase, capital contribution or
redemption shall be excluded in the calculation of the amount of
Restricted Payments and (y) the Net Cash Proceeds from such sale of
Capital Stock or capital contribution shall be excluded from Section
4.4(a)(iii)(B);
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations made by
exchange for, or out of the net proceeds of the substantially concurrent
sale of, Indebtedness of the Company which is permitted to be Incurred
pursuant to Section 4.3; provided, however, that such purchase,
repurchase, redemption, defeasance or other acquisition or retirement
for value shall be excluded in the calculation of the amount of
Restricted Payments;
(iii) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend would
have complied with Section 4.4(a); provided, however, that such dividend
shall be included in the calculation of the amount of Restricted
Payments;
(iv) for so long as the Company is a partnership or
substantially similar pass-through entity for Federal income tax
purposes, the making of Permitted Quarterly Tax
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Distributions in compliance with this Section; provided, however, that
such distributions shall be excluded in the calculation of the amount of
Restricted Payments; and
(v) the repurchase of Capital Stock of the Company from
directors, officers or employees of the Company pursuant to the terms of
an employee benefit plan or employment or other agreement; provided that
the aggregate amount of all such repurchases shall not exceed $1 million
in any fiscal year, and $5 million in the aggregate.
(c) For so long as the Company is a partnership or substantially
similar pass-through entity for Federal income tax purposes, the Company may
make cash distributions to its members, during each Quarterly Payment Period,
in an aggregate amount not to exceed the Permitted Quarterly Tax Distribution
in respect of the related Estimation Period. If any portion of a Permitted
Quarterly Tax Distribution is not distributed during such Quarterly Payment
Period, the Permitted Quarterly Tax Distribution payable during the
immediately following Quarterly Payment Period shall be increased by such
undistributed portion.
Within 10 days following the Company's filing of Internal Revenue
Service Form 1065 for the immediately preceding taxable year, the Tax Amounts
CPA shall file with the Trustee a written statement indicating in reasonable
detail the calculation of the True-Up Amount. In the case of a True-Up Amount
due to the members, the Permitted Quarterly Tax Distribution payable during
the immediately following Quarterly Payment Period shall be increased by such
True-Up Amount. In the case of a True-Up Amount due to the Company, the
Permitted Quarterly Tax Distribution payable during the immediately following
Quarterly Payment Period shall be reduced by such TrueUp Amount and the
excess, if any, of the True-Up Amount over such Permitted Quarterly Tax
Distribution shall be applied to reduce the immediately following Permitted
Quarterly Tax Distributions until such True-Up Amount is entirely offset.
SECTION 4.5 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 on its
Capital Stock to the Company or a Restricted Subsidiary or pay any
Indebtedness owed to the Company, (b) make any loans or advances to the
Company or (c) transfer any of its property or assets to the Company, except:
(i) any encumbrance or restriction pursuant to the Bank
Facility or any other agreement in effect at 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
Indebtedness Incurred by such Restricted Subsidiary on or prior to the
date on which such Restricted Subsidiary was acquired by the Company
(other than Indebtedness Incurred as consideration in, or to provide all
or any portion of the
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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) and outstanding on such date;
(iii) any encumbrance or restriction pursuant to an agreement
effecting Refinancing Indebtedness Incurred pursuant to an agreement
referred to in clause (i) or (ii) of this Section 4.5 or this clause
(iii) or contained in any amendment to an agreement referred to in
clause (i) or (ii) of this Section 4.5 or this clause (iii); provided,
however, that the encumbrances and restrictions with respect to any such
Restricted Subsidiary contained in any such refinancing agreement or
amendment are no less favorable to the Noteholders than encumbrances and
restrictions with respect to such Restricted Subsidiary contained in
such agreements;
(iv) any such encumbrance or restriction consisting of
customary non-assignment provisions in leases to the extent such
provisions restrict the subletting, assignment or transfer of the lease
or the property leased thereunder or in purchase money financings;
(v) in the case of Section 4.5(c), 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;
(vi) encumbrances or restrictions imposed by operation of any
applicable law, rule, regulation or order; and
(vii) any 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.
SECTION 4.6 Limitation on Sales of Assets and Subsidiary Stock.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, sell, lease, transfer or otherwise
dispose of the Escrowed Property other than in accordance with the Escrow
Agreement and the Escrow Security Agreement. The Company shall not, and shall
not permit any Restricted Subsidiary to, directly or indirectly, consummate
any Asset Disposition of property other than the Escrowed Property, unless
(i) the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Disposition at least equal to
the fair market value (including the value of all non-cash
consideration), as determined in good faith by the Board of Directors,
of the shares and assets subject to such Asset Disposition, and at least
85% of the consideration
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thereof received by the Company or such Restricted Subsidiary is in the
form of cash or cash equivalents and
(ii) an amount equal to 100% of the Net Available Cash from
such Asset Disposition is applied by the Company (or such Restricted
Subsidiary, as the case may be) (A) First, to either (i) prepay, repay,
redeem or purchase (and permanently reduce the commitments under)
Indebtedness under the Bank Facility or that is otherwise secured by its
assets subject to such Asset Disposition within 180 days from the date
of the receipt of such Net Available Cash (the "Receipt Date") or (ii)
to the extent the Company elects, to acquire Additional Assets within
180 days from the Receipt Date; (B) Second, to the extent of the balance
of such Net Available Cash after application in accordance with clause
(A), to make an offer pursuant to paragraph (b) below to the Holders to
purchase Notes pursuant to and subject to the conditions contained in
this Indenture; and (C) Third, to the extent of the balance of such Net
Available Cash after application in accordance with clauses (A) or (B)
to any other application or use not prohibited by this Indenture.
Notwithstanding the foregoing provisions of this paragraph, the Company
and the Restricted Subsidiaries shall not be required to apply the Net
Available Cash in accordance with this paragraph except to the extent
that the aggregate Net Available Cash from all Asset Dispositions which
is not applied in accordance with this paragraph exceeds $5 million (at
which time, the entire unutilized Net Available Cash, and not just the
amount in excess of $5 million, shall be applied pursuant to this
paragraph). Pending application of Net Available Cash pursuant to this
Section, such Net Available Cash shall be invested in Permitted
Investments.
For the purposes of this Section, the following are deemed to be cash or
cash equivalents: (x) the express assumption of Indebtedness of the Company
or any Restricted Subsidiary and the release of the Company or such
Restricted Subsidiary from all liability on such Indebtedness in connection
with such Asset Disposition and (y) securities received by the Company or any
Restricted Subsidiary from the transferee that are converted by the Company
or such Restricted Subsidiary into cash within 90 days of closing the
transaction.
(b) In the event of an Asset Disposition that requires the purchase
of the Notes pursuant to clause (a)(ii)(B) above, the Company will be
required to purchase Notes tendered pursuant to an offer (an "Asset
Disposition Offer") by the Company for the Notes at a purchase price of 100%
of their principal amount plus accrued but unpaid interest in accordance with
the procedures (including prorating in the event of oversubscription) set
forth in Section 4.6(c). If the aggregate purchase price of Notes tendered
pursuant to such offer is less than the Net Available Cash allotted to the
purchase thereof, the Company will be required to apply the remaining Net
Available Cash in accordance with clause (a)(ii)(C) above. The Company shall
not be required to make such an offer to purchase Notes pursuant to this
Section if the Net Available Cash available therefor is less than $5 million
(which lesser amount shall be carried forward for purposes of determining
whether such an offer is required with respect to any subsequent Asset
Disposition).
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(c) Promptly, and in any event within 30 days after the Issuers
become obligated to make an Asset Disposition Offer, the Issuers shall be
obligated to deliver to the Trustee and send, by first-class mail to each
Holder, at the address appearing in the Note Register, a written notice
stating that the Holder may elect to have his Notes purchased by the Issuers
either in whole or in part (subject to prorationing as hereinafter described
in the event the Asset Disposition Offer is oversubscribed) in integral
multiples of $1,000 of principal amount, at the applicable purchase price.
The notice, which shall govern the terms of the Asset Disposition Offer,
shall include such disclosures as are required by law and shall specify (i)
that the Asset Disposition Offer is being made pursuant to this Section 4.6;
(ii) the purchase price (including the amount of accrued interest, if any)
for each Note and the purchase date not less than 30 days nor more than 60
days after the date of such notice (the "Asset Disposition Purchase Date");
(iii) that any Note not tendered or accepted for payment will continue to
accrue interest in accordance with the terms thereof; (iv) that, unless the
Issuers default on making the payment, any Note accepted for payment pursuant
to the Asset Disposition Offer shall cease to accrue interest on and after
the Asset Disposition Purchase Date; (v) that Noteholders electing to have
Notes purchased pursuant to an Asset Disposition Offer will be required to
surrender their Notes to the Paying Agent at the address specified in the
notice at least three business days prior to the Asset Disposition Purchase
Date and must complete any form letter of transmittal proposed by the Issuers
and acceptable to the Trustee and the Paying Agent; (vi) that Noteholders
will be entitled to withdraw their election if the Paying Agent receives, not
later than one business day prior to the Asset Disposition Purchase Date, a
tested telex, facsimile transmission or letter setting forth the name of the
Noteholder, the principal amount of Notes the Noteholder delivered for
purchase, the Note certificate number (if any) and a statement that such
Noteholder is withdrawing its election to have such Notes purchased; (vii)
that if Notes in a principal amount in excess of the aggregate principal
amount which the Issuers has offered to purchase are tendered pursuant to the
Asset Disposition Offer, the Issuers shall purchase Notes on a pro rata basis
among the Notes tendered (with such adjustments as may be deemed appropriate
by the Issuers so that only Notes in denominations of $1,000 or integral
multiples of $1,000 shall be acquired); (viii) that Noteholders whose Notes
are purchased only in part will be issued new Notes equal in principal amount
to the unpurchased portion of the Notes surrendered; and (ix) the
instructions that Note holders must follow in order to tender their Notes.
(d) Not later than the date upon which written notice of an Asset
Disposition Offer is delivered to the Trustee as provided below, the Issuers
shall deliver to the Trustee an Officers' Certificate as to (i) the amount of
the Asset Disposition Offer (the "Asset Disposition Offer Amount"), (ii) the
allocation of the Net Available Cash from the Asset Dispositions pursuant to
which such Asset Disposition Offer is being made and (iii) the compliance of
such allocation with the provisions of Section 4.6(a). Upon the expiration of
the period for which the Asset Disposition Offer remains open (the "Asset
Disposition Offer Period"), the Issuers shall deliver to the Trustee for
cancellation the Notes or portions thereof which have been properly tendered
to and are to be accepted by the Issuers. Not later than 11:00 a.m. (New York
City time) on the Asset Disposition Purchase Date, the Issuers shall
irrevocably deposit with the Trustee or with a paying agent (or, if the
Issuers are acting as Paying Agent, segregate and hold in trust) an amount in
cash sufficient to pay the Asset Disposition Offer Amount for all Notes
properly tendered to and accepted by the
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Issuers. The Trustee shall, on the Asset Disposition Purchase Date, mail or
deliver payment to each tendering Holder in the amount of the purchase price.
(e) Holders electing to have a Note purchased will be required to
surrender the Note, together with all necessary endorsements and other
appropriate materials duly completed, to the Issuers at the address specified
in the notice at least three Business Days prior to the Asset Disposition
Purchase Date. Holders will be entitled to withdraw their election in whole
or in part if the Trustee or the Issuers receives not later than one Business
Day prior to the Asset Disposition Purchase Date, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the Note
(which shall be $1,000 or an integral multiple thereof) which was delivered
for purchase by the Holder, the aggregate principal amount of such Note (if
any) that remains subject to the original notice of the Asset Disposition
Offer and that has been or will be delivered for purchase by the Issuers and
a statement that such Holder is withdrawing his election to have such Note
purchased. If at the expiration of the Asset Disposition Offer Period the
aggregate principal amount of Notes surrendered by Holders exceeds the Asset
Disposition Offer Amount, the Issuers shall select the Notes to be purchased
on a pro rata basis (with such adjustments as may be deemed appropriate by
the Issuers so that only securities in denominations of $1,000, or integral
multiples thereof, shall be purchased). Holders whose Notes are purchased
only in part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered.
(f) A Note shall be deemed to have been accepted for purchase at
the time the Trustee, directly or through an agent, mails or delivers payment
therefor to the surrendering Holder.
(g) 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 repurchase of Notes pursuant to
this Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.6 by virtue
thereof.
SECTION 4.7 Limitation on Transactions with Affiliates.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, enter into any transaction (including the purchase, sale,
lease or exchange of any property or the rendering of any service) with any
Affiliate of the Company other than the Company or a Restricted Subsidiary
(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 a comparable 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 $1 million, (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, or such Restricted Subsidiary as the
case may be, having no material personal financial stake in such Affiliate
Transaction, and (3) if such Affiliate Transaction involves an amount in
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excess of $5 million, have been determined by a nationally recognized
investment banking firm to be fair, from a financial standpoint, to the
Company or its Restricted Subsidiary, as the case may be.
(b) The foregoing provisions of Section 4.7(a) shall not prohibit
(i) any Permitted Investment or Restricted Payment permitted to be made
pursuant to Section 4.4, or any payment or transaction specifically excepted
from the definition of Restricted Payment, (ii) any issuance of securities,
or other payments, awards or grants in cash, securities or otherwise pursuant
to, or the funding of, employment arrangements, stock options, stock
ownership or other employee benefit plans, and approved by the Board of
Directors of the Company, (iii) the grant of stock options or similar rights
to employees and directors pursuant to plans approved by the Board of
Directors of the Company, (iv) loans or advances to officers, directors or
employees in the ordinary course of business or pursuant to compensation
plans or employment agreements approved by the Board of Directors of the
Company, in an aggregate amount not to exceed $1 million in any calendar
year, (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, (vi) any transaction between the Company and a
Wholly Owned Restricted Subsidiary or between Wholly Owned Restricted
Subsidiaries, (vii) management and administrative services agreements in
effect on the Issue Date that are disclosed in the Offering Memorandum
relating to the Notes under the caption "Certain Relationships and Certain
Transactions" and any amendments thereto (so long as any such amendment is
not more disadvantageous to the holders of the Notes in any material respect
than the original agreement as in effect on the Issue Date and complies with
clause (a)(1) above).
SECTION 4.8 Right to Require Repurchase upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder shall
have the right to require that the Issuers repurchase such Holder's Notes at
a purchase price in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of repurchase (subject to
the right of Holders of record on the relevant record date to receive
interest due on the related Interest Payment Date), in accordance with the
terms contemplated in Section 4.8(b).
(b) Within 30 days following any Change of Control, unless notice
of redemption of the Notes has been given pursuant to paragraph 5 of the
Notes, the Issuers shall mail a notice to each Holder with a copy to the
Trustee stating:
(1) that a Change of Control has occurred and that such Holder
has the right to require the Issuers 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, if any, to the date of purchase
(subject to the right of Holders of record on a record date to receive
interest on the relevant Interest Payment Date);
(2) the circumstances and relevant facts regarding such Change
of Control;
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(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 the Issuers, consistent
with this Section, that a Holder must follow in order to have its Notes
repurchased.
(c) Holders electing to have a Note purchased will be required to
surrender the Note, together with all necessary endorsements and other
appropriate materials duly completed, to the Issuers at the address specified
in the notice at least three Business Days prior to the purchase date.
Holders will be entitled to withdraw their election if the Trustee or the
Issuers receives not later than one Business Day prior to the purchase date,
a facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Note which was delivered for purchase by the Holder
as to which such notice of withdrawal is being submitted and a statement that
such Holder is withdrawing his election to have such Note purchased.
(d) On the purchase date, all Notes purchased by the Issuers under
this Section shall be delivered to the Trustee for cancellation, and the
Issuers shall pay the purchase price plus accrued and unpaid interest, if
any, to the Holders entitled thereto.
(e) The Issuers 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 pursuant to
this Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Issuers shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached their obligations under this Section by virtue
thereof.
(f) Notwithstanding the occurrence of a Change of Control, the
Issuers shall not be obligated to repurchase the Notes or otherwise comply
with this Section if the Issuers have irrevocably elected to redeem all the
Notes in accordance with Article Three; provided, however, that the Issuers
do not default in their redemption obligations pursuant to such election.
SECTION 4.9 Compliance Certificate.
(a) The Issuers shall deliver to the Trustee within 120 days after
the end of each fiscal year of the Issuers an Officers' Certificate for each
Issuer, one of the signers of each such Officer's Certificate shall be the
principal executive, financial or accounting officer of the Company or
Finance, as the case may be, stating that in the course of the performance by
the signers of their duties as Officers of the Issuers they would normally
have knowledge of any Default and whether or not the signers know of any
Default that occurred during the previous year. If they do, the certificate
shall describe the Default, its status and what action the Issuers are taking
or propose to take with respect thereto. The Issuers also shall comply with
TIA Section 314(a)(4).
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(b) The Issuers shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any
Default, an Officers' Certificate specifying such Default and what action the
Company is taking or proposes to take with respect thereto.
SECTION 4.10 Right to Require Repurchase Upon Contract Termination.
(a) In the event a Construction Contract is terminated (a "Contract
Termination") prior to the Delivery Date of the related Rig, each Holder
shall have the right to require that the Issuers repurchase the Allocated
Principal Amount of such Holder's Notes at a purchase price equal to 101% of
the principal amount thereof, plus accrued and unpaid interest up to and
including the date of repurchase (subject to the right of a Holder of record
on the relevant record date to receive interest due on the relevant Interest
Payment Date), on a payment date no later than 90 days after the termination
of such Construction Contract(s).
(b) Within 30 days following any Contract Termination, unless
notice of redemption of the Notes has been given pursuant to the provisions
of this Indenture described under Section 3.1 above, the Issuers shall mail a
notice to the Trustee and to each Holder stating:
(1) that a Contract Termination has occurred and that such
Holder has the right to require the Issuers to repurchase such Holder's
Notes at a purchase price in cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of
purchase (subject to the right of holders of record on the relevant
record date to receive interest on the relevant Interest Payment Date);
(2) the circumstances and relevant facts regarding such
Contract Termination;
(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 the Issuers, consistent
with this Section, that a Holder must follow in order to have its Notes
repurchased.
(c) Holders electing to have a Note purchased will be required to
surrender the Note, together with all necessary endorsements and other
appropriate materials duly completed, to the Issuers at the address specified
in the notice at least three Business Days prior to the purchase date.
Holders will be entitled to withdraw their election if the Trustee or the
Issuers receives not later than one Business Day prior to the purchase date,
a facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Note (which shall be $1,000 or an integral multiple
thereof) which was delivered for purchase by the Holder as to which such
notice of withdrawal is being submitted and a statement that such Holder is
withdrawing his election to have such Note purchased.
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(d) On the purchase date, all Notes purchased by the Issuers under
this Section shall be delivered to the Trustee for cancellation, and the
Issuers shall pay the purchase price plus accrued and unpaid interest, if
any, to the Holders entitled thereto.
(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 repurchase of Notes pursuant to
this Section. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the covenant described hereunder,
the Company shall comply with the applicable securities laws and regulations
and shall not be deemed to have breached its obligations under this Section
by virtue thereof.
SECTION 4.11 Limitation on Liens.
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, create or permit to exist any Lien upon any of
its property or assets, now owned or hereafter acquired, securing any
obligation unless concurrently with the creation of such Lien effective
provision is made to secure the Notes and the Subsidiary Guarantees equally
and ratably with such obligation for so long as such obligation is so
secured; provided, however, that, if such obligation is a Subordinated
Obligation, the Lien securing such obligation shall be subordinated and
junior to the Lien securing the Notes and the Subsidiary Guarantees with the
same or lesser relative priority as such Subordinated Obligation shall have
been with respect to the Notes and the Subsidiary Guarantees. The preceding
restriction shall not require the Company or any Restricted Subsidiary to
secure the Notes or the Subsidiary Guarantees if the Lien consists of the
following:
(a) Liens created by this Indenture and the Escrow Security
Agreement;
(b) Liens under the Bank Facility;
(c) Liens existing as of the Issue Date;
(d) Permitted Liens;
(e) Liens to secure Indebtedness issued by the Company or a
Restricted Subsidiary for the purpose of financing all or a part of the
purchase price of assets or property acquired or constructed in the ordinary
course of business after the Issue Date; provided, however, that (i) the
aggregate principal amount (or accreted value in the case of Indebtedness
issued at a discount) of Indebtedness so issued shall not exceed the lesser
of the cost or fair market value, as determined in good faith by the Board of
Directors of the Company, of the assets or property so acquired or
constructed, (ii) the Indebtedness secured by such Liens shall have been
permitted to be Incurred under Section 4.3 and (iii) such Liens shall not
encumber any other assets or property of the Company or any of its Restricted
Subsidiaries other than such assets or property or any improvement on such
assets or property and shall attach to such assets or property within 90 days
of the construction or acquisition of such assets or property;
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(f) Liens on the assets or property of a Restricted Subsidiary
existing at the time such Restricted Subsidiary becomes a Restricted
Subsidiary and not issued as a result of (or in connection with or in
anticipation of) such Restricted Subsidiary becoming a Restricted Subsidiary;
provided, however, that such Liens do not extend to or cover any other
property or assets of the Company or any of its other Restricted
Subsidiaries; or
(g) Liens securing Indebtedness issued to Refinance Indebtedness
which has been secured by a Lien permitted under this Indenture and is
permitted to be Refinanced under this Indenture; provided, however, that such
Liens do not extend to or cover any property or assets of the Company or any
of its Restricted Subsidiaries not securing the Indebtedness so Refinanced.
SECTION 4.12 Limitation on Sale/Leaseback Transactions.
The Company shall not, and shall not permit any Restricted Subsidiary
to, enter into any Sale/Leaseback Transaction with respect to any property
unless (i) the Company or such Restricted Subsidiary would be (A) in
compliance with Section 4.3 immediately after giving effect to such
Sale/Leaseback Transaction and (B) entitled to create a Lien on such property
securing the Attributable Debt with respect to such Sale/Leaseback
Transaction without securing the Notes pursuant to Section 4.11, (ii) the net
proceeds received by the Company or any Restricted Subsidiary in connection
with such Sale/Leaseback Transaction are at least equal to the fair market
value (as determined by the Board of Directors of the Company) of such
property and (iii) the Company or such Restricted Subsidiary applies the
proceeds of such transaction in compliance with Section 4.6.
SECTION 4.13 Limitation on Sale or Issuance of Capital Stock of Restricted
Subsidiaries.
The Company shall not sell or otherwise dispose of any shares of Capital
Stock of a Restricted Subsidiary, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of
any shares of its Capital Stock to any Person (other than to the Company or a
Wholly Owned Subsidiary) or permit any Person (other than the Company or a
Wholly Owned Subsidiary) to own any Capital Stock of a Restricted Subsidiary,
if in either case as a result thereof such Restricted Subsidiary would no
longer be a Restricted Subsidiary; provided, however, that this provision
shall not prohibit (x) the Company or any Restricted Subsidiary from selling,
leasing or otherwise disposing of all of the Capital Stock of any Restricted
Subsidiary or (y) the designation of a Restricted Subsidiary as an
Unrestricted Subsidiary in compliance with this Indenture. The foregoing
shall not apply to any Lien granted on the Capital Stock of a Restricted
Subsidiary.
SECTION 4.14 Payment of Taxes and Other Claims.
The Issuers shall, and shall cause each of their Restricted Subsidiaries
to, pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, all taxes, assessments and governmental charges levied or
imposed upon a Restricted Subsidiary's income, profits or property; provided,
however, that neither the Issuers nor any of their Subsidiaries shall be
required
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to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate negotiations or proceedings and for
which disputed amounts adequate reserves have been made in accordance with
GAAP.
SECTION 4.15 Maintenance of Office or Agency.
The Issuers shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office or agency of the Trustee,
Registrar or co-Registrar), where Notes may be surrendered for registration
of transfer or exchange or for presentation for payment and where notices and
demands to or upon the Issuers in respect of the Notes and this Indenture may
be served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Issuers 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
address of the Trustee's office in New York City as set forth in Section 12.2.
The Issuers may also from time to time designate one or more other
offices or agencies where the 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 Issuers of their respective obligations to maintain an office or
agency in the Borough of Manhattan, the City of New York, for such purposes.
The Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency. The Issuers hereby initially designate the Trustee's office
in New York City as set forth in Section 12.2 as an agency of the Issuers in
accordance with Section 2.3.
SECTION 4.16 Corporate Existence.
Subject to Article 5 and Section 4.6, the Issuers shall do or cause to
be done, at their own cost and expense, all things necessary to, and will
cause each of their Restricted Subsidiaries to, preserve and keep in full
force and effect the corporate, limited liability company or partnership
existence and rights (charter and statutory), licenses and/or franchises of
the Issuers and each of their Restricted Subsidiaries; provided, however,
that the Issuers or any of their Restricted Subsidiaries shall not be
required to preserve any such rights, licenses or franchises if the Board of
Directors of the Company shall reasonably determine that the preservation
thereof is no longer desirable in the conduct of the business of the Issuers
and the Restricted Subsidiaries, taken as a whole.
SECTION 4.17 Future Subsidiary Guarantors.
The Company shall cause each Restricted Subsidiary that is organized and
existing under the laws of any State of the United States or the District of
Columbia and that at any time becomes an obligor or guarantor with respect to
any obligations under the Bank Facility to execute and deliver to the Trustee
a supplemental indenture pursuant to which such Restricted Subsidiary will
Guarantee
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payment of the Notes on the same terms and conditions as those set forth in
this Indenture. 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 such Subsidiary Guarantee
voidable under applicable law relating to fraudulent conveyance or fraudulent
transfer or similar laws affecting the rights of creditors generally.
SECTION 4.18 Application of Event of Loss Proceeds.
(a) If an Event of Loss occurs at any time with respect to a Rig
(the Rig suffering such Event of Loss being the "Lost Rig"), the Company
shall apply an amount equal to 100% of the Event of Loss Proceeds from such
Event of Loss received by the Company (or such Restricted Subsidiary, as the
case may be) (i) First, to either (A) prepay, repay, redeem or purchase (and
permanently reduce the commitments under) Indebtedness under the Bank
Facility or that is otherwise secured by the Rig subject to such Event of
Loss within 180 days from the date of the receipt of such Event of Loss
Proceeds (the "Loss Receipt Date") or (B) to the extent the Company elects,
to acquire a Qualified Substitute Rig within 180 days from the Loss Receipt
Date; (ii) Second, to the extent of the balance of such Event of Loss
Proceeds after application in accordance with clause (i), to make an offer
pursuant to paragraph (b) below to the Holders to purchase Notes pursuant to
and subject to the conditions contained in this Indenture; and (iii) Third,
to the extent of the balance of such Event of Loss Proceeds after application
in accordance with clauses (i) or (ii) to any other application or use not
prohibited by this Indenture. Pending application of Event of Loss Proceeds
pursuant to this Section, such Event of Loss Proceeds shall be invested in
Permitted Investments.
(b) In the event of an Event of Loss that requires the purchase of
the Notes pursuant to clause (a)(ii) above, the Issuers will be required to
purchase Notes tendered pursuant to an offer (an "Event of Loss Offer") by
the Issuers for the Notes at a purchase price of 101% of their principal
amount plus accrued but unpaid interest in accordance with the procedures
(including prorating in the event of oversubscription) set forth in this
Indenture. If the aggregate purchase price of Notes tendered pursuant to such
offer is less than the Event of Loss Proceeds allotted to the purchase
thereof, the Issuers will be required to apply the remaining Event of Loss
Proceeds in accordance with clause (a)(iii) above.
(c) Promptly, and in any event within 30 days after the Issuers
become obligated to make an Event of Loss Offer, the Issuers shall be
obligated to deliver to the Trustee and send, by first-class mail to each
Holder, at the address appearing in the Note Register, a written notice
stating that the Holder may elect to have his Notes purchased by the Issuers
either in whole or in part (subject to prorationing as hereinafter described
in the event the Event of Loss Offer is oversubscribed) in integral multiples
of $1,000 of principal amount, at the applicable purchase price. The notice,
which shall govern the terms of the Event of Loss Offer, shall include such
disclosures as are required by law and shall specify (i) that the Event of
Loss Offer is being made pursuant to this Section 4.18; (ii) the purchase
price (including the amount of accrued interest, if any) for each Note and
the purchase date not less than 30 days nor more than 60 days after the date
of such notice
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(the "Event of Loss Purchase Date"); (iii) that any Note not tendered or
accepted for payment will continue to accrue interest in accordance with the
terms thereof; (iv) that, unless the Issuers default on making the payment,
any Note accepted for payment pursuant to the Event of Loss Offer shall cease
to accrue interest on and after the Event of Loss Purchase Date; (v) that
Noteholders electing to have Notes purchased pursuant to an Event of Loss
Offer will be required to surrender their Notes to the Paying Agent at the
address specified in the notice at least three business days prior to the
Event of Loss Purchase Date and must complete any form letter of transmittal
proposed by the Issuers and acceptable to the Trustee and the Paying Agent;
(vi) that Noteholders will be entitled to withdraw their election if the
Paying Agent receives, not later than one business day prior to the Event of
Loss Purchase Date, a tested telex, facsimile transmission or letter setting
forth the name of the Noteholder, the principal amount of Notes the
Noteholder delivered for purchase, the Note certificate number (if any) and a
statement that such Noteholder is withdrawing its election to have such Notes
purchased; (vii) that if Notes in a principal amount in excess of the
aggregate principal amount which the Issuers has offered to purchase are
tendered pursuant to the Event of Loss Offer, the Issuers shall purchase
Notes on a pro rata basis among the Notes tendered (with such adjustments as
may be deemed appropriate by the Issuers so that only Notes in denominations
of $1,000 or integral multiples of $1,000 shall be acquired); (viii) that
Noteholders whose Notes are purchased only in part will be issued new Notes
equal in principal amount to the unpurchased portion of the Notes
surrendered; and (ix) the instructions that Noteholders must follow in order
to tender their Notes.
(d) Not later than the date upon which written notice of an Event
of Loss Offer is delivered to the Trustee as provided below, the Issuers
shall deliver to the Trustee an Officers' Certificate as to (i) the amount of
the Event of Loss Offer (the "Event of Loss Offer Amount"), (ii) the
allocation of the Net Available Cash from the Event of Loss pursuant to which
such Event of Loss Offer is being made and (iii) the compliance of such
allocation with the provisions of Section 4.18(a). Upon the expiration of the
period for which the Event of Loss Offer remains open (the "Event of Loss
Offer Period"), the Issuers shall deliver to the Trustee for cancellation the
Notes or portions thereof which have been properly tendered to and are to be
accepted by the Issuers. Not later than 11:00 a.m. (New York City time) on
the Event of Loss Purchase Date, the Issuers shall irrevocably deposit with
the Trustee or with a paying agent (or, if the Issuers is acting as Paying
Agent, segregate and hold in trust) an amount in cash sufficient to pay the
Event of Loss Offer Amount for all Notes properly tendered to and accepted by
the Issuers. The Trustee shall, on the Event of Loss Purchase Date, mail or
deliver payment to each tendering Holder in the amount of the purchase price.
(e) Holders electing to have a Note purchased will be required to
surrender the Note, together with all necessary endorsements and other
appropriate materials duly completed, to the Issuers at the address specified
in the notice at least three Business Days prior to the Event of Loss
Purchase Date. Holders will be entitled to withdraw their election in whole
or in part if the Trustee or the Issuers receives not later than one Business
Day prior to the Event of Loss Purchase Date, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the Note
(which shall be $1,000 or an integral multiple thereof) which was delivered
for purchase
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by the Holder, the aggregate principal amount of such Note (if any) that
remains subject to the original notice of the Event of Loss Offer and that
has been or will be delivered for purchase by the Issuers and a statement
that such Holder is withdrawing his election to have such Note purchased. If
at the expiration of the Event of Loss Offer Period the aggregate principal
amount of Notes surrendered by Holders exceeds the Event of Loss Offer
Amount, the Issuers shall select the Notes to be purchased on a pro rata
basis (with such adjustments as may be deemed appropriate by the Issuers so
that only securities in denominations of $1,000, or integral multiples
thereof, shall be purchased). Holders whose Notes are purchased only in part
will be issued new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered.
(f) A Note shall be deemed to have been accepted for purchase at
the time the Trustee, directly or through an agent, mails or delivers payment
therefor to the surrendering Holder.
(g) The Issuers 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 pursuant to
this Section. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this clause by virtue thereof.
SECTION 4.19 Insurance.
The Company shall, or shall cause the Restricted Subsidiary owning a
drilling rig or drilling rigs to, carry and maintain with respect to each Rig
owned by it insurance payable in United States Dollars in amounts, against
risks (including marine hull and machinery (including excess value)
insurance, marine protection and indemnity insurance, war risks insurance and
liability insurance and liability arising out of pollution and the spillage
or leakage of cargo and cargo liability insurance) 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 similar to
the Rigs and with insurance companies, underwriters, funds, mutual insurance
associations or clubs of recognized standing. No insurance shall provide for
a deductible in excess of $1,000,000 per occurrence. No insurance policy
shall be subject to lapse without at least seven Business Days' prior notice
to the Trustee.
For purposes of insurance against total loss, each drilling rig is to be
insured for an amount not less than the fair market value (as determined in
good faith by the Board of Directors of the Company) and not less, when
aggregated with the insurance on the other drilling rigs, than the
outstanding principal amount of the Notes, Indebtedness under the Bank
Facility and any other pari passu Indebtedness, in each case together with
premium, if any, and accrued interest thereon.
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SECTION 4.20 Impairment of Security Interest in Collateral.
The Company shall not, and shall not permit any Restricted Subsidiary
to, take or knowingly omit to take, any action which action or omission might
or would have the result of materially impairing the security interest with
respect to the Collateral (as defined in the Escrow Security Agreement) for
the benefit of the Collateral Agent, the Trustee and the Holders of the
Notes, and the Company shall not, and shall not permit any Restricted
Subsidiary to, grant to any Person other than the Collateral Agent, for the
benefit of the Collateral Agent, the Trustee and the Holders of the Notes,
any interest whatsoever in any of the Collateral.
SECTION 4.21 Deposit of Funds with Escrow Agent.
The Issuers shall initially place that portion of the net proceeds
realized from the Offering in the Interest Escrow Account held by the Escrow
Agent for the benefit of the Holders of the Notes in cash as will be
sufficient to pay in full the first two scheduled interest payments due on
the Notes. The disbursement of such funds shall be governed by the Escrow
Agreement and the Escrow Security Agreement.
The Issuers shall place the balance of the net proceeds realized from
the Offering in the Construction Escrow Account held by the Escrow Agent for
the benefit of the Holders of the Notes in cash. The disbursement of such
funds shall be governed by the Escrow Agreement and the Escrow Security
Agreement.
SECTION 4.22 Amendments to Escrow Agreement and Escrow Security Agreement.
The Company shall not, and shall not permit any Restricted Subsidiary
to, amend, modify or supplement, or permit or consent to any amendment,
modification or supplement of, the Escrow Agreement or the Escrow Security
Agreement in any way that would be adverse to the Holders of the Notes.
SECTION 4.23 Limitation on Business Activities.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, engage to any material extent in any business other than a
Related Business.
SECTION 4.24 Limitation on Finance.
In addition to the restrictions set forth under Section 4.3 above,
Finance may not incur any Indebtedness unless (a) the Company is a co-obligor
and guarantor of such Indebtedness or (b) the net proceeds of such
Indebtedness are lent to the Company, used to acquire outstanding debt
securities issued by the Company or used directly or indirectly to refinance
or discharge Indebtedness permitted under the limitation of this paragraph.
Finance may not engage in any
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business not related directly or indirectly to obtaining money or arranging
financing for the Company.
SECTION 4.25 Further Instruments and Acts.
Upon request of the Trustee, the Issuers will execute and deliver such
further instruments and do such further acts as may be reasonably necessary
or proper to carry out more effectively the purpose of this Indenture.
ARTICLE V
MERGER AND CONSOLIDATION
SECTION 5.1 Merger and Consolidation.
Neither of the Issuers shall consolidate with or merge with or into, or
convey, transfer or lease, in one transaction or a series of transactions,
its assets substantially as an entirety to, any Person, unless:
(i) the resulting, surviving or transferee Person (the
"Successor Company") shall be a Person organized and existing under the
laws of the United States of America, any State thereof or the District
of Columbia, and the Successor Company (if not the Company or Finance,
as the case may be) shall expressly assume, by a supplemental indenture,
executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company or Finance, as the case may
be, under the Notes, this Indenture, the Escrow Agreement and the Escrow
Security Agreement;
(ii) immediately after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Restricted Subsidiary as a result of such transaction as
having been Incurred by such Successor Company or such Subsidiary at the
time of such transaction), no Default shall have occurred and be
continuing;
(iii) in the case of the Company, immediately after giving
effect to such transaction, the Successor Company would be able to Incur
an additional $1.00 of Indebtedness pursuant to paragraph (a) of Section
4.3;
(iv) in the case of the Company, immediately after giving
effect to such transaction, the Successor Company shall have
Consolidated Net Worth in an amount that is not less than the
Consolidated Net Worth of the Company prior to such transaction, minus
any costs incurred in connection with such transaction; and
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(v) the Company or Finance, as the case may be, shall have
delivered to the Trustee an officer's certificate and an opinion of
counsel, each stating that such consolidation, merger or transfer and
such supplemental indenture (if any) comply with this Indenture.
The Successor Company shall be the successor to the Company or Finance,
as the case may be, and shall succeed to, and be substituted for, and may
exercise every right and power of, the Company or Finance, as the case may
be, under this Indenture, but the predecessor company, only in the case of a
conveyance, transfer or lease, shall not be released from the obligation to
pay the principal of and interest on the Notes.
Notwithstanding the foregoing, (a) any Restricted Subsidiary may
consolidate or merge with, or transfer its assets substantially as an
entirety to, the Issuers and (b) the Issuers may consolidate or merge with,
or transfer their assets substantially as an entirety to, an Affiliate solely
for the purpose of effecting a Corporate Conversion, provided that, in either
case, the requirements set forth in clauses (i) and (v) of the first
paragraph of this Section are complied with.
ARTICLE VI
DEFAULTS AND REMEDIES
SECTION 6.1 Events of Default.
An "Event of Default" occurs if:
(i) the Issuers default in the payment of interest on the
Notes when due, and such default continues for a period of 30 days;
(ii) the Issuers default in the payment of the principal of
any Note when due at its Stated Maturity, upon optional redemption, upon
required repurchase, upon acceleration or otherwise;
(iii) the Issuers fail to comply with Section 5.1;
(iv) the Issuers fail to comply for 30 days after the notice
specified below with Section 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.10, 4.13,
4.17, 4.19, 4.20, 4.21, 4.22, 4.23, 4.24 or 5.1 (other than a failure to
purchase Notes when required under Section 4.8, 4.10 and 4.18);
(v) the Issuers fail to comply for 60 days after the Issuers
receive the notice specified below with any of their other agreements in
this Indenture (other than those referred to in (i), (ii), (iii) or (iv)
above);
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(vi) Indebtedness of the Issuers or any Restricted Subsidiary
is not paid within any applicable grace period after final maturity or
is accelerated by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $10 million or
its foreign currency equivalent at the time;
(vii) The Issuers or any Restricted Subsidiary that is a
Significant Subsidiary of the Issuers pursuant to or within the meaning
of any Bankruptcy Law:
(A) commence a voluntary case;
(B) consent to the entry of an order for relief against
the Issuers or such Subsidiary in an involuntary case in which it
is the debtor;
(C) consent to the appointment of a Custodian of the
Issuers or such Subsidiary or for any substantial part of their
property;
(D) make a general assignment for the benefit of their
creditors;
(E) or take any comparable action under any foreign laws
having a similar effect or purpose as the Bankruptcy Laws;
(viii) a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that:
(A) is for relief against the Issuers or any Significant
Subsidiary of the Issuers in an involuntary case;
(B) appoints a Custodian of the Issuers or any
Significant Subsidiary of the Issuers or for any substantial part
of the property of the Issuers or Significant Subsidiary; or
(C) orders the winding up or liquidation of the Issuers
or any Significant Subsidiary of the Issuers;
(or any similar relief is granted under any foreign laws having a
similar effect or purpose as the Bankruptcy Laws) and the order or
decree remains unstayed and in effect for 60 days; or
(ix) the rendering of any judgment or decree for the payment of
money in excess of $10 million, or its foreign equivalent at the time,
is entered against the Issuers or any Restricted Subsidiary if such
judgment or decree remains outstanding for a period of 60 days following
entry of such judgment and is not discharged, bonded, waived or stayed
within 30 days after notice thereof to the Issuers;
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(x) a Subsidiary Guarantee ceases to be in full force and effect
(other than in accordance with the terms of such Subsidiary Guarantee or
this Indenture) or a Subsidiary Guarantor denies or disaffirms its
obligations under its Subsidiary Guarantees; or
(xi) the security interest under the Escrow Security Agreement
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
Escrow Security Agreement), or any security interest created thereunder
shall be declared invalid or unenforceable, or the Issuers or any
Restricted Subsidiary shall assert, in any pleading in any court of
competent jurisdiction that any such security interest is invalid or
unenforceable.
However, a default under clause (iv) or (v) will not constitute an Event
of Default until the Trustee or the Holders of 25% in principal amount of the
outstanding Notes notify the Issuers of the default and the Issuers do not
cure such default within the time specified after receipt of such notice.
The foregoing will constitute Events of Default whatever the reason for
any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or
governmental body. The term "Bankruptcy Law" means Title 11, United States
Code, as amended, or any similar Federal or state law for the relief of
debtors. The term "Custodian" means any receiver, trustee, assignee,
liquidator, custodian or similar official under any Bankruptcy Law.
SECTION 6.2 Acceleration.
If an Event of Default (other than an Event of Default specified in
Section 6.1(vii) or (viii) with respect to the Issuers) occurs and is
continuing, the Trustee by notice to the Issuers, or the Holders of at least
25% in aggregate principal amount of the outstanding Notes by notice to the
Issuers and the Trustee, may declare the principal of and accrued but unpaid
interest on all the Notes to be due and payable. Upon such a declaration,
such principal and interest shall be due and payable immediately. If an Event
of Default specified in Section 6.1(vii) or (viii) relating to the Issuers
occurs and is continuing, the principal of and interest on all the Notes will
ipso facto become and be immediately due and payable without any declaration
or other act on the part of the Trustee or any Noteholders. The Holders of a
majority in principal amount of the outstanding Notes may by notice to the
Trustee rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of acceleration. 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 or interest on
the Notes or to enforce the performance of any provision of the Notes or this
Indenture.
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The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder 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. No remedy is
exclusive of any other remedy. All available remedies are, to the extent
permitted by law, cumulative.
SECTION 6.4 Waiver of Past Defaults.
The Holders of a majority in principal amount of the outstanding Notes
by notice to the Trustee may waive any past or existing Default and its
consequences or compliance with any provisions of this Indenture except (i) a
Default in the payment of the principal of or interest on a Note or (ii) a
Default in respect of a provision that under Section 9.2 cannot be amended
without the consent of each Noteholder affected. When a Default is waived, it
is deemed cured, and any Event of Default arising therefrom shall be deemed
to have been cured, but no such waiver shall extend to any subsequent or
other Default or impair any consequent right.
SECTION 6.5 Control by Majority.
The Holders of a majority in aggregate principal amount of the Notes
then outstanding may 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. However, the Trustee may refuse to follow
any direction that conflicts with law or this Indenture or, subject to
Section 7.1, that the Trustee determines is unduly prejudicial to the rights
of other Noteholders or would involve the Trustee in personal liability;
provided, however, that the Trustee may take any other action deemed proper
by the Trustee that is not inconsistent with such direction. Prior to taking
any action hereunder, the Trustee shall be entitled to indemnification from
the Noteholders 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.
Subject to the provisions of this 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 this Indenture at the request or direction of any of the Holders unless
such Holders have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to
receive payment of principal, premium (if any) or interest when due, no
Holder of a Note may pursue any remedy with respect to this Indenture or the
Notes unless:
(1) the Holder gives to the Trustee written notice stating
that an Event of Default is continuing;
(2) the Holders of at least 25% in aggregate principal amount
of the Notes then outstanding make a written request to the Trustee to
pursue the remedy;
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(3) such Holder or Holders offer to the Trustee reasonable
security or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of security or
indemnity; and
(5) the Holders of a majority in aggregate principal amount of
the Notes then outstanding do not give the Trustee a direction
inconsistent with the request during such 60-day period.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over another
Noteholder.
SECTION 6.7 Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of principal of and interest on the Notes held by
such Holder, on or after the respective due dates expressed in the Notes, 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.
SECTION 6.8 Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(i) or (ii) occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee
of an express trust against the Issuers for the whole amount then due and
owing (together with interest on any unpaid interest to the extent lawful)
and the amounts provided for in Section 7.7.
SECTION 6.9 Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
and the Noteholders allowed in any judicial proceedings relative to the
Issuers, their creditors or its property and, unless prohibited by law or
applicable regulations, may vote on behalf of the Holders in any election of
a trustee in bankruptcy or other Person performing similar functions, and any
Custodian in any such judicial proceeding is hereby authorized by each Holder
to make payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and its counsel, and
any other amounts due the Trustee under Section 7.7.
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SECTION 6.10 Priorities.
If the Trustee collects any money or property pursuant to this Article
6, it shall pay out the money or property in the following order, subject to
applicable law:
FIRST: to the Trustee for amounts due under Section 7.7;
SECOND: to the Noteholders for amounts due and unpaid on the
Notes for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Notes for principal and interest, respectively; and
THIRD: to the Issuers.
The Trustee may, upon prior written notice to the Issuers, fix a record
date and payment date for any payment to the Noteholders pursuant to this
Section. At least 15 days before such record date, the Issuers shall mail to
each Noteholder and the Trustee a notice that states the record date, the
payment date and amount to be paid.
SECTION 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted
by it as 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 and expenses, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or
defenses made by the party litigant. This Section does not apply to a suit by
the Trustee, a suit by a Holder pursuant to Section 6.7 or a suit by Holders
of more than 10% in aggregate principal amount of the outstanding Notes.
SECTION 6.12 Waiver of Stay or Extension Laws.
The Issuers (to the extent they may lawfully do so) shall not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or
at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Issuers (to the extent that they may
lawfully do so) hereby expressly waive all benefit or advantage of any such
law, and shall not 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 had been enacted.
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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, in the exercise of its the rights and powers vested in it by
this Indenture and use the same degree of care of a prudent Person in the
conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Indenture. However, in the case of any such certificates or opinions
which by any provision hereof are specifically required to be furnished
to the Trustee, 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 liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph
(b) of this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
(d) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b) and (c) of this Section and to
the provisions of the TIA.
(e) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
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(f) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that
repayment of such funds or adequate indemnity against such risk or liability
is not reasonably assured to it.
(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 TIA.
SECTION 7.2 Rights of Trustee.
Subject to Section 7.1,
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute willful misconduct or negligence.
(e) The Trustee may consult with counsel of its selection, and the
advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Notes shall be full and complete authorization and
protection from liability in respect to any action taken, omitted or suffered
by it hereunder in good faith and in accordance with the advice or opinion of
such counsel.
(f) 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 pursuant to this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by it in compliance
with such request or direction.
(g) Except with respect to Section 4.1, the Trustee shall have no
duty to inquire as to the performance of the Issuers's covenants in Article
4. In addition, the Trustee shall not be deemed to have knowledge of any
Default or Event of Default except (i) any Default or Event of
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Default occurring pursuant to Sections 6.1(i), 6.1(ii) and 4.1 or (ii) any
Default or Event of Default of which the Trustee shall have received written
notification or obtained actual knowledge.
SECTION 7.3 Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Issuers or their
respective Affiliates with the same rights it would have if it were not
Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do
the same with like rights. However, the Trustee must comply with Sections
7.10 and 7.11.
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 or the Notes, it shall not be
accountable for the Issuers' use of the proceeds from the Notes, and it shall
not be responsible for any statement of the Issuers in this Indenture or in
any document issued in connection with the sale of the Notes or in the Notes
other than the Trustee's certificate of authentication.
SECTION 7.5 Notice of Defaults.
If a Default occurs and is continuing and is known to the Trustee, the
Trustee shall mail to each Noteholder notice of the Default within 90 days
after it occurs. Except in the case of a Default in payment of principal of
or interest on any Note, the Trustee may withhold the notice if and so long
as the board of directors, the executive committee or a committee of its
Trust Officers in good faith determines that withholding notice is not
opposed to the interests of the Noteholders.
SECTION 7.6 Reports by Trustee to Holders.
As promptly as practicable after each May 15 beginning with the May 15
following the date of this Indenture, and in any event prior to July 15 in
each year, the Trustee shall mail to each Noteholder a brief report dated as
of May 15 that complies with TIA Section 313(a). The Trustee also shall
comply with TIA Section 313(b). Prior to delivery to the Holders, the Trustee
shall deliver to the Issuers a copy of any report it delivers to Holders
pursuant to this Section 7.6.
A copy of each report at the time of its mailing to the Noteholders
shall be filed with the SEC and each stock exchange (if any) on which the
Notes are listed. The Issuers agree to notify promptly the Trustee whenever
the Notes become listed on any stock exchange and of any delisting thereof.
SECTION 7.7 Compensation and Indemnity.
The Issuers shall pay to the Trustee from time to time such reasonable
compensation for its services as the Issuers and the Trustee shall from time
to time agree in writing. The Trustee's compensation shall not be limited by
any law on compensation of a trustee of an express trust. The
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Issuers shall reimburse the Trustee upon request for all reasonable
out-of-pocket expenses incurred or made by it, including costs of collection,
in addition to such compensation for its services, except any such expense,
disbursement or advance as may arise from its negligence, willful misconduct
or bad faith. Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the Trustee's agents, counsel,
accountants and experts. The Trustee shall provide the Issuers reasonable
notice of any expenditure not in the ordinary course of business; provided
that prior approval by the Issuers of any such expenditure shall not be a
requirement for the making of such expenditure nor for reimbursement by the
Issuers thereof. The Issuers shall indemnify each of the Trustee and any
predecessor Trustees against any and all loss, damage, claim, liability or
expense (including attorneys' fees and expenses) (other than taxes applicable
to the Trustee's compensation hereunder) incurred by it in connection with
the acceptance or administration of this trust and the performance of its
duties hereunder. The Trustee shall notify the Issuers promptly of any claim
for which it may seek indemnity. Failure by the Trustee to so notify the
Issuers shall not relieve the Issuers of their obligations hereunder. The
Issuers shall defend the claim and the Trustee shall cooperate in the defense
of such claim. The Trustee may have separate counsel at its own expense. The
Issuers need not reimburse any expense or indemnify against any loss,
liability or expense incurred by the Trustee through the Trustee's own
willful misconduct, negligence or bad faith. The Issuers need not pay for any
settlement made without their written consent.
To secure the Issuers's payment obligations in this Section, the Trustee
shall have a lien prior to the Notes on all money or property held or
collected by the Trustee other than money or property held in the Escrow
Accounts or held in trust to pay principal of and interest on particular
Notes.
The Issuers's payment obligations pursuant to this Section shall survive
the discharge of this Indenture. When the Trustee incurs expenses after the
occurrence of a Default specified in Section 6.1(vii) or (viii) with respect
to the Issuers, the expenses are intended to constitute expenses of
administration under the Bankruptcy Law.
SECTION 7.8 Replacement of Trustee.
The Trustee may resign at any time upon 30 days notice to the Issuers.
The Holders of a majority in principal amount of the Notes then outstanding
may remove the Trustee by so notifying the Trustee and may appoint a
successor Trustee. The Issuers shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of
the Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
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If the Trustee resigns, is removed by the Issuers or by the Holders of a
majority in principal amount of the Notes and such Holders do not reasonably
promptly appoint a successor Trustee, or if a vacancy exists in the office of
Trustee for any reason (the Trustee in such event being referred to herein as
the retiring Trustee), the Issuers shall promptly appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. 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 the Noteholders. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, subject
to the lien provided for in Section 7.7.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders
of 10% in principal amount of the Notes may petition any court of competent
jurisdiction for the appointment of a successor Trustee. If the Trustee fails
to comply with Section 7.10, any Noteholder may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of
a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section,
the Issuers' obligations under Section 7.7 shall continue for the benefit of
the retiring Trustee.
SECTION 7.9 Successor Trustee by Merger.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee
corporation without any further act shall be the successor Trustee, provided
that such corporation shall be eligible under this Article 7 and TIA Section
3.10(a). 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 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 Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Trustee may authenticate such 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 Notes or in this Indenture
provided that the certificate of the Trustee shall have.
SECTION 7.10 Eligibility; Disqualification.
The Trustee shall at all times satisfy the requirements of TIA Section
310(a). The Trustee shall have a combined capital and surplus of at least
$25,000,000 as set forth in its most recent published annual report of
condition. 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
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of the Issuers 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 Issuers.
The Trustee shall comply with 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.
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1 Discharge of Liability on Notes; Defeasance.
This Indenture will cease to be of further effect as to all outstanding
Notes when:
(a) When (i) the Issuers deliver to the Trustee all outstanding
Notes (other than Notes replaced pursuant to Section 2.6) for cancellation or
(ii) all outstanding Notes have become due and payable, whether at maturity
or as a result of the mailing of a notice of redemption pursuant to Article 3
hereof, and, in each case of this clause (ii), the Issuers irrevocably
deposit or cause to be deposited with the Trustee United States dollars or
Temporary Cash Investments sufficient to pay and discharge the entire
indebtedness on the Notes not heretofore delivered to the Trustee for
cancellation, for the principal of, premium, if any, and interest to the date
of deposit (other than Notes replaced pursuant to Section 2.6), and if in
either case the Issuers pay all other sums payable hereunder by the Issuers,
then this Indenture shall, subject to Section 8.1(c), cease to be of further
effect. The Trustee shall acknowledge satisfaction and discharge of this
Indenture on demand of the Issuers accompanied by an Officers' Certificate
and an Opinion of Counsel from the Issuers that all conditions precedent
provided herein for relating to satisfaction and discharge of this Indenture
have been complied with and at the cost and expense of the Issuers.
(b) Subject to Sections 8.1(c) and 8.2, the Issuers at their option
at any time may terminate (i) all of their obligations under the Notes and
this Indenture ("legal defeasance option") or (ii) their obligations under
Article 4 (and any omission to comply with such obligations shall not
constitute a Default or Event of Default with respect to the Notes) and the
operation of Sections 6.1(vi), 6.1(vii) (but only with respect to a
Significant Subsidiary), 6.1(viii) (but only with respect to a Significant
Subsidiary), 6.1(ix) and 5.1(iii) and 5.1(iv) ("covenant defeasance option").
The Issuers may exercise their legal defeasance option notwithstanding their
prior exercise of their covenant defeasance option.
If the Issuers exercise their legal defeasance option, payment of the
Notes may not be accelerated because of an Event of Default with respect
thereto. If the Issuers exercise their covenant defeasance option, payment of
the Notes may not be accelerated because of an Event of Default
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specified in Sections 6.1(iv), 6.1(vi) and 6.1(vii) (but only with respect to
a Significant Subsidiary), or 6.1(viii) (but only with respect to a
Significant Subsidiary) or 6.1(ix) or 6.1(x) or because of the failure of the
Issuers to comply with Sections 5.1(iii) or 5.1(iv).
If the Issuers exercise their legal defeasance option or their covenant
defeasance option, each Subsidiary Guarantor will be released from all its
obligations with respect to its Subsidiary Guarantee.
Upon satisfaction of the conditions set forth herein and upon request of
the Issuers, the Trustee shall acknowledge in writing the discharge of those
obligations that the Issuers terminate.
(c) Notwithstanding clauses (a) and (b) above, the Issuers's
obligations in Sections 2.3, 2.4, 2.5, 2.6, 2.7, 7.7, 7.8, 8.4, 8.5 and 8.6
shall survive until the Notes have been paid in full. Thereafter, the
Issuers's obligations in Sections 7.7, 8.4 and 8.5 shall survive.
SECTION 8.2 Conditions to Defeasance.
The Issuers may exercise their legal defeasance option or their covenant
defeasance option only if:
(1) the Issuers irrevocably deposit or cause to be deposited
in trust with the Trustee money or U.S. Government Obligations which,
through the scheduled payment of principal and interest in respect
thereof in accordance with their terms, will provide cash at such times
and in such amounts as will be sufficient to pay principal and interest
when due on all outstanding Notes (except Notes replaced pursuant to
Section 2.6) to maturity or redemption, as the case may be;
(2) the Issuers deliver to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited U.S. Government Obligations plus any
deposited money without investment will provide cash at such times and
in such amounts as will be sufficient to pay principal and interest when
due on all outstanding Notes (except Notes replaced pursuant to Section
2.6) to maturity or redemption, as the case may be;
(3) 91 days pass after the deposit is made and during the
91-day period no Default specified in Section 6.1(vii) or (viii) with
respect to the Issuers occurs which is continuing at the end of the
period;
(4) the deposit does not constitute a default under any
other material agreement binding on the Issuers;
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(5) the Issuers deliver to the Trustee an Opinion of Counsel
to the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under the
Investment Company Act of 1940;
(6) in the case of the legal defeasance option, the Issuers
shall have delivered to the Trustee Opinions of Counsel stating that (i)
the Issuers have received from, or there has been published by, the
Internal Revenue Service a ruling, or (ii) since the date of this
Indenture there has been a change in the applicable Federal income tax
law, in either case to the effect that, and based thereon such Opinions
of Counsel shall confirm that, the Noteholders 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;
(7) in the case of the covenant defeasance option, the Issuers
shall have delivered to the Trustee Opinions of Counsel to the effect
that the Noteholders 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
(8) the Issuers deliver to the Trustee an Officers'
Certificate from an officer of each of the Company and Finance and an
Opinion of Counsel from an officer of each of the Company and Finance,
each stating that all conditions precedent to the defeasance and
discharge of the Notes as contemplated by this Article 8 have been
complied with.
Opinions of Counsel required to be delivered under this Section may have
qualifications customary for opinions of the type required and counsel
delivering such Opinions of Counsel may rely on certificates of the Issuers
or government or other officials customary for opinions of the type required,
including certificates certifying as to matters of fact.
Before or after a deposit, the Issuers may make arrangements
satisfactory to the Trustee for the redemption of Notes at a future date in
accordance with Article 3.
SECTION 8.3 Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to this Article 8. It shall apply the deposited
money and the money from U.S. Government Obligations either directly or
through the Paying Agent (including the Issuers acting as their own Paying
Agents as the Trustee may determine) and in accordance with this Indenture to
the payment of principal of and interest on the Notes.
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SECTION 8.4 Repayment to Issuers.
The Trustee and the Paying Agent shall notify the Issuers of any excess
money or Notes held by them at any time and shall promptly turn over to the
Issuers upon request any excess money or securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Issuers upon written request any money held by
them for the payment of principal or interest that remains unclaimed for two
years, and, thereafter, Noteholders entitled to the money must look to the
Issuers for payment as general creditors.
SECTION 8.5 Indemnity for Government Obligations.
The Issuers shall pay and shall indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against deposited U.S. Government
Obligations or the principal and interest received on such U.S. Government
Obligations other than any such tax, fee or other charge which by law is for
the account of the Holders of the defeased Notes; provided that the Trustee
shall be entitled to charge any such tax, fee or other charge to such
Holder's account.
SECTION 8.6 Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Article 8 by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Issuers's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article 8 until such time as the Trustee or Paying Agent is permitted to
apply all such money or U.S. Government Obligations in accordance with this
Article 8; provided, however, that, (a) if the Issuers have made any payment
of interest on or principal of any Notes following the reinstatement of their
obligations, the Issuers shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money or U.S. Government
Obligations held by the Trustee or Paying Agent and (b) unless otherwise
required by any legal proceeding or any order or judgment of any court or
governmental authority, the Trustee or Paying Agent shall return all such
money and U.S. Government Obligations to the Issuers promptly after receiving
a written request therefor at any time, if such reinstatement of the
Issuers's obligations has occurred and continues to be in effect.
ARTICLE IX
AMENDMENTS
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SECTION 9.1 Without Consent of Holders.
The Issuers and the Trustee may amend this Indenture or the Notes
without notice to or consent of any Noteholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Notes in addition to or in
place of certificated Notes; provided, however, 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 as
described in Section 163(f)(2)(B) of the Code;
(4) to add guarantees with respect to the Notes,
including the Subsidiary Guaranties;
(5) to secure the Notes;
(6) to add to the covenants of the Issuers or the Subsidiary
Guarantors for the benefit of the Holders or to surrender any right or
power herein conferred upon the Issuers or the Subsidiary Guarantors;
(7) to make any change that does not adversely affect the
rights of any Noteholder; or
(8) to comply with any requirements of the SEC in connection
with qualifying this Indenture under the TIA.
After an amendment under this Section becomes effective, the Issuers
shall mail to the Noteholders a notice briefly describing such amendment. The
failure to give such notice to all Noteholders, or any defect therein, shall
not impair or affect the validity of an amendment under this section.
SECTION 9.2 With Consent of Holders.
The Issuers and the Trustee may amend this Indenture or the Notes
without notice to any Noteholder but with the written consent of the Holders
of at least a majority in principal amount of the Notes then outstanding.
However, without the consent of each Holder of an outstanding Note affected
thereby, an amendment may not:
(1) reduce the amount of Notes whose Holders must consent to an
amendment;
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(2) reduce the rate of or extend the time for payment of
interest on any Note;
(3) reduce the principal of or extend the Stated Maturity of
any Note;
(4) reduce the premium payable upon the redemption of any Note
or change the time at which any Note may be redeemed in accordance with
Article 3;
(5) make any Note payable in money other than that stated in
the Note;
(6) impair the right of any Holder to receive payment of
principal of and interest on such Holder's 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 Notes;
(7) make any change in Section 6.4 or 6.7 or the second
sentence of this Section;
(8) affect the ranking of the Notes in any material respect; or
(9) make any change in any Subsidiary Guarantee or the Escrow
Security Agreement that would adversely affect the Holders or terminate the
Lien of this Indenture or the Escrow Security Agreement on the Collateral or
deprive the Holders of the security afforded by such Lien.
The consent of the Holders under this Section is not necessary 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 this Section becomes effective, the Issuers shall mail to the
Noteholders a notice briefly describing such amendment. However, the failure
to give such notice to all Noteholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section.
SECTION 9.3 Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Notes shall comply with the TIA
as then in effect.
SECTION 9.4 Revocation and Effect of Consents and Waivers.
A consent to an amendment or a waiver by a Holder of a Note shall bind
the Holder and every subsequent Holder of that Note or portion of the Note
that evidences the same debt as the consenting Holder's Note, even if
notation of the consent or waiver is not made on the Note. An amendment or
waiver becomes effective once the requisite number of consents are received
by the Issuers or the Trustee. After an amendment or waiver becomes
effective, it shall bind every Noteholder.
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The Issuers may, but shall not be obligated to, fix a record date for
the purpose of determining the Noteholders 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 paragraph, those Persons who were Noteholders 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.
SECTION 9.5 Notation on or Exchange of Notes.
If an amendment changes the terms of a Note, the Trustee may require the
Holder of the Note to deliver it to the Trustee. The Trustee may place an
appropriate notation on the Note regarding the changed terms and return it to
the Holder. Alternatively, if the Issuers or the Trustee so determine, the
Issuers in exchange for the Note shall issue and the Trustee shall
authenticate a new Note that reflects the changed terms. Failure to make the
appropriate notation or to issue a new Note shall not affect the validity of
such amendment.
SECTION 9.6 Trustee to Sign Amendments.
The Trustee shall sign any amendment authorized pursuant to this Article
9 if the amendment does not adversely affect the rights, duties, liabilities
or immunities of the Trustee. If it does, the Trustee may but need not sign
it. In signing such amendment 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, an Officers'
Certificate from each of the Company and Finance and an Opinion of Counsel
provided by each of the Company and Finance stating that such amendment
complies with the provisions of Article 9 of this Indenture.
ARTICLE X
SUBSIDIARY GUARANTEES
SECTION 10.1 Guarantees.
Each Subsidiary Guarantor hereby unconditionally and irrevocably
guarantees, jointly and severally, to each Holder and to the Trustee and its
successors and assigns (a) the full and punctual payment of principal of and
interest on the Notes when due, whether at maturity, by acceleration, by
redemption or otherwise, and all other monetary obligations of the Issuers
under this Indenture and the Notes and (b) the full and punctual performance
within applicable grace periods of all other obligations of the Issuers under
this Indenture and the Notes (all the foregoing being hereinafter
collectively called the "Obligations"). Each Subsidiary Guarantor further
agrees that the Obligations may be extended or renewed, in whole or in part,
without notice or further assent from such
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Subsidiary Guarantor and that such Subsidiary Guarantor will remain bound
under this Article 10 notwithstanding any extension or renewal of any
Obligation.
Each Subsidiary Guarantor waives presentation to, demand of, payment
from and protest to the Issuers of any of the Obligations and also waives
notice of protest for nonpayment. Each Subsidiary Guarantor waives notice of
any default under the Notes or the Obligations. The obligations of each
Subsidiary Guarantor hereunder shall not be affected by (a) the failure of
any Holder or the Trustee to assert any claim or demand or to enforce any
right or remedy against the Issuers or any other Person under this Indenture,
the Notes or any other agreement or otherwise; (b) any extension or renewal
of any thereof; (c) any rescission, waiver, amendment or modification of any
of the terms or provisions of this Indenture, the Notes or any other
agreement; (d) the release of any security held by any Holder or the Trustee
for the Obligations or any of them; (e) the failure of any Holder or the
Trustee to exercise any right or remedy against any other guarantor of the
Obligations; or (f) any change in the ownership of such Subsidiary Guarantor.
Each Subsidiary Guarantor further agrees that its Subsidiary Guaranty
herein constitutes a guarantee of payment, performance and compliance when
due (and not a guarantee of collection) and waives any right to require that
any resort be had by any Holder or the Trustee to any security held for
payment of the Obligations.
Except as expressly set forth in Sections 8.1(b), 10.2 and 10.6, the
obligations of each Subsidiary 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 set off, counterclaim, recoupment
or termination whatsoever or by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Subsidiary 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 Notes or any other agreement, by
any waiver of modification of any thereof, by any default, failure or delay,
willful or otherwise, in the performance of the obligations, 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 Subsidiary
Guarantor or would otherwise operate as a discharge of such Subsidiary
Guarantor as a matter of law or equity.
Each Subsidiary Guarantor further agrees that its Guarantee herein 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 or interest on any Obligation
is rescinded or must otherwise be restored by any Holder or the Trustee upon
the bankruptcy or reorganization of the Issuers or otherwise. 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 Subsidiary Guarantor by
virtue hereof, upon the failure of the Issuers to pay the principal of or
interest on any Obligation when and as the same shall become due, whether at
maturity, by acceleration, by redemption or otherwise, or to perform or
comply with any other Obligation, each Subsidiary Guarantor hereby promises
to and will, upon receipt of written demand
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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 Issuers to the Holders and the Trustee.
Each Subsidiary Guarantor agrees that, as between it, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of the
Obligations Guaranteed hereby may be accelerated as provided in Article 6 for
the purposes of such Subsidiary Guarantor's Subsidiary Guaranty herein,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of any Obligations Guaranteed hereby, and (y) in the
event of any declaration of acceleration of such obligations as provided in
Article 6, such Obligations (whether or not due and payable) shall forthwith
become due and payable by such Subsidiary Guarantor for the purposes of this
Section.
Each Subsidiary Guarantor may consolidate with or merge into or sell its
assets to Issuers or another Subsidiary Guarantor without limitation. Each
Subsidiary Guarantor may consolidate with or merge into or sell all or
substantially all its assets to a Person other than Issuers or another
Subsidiary Guarantor (whether or not affiliated with the Subsidiary
Guarantor). Upon the sale or disposition (by merger or otherwise) of a
Subsidiary Guarantor (or all Subsidiary or substantially all of its assets)
to a Person (whether or not an Affiliate of the Subsidiary Guarantor) which
is not a Subsidiary of Issuers, which sale or disposition is otherwise in
compliance with this Indenture (including Section 4.6), such Subsidiary
Guarantor shall be deemed released from all its obligations under this
Indenture and its Subsidiary Guarantee and such Subsidiary Guarantee shall
terminate; provided, however, that any such termination shall occur only to
the extent that all obligations of such Subsidiary Guarantor under the Bank
Facility and all of its Guarantees of, and under all of its pledges of assets
or other security interests which secure, any other Indebtedness of the
Issuers shall also terminate upon such release, sale or transfer.
Each Subsidiary 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 10.2 Limitation on Liability.
Any term or provision of this Indenture to the contrary notwithstanding,
the maximum, aggregate amount of the Obligations guaranteed hereunder by any
Subsidiary Guarantor shall not exceed the maximum amount that can be hereby
guaranteed without rendering this Indenture or the Guarantee, as they relate
to such Subsidiary Guarantor, voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer or similar laws affecting the
rights of creditors generally.
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SECTION 10.3 Successors and Assigns.
This Article 10 shall be binding upon each Subsidiary Guarantor and its
successors and assigns and shall enure to the benefit of the successors and
assigns 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
conferred upon that party in this Indenture and in the Notes shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions of this Indenture.
SECTION 10.4 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 10
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 10 at
law, in equity, by statute or otherwise.
SECTION 10.5 Modification.
No modification, amendment or waiver of any provision of this Article
10, nor the consent to any departure by any Subsidiary 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 Subsidiary Guarantor in any case shall entitle such
Subsidiary Guarantor to any other or further circumstances.
SECTION 10.6 Release of Subsidiary Guarantor.
Upon the sale or other disposition (including by way of consolidation or
merger) of all of the Capital Stock of such a Subsidiary Guarantor, the sale
or disposition of all or substantially all the assets of such Subsidiary
Guarantor (in each case other than to the Issuers or a Subsidiary Guarantor)
or the designation of a Subsidiary Guarantor as an Unrestricted Subsidiary in
each case in compliance with this Indenture, such Subsidiary Guarantor shall
be deemed released from all obligations under this Article 10 without any
further action required on the part of the Trustee or any Holder. At the
request of the Issuers, the Trustee shall execute and deliver an appropriate
instrument evidencing such release.
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ARTICLE XI
COLLATERAL AND SECURITY
SECTION 11.1 Escrow Agreement and Escrow Security Agreement.
On the Issue Date, the Issuers shall (i) enter into the Escrow Agreement
and the Escrow Security Agreement and comply with the terms and provisions
thereof, (ii) deposit into the Interest Escrow Account such amount in cash
from the proceeds of the Offering as will be sufficient to provide for
payment in full of the first two scheduled interest payments due on the Notes
and (iii) deposit the balance into the Construction Escrow Account. On the
first date on which the amount deposited into the Interest Escrow Account is
invested in Temporary Cash Investments, such Temporary Cash Investments shall
be in an amount sufficient upon receipt of scheduled interest and/or
principal payments of such Collateral to provide for payment in full of the
first two scheduled interest payments due on the Notes. The Issuers shall
grant a first priority security interest in the Collateral to the Collateral
Agent for the benefit of the Holders and the Collateral shall be held by the
Collateral Agent in the Escrow Accounts pending disposition pursuant to the
Escrow Agreement.
In the event the Registered Exchange Offer is not consummated, and the
Registration Statement is not declared effective within 120 days (or if the
120th day is not a Business Day, the first Business Day thereafter) after the
Issue Date of the Notes, and the interest rate on the Notes is increased as
required by the Registration Rights Agreement, the Issuers shall deposit into
the Interest Escrow Account, on or before the next succeeding scheduled
interest payment date, additional cash in such amount as will be sufficient
upon receipt of scheduled interest and/or principal payments of all
Collateral thereafter held in the Interest Escrow Account, to provide payment
for the first two scheduled interest payments due on the Notes (assuming the
Additional Interest remains in effect for the entire period). The additional
Collateral shall be subject to the security interest granted by the Issuers
to the Collateral Agent for the benefit of the Holders and shall be held by
the Collateral Agent in the Interest Escrow Account.
Each Holder, by its acceptance of a Note, consents and agrees to the
terms of the Escrow Agreement and the Escrow Security Agreement (including,
without limitation, the provisions providing for foreclosure and release of
the Collateral) as the same may be in effect or may be amended from time to
time in accordance with its terms, and authorizes and directs the Trustee to
enter into the Escrow Agreement and the Escrow Security Agreement and to
perform its respective obligations and exercise its respective rights
thereunder in accordance therewith. The Issuers 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 Escrow Agreement and the Escrow Security Agreement,
to assure and confirm to the Trustee the security interest in the Collateral
contemplated hereby or by the Escrow Agreement or the Escrow Security
Agreement or any part thereof, as from time to time constituted, so as to
render the same available for the security and benefit of this Indenture and
of the Notes secured hereby, according to the intent and purposes herein
expressed. The Issuers shall take, or shall cause to be taken, upon request
of the Trustee, any and all actions reasonably required to cause the
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Escrow Agreement and the Escrow Security Agreement to create and maintain, as
security for the obligations of the Issuers under this Indenture and the
Notes, valid and enforceable first priority liens in and on all the
Collateral, in favor of the Trustee, superior to and prior to the rights of
third Persons and subject to no other Liens.
SECTION 11.2 Recording and Opinions.
(a) The Issuers shall furnish to the Trustee simultaneously with
the execution and delivery of this Indenture an Opinion of Counsel either (i)
stating that in the 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 necessary to make effective the Liens
intended to be created by the Escrow Security Agreement and reciting the
details of such action, except for the filing of any necessary UCC-1
financing statements, or (ii) stating that in the opinion of such counsel no
such action is necessary to make such Liens effective.
(b) The Issuers shall furnish to the Escrow Agent and the Trustee
on April 29, 1998 (unless on such date the balance of the Interest Escrow
Account and the Construction Escrow Account shall be zero) an Opinion of
Counsel, dated as of such date, either (i) stating that, except for the
filing of any necessary UCC-1 financing statements, (A) in the opinion of
such counsel, 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 as are necessary to maintain the Liens
of the Escrow Security Agreement and reciting the details of such action or
referring to prior Opinions of Counsel in which such details are given and
(B) based on relevant laws as in effect on the date of such Opinion of
Counsel, all financing statements and continuation statements have been
executed and filed that are necessary as of such date and during the
succeeding 12 months fully to preserve and protect, to the extent such
protection and preservation are possible by filing, the rights of the Holders
of Notes and the Trustee hereunder and under each of the Escrow Agreement and
the Escrow Security Agreement with respect to the security interests in the
Collateral or (ii) stating that, in the opinion of such counsel, no such
action is necessary to maintain such Liens and assignments.
SECTION 11.3 Release of Collateral.
(a) Subject to subsections (b), (c) and (d) of this Section 11.3,
Collateral may be released from the Liens and security interests created by
the Escrow Security Agreement only in accordance with the provisions of the
Escrow Agreement and the Escrow Security Agreement.
(b) Except to the extent that any Lien on proceeds of Collateral is
automatically released by operation of Section 9-306 of the Uniform
Commercial Code or other similar law, no Collateral shall be released from
the Liens and security interests created by the Escrow Security Agreement
pursuant to the provisions of the Escrow Security Agreement, other than to
the Holders pursuant to the terms thereof, unless there shall have been
delivered to the Trustee the certificate required by Section 11.3(d) and
Section 11.4.
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(c) At any time when an Event of Default shall have occurred and be
continuing and the maturity of the Notes shall have been accelerated (whether
by declaration or otherwise), no Collateral shall be released pursuant to the
provisions of the Escrow Security Agreement, and no release of Collateral in
contravention of this Section 11.3(c) shall be effective as against the
Holders of Notes, except for the disbursement of all Available Funds (as
defined in the Escrow Agreement) and other Collateral to the Trustee pursuant
to Section 11 of the Escrow Agreement.
(d) The release of any Collateral from the Liens and security
interests created by this Indenture and the Escrow Security Agreement shall
not be deemed to impair the security under this Indenture in contravention of
the provisions hereof if and to the extent the Collateral is released
pursuant to the terms hereof or pursuant to the terms of the Escrow Agreement
and the Escrow Security Agreement. To the extent applicable, the Issuers
shall cause TIA Section 314(d) relating to the release of property or Notes
from the Liens and security interests of the Escrow Security Agreement to be
complied with. Any certificate or opinion required by TIA Section 314(d) may
be made by an Officer of each of the Issuers except in cases where TIA
Section 314(d) requires that such certificate or opinion be made by an
independent Person, which Person shall be an independent appraiser or other
expert selected or approved by the Trustee in the exercise of reasonable care.
SECTION 11.4 Certificates of the Issuers.
The Issuers shall furnish to the Trustee, prior to any proposed release
of Collateral other than pursuant to the express terms of the Escrow
Agreement, (i) all documents required by TIA Section 314(d) and (ii) an
Opinion of Counsel, which may be rendered by internal counsel to either of
the Issuers, to the effect that such accompanying documents constitute all
documents required by TIA Section 314(d). The Trustee may, to the extent
permitted by Section 7.1 and Section 7.2, accept as conclusive evidence of
compliance with the foregoing provisions the appropriate statements contained
in such documents and such Opinion of Counsel.
SECTION 11.5 Authorization of Actions to Be Taken by the Trustee
Under the Escrow Agreement and the Escrow Security Agreement.
Subject to the provisions of Section 7.1 and Section 7.2, the Trustee
may, without the consent of the Holders of Notes, on behalf of the Holders of
Notes, take all actions it deems necessary or appropriate in order to (a)
enforce any of the terms of each of the Escrow Agreement and the Escrow
Security Agreement and (b) collect and receive any and all amounts payable in
respect of the obligations of the Issuers hereunder. The Trustee shall have
power to institute and 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 Escrow Agreement, the Escrow Security
Agreement 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 of Notes in the Collateral (including power to institute and
maintain suits or proceedings to restrain the enforcement of or compliance
with any legislative or other governmental enactment, rule or order that may
be unconstitutional or otherwise
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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 of Notes or of the Trustee).
SECTION 11.6 Authorization of Receipt of Funds by the Trustee Under the
Escrow Agreement.
The Trustee is authorized to receive any funds for the benefit of the
Holders of Notes disbursed under the Escrow Agreement, and to make further
distributions of such funds to the Holders of Notes according to the
provisions of this Indenture.
SECTION 11.7 Termination of Security Interest.
Upon the earliest to occur of (i) the date upon which the balance in the
Interest Escrow Account shall have been reduced to zero, (ii) legal
defeasance pursuant to Section 8.1(b), (iii) covenant defeasance pursuant to
Section 8.1(b) or (iv) the date upon which the first two semiannual interest
payments have been made, the Trustee shall, at the written request of each of
the Issuers, release the Liens on the Interest Escrow Account pursuant to
this Indenture, the Escrow Agreement and the Escrow Security Agreement upon
the Issuers' compliance with the provisions of the TIA pertaining to release
of collateral.
Upon the earliest to occur of (i) the date upon which the balance in the
Construction Escrow Account shall have been reduced to zero, (ii) legal
defeasance pursuant to Section 8.1(b), (iii) covenant defeasance pursuant to
Section 8.1(b) or (iv) the full and final payment and performance of all the
Obligations and Construction Expenses (as defined in the Escrow Agreement),
the Trustee shall, at the written request of each of the Issuers, release the
Liens on the Construction Escrow Account pursuant to this Indenture, the
Escrow Agreement and the Escrow Security Agreement upon the Issuers'
compliance with the provisions of the TIA pertaining to release of collateral.
The Escrow Security Agreement shall terminate upon the release of the
Liens on both the Construction Escrow Account and the Interest Escrow Account
pursuant to this Section and the Escrow Agreement.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this Indenture by the
TIA, the required provision shall control. If this Indenture excludes any
provision of the TIA that is required to be included, such provision shall be
deemed included herein.
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SECTION 12.2 Notices.
Any notice or communication shall be in writing and delivered in person,
by overnight courier or facsimile (if to the Issuers, with receipt confirmed
by an Officer) or mailed by first-class mail addressed as follows:
If to the Issuers:
Chiles Offshore LLC
11200 Westheimer, Suite 410
Houston, Texas 77042
Attention: Chief Financial Officer
Chiles Finance Corp.
11200 Westheimer, Suite 410
Houston, Texas 77042
Attention: Chief Financial Officer
With copies to:
Weil, Gotshal & Manges LLP
700 Louisiana
Suite 1600
Houston, Texas 77002
Attention: James L. Rice III
If to the Trustee:
U.S. Bank Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attn: Corporate Trust Administration
And if to the Trustee's Office in New York City:
U.S. Bank Trust National Association
100 Wall Street, 20th Floor
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New York, New York 10041
The Issuers or the Trustee by notice to the others may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed or sent by overnight courier or
facsimile to a Noteholder shall be sent to the Noteholder at the Noteholder's
address as it appears on the registration books of the Registrar and shall be
sufficiently given if so sent within the time prescribed.
Failure to send a notice or communication to a Noteholder or any defect
in it shall not affect its sufficiency with respect to other Noteholders. If
a notice or communication is sent in the manner provided above, it is duly
given, whether or not the addressee receives it.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice.
SECTION 12.3 Communication by Holders with Other Holders.
Noteholders may communicate pursuant to TIA Section 312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes.
The Issuers, 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 Issuers to the Trustee to take or
refrain from taking any action under this Indenture, the Issuers shall
furnish to the Trustee:
(1) Officers' Certificates (which in connection with the
original issuance of the Notes need only be executed by one Officer for
each of the Company and Finance) in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) Opinions of Counsel delivered by each of the Company and
Finance in form and substance reasonably satisfactory to the Trustee
stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.
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SECTION 12.5 Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a covenant or
condition provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he
has made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with; provided,
that an Opinion of Counsel can rely as to matters of fact on an
Officers' Certificate or a certificate of a public official.
SECTION 12.6 When Notes Disregarded.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Issuers or by any Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Issuers shall be
disregarded and deemed not to be outstanding, except that, for the purpose of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes which the Trustee actually knows are
so owned shall be so disregarded. Also, subject to the foregoing, only Notes
outstanding at the time shall be considered in any such determination.
SECTION 12.7 Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable rules for action by or a meeting of the
Noteholders. The Trustee shall provide the Issuers reasonable notice of such
rules. The Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 12.8 Legal Holidays.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in the State of New York are authorized or required by law to
close. If a payment date is a Legal Holiday, payment shall be made on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period. If a regular record date is a Legal Holiday, the
record date shall not be affected.
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SECTION 12.9 Governing Law.
This Indenture and the Notes shall be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to
applicable principles of conflict of laws to the extent that the application
of the laws of another jurisdiction would be required thereby.
SECTION 12.10 No Recourse Against Others.
No recourse for the payment of the principal of, premium, if any, or
interest on any of the Notes or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Issuers in this Indenture, or in any of the Notes or because
of the creation of any Indebtedness represented hereby and thereby, shall be
had against any incorporator, stockholder, officer, director, employee or
controlling person of the Issuers or any Successor Person thereof. Each
Holder, by accepting a Note, waives and releases all such liability. The
waiver and release shall be part of the consideration for the issuance of the
Notes.
SECTION 12.11 Successors.
All agreements of the Issuers in this Indenture and the Notes shall bind
the Issuers's successors. All agreements of the Trustee in this Indenture
shall bind its successors.
SECTION 12.12 Multiple Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement. One signed copy is enough to prove this Indenture.
SECTION 12.13 Table of Contents; Headings.
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not intended to be considered a part hereof and shall not
modify or restrict any of the terms or provisions hereof.
SECTION 12.14 Severability Clause.
In case any provision in this Indenture or in the 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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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
CHILES OFFSHORE LLC
By: /s/ Dick H. Fagerstal
--------------------------------------
Name: Dick H. Fagerstal
Title: Senior Vice President, Chief
Financial Officer and Secretary
CHILES OFFSHORE FINANCE CORP.
By: /s/ Dick H. Fagerstal
--------------------------------------
Name: Dick H. Fagerstal
Title: Senior Vice President, Chief
Financial Officer and Secretary
THE GUARANTORS:
CHILES COLUMBUS LLC
By: /s/ Dick H. Fagerstal
--------------------------------------
Name: Dick H. Fagerstal
Title: Senior Vice President, Chief
Financial Officer and Secretary
CHILES MAGELLAN LLC
By: /s/ Dick H. Fagerstal
--------------------------------------
Name: Dick H. Fagerstal
Title: Senior Vice President, Chief
Financial Officer and Secretary
THE TRUSTEE:
U.S. Bank Trust National Association
By: /s/ Richard H. Prokosel
--------------------------------------
Name: Richard H. Prokosel
Title: Assistant Vice President
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APPENDIX 1
RULE 144A/REGULATION S APPENDIX FOR OFFERINGS TO QUALIFIED INSTITUTIONAL
BUYERS PURSUANT TO RULE 144A AND TO CERTAIN PERSONS IN OFFSHORE TRANSACTIONS
IN RELIANCE ON REGULATION S.
PROVISIONS RELATING TO INITIAL SECURITIES, PRIVATE
EXCHANGE SECURITIES AND EXCHANGE SECURITIES
1. Definitions.
1.1. DEFINITIONS.
For the purposes of this Appendix the following terms shall have the
meanings indicated below:
"Depository" means The Depository Trust Company, its nominees and their
respective successors.
"Exchange Notes" means the 10% Senior Notes Due 2008 to be issued
pursuant to the Indenture in connection with a Registered Exchange Offer
pursuant to the Registration Rights Agreement.
"Initial Purchasers" means Credit Suisse First Boston Corporation and
Wasserstein Perella & Co., Inc.
"Initial Notes" means the 10% Senior Notes Due 2008, issued under the
Indenture on or about the date hereof.
"Private Exchange" means the offer by the Issuers, pursuant to the
Registration Rights Agreement, to the Initial Purchasers to issue and deliver
to each Initial Purchaser, in exchange for the Initial Notes held by the
Initial Purchaser as part of its initial distribution, a like aggregate
principal amount of Private Exchange Notes.
"Private Exchange Notes" means the 10% Senior Notes Due 2008 to be
issued pursuant to the Indenture to the Initial Purchasers in a Private
Exchange,
"Purchase Agreement" means the Purchase Agreement dated April 24, 1998,
among the Issuers, the Subsidiary Guarantors and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
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"Registered Exchange Offer" means the offer by the Issuers, pursuant to
the Registration Rights Agreement, to certain Holders of Initial Notes, to
issue and deliver to such Holders, in exchange for the Initial Notes, a like
aggregate principal amount of Exchange Notes registered under the Securities
Act.
"Registration Rights Agreement" means the Registration Rights Agreement
dated April 29, 1998, among the Issuers, the Subsidiary Guarantors and the
Initial Purchasers.
"Notes" means the Initial Notes, the Exchange Notes and the Private
Exchange Notes, treated as a single class.
"Securities Act" means the Securities Act of 1933.
"Notes Custodian" means the custodian with respect to a Global Note (as
appointed by the Depository), or any successor person thereto and shall
initially be the Trustee.
"Shelf Registration Statement" means the registration statement issued
by the Issuers, in connection with the offer and sale of Initial Notes or
Private Exchange Notes, pursuant to the Registration Rights Agreement.
"Transfer Restricted Notes" means Notes that bear or are required to
bear the legend set forth in Section 2.3(d) hereto.
1.2. Other Definitions.
<TABLE>
<CAPTION>
Term Defined in Section
------------------------------------------------------------------ --------------------
<S> <C>
"Agent Members..................................................... 2.1(b)
"Global Note"...................................................... 2.1(a)
"Regulation S"..................................................... 2.1(a)
"Rule 144A"........................................................ 2.1(a)
</TABLE>
2. The Notes
2.1. Form and Dating.
The Initial Notes are being offered and sold by the Issuers pursuant to
the Purchase Agreement.
(a) Global Notes. Initial Notes offered and sold to a QIB in reliance on
Rule 144A under the Securities Act ("Rule 144A") or in reliance on Regulation
S under the Securities Act ("Regulation S"), in each case as provided in the
Purchase Agreement, shall be issued initially
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in the form of one or more permanent global Notes in definitive, fully
registered form without interest coupons with the global securities legend
and restricted securities legend set forth in Exhibit1 hereto (each, a
"Global Note"), which shall be deposited on behalf of the purchasers of the
Initial Notes represented thereby with the Trustee, at its New York office,
as custodian for the Depository (or with such other custodian as the
Depository may direct), and registered in the name of the Depository or a
nominee of the Depository, duly executed by the Issuers and authenticated by
the Trustee as hereinafter provided. The aggregate principal amount of the
Global Notes 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
hereinafter provided.
(b) Book-entry Provisions. This Section 2.1(b) shall apply only to
a Global Note deposited with or on behalf of the Depository.
The Issuers shall execute and the Trustee shall, in accordance with this
Section 2.1(b), authenticate and deliver initially one or more Global Notes
that (a) shall be registered in the name of the Depository for such Global
Note or Global Notes or the nominee of such Depository and (b) shall be
delivered by the Trustee to such Depository or pursuant to such Depository's
instructions or held by the Trustee as custodian for the Depository.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under the Indenture with respect to any Global Note held on
their behalf by the Depository or by the Trustee as the custodian of the
Depository or under such Global Note, and the Depository may be treated by
the Issuers, the Trustee and any agent of the Issuers or the Trustee as the
absolute owner of such Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Issuers, the
Trustee or any agent of the Issuers or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the
Depository or impair, as between the Depository and its Agent Members, the
operation of customary practices of such Depository governing the exercise of
the rights of a holder of a beneficial interest in any Global Note.
(c) Certificated Notes. Except as provided in this Section 2.1 or
Section 2.3 or 2.4, owners of beneficial interests in Global Notes will not
be entitled to receive physical delivery of certificated Notes.
2.2. Authentication.
The Trustee shall authenticate and deliver: (1) Initial Notes for
original issue in an aggregate principal amount of $110 million and (2)
Exchange Notes or Private Exchange Notes for issue only in a Registered
Exchange Offer or a Private Exchange, respectively, pursuant to the
Registration Rights Agreement, for a like principal amount of Initial Notes,
in each case upon a written order of the Issuers signed by two Officers or by
an Officer and either an Assistant Treasurer or an Assistant Secretary of the
Issuers. Such order shall specify the amount of the Notes to be authenticated
and the date on which the original issue of Notes is to be authenticated and
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whether the Notes are to be Initial Notes, Exchange Notes or Private Exchange
Notes. The aggregate principal amount of Notes outstanding at any time may
not exceed $110 million except as provided in Section 2.6 of the Indenture.
2.3. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. (i) The transfer and
exchange of Global Notes or beneficial interests therein shall be effected
through the Depository, in accordance with the Indenture (including
applicable restrictions on transfer set forth herein, if any) and the
procedures of the Depository therefor. A transferor of a beneficial interest
in a Global Note shall deliver to the Registrar a written order given in
accordance with the Depositary's procedures containing information regarding
the participant account of the Depositary to credited with a beneficial
interest in the Global Note. The Registrar shall, in accordance with such
instructions instruct the Depositary to credit to the account of the Person
specified in such instructions a beneficial interest in the Global Note and
to debit the account of the Person making the transfer the beneficial
interest in the Global Note being transferred.
(ii) Notwithstanding any other provisions of this Appendix
(other than the provisions set forth in Section 2.4), a Global Note may
not be transferred as a whole except by the Depository to a nominee of
the Depository or by a nominee of the Depository to the Depository or
another nominee of the Depository or by the Depository or any such
nominee to a successor Depository or a nominee of such successor
Depository.
(iii) In the event that a Global Note is exchanged for Notes
in definitive registered form pursuant to Section 2.4 of this Appendix
or Section 2.8 of the Indenture, prior to the consummation of a
Registered Exchange Offer or the effectiveness of a Shelf Registration
Statement with respect to such Notes, such Notes may be exchanged only
in accordance with such procedures as are substantially consistent with
the provisions of this Section 2.3 (including the certification
requirements set forth on the reverse of the Initial Notes intended to
ensure that such transfers comply with Rule 144A or Regulation S, as the
case may be) and such other procedures as may from time to time be
adopted by the Issuers.
(b) Legend.
(i) Except as permitted by the following paragraphs (ii),
(iii) and (iv), each Note certificate evidencing the Global Notes (and
all Notes issued in exchange therefor or in substitution thereof) shall
bear a legend in substantially the following form:
"THIS SECURITY (OR ITS PREDECESSOR) AND ANY GUARANTEE THEREOF
WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933
(THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE
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OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED
THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE
ISSUER THAT (A) THIS SECURITY MAY BE OFFERED, RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED ONLY (i) INSIDE THE UNITED STATES TO
A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (ii) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES
ACT, (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), OR (iv) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (i)
THROUGH (iv) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted Note
(including any Transfer Restricted Note represented by a Global Note)
pursuant to Rule 144 under the Securities Act, in the case of any
Transfer Restricted Note that is represented by a Global Note, the
Registrar shall permit the Holder thereof to exchange such Transfer
Restricted Note for a certificated Note that does not bear the legend
set forth above and rescind any restriction on the transfer of such
Transfer Restricted Note, if the Holder certifies in writing to the
Registrar that its request for such exchange was made in reliance on
Rule 144 (such certification to be in the form set forth on the reverse
of the Note).
(iii) After a transfer of any Initial Notes or Private
Exchange Notes during the period of the effectiveness of a Shelf
Registration Statement with respect to such Initial Notes or Private
Exchange Notes, as the case may be, all requirements pertaining to
legends on such Initial Note or such Private Exchange Note will cease to
apply, the requirements
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requiring any such Initial Note or such Private Exchange Note issued to
certain Holders be issued in global form will cease to apply, and a
certificated Initial Note or Private Exchange Note without legends will
be available to the transferee of the Holder of such Initial Notes or
Private Exchange Notes upon exchange of such transferring Holder's
certificated Initial Note or Private Exchange Note or directions to
transfer such Holder's interest in the Global Note, as applicable.
(iv) Upon the consummation of a Registered Exchange Offer with
respect to the Initial Notes pursuant to which Holders of such Initial
Notes are offered Exchange Notes in exchange for their Initial Notes,
all requirements pertaining to such Initial Notes that Initial Notes
issued to certain Holders be issued in global form will cease to apply
and certificated Initial Notes with the restricted securities legend set
forth in Exhibit 1 hereto will be available to Holders of such Initial
Notes that do not exchange their Initial Notes, and Exchange Notes in
certificated or global form will be available to Holders that exchange
such Initial Notes in such Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange with respect
to the Initial Notes pursuant to which Holders of such Initial Notes are
offered Private Exchange Notes in exchange for their Initial Notes, all
requirements pertaining to such Initial Notes that Initial Notes issued
to certain Holders be issued in global form will still apply, and
Private Exchange Notes in global form with the Restricted Notes Legend
set forth in Exhibit I hereto will be available to Holders that exchange
such Initial Notes in such Private Exchange.
(c) Cancellation or Adjustment of Global Note. At such time as all
beneficial interests in a Global Note have either been exchanged for
certificated Notes, redeemed, repurchased or canceled, such Global Note shall
be returned to the Depository for cancellation or retained and canceled by
the Trustee. At any time prior to such cancellation, if any beneficial
interest in a Global Note is exchanged for certificated Notes, redeemed,
repurchased or canceled, the principal amount of Notes represented by such
Global Note shall be reduced and an adjustment shall be made on the books and
records of the Trustee (if it is then the Notes Custodian for such Global
Note) with respect to such Global Note, by the Trustee or the Notes
Custodian, to reflect such reduction.
(d) Obligations with Respect to Transfers and Exchanges of Notes.
(i) To permit registrations of transfers and exchanges, the
Issuers shall execute and the Trustee shall authenticate certificated
Notes and Global Notes at the Registrar's or co-registrar's request. No
service charge shall be made for any registration of transfer or
exchange, but the Issuers may require payment of a sum sufficient to
cover any transfer tax, assessments, or similar governmental charge
payable in connection therewith (other than any such transfer taxes,
assessments or similar governmental charge payable upon exchange or
transfer pursuant to Sections 3.6, 6.11 and Section 9.5 of the
Indenture).
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(ii) The Registrar or co-registrar shall not be required to
register the transfer of or exchange of (a) any certificated Note
selected for redemption in whole or in part pursuant to Article 3 of the
Indenture, except the unredeemed portion of any certificated Note being
redeemed in part, or (b) any Note for a period beginning 15 Business
Days before the mailing of a notice of an offer to repurchase or redeem
Notes or 15 Business Days before an interest payment date.
(iii) Prior to the due presentation for registration of
transfer of any Note, the Issuers, the Trustee, the Paying Agent, the
Registrar or any co-registrar may deem and treat the person in whose
name a Note is registered as the absolute owner of such Note for the
purpose of receiving payment of principal of and interest on such Note
and for all other purposes whatsoever, whether or not such Note is
overdue, and none of the Issuers, the Trustee, the Paying Agent, the
Registrar or any co-registrar shall be affected by notice to the
contrary.
(iv) All Notes issued upon any transfer or exchange pursuant
to the terms of the Indenture shall evidence the same debt and shall be
entitled to the same benefits under the Indenture as the Notes
surrendered upon such transfer or exchange.
(e) No Obligation of the Trustee.
(i) The Trustee shall have no responsibility or obligation to
any beneficial owner of a Global Note, a member of, or a participant in
the Depository or other Person with respect to the accuracy of the
records of the Depository or its nominee or of any participant or member
thereof, with respect to any ownership interest in the Notes or with
respect to the delivery to any participant, member, beneficial owner or
other Person (other than the Depository) of any notice (including any
notice of redemption) or the payment of any amount, under or with
respect to such Notes. All notices and communications to be given to the
Holders and all payments to be made to Holders under the Notes shall be
given or made only to or upon the order of the registered Holders (which
shall be the Depository or its nominee in the case of a Global Note).
The rights of beneficial owners in any Global Note shall be exercised
only through the Depository subject to the applicable rules and
procedures of the Depository. The Trustee may rely and shall be fully
protected in relying upon information furnished by the Depository with
respect to its members, participants and any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under the Indenture or under applicable law with respect to any
transfer of any interest in any Note (including any transfers between or
among Depository participants, members or beneficial owners in any
Global Note) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do
so if and when expressly required by,
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the terms of the Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements hereof.
2.4. Certificated Notes.
(a) A Global Note deposited with the Depository or with the Trustee
as custodian for the Depository pursuant to Section 2.1 shall be transferred
to the beneficial owners thereof in the form of certificated Notes in an
aggregate principal amount equal to the principal amount of such Global Note,
in exchange for such Global Note, only if such transfer complies with Section
2.3 and (i) the Depository notifies the Issuers that it is unwilling or
unable to continue as Depository for such Global Note or if at any time such
Depository ceases to be a "clearing agency" registered under the Exchange Act
and a successor depositary is not appointed by the Issuers within 90 days of
such notice, or (ii) the Issuers, in their sole discretion, notify the
Trustee in writing that they elects to cause the issuance of certificated
Notes under the Indenture.
(b) Any Global Note that is transferable to the beneficial owners
thereof pursuant to this Section shall be surrendered by the Depository to
the Trustee located in the Borough of Manhattan, The City of New York, to be
so transferred, in whole or from time to time in part, without charge, and
the Trustee shall authenticate and deliver, upon such transfer of each
portion of such Global Note, an equal aggregate principal amount of
certificated Initial Notes of authorized denominations. Any portion of a
Global Note transferred pursuant to this Section shall be executed,
authenticated and delivered only in denominations of $1,000 and any integral
multiple thereof and registered in such names as the Depository shall direct.
Any certificated Initial Note delivered in exchange for an interest in the
Global Note shall, except as otherwise provided by Section 2.3(d), bear the
restricted securities legend set forth in Exhibit 1 hereto.
(c) Subject to the provisions of Section 2.4(b), the registered
Holder of a Global Note may grant proxies and otherwise authorize any Person,
including Agent Members and Persons that may hold interests through Agent
Members, to take any action which a Holder is entitled to take under the
Indenture or the Notes.
(d) In the event of the occurrence of either of the events
specified in Section 2.4(a), the Issuers will promptly make available to the
Trustee a reasonable supply of certificated Notes in definitive, fully
registered form without interest coupons.
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EXHIBIT 1
to
RULE 144A/REGULATION S APPENDIX
[Global Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR SUCH OTHER NAME AS 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, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY 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 SECURITY SHALL
BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Notes Legend]
"THIS SECURITY (OR ITS PREDECESSOR) AND ANY GUARANTEE THEREOF WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS
SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUERS THAT
(A) THIS SECURITY MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(i) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii)
OUTSIDE THE UNITED STATES IN AN
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OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), OR (iv) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES
(i) THROUGH (iv) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT
HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE
RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE."
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EXHIBIT A
[FORM OF FACE OF INITIAL SECURITY]
[Global Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR SUCH OTHER NAME AS 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, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY 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 SECURITY SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
[Restricted Notes Legend]
"THIS SECURITY (OR ITS PREDECESSOR) AND ANY GUARANTEE THEREOF WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS
SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE ISSUERS THAT
(A) THIS SECURITY MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(i) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (ii)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE
904 UNDER THE
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SECURITIES ACT, (iii) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), OR (iv)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
EACH OF CASES (i) THROUGH (iv) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM
IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE."
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CHILES OFFSHORE LLC
CHILES OFFSHORE FINANCE CORP.
10% Senior Note Due May 1, 2008
$110,000,000
No. ____ CUSIP No. 168888 AA3
CHILES OFFSHORE LLC, a Delaware limited liability company, and CHILES
OFFSHORE FINANCE CORP., a Delaware corporation, jointly and severally promise
to pay to CEDE & CO., or registered assigns, the principal sum of
$110,000,000 (ONE HUNDRED TEN MILLION DOLLARS) on May 1, 2008.
Interest Payment Dates: May 1 and November 1.
Record Dates: April 15 and October 15.
Additional provisions of this Note are set forth on the reverse side of
this Note.
CHILES OFFSHORE LLC
By:
----------------------------
Name:
Title:
CHILES OFFSHORE FINANCE CORP.
By:
----------------------------
Name:
Title:
Dated: ____________, 1998
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TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
U.S. Bank Trust National Association, as Trustee,
certifies that this is one of the Notes referred to in the within-mentioned
Indenture.
By:
----------------------------------
Authorized Signatory
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[FORM OF REVERSE SIDE OF INITIAL SECURITY]
10% SENIOR NOTE DUE 2008
1. Interest
CHILES OFFSHORE LLC, a Delaware limited liability company, and CHILES
OFFSHORE FINANCE CORP., a Delaware corporation (such entities, and their
successors and assigns under the Indenture hereinafter referred to, and each
other entity which is required to become one of the Issuers pursuant to the
Indenture, and its successors and assigns under the Indenture, being herein
called the "Issuers"), jointly and severally promise to pay interest on the
principal amount of this Note at the rate per annum shown above. The Issuers
will pay interest semiannually on May 1 and November 1 of each year, commencing
November 1, 1998. Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from April 29,
1998. Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Issuers shall pay interest on overdue principal at the rate of 1.0%
per annum in excess of the rate borne by the Notes, and it shall pay interest on
overdue installments of interest at 1.0% per annum in excess of such rate to the
extent lawful.
2. Method of Payment
The Issuers will pay interest on the Notes (except defaulted interest)
to the Persons who are registered holders of Notes at the close of business on
the record date immediately preceding the interest payment date even if Notes
are canceled after the record date and on or before the interest payment date.
Holders must surrender Notes to a Paying Agent to collect principal payments.
The Issuers will pay principal and interest in money of the United States that
at the time of payment is legal tender for payment of public and private debts.
Payments in respect of the Notes represented by a Global Note (including
principal, premium and interest) will be made by wire transfer of immediately
available funds to the accounts specified by The Depository Trust Company. The
Issuers will make all payments in respect of a certificated Note (including
principal, premium and interest) by mailing a check to the registered address of
each Holder thereof; provided, however, that payments on a certificated Note
will be made by wire transfer to a U.S. dollar account maintained by the payee
with a bank in the United States if such Holder elects payment by wire transfer
by giving written notice to the Trustee or the Paying Agent to such effect
designating such account no later than 30 days immediately preceding the
relevant due date for payment (or such other date as the Trustee may accept in
its discretion).
3. Paying Agent and Registrar
Initially, U.S. Bank Trust National Association, a national banking
corporation ("Trustee"), will act as Paying Agent and Registrar. The Issuers may
appoint and change any Paying Agent, Registrar or co-Registrar without notice.
The Issuers may act as Paying Agent, Registrar, co-Registrar or transfer agent.
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4. Indenture
The Issuers issued the Notes under an Indenture dated as of April 29,
1998 (the "Indenture"), among the Issuers, the Subsidiary Guarantors named
therein and the Trustee. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Section 77aa77bbbb) as in effect on the date of
the Indenture (the "TIA"). Terms defined in the Indenture and not defined herein
have the meanings ascribed thereto in the Indenture. The Notes are subject to
all such terms, and Noteholders are referred to the Indenture and the TIA for a
statement of those terms. Any conflict between this Note and the Indenture will
be governed by the Indenture.
The Notes are general senior obligations of the Issuers limited to $110
million aggregate principal amount. The Indenture imposes certain limitations on
the Incurrence of Indebtedness by the Issuers and their Restricted Subsidiaries,
the existence of liens, the payment of dividends on, and redemption of, the
Capital Stock of the Issuers and their Subsidiaries, restricted payments, the
sale or transfer of assets and Subsidiary stock, the issuance or sale of Capital
Stock of Restricted Subsidiaries, sale and leaseback transactions, the
investments of the Issuers and their Restricted Subsidiaries, consolidations,
mergers and transfers of all or substantially all the assets of the Issuers, and
transactions with Affiliates. In addition, the Indenture limits the ability of
the Issuers and certain of their Subsidiaries to restrict distributions and
dividends from Restricted Subsidiaries.
5. Optional Redemption
Except as set forth in the next paragraph, the Notes may not be
redeemed prior to May 1, 2003. Thereafter, the Issuers may redeem as provided
in, and subject to the terms of, the Indenture the Notes in whole or in part, at
any time or from time to time, at the following redemption prices (expressed in
percentages of principal amount), plus accrued interest 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 May 1 of the years set forth below:
<TABLE>
<CAPTION>
Period Percentage
------------------------------ -------------------
<S> <C>
2003.......................... 105.00%
2004.......................... 103.33%
2005.......................... 101.67%
2006 and thereafter........... 100.00%
</TABLE>
In addition, at any time and from time to time prior to May 1, 2001,
the Issuers may redeem in the aggregate up to 35% of the principal amount of the
Notes with the proceeds of one or more Public Equity Offerings, at a redemption
price (expressed as a percentage of principal amount) of 110% plus accrued
interest 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) as provided in,
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<PAGE>
and subject to the terms of, the Indenture; provided, however, that at least
$71.5 million aggregate principal amount of the Notes must remain outstanding
after each such redemption and, provided further, that such redemption shall
occur within 90 days following the closing of such Public Equity Offering.
6. Notice of Redemption
Notice 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 of
Notes to be redeemed at his registered address. Notes in denominations larger
than $1,000 may be redeemed in part but only in whole multiples of $1,000. If
money sufficient to pay the redemption price of and accrued interest on all
Notes (or portions thereof) to be redeemed on the redemption date is deposited
with the Paying Agent on or before the redemption date and certain other
conditions are satisfied, on and after such date interest ceases to accrue on
such Notes (or such portions thereof) called for redemption. If a notice or
communication is sent in the manner provided in the Indenture, it is duly given,
whether or not the addressee receives it. Failure to send a notice or
communication to a Noteholder or any defect in it shall not affect its
sufficiency with respect to other Noteholders. In addition, in the event of
certain Asset Dispositions, the Issuers will be required to make an offer to
purchase Notes at a purchase price of 100% of their principal amount plus
accrued interest to the date of purchase (subject to the rights of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date) as provided in, and subject to the terms of, the
Indenture.
7. Change of Control
Upon a Change of Control, each Holder of Notes will have the right to
require the Issuers to repurchase all or any part of the Notes of such Holder at
a repurchase price in cash equal to 101% of the principal amount of the Notes to
be repurchased plus accrued and unpaid interest to the date of repurchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date) as provided in, and
subject to the terms of, the Indenture.
8. Contract Termination
In the event that a Construction Contract is terminated prior to
delivery of the Rig, each Holder will have the right to require the Issuers to
purchase the Allocated Principal Amount of such Holder's Notes for such Rig at a
purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest to the date of purchase.
9. Event of Loss of a Rig
Upon the occurrence of an Event of Loss of a Rig after the delivery of
such Rig, the Issuers will be required to apply the insurance and other proceeds
either to repay indebtedness outstanding under the Bank Facility or other
secured debt (and permanently reduce the commitments thereunder) or to acquire a
Qualified Substitute Rig, and to apply the balance to purchase the
A-7
<PAGE>
Allocated Principal Amount of Notes tendered by Holders at a purchase price
equal to 101% of the principal amount thereof, plus accrued and unpaid interest
to the date of purchase.
10. Denominations; Transfer; Exchange
The Notes are in registered form without coupons in denominations of
$1,000 and whole multiples of $1,000. A Holder may transfer or exchange Notes in
accordance with the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements or transfer documents and to pay any
taxes and fees required by law or permitted by the Indenture, including any
transfer tax or other similar governmental charge payable in connection
therewith. The Registrar need not register the transfer of or exchange any Notes
selected for redemption (except, in the case of a Note to be redeemed in part,
the portion of the Note not to be redeemed) or any Notes for a period of 15 days
before a selection of Notes to be redeemed or 15 days before an interest payment
date.
11. Persons Deemed Owners
The registered Holder of this Note may be treated as the owner of it
for all purposes.
12. Unclaimed Money
If money for the payment of principal or interest remains unclaimed for
two years, the Trustee or Paying Agent shall pay the money back to the Issuers
at their written request unless an applicable abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Issuers and not to the Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, the Issuers at any time may terminate
some or all of their obligations under the Notes and the Indenture if the
Issuers deposit with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Notes to redemption or maturity, as the
case may be.
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the consent of the Holders of at
least a majority in principal amount outstanding of the Notes and (ii) any past
default or compliance with any provision may be waived with the consent of the
Holders of a majority in principal amount outstanding of the Notes. Subject to
certain exceptions set forth in the Indenture, without the consent of any
Noteholder, the Issuers and the Trustee may amend the Indenture or the Notes to
cure any ambiguity, omission, defect or inconsistency, to comply with Article 5
of the Indenture, to provide for uncertificated Notes in addition to or in place
of certificated Notes, to add guarantees with respect to the Notes, to secure
A-8
<PAGE>
the Notes, to add additional covenants or surrender rights and powers conferred
on the Issuers, to make any change that does not adversely affect the rights of
any Noteholder or to comply with any request of the SEC in connection with
qualifying the Indenture under the TIA.
15. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest on the Notes; (ii) default in payment of principal on any
Note when due at its Stated Maturity, upon redemption pursuant to paragraphs 5
or 6 above, upon required repurchase, upon acceleration or otherwise, (iii)
failure by the Issuers to comply with Article 5 of the Indenture; (iv) failure
by the Issuers to comply for 30 days after the notice specified in the paragraph
below with certain covenants (other than a failure to purchase Notes when
required upon the occurrence of certain events) of the Indenture; (v) failure by
the Issuers to comply for 60 days after the Issuers receive the notice specified
in the paragraph below with any of their other agreements in the Indenture
(other than those referred to in (i), (ii), (iii) or (iv) above); (vi) failure
by the Issuers or any Significant Subsidiary to pay any Indebtedness within any
applicable grace period after final maturity or acceleration by the Holders
thereof because of a default and the total amount of such Indebtedness unpaid or
accelerated exceeds $10 million; (vii) certain events of bankruptcy, insolvency
or reorganization of the Issuers or any Significant Subsidiary; (viii) the
rendering of any judgments or decrees for the payment of money in excess of $10
million, or its foreign equivalent at the time, is entered against the Issuers
or any Significant Subsidiary if such judgment or decree remains outstanding for
a period of 60 days following entry of such judgment and is not discharged,
bonded, waived or stayed within 30 days after notice thereof, (ix) a Subsidiary
Guarantee ceases to be in full force and effect (other than in accordance with
the terms of such Subsidiary Guarantee or the Indenture) or a Subsidiary
Guarantor denies or disaffirm its obligations under its Subsidiary Guarantee,
and (x) the security interest under the Escrow Security Agreement between the
Issuers and U.S. Bank Trust National Association, dated April 29, 1998 (the
"Escrow Security Agreement") 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 Escrow Security Agreement), or any security interest created
thereunder shall be declared invalid or unenforceable, or the Issuers or any
Restricted Subsidiary shall assert, in any pleading in any court of competent
jurisdiction that any such security interest is invalid or unenforceable.
A Default under clause (iv) or (v) of Section 6.1 of the Indenture will
not constitute an Event of Default until the Trustee or the Holders of at least
25% in aggregate principal amount of the outstanding Notes notify the Issuers of
the Default and the Issuers do not cure such Default within the time specified
after receipt of such notice. Such notice must specify the Default, demand that
it be remedied and state that such notice is a "Notice of Default".
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Notes then outstanding may
declare all the Notes to be due and payable. Certain events of bankruptcy or
insolvency are Events of Default which will result in the Notes being due and
payable immediately upon the occurrence of such Events of Default.
A-9
<PAGE>
Noteholders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from the Noteholders notice of any continuing Default (except a Default
in payment of principal or interest) if it determines that withholding notice is
not opposed to the interests of the Holders.
16. Guarantee and Security
The obligations of the Issuers pursuant to the Indenture and the Notes,
including the repurchase obligations under the Indenture, will be
unconditionally guaranteed, on a senior unsecured basis, by each Subsidiary
Guarantor. The obligations of the Issuers pursuant to the Indenture and the
Notes will be secured to the extent provided in the Indenture and the Escrow
Security Agreement.
17. Trustee Dealings with the Issuers
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by the Issuers or any of their Affiliates and may otherwise deal with the
Issuers or any of their Affiliates with the same rights it would have if it were
not Trustee.
18. No Recourse Against Others
No recourse for the payment of the principal of, premium, if any, or
interest on any of the Notes or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Issuers in the Indenture, or in any of the Notes or because of
the creation of any Indebtedness represented hereby and thereby, shall be had
against any incorporator, stockholder, officer, director, employee or
controlling person of the Issuers or any Successor Person thereof. Each Holder,
by accepting a Note, waives and releases all such liability.
19. Governing Law
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICT OF LAWS TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
A-10
<PAGE>
20. Authentication
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Note.
21. Abbreviations
Customary abbreviations may be used in the name of a Noteholder or an
assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with rights of survivorship and not as
tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gift to Minors
Act).
22. Holders' Compliance with Registration Rights Agreement
Each Holder of a Note, by acceptance hereof, acknowledges and agrees to
the provisions of the Registration Rights Agreement, including, without
limitation, the obligations of the Holders with respect to a registration and
the indemnification of the Issuers to the extent provided therein.
23. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Issuers have caused CUSIP numbers to be
printed on the Notes and have directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to the Noteholders. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Issuers will furnish to any Noteholder upon written request and
without charge to the Noteholder a copy of the Indenture which has in it the
text of this Note in larger type. Requests may be made as follows:
Chiles Offshore LLC
11200 Westheimer, Suite 410
Houston, Texas 77042
Attention: Chief Financial Officer
A-11
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint ________________________________________ agent to
transfer this Note on the books of the Issuers. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date: Your Signature:
---------------- -------------------------------------------
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Note.
In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act after the later of the date of original issuance
of such Notes and the last date, if any, on which such Notes were owned by the
Issuers or any Affiliate of the Issuers, the undersigned confirms that such
Notes are being transferred in accordance with its terms:
CHECK ONE
(1) /_/ to the Issuers or a Subsidiary thereof; or
(2) /_/ to a "qualified institutional buyer" (as defined in Rule 144A under
the Securities Act of 1933, as amended) that purchases for its own
account or for the account of a qualified institutional buyer to whom
notice is given that such transfer is being made in reliance on Rule
144A, in each case pursuant to and in compliance with Rule 144A under
the Securities Act of 1933; or
A-12
<PAGE>
(3) /_/ outside the United States to a "foreign person" in compliance with
Rule 904 of Regulation S under the Securities Act of 1933, as amended;
or
(4) /_/ pursuant to an effective registration statement under the
Securities Act of 1933, as amended; or
(5) /_/ pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Issuers as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
/_/ The transferee is an Affiliate of the Issuers. Unless one of the
items above is checked, the Trustee will refuse to register any of the Notes
evidenced by this certificate in the name of any person other than the
registered Holder thereof; provided, however, that if item (3), or (5) is
checked, the Issuers or the Trustee may require, prior to registering any such
transfer of the Notes, in their sole discretion, such written legal opinions,
certifications (including an investment letter in the case of box (3) or (4))
and other information as the Trustee or the Issuers have reasonably requested to
confirm that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
of 1933, as amended.
If none of the foregoing items are checked, the Trustee or Registrar
shall not be obligated to register this Note in the name of any person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.03 of Appendix 1 of the Indenture
shall have been satisfied.
Signed:
----------------------------------
(Sign exactly as your name appears on the
other side of this Note)
Signature Guarantee
-------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended and is aware that the sale to it is being made in reliance on
Rule 144A and
A-13
<PAGE>
acknowledges that it has received such information regarding the Issuers as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:
-----------------------------
---------------------------------------
Notice: to be executed by an executive
officer
A-14
<PAGE>
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL
SECURITY
The following increases or decreases in this Global Note have been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount-of-decrease Amount-of-increase this Global Note authorized officer of
in Principal Amount in Principal Amount following such Trustee-or-Notes
Date of Exchange of this Global Note of this Global Note decrease or increase Custodian
- --------------------- ------------------- ------------------- -------------------- ---------------------
<S> <C> <C> <C> <C>
</TABLE>
A-15
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuers
pursuant to Section 4.8 (Change of Control), 4.10 (Contract Termination) or 4.18
(Event of Loss) of the Indenture, check the applicable box below:
/_/ Section 4.8 /_/ Section 4.10 /_/ Section 4.18
If you want to elect to have only part of this Note purchased by the
Issuers pursuant to Section 4.8, 4.10 or 4.18 of the Indenture, state the amount
in principal amount: $
Date:
-------------------------
Your Signature:
-----------------------
(Sign exactly as your name
appears on the other side of
this Note.)
Signature Guarantee:
---------------------
(Signature must be guaranteed)
A-16
<PAGE>
[FORM OF GUARANTEE]
For value received, the undersigned hereby unconditionally guarantees,
as principal obligor and not only as a surety, to the Holder of this Note the
cash payments in United States dollars of principal of, premium, if any, and
interest on this Note (and including Additional Interest payable thereon) in the
amounts and at the times when due and interest on the overdue principal,
premium, if any, and interest, if any, of this Note, if lawful, and the payment
or performance of all other obligations of the Issuers under the Indenture or
the Notes, to the Holder of this Note and the Trustee, all in accordance with
and subject to the terms and limitations of this Note, Article Ten of the
Indenture and this Guarantee. This Guarantee will become effective in accordance
with Article Ten of the Indenture and its terms shall be evidenced therein. The
validity and enforceability of any Guarantee shall not be affected by the fact
that it is not affixed to any particular Note.
Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Indenture dated as of April 29, 1998, among Chiles
Offshore LLC, a Delaware limited liability company and Chiles Offshore Finance
Corp., a Delaware corporation, the Subsidiary Guarantors named therein and U.S.
Bank Trust National Association, as trustee (the "Trustee"), as amended or
supplemented (the "Indenture").
The obligations of the undersigned to the Holders of Notes and to the
Trustee pursuant to this Guarantee and the Indenture are expressly set forth in
Article Ten of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. Each Subsidiary Guarantor hereby
agrees to submit to the jurisdiction of the courts of the State of New York in
any action or proceeding arising out of or relating to this Guarantee.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused its Guarantee
to be duly executed.
Date:
----------------------------
----------------------------
By:
----------------------------
Name:
Title:
A-17
<PAGE>
EXHIBIT B
[FORM OF FACE OF EXCHANGE SECURITY]
[Global Notes Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS 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, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL
SECURITY 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 LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE
REFERRED TO ON THE REVERSE HEREOF.
<PAGE>
CHILES OFFSHORE LLC
CHILES OFFSHORE FINANCE CORP.
10% Senior Notes Due May 1, 2008
No. CUSIP No.
----
CHILES OFFSHORE LLC, a Delaware limited liability company, and CHILES
OFFSHORE FINANCE CORP., a Delaware corporation, jointly and severally promise to
pay to _____________, or registered assigns, the principal sum of ____________
on May 1, 2008.
Interest Payment Dates: May 1 and November 1.
Record Dates: April 15 and October 15.
Additional provisions of this Note are set forth on the reverse side of
this Note.
CHILES OFFSHORE LLC
By:
-------------------------------------
Name:
Title:
CHILES OFFSHORE FINANCE CORP.
By:
-------------------------------------
Name:
Title:
Dated: , 1998
------------
B-2
<PAGE>
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
U.S. Bank Trust National Association, as Trustee, certifies that this is
one of the Notes referred to in the within-mentioned Indenture.
By:
-------------------------------------
Authorized Signatory
B-3
<PAGE>
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
10% SENIOR NOTE DUE 2008
1. Interest
CHILES OFFSHORE LLC, a Delaware limited liability company, and CHILES
OFFSHORE FINANCE CORP., a Delaware corporation (such entities, and their
successors and assigns under the Indenture hereinafter referred to, and each
other entity which is required to become one of the Issuers pursuant to the
Indenture, and their successors and assigns under the Indenture, being herein
called the "Issuers"), jointly and severally promise to pay interest on the
principal amount of this Note at the rate per annum shown above. The Issuers
will pay interest semiannually on May 1 and November 1 of each year, commencing
November 1, 1998. Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from, April 29,
1998. Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Issuers shall pay interest on overdue principal at the rate of 1.0%
per annum in excess of the rate borne by the Notes, and it shall pay interest on
overdue installments of interest at 1.0% per annum in excess of such rate to the
extent lawful.
2. Method of Payment
The Issuers will pay interest on the Notes (except defaulted interest)
to the Persons who are registered holders of Notes at the close of business on
the record date immediately preceding the interest payment date even if Notes
are canceled after the record date and on or before the interest payment date.
Holders must surrender Notes to a Paying Agent to collect principal payments.
The Issuers will pay principal and interest in money of the United States that
at the time of payment is legal tender for payment of public and private debts.
Payments in respect of the Notes represented by a Global Note (including
principal, premium and interest) will be made by wire transfer of immediately
available funds to the accounts specified by The Depository Trust Company. The
Issuers will make all payments in respect of a certificated Note (including
principal, premium and interest) by mailing a check to the registered address of
each Holder thereof; provided, however, that payments on a certificated Note
will be made by wire transfer to a U.S. dollar account maintained by the payee
with a bank in the United States if such Holder elects payment by wire transfer
by giving written notice to the Trustee or the Paying Agent to such effect
designating such account no later than 30 days immediately preceding the
relevant due date for payment (or such other date as the Trustee may accept in
its discretion).
3. Paying Agent and Registrar
Initially, U.S. Bank Trust National Association, a national banking
corporation ("Trustee"), will act as Paying Agent and Registrar. The Issuers may
appoint and change any Paying Agent, Registrar or co-Registrar without notice.
The Issuers may act as Paying Agent, Registrar, co-Registrar or transfer agent.
B-4
<PAGE>
4. Indenture
The Issuers issued the Notes under an Indenture dated as of April 29,
1998 (the "Indenture"), among the Issuers, the Subsidiary Guarantors named
therein and the Trustee. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S.C. Section 77aa77bbbb) as in effect on the date of
the Indenture (the "TIA"). Terms defined in the Indenture and not defined herein
have the meanings ascribed thereto in the Indenture. The Notes are subject to
all such terms, and Noteholders are referred to the Indenture and the TIA for a
statement of those terms. Any conflict between this Note and the Indenture will
be governed by the Indenture.
The Notes are general senior obligations of the Issuers limited to $110
million aggregate principal amount. The Indenture imposes certain limitations on
the Incurrence of Indebtedness by the Issuers and their Restricted Subsidiaries,
the existence of liens, the payment of dividends on, and redemption of, the
Capital Stock of the Issuers and their Subsidiaries, restricted payments, the
sale or transfer of assets and Subsidiary stock, the issuance or sale of Capital
Stock of Restricted Subsidiaries, sale and leaseback transactions, the
investments of the Issuers and their Restricted Subsidiaries, consolidations,
mergers and transfers of all or substantially all the assets of the Issuers, and
transactions with Affiliates. In addition, the Indenture limits the ability of
the Issuers and certain of their Subsidiaries to restrict distributions and
dividends from Restricted Subsidiaries.
5. Optional Redemption
Except as set forth in the next paragraph, the Notes may not be
redeemed prior to May 1, 2003. Thereafter, the Issuers may redeem as provided
in, and subject to the terms of, the Indenture the Notes in whole or in part, at
any time or from time to time, at the following redemption prices (expressed in
percentages of principal amount), plus accrued interest 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 May 1 of the years set forth below:
<TABLE>
<CAPTION>
Period Percentage
---------------------------- ----------------
<S> <C>
2003........................ 105.00%
2004........................ 103.33%
2005........................ 101.67%
2006 and thereafter......... 100.00%
</TABLE>
In addition, at any time and from time to time prior to May 1, 2001,
the Issuers may redeem in the aggregate up to 35% of the principal amount of the
Notes with the proceeds of one or more Public Equity Offerings, at a redemption
price (expressed as a percentage of principal amount) of 110% plus accrued
interest 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) as provided in,
B-5
<PAGE>
and subject to the terms of, the Indenture; provided, however, that at least
$71.5 million aggregate principal amount of the Notes must remain outstanding
after each such redemption and, provided further, that such redemption shall
occur within 90 days following the closing of such Public Equity Offering.
6. Notice of Redemption
Notice 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 of
Notes to be redeemed at his registered address. Notes in denominations larger
than $1,000 may be redeemed in part but only in whole multiples of $1,000. If
money sufficient to pay the redemption price of and accrued interest on all
Notes (or portions thereof) to be redeemed on the redemption date is deposited
with the Paying Agent on or before the redemption date and certain other
conditions are satisfied, on and after such date interest ceases to accrue on
such Notes (or such portions thereof) called for redemption. If a notice or
communication is sent in the manner provided in the Indenture, it is duly given,
whether or not the addressee receives it. Failure to send a notice or
communication to a Noteholder or any defect in it shall not affect its
sufficiency with respect to other Noteholders. In addition, in the event of
certain Asset Dispositions, the Issuers will be required to make an offer to
purchase Notes at a purchase price of 100% of their principal amount plus
accrued interest to the date of purchase (subject to the rights of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date) as provided in, and subject to the terms of, the
Indenture.
7. Change of Control
Upon a Change of Control, each Holder of Notes will have the right to
require the Issuers to repurchase all or any part of the Notes of such Holder at
a repurchase price in cash equal to 101% of the principal amount of the Notes to
be repurchased plus accrued and unpaid interest to the date of repurchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the related interest payment date) as provided in, and
subject to the terms of, the Indenture.
8. Contract Termination
In the event that a Construction Contract is terminated prior to
delivery of the Rig, each Holder will have the right to require the Issuers to
purchase the Allocated Principal Amount of such Holder's Notes for such Rig at a
purchase price equal to 101% of the principal amount thereof, plus accrued and
unpaid interest to the date of purchase.
9. Event of Loss of a Rig
Upon the occurrence of an Event of Loss of a Rig after the delivery of
such Rig, the Issuers will be required to apply the insurance and other proceeds
either to repay indebtedness outstanding under the Bank Facility or other
secured debt (and permanently reduce the commitments thereunder) or to acquire a
Qualified Substitute Rig, and to apply the balance to purchase the
B-6
<PAGE>
Allocated Principal Amount of Notes tendered by Holders at a purchase price
equal to 101% of the principal amount thereof, plus accrued and unpaid interest
to the date of purchase.
10. Denominations; Transfer; Exchange
The Notes are in registered form without coupons in denominations of
$1,000 and whole multiples of $1,000. A Holder may transfer or exchange Notes in
accordance with the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements or transfer documents and to pay any
taxes and fees required by law or permitted by the Indenture, including any
transfer tax or other similar governmental charge payable in connection
therewith. The Registrar need not register the transfer of or exchange any Notes
selected for redemption (except, in the case of a Note to be redeemed in part,
the portion of the Note not to be redeemed) or any Notes for a period of 15 days
before a selection of Notes to be redeemed or 15 days before an interest payment
date interest payment date.
11. Persons Deemed Owners
The registered Holder of this Note may be treated as the owner of it
for all purposes.
12. Unclaimed Money
If money for the payment of principal or interest remains unclaimed for
two years, the Trustee or Paying Agent shall pay the money back to the Issuers
at their written request unless an applicable abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Issuers and not to the Trustee for payment.
13. Discharge and Defeasance
Subject to certain conditions, the Issuers at any time may terminate
some or all of their obligations under the Notes and the Indenture if the
Issuers deposit with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Notes to redemption or maturity, as the
case may be.
14. Amendment, Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the consent of the Holders of at
least a majority in principal amount outstanding of the Notes and (ii) any past
default or compliance with any provision may be waived with the consent of the
Holders of a majority in principal amount outstanding of the Notes. Subject to
certain exceptions set forth in the Indenture, without the consent of any
Noteholder, the Issuers and the Trustee may amend the Indenture or the Notes to
cure any ambiguity, omission, defect or inconsistency, to comply with Article 5
of the Indenture, to provide for uncertificated Notes in addition to or in place
of certificated Notes, to add guarantees with respect to the Notes, to secure
B-7
<PAGE>
the Notes, to add additional covenants or surrender rights and powers conferred
on the Issuers, to make any change that does not adversely affect the rights of
any Noteholder or to comply with any request of the SEC in connection with
qualifying the Indenture under the TIA.
15. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest on the Notes; (ii) default in payment of principal on any
Note when due at its Stated Maturity, upon redemption pursuant to paragraphs 5
or 6 above, upon required repurchase, upon acceleration or otherwise, (iii)
failure by the Issuers to comply with Article 5 of the Indenture; (iv) failure
by the Issuers to comply for 30 days after the notice specified in the paragraph
below with certain covenants (other than a failure to purchase Notes upon the
occurrence of certain events) of the Indenture; (v) failure by the Issuers to
comply for 60 days after the Issuers receive the notice specified in the
paragraph below with any of their other agreements in the Indenture (other than
those referred to in (i), (ii), (iii) or (iv) above); (vi) failure by the
Issuers or any Significant Subsidiary to pay any Indebtedness within any
applicable grace period after final maturity or acceleration by the Holders
thereof because of a default and the total amount of such Indebtedness unpaid or
accelerated exceeds $10 million; (vii) certain events of bankruptcy, insolvency
or reorganization of the Issuers or any Significant Subsidiary; (viii) the
rendering of any judgments or decrees for the payment of money in excess of $10
million, or its foreign equivalent at the time, is entered against the Issuers
or any Significant Subsidiary if such judgment or decree remains outstanding for
a period of 60 days following entry of such judgment and is not discharged,
bonded, waived or stayed within 30 days after notice thereof, (ix) a Subsidiary
Guarantee ceases to be in full force and effect (other than in accordance with
the terms of such Subsidiary Guarantee or the Indenture) or a Subsidiary
Guarantor denies or disaffirm its obligations under its Subsidiary Guarantee,
and (x) the security interest under the Escrow Security Agreement between the
Issuers and U.S. Bank Trust National Association, dated April 29, 1998 (the
"Escrow Security Agreement"), 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 Escrow Security Agreement), or any security interest created
thereunder shall be declared invalid or unenforceable, or the Issuers or any
Restricted Subsidiary shall assert, in any pleading in any court of competent
jurisdiction that any such security interest is invalid or unenforceable
A Default under clause (iv) or (v) of Section 6.1 of the Indenture will
not constitute an Event of Default until the Trustee or the Holders of at least
25% in aggregate principal amount of the outstanding Notes notify the Issuers of
the Default and the Issuers do not cure such Default within the time specified
after receipt of such notice. Such notice must specify the Default, demand that
it be remedied and state that such notice is a "Notice of Default".
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the Notes then outstanding may
declare all the Notes to be due and payable. Certain events of bankruptcy or
insolvency are Events of Default which will result in the Notes being due and
payable immediately upon the occurrence of such Events of Default.
B-8
<PAGE>
Noteholders may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee may refuse to enforce the Indenture or
the Notes unless it receives reasonable indemnity or security. Subject to
certain limitations, Holders of a majority in principal amount of the Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from the Noteholders notice of any continuing Default (except a Default
in payment of principal or interest) if it determines that withholding notice is
not opposed to the interests of the Holders.
16. Guarantee
The obligations of the Issuers pursuant to the Indenture and the Notes,
including the repurchase obligations under the Indenture, will be
unconditionally guaranteed, on a senior unsecured basis, by each Subsidiary
Guarantor. The obligations of the Issuers pursuant to the Indenture and the
Notes will be secured to the extent provided in the Indenture and the Escrow
Security Agreement.
17. Trustee Dealings with the Issuers
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by the Issuers or any of their Affiliates and may otherwise deal with the
Issuers or any of their Affiliates with the same rights it would have if it were
not Trustee.
18. No Recourse Against Others
No recourse for the payment of the principal of, premium, if any, or
interest on any of the Notes or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Issuers in the Indenture, or in any of the Notes or because of
the creation of any Indebtedness represented hereby and thereby, shall be had
against any incorporator, stockholder, member, officer, director, manager,
employee or controlling person of the Issuers or any Successor Person thereof.
Each Holder, by accepting a Note, waives and releases all such liability.
19. Governing Law
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICT OF LAWS TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
B-9
<PAGE>
20. Authentication
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Note.
21. Abbreviations
Customary abbreviations may be used in the name of a Noteholder or an
assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with rights of survivorship and not as
tenants in common), CUST (= custodian), and U/G/M/A (= Uniform Gift to Minors
Act).
22. Holders' Compliance with Registration Rights Agreement
Each Holder of a Note, by acceptance hereof, acknowledges and agrees to
the provisions of the Registration Rights Agreement, including, without
limitation, the obligations of the Holders with respect to a registration and
the indemnification of the Issuers to the extent provided therein.
23. CUSIP Numbers
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Issuers have caused CUSIP numbers to be
printed on the Notes and have directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to the Noteholders. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Issuers will furnish to any Noteholder upon written request and
without charge to the Noteholder a copy of the Indenture which has in it the
text of this Note in larger type. Requests may be made as follows:
Chiles Offshore LLC
11200 Westheimer, Suite 410
Houston, Texas 77042
Attention: Chief Financial Officer
B-10
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint ________________________________________ agent to
transfer this Note on the books of the Issuers. The agent may substitute another
to act for him.
Date: Your Signature:
---------------- --------------------------------------------
- --------------------------------------------------------------------------------
Sign exactly as your name appears on the other side of this Note.
Signature Guarantee:
------------------------------------------------------------
(Signature must be guaranteed)
B-11
<PAGE>
[FORM OF GUARANTEE]
For value received, the undersigned hereby unconditionally guarantees,
as principal obligor and not only as a surety, to the Holder of this Note the
cash payments in United States dollars of principal of, premium, if any, and
interest on this Note (and including Additional Interest payable thereon) in the
amounts and at the times when due and interest on the overdue principal,
premium, if any, and interest, if any, of this Note, if lawful, and the payment
or performance of all other obligations of the Issuers under the Indenture or
the Notes, to the Holder of this Note and the Trustee, all in accordance with
and subject to the terms and limitations of this Note, Article Ten of the
Indenture and this Guarantee. This Guarantee will become effective in accordance
with Article Ten of the Indenture and its terms shall be evidenced therein. The
validity and enforceability of any Guarantee shall not be affected by the fact
that it is not affixed to any particular Note.
Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Indenture dated as of April 29, 1998, among Chiles
Offshore LLC, a Delaware limited liability company and Chiles Offshore Finance
Corp., a Delaware corporation, the Subsidiary Guarantors named therein and U.S.
Bank Trust National Association, as trustee (the "Trustee"), as amended or
supplemented (the "Indenture").
The obligations of the undersigned to the Holders of Notes and to the
Trustee pursuant to this Guarantee and the Indenture are expressly set forth in
Article Ten of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. Each Subsidiary Guarantor hereby
agrees to submit to the jurisdiction of the courts of the State of New York in
any action or proceeding arising out of or relating to this Guarantee.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
IN WITNESS WHEREOF, each Subsidiary Guarantor has caused its Guarantee
to be duly executed.
Date:
--------------------------
By:
---------------------------------
Name:
Title:
B-12
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuers
pursuant to Section 4.8 (Change of Control), 4.10 (Contract Termination) or 4.18
(Event of Loss) of the Indenture, check the applicable box below:
/_/ Section 4.8 /_/ Section 4.10 /_/ Section 4.18
If you want to elect to have only part of this Note purchased by the
Issuers pursuant to Section 4.8, 4.10 or 4.18 of the Indenture, state the amount
in principal amount: $
-------------
Date:
-------------------------
Your Signature:
---------------------------
(Sign exactly as your name appears on the
other side of this Note.)
Signature Guarantee:
-------------------
(Signature must be guaranteed)
B-13
<PAGE>
Exhibit 4.4
$110,000,000
CHILES OFFSHORE LLC
CHILES OFFSHORE FINANCE CORP.
10% Senior Notes due 2008
REGISTRATION RIGHTS AGREEMENT
April 29, 1998
CREDIT SUISSE FIRST BOSTON CORPORATION
WASSERSTEIN PERELLA SECURITIES, INC.
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Dear Sirs:
Chiles Offshore LLC, a Delaware limited liability company ("Chiles"),
and Chiles Offshore Finance Corp., a Delaware corporation ("Finance" and,
together with Chiles, the "Issuers"), propose to issue and sell to Credit
Suisse First Boston Corporation and Wasserstein Perella Securities, Inc.
(collectively, the "Initial Purchasers"), upon the terms set forth in a
purchase agreement of even date herewith (the "Purchase Agreement"),
$110,000,000 aggregate principal amount of their 10% Senior Notes due 2008
(the "Initial Securities") to be unconditionally guaranteed (the
"Guaranties") by Chiles Columbus LLC, a Delaware limited liability company
("Columbus") and Chiles Magellan LLC, a Delaware limited liability company
("Magellan" and, together with Columbus, the "Guarantors" and together with
the Issuer, the "Company"). The Initial Securities will be issued pursuant to
an Indenture, dated as of April 29, 1998, (the "Indenture") among the Issuer,
the Guarantors named therein and U.S. Bank Trust National Association (the
"Trustee"). As an inducement to the Initial Purchasers, the Issuers agree
with the Initial Purchasers, for the benefit of the holders of the Initial
Securities (including, without limitation, the Initial Purchasers), the
Exchange Securities (as defined below) and the Private Exchange Securities
(as defined below) (collectively, the "Holders"), as follows:
1. Registered Exchange Offer. The Issuers shall, at their own cost,
prepare and, not later than 60 days after (or if the 60th day is not a
business day, the first business day thereafter) the date of original issue
of the Initial Securities (the "Issue Date"), file with the Securities and
Exchange Commission (the "Commission") a registration statement (the
"Exchange Offer Registration
<PAGE>
Statement") on an appropriate form under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to a proposed offer (the
"Registered Exchange Offer") to the Holders of Transfer Restricted Securities
(as defined in Section 6 hereof), who are not prohibited by any law or policy
of the Commission from participating in the Registered Exchange Offer, to
issue and deliver to such Holders, in exchange for the Initial Securities, a
like aggregate principal amount of debt securities (the "Exchange
Securities") of the Issuers issued under the Indenture and identical in all
material respects to the Initial Securities (except for the transfer
restrictions relating to the Initial Securities and the provisions relating
to the matters described in Section 6 hereof) that would be registered under
the Securities Act. The Issuers shall use their reasonable best efforts to
cause such Exchange Offer Registration Statement to become effective under
the Securities Act within 120 days (or if the 120th day is not a business
day, the first business day thereafter) after the Issue Date of the Initial
Securities and shall keep the Exchange Offer Registration Statement effective
for not less than 30 days (or longer, if required by applicable law) after
the date notice of the Registered Exchange Offer is mailed to the Holders
(such period being called the "Exchange Offer Registration Period").
If the Issuers effect the Registered Exchange Offer, the Issuers will be
entitled to close the Registered Exchange Offer 30 days after the
commencement thereof provided that the Issuers have accepted all the Initial
Securities theretofore validly tendered and not withdrawn in accordance with
the terms of the Registered Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Issuers shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of Transfer Restricted Securities (as defined in Section 6
hereof) electing to exchange the Initial Securities for Exchange Securities
(assuming that such Holder is not an affiliate of the Issuers within the
meaning of the Securities Act, acquires the Exchange Securities in the
ordinary course of such Holder's business and has no arrangements with any
person to participate in the distribution of the Exchange Securities and is
not prohibited by any law or policy of the Commission from participating in
the Registered Exchange Offer) to trade such Exchange Securities from and
after their receipt without any limitations or restrictions under the
Securities Act and without material restrictions under the securities laws of
the several states of the United States.
The Issuers and the Initial Purchasers acknowledge that, pursuant to
current interpretations by the Commission's staff of Section 5 of the
Securities Act, in the absence of an applicable exemption therefrom, (i) each
Holder which is a broker-dealer electing to exchange Securities, acquired for
its own account as a result of market making activities or other trading
activities, for Exchange Securities (an "Exchanging Dealer"), is required to
deliver a prospectus containing the information set forth in (a) Annex A
hereto on the cover, (b) Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section, and (c) Annex C
hereto in the "Plan of Distribution" section of such prospectus in connection
with a sale of any such Exchange Securities received by such Exchanging
Dealer pursuant to the Registered Exchange Offer and (ii) an Initial
Purchaser that elects to sell Exchange Securities acquired in exchange for
Initial Securities constituting any portion of an unsold allotment is
required to deliver a prospectus containing the
2
<PAGE>
information required by Items 507 or 508 of Regulation S-K under the Securities
Act, as applicable, in connection with such sale.
The Issuers shall use their reasonable best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
prospectus contained therein, in order to permit such prospectus to be
lawfully delivered by all persons subject to the prospectus delivery
requirements of the Securities Act for such period of time as such persons
must comply with such requirements in order to resell the Exchange
Securities; provided, however, that (i) in the case where such prospectus and
any amendment or supplement thereto must be delivered by an Exchanging Dealer
or an Initial Purchaser, such period shall be the lesser of 180 days and the
date on which all Exchanging Dealers and the Initial Purchasers have sold all
Exchange Securities held by them (unless such period is extended pursuant to
Section 3(j) below) and (ii) the Issuers shall make such prospectus and any
amendment or supplement thereto, available to any broker-dealer for use in
connection with any resale of any Exchange Securities for a period of not
less than 90 days after the consummation of the Registered Exchange Offer.
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Initial Securities acquired by it as part of its initial
distribution, the Issuers, simultaneously with the delivery of the Exchange
Securities pursuant to the Registered Exchange Offer, shall issue and deliver
to such Initial Purchaser upon the written request of such Initial Purchaser,
in exchange (the "Private Exchange") for the Initial Securities held by such
Initial Purchaser, a like principal amount of debt securities of the Issuers
issued under the Indenture and identical in all material respects (including
the existence of restrictions on transfer under the Securities Act and the
securities laws of the several states of the United States, but excluding
provisions relating to the matters described in Section 6 hereof) to the
Initial Securities (the "Private Exchange Securities"). The Initial
Securities, the Exchange Securities and the Private Exchange Securities are
herein collectively called the "Securities".
In connection with the Registered Exchange Offer, the Issuers shall:
(a) mail to each Holder a copy of the prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30
days (or longer, if required by applicable law) after the date notice thereof
is mailed to the Holders;
(c) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of New
York, which may be the Trustee or an affiliate of the Trustee;
3
<PAGE>
(d) permit Holders to withdraw tendered Securities at any time
prior to the close of business, New York time, on the last business day on
which the Registered Exchange Offer shall remain open; and
(e) otherwise comply with all applicable laws.
As soon as practicable after the close of the Registered Exchange Offer
or the Private Exchange, as the case may be, the Issuers shall:
(x) accept for exchange all the Securities validly tendered and
not withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(y) deliver to the Trustee for cancellation all the Initial
Securities so accepted for exchange; and
(z) cause the Trustee to authenticate and deliver promptly to each
Holder of the Initial Securities, Exchange Securities or Private Exchange
Securities, as the case may be, equal in principal amount to the Initial
Securities of such Holder so accepted for exchange.
The Indenture will provide that the Exchange Securities will not be
subject to the transfer restrictions set forth in the Indenture and that all
the Securities will vote and consent together on all matters as one class and
that none of the Securities will have the right to vote or consent as a class
separate from one another on any matter.
Interest on each Exchange Security and Private Exchange Security issued
pursuant to the Registered Exchange Offer and in the Private Exchange will
accrue from the last interest payment date on which interest was paid on the
Initial Securities surrendered in exchange therefor or, if no interest has
been paid on the Initial Securities, from the date of original issue of the
Initial Securities.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Issuers that at the time of the consummation of
the Registered Exchange Offer (i) any Exchange Securities received by such
Holder will be acquired in the ordinary course of business, (ii) such Holder
will have no arrangements or understanding with any person to participate in
the distribution of the Securities or the Exchange Securities within the
meaning of the Securities Act, (iii) such Holder is not an "affiliate," as
defined in Rule 405 of the Securities Act, of either of the Issuers or if it
is an affiliate, such Holder will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable, (iv) if
such Holder is not a broker-dealer, that it is not engaged in, and does not
intend to engage in, the distribution of the Exchange Securities and (v) if
such Holder is a broker-dealer, that it will receive Exchange Securities for
its own account in exchange for Initial Securities that were acquired as a
result of market-making activities or other trading activities and that it
will be required to acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Securities.
4
<PAGE>
Notwithstanding any other provisions hereof, the Issuers will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto
and any prospectus forming part thereof and any supplement thereto complies
in all material respects with the Securities Act and the rules and
regulations thereunder, (ii) any Exchange Offer Registration Statement and
any amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Exchange Offer Registration
Statement, and any supplement to such prospectus, does not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
2. Shelf Registration. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission, the
Issuers are not permitted to effect a Registered Exchange Offer, as
contemplated by Section 1 hereof, (ii) the Registered Exchange Offer is not
consummated within 150 days of the Issue Date, (iii) any Initial Purchaser so
requests with respect to the Initial Securities (or the Private Exchange
Securities) not eligible to be exchanged for Exchange Securities in the
Registered Exchange Offer and held by it following consummation of the
Registered Exchange Offer or (iv) any Holder (other than an Exchanging
Dealer) is not eligible to participate in the Registered Exchange Offer or,
in the case of any Holder (other than an Exchanging Dealer) that participates
in the Registered Exchange Offer, such Holder does not receive freely
tradeable Exchange Securities on the date of the exchange, the Issuers shall
take the following actions:
(a) The Issuers shall, at their cost, as promptly as practicable (but
in no event more than 60 days after so required or requested pursuant to this
Section 2) file with the Commission and thereafter shall use their reasonable
best efforts to cause to be declared effective a registration statement (the
"Shelf Registration Statement" and, together with the Exchange Offer
Registration Statement, a "Registration Statement") on an appropriate form
under the Securities Act relating to the offer and sale of the Transfer
Restricted Securities (as defined in Section 6 hereof) by the Holders thereof
from time to time in accordance with the methods of distribution set forth in
the Shelf Registration Statement and Rule 415 under the Securities Act
(hereinafter, the "Shelf Registration"); provided, however, that with respect
to Exchange Securities received by an Initial Purchaser in exchange for
Initial Securities constituting any portion of an unsold allotment, the
Issuers may, if permitted by current interpretations by the Commission's
staff, file a post-effective amendment to the Exchange Offer Registration
Statement containing the information required by Regulation S-K Items 507
and/or 508, as applicable, in satisfaction of its obligations under this
paragraph (a) with respect thereof, and any such Exchange Offer Registration
Statement, as so amended, shall be referred to herein as, and governed by,
the provisions herein applicable to, a Shelf Registration Statement; and
provided further, however, that no Holder (other than an Initial Purchaser)
shall be entitled to have the Securities held by it covered by such Shelf
Registration Statement unless such Holder agrees in writing to be bound by
all the provisions of this Agreement applicable to such Holder as provided in
a written notice and questionnaire delivered to all Holders (including the
Initial Purchasers) notifying such Holders that a Shelf Registration
Statement will be filed by the Issuers, requesting such information with
respect to the Holders as required to be disclosed by the
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Shelf Registration Statement and setting forth a deadline for response
therein (which in no event shall be less than 30 calendar days).
(b) The Issuers shall use their reasonable best efforts to keep the
Shelf Registration Statement continuously effective in order to permit the
prospectus included therein to be lawfully delivered by the Holders of the
relevant Securities, for a period of two years (or for such longer period if
extended pursuant to Section 3(j) below) from the date of its effectiveness
or such shorter period that will terminate when all the Securities covered by
the Shelf Registration Statement (i) have been sold pursuant thereto or (ii)
are no longer restricted securities (as defined in Rule 144 under the
Securities Act, or any successor rule thereof). During any consecutive
365-day period, the Issuers will have the ability to suspend the availability
of the Shelf Registration Statement for up to two periods of up to 45
consecutive days, but no more than an aggregate of 60 days during any 365-
day period. The Issuers shall be deemed not to have used their reasonable
best efforts to keep the Shelf Registration Statement effective during the
requisite period if they voluntarily take any action that would result in
Holders of Securities covered thereby not being able to offer and sell such
Securities during that period, unless (i) such action is required by
applicable law, or (ii) upon the occurrence of any event contemplated by
Section 3(b)(ii) through (v) below, such action is taken by the Issuer in
good faith and for valid business reasons (not including avoidance of the
Issuers' obligations hereunder), so long as the Issuers promptly thereafter
comply with the requirements of Section 3(j) hereof, if applicable, if the
Issuers have determined in good faith that there are no material legal or
commercial impediments in so doing.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Issuers shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the
effective date of the Shelf Registration Statement, amendment or supplement,
(i) to comply in all material respects with the applicable requirements of
the Securities Act and the rules and regulations of the Commission and (ii)
not to contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading (other than with respect to information supplied in writing by
the selling Holders for expressly use in the Shelf Registration Statement
pursuant to this Agreement).
3. Registration Procedures. In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any
Registered Exchange Offer contemplated by Section 1 hereof, the following
provisions shall apply:
(a) The Issuers shall (i) furnish to each Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration Statement
and each amendment thereof and each supplement, if any, to the prospectus
included therein and, in the event that an Initial Purchaser (with respect to
any portion of an unsold allotment from the original offering) is
participating in the Registered Exchange Offer or the Shelf Registration
Statement, the Issuers shall use their reasonable best efforts to reflect in
each such document, when so filed with the Commission, such comments as such
Initial Purchaser reasonably may propose; (ii) include the information set
forth in Annex A
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hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures"
section and the "Purpose of the Exchange Offer" section and in Annex C hereto
in the "Plan of Distribution" section of the prospectus forming a part of the
Exchange Offer Registration Statement and include the information set forth
in Annex D hereto in the Letter of Transmittal delivered pursuant to the
Registered Exchange Offer; (iii) if requested by an Initial Purchaser,
include the information required by Items 507 or 508 of Regulation S-K under
the Securities Act, as applicable, in the prospectus forming a part of the
Exchange Offer Registration Statement; (iv) include within the prospectus
contained in the Exchange Offer Registration Statement a section entitled
"Plan of Distribution," reasonably acceptable to the Initial Purchasers,
which shall contain a summary statement of the positions taken or policies
made by the staff of the Commission with respect to the potential
"underwriter" status of any broker-dealer that is the beneficial owner (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of Exchange Securities received by such broker-dealer
in the Registered Exchange Offer (a "Participating Broker-Dealer"), whether
such positions or policies have been publicly disseminated by the staff of
the Commission or such positions or policies, in the reasonable judgment of
the Initial Purchasers based upon advice of counsel (which may be in-house
counsel), represent the prevailing views of the staff of the Commission; and
(v) in the case of a Shelf Registration Statement, include the names of the
Holders, who propose to sell Securities pursuant to the Shelf Registration
Statement, as selling securityholders.
(b) The Issuers shall give written notice to the Initial Purchasers,
and, in the case of a Shelf Registration Statement only, the Holders of the
Securities and, in the case of a Exchange Offer Registration Statement only,
any Participating Broker-Dealer from whom the Issuers have received prior
written notice that it will be a Participating Broker-Dealer in the
Registered Exchange Offer (which notice pursuant to clauses (ii)-(v) hereof
shall be accompanied by an instruction to suspend the use of the prospectus
until the requisite changes have been made):
(i) when the Registration Statement or any amendment thereto has
been filed with the Commission and when the Registration Statement or any
post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements
to the Registration Statement or the prospectus included therein or for
additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Issuers or their legal counsel of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose; and
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(v) of the happening of any event that requires the Issuers to make
changes in the Registration Statement or the prospectus in order that the
Registration Statement or the prospectus do not contain an untrue
statement of a material fact nor omit to state a material fact required to
be stated therein or necessary to make the statements therein (in the case
of the prospectus, in light of the circumstances under which they were
made) not misleading (which written notice shall be accompanied by an
instruction to suspend the use of the prospectus until the requisite
changes have been made and which need not provide any detail as to the
nature of such event).
(c) The Issuers shall make every reasonable commercial effort to
obtain the withdrawal, at the earliest possible time, of any order suspending
the effectiveness of the Registration Statement.
(d) The Issuers shall furnish to each Holder of Securities included
within the coverage of the Shelf Registration and each Initial Purchaser,
without charge, one copy of the Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules, and, if the Holder or Initial Purchaser so requests in writing,
all exhibits thereto (excluding those, if any, incorporated by reference and
available on-line via EDGAR).
(e) The Issuers shall deliver to each Exchanging Dealer and each
Initial Purchaser, without charge, one copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, and, if any Initial Purchaser or any such
Exchanging Dealer requests, all exhibits thereto (excluding, those, if any,
incorporated by reference and available on-line via EDGAR).
(f) The Issuers shall, during the Shelf Registration Period, deliver
to each Holder of Securities included within the coverage of the Shelf
Registration, without charge, as many copies of the prospectus (including
each preliminary prospectus) included in the Shelf Registration Statement and
any amendment or supplement thereto as such person may reasonably request.
The Issuers consent, subject to the provisions of this Agreement, to the use
of the prospectus or any amendment or supplement thereto by each of the
selling Holders of the Securities in connection with the offering and sale of
the Securities covered by the prospectus, or any amendment or supplement
thereto, included in the Shelf Registration Statement.
(g) The Issuers shall deliver to each Initial Purchaser, any
Exchanging Dealer, any Participating Broker-Dealer and such other persons
required to deliver a prospectus following the Registered Exchange Offer,
without charge, as many copies of the final prospectus included in the
Exchange Offer Registration Statement and any amendment or supplement thereto
as such persons may reasonably request. The Issuers consent, subject to the
provisions of this Agreement, to the use of the prospectus or any amendment
or supplement thereto by any Initial Purchaser, if necessary, any
Participating Broker-Dealer and such other persons required to deliver a
prospectus following the Registered Exchange Offer in connection with the
offering and sale of the Exchange
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Securities covered by the prospectus, or any amendment or supplement thereto,
included in such Exchange Offer Registration Statement.
(h) Prior to any public offering of the Securities, pursuant to any
Registration Statement, the Issuers shall register or qualify or cooperate
with the Holders of the Securities included therein and their respective
counsel in connection with the registration or qualification of the
Securities for offer and sale under the securities or "blue sky" laws of such
states of the United States as any Holder of the Securities reasonably
requests in writing and do any and all other acts or things necessary or
advisable to enable the offer and sale in such jurisdictions of the
Securities covered by such Registration Statement; provided, however, that
the Issuers shall not be required to (i) qualify generally to do business in
any jurisdiction where it is not then so qualified or (ii) take any action
which would subject it to general service of process or to taxation in any
jurisdiction where it is not then so subject.
(i) The Issuers shall cooperate with the Holders of the Securities to
facilitate the timely preparation and delivery of certificates representing
the Securities to be sold pursuant to any Registration Statement free of any
restrictive legends and in such denominations and registered in such names as
the Holders may request a reasonable period of time prior to sales of the
Securities pursuant to such Registration Statement.
(j) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 3(b) above during the period for which the Issuers are
required to maintain an effective Registration Statement, the Issuers shall
promptly prepare and file a post-effective amendment to the Registration
Statement or a supplement to the related prospectus and any other required
document so that, as thereafter delivered to Holders of the Securities or
purchasers of Securities, the prospectus will not contain an untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. If the Issuers
notify the Initial Purchasers, the Holders of the Securities and any known
Participating Broker-Dealer in accordance with paragraphs (ii) through (v) of
Section 3(b) above to suspend the use of the prospectus until the requisite
changes to the prospectus have been made, then the Initial Purchasers, the
Holders of the Securities and any such Participating Broker-Dealers shall
suspend use of such prospectus, and the period of effectiveness of the
Exchange Offer Registration Statement provided for in Section 1 above shall
be extended by the number of days from and including the date of the giving
of such notice to and including the date when the Initial Purchasers, the
Holders of the Securities and any known Participating Broker-Dealer shall
have received such amended or supplemented prospectus pursuant to this
Section 3(j).
(k) Not later than the effective date of the applicable Registration
Statement, the Issuers will provide a CUSIP number for the Initial
Securities, the Exchange Securities or the Private Exchange Securities, as
the case may be, and provide the applicable trustee with printed certificates
for the Initial Securities, the Exchange Securities or the Private Exchange
Securities, as the case may be, in a form eligible for deposit with The
Depository Trust Company.
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(l) The Issuers will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the Registered
Exchange Offer or the Shelf Registration and will make generally available to
its security holders (or otherwise provide in accordance with Section 11(a)
of the Securities Act) an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act, no later than 45 days after the end of a
12-month period (or 90 days, if such period is a fiscal year) beginning with
the first month of the Issuers' first fiscal quarter commencing after the
effective date of the Registration Statement, which statement shall cover
such 12-month period.
(m) The Issuers shall cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended, in a timely manner and containing
such changes, if any, as shall be necessary for such qualification. In the
event that such qualification would require the appointment of a new trustee
under the Indenture, the Issuers shall appoint a new trustee thereunder
pursuant to the applicable provisions of the Indenture.
(n) The Issuers may require each Holder of Securities to be sold
pursuant to the Shelf Registration Statement to furnish to the Issuers such
information regarding the Holder and the distribution of the Securities as
the Issuers may from time to time reasonably require for inclusion in the
Shelf Registration Statement, and the Issuers may exclude from such
registration the Securities of any Holder that unreasonably fails to furnish
such information within a reasonable time after receiving such request.
(o) The Issuers shall enter into such customary agreements
(including, if requested, an underwriting agreement in customary form with
managing underwriters reasonably acceptable to the Issuers) and shall use
reasonable best efforts to take all such other action, if any, as any Holder
of the Securities shall reasonably request in order to facilitate the
disposition of the Securities pursuant to any Shelf Registration.
(p) In the case of any Shelf Registration, the Issuers and the
Guarantors shall (i) make reasonably available for inspection by the Holders
of the Securities, any underwriter participating in any disposition pursuant
to the Shelf Registration Statement and any attorney, accountant or other
agent retained by the Holders of the Securities or any such underwriter all
relevant financial and other records, pertinent corporate documents and
properties of the Issuers and (ii) cause the Issuers' officers, directors,
employees, accountants and auditors to supply all relevant information
reasonably requested by the Holders of the Securities or any such
underwriter, attorney, accountant or agent in connection with the Shelf
Registration Statement, in each case, as shall be reasonably necessary to
enable such persons, to conduct a reasonable investigation within the meaning
of Section 11 of the Securities Act; provided, however, that any information
that is designated in writing by the Issuers, in good faith, as confidential
at the time of delivery of such information shall be kept confidential by the
Holders or any such underwriter, attorney, accountant or agent, unless such
disclosure is made in connection with a court proceeding or required by law,
or such information becomes available to the public generally or through a
third party without an accompanying obligation of confidentiality and that
the foregoing inspection and information
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gathering (i) shall be coordinated on behalf of the Initial Purchasers by you
and on behalf of the other parties, by one counsel (the "Designated Counsel")
designated by the Holders of a majority in principal amount of the Securities
covered by the Registration Statement and (ii) shall not be available for any
such Holder that is a competitor of the Issuers.
(q) In the case of any Shelf Registration, the Issuers and the
Guarantors, if requested by the Designated Counsel, shall cause (i) their
counsel to deliver an opinion and updates thereof relating to the Securities
in customary form addressed to such Holders and the managing underwriters, if
any, thereof and dated, in the case of the initial opinion, the effective
date of such Shelf Registration Statement (it being agreed that the matters
to be covered by such opinion shall include, without limitation, subject to
usual and customary qualifications, the due incorporation and good standing
of the Issuers and its subsidiaries; the qualification of the Issuers and its
subsidiaries to transact business as foreign corporations; the due
authorization, execution and delivery of the relevant agreement of the type
referred to in Section 3(o) hereof; the due authorization, execution,
authentication and issuance, and the validity and enforceability, of the
applicable Securities; the absence of material legal or governmental
proceedings involving the Issuers and its subsidiaries; the absence of
governmental approvals required to be obtained in connection with the Shelf
Registration Statement, the offering and sale of the applicable Securities,
or any agreement of the type referred to in Section 3(o) hereof; the
compliance as to form of such Shelf Registration Statement and any documents
incorporated by reference therein and of the Indenture with the requirements
of the Securities Act and the Trust Indenture Act, respectively; and, as of
the date of the opinion and as of the effective date of the Shelf
Registration Statement or most recent post-effective amendment thereto, as
the case may be, negative assurance with respect to the absence from such
Shelf Registration Statement and the prospectus included therein, as then
amended or supplemented, and from any documents incorporated by reference
therein of an untrue statement of a material fact or the omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading (in the case of any such documents, in
the light of the circumstances existing at the time that such documents were
filed with the Commission under the Exchange Act)); (ii) its officers to
execute and deliver all customary documents and certificates and updates
thereof requested by the Designated Counsel; and (iii) its independent public
accountants to provide to the selling Holders of the applicable Securities
and any managing underwriter therefor a comfort letter in customary form and
covering matters of the type customarily covered in comfort letters in
connection with primary underwritten offerings, subject to receipt of
appropriate documentation as contemplated, and only if permitted, by
Statement of Auditing Standards No. 72.
(r) In the case of the Registered Exchange Offer, if requested by any
Initial Purchaser or any known Participating Broker-Dealer, the Issuers shall
cause (i) their counsel to deliver to such Initial Purchaser or such
Participating Broker-Dealer a signed opinion substantially in the form set
forth in Section 6(c) of the Purchase Agreement with such changes as are
customary in connection with the preparation of a Registration Statement and
(ii) their independent public accountants to deliver to such Initial
Purchaser or such Participating Broker- Dealer a comfort letter, in customary
form, meeting the requirements as to the substance thereof as set forth in
Section 6(a) of the Purchase Agreement, with appropriate date changes.
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(s) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Initial Securities by Holders to the
Issuers (or to such other Person as directed by the Issuers) in exchange for
the Exchange Securities or the Private Exchange Securities, as the case may
be, the Issuers shall mark, or caused to be marked, on the Initial Securities
so exchanged that such Initial Securities are being canceled in exchange for
the Exchange Securities or the Private Exchange Securities, as the case may
be; in no event shall the Initial Securities be marked as paid or otherwise
satisfied.
(t) The Company will use its reasonable best efforts to continue to
have the Securities rated by the rating agencies that rated the Securities in
connection with the sale to the Initial Purchasers and, at the request of any
Holder, confirm to such Holder the current rating of the Securities at the
time of such request.
(u) In the event that any broker-dealer registered under the Exchange
Act shall underwrite any Securities or participate as a member of an
underwriting syndicate or selling group or "assist in the distribution"
(within the meaning of the Conduct Rules (the "Rules") of the National
Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a
Holder of such Securities or as an underwriter, a placement or sales agent or
a broker or dealer in respect thereof, or otherwise, the Issuers will assist
such broker-dealer in complying with the requirements of such Rules,
including, without limitation, by (i) if such Rules, including Rule 2720,
shall so require, engaging a "qualified independent underwriter" (as defined
in Rule 2720) on customary terms to participate in the preparation of the
Registration Statement relating to such Securities, to exercise usual
standards of due diligence in respect thereto and, if any portion of the
offering contemplated by such Registration Statement is an underwritten
offering or is made through a placement or sales agent, to recommend the
yield of such Securities, (ii) indemnifying any such qualified independent
underwriter to the extent of the indemnification of underwriters provided in
Section 5 hereof and (iii) providing such information to such broker-dealer
as may be required in order for such broker-dealer to comply with the
requirements of the Rules.
(v) The Issuers shall use their reasonable best efforts to take all
other steps necessary to effect the registration of the Securities covered by
a Registration Statement contemplated hereby.
4. Registration Expenses. The Issuers shall bear all fees and expenses
incurred in connection with the performance of their obligations under
Sections 1 through 3 hereof (including the reasonable fees and expenses, if
any, of Andrews & Kurth L.L.P., counsel for the Initial Purchasers, incurred
in connection with the Registered Exchange Offer), whether or not the
Registered Exchange Offer or a Shelf Registration is filed or becomes
effective, and, in the event of a Shelf Registration, shall bear or reimburse
the Holders of the Securities covered thereby for the reasonable fees and
disbursements of Designated Counsel.
5. Indemnification. (a) The Issuers and the Guarantors, jointly and
severally, agree to indemnify and hold harmless each Holder of the
Securities, any Participating Broker-Dealer and each
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person, if any, who controls such Holder or such Participating Broker-Dealer
within the meaning of the Securities Act or the Exchange Act (each Holder,
any Participating Broker-Dealer and such controlling persons are referred to
collectively as the "Indemnified Parties") from and against any losses,
claims, damages or liabilities, joint or several, or any actions in respect
thereof (including, but not limited to, any losses, claims, damages,
liabilities or actions relating to purchases and sales of the Securities) to
which each Indemnified Party may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in a Registration
Statement or prospectus or in any amendment or supplement thereto or in any
preliminary prospectus relating to a Shelf Registration, or arise out of, or
are based upon, the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and shall reimburse, as incurred, the Indemnified
Parties for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action in respect thereof; provided, however, that (i) the
Issuers shall not be liable in any such case to the extent that such loss,
claim, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
a Registration Statement or prospectus or in any amendment or supplement
thereto or in any preliminary prospectus relating to a Shelf Registration in
reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Issuers by or on behalf of such Holder
specifically for inclusion therein and (ii) with respect to any untrue
statement or omission or alleged untrue statement or omission made in any
preliminary prospectus relating to a Shelf Registration Statement, the
indemnity agreement contained in this subsection (a) shall not inure to the
benefit of any Holder or Participating Broker-Dealer from whom the person
asserting any such losses, claims, damages or liabilities purchased the
Securities concerned, to the extent that a prospectus relating to such
Securities was required to be delivered by such Holder or Participating
Broker-Dealer under the Securities Act in connection with such purchase and
any such loss, claim, damage or liability of such Holder or Participating
Broker-Dealer results from the fact that there was not sent or given to such
person, at or prior to the written confirmation of the sale of such
Securities to such person, a copy of the final prospectus if the Issuers had
previously furnished copies thereof to such Holder or Participating
Broker-Dealer; provided further, however, that this indemnity agreement will
be in addition to any liability which the Issuers may otherwise have to such
Indemnified Party. The Issuers shall also indemnify underwriters, their
officers and directors and each person who controls such underwriters within
the meaning of the Securities Act or the Exchange Act to the same extent as
provided above with respect to the indemnification of the Holders of the
Securities if requested by such Holders.
(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Issuers and each person, if any, who controls
the Issuers within the meaning of the Securities Act or the Exchange Act from
and against any losses, claims, damages or liabilities or any actions in
respect thereof, to which the Issuers or any such controlling person may
become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such losses, claims, damages, liabilities or actions arise out of
or are based upon any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement or prospectus or in any
amendment
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or supplement thereto or in any preliminary prospectus relating to a Shelf
Registration, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein not misleading, but in each case only to the extent that the untrue
statement or omission or alleged untrue statement or omission was made in
reliance upon and in conformity with written information pertaining to such
Holder and furnished to the Issuers by or on behalf of such Holder
specifically for inclusion therein; and, subject to the limitation set forth
immediately preceding this clause, shall reimburse, as incurred, the Issuers
for any legal or other expenses reasonably incurred by the Issuers or any
such controlling person in connection with investigating or defending any
loss, claim, damage, liability or action in respect thereof. This indemnity
agreement will be in addition to any liability which such Holder may
otherwise have to the Issuers or any of its controlling persons.
(c) Promptly after receipt by an indemnified party under this Section
5 of notice of the commencement of any action or proceeding (including a
governmental investigation), such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party under this
Section 5, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not, in any event (except
to the extent that a defense or counterclaim thereto has been foreclosed
thereby), relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation provided in
paragraph (a) or (b) above. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of the commencement
thereof, the indemnifying party will be entitled to participate therein and,
to the extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof the indemnifying party will not be
liable to such indemnified party under this Section 5 for any legal or other
expenses, other than reasonable costs of investigation, subsequently incurred
by such indemnified party in connection with the defense thereof. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action
in respect of which any indemnified party is or could have been a party and
indemnity could have been sought hereunder by such indemnified party unless
such settlement includes an unconditional release of such indemnified party
from all liability on any claims that are the subject matter of such action.
(d) If the indemnification provided for in this Section 5 is
unavailable or insufficient to hold harmless an indemnified party under
subsections (a) or (b) above, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof)
referred to in subsection (a) or (b) above (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party on the other from
the exchange of the Securities, pursuant to the Registered Exchange Offer, or
(ii) if the allocation provided by the foregoing clause (i) is not permitted
by applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause (i) above but also the
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relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities (or actions in
respect thereof) as well as any other relevant equitable considerations. The
relative fault of the parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Issuers on the one hand or such Holder or such
other indemnified party, as the case may be, on the other, and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission. The amount paid by an indemnified
party as a result of the losses, claims, damages or liabilities referred to
in the first sentence of this subsection (d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any action or claim which is the
subject of this subsection (d). Notwithstanding any other provision of this
Section 5(d), the Holders of the Securities shall not be required to
contribute any amount in excess of the amount by which the net proceeds
received by such Holders from the sale of the Securities pursuant to a
Registration Statement exceeds the amount of damages which such Holders have
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (d), each
person, if any, who controls such indemnified party within the meaning of the
Securities Act or the Exchange Act shall have the same rights to contribution
as such indemnified party and each person, if any, who controls the Issuers
within the meaning of the Securities Act or the Exchange Act shall have the
same rights to contribution as the Issuers.
(e) The agreements contained in this Section 5 shall survive the sale
of the Securities pursuant to a Registration Statement and shall remain in
full force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.
6. Additional Interest Under Certain Circumstances. (a) Additional
interest (the "Additional Interest") with respect to the Initial Securities
shall be assessed as follows if any of the following events occur (each such
event in clauses (i) through (iii) below a "Registration Default"):
(i) If by June 28, 1998, neither the Exchange Offer Registration
Statement nor a Shelf Registration Statement has been filed with the
Commission;
(ii) If by August 27, 1998, neither the Registered Exchange Offer
is consummated nor, if required in lieu thereof, the Shelf Registration
Statement is declared effective by the Commission; or
(iii) If after either the Exchange Offer Registration Statement or
the Shelf Registration Statement is declared effective (A) such
Registration Statement thereafter ceases to be effective; or (B) such
Registration Statement or the related prospectus ceases to be
15
<PAGE>
usable (except as permitted in paragraph (b)) in connection with resales of
Transfer Restricted Securities during the periods specified herein because
either (1) any event occurs as a result of which the related prospectus
forming part of such Registration Statement would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein in the light of the circumstances under
which they were made not misleading, or (2) it shall be necessary to amend
such Registration Statement or supplement the related prospectus, to comply
with the Securities Act or the Exchange Act or the respective rules
thereunder.
Additional Interest shall accrue on the Initial Securities over and above the
interest set forth in the title of the Securities from and including the date
on which any such Registration Default shall occur to but excluding the date
on which all such Registration Defaults have been cured, at a rate of 0.50%
per annum.
(b) A Registration Default referred to in Section 6(a)(iii)(B) hereof
shall be deemed not to have occurred and be continuing in relation to a Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate annual audited
financial information with respect to the Issuers where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related prospectus or (y) other material events, with
respect to the Issuers that would need to be described in such Shelf
Registration Statement or the related prospectus and (ii) in the case of
clause (y), the Issuers are proceeding promptly and in good faith to amend or
supplement such Shelf Registration Statement and related prospectus to
describe such events; provided, however, that in any case if such
Registration Default occurs for a continuous period in excess of 30 days,
Additional Interest shall be payable in accordance with the above paragraph
from the day such Registration Default occurs until such Registration Default
is cured.
(c) Any amounts of Additional Interest due pursuant to clause (i),
(ii) or (iii) of Section 6(a) above will be payable in cash on the regular
interest payment dates with respect to the Initial Securities. The amount of
Additional Interest will be determined by multiplying the applicable
Additional Interest rate by the principal amount of the Initial Securities,
multiplied by a fraction, the numerator of which is the number of days such
Additional Interest rate was applicable during such period (determined on the
basis of a 360-day year comprised of twelve 30-day months), and the
denominator of which is 360.
(d) "Transfer Restricted Securities" means each Security until (i)
the date on which such Transfer Restricted Security has been exchanged by a
person other than a broker-dealer for a freely transferable Exchange Security
in the Registered Exchange Offer, (ii) following the exchange by a
broker-dealer in the Registered Exchange Offer of an Initial Security for an
Exchange Security, the date on which such Exchange Security is sold to a
purchaser who receives from such broker-dealer on or prior to the date of
such sale a copy of the prospectus contained in the Exchange Offer
Registration Statement, (iii) the date on which such Initial Security has
been effectively
16
<PAGE>
registered under the Securities Act and disposed of in accordance with the
Shelf Registration Statement or (iv) the date on which such Initial Security
is distributed to the public pursuant to Rule 144 under the Securities Act or
is saleable pursuant to Rule 144(k) under the Securities Act.
(e) Notwithstanding anything to the contrary contained in this
Agreement, it is hereby acknowledged and agreed that the Issuers will have no
other liabilities for monetary damages to the Initial Purchasers or any
Holder for a Registration Default other than the payment of Additional
Interest; provided, however, that in the event of a Registration Default, the
Initial Purchasers and any Holder shall be entitled to, and the Issuers shall
not oppose the granting of, equitable relief, including injunction and
specific performance, to enforce the Issuers' obligations under Sections 1
and 2 hereof.
7. Rules 144 and 144A. The Issuers shall use their reasonable best
efforts to file the reports required to be filed by it under the Securities
Act and the Exchange Act in a timely manner and, if at any time the Issuers
are not required to file such reports, they will, upon the request of any
Holder of Initial Securities, make publicly available other information so
long as necessary to permit sales of their securities pursuant to Rules 144
and 144A. The Issuers covenant that they will take such further action as any
Holder of Initial Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell Initial Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rules 144 and 144A (including the requirements of Rule
144A(d)(4)). The Issuers will provide a copy of this Agreement to prospective
purchasers of Initial Securities identified to the Issuers by the Initial
Purchasers upon request. Upon the request of any Holder of Initial
Securities, the Issuers shall deliver to such Holder a written statement as
to whether it has complied with such requirements. Notwithstanding the
foregoing, nothing in this Section 7 shall be deemed to require the Issuers
to register any of its securities pursuant to the Exchange Act.
8. Underwritten Registrations. If any of the Transfer Restricted
Securities covered by any Shelf Registration are to be sold in an
underwritten offering, the investment banker or investment bankers and
manager or managers that will administer the offering ("Managing
Underwriters") will be selected by the Holders of a majority in aggregate
principal amount of such Transfer Restricted Securities to be included in
such offering, subject to the consent of the Issuers, which shall not be
unreasonably withheld.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and
(ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements.
9. Miscellaneous.
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<PAGE>
(a) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, except by the Issuers and the
written consent of the Holders of a majority in principal amount of the
Securities affected by such amendment, modification, supplement, waiver or
consents.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class
mail, facsimile transmission, or air courier which guarantees overnight
delivery:
(1) if to a Holder of the Securities, at the most current
address given by such Holder to the Issuers.
(2) if to the Initial Purchasers:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010-3629
Fax No.: (212) 325-8278
Attention: Transactions Advisory Group
with a copy to:
Andrews & Kurth L.L.P.
425 Lexington Avenue
New York, New York 10017
Attention: Allan D. Reiss, Esq.
(3) if to the Issuers, at its address as follows:
Chiles Offshore LLC
1370 Avenue of the Americas
25th Floor
New York, New York 10019
Attention: Dick H. Fagerstal
with a copy to:
18
<PAGE>
Weil, Gotshal & Manges LLP
700 Louisiana
Houston, Texas 77002
Attention: James L. Rice III, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, postage prepaid, if mailed; when
receipt is acknowledged by recipient's facsimile machine operator, if sent by
facsimile transmission; and on the day delivered, if sent by overnight air
courier guaranteeing next day delivery.
(c) No Inconsistent Agreements. The Issuers have not, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter into,
any agreement with respect to its securities that is inconsistent with the
rights granted to the Holders herein or otherwise conflicts with the
provisions hereof.
(d) Successors and Assigns. This Agreement shall be binding upon the
Issuers and their successors and assigns.
(e) 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.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
(h) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid,
illegal or unenforceable, the validity, legality and enforceability of any
such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(i) Securities Held by the Issuers. Whenever the consent or approval
of Holders of a specified percentage of principal amount of Securities is
required hereunder, Securities held by the Issuers or their affiliates (other
than subsequent Holders of Securities if such subsequent Holders are deemed
to be affiliates solely by reason of their holdings of such Securities) shall
not be counted in determining whether such consent or approval was given by
the Holders of such required percentage.
19
<PAGE>
(j) Submission to Jurisdiction. By the execution and delivery of this
Agreement, each of the Issuers and the Subsidiary Guarantors submits to the
nonexclusive jurisdiction of the federal and state courts in the Borough of
Manhattan in The City of New York in such suit or proceeding arising out of
or relating to this Agreement or the transactions contemplated hereby.
20
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Issuers a counterpart of this
Registration Rights Agreement, whereupon this instrument, along with all
counterparts, will become a binding agreement among the several Initial
Purchasers, the Issuers and the Guarantors in accordance with its terms.
Very truly yours,
CHILES OFFSHORE LLC
By:/s/ Dick H. Fagerstal
-------------------------------------
Name: Dick H. Fagerstal
Title: Senior Vice President, Chief
Financial Officer and Secretary
CHILES OFFSHORE FINANCE CORP.
By:/s/ Dick H. Fagerstal
--------------------------------------
Name: Dick H. Fagerstal
Title: Senior Vice President, Chief
Financial Officer and Secretary
CHILES COLUMBUS LLC
By:/s/ Dick H. Fagerstal
--------------------------------------
Name: Dick H. Fagerstal
Title: Senior Vice President, Chief
Financial Officer and Secretary
CHILES MAGELLAN LLC
By:/s/ Dick H. Fagerstal
--------------------------------------
Name: Dick H. Fagerstal
Title: Senior Vice President, Chief
Financial Officer and Secretary
21
<PAGE>
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first above
written.
CREDIT SUISSE FIRST BOSTON CORPORATION
WASSERSTEIN PERELLA SECURITIES, INC.
By: CREDIT SUISSE FIRST BOSTON
CORPORATION
By: /s/ A. Sundich
-----------------------------
Name: Alex Sundich
Title: Director
22
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Securities received in
exchange for Initial Securities where such Initial Securities were acquired
by such broker-dealer as a result of market-making activities or other
trading activities. The Issuers have agreed that, for a period of 180 days
after the Expiration Date (as defined herein), they will make this Prospectus
available to any broker-dealer for use in connection with any such resale.
See "Plan of Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own account
in exchange for Securities, where such Initial Securities were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Securities
received in exchange for Initial Securities where such Initial Securities
were acquired as a result of market-making activities or other trading
activities. The Issuers have agreed that, for a period of 180 days after the
Expiration Date, they will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until , 199 , all dealers effecting transactions in the Exchange
Securities may be required to deliver a prospectus.1
The Issuers will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange
Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation
in the form of commissions or concessions from any such broker-dealer or the
purchasers of any such Exchange Securities. Any broker-dealer that resells
Exchange Securities that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Securities may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Securities and any 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.
For a period of 180 days after the Expiration Date the Issuers will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. The Issuers have agreed to pay all expenses incident to the
Exchange Offer (including the expenses of one counsel for the Holders of the
Securities) other than commissions or concessions of any brokers or dealers and
will indemnify the Holders of the Securities (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
[If applicable, add information required by Regulation S-K Items 507 and/or
508.]
- --------------
1 In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
<PAGE>
ANNEX D
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
-------------------------------
Address:
-------------------------------
-------------------------------
If the undersigned is not a broker-dealer, the undersigned represents that it
is not engaged in, and does not intend to engage in, a distribution of
Exchange Securities. If the undersigned is a broker-dealer that will receive
Exchange Securities for its own account in exchange for Initial Securities
that were acquired as a result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus in connection
with any resale of such Exchange Securities; however, by so acknowledging and
by delivering a prospectus, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
<PAGE>
Exhibit 4.5
$110,000,000
CHILES OFFSHORE LLC
CHILES OFFSHORE FINANCE CORP.
10% Senior Notes due 2008
PURCHASE AGREEMENT
April 24, 1998
CREDIT SUISSE FIRST BOSTON CORPORATION
WASSERSTEIN PERELLA SECURITIES, INC.
c/o Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, N.Y. 10010-3629
Dear Sirs:
1. Introductory. Chiles Offshore LLC, a Delaware limited liability
company (the "Company"), and Chiles Offshore Finance Corp., a Delaware
corporation ("Finance" and, together with the Company, the "Issuers"),
propose, subject to the terms and conditions stated herein, to issue and sell
to the several initial purchasers named in Schedule A hereto (the
"Purchasers") $110,000,000 aggregate principal amount of their 10% Senior
Notes due 2008 ("Offered Securities") to be issued under an indenture dated
as of April 29, 1998 (the "Indenture") among the Company, the Subsidiary
Guarantors (as defined below) and U.S. Bank Trust National Association, as
Trustee. The Offered Securities will be unconditionally guaranteed (the
"Guarantees") by Chiles Columbus LLC, a Delaware limited liability company
("Columbus"), and Chiles Magellan LLC, a Delaware limited liability company
("Magellan" and, together with Columbus, the "Subsidiary Guarantors"). The
United States Securities Act of 1933 is herein referred to as the "Securities
Act."
The Issuers and the Subsidiary Guarantors hereby agree, jointly and
severally, with the several Purchasers as follows:
<PAGE>
2. Representations and Warranties of the Issuers and the Subsidiary
Guarantors. The Issuers and Subsidiary Guarantors, jointly and severally,
represent and warrant to, and agree with, the several Purchasers that:
(a) A preliminary offering circular and an offering circular
relating to the Offered Securities to be offered by the Purchasers have been
prepared by the Issuers and the Subsidiary Guarantors. Such preliminary
offering circular and offering circular, as supplemented as of the date of
this Agreement, and any other document approved by the Issuers and the
Subsidiary Guarantors for use in connection with the contemplated resale of
the Offered Securities are hereinafter collectively referred to as the
"Offering Document." On the date of this Agreement, the Offering Document
does not include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading. The
preceding sentence does not apply to statements in or omissions from the
Offering Document based upon written information furnished to the Issuers or
the Subsidiary Guarantors by any Purchaser through Credit Suisse First Boston
Corporation ("CSFBC") specifically for use therein, it being understood and
agreed that the only such information is that described as such in Section
7(b) hereto. The information required to be delivered to holders and
prospective purchasers of the Offered Securities pursuant to Section 4.2 of
the Indenture in accordance with Rule 144A(d)(4) under the Securities Act
does not include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The preceding
sentence does not apply to statements in or omissions from the Offering
Document based upon written information furnished to the Issuers or the
Subsidiary Guarantors by any Purchaser through CSFBC specifically for use
therein, it being understood and agreed that the only such information is
that described as such in Section 7(b) hereof.
(b) The Company has been duly formed and is an existing limited
liability company in good standing under the laws of the State of Delaware,
with power and authority (limited liability company and other) to own its
properties and conduct its business as described in the Offering Document;
and the Company is duly qualified to do business as a foreign limited
liability company in good standing in all other jurisdictions in which its
ownership or lease of property or the conduct of its business requires such
qualification.
(c) Finance has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with
power and authority (corporate and other) to own its properties and conduct
its business as described in the Offering Document; and Finance is duly
qualified to do business as a foreign corporation in good standing in all
other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification. All of the issued and
outstanding capital stock of Finance has been duly authorized and validly
issued and is fully paid and non-assessable; and the capital stock of Finance
is owned directly by the Company, free from liens or encumbrances.
2
<PAGE>
(d) Each of the Subsidiary Guarantors has been duly formed and is
an existing limited liability company in good standing under the laws of the
State of Delaware, with power and authority (limited liability company and
other) to own its properties and conduct its business as described in the
Offering Document; and each of the Subsidiary Guarantors is duly qualified to
do business as a foreign limited liability company in good standing in all
other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification, except where the failure
to be so qualified would not have a material adverse effect on the Issuers
and the Subsidiary Guarantors taken as a whole; all of the issued and
outstanding member interests of each Subsidiary Guarantor has been duly
authorized and validly issued and is fully paid and nonassessable; and the
member interests of each Subsidiary Guarantor are owned directly by the
Company, free from liens or encumbrances. The Company has no direct or
indirect subsidiaries other than Finance and the Subsidiary Guarantors.
(e) The Indenture (including the Guarantees) has been duly
authorized; the Offered Securities have been duly authorized; and when the
Offered Securities are delivered and paid for pursuant to this Agreement on
the Closing Date (as defined below), the Indenture will have been duly
executed and delivered, such Offered Securities will have been duly executed,
authenticated, issued and delivered and will conform to the description
thereof contained in the Offering Document and the Indenture (including the
Guarantees) and such Offered Securities will constitute valid and legally
binding obligations of the Issuers and the Subsidiary Guarantors, as the case
may be, enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors' rights and to
general equity principles.
(f) Except as disclosed in the Offering Document, there are no
contracts, agreements or understandings between any of the Issuers or the
Subsidiary Guarantors and any person that would give rise to a valid claim
against the Issuers or Subsidiary Guarantors or any Purchaser for a brokerage
commission, finder's fee or other like payment in connection with the sale of
the Offered Securities.
(g) No consent, approval, authorization, or order of, or filing
with, any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement and the
Registration Rights Agreement in connection with the issuance and sale of the
Offered Securities by the Issuers and the issuance of the Guarantees by the
Subsidiary Guarantors, or for the execution, delivery and performance of the
Indenture, the Escrow Agreement and the Escrow Security Agreement (as defined
in the Indenture), except such as may be required under state or foreign
securities laws and except for such filings with the Securities and Exchange
Commission as are required in connection with the Registration Rights
Agreement.
(h) The execution, delivery and performance of the Indenture, the
Registration Rights Agreement, the Escrow Agreement, the Escrow Security
Agreement and this Agreement, and the issuance and sale of the Offered
Securities and compliance with the terms and provisions thereof will not
result in a breach or violation of any of the terms and provisions of, or
constitute a default
3
<PAGE>
under, any statute, any rule, regulation or order of any governmental agency
or body or any court, domestic or foreign, having jurisdiction over the
Issuers or the Subsidiary Guarantors or any of their properties, or any
agreement or instrument to which any of the Issuers or the Subsidiary
Guarantors is a party or by which the Issuers or the Subsidiary Guarantors
are bound or to which any of the properties of the Issuers or the Subsidiary
Guarantors are subject, or the Amended and Restated Operating Agreement, as
amended, of the Company, the Certificate of Incorporation and Bylaws of
Finance or the Operating Agreement of each of the Subsidiary Guarantors; and
the Issuers have full power and authority to authorize, issue and sell the
Offered Securities as contemplated by this Agreement.
(i) Each of this Agreement and Registration Rights Agreement has
been duly authorized, executed and delivered by the Issuers and the
Subsidiary Guarantors.
(j) Each of the Escrow Agreement and the Escrow Security Agreement
has been duly authorized by the Issuers; the Escrow Agreement will conform to
the description thereof contained in the Offering Document and the each of
the Escrow Agreement and the Escrow Security Agreement will constitute valid
and legally binding obligations of the Issuers, enforceable in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating
to or affecting creditors' rights and to general equity principles. The
Escrow Security Agreement creates in favor of the Collateral Agent (as
defined therein) acting as agent for the Trustee as the secured party, a
valid perfected first priority security interest in all right, title and
interest in the Collateral (as defined therein).
(k) Except as disclosed in the Offering Document, the Issuers and
the Subsidiary Guarantors have good and marketable title to all real
properties and all other properties and assets owned by them, in each case
free from liens, encumbrances and defects that would materially affect the
value thereof or materially interfere with the use made or to be made thereof
by them; and except as disclosed in the Offering Document, the Issuers and
the Subsidiary Guarantors hold any leased real or personal property under
valid and enforceable leases with no exceptions that would materially
interfere with the use made or to be made thereof by them.
(l) The Issuers and the Subsidiary Guarantors possess adequate
certificates, authorities or permits issued by appropriate governmental
agencies or bodies necessary to conduct the business now operated by them and
have not received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if determined
adversely to the Issuers or the Subsidiary Guarantors, would individually or
in the aggregate have a material adverse effect on the Issuers and the
Subsidiary Guarantors taken as a whole.
(m) No labor dispute with the employees of the Issuers or the
Subsidiary Guarantors exists or, to the knowledge of the Issuers and
Subsidiary Guarantors, is imminent that might have a material adverse effect
on the Issuers and the Subsidiary Guarantors taken as a whole.
4
<PAGE>
(n) None of the Issuers or the Subsidiary Guarantors is in
violation of any statute, any rule, regulation, decision or order of any
governmental agency or body or any court, domestic or foreign, relating to
the use, disposal or release of hazardous or toxic substances or relating to
the protection or restoration of the environment or human exposure to
hazardous or toxic substances (collectively, "environmental laws"), owns or
operates any real property contaminated with any substance that is subject to
any environmental laws, is liable for any off-site disposal or contamination
pursuant to any environmental laws, or is subject to any claim relating to
any environmental laws, which violation, contamination, liability or claim
would individually or in the aggregate have a material adverse effect on the
Issuers and the Subsidiary Guarantors taken as a whole; and none of the
Issuers or the Subsidiary Guarantors is aware of any pending investigation
which might lead to such a claim.
(o) There are no pending actions, suits or proceedings against or
affecting the Issuers, the Subsidiary Guarantors or any of their respective
properties that, if determined adversely to the Issuers and the Subsidiary
Guarantors, would individually or in the aggregate have a material adverse
effect on the condition (financial or other), business, properties or results
of operations of the Issuers and the Subsidiary Guarantors taken as a whole,
or would materially and adversely affect the ability of the Issuers and the
Subsidiary Guarantors to perform their obligations under the Indenture, the
Registration Rights Agreement or the Escrow Agreement, or which are otherwise
material in the context of the sale of the Offered Securities; and no such
actions, suits or proceedings are threatened or, to the Issuers' or the
Subsidiary Guarantors' knowledge, contemplated.
(p) The assumptions used in preparing, and the estimates disclosed
in, the forecasted financial information under the caption "Certain Financial
Forecast Information" represent the Issuers' current best assumptions and
estimates of the anticipated results of operations for the Company and its
consolidated subsidiaries for each of the years in the three-year period
ended December 31, 2001, and the assumptions disclosed therein have been
prepared in good faith by the Issuers and on reasonable basis, and are all
those the Issuers and the Guarantors believe are significant to the
forecasted financial information.
(q) The financial statements included in the Offering Document
present fairly the financial position of the Company and its consolidated
subsidiaries as of the dates shown and their results of operations and cash
flows for the periods shown, and such financial statements have been prepared
in conformity with the generally accepted accounting principles in the United
States applied on a consistent basis. The financial data included in the
Offering Document relating to payments under the Construction Contracts (as
defined in the Offering Document) and for owner furnished equipment and
overhead, with respect to 1997, fairly present actual payments made, and,
with respect to periods thereafter, represent the Company's best assumptions
and estimates of the amounts and timing of such payments, and have been
prepaid by the Issuers in good faith and on a reasonable basis. The
statements in the Offering Document in the second paragraph under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations --Overview" with respect to Finance and the Subsidiary Guarantors
are true and correct.
5
<PAGE>
(r) Since the date of the latest audited financial statements
included in the Offering Document there has been no material adverse change,
nor any development or event involving a prospective material adverse change,
in the condition (financial or other), business, properties (including,
without limitation, the construction in progress of the Rigs (as defined in
the Offering Document) and any owner furnished equipment relating thereto) or
results of operations of the Issuers and the Subsidiary Guarantors taken as a
whole, and there has been no dividend or distribution of any kind declared,
paid or made by the Issuers or the Subsidiary Guarantors.
(s) Each of the Construction Contracts and binder for the
"delay-in-delivery" insurance policy relating to the Rigs described in the
Offering Documents is in full force and effect and no default or event that
with notice, a lapse of time, or both, would constitute a default, exists
thereunder.
(t) None of the Issuers or the Subsidiary Guarantors is an open-end
investment company, unit investment trust or face-amount certificate company
that is or is required to be registered under Section 8 of the United States
Investment Company Act of 1940 (the "Investment Company Act"); and none of
the Issuers or the Subsidiary Guarantors is or, after giving effect to the
offering and sale of the Offered Securities and the application of the
proceeds thereof as described in the Offering Document, will be, an
"investment company" as defined in the Investment Company Act.
(u) No securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the Offered Securities are listed on
any national securities exchange registered under Section 6 of the Securities
Exchange Act of 1934 (the "Exchange Act") or quoted in a U.S. automated
inter-dealer quotation system.
(v) Assuming the accuracy of the representations and warranties of
the Purchasers and the compliance by the Purchasers with the covenants set
forth in Section 4 hereof, the offer and sale of the Offered Securities in
the manner contemplated by this Agreement will be exempt from the
registration requirements of the Securities Act by reason of Section 4(2)
thereof, Rule 144A thereunder ("Rule 144A") and Regulation S under the
Securities Act ("Regulation S"); and prior to the effectiveness of a
registration statement as contemplated in the Registration Rights Agreement,
it is not necessary to qualify an indenture in respect of the Offered
Securities under the United States Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act").
(w) None of the Issuers, Subsidiary Guarantors or any of their
affiliates, or any person acting on its or their behalf (i) has, within the
six-month period prior to the date hereof, offered or sold in the United
States or to any U.S. person (as such terms are defined in Regulation S under
the Securities Act) the Offered Securities or any security of the same class
or series as the Offered Securities or (ii) has offered or will offer or sell
the Offered Securities (A) in the United States by means of any form of
general solicitation or general advertising within the meaning of Rule 502(c)
under the Securities Act or (B) with respect to any such securities sold in
reliance on Rule 903 of Regulation S, by means of any directed selling
efforts within the meaning of Rule 902(b) of
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Regulation S. Assuming the accuracy of the representations and warranties of
the Purchasers and compliance by the Purchaser with the covenants set forth
in Section 4 hereof, the Issuers, the Subsidiary Guarantors, their affiliates
and any person acting on their behalf have complied and will comply with the
offering restrictions requirement of Regulation S. The Issuers and the
Subsidiary Guarantors have not entered and will not enter into any
contractual arrangement with respect to the distribution of the Offered
Securities except for this Agreement and the Registration Rights Agreement.
(x) The proceeds to the Issuers from the offering of the Offered
Securities will not be used to purchase or carry any "margin security" or
"margin stock", within the meaning of Regulations G, T, U or X, as
applicable, of the Board of Governors of the Federal Reserve System.
(y) The proceeds to the Issuers from the offering of the Offered
Securities will be used as described in the Offering Document.
(z) None of the Issuers, the Guarantors, any of their respective
affiliates, or any director, officer, agent, employee or other person, in any
case, acting on behalf of the Issuers or the Guarantors has (i) used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expense relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977; or (iv) made any
bribe, rebate, payoff, influence payment, kickback or other unlawful payment.
(aa) As of the Closing Date and after the application of the
proceeds of the offering as described in the Offering Document, (i) the
amounts held in the Interest Escrow Account will provide cash at such times
and in such amounts as will be sufficient to pay, when due, interest on the
Offered Securities for the first two semi-annual interest payment dates, and
(ii) the amounts held in the Construction Escrow Account will provide cash at
such times and in such amounts as will be sufficient, after giving effect to
amounts paid prior to the Closing Date, cash on hand immediately prior to the
Closing Date and borrowing availability under the Bank Facility to pay, when
due, each installment payment for the Purchase Price (as defined in the
Indenture) for each Rig as well as all expenses for owner furnished equipment
and overhead allocable to such Rig prior to its Delivery Date, in each case
as set forth in the table appearing in the Offering Document under the
caption "Business - The Construction Contracts."
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject
to the terms and conditions herein set forth, the Issuers agree to sell to
the Purchasers, and the Purchasers agree, severally and not jointly, to
purchase from the Issuers, at a purchase price of 97.25% of the principal
amount thereof plus accrued interest from April 29, 1998 to the Closing Date
(as hereinafter defined), the respective principal amounts of Securities set
forth opposite the names of the several Purchasers in Schedule A hereto.
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The Issuers will deliver against payment of the purchase price the
Offered Securities in the form of one or more permanent global Securities in
registered form without interest coupons (the "Global Securities") which will
be deposited with the Trustee as custodian for The Depository Trust Company
("DTC") and registered in the name of Cede & Co., as nominee for DTC.
Interests in any permanent global Securities will be held only in book-entry
form through DTC, except in the limited circumstances described in the
Offering Document. Payment for Offered Securities shall be made by the
Purchasers in Federal (same day) funds by wire transfer to an account at a
bank acceptable to CSFBC, at the office of Andrews & Kurth L.L.P., 425
Lexington Avenue, New York, New York 10017, at 10:00 a.m. (New York time),
April 29, 1998, or at such other time not later than seven full business days
thereafter as CSFBC and the Company determine, such time being herein
referred to as the "Closing Date", against delivery to the Trustee as
custodian for DTC of Global Securities representing all of the Securities.
The Global Securities will be made available for checking at the above office
of Andrews & Kurth L.L.P. at least 24 hours prior to the Closing Date.
4. Representations by Purchasers; Resale by Purchasers. (a) Each
Purchaser severally represents and warrants to the Issuers that it is an
"accredited investor" within the meaning of Regulation D under the Securities
Act.
(b) Each Purchaser severally acknowledges that the Offered
Securities have not been registered under the Securities Act and may not be
offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except in accordance with Regulation S or pursuant to an
exemption from the registration requirements of the Securities Act. Each
Purchaser severally represents and agrees that it has offered and sold the
Offered Securities, and will offer and sell the Offered Securities, only in
accordance with Rule 903 or Rule 144A. Accordingly, neither such Purchaser
nor its affiliates, nor any persons acting on its or their behalf, have
engaged or will engage in any directed selling efforts with respect to the
Offered Securities, and such Purchaser, its affiliates and all persons acting
on its or their behalf have complied and will comply with the offering
restrictions requirement of Regulation S. Each Purchaser severally agrees
that, at or prior to confirmation of sale of the Offered Securities, other
than a sale pursuant to Rule 144A, such Purchaser will have sent to each
distributor, dealer or person receiving a selling concession, fee or other
remuneration that purchases the Offered Securities from it during the
restricted period under Regulation S a confirmation or notice to
substantially the following effect:
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933 (the "Securities Act") and may not be
offered or sold within the United States or to, or for the account or
benefit of, U.S. persons except in accordance with Regulation S (or
Rule 144A if available) under the Securities Act. Terms used above
have the meanings given to them by Regulation S."
Terms used in this subsection (b) have the meanings given to them by
Regulation S.
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(c) Each Purchaser severally agrees that it and each of its
affiliates has not entered and will not enter into any contractual
arrangement with respect to the distribution of the Offered Securities except
for any such arrangements with the other Purchasers or affiliates of the
other Purchasers with the prior written consent of the Company.
(d) Each Purchaser severally represents that it and each of its
affiliates has not offered, and each Purchaser severally agrees that it and
each of its affiliates will not offer or sell, the Offered Securities in the
United States by means of any form of general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities Act,
including, but not limited to (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio, or (ii) any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising. Each Purchaser severally agrees, with respect to resales made in
reliance on Rule 144A of any of the Offered Securities, to deliver either
with the confirmation of such resale or otherwise prior to settlement of such
resale a notice to the effect that the resale of such Offered Securities has
been made in reliance upon the exemption from the registration requirements
of the Securities Act provided by Rule 144A.
(e) Each of the Purchasers severally represents and agrees that (i)
it has not offered or sold and prior to the date six months after the date of
issue of the Offered Securities will not offer or sell any Offered Securities
to persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Offered Securities in, from or
otherwise involving the United Kingdom; and (iii) it has only issued or
passed on and will only issue or pass on in the United Kingdom any document
received by it in connection with the issue of the Offered Securities to a
person who is of a kind described in Article 11(3) of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person
to whom such document may otherwise lawfully be issued or passed on.
5. Certain Agreements of the Issuers and the Subsidiary Guarantors. The
Issuers and the Subsidiary Guarantors, jointly and severally, agree with the
several Purchasers that:
(a) The Issuers and the Subsidiary Guarantors will advise CSFBC
promptly of any proposal to amend or supplement the Offering Document and
will not effect such amendment or supplementation without CSFBC's consent,
nor to be unreasonably withheld. If, at any time prior to the completion of
the resale of the Offered Securities by the Purchasers, any event occurs as a
result of which the Offering Document as then amended or supplemented would
include an untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, the Issuers and the
Subsidiary Guarantors promptly will notify CSFBC of such event and promptly
9
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will prepare, at their own expense, an amendment or supplement which will
correct such statement or omission. Neither CSFBC's consent to, nor the
Purchasers' delivery to offerees or investors of, any such amendment or
supplement shall constitute a waiver of any of the conditions set forth in
Section 6.
(b) The Issuers and the Subsidiary Guarantors will furnish to CSFBC
copies of any preliminary offering circular, the Offering Document and all
amendments and supplements to such documents, in each case as soon as
available and in such quantities as CSFBC requests and, upon request, the
Issuers and the Subsidiary Guarantors will furnish to CSFBC on the date
hereof three copies of the Offering Document signed by a duly authorized
officer of each of the Issuers and the Subsidiary Guarantors, one of which
will include the independent accountants' reports therein manually signed by
such independent accountants. At any time when the Issuers and the Subsidiary
Guarantors are not subject to Section 13 or 15(d) of the Exchange Act, the
Issuers and the Subsidiary Guarantors will promptly furnish or cause to be
furnished to CSFBC (and, upon request, to each of the other Purchasers) and,
upon request of holders and prospective purchasers of the Offered Securities,
to such holders and purchasers, copies of the information required to be
delivered to holders and prospective purchasers of the Offered Securities
pursuant to Rule 144A(d)(4) under the Securities Act (or any successor
provision thereto) in order to permit compliance with Rule 144A in connection
with resales by such holders of the Offered Securities. The Company will pay
the expenses of printing and distributing to the Purchasers all such
documents.
(c) The Issuers will arrange for the qualification of the Offered
Securities for sale and the determination of their eligibility for investment
under the laws of such jurisdictions in the United States and Canada as CSFBC
designates and will continue such qualifications in effect so long as
required for the resale of the Offered Securities by the Purchasers, provided
that the Issuers and the Subsidiary Guarantors will not be required to
qualify as a foreign corporation or to file a general consent to service of
process in any such state or take any action that would subject it to general
service of process or to taxation in any jurisdiction where it is not then so
subject.
(d) During the period of five years hereafter, the Company will
furnish to CSFBC and, upon request, to each of the other Purchasers, as soon
as practicable after the end of each fiscal year, a copy of its annual report
to members for such year; and the Company will furnish to CSFBC and, upon
request, to each of the other Purchasers (i) as soon as available, a copy of
each report or financial statement furnished to or filed with the Commission
or any securities exchange on which any class of securities of either of the
Issuers is listed, and (ii) from time to time, such other information
concerning the Company as CSFBC may reasonably request.
(e) During the period of two years after the Closing Date, the
Issuers will, upon request, furnish to CSFBC, each of the other Purchasers
and any holder of Offered Securities a copy of the restrictions on transfer
applicable to the Offered Securities.
(f) During the period of two years after the Closing Date, neither
the Issuers nor the Subsidiary Guarantors will, and they will not permit any
of their affiliates (as defined in Rule 144
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under the Securities Act) to, resell any of the Offered Securities that have
been reacquired by any of them.
(g) During the period of two years after the Closing Date, neither
the Issuers nor the Subsidiary Guarantors will be or become, an open-end
investment company, unit investment trust or face-amount certificate company
that is or is required to be registered under Section 8 of the Investment
Company Act.
(h) The Issuers will pay all expenses incidental to the performance
of their obligations under this Agreement, the Indenture, the Escrow
Agreement and the Registration Rights Agreement, including (i) the fees and
expenses of the Trustee and its professional advisers; (ii) all expenses in
connection with the execution, issue, authentication, packaging and initial
delivery of the Offered Securities, the preparation and printing of this
Agreement, the Offered Securities, the Registration Rights Agreement and the
Indenture, the Offering Document and amendments and supplements thereto, and
any other document relating to the issuance, offer, sale and delivery of the
Offered Securities; (iii) the cost of listing the Offered Securities and
qualifying the Offered Securities for trading in The PortalSM Market
("PORTAL") of the Nasdaq Stock Market, Inc. and any expenses incidental
thereto; (iv) the cost of any advertising approved by the Company in
connection with the issue of the Offered Securities; (v) for any expenses
(including fees and disbursements of counsel) incurred in connection with
qualification of the Offered Securities for sale under the laws of such
jurisdictions in the United States and Canada as CSFBC designates and the
printing of memoranda relating thereto; (vi) for any fees charged by
investment rating agencies for the rating of the Securities, and (vii) for
expenses incurred in distributing preliminary offering circulars and the
Offering Document (including any amendments and supplements thereto) to the
Purchasers. The Issuers will also pay or reimburse the Purchasers (to the
extent incurred by them) for all air travel expenses and hotel accommodations
of the Issuers' officers and employees and any other expenses of the Issuers
in connection with attending or hosting meetings with prospective purchasers
of the Offered Securities from the Purchasers.
(i) In connection with the offering, until CSFBC shall have
notified the Issuers and the other Purchasers of the completion of the resale
of the Offered Securities, neither the Issuers nor any of their affiliates
has or will, either alone or with one or more other persons, bid for or
purchase for any account in which it or any of its affiliates has a
beneficial interest any Offered Securities or attempt to induce any person to
purchase any Offered Securities; and neither it nor any of its affiliates
will make bids or purchases for the purpose of creating actual, or apparent,
active trading in, or of raising the price of, the Offered Securities.
6. Conditions of the Obligations of the Purchasers. The obligations of
the several Purchasers to purchase and pay for the Offered Securities will be
subject to the accuracy of the representations and warranties on the part of
the Issuers and the Subsidiary Guarantors herein, to the accuracy of the
statements of officers of the Issuers and the Subsidiary Guarantors made
pursuant to the provisions hereof, to the performance by the Issuers and the
Subsidiary Guarantors of their obligations hereunder and to the following
additional conditions precedent:
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(a) The Purchasers shall have received a letter, dated the date of
this Agreement, of Arthur Andersen LLP in form and substance satisfactory to
the Purchasers concerning the financial information with respect to the
Issuers and the Subsidiary Guarantors set forth in the Offering Document.
(b) Subsequent to the execution and delivery of this Agreement,
there shall not have occurred (i) a change in U.S. or international
financial, political or economic conditions or currency exchange rates or
exchange controls as would, in the judgment of CSFBC, be likely to prejudice
materially the success of the proposed issue, sale or distribution of the
Offered Securities, whether in the primary market or in respect of dealings
in the secondary market, or (ii) (A) any change, or any development or event
involving a prospective change, in the condition (financial or other),
business, properties or results of operations of the Issuers and the
Subsidiary Guarantors which, in the judgment of a majority in interest of the
Purchasers including CSFBC, is material and adverse and makes it impractical
or inadvisable to proceed with completion of the offering or the sale of and
payment for the Offered Securities; (B) any downgrading in the rating of any
debt securities of the Company by any "nationally recognized statistical
rating organization" (as defined for purposes of Rule 436(g) under the
Securities Act), or any public announcement that any such organization has
under surveillance or review its rating of any debt securities of the Company
(other than an announcement with positive implications of a possible
upgrading, and no implication of a possible downgrading, of such rating); (C)
any suspension or limitation of trading in securities generally on the New
York Stock Exchange; (D) any banking moratorium declared by U.S. Federal or
New York authorities; or (E) any outbreak or escalation of major hostilities
in which the United States is involved, any declaration of war by Congress or
any other substantial national or international calamity or emergency if, in
the judgment of a majority in interest of the Purchasers including CSFBC, the
effect of any such outbreak, escalation, declaration, calamity or emergency
makes it impractical or inadvisable to proceed with completion of the
offering or sale of and payment for the Offered Securities.
(c) The Purchasers shall have received an opinion, dated the
Closing Date, of Weil, Gotshal & Manges LLP, counsel for the Issuers and the
Subsidiary Guarantors, that:
(i) The Company has been duly formed and is an existing
corporation in good standing under the laws of the State of Delaware,
with limited liability company power and authority to own its properties
and conduct its business as described in the Offering Document; and the
Company is duly qualified to do business as a foreign limited liability
company in good standing in all other jurisdictions in which its
ownership or lease of property or the conduct of its business requires
such qualification, except where the failure to be so qualified would
not have a material adverse effect on the Issuers and the Subsidiary
Guarantors taken as a whole.
(ii) Finance has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties and
conduct its business as described in the Offering
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Document; and Finance is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions in which its
ownership or lease of property or the conduct of its business requires
such qualification, except where the failure to be so qualified would
not have a material adverse effect on the Issuers and the Subsidiary
Guarantors taken as a whole. All of the issued and outstanding capital
stock of Finance has been duly authorized and validly issued and is
fully paid and non-assessable; and the capital stock of Finance is owned
directly of record and, to such counsel's knowledge, beneficially, by
the Company free, to such counsel's knowledge, from liens or
encumbrances.
(iii) Each of the Subsidiary Guarantors has been duly formed
and is an existing limited liability company in good standing under the
laws of the jurisdiction of Delaware, with power and authority
(corporate and other) to own its properties and conduct its business as
described in the Offering Document; and each of the Subsidiary
Guarantors is duly qualified to do business as a foreign limited
liability company in good standing in all other jurisdictions in which
its ownership or lease of property or the conduct of its business
requires such qualification, except where the failure to be so qualified
would not have a material adverse effect on the Issuers and the
Subsidiary Guarantors taken as a whole; all of the issued and
outstanding member interests of each Subsidiary Guarantor has been duly
authorized and validly issued and is fully paid and nonassessable; and
the member interests of each Subsidiary Guarantor are owned directly of
record and, to such counsel's knowledge, beneficially by the Company
free, to such counsel's knowledge, from liens or encumbrances. To such
counsel's knowledge, the Company has no direct or indirect subsidiaries
other than Finance and the Subsidiary Guarantors.
(iv) The Indenture (including the Guarantees) has been duly
authorized; the Offered Securities have been duly authorized for
issuance; and when the Offered Securities are delivered and paid for
pursuant to this Agreement on the Closing Date (as defined below)
(assuming the due authorization, execution and delivery of the Indenture
by the Trustee and the execution and authentication of the Offered
Securities in the manner prescribed by the Indenture by a duly
authorized officer of the Trustee), the Indenture will have been duly
executed and delivered, such Offered Securities will have been duly
executed, authenticated, issued and delivered and will conform to the
description thereof contained in the Offering Document and the Indenture
(including the Guarantees) and such Offered Securities will constitute
valid and legally binding obligations of the Issuers and the Subsidiary
Guarantors, as the case may be, enforceable in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and remedies and to general
equity principles, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether a proceeding is
sought at law or in equity).
(v) None of the Issuers or Subsidiary Guarantors is nor, after
giving effect to the offering and sale of the Offered Securities and the
application of the proceeds thereof
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as described in the Prospectus, will be, an "investment company" as
defined in the Investment Company Act.
(vi) No consent, approval, authorization or order of, or
filing with, any New York, Texas, Delaware corporate or United States
federal governmental authority is required for the consummation of the
transactions contemplated by this Agreement and the Registration Rights
Agreement in connection with the issuance or sale of the Offered
Securities by the Issuers, or for the execution, delivery and
performance of the Indenture and the Escrow Agreement, except such as
may be required under state securities laws and except for such filings
with the Commission as are required in connection with the Registration
Rights Agreement, as to all of which such counsel need express no
opinion.
(vii) The execution, delivery and performance of the
Indenture, this Agreement, the Registration Rights Agreement, the Escrow
Agreement and the Escrow Security Agreement and the issuance and sale of
the Offered Securities pursuant to this Agreement and compliance with
the terms and provisions thereof will not conflict with or constitute a
default under, or violate any New York, Texas, Delaware corporate or
United States federal statute, any rule, regulation or order of any New
York, Texas, Delaware corporate or United States federal governmental
authority having jurisdiction over the Issuers or the Subsidiary
Guarantors of which such counsel is aware (other than state securities
or "blue sky" law, rules and regulations, as to which such counsel need
not express any opinion in this paragraph), or any agreement or
instrument (including, without limitation, the Bank Facility (as defined
in the Offering Document)) to which the Issuers or the Subsidiary
Guarantors is a party or by which the Issuers or the Subsidiary
Guarantors, of which such counsel is aware or the Operating Agreement,
as amended, of the Company, the Certificate of Incorporation and Bylaws
of Finance or the Operating Agreement of each of the Subsidiary
Guarantors; and the Issuers have full power and authority to authorize,
issue and sell the Offered Securities as contemplated by this Agreement.
(viii) The provisions of the Escrow Security Agreement are
effective to create in favor of the Trustee, acting as agent for the
Collateral Agent, a valid security interest in all right, title and
interest of the Issuers in the Collateral. Assuming, with respect to the
Assigned Agreement (as defined in the Escrow Security Agreement) and the
proceeds thereof, the filing of appropriate financing statements under
the New York Uniform Commercial Code, no further action is required to
be taken under or pursuant to the laws of the State of New York in order
to perfect such security interest therein. Assuming, with respect to the
Collateral described in Sections 2(a)(i) and (ii) of the Escrow Security
Agreement and the proceeds thereof, compliance with the provisions of
the Escrow Agreement and the Escrow Security Agreement and the other
requirements set forth in such opinion, no further action is required be
taken under or pursuant to the laws of the State of Minnesota in order
to perfect such security interest therein. Such counsel need express no
opinion as to the priority of any such security interest referred to in
this paragraph.
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(ix) The descriptions in the Offering Document under the
captions "Business," "Management," "Principal Members," "Controlling
Member," "Certain Relationships and Related Transactions," "Description
of Bank Facility" and "Description of the Notes" insofar as they
describe the provisions of documents and instruments therein described,
constitute fair summaries thereof, and are accurate in all material
respects; the statements in the Offering Document under the caption
"Business--Governmental Regulation," insofar as they purport to describe
federal environmental laws of the United States, fairly present in all
material respects the information set forth therein; and the statements
in the Offering Document under the caption "Certain United States
Federal Income Tax Consequences to Non-U.S. Holders," insofar as they
purport to describe federal income tax laws of the United States, fairly
present in all material respects the information set forth therein; it
being understood that such counsel need express no opinion as to the
financial statements, the financial forecast or other financial or
statistical data contained in the Offering Document. Insofar as such
opinion covers federal environmental laws of the United States, such
counsel may rely solely upon the opinion of Gardere Wynne Sewell & Riggs
L.L.P.
(x) Each of this Agreement and the Registration Rights
Agreement has been duly authorized, executed and delivered by the
Issuers and the Subsidiary Guarantors.
(xi) Each of the Escrow Agreement and the Escrow Security
Agreement has been duly authorized, executed and delivered by the
Issuers; the Escrow Agreement will conform to the description thereof
contained in the Offering Document and each of the Escrow Agreement and
the Escrow Security Agreement will constitute a valid and legally
binding obligation of the Issuers, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and remedies and to general
equity principles, including principles of commercial reasonableness,
good faith and fair dealing (regarding of whether a proceeding is sought
at law or in equity).
(xii) It is not necessary in connection with (A) the offer,
sale and delivery of the Offered Securities by the Issuers to the
several Purchasers pursuant to this Agreement or (B) the resales of the
Offered Securities by the several Purchasers in the manner contemplated
by this Agreement and the Offering Document, to register the Offered
Securities under the Securities Act or to qualify an indenture in
respect thereof under the Trust Indenture Act.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the
State of New York, the State of Texas or the United States or the
corporation law and limited liability company law of the State of
Delaware, to the extent they deem proper and specified in such opinion,
upon the opinion of other counsel of good standing whom they believe to
be reliable and who are satisfactory to counsel for the Purchasers and
(B) as to matters of fact, to the extent they deem proper, on
15
<PAGE>
certificates of responsible officers of the Company and public
officials. References to the Offering Document in this paragraph (c)
include any supplements thereto on or prior to the Closing Date.
In addition to the foregoing, such counsel shall state that it has
participated in conferences with directors, executive officers and other
representatives of the Company, representatives of the Purchasers and
their counsel and representatives of the Company's independent public
accountants, at which conferences the contents of the Offering Document
and related matters were discussed, and although such counsel has not
independently verified and has not passed upon or assumed any
responsibility for the accuracy, completeness or fairness of the
statements contained in such documents (except to the extent set forth
in paragraph (ix) above), no facts have come to such counsel's attention
to lead it to believe that the Offering Document and any further
amendments or supplements thereto as of their respective dates and on
the date of such opinion letter contained or contains an untrue
statement of a material fact or omitted or omits to state a material
fact required to be stated therein, or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading (it being understood that such counsel need not express any
view with respect to the financial statements and related notes, the
financial statement schedules, the financial forecasts and the other
financial, statistical and accounting data included in the Offering
Document).
(d) The Purchasers shall have received from Andrews & Kurth L.L.P.,
counsel for the Purchasers, such opinion, dated the Closing Date, with
respect to the formation of the Issuers and the Subsidiary Guarantors, the
validity of the Offered Securities, the Offering Document, the exemption from
registration for the offer and sale of the Offered Securities by the Issuers
to the several Purchasers and the resales by the several Purchasers as
contemplated hereby and other related matters as CSFBC may require, and the
Issuers and the Subsidiary Guarantors shall have furnished to such counsel
such documents as they request for the purpose of enabling them to pass upon
such matters.
(e) The Purchasers shall have received a certificate, dated the
Closing Date, of the President or any Vice President and a principal
financial or accounting officer of each of the Issuers and the Subsidiary
Guarantors in which such officers, to the best of their knowledge after
reasonable investigation, shall state that the representations and warranties
of the applicable party in this Agreement are true and correct, that the
applicable party has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to
the Closing Date, and that, subsequent to the date of the most recent
financial statements in the Offering Document there has been no material
adverse change, nor any development or event involving a prospective material
adverse change, in the condition (financial or other), business, properties
or results of operations of the Issuers and Subsidiary Guarantors taken as a
whole except as set forth in or contemplated by the Offering Document or as
described in such certificate. Such certificate from such officer of Finance
further shall attach a balance sheet of Finance as of a recent date and
certify that such balance sheet presents fairly the financial position of
Finance as of such date in
16
<PAGE>
conformity with generally accepted accounting principles in the United States
and further certify that Finance had as of such date and has as of the
Closing Date no liabilities (other than, as of the Closing Date, the Notes).
(f) The Purchasers shall have received a letter, dated the Closing
Date, of Arthur Andersen LLP which meets the requirements of subsection (a)
of this Section, except that the specified date referred to in such
subsection will be a date not more than three business days prior to the
Closing Date for the purposes of this subsection. In the event the Issuers
shall elect to deposit into the Interest Escrow Account any Temporary Cash
Investments rather than cash only in the aggregate amount of the first two
semi-annual interest payments, the Purchasers also shall have received from
Arthur Andersen LLP a letter which shall certify that as of the Closing Date
and after the application of the proceeds of the Offering as described in the
Offering Document, the amounts held in the Interest Escrow Account will
provide cash at such times and in such amounts as will be sufficient to pay,
when due, interest on the Offered Securities for the first two semi-annual
interest payment dates.
(g) The Offered Securities shall have been made eligible for
trading in PORTAL.
(h) Each of the Construction Contracts and the binder for the
"delay-in-delivery" insurance policy relating to the Rigs described in the
Offering Document shall be in full force and effect, and no default or event
that with notice, a lapse of time, or both, would constitute a default, shall
exist thereunder.
(i) The Company shall have entered into the Bank Facility and no
default or event that with notice, a lapse of time, or both, would constitute
a default, shall exist thereunder.
(j) The Issuers shall have entered into the Escrow Agreement and no
default or event that with notice, a lapse of time, or both would constitute
a default, shall exist thereunder. Concurrently with the Closing, the
aggregate net proceeds of the Offered Securities shall have been deposited in
the Escrow Accounts.
The Issuers will furnish the Purchasers with such conformed copies of
such opinions, certificates, letters and documents as the Purchasers
reasonably request. CSFBC may in its sole discretion waive on behalf of the
Purchasers compliance with any conditions to the obligations of the
Purchasers hereunder, whether in respect of the Closing Date or otherwise.
7. Indemnification and Contribution. (a) The Issuers and the Subsidiary
Guarantors , jointly and severally, will indemnify and hold harmless each
Purchaser against any losses, claims, damages or liabilities, joint or
several, to which such Purchaser may become subject, under the Securities Act
or the Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any breach of any of the representations and warranties of the Issuers and
the Subsidiary Guarantors contained herein or any untrue statement or alleged
untrue statement of any material fact contained in the Offering Document, or
any
17
<PAGE>
amendment or supplement thereto, or any related preliminary offering
circular, or arise out of or are based upon the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and will reimburse each Purchaser for any legal or other expenses
reasonably incurred by such Purchaser in connection with investigating or
defending any such loss, claim, damage, liability or action as such expenses
are incurred; provided, however, that the Issuers and the Subsidiary
Guarantors will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and in conformity with written
information furnished to the Company by any Purchaser through CSFBC
specifically for use therein, it being understood and agreed that the only
such information consists of the information described as such in subsection
(b) below.
(b) Each Purchaser will severally and not jointly indemnify and
hold harmless the Issuers and the Subsidiary Guarantors against any losses,
claims, damages or liabilities to which the Issuers and the Subsidiary
Guarantors may become subject, under the Securities Act or the Exchange Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Offering Document, or any amendment or supplement thereto, or any related
preliminary offering circular, or arise out of or are based upon the omission
or the alleged omission to state therein a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Issuers by such Purchaser through CSFBC
specifically for use therein, and will reimburse any legal or other expenses
reasonably incurred by the Issuers and the Subsidiary Guarantors in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred, it being understood and
agreed that the only such information furnished by any Purchaser consists of
the following information in the Offering Document furnished on behalf of
each Purchaser: the last paragraph at the bottom of the cover page concerning
the terms of the offering by the Purchasers, the legend concerning
over-allotments and stabilizing on the inside front cover page and paragraph
seven under the caption "Plan of Distribution."
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying
party under subsection (a) or (b) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party (except to the extent that a defense or counterclaim thereto has been
foreclosed thereby) otherwise than under subsection (a) or (b) above. In case
any such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party
18
<PAGE>
(who shall not, except with the consent of the indemnified party, be counsel
to the indemnifying party), and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened action in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by
such indemnified party unless such settlement includes an unconditional
release of such indemnified party from all liability on any claims that are
the subject matter of such action.
(d) If the indemnification provided for in this Section is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the
losses, claims, damages or liabilities referred to in subsection (a) or (b)
above (i) in such proportion as is appropriate to reflect the relative
benefits received by the Issuers and Subsidiary Guarantors on the one hand
and the Purchasers on the other from the offering of the Offered Securities
or (ii) if the allocation provided by clause (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 (i) above but also the relative fault
of the Issuers and the Subsidiary Guarantors on the one hand and the
Purchasers on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities as well as any other
relevant equitable considerations. The relative benefits received by the
Issuers and the Subsidiary Guarantors on the one hand and the Purchasers on
the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the
Issuers and the Subsidiary Guarantors bear to the total discounts and
commissions received by the Purchasers from the Issuers and the Subsidiary
Guarantors under this Agreement. The relative fault 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 Issuers and the
Subsidiary Guarantors or the Purchasers and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), no
Purchaser shall be required to contribute any amount in excess of the amount
by which the total price at which the Offered Securities purchased by it were
resold exceeds the amount of any damages which such 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 Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Purchasers' obligations in this subsection
(d) to contribute are several in proportion to their respective purchase
obligations and not joint.
19
<PAGE>
(e) The obligations of the Issuers and the Subsidiary Guarantors
under this Section shall be in addition to any liability which the Issuers
and the Subsidiary Guarantors may otherwise have and shall extend, upon the
same terms and conditions, to each person, if any, who controls any Purchaser
within the meaning of the Securities Act or the Exchange Act; and the
obligations of the Purchasers under this Section shall be in addition to any
liability which the respective Purchasers may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls the Issuers and the Subsidiary Guarantors within the meaning of the
Securities Act or the Exchange Act.
8. Default of Purchasers. If any Purchaser or Purchasers default in
their obligations to purchase Offered Securities hereunder and the aggregate
amount of Offered Securities that such defaulting Purchaser or Purchasers
agreed but failed to purchase does not exceed 10% of the total principal
amount of Offered Securities, CSFBC may make arrangements satisfactory to the
Issuers and the Subsidiary Guarantors for the purchase of such Offered
Securities by other persons, including any of the Purchasers, but if no such
arrangements are made by such Closing Date, the non-defaulting Purchasers
shall be obligated severally, in proportion to their respective commitments
hereunder, to purchase the Offered Securities that such defaulting Purchasers
agreed but failed to purchase. If any Purchaser or Purchasers so default and
the aggregate principal amount of Offered Securities with respect to which
such default or defaults occur exceeds 10% of the total principal amount of
Offered Securities and arrangements satisfactory to CSFBC and the Issuers and
the Subsidiary Guarantors for the purchase of such Offered Securities by
other persons are not made within 36 hours after such default, this Agreement
will terminate without liability on the part of any non-defaulting Purchaser
or the Issuers and the Subsidiary Guarantors, except as provided in Section
9. As used in this Agreement, the term "Purchaser" includes any person
substituted for a Purchaser under this Section. Nothing herein will relieve a
defaulting Purchaser from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of
the Issuers and the Subsidiary Guarantors or its officers and of the several
Purchasers set forth in or made pursuant to this Agreement will remain in
full force and effect, regardless of any investigation, or statement as to
the results thereof, made by or on behalf of any Purchaser, the Issuers and
the Subsidiary Guarantors or any of their respective officers or directors or
any controlling person, and will survive delivery of and payment for the
Offered Securities. If this Agreement is terminated pursuant to Section 8 or
if for any reason the purchase of the Offered Securities by the Purchasers is
not consummated, the Issuers and the Subsidiary Guarantors shall remain
responsible for the expenses to be paid or reimbursed by them pursuant to
Section 5 and the respective obligations of the Issuers and the Subsidiary
Guarantors and the Purchasers pursuant to Section 7 shall remain in effect.
If the purchase of the Offered Securities by the Purchasers is not
consummated for any reason other than solely because of the termination of
this Agreement pursuant to Section 8 or the occurrence of any event specified
in clause (C), (D) or (E) of Section 6(b)(ii), the Issuers and the Subsidiary
Guarantors will reimburse the Purchasers for all out-of-pocket expenses
(including fees and disbursements of counsel) reasonably incurred by them in
connection with the offering of the Offered Securities.
20
<PAGE>
10. Notices. All communications hereunder will be in writing and, if
sent to the Purchasers will be mailed, delivered or telecopied and confirmed
to the Purchasers c/o Credit Suisse First Boston Corporation, Eleven Madison
Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking
Department--Transactions Advisory Group, or, if sent to the Issuers and the
Subsidiary Guarantors, will be mailed, delivered or telegraphed and confirmed
to it at Chiles Offshore LLC, 1370 Avenue of the Americas, 25th Floor, New
York, New York 10029, Attention: Dick H. Fagerstal; provided, however, that
any notice to a Purchaser pursuant to Section 7 will be mailed, delivered or
telegraphed and confirmed to such Purchaser.
11. Successors. This Agreement will be binding upon the parties hereto
and their respective successors, and will inure to the benefit of the parties
hereto and their respective successors, and the controlling persons referred
to in Section 7, and no other person will have any right or obligation
hereunder, except that holders of Offered Securities shall be entitled to
enforce the agreements for their benefit contained in the second and third
sentences of Section 5(b) hereof against the Issuers and the Subsidiary
Guarantors as if such holders were parties thereto.
12. Representation of Purchasers. You will act for the several
Purchasers in connection with this purchase, and any action under this
Agreement taken by you jointly or by CSFBC will be binding upon all the
Purchasers.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York without regard to
principles of conflicts of laws.
Each of the Issuers and the Subsidiary Guarantors hereby submits to the
non-exclusive jurisdiction of the Federal and state courts in the Borough of
Manhattan in The City of New York in any suit or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby.
21
<PAGE>
If the foregoing is in accordance with the Purchasers' understanding of
our agreement, kindly sign and return to us one of the counterparts hereof,
whereupon it will become a binding agreement among the Issuers and the
Subsidiary Guarantors and the several Purchasers in accordance with its terms.
Very truly yours,
CHILES OFFSHORE LLC
By /s/ William E. Chiles
---------------------------
Name: William E. Chiles
Title: President & CEO
CHILES OFFSHORE FINANCE CORP.
By /s/ William E. Chiles
---------------------------
Name: William E. Chiles
Title: President & CEO
CHILES COLUMBUS LLC
By /s/ William E. Chiles
----------------------------
Name: William E. Chiles
Title: President & CEO
CHILES MAGELLAN LLC
By /s/ William E. Chiles
----------------------------
Name: William E. Chiles
Title: President & CEO
22
<PAGE>
The foregoing Purchase Agreement is hereby
confirmed and accepted as of the date first
above written.
CREDIT SUISSE FIRST BOSTON CORPORATION
WASSERSTEIN PERELLA SECURITIES, INC.
By: CREDIT SUISSE FIRST BOSTON
CORPORATION
By: /s/ Rome Arnold
-----------------------------------
Name: Rome Arnold
Title: Managing Director
23
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Principal Amount
of Offered
Purchaser Securities
<S> <C>
Credit Suisse First Boston Corporation.................. $ 77,000,000
Wasserstein Perella Securities, Inc..................... 33,000,000
----------------------
Total........................................... $ 110,000,000
----------------------
----------------------
</TABLE>
24
<PAGE>
Exhibit 10.1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CREDIT AGREEMENT PROVIDING FOR
A
U.S. $25,000,000
REVOLVING CREDIT FACILITY
TO BE MADE AVAILABLE TO
CHILES OFFSHORE LLC
ARRANGED BY
NEDERLANDSE SCHEEPSHYPOTHEEK BANK N.V.
and
MEESPIERSON CAPITAL CORP.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
April 29, 1998
<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 1 DEFINITIONS ........................................................................ 1
1.1 Defined Terms........................................................... 1
1.2 ........................................................................ 13
1.3 ........................................................................ 13
SECTION 2 REPRESENTATIONS AND WARRANTIES...................................................... 13
2.1 ........................................................................ 13
2.1(a) Due Organization and Power.............................................. 13
2.1(b) Authorization and Consents.............................................. 14
2.1(c) Binding Obligations..................................................... 14
2.1(d) No Violation............................................................ 14
2.1(e) Litigation.............................................................. 14
2.1(f) No Default.............................................................. 14
2.1(g) Units................................................................... 14
2.1(h) Insurance............................................................... 15
2.1(i) Financial Information................................................... 15
2.1(j) Tax Returns............................................................. 15
2.1(k) ERISA................................................................... 15
2.1(l) Chief Executive Office.................................................. 16
2.1(m) Foreign Trade Control Regulations....................................... 16
2.1(n) Equity Ownership........................................................ 16
2.1(o) Environmental Matters and Claims........................................ 16
2.1(p) Indenture............................................................... 18
2.1(q) Survival................................................................ 18
SECTION 3 ADVANCES ........................................................................ 18
3.1(a) Purposes................................................................ 18
3.1(b) Making of the Advances.................................................. 18
3.1(c) Maximum Number of Advances.............................................. 18
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
3.2 Drawdown Notice......................................................... 18
3.3 Effect of Drawdown Notices.............................................. 19
3.4 Notation of Advances.................................................... 19
SECTION 4 CONDITIONS ........................................................................ 19
4.1 Conditions Precedent to Drawdown
of the Initial Advance................................................ 19
4.2 Further Conditions Precedent............................................ 23
4.3 Breakfunding Costs...................................................... 23
4.4 Satisfaction After Drawdown............................................. 23
SECTION 5 REPAYMENT, REDUCTION AND PREPAYMENT................................................. 24
5.1 Repayment............................................................... 24
5.2 Prepayments; Reborrowing................................................ 24
5.3 Optional Permanent Reduction of
Credit Facility....................................................... 24
5.4 Interest and Costs with Prepayments..................................... 24
SECTION 6 INTEREST AND RATE................................................................... 24
6.1 Applicable Rate; Default Rate........................................... 24
6.2 Interest Periods........................................................ 25
6.3 Interest Payments....................................................... 25
6.4 Payment on Banking Day.................................................. 25
6.5 Calculation of Interest................................................. 25
SECTION 7 PAYMENTS ........................................................................ 25
7.1 Place of Payments, No Set Off........................................... 25
7.2 Proof of Withholding.................................................... 26
7.3 Tax Credits............................................................. 26
SECTION 8 EVENTS OF DEFAULT.................................................................... 27
8.1(a) Non-Payment of Principal................................................ 27
8.1(b) Non-Payment of Interest or Other Amounts................................ 27
8.1(c) Representations......................................................... 27
8.1(d) Mortgage................................................................ 27
8.1(e) Covenants............................................................... 27
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
8.1(f) Indebtedness............................................................ 27
8.1(g) Indenture Default....................................................... 28
8.1(h) Equity Ownership........................................................ 28
8.1(i) Bankruptcy.............................................................. 28
8.1(j) Termination of Operations;
Sale of Assets........................................................ 28
8.1(k) Judgments............................................................... 28
8.1(l) Inability to Pay Debts.................................................. 29
8.1(m) Change in Control....................................................... 29
8.2 Indemnification......................................................... 30
8.3 Application of Moneys................................................... 30
SECTION 9 COVENANTS ........................................................................ 31
9.1 ........................................................................ 31
9.1(A)(i) Performance of Agreements............................................... 31
9.1(A)(ii) Notice of Default, Etc.................................................. 31
9.1(A)(iii) Obtain Consents......................................................... 31
9.1(A)(iv) Financial Information................................................... 31
9.1(A)(v) Existence............................................................... 32
9.1(A)(vi) Books and Records....................................................... 33
9.1(A)(vii) Taxes and Assessments................................................... 33
9.1(A)(viii) Inspection.............................................................. 33
9.1(A)(ix) Compliance with Statutes, etc........................................... 33
9.1(A)(x) Environmental Matters................................................... 33
9.1(A)(xi) ERISA................................................................... 34
9.1(A)(xii) Delivery of Second Unit................................................. 34
9.1(A)(xiii) Permanent Registration.................................................. 34
9.1(A)(xiv) Brokerage Commissions, etc.............................................. 35
9.1(B)(i) Liens................................................................... 35
9.1(B)(ii) Change in Business...................................................... 36
9.1(B)(iii) Sale or Pledge of Membership
Interests.............................................................. 36
9.1(B)(iv) Sale of Assets.......................................................... 36
9.1(B)(v) Changes in Offices or Names............................................. 36
9.1(B)(vi) Consolidation and Merger................................................ 36
9.1(B)(vii) Limitation on Restricted
Payments............................................................... 36
9.1(B)(viii) Limitation on Call of Notes............................................. 37
9.1(B)(ix) Amendment of Indenture.................................................. 37
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
9.1(C)(i) Loans and Advances...................................................... 37
9.1(C)(ii) Guarantees, etc......................................................... 37
9.1(C)(iii) Use of Corporate Funds.................................................. 37
9.1(C)(iv) Issuance of Membership Interests........................................ 37
9.2 Unit Valuation.......................................................... 37
9.3 Asset Maintenance....................................................... 38
9.4 Reduction of Collateral................................................. 38
9.5 Inspection and Survey Reports........................................... 39
SECTION 10 ASSIGNMENT......................................................................... 39
SECTION 11 ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC.................................. 39
11.1 Illegality.............................................................. 39
11.2 Increased Costs......................................................... 40
11.3 Nonavailability of Funds................................................ 41
11.4 Lender's Certificate Conclusive......................................... 41
11.5 Compensation for Losses................................................. 41
SECTION 12 CURRENCY INDEMNITY................................................................. 42
12.1 Currency Conversion..................................................... 42
12.2 Change in Exchange Rate................................................. 42
12.3 Additional Debt Due..................................................... 42
12.4 Rate of Exchange........................................................ 42
SECTION 13 FEES AND EXPENSES.................................................................. 42
13.1 Commitment Fee.......................................................... 42
13.2 Agency Fee.............................................................. 43
13.3 Arrangement Fee......................................................... 43
13.4 Other Fees.............................................................. 43
13.5 Expenses................................................................ 43
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
SECTION 14 APPLICABLE LAW, JURISDICTION AND WAIVER............................................ 44
14.1 Applicable Law.......................................................... 44
14.2 Jurisdiction ........................................................... 44
14.3 WAIVER OF JURY TRIAL.................................................... 44
SECTION 15 THE AGENTS......................................................................... 45
15.1(a) Appointment of Agents................................................... 45
15.1(b) Appointment of Security Trustee......................................... 45
15.2 Distribution of Payments................................................ 45
15.3 Holder of Interest in Note.............................................. 46
15.4 No Duty to Examine, Etc................................................. 46
15.5 Agents as Lenders....................................................... 46
15.6(a) Obligations of Agents................................................... 46
15.6(b) No Duty to Investigate.................................................. 46
15.7(a) Discretion of Agents.................................................... 46
15.7(b) Instructions of Majority Lenders........................................ 46
15.8 Assumption re Event of Default.......................................... 47
15.9 No Liability of Agents or Lenders....................................... 47
15.10 Indemnification of Agents............................................... 48
15.11 Consultation with Counsel............................................... 48
15.12 Resignation of Administrative Agent..................................... 48
15.13 Representations of Lenders.............................................. 49
15.14 Notification of Event of Default........................................ 49
SECTION 16 NOTICES AND DEMANDS................................................................ 49
16.1 Notices................................................................. 49
SECTION 17 MISCELLANEOUS...................................................................... 50
17.1 Time of Essence......................................................... 50
17.2 Unenforceable, etc., Provisions - Effect................................ 50
17.3 References.............................................................. 50
17.4 Further Assurances...................................................... 50
17.5 Prior Agreements, Merger................................................ 50
17.6 Entire Agreement, Amendments............................................ 51
17.7 Indemnification......................................................... 51
17.8 Headings................................................................ 51
</TABLE>
v
<PAGE>
SCHEDULE
1 The Lenders and the Commitments
2 The Guarantors
EXHIBITS CONTENTS
1 Form of Promissory Note
2 Form of Guaranty
3 Form of Mortgage
4 Form of Earnings Assignment
5 Form of Insurances Assignment
6 Form of Drawdown Notice
7 Form of Assignment and Assumption Agreement
vi
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of the 29th day of April,
1998, by and among (1) CHILES OFFSHORE LLC, a limited liability company
organized under the laws of the State of Delaware with offices at 11200
Westheimer, Suite 410, Houston, Texas (the "Borrower"), (2) NEDERLANDSE
SCHEEPSHYPOTHEEK BANK N.V. ("Nedship") and MEESPIERSON CAPITAL CORP.
("MeesPierson"), as co-arrangers (the "Arrangers"), (3) the banks and financial
institutions whose names and addresses are set out in Schedule 1 (together, the
"Lenders", each a "Lender"); (4) Nedship, as documentation agent (the
"Documentation Agent") and security trustee (the "Security Trustee") for the
Lenders, and (5) MeesPierson, as administrative and paying agent (the
"Administrative Agent", and, together with the Documentation Agent, the
"Agents") for the Lenders.
WITNESSETH THAT:
1. DEFINITIONS
1.1 In this Agreement the words and expressions specified below shall, except
where the context otherwise requires, have the meanings attributed to them
below:
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"Acceptable Accounting Firm" means Arthur Anderson & Co. L.L.P., or such other recognized
international accounting firm selected by the Borrower
and approved by the Agent, such approval not to be unreasonably
withheld;
"Advance(s)" means any amount advanced to the Borrower hereunder or (as the
context may require) the aggregate amount of all such advances for
the time being outstanding;
"Affiliate" means with respect to any Person, any other Person directly or
indirectly controlled by or under common control with such
Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms
</TABLE>
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"controlled by" and "under common control with") as applied to any
Person means the possession directly or indirectly of the power to
direct or cause the direction of the management and policies of that
Person whether through ownership of voting securities or by contract
or otherwise;
"Agreement" means this Agreement, as the same shall be amended, modified or
supplemented from time to time;
"Applicable Rate" means any rate of interest on the Advances from time to time
applicable pursuant to Section 6.1;
"Assignment and Assumption
Agreement(s)" means the Assignment and Assumption Agreement(s) executed
pursuant to Section 10 substantially in the form set out in
Exhibit 7;
"Assignment Notices" means (i) notices with respect to the Earnings Assignments
substantially in the form set out in Exhibit 1 thereto; and
(ii) notices with respect to the Insurances Assignments
substantially in the form set out in Exhibit 3 thereto;
"Assignments" means the Earnings Assignments and the Insurances Assignments;
"Banking Day(s)" means day(s) on which banks are open for the
transaction of business in London, England, New York, New
York and Rotterdam, The Netherlands;
"Builder" AMFELS, Inc., a Texas corporation;
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"Change of Control" means (a) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) (other than SEACOR Offshore Rigs
Inc. or its Affiliates) becomes the beneficial owner (as defined
in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of more than 45% of the total voting power of the
Borrower or (b) the Management Committee of the Borrower ceases
to consist of a majority of the existing managers as of the date
of this Agreement or managers elected by such existing managers;
"Chiles Finance" means Chiles Offshore Finance Corp., a Delaware corporation;
"Classification Society" shall mean a member of the International Association of
Classification Societies with whom the Units are entered and
who conducted periodic physical surveys and/or inspections of
the Units;
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute and regulation promulgated thereunder;
"Collateral" means all property or other assets, real or personal,
tangible or intangible, whether now owned or hereafter acquired
in which the Security Trustee for the benefit of the Creditors
have been granted a security interest pursuant to a Security
Document;
"Commitment(s)" means in relation to a Lender, the portion of the Credit
Facility set out opposite its name on Schedule 1 or, as the
case may be, in any relevant Assignment and
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Assumption Agreement, as reduced from time to time pursuant to
the terms of this Agreement;
"Compliance Certificate" means a certificate certifying the compliance by the Borrower
with all of its covenants contained herein and showing the
calculations thereof in reasonable detail, delivered by the Chief
Financial Officer of the Borrower to the Agents from time to time
pursuant to Section 9.1(A)(iv) in such form as the Administrative
Agent may agree;
"Credit Facility" means the sums to be advanced by the Lenders to the
Borrower pursuant to this Agreement in an aggregate amount
not to exceed at any one time outstanding Twenty-Five Million
Dollars ($25,000,000), as such amount shall be reduced from
time to time pursuant to this Agreement;
"Credit Facility Balance" means the Dollar amount of the Advances at
any relevant time then outstanding as reduced by
payments pursuant to the terms of this Agreement;
"Credit Facility Period" means the period from the date of this
Agreement to the date on which all amounts owing under the
Credit Facility and all other amounts owing to the Creditors
pursuant to this Agreement, the Note and the Security Documents
become repayable and are repaid in full;
"Creditors" means the Arrangers, the Agents, the Security Trustee and the
Lenders;
"Default Rate" shall have the meaning ascribed thereto in Section 6.1;
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"Dollars" and the means the legal currency, at any relevant time
sign "$" hereunder, of the United States of America and, in relation to
all payments hereunder, in same day funds settled through the New
York Clearing House Interbank Payments System (or such other
Dollar funds as may be determined by the Agent to be customary
for the settlement in New York City of banking transactions of
the type herein involved);
"Drawdown Dates" means the dates, each being a Banking Day falling not
later than the day immediately preceding the Maturity Date,
upon which the Borrower has requested that an Advance be
made available to the Borrower as provided in Section 3;
"Drawdown Notice" shall have the meaning ascribed thereto in Section 3.2;
"Earnings Assignments" means assignments in respect of the earnings of
each Unit from any and all sources to be executed by the
relevant Guarantor in favor of the Security Trustee pursuant to
Section 4.1(d) substantially in the form set out in Exhibit 4;
"Environmental Affiliate" means any person or entity, the liability of which
for Environmental Claims any Security Party or Subsidiary of
any Security Party may have assumed by contract or operation
of law;
"Environmental Approvals" shall have the meaning ascribed thereto in Section 2.1(o);
"Environmental Claim(s)" shall have the meaning ascribed thereto in Section 2.1(o);
</TABLE>
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"Environmental Laws" shall have the meaning ascribed thereto in Section 2.1(o);
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended;
"ERISA Affiliate" means a trade or business (whether or not incorporated) which
is under common control with the Borrower within the meaning
of Sections 414(b), (c), (m) or (o) of the Code;
"Events of Default" means any of the events set out in Section 8.1;
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as amended;
"Fee Letter" means the letter dated of even date herewith and
entered into by and among the Borrower and the Arrangers in
respect of the fees referred to therein;
"First Unit" means the "Chiles Columbus", a LeTourneau designed
Enhanced 116 class jackup rig with 350 foot water depth, to be
built at the Builder's Brownsville, Texas yard, and
anticipated to be delivered in April, 1999 and to be registered
in the name of the relevant Guarantor under Panamanian flag;
"FMV" with respect to a Unit, means fair market value as determined in
accordance with Section 9.2;
"GAAP" shall have the meaning ascribed thereto in Section 1.3;
</TABLE>
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"Guarantor(s)" means each of the companies listed in Schedule 2 as Guarantors;
"Guaranty" means the guaranty to be executed by each Guarantor in
respect of the obligations of the Borrower under this
Agreement and under the Note in favor of the Security Trustee
pursuant to Section 4.l(d) substantially in the form set
out in Exhibit 2;
"Indebtedness" means, with respect to any Person at any date of determination
(without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all
obligations of such Person in respect of letters of credit or
other similar instruments (including reimbursement obligations
with respect thereto), (iv) all obligations of such Person to pay
the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date
of placing such property in service or taking delivery thereof or
the completion of such services, except trade payables, (v) all
obligations on account of principal of such Person as lessee
under capitalized leases, (vi) all indebtedness of other Persons
secured by a lien on any asset of such Person, whether or not
such indebtedness is assumed by such Person; provided that the
amount of such indebtedness shall be the lesser of (a) the fair
market value of such asset at such date of determination and
(b) the amount of such indebtedness, and (vii) all indebtedness of
other Persons guaranteed
</TABLE>
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by such Person to the extent such indebtedness is guaranteed by
such Person. 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, with respect
to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation,
provided that the amount outstanding at any time of any
indebtedness issued with original issue discount is the face
amount of such indebtedness less the remaining unamortized
portion of the original issue discount of such indebtedness at
such time as determined in conformity with GAAP; and provided
further that Indebtedness shall not include any liability for
current or deferred federal, state, local or other taxes, or
any trade payables;
"Indenture" means the Indenture executed or to be executed by and among the
Borrower, Chiles Finance, certain subsidiary guarantors
therein described and the Trustee as trustee for certain
noteholders in respect of the issuance by the Borrower of
$110,000,000 of 10% Senior Notes due 2008;
"Insurances Assignments" means assignments in respect of the insurances of
the Units to be executed by the respective Guarantor owning same
in favor of the Security Trustee pursuant to Section 4.1(d)
substantially in the form set out in Exhibit 5;
</TABLE>
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"Interest Notice" a notice to the Administrative Agent specifying the duration of
any relevant Interest Period;
"Interest Period(s)" period(s) of one, three or six months selected by
the Borrower or, at the Lenders' option, such other period(s) as
may be agreed; provided, however, that an Interest Period
of one month may not be selected by the Borrower more than three
times in any calendar year;
"Interest Rate Agreements" means any interest rate protection agreement, interest rate
future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement or other similar
agreement or arrangement designed to protect the Borrower or any
of its Subsidiaries against fluctuations in interest rates to or
under which the Borrower or any of its Subsidiaries is a party or
a beneficiary on the date of this Agreement or becomes a party or
a beneficiary hereafter;
"LIBOR" means the rate (rounded upward to the nearest 1/16th of one
percent) for deposits of Dollars for a period equivalent to the
relevant Interest Period at or about 11:00 a.m. (London time)
on the second London Banking Day before the first day of such
period as displayed on Telerate page 3750 (British Bankers'
Association Interest Settlement Rates) (or such other page as
may replace such page 3750 on such system or on any other
system of the information vendor for the time being designated
by the British Bankers' Association to calculate the
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<S> <C>
BBA Interest Settlement Rate (as defined in the British Bankers'
Association's Recommended Terms and Conditions ("BBAIRS" terms)
dated August 1985)), provided that if on such date no such rate
is so displayed for the relevant Interest Period, LIBOR for such
period shall be the arithmetic mean (rounded upward if necessary
to four decimal places) of the rates respectively quoted to the
Administrative Agent by each of the Reference Banks at the
request of the Administrative Agent as the offered rate for
deposits of Dollars in an amount approximately equal to the
amount in relation to which LIBOR is to be determined for a
period equivalent to the relevant Interest Period to prime banks
in the London Interbank Market at or about 11:00 a.m. (London
time) on the second Banking Day before the first day of such
period;
"Majority Lenders" means any two or more Lenders whose Commitments exceed fifty
percent of the total Commitments;
"Management Committee" means the board of managers, management committee
or such other governing body charged with the management of
the Borrower under its certificate of formation and/or
operating agreement;
"Margin" 1.25% per annum;
"Material Adverse Effect" shall mean a material adverse effect on (i) the ability of any
Security Party to perform its obligations to the Creditors under
any Security Documents or (ii) the business, property, assets,
liabilities,
</TABLE>
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operations, condition (financial or otherwise) or prospects of the
Borrower and other Security Parties taken as a whole;
"Materials of Environmental shall have the meaning ascribed thereto in Section 2.1(o);
Concern"
"Maturity Date" means December 31, 2004;
"Mortgages" the first preferred naval Panamanian mortgages on each
Unit to be executed by the respective Guarantor which is
the registered owner of such Unit in favor of the Security
Trustee pursuant to Section 4.1(d) substantially in the form
set out in Exhibit 3;
"Note" means that certain promissory note to be executed by the
Borrower to the order of the Administrative Agent pursuant to
Section 4.1(c), to evidence the Advances substantially in the
form set out Exhibit 1;
"Person" means any individual, sole proprietorship, corporation,
partnership (general or limited), limited liability
company, business trust, bank, trust company, joint venture,
association, joint stock company, trust or other
unincorporated organization, whether or not a legal entity,
or any government or agency or political subdivision thereof;
"Plan" means any employee benefit plan covered by Title IV of ERISA;
"Reference Banks" Nederlandse Scheepshypotheek Bank N.V. and MeesPierson N.V.;
</TABLE>
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"Required Percentage" shall have the meaning set forth for such term in Section 9.3;
"Second Unit" the "Chiles Magellan", a LeTourneau designed Super 116
class jackup rig with 350 foot water depth, to be built at the
Builder's Brownsville, Texas yard, and anticipated to be
delivered in October 1999 and registered in the name of the
relevant Guarantor under Panamanian flag;
"Security Documents" means the Mortgages, the Assignments and any other documents that
may be executed as security for the Credit Facility and the
Borrower's obligations in connection therewith;
"Security Party(ies)" means the Borrower and each of the Guarantors;
"Subsidiaries" is defined to mean, with respect to any Person, any business
entity of which more than 50% of the outstanding voting stock,
membership interests or other equity interests are owned
directly or indirectly by such Person and one or more other
Subsidiaries of such Person;
"Taxes" means any present or future income or other taxes, levies,
duties, charges, fees, deductions or withholdings of any nature
now or hereafter imposed, levied, collected, withheld or
assessed by any taxing authority whatsoever, except for taxes
on or measured by the overall net income of each Lender imposed
by its jurisdiction of incorporation or applicable lending
office, the United States of America, the State or City of New
York or any governmental subdivision or
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taxing authority of any thereof or by any other
taxing authority having jurisdiction over such Lender (unless
such jurisdiction is asserted by reason of the activities of the
Borrower or any of the Subsidiaries);
"Total Loss" shall have the meaning ascribed thereto in the Mortgages;
"Trustee" means U.S. Bank Trust National Association; and
"Units" means the First Unit and the Second Unit.
</TABLE>
1.2 Words importing the singular number only shall include the plural and vice
versa. Words importing persons shall include companies, firms, corporations,
partnerships, unincorporated associations and their respective successors and
assigns.
1.3 All accounting terms not specifically defined herein shall be construed in
accordance with generally accepted accounting principles as in effect from time
to time in the United States of America consistently applied ("GAAP") and all
financial statements submitted pursuant to this Agreement shall be prepared in
accordance with, and all financial data submitted pursuant hereto shall be
derived from financial statements prepared in accordance with, GAAP.
2. REPRESENTATIONS AND WARRANTIES
2.1 In order to induce Creditors to enter into this Agreement and to induce the
Lenders to make the Credit Facility available, the Borrower hereby represents
and warrants to the Creditors (which representations and warranties shall
survive the execution and delivery of this Agreement and the Note and the
drawdown of the Advances hereunder) that:
(a) Due Organization and Power. Each Security Party is duly
formed and is validly existing in good standing under the laws of its
jurisdiction of formation, has full power to carry on its business as now being
conducted and to enter into and perform its obligations under this Agreement,
the Note, the Guaranty and the Security Documents, and has complied with all
statutory, regulatory and other requirements applicable to such business and
such agreements;
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(b) Authorization and Consents. All necessary limited
liability company action has been taken to authorize, and all necessary consents
and authorities have been obtained and remain in full force and effect to
permit, each Security Party to enter into and perform its obligations under this
Agreement, the Note, the Guaranty and the Security Documents and, in the case of
the Borrower, to borrow, service and repay the Advances and, as of the date of
this Agreement, no further consents or authorities are necessary for the service
and repayment of the Advances or any part thereof;
(c) Binding Obligations. This Agreement, the Note, the
Guaranty and the Security Documents constitute or will, when executed and
delivered, constitute the legal, valid and binding obligations of each Security
Party as is a party thereto enforceable against such Security Party in
accordance with their respective terms, except to the extent that such
enforcement may be limited by equitable principles, principles of public policy
or applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting generally the enforcement of creditors' rights;
(d) No Violation. The execution and delivery of, and the
performance of the provisions of, this Agreement, the Note, the Guaranty and
those of the Security Documents to which it is to be a party by each Security
Party do not contravene any applicable law or regulation existing at the date
hereof or any contractual restriction binding on such Security Party or the
certificate of formation or operating agreement (or equivalent instruments)
thereof;
(e) Litigation. No action, suit or proceeding is currently
pending or threatened against any Security Party before any court, board of
arbitration or administrative agency;
(f) No Default. No Security Party is in default under any
material agreement by which it is bound, or is in default in respect of any
material financial commitment or obligation;
(g) Units. Upon delivery of the Units to the Guarantors:
(i) each of the Units will be in the sole and
absolute ownership of the respective
Guarantor as set forth in Schedule 3 and
duly registered in such Guarantor's name
under Panamanian flag, unencumbered, save
and except for the Mortgage recorded
against her and as permitted by such
Mortgage;
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(ii) each Unit will be classed in the highest
classification and rating for rigs of the
same age and type with the respective
classification society as set forth in
Schedule 3 without any material outstanding
recommendations affecting class;
(iii) each Unit will be operationally seaworthy
and in every way fit for its intended
service; and
(iv) each Unit will be insured in accordance
with the provisions of the Mortgage
thereagainst and the requirements thereof
in respect of such insurances will have
been complied with;
(h) Insurance. Each of the Security Parties has insured its
properties and assets against such risks and in such amounts as are customary
for companies engaged in similar businesses;
(i) Financial Information. Except as otherwise disclosed in
writing to the Lenders on or prior to the date hereof, all financial statements,
information and other data furnished by the Borrower to the Lenders are complete
and correct, such financial statements have been prepared in accordance with
GAAP and accurately and fairly present the financial condition of the parties
covered thereby as of the respective dates thereof and the results of the
operations thereof for the period or respective periods covered by such
financial statements and since the date of the most recent of such statements,
there has been no Material Adverse Effect as to any of such parties and none
thereof has any contingent obligations, liabilities for taxes or other
outstanding financial obligations which are material in the aggregate except as
disclosed in such statements, information and data;
(j) Tax Returns. Each Security Party has filed all material
tax returns required to be filed thereby and has paid all taxes payable thereby
which have become due, other than those not yet delinquent or the nonpayment of
which would not have a Material Adverse Effect on such Security Party and except
for those taxes being contested in good faith and by appropriate proceedings or
other acts and for which adequate reserves shall have been set aside on its
books;
(k) ERISA. The execution and delivery of this Agreement and
the consummation of the transactions hereunder will not involve any prohibited
transaction within the meaning of ERISA or Section 4975 of the Code and no
condition exists or event or transaction has occurred in connection with any
Plan maintained or contributed to by any Security Party or any ERISA Affiliate
resulting from the failure of any thereof to comply with ERISA insofar as ERISA
applies thereto which is reasonably likely to
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result in such Security Party or any ERISA Affiliate incurring any liability,
fine or penalty which individually or in the aggregate would have a Material
Adverse Effect. Prior to the date hereof, the Borrower has delivered to the
Agent a list of all the employee benefit plans to which each Security Party or
any ERISA Affiliate is a "party in interest" (within the meaning of Section
3(14) of ERISA) or a "disqualified person" (within the meaning of Section
4975(e)(2) of the Code);
(l) Chief Executive Office. The Borrower's chief executive
office and chief place of business and the office in which the records relating
to the earnings and other receivables of each Security Party are kept is, and
will continue to be, located at 11200 Westheimer, Suite 410, Houston, Texas
77042;
(m) Foreign Trade Control Regulations. None of the
transactions contemplated herein will violate any of the provisions of the
Foreign Assets Control Regulations of the United States of America (Title 31,
Code of Federal Regulations, Chapter V, Part 500, as amended), any of the
provisions of the Cuban Assets Control Regulations of the United States of
America (Title 31, Code of Federal Regulations, Chapter V, Part 515, as
amended), any of the provisions of the Libyan Assets Control Regulations of the
United States of America (Title 31, Code of Federal Regulations, Chapter V, Part
550, as amended), any of the provisions of the Iranian Transaction Regulations
of the United States of America (Title 31, Code of Federal Regulations, Chapter
V, Part 560, as amended), any of the provisions of the Iraqi Sanctions
Regulations (Title 31, Code of Federal Regulations, Chapter V, Part 575, as
amended), any of the provisions of the Federal Republic of Yugoslavia (Serbia
and Montenegro) Assets Control Regulations (Title 31, Code of Federal
Regulations, Chapter V, Part 585 as amended) or any of the provisions of the
Regulations of the United States of America Governing Transactions in Foreign
Shipping of Merchandise (Title 31, Code of Federal Regulations, Chapter V, Part
505, as amended);
(n) Equity Ownership. Each of the Guarantors is a wholly owned
direct or indirect Subsidiary of the Borrower. On the first Drawdown Date, the
Borrower will not own any shares of capital stock, partnership interest or any
other direct or indirect equity interest in any corporation, partnership or
other entity except the Guarantors and Chiles Finance;
(o) Environmental Matters and Claims. (a) Except as heretofore
disclosed in writing to the Lenders (i) the Borrower, each of its Subsidiaries
and their Affiliates will, when required to operate their business as then being
conducted, be in compliance with all applicable United States federal and state,
local, foreign and international laws, regulations, conventions and agreements
relating to pollution prevention or protection of human health or the
environment (including, without
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limitation, ambient air, surface water, ground water, navigable waters, waters
of the contiguous zone, ocean waters and international waters), including,
without limitation, laws, regulations, conventions and agreements relating to
(1) emissions, discharges, releases or threatened releases of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous materials, oil,
hazardous substances, petroleum and petroleum products and by-products
("Materials of Environmental Concern"), or (2) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern ("Environmental Laws") where the failure to
so comply could reasonably be expected to have a Material Adverse Effect; (ii)
the Borrower, each of its Subsidiaries and their Affiliates will, when required,
have all permits, licenses, approvals, rulings, variances, exemptions,
clearances, consents or other authorizations required under applicable
Environmental Laws ("Environmental Approvals") and will, when required, be in
compliance with all Environmental Approvals required to operate their business
as then being conducted if the failure to so hold or be in compliance could
reasonably be expected to have a Material Adverse Effect ; (iii) none of the
Borrower, any Subsidiary nor any Affiliate thereof has received any notice of
any claim, action, cause of action, investigation or demand by any person,
entity, enterprise or government, or any political subdivision,
intergovernmental body or agency, department or instrumentality thereof,
alleging potential liability for, or a requirement to incur, material
investigatory costs, cleanup costs, response and/or remedial costs (whether
incurred by a governmental entity or otherwise), natural resources damages,
property damages, personal injuries, attorneys' fees and expenses, or fines or
penalties, in each case arising out of, based on or resulting from (1) the
presence, or release or threat of release into the environment, of any Materials
of Environmental Concern at any location, whether or not owned by such person,
or (2) circumstances forming the basis of any violation, or alleged violation,
of any Environmental Law or Environmental Approval ("Environmental Claim")
(other than Environmental Claims that have been fully and finally adjudicated or
otherwise determined and all fines, penalties and other costs, if any, payable
by the Security Parties in respect thereof have been paid in full or which are
fully covered by insurance (including permitted deductibles)) which, if
adversely determined to the Borrower or any Environmental Affiliate, could
reasonably be expected to have a Material Adverse Effect; and (iv) there are no
circumstances that may prevent or interfere with such full compliance in the
future; and (b) except as heretofore disclosed in writing to the Agent there is
no Environmental Claim pending or threatened against the Borrower, any
Subsidiary or any Affiliate thereof and there are no past or present actions,
activities, circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge or disposal of any Materials of
Environmental Concern, that could form the basis of any Environmental Claim
against such persons the adverse disposition of which may result in a Material
Adverse Effect; and
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(p) Indenture. On or before the date hereof, the Borrower has
delivered to each of the Arrangers a true, correct and complete copy of the
Indenture and the Indenture has not been amended or modified in any respect
since the date of delivery of such copy thereof to the Arrangers.
(q) Survival. All representations, covenants and warranties
made herein and in any certificate or other document delivered pursuant hereto
or in connection herewith shall survive the making of the Advances and the
issuance of the Note to be issued by the Borrower hereunder.
3. ADVANCES
3.1 (a) Purposes. The Lenders shall make the Advances available to the Borrower
for the purpose of (i) partial financing of the construction and acquisition of
the Units and (ii) for general working capital purposes.
(b) Making of the Advances. Each of the Lenders, relying upon
each of the representations and warranties set out in Section 2, hereby
severally and not jointly agrees with the Borrower that, subject to and upon the
terms of this Agreement, it will on the Drawdown Dates, make the Advances
available through the Administrative Agent to the Borrower in an aggregate
amount not to exceed its Commitment ratably with the other Lenders according to
their respective Commitments. The maximum aggregate amount of all Advances which
may be outstanding at any time under this Agreement is the aggregate amount of
the Credit Facility, as may be reduced pursuant to Sections 5.3, 9.3 and 9.4.
All Advances shall be in a minimum amount of One Million Dollars ($1,000,000)
and in multiples thereof until the delivery of the Second Unit and in a minimum
amount of Two Million Five Hundred Thousand Dollars ($2,500,000) and in
multiples thereof thereafter.
(c) Maximum Number of Advances. The maximum number of Advances
that may be outstanding at any time under this Agreement shall be six (6).
3.2 Drawdown Notice. The Borrower shall, at least three (3) Banking Days before
a Drawdown Date, serve a notice (a "Drawdown Notice") substantially in the form
of Exhibit 6 on the Administrative Agent which notice shall (a) be in writing
addressed to the Administrative Agent, (b) be effective on receipt by the
Administrative Agent, (c) specify the amount of the Advance to be drawn, (d)
specify the Banking Day on which the Advance is to be drawn and the initial
Interest Period for such Advance, (e) specify the purpose(s) of each Advance,
(f) specify the disbursement instructions and (g) be irrevocable.
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3.3 Effect of Drawdown Notices. Each Drawdown Notice shall be deemed to
constitute a warranty by the Borrower (a) that the representations and
warranties stated in Section 2 (updated mutatis mutandis) are true and correct
on and as of the date of such Drawdown Notice and will be true and correct on
and as of the relevant Drawdown Date as if made on such date, (b) that after
giving effect to the borrowing made pursuant to such Drawdown Notice, the Credit
Facility Balance shall not exceed the maximum amount then available hereunder
pursuant to the terms hereof and (c) that no Event of Default nor any event
which with the giving of notice or lapse of time or both would constitute an
Event of Default has occurred and is continuing.
3.4 Notation of Advances. Each Advance made by the Lenders to the Borrower may
be evidenced by a notation of the same made by the Administrative Agent on the
grid attached to the Note, which notation, absent manifest error, shall be prima
facie evidence of the amount of the relevant Advance.
4. CONDITIONS
4.1 Conditions Precedent to Drawdown of the Initial Advance. The obligation of
the Lenders to make the initial Advance available to the Borrower under this
Agreement shall be expressly subject to the following conditions precedent:
(a) the Administrative Agent shall have received the following
documents in form and substance satisfactory to the Arrangers and their legal
advisor:
(i) copies, certified as true and complete by
an officer of the Borrower, of the
resolutions of the Management Committee
of the Borrower evidencing approval of
this Agreement and the Note and
authorizing an appropriate officer or
officers or attorney-in-fact or
attorneys-in-fact to execute the same on
its behalf, or other evidence of such
approvals and authorizations;
(ii) copies, certified as true and complete by
an officer of each Security Party (other
than the Borrower), of the resolutions of
the Management Committee and member(s)
thereof evidencing approval of the
Guaranty and those Security Documents to
which it is to be a party and authorizing
an appropriate officer or officers or
attorney-in-fact or attorneys-in-fact to
execute the same on its behalf, or other
evidence of such approvals and
authorizations;
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(iii) copies, certified as true and complete by
an officer of the Borrower, of all
documents evidencing any other necessary
action (including actions by such parties
thereto other than the Borrower as may be
required by the Arrangers), approvals or
consents with respect to this Agreement,
the Note, the Guaranty and the Security
Documents;
(iv) copies, certified as true and complete by
an officer of the respective Security
Party of the certificate of formation and
operating agreement (or equivalent
instruments) thereof;
(v) certificate of the Secretary of the
Borrower certifying that it legally and
beneficially owns, directly or
indirectly, all of the issued and
outstanding membership interests of each
of the other Security Parties and that
such membership interests are free and
clear of any liens, claims, pledges or
other encumbrances whatsoever;
(vi) certificate of the Secretary of each
Security Party (other than the Borrower)
certifying as to the record ownership of
all of its issued and outstanding
membership interests; and
(vii) certificates of the jurisdiction of
formation of each Security Party as to
the good standing thereof.
(b) the Administrative Agent shall have received evidence
satisfactory to the Arrangers and their legal advisor that:
(i) the First Unit is in the sole and
absolute ownership of the relevant
Guarantor as set forth in Schedule 3 and
duly provisionally registered in such
Guarantor's name under Panamanian flag,
unencumbered, save and except for the
Mortgage recorded against it and as
permitted by such Mortgage;
(ii) the First Unit is classed in the highest
classification and rating for rigs of the
same age and type with the
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respective classification society as set
forth in Schedule 3 without any
outstanding recommendations affecting
class;
(iii) the First Unit shall have been delivered
(or due provision reasonably acceptable
to the Arrangers shall have been made
therefor) to the respective Guarantor set
forth on Schedule 2 and such Unit is
operationally seaworthy and in every way
fit for its intended service; and
(iv) the First Unit is insured in accordance
with the provisions of the Mortgage on it
and the requirements thereof in respect
of such insurances have been complied
with;
(c) the Borrower shall have duly executed and delivered this
Agreement and the Note;
(d) the Guarantor owning the First Unit shall have duly
executed and delivered:
(i) its Guaranty;
(ii) the Mortgage over its Unit;
(iii) an Insurances Assignment with respect to
its Unit;
(iv) an Earnings Assignment with respect to
its Unit;
(v) its Assignment Notices (provided that
neither the Security Trustee nor any
Lender shall deliver an Assignment Notice
to any operator of the Unit or any
charterer thereof for a period of twelve
(12) months or less unless an Event of
Default has occurred and is continuing
hereunder); and
(vi) Uniform Commercial Code Financing
Statements for filing with the State of
Texas and Harris County, Texas and in
such other jurisdictions as the Agent may
reasonably require;
(e) the Administrative Agent shall have received an appraisal,
in form and substance satisfactory to the Arrangers, from an independent
shipbroker acceptable to the Arrangers as to the current market value (charter
free) of the First Unit, which
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appraisal shall be dated no earlier than two months prior to the date of the
initial Advance hereunder;
(f) the Administrative Agent shall have received a certificate
of an officer of each Guarantor confirming the representations and warranties
with respect to solvency set forth in its Guaranty and containing conclusions as
to the solvency of such Guarantor;
(g) the Arrangers shall be satisfied that neither the Borrower
nor any of its Subsidiaries is subject to any Environmental Claim which could
have a Material Adverse Effect;
(h) the Administrative Agent shall have received payment in
full of all fees and expenses due to the Agents, the Arranger and the Lenders
under Section 13 and the Fee Letter;
(i) each Security Party shall have established an operating
account with the Security Trustee into which assigned moneys are to be paid;
(j) the Administrative Agent shall have received evidence
satisfactory to the Arrangers and to their legal advisor that, save for the
liens created by the Mortgages and the Assignments, there are no liens, charges
or encumbrances of any kind whatsoever on any of the Units or on their
respective earnings except as permitted hereby or by any of the Security
Documents;
(k) the Administrative Agent shall have received legal
opinions addressed to the Creditors from (i) Gardere Wynne Sewell & Riggs,
L.L.P., counsel for the Security Parties, and (ii) Seward & Kissel, special
counsel to the Creditors, in each case in such form as the Arrangers may
require, as well as such other legal opinions as the Arrangers shall have
required as to all or any matters under the laws of the United States of
America, the State of Delaware, the State of New York, the State of Texas and
the Republic of Panama covering the representations and conditions which are the
subjects of Sections 2 and 4.1;
(l) the Borrower and/or the Guarantor with respect to the
Second Unit shall have executed and delivered an assignment to the Security
Trustee of the construction contract and the "builder's risk" insurances in
respect of the Second Unit;
(m) there having been no Material Adverse Effect since the
date hereof.
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4.2 Further Conditions Precedent. The obligation of the Lenders to make any
Advance available to the Borrower under this Agreement shall be expressly and
separately subject to the following further conditions precedent on the relevant
Drawdown Date:
(a) the Administrative Agent having received a Drawdown
Notice in accordance with the terms of Section 3.2;
(b) the representations stated in Section 2 (updated mutatis
mutandis to such date) being true and correct as if made on and as of that date;
(c) no Event of Default having occurred and being continuing
and no event having occurred and being continuing which, with the giving of
notice or lapse of time, or both, would constitute an Event of Default; and
(d) the Arrangers being satisfied that no change in any
applicable laws, regulations, rules or in the interpretation thereof shall have
occurred which make it unlawful for any Security Party to make any payment as
required under the terms of this Agreement, the Note, the Guaranty, the Security
Documents or any of them.
4.3 Breakfunding Costs. In the event that, on any date specified for the making
of an Advance in any Drawdown Notice, the Lenders shall not be obliged under
this Agreement to make such Advance available under this Agreement, the Borrower
shall indemnify and hold the Lenders fully harmless against any losses which the
Lenders (or any thereof) may sustain as a result of borrowing or agreeing to
borrow funds to meet the drawdown requirement of such Drawdown Notice and the
certificate of the relevant Lender or Lenders shall, absent manifest error, be
conclusive and binding on the Borrower as to the extent of any such losses.
4.4 Satisfaction after Drawdown. Without prejudice to any of the other terms and
conditions of this Agreement, in the event the Lenders, in their sole
discretion, advance any Advance prior to the satisfaction of all or any of the
conditions referred to elsewhere in Sections 4.1 or 4.2, the Borrower hereby
covenants and undertakes to satisfy or procure the satisfaction of such
condition or conditions within fourteen (14) days after the relevant Drawdown
Date (or such longer period as the Lenders, in their sole discretion, may
agree).
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5 REPAYMENT, REDUCTION AND PREPAYMENT
5.1 Repayment. The Borrower shall repay all outstanding Advances (subject to
such reduction and prepayments as hereinafter set forth) on the Maturity Date.
5.2 Prepayment; Reborrowing. The Borrower may prepay, upon five (5) Banking Days
written notice, any outstanding Advance or any portion thereof, without penalty,
provided that such prepayment is made on the last day of the Interest Period of
such Advance. Each prepayment shall be in a minimum amount of One Million
Dollars ($1,000,000) plus any One Million Dollar ($1,000,000) multiples thereof
or the full amount of the Advance. Subject to the limits and upon the conditions
herein provided, the Borrower may from time to time prepay the Advances and
thereafter re-borrow such Advances or a portion thereof.
5.3 Optional Permanent Reduction of Credit Facility. The Borrower shall have the
right, at any time and from time to time, to request, without penalty, a
permanent reduction in the Credit Facility, provided (a) that the Administrative
Agent receives five (5) Banking Days prior written notice of such request and
(b), in the case of drawn amounts under the Credit Facility, that such requested
reduction occurs on the last day of the applicable Interest Period(s). Each such
partial permanent reduction shall be equal to or shall exceed Two Million Five
Hundred Thousand Dollars ($2,500,000) and multiples thereof.
5.4 Interest and Costs with Prepayments. Any prepayment of the Advances made
hereunder shall be subject to the condition that on the date of prepayment all
accrued interest to the date of such prepayment shall be paid in full with
respect to the Advances or portions thereof being prepaid, together with any and
all actual costs or expenses incurred by any Lender in connection with any
breaking of funding (as certified by such Lender, which certification shall,
absent any manifest error, be conclusive and binding on the Borrower).
6. INTEREST AND RATE
6.1 Applicable Rate; Default Rate. Each Advance shall bear interest at the
Applicable Rate which shall be the rate per annum which is equal to the
aggregate of (a) LIBOR for the relevant Interest Period plus (b) the Margin. The
Applicable Rate with respect to each Advance shall be determined by the
Administrative Agent two Banking Days prior to the first day of the relevant
Interest Period and the Borrower shall be promptly notified in writing thereof,
such determination of each such Applicable Rate, absent manifest error, to be
conclusive and binding upon the Borrower. Any amounts due under this Agreement
not paid when due, whether by acceleration or otherwise, shall bear
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interest thereafter until paid at a rate per annum of two percent (2%) over the
Applicable Rate in effect with respect to such payment at the time of such
default (the "Default Rate").
6.2 Interest Periods. With respect to each Advance, the Borrower may select
Interest Periods of one, three or six months. The Borrower shall give the
Administrative Agent an Interest Notice specifying the Interest Period selected
at least three (3) Banking Days prior to the end of any then existing Interest
Period. If at the end of any then existing Interest Period the Borrower fails to
give an Interest Notice the relevant Interest Period shall be three (3) months.
The Borrower's right to select an Interest Period shall be subject to the
restriction that no selection of an Interest Period shall be effective unless
the Administrative Agent is satisfied that the necessary funds will be available
to the Lenders for such period and that no Event of Default or event which, with
the giving of notice or lapse of time, or both, would constitute an Event of
Default shall have occurred and be continuing.
6.3 Interest Payments. Accrued interest on each Advance shall be payable in
arrears on the last day of each Interest Period, except that if the Borrower
shall select an Interest Period in excess of three (3) months, accrued interest
shall be payable during such Interest Period on each three (3) month anniversary
of the commencement of such Interest Period and upon the end of such Interest
Period.
6.4 Payment on Banking Day. If interest would, under Section 6.3, be payable on
a day which is not Banking Day, it shall then be payable on the next following
Banking Day unless such next following Banking Day falls in the following
calendar month, in which case interest shall be payable on the immediately
preceding Banking Day.
6.5 Calculation of Interest. All interest shall accrue and be calculated on the
actual number of days lapsed and on the basis of a three hundred sixty (360) day
year.
7. PAYMENTS
7.1 Place of Payments, No Set Off. All payments to be made hereunder by the
Borrower shall be made to the Administrative Agent, not later than 11 a.m. New
York time (any payment received after 11 a.m. New York time shall be deemed to
have been paid on the next Banking Day) on the due date of such payment, at its
office located at 3 Stamford Plaza, 301 Tresser Boulevard, Stamford, Connecticut
or to such other office of the Administrative Agent as the Administrative Agent
may direct, without set-off or counterclaim and free from, clear of, and without
deduction for, any Taxes, provided, however, that if the Borrower shall at any
time be compelled by law to withhold or
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deduct any Taxes from any amounts payable to the Lenders hereunder, then the
Borrower shall pay such additional amounts in Dollars as may be necessary in
order that the net amounts received after withholding or deduction shall equal
the amounts which would have been received if such withholding or deduction were
not required and, in the event any withholding or deduction is made, whether for
Taxes or otherwise, the Borrower shall promptly send to the Administrative Agent
such documentary evidence with respect to such withholding or deduction as may
be required from time to time by the Lenders.
7.2 Proof of Withholding. Each Lender and any transferee, assignee or
participation holder (a "Transferee") that is not incorporated under the laws of
the United States of America or a State thereof agrees that, on the initial
Drawdown Date and prior to the first date on which any payment is due to such
Lenders hereunder, such Lenders will deliver to the Borrower (i) two duly
completed copies of United States Internal Revenue Service Form 1001 or 4224, or
successor applicable form, as the case may be, certifying in each case that the
Lender or Transferee is entitled to receive payments under this Agreement and
the Notes without deduction or withholding of any United States Federal income
taxes and (ii) a United States Internal Revenue Service Form W-8 or W-9, or
successor applicable form, as the case may be, to establish an exemption from
United States backup withholding tax. Such Lender or Transferee which delivers
to the Borrower a Form 1001 or 4224 and Form W-8 or W-9 pursuant to the
preceding sentence further undertakes to deliver to the Borrower two further
copies of said Form 1001 or 4224 and Form W-8 or W-9, or successor applicable
forms, or other manner of certification, as the case may be, on or before the
date that any such form expires or becomes obsolete or after the occurrence of
any event requiring a change in the most recent form previously delivered
thereby to the Borrower and such extensions or renewals thereof as may
reasonably be requested by the Borrower certifying in the case of a Form 1001 or
4224 that such Lender or such Transferee is entitled to receive payments under
this Agreement and the Note without deduction or withholding of any United
States Federal income taxes, unless in any such case an event (including,
without limitation, any change in treaty, law or regulation) has occurred prior
to the date on which any such delivery would otherwise be required which renders
all such forms inapplicable or which would prevent such Lender or such
Transferee from duly completing and delivering any such letter or form with
respect to it, and such Lender or such Transferee advised the Borrower that it
is not capable of (i) receiving payments without any deduction or withholding of
United States Federal income tax, and (ii) in the case of a Form W-8 or W-9,
establishing an exemption from United States backup withholding tax.
7.3 Tax Credits. If any Lender obtains the benefit of a credit against the
liability thereof for federal income taxes imposed by any taxing authority for
all or part of the Taxes as to which the Borrower has paid additional amounts as
aforesaid, then such Lender shall reimburse the Borrower for the amount of the
credit so obtained.
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8. EVENTS OF DEFAULT
8.1 In the event that any of the following events shall occur and be continuing:
(a) Non-Payment of Principal. Any payment of principal due on
the Maturity Date is not paid on the Maturity Date or is not prepaid in
connection with any reduction of the Credit Facility pursuant to Sections 5.3,
9.3 or 9.4 when required thereby; or
(b) Non-Payment of Interest or Other Amounts. Any interest on
any Advance or any other amount becoming payable to any Creditor under this
Agreement, under the Note, under the Guaranty or under any of the Security
Documents is not paid within three (3) Banking Days of the due date or date of
demand (as the case may be); or
(c) Representations. Any representation, warranty or other
statement made by the Borrower in this Agreement or by any Security Party in the
Guaranty or in any of the Security Documents or in any other instrument,
document or other agreement delivered in connection herewith or therewith proves
to have been untrue or misleading in any material respect as at the date as of
which made or confirmed; or
(d) Mortgage. There is an event of default under either
Mortgage; or
(e) Covenants. Any Security Party defaults in the due and
punctual observance or performance of any other term, covenant or agreement
contained in the Indenture, this Agreement, in the Note, in the Guaranty, in any
of the Security Documents or in any other instrument, document or other
agreement delivered in connection herewith or therewith, or it becomes
impossible or unlawful for any Security Party to fulfill any such term, covenant
or agreement or there occurs any other event which constitutes a default under
this Agreement, under the Note, under the Guaranty or under any of the Security
Documents, in each case other than an Event of Default referred to elsewhere in
this Section 8.1, and such default, impossibility and/or unlawfulness, in the
reasonable opinion of the Majority Lenders, could have a material adverse effect
on the Lenders' rights hereunder, under the Note, under the Guaranty and/or
under the Security Documents or on the Lenders' right to enforce this Agreement,
the Note, the Guaranty and/or the Security Documents and such default is not
cured by the Borrower within thirty (30) days of the occurrence of such default;
or
(f) Indebtedness. Any Security Party, any Subsidiary or any
Affiliate shall default in the payment when due (subject to any applicable grace
period) of any Indebtedness or of any other indebtedness, in either case, in the
outstanding principal
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amount equal to or exceeding One Million Dollars ($1,000,000) or such
Indebtedness or indebtedness is, or by reason of such default is subject to
being, accelerated or any party becomes entitled to enforce the security for any
such Indebtedness or indebtedness and such party shall take steps to enforce the
same, unless such default or enforcement is being contested in good faith and by
appropriate proceedings or other acts and the Security Party, Subsidiary or
Affiliate, as the case may be, shall set aside on its books adequate reserves
with respect thereto; provided, however, that the provisions of this paragraph
(f) shall not apply to any indebtedness of the Borrower which is non-recourse to
the Borrower, any Security Party or any Unit; or
(g) Indenture Default. An event of default under the
Indenture shall have occurred and be continuing;
(h) Equity Ownership. The Borrower shall cease to own (except
as otherwise expressly permitted by this Agreement), directly or indirectly, one
hundred percent (100%) of any of the other Security Parties, and in any such
case the Majority Lenders have not prior thereto consented in writing to such
change; or
(i) Bankruptcy. The Borrower or any Affiliate commences any
proceeding under any reorganization, arrangement or readjustment of debt,
dissolution, winding up, adjustment, composition, bankruptcy or liquidation law
or statute of any jurisdiction, whether now or hereafter in effect
("Proceeding"), or there is commenced against any thereof any Proceeding and
such Proceeding remains undismissed or unstayed for a period of sixty (60) days
or any receiver, trustee, liquidator or sequestrator of, or for, any thereof or
any substantial portion of the property of any thereof is appointed and is not
discharged within a period of sixty (60) days or any thereof by any act
indicates consent to or approval of or acquiescence in any Proceeding or the
appointment of any receiver, trustee, liquidator or sequestrator of, or for,
itself or of, or for, any substantial portion of its property; or
(j) Termination of Operations; Sale of Assets. Except as
expressly permitted under this Agreement, any Security Party ceases its
operations or sells or otherwise disposes of all or substantially all of its
assets or all or substantially all of the assets of any Security Party are
seized or otherwise appropriated (subject to the provisions hereof and of the
Security Documents respecting in rem proceedings); or
(k) Judgments. Any judgment or order is made the effect
whereof would be to render ineffective or invalid this Agreement, the Note, the
Guaranty or any of the Security Documents; or
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(l) Inability to Pay Debts. Any Security Party is unable to
pay or admits its inability to pay its debts as they fall due or a moratorium
shall be declared in respect of any material indebtedness of any Security Party;
or
(m) Change in Control. A Change of Control shall occur with
respect to the Borrower;
then the Lenders' obligation to make any Advance available shall cease and the
Administrative Agent on the instructions of the Majority Lenders may, by notice
to the Borrower, declare the entire unpaid balance of the then outstanding
Advances, accrued interest and any other sums payable by the Borrower hereunder
or under the Note due and payable, whereupon the same shall forthwith be due and
payable without presentment, demand, protest or notice of any kind, all of which
are hereby expressly waived; provided that upon the happening of an event
specified in subsections (i) or (l) of this Section 8.1 with respect to the
Borrower, the Note shall be immediately due and payable without declaration or
other notice to the Borrower. In such event, the Lenders (or the Security
Trustee acting at the direction of the Lenders) may proceed to protect and
enforce their rights by action at law, suit in equity or in admiralty or other
appropriate proceeding, whether for specific performance of any covenant
contained in this Agreement, in the Note, in the Guaranty or in any Security
Document, or in aid of the exercise of any power granted herein or therein, or
the Lenders may proceed to enforce the payment of the Note or to enforce any
other legal or equitable right of the Lenders, or proceed to take any action
authorized or permitted under the terms of the Guaranty or any Security Document
or by applicable law for the collection of all sums due, or so declared due, on
the Note, including, without limitation, the right to appropriate and hold or
apply (directly, by way of set-off or otherwise) to the payment of the
obligations of the Borrower to the Lenders hereunder and/or under the Note
(whether or not then due) all moneys and other amounts of the Borrower then or
thereafter in possession of any Lender, the balance of any deposit account
(demand or time, mature or unmatured) of the Borrower then or thereafter with
any Lender and every other claim of the Borrower then or thereafter against any
of the Lenders. Notwithstanding anything herein to the contrary, upon the
occurrence of an event which with the giving of notice or the passage of time or
both would constitute an Event of Default, the Lenders will grant the note
holders under the Indenture and/or the Borrower a one time only opportunity to
cure such default expiring on the earlier of (i) the date which is 60 days from
and after the date on which the Administrative Agent shall give the Trustee and
the Borrower written notice of such default, and (ii) the Administrative Agent's
receipt of written notice from the Trustee indicating that such note holders do
not wish to exercise such cure right; provided, however, that such cure period
shall not be applicable if (i) the Borrower defaults under any other
Indebtedness and the holder thereof takes steps to enforce same, (ii) any party
seeks to enforce any in rem claim against either Unit which is not released
within five (5) days by posting of
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appropriate security or otherwise, or (iii) the Borrower or either Guarantor
becomes the subject of a bankruptcy proceeding.
8.2 Indemnification. The Borrower agrees to, and shall, indemnify and hold the
Creditors harmless against any loss, as well as against any costs or expenses
(including legal fees and expenses), which any of the Creditors sustains or
incurs as a consequence of any default in payment of the principal amount of the
Advances, interest accrued thereon or any other amount payable hereunder, under
the Note, under the Guaranty or under any Security Documents including, but not
limited to, all actual losses incurred in liquidating or re-employing fixed
deposits made by third parties or funds acquired to effect or maintain the
Advances or any portion thereof. Any Lenders' certification of such costs and
expenses shall, absent any manifest error, be conclusive and binding on the
Borrower.
8.3 Application of Moneys. Except as otherwise provided in any Security
Document, all moneys received by the Creditors under or pursuant to this
Agreement, the Note, the Guaranty or any of the Security Documents after the
happening of any Event of Default (unless cured to the satisfaction of the
Majority Lenders) shall be applied by the Administrative Agent in the following
manner:
(a) first, in or towards the payment or reimbursement of any
expenses or liabilities incurred by the Creditors in connection with the
ascertainment, protection or enforcement of its rights and remedies hereunder,
under the Note, under the Guaranty and under any of the Security Documents,
(b) secondly, in or towards payment of any interest owing in
respect of the Advances,
(c) thirdly, in or towards repayment of principal owing in
respect of the Advances,
(d) fourthly, in or towards payment of all other sums which
may be owing to the Creditors under this Agreement, under the Note, under the
Fee Letter, under the Guaranty or under any of the Security Documents, and
(e) fifthly, the surplus (if any) shall be paid to the
Borrower or to whosoever else may be entitled thereto.
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9. COVENANTS
9.1 The Borrower hereby covenants and undertakes with the Creditors that, from
and after the date of the initial Advance hereunder (except with respect to
clause A.(iv) which shall be effective from the date hereof) and as a
precondition thereto and so long as any principal, interest or other moneys are
owing in respect of this Agreement, under the Note, under the Guaranty or under
any of the Security Documents:
A. The Borrower will, and will procure that each other
Security Party will:
(i) Performance of Agreements. Duly perform and
observe, and procure the observance and performance by all other parties thereto
(other than the Creditors) of, the terms of this Agreement, the Note, the
Guaranty and the Security Documents;
(ii) Notice of Default, Etc. Promptly upon
obtaining knowledge thereof, inform the Administrative Agent of the occurrence
of (a) any Event of Default or of any event which, with the giving of notice or
lapse of time, or both, would constitute an Event of Default, (b) any litigation
or governmental proceeding pending or threatened against it or against any of
the Subsidiaries which could reasonably be expected to have a Material Adverse
Effect, (c) the withdrawal of any Unit's rating by its Classification Society or
the issuance by the Classification Society of any material recommendation or
notation affecting class and (d) any other event or condition which is
reasonably likely to have a Material Adverse Effect on its ability, or the
ability of any of the Security Parties, to perform its obligations under this
Agreement, under the Note, under the Guaranty and/or under any of the Security
Documents;
(iii) Obtain Consents. Without prejudice to
Section 2.1 and this Section 9.1, obtain every consent and do all other acts and
things which may from time to time be required for the continued due performance
of all its and the other Security Parties' respective obligations under this
Agreement, under the Note, under the Guaranty and under the Security Documents;
(iv) Financial Information. At the expense of
the Borrower, deliver to the Administrative Agent in a sufficient number of
copies for distribution by the Administrative Agent to the Lenders:
(a) as soon as available but not later than
ninety (90) days after the end of each
fiscal year of the Borrower, complete copies
of the consolidated financial reports of the
Borrower and its
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Subsidiaries (together with a Compliance
Certificate), all in reasonable detail,
which shall include at least the
consolidated balance sheet of the Borrower
and its Subsidiaries as of the end of such
year and the related consolidated statements
of income and sources and uses of funds for
such year, which shall be audited reports
prepared by an Acceptable Accounting Firm;
(b) as soon as available but not less than
forty-five (45) days after the end of each
of the first three quarters of each fiscal
year of the Borrower, a quarterly interim
consolidated balance sheet of the Borrower
and its Subsidiaries and the related
consolidated profit and loss statements and
sources and uses of funds (together with a
Compliance Certificate), all in reasonable
detail, unaudited, but certified to be true
and complete by the chief financial officer
of the Borrower;
(c) within ten (10) days of the filing thereof,
copies of all registration statements and
reports on Forms 10-K, 10-Q and 8-K (or
their equivalents) and other material
filings which the Borrower shall have filed
with the Securities and Exchange Commission
or any similar governmental authority;
(d) promptly upon the mailing thereof to the
Trustee, copies of all financial statements,
reports, notices and other communications
provided thereto; and
(e) such other statements (including, without
limitation, monthly consolidated statements
of operating revenues and expenses), lists
of assets and accounts, budgets, forecasts,
reports and other financial information with
respect to its business as the
Administrative Agent may from time to time
reasonably request;
(v) Existence. Do or cause to be done, and procure that
each other Security Party shall do or cause to be done, all things necessary to
preserve and keep in full force and effect its limited liability company
existence, and all licenses, franchises, permits and assets necessary to the
conduct of its business;
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(vi) Books and Records. Keep, and cause each other
Security Party to keep, proper books of record and account into which full and
correct entries shall be made in accordance with GAAP throughout the Credit
Facility Period;
(vii) Taxes and Assessments. Pay and discharge, and cause
each other Security Party to pay and discharge, all material taxes, assessments
and governmental charges or levies imposed upon it or upon its income or
property prior to the date upon which penalties attach thereto; provided,
however, that it shall not be required to pay and discharge, or cause to be paid
and discharged, any such tax, assessment, charge or levy so long as the legality
thereof shall be contested in good faith and by appropriate proceedings or other
acts and it shall set aside on its books adequate reserves with respect thereto;
(viii) Inspection. Allow, and cause each other Security
Party to allow, any representative or representatives designated by any Lender,
subject to applicable laws and regulations, to visit and inspect any of its
properties, and, on request, to examine its books of account, records, reports
and other papers and to discuss its affairs, finances and accounts with its
officers, all at such reasonable times and as often as the Lenders reasonably
request;
(ix) Compliance with Statutes, etc. Do or cause to be
done, and cause each other Security Party to do and cause to be done, all things
necessary to comply with all material laws, and the rules and regulations
thereunder, applicable to the Borrower or such other Security Party, including,
without limitation, those laws, rules and regulations relating to employee
benefit plans and environmental matters;
(x) Environmental Matters. Promptly upon the occurrence
of any of the following conditions, provide to the Administrative Agent a
certificate of a chief executive officer thereof, specifying in detail the
nature of such condition and its proposed response or the response of its
Environmental Affiliates: (a) its receipt or the receipt by any other Security
Party or any Environmental Affiliates of the Borrower or any other Security
Party of any written communication whatsoever that alleges that such person is
not in compliance with any applicable environmental law or environmental
approval, if such noncompliance could reasonably be expected to have a Material
Adverse Effect, (b) knowledge by it, or by any other Security Party or any
Environmental Affiliates of the Borrower or any other Security Party that there
exists any Environmental Claim pending or threatened against any such person,
which could reasonably be expected to have a Material Adverse Effect, or (c) any
release, emission, discharge or disposal of any material that could form the
basis of any Environmental Claim against it, any other Security Party or against
any Environmental Affiliates of the Borrower or any other Security Party, if
such Environmental Claim could reasonably be expected to have a
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Material Adverse Effect. Upon the written request by the Administrative Agent,
it will submit to the Administrative Agent at reasonable intervals, a report
providing an update of the status of any issue or claim identified in any notice
or certificate required pursuant to this subsection;
(xi) ERISA. Forthwith upon learning of the
occurrence of any material liability of the any Security Party or any ERISA
Affiliate pursuant to ERISA in connection with the termination of any Plan or
withdrawal or partial withdrawal of any multi-employer plan (as defined in
ERISA) or of a failure to satisfy the minimum funding standards of Section 412
of the Code or Part 3 of Title I of ERISA by any Plan for which any Security
Party or any ERISA Affiliate is plan administrator (as defined in ERISA),
furnish or cause to be furnished to the Administrative Agent written notice
thereof;
(xii) Delivery of Second Unit. Contemporaneous
with the delivery of the Second Unit by the Builder, cause the owner thereof to
register the same under Panamanian flag in its name and cause such owner, as a
Guarantor, to execute and deliver:
(a) its Guaranty;
(b) the Mortgage over its Unit;
(c) an Insurances Assignment with respect to its
Unit;
(d) an Earnings Assignment with respect to its
Unit;
(e) its Assignment Notices; and
(f) Uniform Commercial Code Financing Statements
for filing with the State of Texas and
Harris County, Texas and in such other
jurisdictions as the Arrangers may
reasonably require; and
(xiii) Permanent Registration. Within ninety (90)
days of the date of delivery of each Unit to a Guarantor and its provisional
registration under Panamanian flag, cause the same to be permanently registered
under such flag and the Mortgage thereon to be permanently recorded and deliver
to the Administrative Agent a favorable opinion, in form and substance
satisfactory to the Arrangers, of Panamanian counsel satisfactory to the
Arrangers with respect thereto; and
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(xiv) Brokerage Commissions, etc. The Borrower agrees to
indemnify and hold the Creditors harmless from any claim for any brokerage
commission, fee, or compensation from any broker or third party resulting from
the transactions contemplated hereby.
B. The Borrower will not, and will procure that each Security
Party will not, without the prior written consent of the Arrangers (or the
Majority Lenders or all of the Lenders if required by Section 15.7 hereof):
(i) Liens. Create, assume or permit to exist,
any mortgage, pledge, lien, charge, encumbrance or any security interest
whatsoever upon any Collateral except:
(a) liens for taxes not yet payable for
which adequate reserves have been
maintained;
(b) the Mortgages, the Assignments and
other liens in favor of the Security
Trustee;
(c) liens, charges and encumbrances against
their respective Units permitted to exist
under the terms of the Mortgages;
(d) pledges of certificates of deposit or
other cash collateral securing any Security
Party's reimbursement obligations in
connection with letters of credit now or
hereafter issued for the account of such
Security Party in connection with the
establishment of the financial
responsibility of the Security Parties under
33 C.F.R. Part 130 or 46 C.F.R. Part 540, as
the case may be, as the same may be amended
or replaced;
(e) pledges or deposits to secure
obligations under workmen's compensation
laws or similar legislation, deposits to
secure public or statutory obligations,
warehousemen's or other like liens, or
deposits to obtain the release of such liens
and deposits to secure surety, appeal or
customs bonds on which the Borrower or any
of the Guarantors is the principal, as to
all of the foregoing, only to the extent
arising and continuing in the ordinary
course of business; and
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(f) other liens, charges and encumbrances
incidental to the conduct of the business of
each such party, the ownership of any such
party's property and assets and which do not
in the aggregate materially detract from the
value of each such party's property or
assets or materially impair the use thereof
in the operation of its business;
(ii) Change in Business. Materially change the
nature of its business or commence any business materially different from its
current business;
(iii) Sale or Pledge of Membership Interests.
Sell, assign, transfer, pledge or otherwise convey or dispose of any of the
direct or indirect membership interests (including by way of spin-off,
installment sale or otherwise) of any Guarantor;
(iv) Sale of Assets. Sell, or otherwise dispose
of, any Unit or any other asset (including way of spin-off, installment sale or
otherwise) which is substantial in relation to its assets taken as a whole
including without limitation, any material foreign Subsidiary or foreign assets
or interest in an Affiliate;
(v) Changes in Offices or Names. Change the
location of the chief executive office of any Security Party, the office of the
chief place of business any such parties, the office of the Security Parties in
which the records relating to the earnings or insurances of the Units are kept
unless the Administrative Agent shall have received sixty (60) days prior
written notice of such change;
(vi) Consolidation and Merger. Consolidate with,
or merge into, any corporation or other entity, or merge any corporation or
other entity into it; and
(vii) Limitation on Restricted Payments. In the
case of the Borrower, directly or indirectly declare or pay any dividend or make
any distribution on its membership interests (such payments being defined as
"Restricted Payments") if, at the time of, and after giving effect to, the
proposed Restricted Payment: (A) an Event of Default shall have occurred and be
continuing or (B) the aggregate amount expended for all Restricted Payments (the
amount so expended, if other than in cash, to be determined in good faith by the
Board of Directors) would exceed fifty percent (50%) of the aggregate amount of
the consolidated net income of the Borrower and its consolidated Subsidiaries
for the fiscal year ended immediately prior to the fiscal year in which such
proposed Restricted Payment is to be made determined in accordance with GAAP;
provided, however, that the provisions of this clause (vii) shall not prohibit
any
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distributions to the members of the Borrower in respect of taxes in accordance
with and subject to the provisions of the Indenture.
(viii) Limitation on Call of Notes. Exercise its
right to call the notes issued pursuant to the Indenture.
(ix) Amendment of Indenture. Make or consent to
any material amendment, change or modification of the Indenture.
C. The Borrower will procure that no Guarantor will:
(i) Loans and Advances. Make any loans or
advances to, or any investments in, any person, firm, corporation, joint venture
or other entity (including, without limitation, any loan or advance to any
officer, director, member, stockholder, employee or customer of any company
affiliated with any Security Party) except for advances and investments in the
normal course of its business and loans or advances to any Security Party and
any directly or indirectly wholly owned Subsidiary of the Borrower;
(ii) Guarantees, etc. Assume, guarantee or (other
than in the ordinary course of its business) endorse or otherwise become liable,
in connection with any obligation of any person, firm, company or other entity
except for (A) guaranties in favor of the Lenders or the Security Trustee on
behalf of the Lenders, (B) guaranties in favor of the note holders under the
Indenture, and (C) any guaranties existing on or before the date hereof and
reflected in the financial reports of the Borrower and its Subsidiaries
previously delivered to the Agent, the Security Trustee and the Lenders;
(iii) Use of Corporate Funds. Pay out any funds
to any company or person except (a) in the ordinary course of business in
connection with the management of the business of the Borrower and its
Subsidiaries, including the operation and/or repair of the Units and other
vessels owned or operated by such parties and (b) the servicing of the
Indebtedness permitted hereunder (but excluding, any prepayments of any
Indebtedness other than the Advances);
(iv) Issuance of Membership Interests. Issue or
dispose of any shares of its own membership interests to any person other than
the Borrower; or
9.2 Unit Valuation. In the event that the Arrangers shall have determined in
their sole discretion that the value of the Units shall have materially
decreased, the Borrower shall obtain, at the Borrower's cost, a valuation of the
Units, charter-free, in Dollars from an independent shipbroker selected by the
Arrangers. In the event the
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Borrower fails or refuses to obtain the valuation requested pursuant to this
Section 9.2 within ten (10) days of the Arrangers' request therefor, the
Arrangers shall be authorized to obtain such valuation, at the Borrower's cost,
from an independent shipbroker selected by the Arrangers, which valuation shall
be deemed the equivalent of valuation duly obtained by the Borrower pursuant to
this Section 9.2, but the Arrangers' actions in doing so shall not excuse any
default of the Borrower under this Section 9.2.
9.3 Asset Maintenance. If at any time following the Drawdown Date of the initial
Advance, the aggregate FMV of the Units then mortgaged to the Security Trustee
(based upon the valuations obtained pursuant to Section 9.2) (together with the
value of any additional collateral theretofore provided under this Section) is
less than one hundred thirty percent (130%) of the Credit Facility Balance (such
percentage herein called the "Required Percentage"), the Borrower shall, within
a period of thirty (30) days following receipt by the Borrower of written notice
from the Administrative Agent notifying the Borrower of such shortfall and
specifying the amount thereof (which amount shall, in the absence of manifest
error, be deemed to be conclusive and binding on the Borrower), either (a)
deliver to the Security Trustee, upon the Administrative Agent's request, such
additional collateral as may be satisfactory to the Lenders in their sole
discretion of sufficient value to restore compliance with the Required
Percentage or (b) the Lenders shall reduce their Commitments hereunder and the
Borrower shall, if necessary, prepay such Advances or part thereof (together
with interest thereon and any other monies payable in respect of such prepayment
pursuant to Section 5.4) as shall result in the FMV of the Units then mortgaged
to the Security Trustee being not less than the Required Percentage.
9.4 Reduction of Collateral. (a) In the event of the Total Loss of a Unit or the
sale by a Guarantor of its Unit, upon such Total Loss or prior to or
simultaneously with such sale the Credit Facility shall, on the date of the
Total Loss or sale, be reduced by $12,500,000, provided, however, that, if the
FMV of the remaining Unit then mortgaged to the Security Trustee is less than
200% of the maximum amount then available under the Credit Facility, after
giving effect to the reduction as aforesaid, the Credit Facility shall be
reduced by the amount of such shortfall divided by two (2), and, the Borrower
shall, if necessary, prepay such Advances or part thereof (together with
interest thereon and any other monies payable in respect of such prepayment
pursuant to Section 5.4) as required so that the principal amount thereof does
not exceed the reduced available Commitments.
(b) Unless otherwise agreed by the Lenders, any sale of a Unit
shall be for cash and shall not be subject to any contingencies.
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(c) In the event of a sale or Total Loss of Unit as
contemplated by this Section 9.4, the Creditors agree to release the relevant
Guarantor from its obligations under the Guaranty and the Security Documents in
respect of its Unit upon the reduction of Commitment provided for in Section
9.4(a) or the substitution of a Unit as provided for in Section 9.4(b).
9.5 Inspection and Survey Reports. If the Lenders shall so request, the
Borrowers shall provide the Lenders with copies of all internally generated
inspection or survey reports on the Units.
10. ASSIGNMENT.
This Agreement shall be binding upon, and inure to the benefit
of, the Borrower and the Creditors and their respective successors and assigns,
except that the Borrower may not assign any of its rights or obligations
hereunder. Each Lender shall be entitled to assign its rights and obligations
under this Agreement or grant participation(s) in the Credit Facility to any
subsidiary, holding company or other affiliate of such Lender, to any subsidiary
or other affiliate company of any thereof or, with the consent of the Borrower
and the Arrangers, not to be unreasonably withheld, to any other bank or
financial institution, and such Lender shall forthwith give notice of any such
assignment or participation to the Borrower; provided, however, that any such
assignment must be made pursuant to an Assignment and Assumption Agreement. The
Borrower will take all reasonable actions requested by the Administrative Agent
or any Lender to effect such assignment, including, without limitation, the
execution of a written consent to such Assignment and Assumption Agreement.
11. ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC.
11.1 Illegality. In the event that by reason of any change in any applicable
law, regulation or regulatory requirement or in the interpretation thereof, a
Lender has a reasonable basis to conclude that it has become unlawful for any
Lender to maintain or give effect to its obligations as contemplated by this
Agreement, such Lender shall inform the Administrative Agent and the Borrower to
that effect, whereafter the liability of such Lender to make its Commitment
available shall forthwith cease and the Borrower shall be required either to
repay to such Lender that portion of the Advances advanced by such Lender
immediately or, if such Lender so agrees, to repay such portion of the Advances
to the Lender on the last day of any then current Interest Period in accordance
with and subject to the provisions of Section 11.5. In any such event, but
without prejudice to the aforesaid obligations of the Borrower to repay such
portion of the Advances, the Borrower and the relevant Lender shall negotiate in
good faith with a view to agreeing on terms for making such portion of the
Advances available from another jurisdiction or
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otherwise restructuring such portion of the Credit Facility on a basis which is
not unlawful.
11.2 Increased Costs. If any change in applicable law, regulation or regulatory
requirement, or in the interpretation or application thereof by any governmental
or other authority, shall:
(i) subject any Lender to any Taxes with respect to its
income from the Credit Facility, or any part thereof,
or
(ii) change the basis of taxation to any Lender of
payments of principal or interest or any other
payment due or to become due pursuant to this
Agreement (other than a change in the basis effected
by the jurisdiction of organization of such Lender,
the jurisdiction of the principal place of business
of such Lender, the United States of America, the
State or City of New York or any governmental
subdivision or other taxing authority having
jurisdiction over such Lender (unless such
jurisdiction is asserted by reason of the activities
of the Borrower or any of the other Security Parties)
or such other jurisdiction where the Credit Facility
may be payable), or
(iii) impose, modify or deem applicable any reserve
requirements or require the making of any special
deposits against or in respect of any assets or
liabilities of, deposits with or for the account of,
or loans by, a Lender, or
(iv) impose on any Lender any other condition affecting
the Credit Facility or any part thereof,
and the result of the foregoing is either to increase the cost to such Lender of
making available or maintaining its Commitment or any part thereof or to reduce
the amount of any payment received by such Lender, then and in any such case if
such increase or reduction in the opinion of such Lender materially affects the
interests of such Lender under or in connection with this Agreement:
(a) the Lender shall notify the Administrative Agent and
the Borrower of the happening of such event, and
(b) the Borrower agrees forthwith upon demand to pay to
such Lender such amount as such Lender certifies to
be necessary to compensate such Lender for such
additional cost or such reduction, provided,
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however, that the foregoing provisions shall not be
applicable in the event that increased costs to the
Lender result from the exercise by the Lender of its
right to assign its rights or obligations under
Section 10.
11.3 Nonavailability of Funds. If the Administrative Agent shall determine that,
by reason of circumstances affecting the London Interbank Market generally,
adequate and reasonable means do not or will not exist for ascertaining the
Applicable Rate for any Advance for any Interest Period, the Administrative
Agent shall give notice of such determination to the Borrower. The Borrower and
the Agents shall then negotiate in good faith in order to agree upon a mutually
satisfactory interest rate and/or Interest Period to be substituted for those
which would otherwise have applied under this Agreement. If the Borrower and the
Agents are unable to agree upon such a substituted interest rate and/or Interest
Period within thirty (30) days of the giving of such determination notice, the
Agents shall set an interest rate and Interest Period to take effect from the
expiration of the Interest Period in effect at the date of determination, which
rate shall be equal to the Margin plus the cost to the Lenders (as certified by
each Lender) of funding such Advance. In the event the state of affairs referred
to in this Section 11.3 shall extend beyond the end of the Interest Period, the
foregoing procedure shall continue to apply until circumstances are such that
the Applicable Rate may be determined pursuant to Section 6.
11.4 Lender's Certificate Conclusive. A certificate or determination notice of
any Lender as to any of the matters referred to in this Section 11 shall, absent
manifest error, be conclusive and binding on the Borrower.
11.5 Compensation for Losses. Where any Advance or a portion thereof is to be
repaid by the Borrower pursuant to this Section 11, the Borrower agrees
simultaneously with such repayment to pay to the relevant Lender all accrued
interest to the date of actual payment on the amount repaid and all other sums
then payable by the Borrower to the relevant Lender pursuant to this Agreement,
together with such amounts as may be certified by the relevant Lender to be
necessary to compensate such Lender for any actual loss, premium or penalties
incurred or to be incurred thereby on account of funds borrowed to make, fund or
maintain its Commitment or such portion thereof for the remainder (if any) of
the then current Interest Period or Periods, if any, but otherwise without
penalty or premium.
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12. CURRENCY INDEMNITY
12.1 Currency Conversion. If for the purpose of obtaining or enforcing a
judgment in any court in any country it becomes necessary to convert into any
other currency (the "judgment currency") an amount due in Dollars under this
Agreement, the Note, the Guaranty or any of the Security Documents then the
conversion shall be made, in the discretion of the Administrative Agent, at the
rate of exchange prevailing either on the date of default or on the day before
the day on which the judgment is given or the order for enforcement is made, as
the case may be (the "conversion date"), provided that the Administrative Agent
shall not be entitled to recover under this section any amount in the judgment
currency which exceeds at the conversion date the amount in Dollars due under
this Agreement, the Note, the Guaranty and/or any of the Security Documents.
12.2 Change in Exchange Rate. If there is a change in the rate of exchange
prevailing between the conversion date and the date of actual payment of the
amount due, the Borrower shall pay such additional amounts (if any, but in any
event not a lesser amount) as may be necessary to ensure that the amount paid in
the judgment currency when converted at the rate of exchange prevailing on the
date of payment will produce the amount then due under this Agreement, the Note,
the Guaranty and/or any of the Security Documents in Dollars; any excess over
the amount due received or collected by the Lenders shall be remitted to the
Borrower.
12.3 Additional Debt Due. Any amount due from the Borrower under Section 12
shall be due as a separate debt and shall not be affected by judgment being
obtained for any other sums due under or in respect of this Agreement, the Note,
the Guaranty and/or any of the Security Documents.
12.4. Rate of Exchange. The term "rate of exchange" in this Section 12 means the
rate at which the Administrative Agent in accordance with its normal practices
is able on the relevant date to purchase Dollars with the judgment currency and
includes any premium and costs of exchange payable in connection with such
purchase.
13 FEES AND EXPENSES
13.1 Commitment Fee. The Borrower shall pay to the Administrative Agent on
behalf of the Lenders a fee in the amount of (i) .25% per annum on the available
but undrawn amount of the Credit Facility from the date hereof through the
initial Drawdown Date and (ii) .50% per annum thereafter, in each case quarterly
in arrears from the date hereof. Such fee shall accrue from day-to-day and be
calculated on the actual number of days elapsed and a three hundred sixty (360)
day year.
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13.2 Agency Fee. The Borrower shall pay to the Agents an annual agency fee of
$10,000 payable upon the signing of this Agreement and annually thereafter,
which agency fee shall be shared equally by the Agents.
13.3 Arrangement Fee. The Borrower shall pay to the Arrangers an arrangement fee
equal to .50% of the Facility, such arrangement fee to be divided evenly between
the Arrangers and payable upon signing of this Agreement.
13.4 Other Fees. The Borrower shall pay such other fees to the Agents as the
parties have agreed pursuant to the Fee Letter.
13.5 Expenses. The Borrower agrees, whether or not the transactions hereby
contemplated are consummated, on demand to pay, or reimburse the Creditors for
their payment of, the reasonable expenses of the Agents, the Security Trustee,
the Arrangers and (after the occurrence and during the continuance of an Event
of Default) the Lenders incident to said transactions (and in connection with
any supplements, amendments, waivers or consents relating thereto or incurred in
connection with the enforcement or defense of any of the Agents' (the Security
Trustee's, the Arrangers' and the Lenders' rights or remedies with respect
thereto or in the preservation of the Agents', the Security Trustee's, the
Arrangers' and the Lenders' priorities under the documentation executed and
delivered in connection therewith), including, without limitation, all
reasonable costs and expenses of preparation, negotiation, execution and
administration of this Agreement and the documents referred to herein, the
reasonable fees and disbursements of the Agent's counsel in connection
therewith, as well as the reasonable fees and expenses of any independent
appraisers, surveyors, engineers and other consultants retained by the Agents,
the Security Trustee or the Arrangers in connection with this transaction, all
reasonable costs and expenses, if any, in connection with the enforcement of
this Agreement, the Note, the Guaranty and the Security Documents and stamp and
other similar taxes, if any, incident to the execution and delivery of the
documents (including, without limitation, the Note) herein contemplated and to
hold the Agents, the Security Trustee, the Arrangers and the Lenders free and
harmless in connection with any liability arising from the nonpayment of any
such stamp or other similar taxes. Such taxes and, if any, interest and
penalties related thereto as may become payable after the date hereof shall be
paid immediately by the Borrower to the Agents, the Security Trustee, the
Arrangers or the Lenders, as the case may be, when liability therefor is no
longer contested by such party or parties or reimbursed immediately by the
Borrower to such party or parties after payment thereof (if the Agents, the
Security Trustee, the Arrangers or the Lenders, at their sole discretion,
chooses to make such payment).
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14 APPLICABLE LAW, JURISDICTION AND WAIVER
14.1 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
14.2 JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION
OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK IN ANY ACTION OR PROCEEDING BROUGHT
AGAINST IT BY ANY OF THE LENDERS, THE AGENTS, THE SECURITY TRUSTEE OR THE
ARRANGERS UNDER THIS AGREEMENT OR UNDER ANY DOCUMENT DELIVERED HEREUNDER AND
HEREBY IRREVOCABLY AGREES THAT VALID SERVICE OF SUMMONS OR OTHER LEGAL PROCESS
ON IT MAY BE EFFECTED BY SERVING A COPY OF THE SUMMONS AND OTHER LEGAL PROCESS
IN ANY SUCH ACTION OR PROCEEDING ON THE BORROWER BY MAILING OR DELIVERING THE
SAME BY HAND TO THE BORROWER AT THE ADDRESS INDICATED FOR NOTICES IN SECTION
16.1. THE SERVICE, AS HEREIN PROVIDED, OF SUCH SUMMONS OR OTHER LEGAL PROCESS IN
ANY SUCH ACTION OR PROCEEDING SHALL BE DEEMED PERSONAL SERVICE AND ACCEPTED BY
THE BORROWER AS SUCH, AND SHALL BE LEGAL AND BINDING UPON THE BORROWER FOR ALL
THE PURPOSES OF ANY SUCH ACTION OR PROCEEDING. FINAL JUDGMENT (A CERTIFIED OR
EXEMPLIFIED COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND OF THE
AMOUNT OF ANY INDEBTEDNESS OF THE BORROWER TO THE CREDITORS) AGAINST THE
BORROWER IN ANY SUCH LEGAL ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT. THE BORROWER WILL
ADVISE THE ADMINISTRATIVE AGENT PROMPTLY OF ANY CHANGE OF ADDRESS FOR THE
PURPOSE OF SERVICE OF PROCESS. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY,
THE CREDITORS MAY BRING ANY LEGAL ACTION OR PROCEEDING IN ANY OTHER APPROPRIATE
JURISDICTION.
14.3 WAIVER OF JURY TRIAL. IT IS MUTUALLY AGREED BY AND AMONG THE BORROWER, THE
OTHER SECURITY PARTIES AND THE CREDITORS THAT EACH OF THEM HEREBY WAIVES TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO
AGAINST ANY OTHER PARTY HERETO ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY
WAY CONNECTED
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WITH THIS AGREEMENT, THE NOTE, THE GUARANTY OR THE SECURITY DOCUMENTS.
15. THE AGENTS
15.1 (a) Appointment of Agents. Each of the Lenders hereby irrevocably appoints
and authorizes each Agent (which for purposes of this Section 15 shall be deemed
to include the Security Trustee pursuant to Section 15.1(b)) to take such action
as agent on its behalf and to exercise such powers under this Agreement, the
Note, the Guaranty and the Security Documents as are delegated to such Agent by
the terms hereof and thereof. No Agent nor any of its directors, officers,
employees or agents shall be liable for any action taken or omitted to be taken
by it or them under this Agreement, the Note, the Guaranty or the Security
Documents or in connection therewith, except for its or their own gross
negligence or willful misconduct.
(b) Appointment of Security Trustee. Each of the Creditors
irrevocably appoints the Security Trustee as security trustee on its behalf with
regard to (i) the security, powers, rights, titles, benefits and interests (both
present and future) constituted by and conferred on the Creditors or any of them
or for the benefit thereof under or pursuant to this Agreement, the Note, the
Guaranty or any of the Security Documents (including, without limitation, the
benefit of all covenants, undertakings, representations, warranties and
obligations given, made or undertaken to any Creditor in the Agreement, the
Note, the Guaranty or any Security Document), (ii) all moneys, property and
other assets paid or transferred to or vested in any Creditor or any agent of
any Creditor or received or recovered by any Creditor or any agent of any
Creditor pursuant to, or in connection with, this Agreement, the Note, the
Guaranty or the Security Documents whether from any Security Party or any other
person and (iii) all money, investments, property and other assets at any time
representing or deriving from any of the foregoing, including all interest,
income and other sums at any time received or receivable by any Creditor or any
agent of any Creditor in respect of the same (or any part thereof). The Security
Trustee hereby accepts such appointment.
15.2 Distribution of Payments. Whenever any payment is received by the
Administrative Agent from the Borrower or any other Security Party for the
account of the Creditors, or any of them, whether of principal or interest on
the Note, commissions, fee under Section 13.1 or otherwise, it will thereafter
cause to be distributed on the same day if received before 11 a.m. New York
time, or on the next day if received thereafter, like funds relating to such
payment to the Creditors according to their respective interest therein, in each
case to be applied according to the terms of this Agreement.
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15.3 Holder of Interest in Note. The Administrative Agent may treat each Lender
as the holder of all of the interest of such Lender in the Note.
15.4 No Duty to Examine, Etc. The Agents shall not be under a duty to examine or
pass upon the validity, effectiveness or genuineness of any of this Agreement,
the Guaranty, the Note, the Security Documents or any instrument, document or
communication furnished pursuant to this Agreement or in connection therewith or
in connection with the Note, the Guaranty or any Security Document, and the
Agents shall be entitled to assume that the same are valid, effective and
genuine, have been signed or sent by the proper parties and are what they
purport to be.
15.5 Agents as Lenders. With respect to that portion of the Advances made
available by it, each Agent shall have the same rights and powers hereunder as
any other Lender and may exercise the same as though it were not an Agent, and
the term "Lender" or "Lenders" shall include such Agent in its capacity as a
Lender. Each Agent and its affiliates may accept deposits from, lend money to
and generally engage in any kind of business with, the Borrower and the other
Security Parties as if it were not an Agent.
15.6 (a) Obligations of Agents. The obligations of each Agent under this
Agreement, under the Note, under the Guaranty and under the Security Documents
are only those expressly set forth herein and therein.
(b) No Duty to Investigate. No Agent shall at any time be under any
duty to investigate whether an Event of Default, or an event which with the
giving of notice or lapse of time, or both, would constitute an Event of
Default, has occurred or to investigate the performance of this Agreement, the
Note, the Guaranty or any Security Document by any Security Party.
15.7 (a) Discretion of Agents. Each Agent shall be entitled to use its
discretion with respect to exercising or refraining from exercising any rights
which may be vested in it by, and with respect to taking or refraining from
taking any action or actions which it may be able to take under or in respect
of, this Agreement, the Note, the Guaranty and the Security Documents, unless
such Agent shall have been instructed by the Majority Lenders to exercise such
rights or to take or refrain from taking such action; provided, however, that
such Agent shall not be required to take any action which exposes such Agent to
personal liability or which is contrary to this Agreement or applicable law.
(b) Instructions of Majority Lenders. Each Agent shall in all cases be
fully protected in acting or refraining from acting under this Agreement, under
the Note, under the Guaranty or under any Security Document in accordance with
the instructions of the Majority Lenders, and any action taken or failure to act
pursuant to such instructions shall
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be binding on all of the Lenders. Neither this Agreement nor any of the Security
Documents nor any terms hereof or thereof may be amended unless such amendment
is approved by the Borrower and the Majority Lenders, provided that no such
amendment shall, without the consent of each Lender affected hereby, (i) extend
the Credit Facility Period, or reduce the rate or extend the time of payment of
principal or interest or fees thereon, or reduce the principal amount of the
Advances, (ii) increase the Commitment of any Lender over the amount thereof
then in effect (it being understood that a waiver of any Default or Event of
Default or any mandatory repayment of Advances shall not constitute a change in
the terms of any Commitment of any Lender), (iii) amend, modify or waive any
provision of this Section 15.7, (iv) amend the definition of Majority Lenders,
(v) consent to the assignment or transfer by the Borrower of any of its rights
and obligations under this Agreement, (vi) release any Security Party from any
of its obligations under any Security Document except as expressly provided
herein or in such Security Document or (vii) amend any provision relating to the
maintenance of collateral under Section 9.3. All amendments approved by the
Majority Lenders under this Section 15.7 must be in writing and signed by the
Borrower and each of the Lenders. In the event that any Lender is unable to or
refuses to sign an amendment approved by the Majority Lenders hereunder, such
Lender hereby appoints the Administrative Agent as its Attorney-In-Fact for the
purposes of signing such amendment. No provision of this Section 15 or any other
provisions relating to the Agents may be modified without the consent of the
Agents.
15.8 Assumption re Event of Default. Except as otherwise provided in Section
15.14, the Administrative Agent shall be entitled to assume that no Event of
Default, or event which with the giving of notice or lapse of time, or both,
would constitute an Event of Default, has occurred and is continuing, unless the
Administrative Agent has been notified by any Security Party of such fact, or
has been notified by a Lender that such Lender considers that an Event of
Default or such an event (specifying in detail the nature thereof) has occurred
and is continuing. In the event that the Administrative Agent shall have been
notified by any Security Party or any Lender in the manner set forth in the
preceding sentence of any Event of Default or of an event which with the giving
of notice or lapse of time, or both, would constitute an Event of Default, the
Administrative Agent shall notify the Lenders and shall take action and assert
such rights under this Agreement, under the Note, under the Guaranty and under
Security Documents as the Majority Lenders shall request in writing.
15.9 No Liability of Agents or Lenders. Neither the Agents nor any of the
Lenders shall be under any liability or responsibility whatsoever:
(A) to any Security Party or any other person or entity as a
consequence of any failure or delay in performance by, or any breach by, any
other Lenders or any other
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person of any of its or their obligations under this Agreement or under any
Security Document;
(B) to any Lender or Lenders as a consequence of any failure or delay
in performance by, or any breach by, any Security Party of any of its respective
obligations under this Agreement, under the Note, under the Guaranty or under
the Security Documents; or
(C) to any Lender or Lenders for any statements, representations or
warranties contained in this Agreement, in the Guaranty, in any Security
Document or in any document or instrument delivered in connection with the
transaction hereby contemplated; or for the validity, effectiveness,
enforceability or sufficiency of this Agreement, the Note, the Guaranty, any
Security Document or any document or instrument delivered in connection with the
transactions hereby contemplated.
15.10 Indemnification of Agents. The Lenders agree to indemnify each Agent (to
the extent not reimbursed by the the Security Parties or any thereof), pro rata
according to the respective amounts of their Commitments, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever (including legal fees and expenses incurred in investigating claims
and defending itself against such liabilities) which may be imposed on, incurred
by or asserted against, such Agent in any way relating to or arising out of this
Agreement, the Note, the Guaranty or any Security Document, any action taken or
omitted by such Agent thereunder or the preparation, administration, amendment
or enforcement of, or waiver of any provision of, this Agreement, the Note, the
Guaranty or any Security Document, except that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from such Agent's
gross negligence or willful misconduct.
15.11 Consultation with Counsel. Each Agent may consult with legal counsel
selected by such Agent and shall not be liable for any action taken, permitted
or omitted by it in good faith in accordance with the advice or opinion of such
counsel.
15.12 Resignation of Administrative Agent. The Administrative Agent may resign
at any time by giving sixty (60) days' written notice thereof to the Lenders and
the Borrower. Upon any such resignation, the Lenders shall have the right to
appoint a successor Administrative Agent. If no successor Administrative Agent
shall have been so appointed by the Lenders and shall have accepted such
appointment within sixty (60) days after the retiring Administrative Agent's
giving notice of resignation, then the retiring Administrative Agent may, on
behalf of the Lenders, appoint a successor
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Administrative Agent which shall be a bank or trust company of recognized
standing. The appointment of any successor Administrative Agent shall be subject
to the prior written consent of the Borrower, such consent not to be
unreasonably withheld. After any retiring Administrative Agent's resignation as
Administrative Agent hereunder, the provisions of this Section 15 shall continue
in effect for its benefit with respect to any actions taken or omitted by it
while acting as Administrative Agent.
15.13 Representations of Lenders. Each Lender represents and warrants to each
other Lender and the Agents that:
(i) In making its decision to enter into this Agreement and to make its
Commitment available hereunder, it has independently taken whatever steps it
considers necessary to evaluate the financial condition and affairs of the
Security Parties, that it has made an independent credit judgment and that it
has not relied upon any statement, representation or warranty by any other
Lender or the Agents; and
(ii) So long as any portion of its Commitment remains outstanding, it
will continue to make its own independent evaluation of the financial condition
and affairs of the Security Parties.
15.14 Notification of Event of Default. The Administrative Agent hereby
undertakes to promptly notify the Lenders, and each Lender hereby promptly
undertakes to notify the Administrative Agent and the other Lenders, of the
existence of any Event of Default which shall have occurred and be continuing of
which the Administrative Agent or any Lender has actual knowledge.
16. NOTICES AND DEMANDS
16.1 Notices. All notices, requests, demands and other communications to any
party hereunder shall be in writing (including prepaid overnight courier,
facsimile transmission or similar writing) and shall be given to the Borrower at
the address or telecopy number set forth below and to the Lenders, the Agents
and the Security Trustee at their address and telecopy number set forth in
Schedule 1 or at such other address or telecopy number as such party may
hereafter specify for the purpose by notice to each other party hereto. Each
such notice, request or other communication shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified in
this Section and telephonic confirmation of receipt thereof is obtained or (ii)
if given by mail, prepaid overnight courier or any other means, when received at
the address specified in this Section or when delivery at such address is
refused.
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If to the Borrower:
11200 Westheimer, Suite 410
Houston, Texas 77042-3227
Telecopy No. (713) 339-3888
17. MISCELLANEOUS
17.1 Time of Essence. Time is of the essence of this Agreement but no failure or
delay on the part of any Creditor to exercise any power or right under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise by any Creditor of any power or right hereunder preclude any other or
further exercise thereof or the exercise of any other power or right. The
remedies provided herein are cumulative and are not exclusive of any remedies
provided by law.
17.2 Unenforceable, etc., Provisions - Effect. In case any one or more of the
provisions contained in this Agreement, the Note, the Guaranty or in any
Security Document would, if given effect, be invalid, illegal or unenforceable
in any respect under any law applicable in any relevant jurisdiction, said
provision shall not be enforceable against the relevant Security Party, but the
validity, legality and enforceability of the remaining provisions herein or
therein contained shall not in any way be affected or impaired thereby.
17.3 References. References herein to Sections and Schedules are to be construed
as references to sections of, and schedules to, this Agreement.
17.4 Further Assurances. The Borrower agrees that if this Agreement, the Note,
the Guaranty or any Security Document shall, in the reasonable opinion of the
Lenders, at any time be deemed by the Lenders for any reason insufficient in
whole or in part to carry out the true intent and spirit hereof or thereof, it
will execute or cause to be executed such other and further assurances and
documents as in the opinion of the Lenders may be required in order more
effectively to accomplish the purposes of this Agreement, the Note, the Guaranty
or any Security Document.
17.5 Prior Agreements, Merger. Any and all prior understandings and agreements
heretofore entered into between the Security Parties on the one part, and the
Creditors, on the other part, whether written or oral, are superseded by and
merged into this Agreement and the other agreements (the forms of which are
exhibited hereto) to be executed and delivered in connection herewith to which
the Security Parties and/or the Creditors are parties, which alone fully and
completely express the agreements between the Security Parties and the
Creditors.
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17.6 Entire Agreement; Amendments. This Agreement constitutes the entire
agreement of the parties hereto including all parties added hereto pursuant to
an Assignment and Assumption Agreement and cannot be amended other than by
written agreement signed by all such parties.
17.7 Indemnification. The Borrower and, by its execution and delivery of the
Consent and Agreement set forth below, each of the other Security Parties
jointly and severally agree to indemnify each Creditor, their respective
successors and assigns, and their respective officers, directors, employees,
representatives and agents (each an "Indemnitee") from, and hold each of them
harmless against, any and all losses, liabilities, claims, damages, expenses,
obligations, penalties, actions, judgments, suits, costs or disbursements of any
kind or nature whatsoever (including, without limitation, the fees and
disbursements of counsel for such Indemnitee in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitee shall be designated a party thereto) that may at
any time (including, without limitation, at any time following the payment of
the obligations of the Borrower hereunder) be imposed on, asserted against or
incurred by, any Indemnitee as a result of, or arising out of or in any way
related to or by reason of, (a) any violation by any Security Party (or any
charterer or other operator of any Unit) of any applicable Environmental Law,
(b) any Environmental Claim arising out of the management, use, control,
ownership or operation of property or assets by any Security Party (or, after
foreclosure, by any Creditor or any of their respective successors or assigns)
and (3) the breach of any representation, warranty or covenant set forth in
Sections 2.1 (o) or 9.1A.(x). The foregoing indemnity shall not apply to any
claim, including, without limitation, Environmental Claims, arising out of the
operation of the Unit by any Creditor or any agent or contractor thereof. If and
to the extent that the obligations of the Security Parties under this Section
are unenforceable for any reason, the Borrower and, by its execution and
delivery of the Consent and Agreement set forth below, each of the other
Security Parties jointly and severally agree to make the maximum contribution to
the payment and satisfaction of such obligations which is permissible under
applicable law. The obligations of the Security Parties under this Section 17.7
shall survive the termination of this Agreement and the repayment to the
Creditors of all amounts owing thereto under or in connection herewith.
17.8 Headings. In this Agreement, Section headings are inserted for convenience
of reference only and shall not be taken into account in the interpretation of
this Agreement.
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IN WITNESS whereof the parties hereto have caused this
Agreement to be duly executed by their duly authorized representatives as of the
day and year first above written.
CHILES OFFSHORE LLC
By: [Illegible]
-----------------------------------
Name: [Illegible]
Title:
NEDERLANDSE SCHEEPSHYPOTHEEK BANK N.V.,
Arranger, Documentation Agent, Security
Trustee and Lender
By: /s/ Lawrence Rutkowski
-----------------------------------
Name: Lawrence Rutkowski
Title: Attorney-in-fact
MEESPIERSON CAPITAL CORP.,
Arranger, Administrative Agent and Lender
By: /s/ Lawrence Rutkowski
-----------------------------------
Name: Lawrence Rutkowski
Title: Attorney-in-fact
By: [Illegible]
-----------------------------------
Name: [Illegible]
Title:
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Exhibit 10.2
PLATFORM CONSTRUCTION AGREEMENT
This Agreement including the Exhibits attached hereto which are
incorporated by reference herein and made a part hereof (hereinafter referred to
as this "Contract"), entered into on the 30th day of April, 1997, by and between
CHILES OFFSHORE INC., a corporation organized under the laws of the State of
Delaware (hereinafter referred to as "Buyer") and AMFELS, INC., a corporation
organized under the laws of the State of Texas (hereinafter referred to as
"Seller");
W I T N E S S E T H:
1. Description of Platform.
(a) Seller hereby agrees with Buyer to commence the construction of at
Seller's shipyard at Brownsville, Texas ("Seller's Yard"), to prosecute in
accordance with good shipyard practice to completion, and to deliver to Buyer by
April 30, 1999 (such date as the same may be extended under the terms of this
Agreement is referred to herein as the "Scheduled Delivery Date"), at Seller's
Yard a mobile, self-contained and elevating platform, being Seller's Yard No.
P-178, in accordance with (i) Seller's specifications therefor, dated April 30,
1997 and all related drawings, plans and data, whether now or hereafter prepared
by Seller (hereinafter referred to collectively as the "Specifications"), the
said Specifications having been (or shall be, in instances where specifications,
drawings, plans, and data are hereafter prepared) initialed by Seller and Buyer
as evidence of the accuracy thereof and being (and to be) hereby incorporated by
reference as part of this Agreement and (ii) the certain rules of the American
Bureau of Shipping (hereinafter referred to as the "ABS"), Rules for Building
and Classing Offshore Mobile Drilling Units, 1996, Part 3, Hull Construction and
Equipment, Sections 1 through 10 (provided that if the ABS enforces p-delta,
Seller's responsibility as to p-delta shall be limited to obtaining from
Seller's licensor LeTourneau, Inc. ("LeTourneau") a set of new severe storm data
incorporating the effects of p-delta), which were in effect and enforced against
Seller by the ABS on April 1, 1997 and which are specified and limited in Part I
of the Specifications. For purposes of this Agreement, the mobile,
self-contained, and elevating platform to be constructed and delivered to Buyer
in accordance herewith shall be referred to as the "Platform". Buyer hereby
agrees with Seller to purchase the Platform from Seller, and to pay Seller for
same, all in accordance with the provisions of this Agreement.
(b) If any conflict or inconsistency shall arise between this Agreement
and the Specifications, this Agreement shall prevail. Similarly, if any conflict
or
<PAGE>
inconsistency shall arise between the written Specifications and the
Specification drawings, the written Specifications shall prevail. In the event
of a dispute as to conformity with ABS classification requirements, the decision
of the ABS shall be final.
(c) Notwithstanding anything in this Agreement to the contrary, it is
expressly understood that the obligations of Seller under this Agreement are
subject to and conditioned upon the full and timely performance by LeTourneau of
its covenants, agreements, and undertakings and fulfillment of all subjects and
conditions under that certain License Agreement and Kit Construction Agreement
between Seller and LeTourneau dated April 30, 1997 (collectively the "LeTourneau
Agreements"), copies of which have been provided to Buyer. Seller shall have no
liability of any nature whatsoever, including damages (whether direct,
incidental, consequential, special, or otherwise) to Buyer if LeTourneau is
unable to or otherwise fails or refuses to fully and timely perform all of its
covenants, agreements, and undertakings under the LeTourneau Agreements or if
all subjects and conditions under the LeTourneau Agreements are not fully and
timely met. As used in this Agreement, "Package" and "Equipment" shall have the
meanings set forth in the LeTourneau Agreements. In the event LeTourneau is
unable to or otherwise fails or refuses to fully and timely perform all of its
covenants, agreements, and undertakings under the LeTourneau Agreements or if
all subjects and conditions under the LeTourneau Agreements are not fully and
timely met and as a result thereof Seller is delayed in the construction of the
Platform for ninety (90) days, Seller and Buyer shall each have the right to
terminate this Agreement without further liability of either party to the other
except that Seller shall retain all progress payments made pursuant to Paragraph
2(b) hereinbelow and shall be paid by Buyer for the price for that portion of
the Platform then constructed for which progress payments have not yet been made
and all work in process (including profit on all to Seller).
(d) In the event that any of the equipment or materials required to be
furnished by Seller in the performance of the work under this Agreement cannot
be timely procured or are in short supply, Seller may supply other materials and
equipment complying with the requirements of this Agreement and the
Specifications.
2. Contract Price.
(a) As consideration for Seller's construction of the Platform in
accordance with the terms of this Agreement, Buyer agrees to pay Seller the sum
of U.S. Dollars Fifty Seven Million Two Hundred Fifty Thousand ($57,250,000),
subject to adjustment as provided in this Agreement including Exhibit "A" hereto
(hereinafter referred to as
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the "Contract Price") at Seller's office at Brownsville, Texas or at such other
place as Seller may from time to time designate in writing to Buyer.
(b) The Contract Price shall be paid by Buyer to Seller in installments as
provided in Exhibit "A" attached to and made a part of this Agreement. Wire
transfer shall be made to Seller's account at Texas Commerce Bank as follows:
Texas Commerce Bank, Rio Grande Valley
1034 E. Levede Street
Brownsville, Texas 78520
Officer: Irv Downing
ACCOUNT NUMBER 06700278275
ABA NUMBER 113000609
(c) Seller shall submit to Buyer invoices at least five (5) working days
prior to the date any payment is due under this Agreement.
(d) Any agreed lump sum change order (other than proposed Change Order No.
1 dealing with the matters described in Exhibit B attached hereto which shall be
paid as agreed by the parties hereto) shall be paid 50% of the change order
value upon confirmation of change order and the balance of 50% on the last
installment schedule as stipulated subparagraph (b) above. For change orders
performed on time and material basis, payments shall be made monthly based upon
percentage of completion of the change.
(e) All costs for ABS approvals for the Platform are for the Seller's
account with the exception of Buyer furnished equipment and materials.
(f) Prior to delivery of the Platform, the Seller shall furnish evidence
satisfactory to the Buyer showing that no liens, claims, security interests or
rights in rem of any kind have been or can be acquired against the Platform by,
through, or under Seller.
(g) All progress payments, payments for change orders, and other sums
owing by Buyer to Seller under this Agreement must be paid in full at the time
of delivery of the Platform under this Agreement and in any event prior to
departure of the Platform from Seller's Yard. If Buyer disputes in good faith
any sums claimed by Seller under or in connection with this Agreement, Buyer
shall provide to Seller a corporate surety bond from a first class U.S. Surety
acceptable to Seller in a form
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reasonable satisfactory to Seller. Such bond shall be in an amount equal to 150%
of the disputed sum. The bond must be executed and delivered to Seller at the
time of delivery of the Platform under this Agreement and in any event prior to
departure of the Platform from Seller's Yard.
(h) If within twelve (12) months from the date of this Agreement the
Seller or Keppel FELS Ltd. ("FELS") orders another kit from LeTourneau which
LeTourneau agrees to sell to non-affiliated companies on behalf of the Buyer or
any other customer, the Seller shall promptly refund to the Buyer the U.S.
$2,000,000 portion of the Contract Price paid by the Buyer on May 30, 1997 and
used to reimburse the Seller for its payment of the transfer fee under the
License Agreement. The refund shall be made to Buyer when the $2,000,000 is
credited by LeTourneau to Seller.
(i) If the Seller contracts with the Buyer for the construction of a third
116-C LeTourneau mobile, self-contained and elevating platforms in addition to
the Platform, the Seller shall promptly refund to the Buyer U.S.$550,000 of the
Contract Price.
3. [Intentionally Omitted]
4. Representatives and Progress of Platform.
(a) Seller will furnish office space and parking facilities at the Yard
for Buyer's authorized representatives (the "Representative"), who will have
complete and unrestricted access to the Yard of Seller, or its subcontractors,
where the Platform under this Agreement is being constructed. The office
provided to Buyer will have telephone, telefax, and duplicating facilities.
Costs for long distance telephone calls, telefaxes, and duplication will be for
Buyer's account. Such authorized Representatives shall have the right to make
inspection of workmanship, material, equipment and supplies as the construction
of the Platform progresses and shall notify Seller in writing of any
deficiencies noted therein, and Seller will then take such steps as are
necessary to correct such deficiencies. Seller shall give notice to Buyer and
its Representative at least forty-eight (48) hours in advance of the date and
place of all tests, trials, and inspections. Inspections shall be made so as not
to impede the progress of the construction of the Platform and if defective or
non-conforming workmanship or material is rejected, rejection shall be made
promptly in order that Seller may minimize the expense and disruption of
construction. In the event Buyer's Representative shall fail to be present at
any properly notified test, trial, or inspection, the results thereof shall be
binding on Buyer. Buyer shall ensure that its Representative shall not in
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performing their inspections obstruct the construction schedule for the
Platform. If Buyer's Representative fails to promptly submit to Seller
notification of any non-conforming work discovered by Buyer's Representative,
Buyer shall be deemed to have approved such item and Buyer shall be precluded
from making demand for correction of such item, refusing to accept tender of
delivery of the Platform, or claiming such item as a warranty defect under
Seller's warranty set forth in Section 11 herein below.
(b) In all working hours during the construction of the Platform until
delivery thereof, the Representative and all assistants of the Representative
shall be given free and ready access to the Platform and to any other place
where construction of the Platform is being done or materials are being
processed or stored in connection with the construction of the Platform,
including the yards, workshops, stores and offices of Seller, and the premises
of subcontractors of Seller who are doing work for the Platform or storing
materials at such premises in connection with the Platform's construction.
(c) Seller shall appoint a project manager who shall be the direct
interface with the Buyer's Representative, with full authority to act for Seller
under this Agreement.
(d) Any difference in opinion between parties hereto which may arise
during the construction of the Platform concerning technical matters in respect
of the materials and workmanship covered by ABS rules, such difference in
opinion shall be referred to ABS whose opinion thereof shall be final and
binding upon both parties.
(e) Within thirty (30) days of the date of this Agreement the Seller shall
deliver to the Buyer a key event production schedule (the "Production Schedule")
showing planned construction progress of the Platform. The Production Schedule
shall be reasonably acceptable to the Buyer. The Seller shall develop an overall
Platform erection plan that integrates material delivery and assembly actions
needed to schedule work flow during all phases of construction. This plan shall
encompass sufficient planning data to assure that all phases of construction can
be adequately accomplished so as to deliver the Platform on or before the
Scheduled Delivery Date. The Platform erection/construction plan shall be
furnished to Buyer within sixty (60) days after the effective date of this
Agreement and shall, upon acceptance by Buyer, become by reference an integral
part of the Production Schedule. The Scheduled Delivery Date shall be extended
by any delay to Seller caused by act or omission of Buyer, failure to timely
deliver to Seller any Buyer Furnished Equipment, delays caused by ABS or any
governmental agency, changes, events of force majeure, or inability of or
failure or
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refusal of LeTourneau to fully and timely perform all of its covenants,
agreements, and undertakings under the LeTourneau Agreements or if all subjects
and conditions under the LeTourneau Agreements are not fully and timely met.
(f) Included in the Specifications is a list of tests and trials to be
performed by Seller in connection with the completion of the Platform. Buyer's
Representative shall be given the number of days of prior notice for each
applicable test or trial as set forth in the Specifications.
5. Changes and Additional Work.
(a) Buyer shall have the right, at any time or times, to request that
reasonable change or changes be made in any of the Specifications, and Buyer
shall issue to Seller a written change order to be executed by Buyer and Seller;
provided, however, if such requested change or changes in the aggregate would
materially increase the overall scope of work so as to adversely impact Seller's
other work or commitments or if LeTourneau refuses to agree to any requested
change with respect to the Package or the Equipment or if Seller and Buyer
cannot reach agreement as to a lump sum price or credit or change in the
Scheduled Delivery Date or other terms and conditions of this Agreement or the
Specifications, Seller shall have no obligation to Buyer to perform same. If any
change necessitates an increase or decrease in the quantity or quality of the
materials or the nature of the labor to be furnished by Seller for the Platform,
then the Contract Price shall be increased or decreased on a lump sum basis in
accordance with the mutual agreement of the parties. Seller shall be entitled to
make minor changes to the Specifications, if found necessary, for the
introduction of improved production methods or otherwise, subject to Buyer's
approval not to be unreasonably withheld.
(b) If any such change will prolong the time for completion of the
Platform, the Scheduled Delivery Date provided hereunder shall be extended
accordingly.
6. Buyer Furnished Equipment.
(a) Within forty five (45) days of the execution of this Agreement, Seller
shall furnish to Buyer a schedule of in-yard delivery dates of those items of
material, equipment, engineering data and information ("Buyer Furnished
Equipment"), as are set forth in the Specifications to be provided by Buyer. The
time for delivery of the Buyer Furnished Equipment as detailed on such delivery
schedule shall be such so as to not
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cause Seller to be delayed in the timely prosecution of the work in accordance
with the Production Schedule.
(b) Seller shall at its own cost install the Buyer Furnished Equipment.
Seller's scope of work includes all necessary foundations and supplies, such as,
but not limited to, electric power, air, fuel, steam, etc. All Buyer Furnished
Equipment shall be delivered by Buyer to Seller at Seller's Yard in their
assembled form, tested and in proper condition, ready for installation in or on
the Platform, in accordance with the Production Schedule. Seller will assist
Buyer in unloading all Buyer Furnished Equipment. Suitable storage will be
provided by Seller for all Buyer Furnished Equipment.
(c) In order to facilitate installation by Seller of the Buyer Furnished
Equipment on the Platform, Buyer shall furnish the Seller with all necessary
information including specifications, plans, drawings, instruction books,
manuals, test reports and certificates. Buyer, if so requested by Seller, shall
without any charge to Seller cause representatives of the manufacturers of the
Buyer Furnished Equipment to assist Seller in installation thereof in or on the
Platform and/or to carry out installation thereof by themselves or to make
necessary adjustments thereof at the Yard. Seller's scope of work under this
Agreement excludes any testing, adjustment of equipment, repair and modification
and supply of all inter-connecting parts.
(d) In the event of a delay in delivery of any Buyer Furnished Equipment,
then Buyer and Seller shall mutually agree on a new installation date of the
delayed Buyer Furnished Equipment. If no agreement is reached between both
parties within fifteen (15) days, then Seller shall have the right to proceed
with the construction of the Platform without installation thereof on the
Platform, without prejudice to Seller's other rights as hereinabove provided,
and Buyer shall accept and take delivery of Platform as so constructed.
(e) On delivery of each consignment of Buyer Furnished Equipment, Seller
shall assist Buyer in the inspection of the consignment delivered. Any and all
of the Buyer Furnished Equipment shall be subject to Seller's reasonable right
of rejection as and if they are found to be unsatisfactory or in improper
condition for installation. In such instances, Seller shall first give adequate
notice to Buyer before being entitled to reject the Buyer Furnished Equipment.
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(f) Should Buyer fail to timely deliver the Buyer Furnished Equipment as
provided in this Agreement and such delay results in increased costs to Seller,
Buyer shall reimburse Seller for such increased cost as and when incurred.
7. Liens.
Provided Seller is paid all amounts owing to Seller by Buyer under this
Agreement as and when due, Seller shall not place or create or permit to be
placed or created, any liens, charges, or encumbrances on, or security interests
as to, or pledges of, the Platform, and any lien, charge, encumbrance or
security interest so placed or created by or though Seller, its subcontractors
and suppliers, or any of them, shall be forthwith released by the Seller. The
Seller shall release and cause to be discharged any such lien, charge,
encumbrance or security interest. In the event Seller fails to secure the
discharge or release of any such lien, charge, encumbrance or security interest,
after notice to Seller the Buyer may secure the removal of same, in which event
the Seller shall reimburse the Buyer for its costs of securing such discharge or
release (which cost shall include any expenses incurred in connection therewith)
or at Buyer's sole option by deducting such sum from any payments due or to
become due the Seller's under this Agreement. In the event such cost is in
excess of the amount of any such reimbursement by deductions, the Seller further
agrees to pay the amount of such excess to the Buyer upon demand.
8. Insurance.
Seller shall obtain and maintain during all times hereunder the following
insurances:
(a) Worker's Compensation (including occupational disease), United States
Longshoremen and Harbor Workers, and employer's liability insurance in
accordance with the applicable statutory requirements of the jurisdiction in
which the Platform is constructed, with maritime and in rem, alternate employer,
and voluntary compensation coverages, with limits on the employer's liability
coverage of not less than U.S. $1,000,000 for bodily injury per person and with
excess liability limits of not less than U.S. $l,000,000 per occurrence.
(b) Broad Form Comprehensive General Liability Insurance covering all of
the operations of Seller, including Contractual Liability and Contractor's
Protective Liability with a combined single limit of not less than U.S.
$1,000,000 per occurrence
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for bodily injury and/or property damage, including products and completed
operations coverage, with excess liability limits of not less than U.S.
$1,000,000 per occurrence.
(c) Each of the foregoing insurance policies shall, either on the face
thereof or by appropriate endorsement name (except for the policies specified in
subparagraph (a) above) Buyer as an additional assured with respect to the
indemnities of Seller assumed under this Agreement, provide that the insurance
policy shall not be cancelled or coverage reduced except upon 30 days prior
written notice to Buyer, contain waivers of subrogation pursuant to which the
insurer waives all express or implied rights of subrogation against Buyer,
provide that Buyer shall not be liable for premiums or calls, and be retained in
full force and effect by Seller until the conclusion of the Platform hereunder
as provided below. Seller shall be responsible for all deductibles and self
insured retentions, to the extent the loss or claim would otherwise be covered
by Seller's indemnities contained in this Agreement. Concurrently with the
execution of this Agreement, Seller shall furnish to Buyer certificates or other
evidence satisfactory to the other of the insurance required hereunder.
(d) Until final delivery of the Platform, Seller shall its own cost and
expense, keep the Platform and all materials either delivered to the Yard or
being handled by Seller for the Platform or built into, or installed in or upon
the Platform fully insured under coverage and with underwriters satisfactory to
the Buyer and not more restrictive than the current form of London or American
Institute Clauses for Builder's Risks or equivalent form, including tests and
trials clauses. The Builder's Risks insurance shall include supplemental
coverage for war risks, strikes, lockouts, labor disturbances, riot or civil
commotion, earthquakes, and protection and indemnity risks. The amount of such
insurance coverage shall be in an amount at least equal to the Contract Price
and shall be increased from time to time to cover the cost of all changes,
alterations, or modifications.
(e) The Builders Risks policy shall be taken out in the joint names of
Seller and Buyer and all losses under such policy shall be payable to the Seller
and Buyer in accordance with their respective interests. The policies shall
provide that there shall be no recourse against the Buyer for the payment of
premiums or other charges and shall further provide that at least thirty (30)
days' prior written notice of any material alteration, cancellation, or
cancellation for the non-payment of premiums or other charges shall be given to
the Buyer by the insurance underwriters. Any deductible under this insurance
policy shall be for the account of Seller.
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9. Title and Risk of Loss.
(a) Title to the Platform, to the extent complete, including all materials
destined for incorporation therein, whether located at Seller's Yard or
elsewhere, shall immediately vest in Buyer when the same is paid for by Buyer,
whether prior to or after incorporation into the Platform. The vesting of title
shall not relieve Seller of its obligation to replace damaged or defective
materials at Seller's expense and to complete and deliver the Platform in
accordance with the provisions of this Agreement. Risk of loss of the Platform
shall pass to Buyer upon delivery and acceptance thereof in accordance with this
Agreement.
(b) If the Platform or any Buyer Furnished Equipment shall be damaged by
any insured cause whatsoever prior to acceptance thereof by Buyer and such
damage does not constitute an actual or a constructive total loss of the
Platform, Seller and/or Buyer shall apply the amount recovered under the
insurance policy referred to in Paragraph 8(d) of this Agreement to the repair
of such damage and Buyer shall accept the Platform under this Agreement if
completed in accordance with this Agreement and the Specifications. The
Production Schedule including the Scheduled Delivery Date shall be deemed
extended by the time necessary to repair such damage.
(c) In the event of an actual or constructive total loss of the Platform
prior to delivery, this Agreement shall automatically be deemed terminated, and
Seller shall retain all progress payments made pursuant to Paragraph 2(b)
hereinbelow and shall be paid by Buyer for the price for that portion of the
Platform then constructed for which progress payments have not yet been made and
all work in progress (including profit on all to Seller). In the event that the
actual or constructive total loss of the Platform results from the operation of
an insurable risk covered by insurance as required under Paragraph 8(d) of this
Agreement, all of the proceeds of such insurance payable as a result of such
loss shall be paid to the Buyer and the Seller as their interests may appear.
10. Delivery.
(a) Upon completion of the construction of the Platform and the tests and
trials as provided in the Specifications, Seller shall tender delivery of the
Platform to Buyer. Prior to tendering delivery, Seller shall have remedied at
Seller's sole cost and expense any defects discovered by Buyer or Seller in
Seller's workmanship or materials including installation of Buyer Furnished
Equipment or any other nonconformity of the Platform with the requirements of
the Specifications and performed any retests
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necessary to ensure that such items have been fully corrected. Buyer shall
accept such tender of delivery, and Buyer shall not have the right to refuse to
accept delivery of the Platform provided the same is substantially completed and
capable of being utilized by Buyer. Any remaining items shall be completed by
Seller following delivery and prior to departure of the Platform from Seller's
Yard, or Buyer and Seller may mutually agree on an appropriate reduction of the
Contract Price for such remaining items.
(b) On the Delivery Date, Buyer shall pay to Seller all amounts payable
under this Agreement and Seller and Buyer shall execute and deliver a Protocol
of Acceptance and Delivery acknowledging delivery of the Platform. Seller shall
further deliver to Buyer a Bill of Sale confirming the conveyance of title to
the Platform to the Buyer, which Bill of Sale shall (i) generally describe the
Platform as a mobile, self-contained and elevating platform, (ii) contain a
general warranty of title and freedom from liens (except as to matters arising
by, through, or under Buyer) in favor of the Buyer, and (iii) be deemed to
contain the additional warranties and covenants set forth in Section 11
hereinbelow without the necessity of making any reference to such warranties in
the Bill of Sale. Seller shall also deliver to Buyer the remaining delivery
documents set forth in the Specifications.
(c) Seller shall deliver the Platform along side Seller's dock at the
Yard. Following delivery, Buyer shall have the right to dock the Platform at
Seller's Yard for a period not to exceed fourteen (14) days, after which time
the Platform must depart from Seller's Yard. During such post-delivery docking
period, Buyer shall pay to Seller its standard charges for shore power, potable
water, and security guard service. All such charges must be paid by Buyer to
Seller prior to departure of the Platform from Seller's Yard.
11. Warranty.
Seller hereby warrants to Buyer that (i) Seller's workmanship and materials
shall be free from material defects, (ii) that systems designed, supplied, and
installed by Seller will perform the functions intended by this Agreement and
the Specifications, and (iii) that the components of the Equipment manufactured
by LeTourneau shall be free from material defects in LeTourneau's workmanship
and material and shall perform in accordance with the Kit Construction Agreement
and the specifications attached thereto as Annex C in normal use and service.
The warranty set forth in the preceding sentence (hereinafter referred to as the
"Warranty") shall commence on the date of delivery of the Platform to Buyer and
expire twelve (12) months thereafter (provided, however, that if any of the
equipment of the Platform, including without limitation any cranes or
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winches, is put into service prior to said delivery, the twelve (12) months
warranty period shall begin with the commencement of such service or operation
insofar as such equipment is concerned) and shall be subject to the following
provisions:
(a) The Warranty shall not apply to any part of the Platform which (i) has
been misused or structurally repaired or altered by anyone other than Seller or
its duly authorized representative, or (ii) has been damaged because of it use,
or the use of any other materials or equipment, after Buyer (or any other person
or firm operating the Platform or its equipment) has knowledge of such defect.
Except for the components of the Equipment manufactured by LeTourneau as
expressly set forth and as limited herein, equipment or other components of the
Platform sold to Buyer pursuant to this Agreement but not manufactured by Seller
are not warranted to any extent, but Seller shall assign (to the extent same are
assignable by Seller) to Buyer, without recourse, any warranties furnished to
Seller by the vendors of such equipment or other components. Buyer shall seek
performance or damages under such warranties only from such parties and not from
Seller. Seller shall use reasonable efforts to secure the best available
warranties available from such vendors and shall cooperate with Buyer in any
resulting dispute Buyer may have with such vendors.
(b) The extent of Seller's liability for any breach of the Warranty shall
be limited to (i) repairing or replacing (whichever of the two Seller, in its
sole discretion, shall elect) any material defects in Seller's workmanship or
materials, or causing the components of the Equipment manufactured by LeTourneau
to perform in accordance with the Kit Construction Agreement and the
specifications thereto by repairing or replacing (whichever of the two Seller,
in its sole discretion, shall elect) any material defects in LeTourneau's
workmanship or materials, as the case may be, at Seller's Yard or at any other
shipyard of Seller or its affiliates (hereinafter referred to as an "AMFELS
Yard"), with the Platform to be brought to an AMFELS Yard at Buyer's sole risk
and expense, or (ii) reimbursing Buyer for the cost of such repair or
replacement in accordance with the provisions of subparagraph (c) hereinbelow.
(c) Buyer, at its discretion, may elect to cause the necessary repairs or
replacements to be made at a non-AMFELS Yard. In such event, Seller's sole
obligation shall be to reimburse Buyer for the cost of such repairs or
replacements, provided, however, that in no event shall the sum to be paid to
Buyer by Seller exceed the cost that Seller would have borne, based on Seller's
normal rates, if the repairs or replacements had been made at the Seller's Yard.
If Buyer elects to proceed under the provisions of this subparagraph (c), Buyer
shall, as soon as possible after such election (but in any event prior to the
commencement of such repairs or replacements), notify
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Seller of the time, place, and estimated cost of such repairs and replacements.
Seller shall have the right to verify, at its sole cost and expense, by its own
representative, the nature and extent of the defects complained of prior to the
time that the repairs or replacements are made, and if in fact no breach of the
warranty made by Seller herein has occurred, Buyer shall pay to Seller a per
diem fee equal to Sellers then current labor rate schedule and the reasonable
expenses incurred by such representative.
(d) The REMEDIES provided in subparagraphs (b) and (c) hereinabove are
EXCLUSIVE. Buyer further agrees that in no event will Seller's liability to
Buyer for breach of the Warranty set forth in subparagraph (a) with respect to
the components of the Equipment manufactured by LeTourneau exceed such amount as
Seller may actually recover from LeTourneau for the same breach of warranty
under the Kit Construction Agreement. Such Warranty shall not include
transportation, towage, insurance, or other incidental expenses. In no event
shall the obligation of Seller to repair or replace (or to reimburse Buyer
pursuant to subparagraph (c) hereinabove for the cost of repairing or replacing)
defective workmanship or materials be construed to require Seller to repair or
replace more than the actual workmanship or material that is found to be
defective. The Platform as a whole or any other part thereof shall not be
construed to be "workmanship" or "material" for the purposes of the preceding
sentence and this Agreement.
(e) The Warranty shall not be effective unless Seller receives from Buyer
a written claim therefor (i) within thirty (30) days after the date of discovery
of such defect and (ii) prior to the expiration of the prescribed Warranty
period.
(f) Any work performed or materials furnished by Seller pursuant to the
Warranty shall be warranted for the remaining term of the original Warranty, and
nothing in subparagraph (b) or (c) shall extend the Warranty period beyond the
Warranty period specified in this Section 10.
(g) THE WARRANTY AS DEFINED HEREINABOVE IS IN LIEU OF ALL OTHER WARRANTIES
(EXCEPT OF TITLE), EXPRESS OR IMPLIED, STATUTORY OR AT COMMON LAW, AND ALL OTHER
LIABILITIES (AT COMMON LAW OR IN CONTRACT, TORT, OR OTHERWISE, RELATING IN ANY
WAY TO THE PLATFORM OR COMPONENTS THEREOF OR SERVICES TO BE PROVIDED UNDER THIS
AGREEMENT INCLUDING, WITHOUT LIMITATION, STRICT LIABILITY AND NEGLIGENCE).
WITHOUT LIMITATION OF THE GENERALITY OF THE IMMEDIATELY PRECEDING SENTENCE,
SELLER EXPRESSLY DISCLAIMS AND NEGATES (i) ANY
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IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (ii) ANY IMPLIED OR EXPRESS
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (iii) ANY IMPLIED OR EXPRESS
WARRANTY OF CONFORMITY TO MODELS OR SAMPLES (iv) ANY IMPLIED OR EXPRESS WARRANTY
OF DILIGENCE, (v) ANY IMPLIED OR EXPRESS WARRANTY OF WORKMANLIKE SERVICE, (vi)
ANY IMPLIED OR EXPRESS WARRANTY OF SEAWORTHINESS, AND (vii) ALL OTHER LIABILITY,
AT COMMON LAW OR IN CONTRACT OR TORT OR OTHERWISE, INCLUDING, WITHOUT
LIMITATION, STRICT LIABILITY (WHETHER FOUNDED IN SECTION 402(A) OF THE
RESTATEMENT OF TORTS OR OTHERWISE) AND NEGLIGENCE, WHETHER OCCASIONED BY ACTS OR
OMISSIONS OF SOLE OR CONCURRENT NEGLIGENCE OF SELLER, ITS AFFILIATES AND/OR
OTHERS. SELLER DISCLAIMS LIABILITY FOR, AND IN NO EVENT WHATEVER SHALL BE LIABLE
FOR, ANY LOSS OF PROFITS OF BUYER OR OTHERS OR ANY OTHER INCIDENTAL,
CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES.
(h) Seller's liability with respect to the Buyer Furnished Equipment shall
extend only to installation thereof in accordance with the certified equipment
drawings furnished by Buyer in those instances where such Equipment is actually
installed by Seller. In all other instances (including, without limitation,
those instances in which Buyer does not furnish certified equipment drawings to
Seller), the sole risk and responsibility for the proper installation of the
Buyer Furnished Equipment shall, as between Seller and Buyer, be borne by Buyer.
In all instances the sole risk and responsibility for the operability of the
Buyer Furnished Equipment shall, as between Seller and Buyer, be borne by Buyer.
(i) No employee or representative of Seller is authorized to change the
Warranty in any way or to grant any other warranty.
(j) Buyer understands and agrees that any modification to the design of
the Package or modification to the Equipment made by the Buyer are the
responsibility of Buyer and not the responsibility of Seller for any purpose
whatsoever, including claims for damages or other liability asserted by Buyer,
its customers or any third party. In the event such modifications require
regulatory approval, Buyer shall be responsible for obtaining such approval
unless Seller accepts the responsibility by executing a change order to perform
the work as additional work under this Agreement.
(k) Buyer understands and agrees that the information contained in the
Package and relating to the Equipment do not guarantee a fixed or variable
weight of
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the Platform or designate the use of equipment other than the Equipment. The
fixed and variable weight of the Platform and the selection of equipment other
than the Equipment are decisions of the Buyer, including outfitting and
fabrication decisions. The weight information provided by Seller is for
information only and reflects historical information or estimated and
approximate data. Seller is unable to predict actual weights for the Platform to
be constructed by Seller. Seller does not warrant or represent that Seller's
sale or construction of a Platform will meet the historical or approximate data
supplied to Buyer.
(l) Buyer acknowledges that certain information to be provided by
LeTourneau relate to a LeTourneau 116-C Class Platform rather than to an
Enhanced 116-C Platform. (See Annex C to the Kit Construction Agreement). Such
supplemental information shall be deemed to be part of the Package for all
purposes of this Agreement, including the provisions of the Confidentiality
Agreement referred to in Section 29 hereinbelow. Such supplemental information
is to be provided to Seller by LeTourneau approximately 120 days after the
Effective Date of the Kit Construction Agreement. During the term of this
Agreement, LeTourneau may provide other supplemental information to Seller
relating to an Enhanced 116-C which shall, at such time, become part of the
Package for purposes of this Agreement.
12. Indemnification Provisions.
A. SELLER INDEMNITIES
(A) SELLER HEREBY AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS
BUYER, ITS CUSTOMERS, AND THEIR RESPECTIVE PARENT, HOLDING AND AFFILIATED
COMPANIES, AND THEIR EMPLOYEES, OFFICERS, DIRECTORS, AND AGENTS (COLLECTIVELY
THE "BUYER INDEMNITIES"), FROM AND AGAINST ALL LIABILITIES, LOSSES, CLAIMS,
DEMANDS OR CAUSES OF ACTION (COLLECTIVELY "CLAIMS"), BY SELLER OR ITS
SUBCONTRACTORS OF ANY TIER OR THEIR RESPECTIVE EMPLOYEES, OFFICERS AND AGENTS,
BASED ON ILLNESS, INJURY OR DEATH OR DAMAGE OR DESTRUCTION OR LOSS OF USE OF
PROPERTY THEREOF INCLUDING WITHOUT LIMITATION THE YARD, OCCURRING PRIOR TO THE
DELIVERY TO AND ACCEPTANCE BY BUYER OF THE PLATFORM, INCIDENT TO OR CONNECTED
WITH OR ARISING OUT OF OR IN ANY WAY RELATED DIRECTLY OR INDIRECTLY TO THE
PERFORMANCE OF THIS AGREEMENT OR BREACH HEREOF, REGARDLESS OF CAUSE, INCLUDING
THE SOLE OR CONCURRENT NEGLIGENCE OR
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FAULT OF ANY OF SELLER OR THE BUYER INDEMNITIES OR THEIR OFFICERS, AGENTS,
EMPLOYEES, OR SUBCONTRACTORS OF ANY TIER OR THEIR EMPLOYEES OR AGENTS,
UNSEAWORTHINESS, STRICT LIABILITY, OR ANY OTHER EVENT OR CONDITION WHETHER OR
NOT ANTICIPATED BY ANY PERSON OR PARTY, REGARDLESS OF WHETHER PREEXISTING THE
EXECUTION OF THIS AGREEMENT.
(B) SELLER SHALL BE LIABLE FOR ALL COSTS, EXPENSES, AND REASONABLE
ATTORNEYS FEES INCURRED BY BUYER INDEMNITIES IN DEFENDING ANY COVERED CLAIMS AND
IN ASSERTING THE INDEMNITIES AS SET FORTH HEREIN AGAINST SELLER. SELLER SHALL BE
OBLIGATED TO BEAR THE EXPENSE OF THE INVESTIGATIONS AND EXPENSES OF ALL CLAIMS
ARISING THEREFROM AND TO PAY THE FULL AMOUNT OF ANY JUDGMENT OR SETTLEMENT
RENDERED AGAINST THE BUYER INDEMNITIES, IT BEING STIPULATED THAT ALL OBLIGATIONS
OF INDEMNITY ASSUMED HEREIN SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT,
REGARDLESS OF HOW SUCH TERMINATION IS AFFECTED. THE BUYER INDEMNITIES SHALL
PROVIDE REASONABLE ASSISTANCE TO SELLER IN RELATION TO THE DEFENSE OF CLAIMS
WHICH ARE SUBJECT TO INDEMNITY HEREUNDER.
B. BUYER INDEMNITIES
(A) BUYER HEREBY AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS SELLER
AND LETOURNEAU AND THEIR RESPECTIVE PARENTS, HOLDING AND AFFILIATED COMPANIES,
AND THEIR RESPECTIVE EMPLOYEES, OFFICERS, DIRECTORS, AND AGENTS AND THE
SUBCONTRACTORS OF LETOURNEAU AND THEIR SERVANTS (COLLECTIVELY THE "SELLER
INDEMNITIES"), FROM AND AGAINST ALL LIABILITIES, LOSSES, CLAIMS, DEMANDS, COSTS,
OR CAUSES OF ACTION (COLLECTIVELY "CLAIMS"), BY BUYER OR ITS SUBCONTRACTORS OF
ANY TIER OR THEIR RESPECTIVE EMPLOYEES, OFFICERS AND AGENTS, BASED ON ILLNESS,
INJURY OR DEATH OR DAMAGE OR DESTRUCTION OR LOSS OF USE OF PROPERTY OTHER THAN
THE PLATFORM, OCCURRING PRIOR TO THE DELIVERY TO AND ACCEPTANCE BY BUYER OF THE
PLATFORM, INCIDENT TO OR CONNECTED WITH OR ARISING OUT OF OR IN ANY WAY RELATED
DIRECTLY OR INDIRECTLY TO THE PERFORMANCE OF THIS AGREEMENT OR BREACH HEREOF,
REGARDLESS OF CAUSE, INCLUDING THE SOLE OR CONCURRENT NEGLIGENCE OR FAULT OF ANY
OF BUYER
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OR THE SELLER INDEMNITIES OR THEIR OFFICERS, AGENTS, EMPLOYEES, OR
SUBCONTRACTORS OF ANY TIER OR THEIR EMPLOYEES OR AGENTS, UNSEAWORTHINESS, STRICT
LIABILITY OR ANY OTHER EVENT OR CONDITION WHETHER OR NOT ANTICIPATED BY ANY
PERSON OR PARTY, REGARDLESS OF WHETHER PREEXISTING THE EXECUTION OF THIS
AGREEMENT.
(B) BUYER SHALL BE LIABLE FOR ALL COSTS, EXPENSES, AND REASONABLE
ATTORNEYS FEES INCURRED BY SELLER INDEMNITIES IN DEFENDING ANY COVERED CLAIMS
AND IN ASSERTING THE INDEMNITIES AS SET FORTH IN PARAGRAPH (A) HEREINABOVE
AGAINST BUYER. BUYER SHALL BE OBLIGATED TO BEAR THE EXPENSE OF THE
INVESTIGATIONS AND EXPENSES OF ALL CLAIMS ARISING THEREFROM AND TO PAY THE FULL
AMOUNT OF ANY JUDGMENT OR SETTLEMENT RENDERED AGAINST THE SELLER INDEMNITIES, IT
BEING STIPULATED THAT ALL OBLIGATIONS OF INDEMNITY ASSUMED HEREIN SHALL SURVIVE
THE TERMINATION OF THIS AGREEMENT, REGARDLESS OF HOW SUCH TERMINATION IS
AFFECTED. THE SELLER INDEMNITIES SHALL PROVIDE REASONABLE ASSISTANCE TO BUYER IN
RELATION TO THE DEFENSE OF CLAIMS WHICH ARE SUBJECT TO INDEMNITY HEREUNDER.
C. AS USED HEREIN AND IN SECTIONS 14 AND 24 HEREINBELOW, "AFFILIATES" OR
"AFFILIATED COMPANIES" SHALL MEAN AN ENTITY WHICH, DIRECTLY OR INDIRECTLY,
THROUGH ONE OR MORE INTERMEDIARIES, CONTROLS, IS CONTROLLED BY, OR IS UNDER
COMMON CONTROL WITH, THE PARTY IN QUESTION.
13. Patent Indemnity.
(a) Seller hereby agrees to defend any claim or suit and to indemnify and
save Buyer harmless from and against any damages (including the costs of the
suit and reasonable attorney's fees) awarded against Buyer in a suit arising out
of any infringement of any U.S. patent by reason of the incorporation into the
Platform in accordance with the Package of any Equipment components manufactured
by LeTourneau; provided, however, that
(i) the indemnity contained in this Section 13 shall not apply to any
claim or suit arising out of the construction or use of (1) processes, devices,
apparatus, or equipment specified or furnished by Buyer or anyone else other
than Seller, for
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which Buyer shall indemnify and defend Seller, and mounted upon or used in
connection with the Platform; and (2) any combination of and falling within
subparagraph (i)(1) hereof with the Equipment or the Platform; and
(ii) Buyer shall give Seller prompt written notice of any such claim
or suit and shall permit Seller to control settlement negotiations and any
litigation in connection therewith; provided, however, no settlement which
purports to acknowledge, on Buyer's behalf the validity of the patent involved
shall be entered into by Seller without Buyer's consent. As to any Equipment
components purchased by Seller, Seller shall assign (to the extent same is
assignable) to Buyer, without recourse, any patent indemnity coverage granted to
Seller by any vendor thereof Buyer shall seek performance of damages under such
warranties and Patent indemnities only from such parties and not from Seller.
(b) Seller makes no representations and extends no warranties that the
manufacture, construction, or commercialization of the Platform will not
infringe the claims of any United States or foreign Letters Patent that are not
included in Article II of the License Agreement, and Seller specifically
excludes any responsibility, liability, or obligation to defend Buyer or to hold
harmless and indemnify Buyer against charges, claims, or suits brought against
Buyer, its affiliates (an "affiliate" of Buyer being an entity which, directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with Buyer), assigns, successors, agents, employees,
representatives, subcontractors, or independent contractors for infringement of
any United States or foreign Letters Patent not included in Article II of the
License Agreement. Buyer further agrees that in no event shall Seller's
liability to indemnify and hold harmless Buyer as provided herein exceed such
amount as Seller may actually recover from LeTourneau for the same obligation to
indemnify and hold harmless under the License Agreement.
(c) Buyer agrees to defend any claim, suit, or proceeding brought against
Seller alleging that the construction or use by Seller, pursuant to this
Agreement, of any process, method of construction, construction equipment,
device, or apparatus (including, without limitation, Buyer Furnished Equipment)
specified or furnished by Buyer or mounted upon or used in connection with the
Platform constitutes infringement of any letters patent, and Buyer agrees to
indemnify and save Seller harmless from and against any judgment rendered
against Seller as a result of such claim, suit, or proceeding. Seller shall
promptly notify Buyer in writing of any such claim, suit, or proceeding and
shall permit Buyer to control the conduct and settlement of such claim, suit, or
proceeding, provided, however, no settlement shall be entered
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into without Seller's consent which purports to acknowledge on Seller's behalf
the validity of any patent. Seller shall provide information and assistance to
Buyer, at Seller's expense, as may be reasonably necessary to aid in the conduct
and settlement of the claim, suit, or proceeding. Seller shall be entitled to
participate, at its own expense, in the conduct and settlement of such claim,
suit, or proceeding through its selected representatives and attorneys.
14. General Limitation of Liability.
IN NO EVENT SHALL SELLER OR LETOURNEAU OR THEIR AFFILIATES OR THE AGENTS,
OFFICERS, EMPLOYEES, INVITEES, OR REPRESENTATIVES OF SELLER OR ITS AFFILIATES OR
THE SUBCONTRACTORS OF LETOURNEAU OR THEIR SERVANTS BE LIABLE TO BUYER, ITS
AGENTS, OFFICERS, EMPLOYEES, REPRESENTATIVES, SUBCONTRACTORS, INDEPENDENT
CONTRACTORS, OR AFFILIATES, OR TO ANY THIRD PARTIES FOR ANY ECONOMIC LOSS,
PHYSICAL HARM, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES
(INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS AND LOSS OF BUSINESS
OPPORTUNITIES), ARISING OUT OF, RESULTING FROM OR RELATING IN ANY WAY TO THIS
AGREEMENT OR THE LETOURNEAU AGREEMENTS OR ANY ACTIVITIES OR OMISSIONS OR DELAYS
IN CONNECTION HEREWITH OR THEREWITH INCLUDING, WITHOUT LIMITATION, THE
PERFORMANCE (WHETHER TIMELY OR NOT) OR THE NON-PERFORMANCE OF THIS AGREEMENT OR
THE LETOURNEAU AGREEMENTS, BREACH OF ANY WARRANTY, THE DESIGN OF THE PLATFORM OR
ANY PART THEREOF OR , OR THE LOSS OF OR LOSS OF USE OF THE PLATFORM OR ANY PART
THEREOF OR ANY OTHER EQUIPMENT, MATERIALS, OR PROPERTY), REGARDLESS OF CAUSE AND
REGARDLESS OF WHETHER SELLER, LETOURNEAU OR THEIR AFFILIATES, AND/OR THEIR
RESPECTIVE OFFICERS, EMPLOYEES, AGENTS, REPRESENTATIVES, SUBCONTRACTORS, AND/OR
OTHERS MAY BE WHOLLY, PARTIALLY, OR SOLELY NEGLIGENT OR OTHERWISE AT FAULT,
UNSEAWORTHINESS, STRICT LIABILITY, OR ANY DEFECT IN PREMISES, EQUIPMENT, OR
MATERIALS, OR ANY OTHER EVENT OR CONDITION WHETHER OR NOT ANTICIPATED BY ANY
PERSON OR PARTY, REGARDLESS OF WHETHER PREEXISTING THE EXECUTION OF THIS
AGREEMENT.
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<PAGE>
15. Force Majeure.
For purposes of this Agreement, events of "force majeure" shall be defined
to mean all causes beyond the reasonable control of the party asserting the
benefit of this Article, and shall include but not be limited to fire,
explosion, breakdown of machinery or equipment, shortage or unavailability of
materials or equipment, delay in transportation, government order, edict, or
other action, storms, abnormal weather that prevents blasting or painting,
strikes or other labor disturbances, destruction or damage to Seller's Yard or
equipment or any Buyer Furnished Equipment or the Platform or any part thereof
from any cause; acts of Buyer or the classification society or regulatory bodies
having or proporting to have jurisdiction including failure to give timely
approvals; late delivery of Buyer Furnished Equipment or failure to furnish in a
timely manner necessary information concerning the Buyer Furnished Equipment or
the performance of the work; and any other causes or accidents of the same or
similar nature which are beyond the control of the Seller or Buyer or any or
their respective subcontractors or suppliers. In case either party shall be
unable, wholly or in part, because of any such event of force majeure to carry
out its obligations under this Agreement, the time for performance, other than
the obligation to make payments, shall be extended by the period of such actual
delay due to force majeure for which notices are given as provided hereinbelow.
Performance of any obligations suspended while any force majeure is operative
shall be resumed as soon as possible after such force majeure is operative shall
be resumed as soon as possible after such force majeure ceases. The party
seeking benefit of this paragraph shall notify the other of the occurrence of
each event of force majeure within seven (7) days after commencement of such
event. Any increased costs to Seller as the result of events of force majeure
will be compensated to Seller by Buyer. After ninety (90) continuous days of
delay in the construction of the Platform due to force majeure, Seller and Buyer
shall each have the right to terminate this Agreement without further liability
of either party to the other except that Seller shall retain all progress
payments pursuant to Paragraph 2(b) hereinabove and shall be paid by Buyer for
the price for that portion of the Platform then constructed for which progress
payments have not yet been made and all work in process (including profit on all
to Seller).
16. Independent Contractor.
(a) Throughout the entire term of this Agreement, Seller shall be an
independent contractor with full power and authority to select the means,
methods and manner of performing its work hereunder.
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(b) All operations shall be conducted in Seller's own name and as an
independent contractor and not in the name of, or as an agent for, Buyer. In the
event Seller shall sublet or subcontract any of the construction of the Platform
provided for herein, Seller nevertheless shall remain primarily responsible for
compliance with all of the provisions hereof and for the portion of the
construction of the Platform performed by the party to whom the work is sublet
or subcontracted, and Seller shall require such Seller and such Seller's
employees, agents and representatives to comply with all the agreements,
covenants, terms, conditions, and provisions on the part of Seller to be
performed hereunder insofar as applicable to the work to be performed by each
party.
17. Default.
A. Seller's Default
(a) Seller shall be in default of its obligations under this
Agreement if any of the following events occurs:
(i) The failure of the Seller to perform or breach of any of the
covenants, agreements, or undertakings on its part to be performed under this
Agreement, provided that the Buyer shall give notice to the Seller as to such
failure and the Buyer shall not, within thirty (30) days after being so
notified, commence and diligently prosecute remedial action to cure such failure
to perform or breach which shall in any event be cured within ninety (90) days
of the date of such notice from Buyer;
(ii) Seller goes into liquidation, whether voluntary or
compulsory, or enters into a scheme of arrangement, or makes a general
assignment of its assets for the benefit of its creditors, or a receiver or
receivers of any kind whatsoever, whether temporary or permanent, is appointed
for the property of Seller, or Seller institutes proceedings for its
reorganization or the institution of such proceedings by creditors and approval
thereof by the court, whether proposed by a creditor, a stockholder or any other
person whomsoever, or Seller suffers any execution against a major portion of
its assets which is not satisfied within seven (7) days, or Seller fails
generally, or admits in writing its inability, to pay its debts generally as
they become due.
(b) If any default by Seller occurs as defined in Subparagraph (a) of
this Paragraph 17(A), Buyer, at its election, may upon prompt notice to Seller
terminate this Agreement without prejudice and exercise all rights and remedies
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available to Buyer at law, in admiralty, or in equity. Prior to exercise of any
remedy involving or which includes ant attempt to take control or possession of
the Platform or any components thereof or work in progress, directly or through
judicial process, if Seller disputes that it is in default, Buyer shall first be
required to post with Seller a corporate surety bond from a first class U.S.
Surety acceptable to Seller in a form reasonable satisfactory to Seller. Such
bond shall be in an amount equal to 150% of any sum claimed by Seller under this
Agreement.
A. Buyer's Default
(a) Buyer shall be in default of its obligations under this Agreement
if any of the following events occurs:
(i) In the event of failure by Buyer to pay to Seller any
installments which are properly payable pursuant to Paragraph 2(b) hereinabove
or the failure of the Seller to perform or breach of any of the other covenants,
agreements, or undertakings on its part to be performed under this Agreement,
provided that the Buyer shall give notice to the Seller as to such failure and
the Buyer shall not, within five (5) days in the case of failure to pay or to
take delivery of the Platform when completed under the terms of this Agreement
and thirty (30) days in the case of other defaults after being so notified, cure
such failure to perform or breach;
(ii) Buyer goes into liquidation, whether voluntary or
compulsory, or enters into a scheme of arrangement, or makes a general
assignment of its assets for the benefit of its creditors, or a receiver or
receivers of any kind whatsoever, whether temporary or permanent, is appointed
for the property of Buyer, or Buyer institutes proceedings for its
reorganization or the institution of such proceedings by creditors and approval
thereof by the court, whether proposed by a creditor, a stockholder or any other
person whomsoever, or Buyer suffers any execution against a major portion of its
assets which is not satisfied within seven (7) days, or Buyer fails generally,
or admits in writing its inability, to pay its debts generally as they become
due.
(b) If any default by Buyer occurs as defined in subparagraph (a) of
this Paragraph 17(B), Seller, at its election, may upon prompt notice to Buyer
suspend its performance under this Agreement and at any time thereafter may
terminate this Agreement without prejudice and exercise all rights and remedies
available to Seller at law, in admiralty, or in equity.
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<PAGE>
18. Litigation.
(a) Buyer and Seller agree that any legal suit, action, or proceeding
arising out of or relating to this Agreement may be instituted only in a state
or federal court in Harris County, Texas, United States of America.
(b) Buyer hereby designates and appoints CT Corporation Systems Inc., 811
Dallas Avenue, Houston, Texas 77002 ("CT") as Buyer's authorized agent and
acknowledges on its behalf service of any and all process and, if through
reasonable efforts, service on CT has been unsuccessful, Buyer hereby designates
and appoints the Secretary of State, State of Texas, as Buyer's authorized agent
to accept and acknowledge on it behalf service of any and all process which may
be served in any such suit, action, or proceeding in any such State or federal
court in the State of Texas and agrees that service of process upon said agent
or the Assistant Secretary of State or any clerk having charge of the
corporation department of the office of said Secretary of State, at his office
in Austin, Texas, and written notice of said service to Buyer, mailed or
delivered to Buyer at the address specified for Buyer in Article 19 of this
Agreement shall be deemed in every respect effective service of process upon
Buyer in any suit, action, or proceeding and shall be taken and held to be valid
personal service upon Buyer, whether or not Buyer shall then be doing, or at any
time shall have done, business within the State of Texas, and that any such
service of process shall be of the same force and validity as if service were
made upon it according to the laws governing the validity and requirements of
such service in such State, and waives all claims of error by reason of any such
service.
(c) Seller hereby designates and appoints Frank Puglisi, AMFELS, Inc.,
Highway 48, Port of Brownsville, Brownsville, Texas 78523 ("Puglisi") as Buyer's
authorized agent and acknowledges on its behalf service of any and all process
and, if through reasonable efforts, service on Puglisi has been unsuccessful,
Seller hereby designates and appoints the Secretary of State, State of Texas, as
Seller's authorized agent to accept and acknowledge on it behalf service of any
and all process which may be served in any such suit, action, or proceeding in
any such State or federal court in the State of Texas and agrees that service of
process upon said agent or the Assistant Secretary of State or any clerk having
charge of the corporation department of the office of said Secretary of State,
at his office in Austin, Texas, and written notice of said service to Seller,
mailed or delivered to Seller at the address specified for Seller in Article 19
of this Agreement, shall be deemed in every respect effective service of process
upon Seller in any suit, action, or proceeding and shall be taken and held to be
valid personal service upon Seller, whether or not Seller shall then be doing,
or at any
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<PAGE>
time shall have done, business within the State of Texas, and that any such
service of process shall be of the same force and validity as if service were
made upon it according to the laws governing the validity and requirements of
such service in such State, and waives all claims of error by reason of any such
service.
19. Notice.
Any notice provided for under this Agreement must be given in writing, but
may be served by depositing same in the mail, addressed to the party to be
notified, postage paid, and registered or certified with return receipt
requested, or by delivering same in person to such other party, or by pre-paid
telegram, telex, facsimile confirmed by mail, or cable. For purposes of notice,
the addresses of the parties shall be:
If to Buyer: Chiles Offshore Inc.
2000 West Loop South, Suite 2130
Houston, Texas 77027
Telephone: (713) 552-1400
Facsimile: (713) 552-9998
Attention: William E. Chiles
If to Seller: AMFELS, Inc.
P.O. Box 3107
Highway 48
Port of Brownsville
Brownsville, Texas 78523
Telephone: (210) 831-8200
Facsimile: (210) 831-6220
Attention: Eric Phua
Provided, however, that each party shall have the continuing right to change its
address of notice at any time or times by the giving of 10 days notice in the
manner hereinabove described. Notices shall be deemed given only upon receipt or
by facsimile confirmation.
20. Successors and Assigns.
This Agreement shall inure to the benefit of, and shall be binding upon,
the parties hereto, and their respective successors and assigns. It is expressly
understood and agreed that neither party shall assign any of its rights, title
and interest thereto
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<PAGE>
without the prior written consent of the other party; provided, however, that
Buyer shall have the right to assign this Agreement to any entity that is
controlled through ownership or contractual rights by William E. Chiles,
provided that regardless of any such assignment Buyer shall remain primarily
liable to Seller for the performance of the obligations of Buyer under this
Agreement.
21. Governing Law.
This Agreement shall be deemed to have been made under, shall be construed
and interpreted in accordance with the laws of the State of Texas, excluding any
conflicts of law rule or law which might refer such construction and
interpretation to the laws of another state, republic or country; provided,
however, that all matters relating to the interpretation of any patent or patent
application will be decided in accordance with the laws of the county which
issued the patent to be interpreted or in which the patent applications to be
interpreted have been filed.
22. Modification or Waiver.
This Agreement, which incorporates all prior negotiations and
understandings relating to the subject matter thereof, sets forth the entire
agreement of the parties hereto and shall not be modified except by a written
instrument executed by the duly authorized representatives of Seller and Buyer.
The failure of either party to insist upon strict performance of any provision
hereof shall not constitute a waiver of or estoppel against asserting the right
to require such performance in the future, nor shall a waiver or estoppel in any
one instance, constitute a waiver or estoppel with respect to a later breach of
a similar nature or otherwise.
23. Reliance.
AS MORE FULLY SET FORTH IN OTHER PROVISIONS OF THIS AGREEMENT, SELLER AND
BUYER HAVE REACHED EXPRESS AGREEMENT WITH RESPECT TO THE LIMITATION OF THE
LIABILITY OF SELLER AND LETOURNEAU IN CONNECTION WITH THIS AGREEMENT AND THE
WAIVER REFERRED TO IN SECTION 24 HEREINBELOW. SELLER AND BUYER EXPRESSLY
RECOGNIZE THAT (A) THE PRICE FOR WHICH SELLER HAS AGREED TO PERFORM ITS
OBLIGATIONS UNDER THIS AGREEMENT HAS BEEN PREDICATED ON THE AFORESAID LIMITATION
OF LIABILITY AND WAIVER (IT BEING ACKNOWLEDGED THAT BUYER COULD HAVE NEGOTIATED
WITH SELLER FOR MODIFICATIONS TO THE LIMITATION OF
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<PAGE>
SELLER'S AND LETOURNEAU'S LIABILITY AND THE WAIVER BUT THAT THE PRICE OF THE
PLATFORM WOULD HAVE BEEN INCREASED TO REFLECT SUCH MODIFICATIONS), AND (B)
SELLER, IN DETERMINING TO PROCEED WITH THE PERFORMANCE OF ITS OBLIGATIONS
PURSUANT TO THIS AGREEMENT, HAS EXPRESSLY RELIED ON SUCH LIMITATION OF LIABILITY
AND WAIVER AND WOULD NOT HAVE EXECUTED THIS AGREEMENT BUT FOR SUCH LIMITATION OF
LIABILITY AND WAIVER.
24. Waiver of Consumer Rights and Representations of Buyer
BUYER HEREBY WAIVES THE SPECIAL RIGHTS AND PROTECTION PROVIDED BY THE
PROVISION OF THE TEXAS DECEPTIVE TRADE PRACTICE ACTS-CONSUMER PROTECTION,
CHAPTER 17, SUBCHAPTER E, SECTIONS 17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN
SECTION 17.555 WHICH IS NOT WAIVED), VERNON'S TEXAS CODES ANNOTATED, BUSINESS
AND COMMERCE CODE. TO EVIDENCE ITS ABILITY TO GRANT SUCH WAIVER, BUYER HEREBY
REPRESENTS AND WARRANTS TO SELLER THAT BUYER (a) IS IN THE BUSINESS OF SEEKING
OR ACQUIRING, BY PURCHASE OR LEASE, GOODS OR SERVICES FOR COMMERCIAL OR BUSINESS
USE AND IS ACQUIRING THE GOODS AND SERVICES COVERED BY THIS AGREEMENT FOR
COMMERCIAL OR BUSINESS USE, (b) HAS ASSETS OF $5,000,000 OR MORE ACCORDING TO
ITS MOST RECENT FINANCIAL STATEMENT PREPARED IN ACCORDANCE WITH GENERALLY
ACCEPTED ACCOUNTING PRINCIPALS, (c) HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL
AND BUSINESS MATTERS THAT ENABLE IT TO EVALUATE THE MERITS AND RISKS OF THE
TRANSACTIONS CONTEMPLATED HEREBY, (d) IS NOT IN A SIGNIFICANTLY DISPARATE
BARGAINING POSITION; AND (e) IS REPRESENTED BY LEGAL COUNSEL IN THIS TRANSACTION
WHICH WAS NOT IDENTIFIED, SUGGESTED OR SELECTED BY SELLER. Buyer's
representations and warranties shall survive the performance of all work in
connection with this Agreement and shall remain effective
regardless of any investigation at any time made by or on behalf of Seller or
any information Seller may have with respect thereto. Buyer hereby agrees to
protect, indemnify, and hold Seller, LeTourneau, and their respective Affiliates
free and harmless from and against any and all losses, costs (including, without
limitation, the cost of the suit and reasonable attorneys' fees), claims, causes
of action, and liabilities arising out or resulting from, or relating in any way
to the breach of the aforesaid representations and warranties.
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25. Export Laws.
In accordance with the Export Administration Regulations issued by the
United States Department of Commerce to enforce the Export Administration Act of
1979, as amended from time to time, Buyer hereby gives written assurance to
Seller that neither the Equipment nor the direct product thereof (including,
without limitation, the Platform) nor any technical data is intended to be
shipped, directly or indirectly, to any country, person, or other entity
contrary to any laws, regulations or administrative orders of the United States
or other jurisdiction applicable to a transaction affecting this Agreement
and/or the LeTourneau Agreements. Buyer further acknowledges that Seller, in
determining to execute this Agreement and perform its obligations under this
Agreement, has expressly relied on the written assurance contained in the
immediately preceding sentence.
26. Licenses.
Notwithstanding anything in this Agreement to the contrary, it is expressly
understood that the obligations of Seller hereunder are subject to and
conditioned upon the timely issuance of all required consents, approvals,
rulings, licenses (including, without limitation, export licenses and reexport
licenses), and order in form and substance satisfactory to Seller from all
agencies, governments, or other bodies having or purporting to have jurisdiction
or control over any matters covered by or arising out of this Agreement or the
LeTourneau Agreements. Seller shall have no liability (including, without
limitation, any liability for damages, whether special, incidental,
consequential, or otherwise) if Seller is unable to obtain, or is delayed in
obtaining, any such required consent, approval, ruling, license, or order.
27. Computation of Time.
All periods of time shall be computed by including Saturdays, Sundays and
holidays except that if such period terminates on a Saturday, Sunday or holiday
it shall be deemed extended to the business day next succeeding. All references
in this Agreement to days shall mean calendar days.
28. Severability.
This Agreement shall cease and terminate if for any reason any of the terms
and conditions of Sections 11(g) and 14 of this Agreement (hereinafter
collectively referred to as the "Limitation of Liability Clauses") are held by
any court of competent
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jurisdiction to contravene or to be invalid under the laws of any political body
having jurisdiction over the subject matter hereof or thereof; provided,
however, that notwithstanding the termination of this Agreement, Seller shall
retain all progress payments then made and Buyer shall be obligated to pay to
Seller the price for that portion of the Platform then constructed for which
progress payments have not yet been made and all work in process (including
profit on all to Seller) on or before such termination. Buyer and Seller agree
not to take any action either on their own behalf, or by way of providing
assistance to or cooperating with any third party for the purpose of
invalidating any of the Limitations of Liability Clauses. If any of the terms
and conditions of this Agreement other than the terms and conditions referred to
in this Section 26 are held by any court of competent jurisdiction to contravene
or to be invalid under the laws of any political body having jurisdiction over
the subject matter hereof, such contravention or invalidity shall not invalidate
the entire Agreement, but, instead, this Agreement shall be construed as if not
containing the particular provision or provisions held to be invalid and the
rights and obligations of the parties shall be construed and enforced
accordingly and this Agreement shall thereupon and thereafter remain in full
force and effect.
29. Confidentiality and Ancillary Agreements.
For and in consideration of the mutual covenants and provisions hereof,
Buyer and Seller shall contemporaneously with the execution of this Agreement
execute and deliver to the other a Confidentiality Agreement and Ancillary
Agreement in the forms attached hereto as Exhibits "C" and "D".
30. Construction.
The parties to this Agreement having been represented by legal counsel of
their own choosing in connection with the negotiation and drafting of this
Agreement, this Agreement shall be construed and interpreted for all purposes
without regard to the author of any specific language appearing herein. The
headings contained in this Agreement are for reference purposes only and shall
not affext in any way the meaning or interpretation of this Agreement.
31. Option Platform.
(a) Seller hereby grants to Buyer an option (the "Option") to have Seller
construct and sell to Buyer a mobile, self contained and elevating platform with
the
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<PAGE>
same specifications as the Platform (the "Option Platform") for a fixed purchase
price (without the LeTourneau kit) as follows:
(i) if the Option is exercised between April 30, 1997 and July 31,
1997- U.S. $42,200,000;
(ii) if the Option is exercised between August 1, 1997 and November
30,1997- U.S. $42,620,000; and
(iii) if the Option is exercised between December 1, 1997 and
April 29,1998- U.S. $43,050,000.
(b) The purchase price excluding the LeTourneau kit for the Option
Platform shall be paid on the following schedule:
<TABLE>
<S> <C>
(i) Contract Signing- 15%
(ii) Start Fabrication/2000 tons of steel delivered- 15%
(iii) Lay keel- 20%
(iv) Install 3rd spud can- 20%
(v) Launch- 20%
(vi) Delivery- 10%
</TABLE>
The above milestone payments mentioned above shall become due upon completion of
each event.
(c) The Option shall be exercised by Buyer by written notice delivered to
the Seller as provided in Section 19 hereinabove by the dates set forth in
Section 31(a) above.
(d) The Option Platform shall be constructed by Seller and purchased by
Buyer pursuant to a Platform Construction Contract containing the terms of
Section 31(a) above as to price, the terms of Section 31(b) above as to the
payment schedule, and the terms and conditions of this Agreement as to other
provisions other than scheduled delivery which shall be agreed by Buyer and
Seller. The obligations of Seller
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<PAGE>
to construct and sell the Option Platform and the obligations of Buyer to
purchase and accept the Option Platform as provided herein are expressly subject
to and conditioned upon agreement to the scheduled delivery date in the sole
discretion of such parties.
(e) Buyer's obligation to purchase the Option Platform after exercise of
the Option and Seller's obligation to construct and sell the Option Platform to
Buyer after exercise of the Option shall be subject and conditioned upon:
(i) Presentation by Seller within thirty (30) days of the exercise of
the Option of written price and delivery schedule for a
LeTourneau kit for the Option Platform (provided LeTourneau will
commit to a firm price and delivery).
(ii) Commitment in writing by Seller within thirty (30) days of the
exercise of the Option of a revised purchase price for the Option
Platform based on the LeTourneau kit price and any other changes
to the Option Platform requested by Buyer.
(iii) Notice by Buyer that within the thirty (30) day period
referred to in (i) above that after review of the revised
price and delivery schedule that referred to in (i) above
Buyer wishes to proceed with the Option. If Buyer fails to
give such notice within the required time or notifies Seller
that it does not wish to proceed with the Option, the Option
shall terminate and Buyer shall have no further rights in or
to the Option Platform.
(iv) The negotiation and execution of contracts between Seller and
LeTourneau including an ancillary Agreement and confidentiality
agreement, in form and substance satisfactory to Seller, Buyer,
and LeTourneau.
(v) Performance by LeTourneau under the LeTourneau Agreements.
(f) As used herein, the LeTourneau kit shall mean the elevating units, leg
material, cranes, skidding systems, and raw water tower elevating system for a
LeTourneau 116-C platform.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on their behalf by their respective duly authorized representatives on the date
first shown above.
AMFELS, INC.
By: /s/ [Illegible]
-------------------------------
Title: President
CHILES OFFSHORE, INC.
By: /s/ William E. Chiles
-------------------------------
Title: President & CEO
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<PAGE>
Exhibit 10.3
ASSIGNMENT AND ASSUMPTION AND CONSENT TO ASSIGNMENT
Assignment and Assumption (this "Assignment") dated as of the 5th day of
August, 1997, between COI, LLC, a Delaware limited liability company (the
"Assignor") and CHILES OFFSHORE LLC, a Delaware limited liability company (the
"Assignee").
WHEREAS, Chiles Offshore inc., a Delaware company ("Chiles") and Amfels,
Inc. ("Amfels") are parties to the Platform Construction Agreement, the
Ancillary Agreement and the Confidentiality Agreement, all dated April 30, 1997
(collectively, the "Construction Contract"), concerning the construction, sale
and purchase of a mobile offshore drilling platform being built by Amfels at its
Brownsville, Texas yard; and
WHEREAS, Chiles and the Assignor merged, effective as of July 31, 1997,
with the Assignor being the surviving entity and the successor by merger to all
Chiles' rights and obligations in and to the Construction Contract; and
WHEREAS, the Assignor wishes to assign to the Assignee all of it right,
title and interest to and obligations under the Construction Contract.
NOW, WHEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, the parties agree as follows:
1. The Assignor hereby transfers, assigns and grants absolutely to the
Assignor and not by way of security, all of its right, title and interest to and
obligations under the Construction Contract. The Assignee hereby accepts such
assignment and assumes and agrees to fulfill and carry out, as of the date of
this Assignment, all of the liabilities, obligations, duties and terms and
conditions applicable to the Assignor under the Construction Contract.
2. The Assignor represents and warrants that the Construction Contract is
in full force and effect and there are no events which would constitute a
default by the Assignor under the terms of the Construction Contract.
3. The Assignor hereby warrants and represents that, except for the
granting of a security interest in the Construction Contract, to Seacor Smit
Inc. pursuant to the Security Agreement between Chiles and Seacor Smit Inc.
dated as of July 18, 1997, it has not assigned or pledged, the whole or any part
of the Construction Contract hereby assigned to anyone other than the Assignee
and it will not take or omit to take any action, the taking or omission of which
might result in an alteration or impairment of the Construction Contract or this
Assignment.
<PAGE>
4. The Assignor agrees that at any time and from time to time, upon the
written request of the Assignee or its successors or assigns, it will promptly
and duly execute and deliver any and all such further instruments and documents
necessary or desirable to put into effect the assignment contained herein.
5. This Assignment shall be governed by and construed under the internal
laws of the State of Texas and may not be amended or changed without the written
consent of the parties hereto.
6. This Assignment may be signed in multiple counterparts, all of which
shall constitute one agreement.
IN WITNESS WHEREOF, the parties hereto have executed this document as of
the date first above written.
COI, LLC
By: /S/ William E. Chiles
-------------------------------
William E. Chiles
President
CHILES OFFSHORE LLC
By: /S/ William E. Chiles
-------------------------------
William E. Chiles
President
THE ABOVE MENTIONED MERGER AND ASSIGNMENT ARE HEREBY CONSENTED TO AND ACCEPTED
THIS 5TH DAY OF AUGUST, 1997.
AMFELS, INC.
By: /S/ G.S.Tan
-------------------------------
G.S. Tan
Executive Vice-President
2
<PAGE>
Exhibit 10.4
PLATFORM CONSTRUCTION AGREEMENT
This Agreement including the Exhibits attached hereto which are
incorporated by reference herein and made a part hereof (hereinafter referred to
as this "Contract"), entered into on the 5th day of August, 1997, by and between
CHILES OFFSHORE LLC, a limited liability company organized under the laws of the
State of Delaware (hereinafter referred to as "Buyer") and AMFELS, INC., a
corporation organized under the laws of the State of Texas (hereinafter referred
to as "Seller");
WITNESSETH:
1. Description of Platform.
(a) Seller hereby agrees with Buyer to commence the construction of, at
Seller's shipyard at Brownsville, Texas ("Seller's Yard), to prosecute in
accordance with good shipyard practice to completion, and to deliver to Buyer by
September 10, 1999 (such date as the same may be extended under the terms of
this Agreement is referred to herein as the "Scheduled Delivery Date"), at
Seller's Yard a mobile, self-contained and elevating platform, being Seller's
Yard No. P179, in accordance with (i) Seller's specifications No. 9701 Revision
2 therefor, dated May 21, 1997 and all related drawings, plans and data, whether
now or hereafter prepared by Seller (hereinafter referred to collectively as the
"Specifications"), the said Specifications having been (or shall be in instances
where specifications, drawings, plans, and data are hereafter prepared)
initialed by Seller and Buyer as evidence of the accuracy thereof and being (and
to be) hereby incorporated by reference as part of this Agreement and (ii) the
certain rules of the American Bureau of Shipping (hereinafter referred to as
the "ABS"); Rules for Building and Classing Offshore Mobile Drilling Units,
1996, Part 3, Hull Construction and Equipment, Sections 1 through 10 which were
in effect and enforced against Seller by the ABS on April 1, 1997 and which are
specified and limited in Part I of the Specifications. For purposes of this
Agreement, the mobile, self-contained, and elevating platform be constructed and
delivered to Buyer in accordance herewith shall be referred to as the
"Platform". Buyer hereby agrees with Seller to purchase the Platform from
Seller, and to pay Seller for same, all in accordance with the provisions of
this Agreement.
(b) If any conflict or inconsistency shall arise between this Agreement
and the Specifications, this Agreement shall prevail. Similarly, if any conflict
or inconsistency shall arise between the written Specifications and the
Specification drawings, the written Specifications shall prevail. In the event
of a dispute as to conformity with ABS classification requirements, the decision
of the ABS shall be final.
(c) Notwithstanding anything in this Agreement to the contrary, it is
expressly understood that the obligations of Seller under this Agreement are
subject to and conditioned
<PAGE>
upon the full and timely performance by Seller's Licensor LeTourneau, Inc.
("LeTourneau'') of its covenants, agreements, and undertakings and fulfillment
of all subjects and conditions under that certain License Agreement and Kit
Construction Agreement between Seller and LeTourneau dated August 1, 1997
(collectively the "LeTourneau Agreements"), copies of which have been provided
to Buyer. Seller shall have no liability of any nature whatsoever, including
damages (whether direct, incidental, consequential, special, or otherwise) to
Buyer if LeTourneau is unable to or otherwise fails or refuses to fully and
timely perform all of its covenants, agreements, and undertakings under the
LeTourneau Agreements or if all subjects and conditions under the LeTourneau
Agreements are not fully and timely met. As used in this Agreement, "Package"
and "Equipment" shall have the meanings set forth in the LeTourneau Agreements.
In the event LeTourneau is unable to or otherwise fails or refuses to fully and
timely perform all of its covenants, agreements, and undertakings under the
LeTourneau Agreements or if all subjects and conditions under the LeTourneau
Agreements are not fully and timely met and as a result thereof Seller is
delayed in the construction of the Platform for ninety (90) days, Seller and
Buyer shall each have the right to terminate this Agreement without further
liability of either party to the other except that Seller shall retain all
progress payments made pursuant to Paragraph 2(b) hereinbelow and shall be paid
by Buyer for the price for that portion of the Platform then constructed for
which progress payments have not yet been made and all work in process
(including profit on all to Seller).
(d) In the event that any of the equipment or materials required to be
furnished by Seller in the performance of the work under this Agreement cannot
be timely procured or are in short supply, Seller may supply other materials and
equipment complying with the requirements of this Agreement and the
Specifications.
2. Contract Price.
(a) As consideration for Seller's construction of the Platform in
accordance with the terms of this Agreement, Buyer agrees to pay Seller the sum
of U.S. Dollars Sixty Two Million Four Hundred Thousand, ($62, 400,000.00)
subject to adjustment as provided in this Agreement including Exhibit "A" hereto
(hereinafter referred to as the "Contract Price") at Seller's office at
Brownsville, Texas or at such other place as Seller may from time to time
designate in writing to Buyer.
(b) The Contract Price shall be paid by Buyer to Seller in installments as
provided in Exhibit "A" attached to and made a part of this Agreement. Wire
transfer shall be made to Seller's account at Texas Commerce Bank as follows:
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Texas Commerce Bank, Rio Grande Valley
1034 E. Levede Street
Brownsville, Texas 78520
Officer: Irv Downing
ACCOUNT NUMBER 6700278275
ABA NUMBER113000609
(c) Seller shall submit to Buyer invoices at least five (5) working days
prior to the date any payment is due under this Agreement.
(d) Any agreed lump sum change order (other than proposed Change Order No.
1 dealing with the matters described in Exhibit B attached hereto which shall be
paid as agreed by the parties hereto) shall be paid 50% of the change order
value upon confirmation of change order and the balance of 50% on the last
scheduled installment as stipulated subparagraph (b) above. For change orders
performed on time and material basis, payments shall be made monthly based upon
percentage of completion of the change.
(e) All costs for ABS approvals for the Platform are for the Seller's
account with the exception of Buyer furnished equipment and materials.
(f) Prior to delivery of the Platform, the Seller shall furnish evidence
satisfactory to the Buyer showing that no liens, claims, security interests or
rights in rem of any kind have been or can be acquired against the Platform by,
through, or under Seller.
(g) All progress payments, payments for change orders, and other sums
owing by Buyer to Seller under this Agreement must be paid in full at the time
of delivery of the Platform under this Agreement and in any event prior to
departure of the Platform from Seller's Yard. If Buyer disputes in good faith
any sums claimed by Seller under or in connection with this Agreement, Buyer
shall provide to Seller a corporate surety bond from a first class U.S. surety
acceptable to Seller in a form reasonable satisfactory to Seller. Such bond
shall be in an amount equal to 150% of the disputed sum. The bond must be
executed and delivered to Seller at the time of delivery of the Platform under
this Agreement and in any event prior to departure of the Platform from Seller's
Yard.
(h) All amounts owing to Seller by Buyer hereunder shall bear interest at
the lesser of the highest lawful rate or the rate of eighteen percent (18%) per
annum from the date notice of failure to pay is received by Buyer and Buyer
fails to pay same within thirty (30) days until paid in full.
3. [Intentionally Omitted]
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4. Representatives and Progress of Platform.
(a) Seller will furnish office space and parking facilities at the Yard
for Buyer's authorized representatives (the "Representative"), who will have
complete and unrestricted access to the Yard of Seller, or its subcontractors,
where the Platform under this Agreement is being constructed. The office
provided to Buyer will have telephone, telefax, and duplicating facilities.
Costs for long distance telephone calls, telefaxes, and duplication will be for
Buyer's account. Such authorized Representatives shall have the right to make
inspection of workmanship, material, equipment and supplies as the construction
of the Platform progresses and shall notify Seller in writing of any
deficiencies noted therein, and Seller will then take such steps as are
necessary to correct such deficiencies. Seller shall give notice to Buyer and
its Representative at least forty-eight (48) hours in advance of the date and
place of all tests, trials, and inspections. Inspections shall be made so as not
to impede the progress of the construction of the Platform and if defective or
non-conforming workmanship or material is rejected, rejection shall be made
promptly in order that Seller may minimize the expense and disruption of
construction. In the event Buyer's Representative shall fail to be present at
any properly notified test, trial, or inspection, the results thereof shall be
binding on Buyer. Buyer shall ensure that its Representative shall not in
performing their inspections obstruct the construction schedule for the
Platform. If Buyer's Representative fails to promptly submit to Seller
notification of any non-conforming work discovered by Buyer's Representative,
Buyer shall be deemed to have approved such item and Buyer shall be precluded
from making demand for correction of such item, refusing to accept tender of
delivery of the Platform, or claiming such item as a warranty defect under
Seller's warranty set forth in Section 11 herein below.
(b) In all working hours during the construction of the Platform until
delivery thereof, the Representative and all assistants of the Representative
shall be given free and ready access to the Platform and to any other place
where construction of the Platform is being done or materials are being
processed or stored in connection with the construction of the Platform,
including the yards, workshops, stores and offices of Seller, and the premises
of subcontractors of Seller who are doing work for the Platform or storing
materials at such premises in connection with the Platform's construction.
(c) Seller shall appoint a project manager who shall be the direct
interface with the Buyer's-Representative, with full authority to act for Seller
under this Agreement.
(d) If any difference in opinion between parties hereto shall arise during
the construction of the Platform concerning technical matters in respect of the
materials and workmanship covered by the ABS rules, such difference in opinion
shall be referred to ABS whose opinion thereof shall be final and binding upon
both parties.
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(e) Within thirty (30) days of the date of this Agreement the Seller shall
deliver to the Buyer a key event production schedule (the "Production Schedule")
showing planned construction progress of the Platform. The Production Schedule
shall be reasonably acceptable to the Buyer. The Seller shall develop an overall
Platform erection plan that integrates material delivery and assembly actions
needed to schedule work flow during all phases of construction. This plan shall
encompass sufficient planning data to assure that all phases of construction can
be adequately accomplished so as to deliver the Platform on or before the
Scheduled Delivery Date. The Platform erection/construction plan shall be
furnished to Buyer within sixty (60) days after the effective date of this
Agreement and shall, upon acceptance by Buyer, become by reference an integral
part of the Production Schedule. The Scheduled Delivery Date shall be extended
by any delay caused by act or omission of Buyer, failure to timely deliver to
Seller any Buyer Furnished Equipment, delays caused by ABS or any governmental
agency, changes, events of force major, or inability of or failure or refusal of
LeTourneau to fully and timely perform all of its covenants, agreements, and
undertakings under the LeTourneau Agreements or if all subjects and conditions
under the LeTourneau Agreements are not fully and timely met.
(f) Included in the Specifications is a list of tests and trials to be
performed by Seller in connection with the completion of the Platform. Buyer's
Representative shall be given the number of days of prior notice for each
applicable test or trial as set forth in the Specifications.
5. Changes and Additional Work.
(a) Buyer shall have the right, at any time or times, to request that
reasonable change or changes be made in any of the Specifications, and Buyer
shall issue to Seller a written change order to be executed by Buyer and Seller;
provided, however, if such requested change or changes in the aggregate would
materially increase the overall scope of work so as to adversely impact Seller's
other work or commitments or if LeTourneau refuses to agree to any requested
change with respect to the Package or the Equipment or if Seller and Buyer
cannot reach agreement as to a lump sum price or credit or change in the
Scheduled Delivery Date or other terms and conditions of this Agreement or the
Specifications, Seller shall have no obligation to Buyer to perform same. If any
change necessitates an increase or decrease in the quantity or quality of the
materials or the nature of the labor to be furnished by Seller for the Platform,
then the Contract Price shall be increased or decreased on a lump sum basis in
accordance with the mutual agreement of the parties. Seller shall be entitled to
make minor changes to the Specifications, if found necessary, for the
introduction of improved production methods or otherwise, subject to Buyer's
approval not to be unreasonably withheld.
(b) If any such change will prolong the time for completion of the
Platform, the Scheduled Delivery Date provided hereunder shall be extended
accordingly.
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(c) Seller and Buyer recognize that the Contract Price set forth
hereinabove is based upon the scope of work for the platform designated as
Seller's Yard No. P178 and that the license agreement from LeTourneau is
specifically limited to the LeTourneau Super 116 design. Accordingly, the
parties agree that the Platform will be built as a Super 116 and that the
Specifications will be amended and changed to accommodate same at such time as
LeTourneau supplies the drawings and other information for the Super 116 design
and that this change will be reflected as Change Order No. 2. If this mandatory
change necessitates an increase or decrease in the quantity or quality of the
materials or the nature of the labor to be furnished by Seller for the Platform,
then the Contract Price shall be increased on a lump sum basis in accordance
with the mutual agreement of the parties. Seller will provide Buyer with
Seller's estimate of the change in the Contract Price within forty five (45)
days of receipt of all information and drawings from LeTourneau related to
Change Order No. 2. Buyer will within thirty (30) days thereafter advise Seller
in writing whether Buyer accepts or rejects such change in the Contract Price
and if rejected then Buyer's notice of rejection shall include Buyer's estimate
of the change in the Contract Price. In the event of rejection by Buyer, the
parties shall negotiate in good faith in an effort to reach resolution of the
dispute. In the event the parties, despite good faith negotiations, are unable
to agree to the lump sum price for this change, then Seller shall be entitled to
equitable and reasonable compensation (including profit) for performing same and
the amount of this compensation shall be determined by final and binding
arbitration utilizing in accordance with the Construction Industry Rules of the
American Arbitration Association. The arbitration shall be held in Houston,
Texas. Each of the parties shall nominate their own party arbitrator and the two
party arbitrators shall select the third arbitrator. In the event the party
arbitrators shall be unable to agree to the third arbitrator within ten (10)
days, the third arbitrator shall be appointed by the American Arbitration
Association. All arbitrators shall be commercial persons (and not attorneys)
with at least ten (10) years experience in the construction of mobile offshore
jackupdrilling rigs. The third arbitrator shall have no prior or current
business relationship to either party or their counsel of record. The decision
of the majority of the arbitrators shall be final, binding and enforceable in
any court of competent jurisdiction and the Parties agree that there shall be no
appeal from the arbitrators' decision. The arbitrators shall render their
decision within ninety (90) days after selection of the third arbitrator, but in
any event prior to delivery of the Platform.. The arbitrators must select either
Seller's or Buyer's price and shall have no authority to determine any other
figure for compensation to Seller for this mandatory change.
6. Buyer Furnished Equipment.
(a) Within forty five (45) days of the execution of this Agreement, Seller
shall furnish to Buyer a schedule of in-yard delivery dates of those items of
material, equipment, engineering data and information ("Buyer Furnished
Equipment"), as are set forth in the Specifications to be provided by Buyer. The
time for delivery of the Buyer Furnished
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Equipment as detailed on such delivery schedule shall be such so as to not cause
Seller to be delayed in the timely prosecution of the work in accordance with
the Production Schedule.
(b) Seller shall at its own cost install the Buyer Furnished Equipment.
Seller's scope of work includes all necessary foundations and supplies, such
as, but not limited to, electric power, air, fuel, steam, etc. All Buyer
Furnished Equipment shall be delivered by Buyer to Seller at Seller's Yard in
their assembled form, tested and in proper condition,ready for installation
in or on the Platform, in accordance with the Production Schedule. Seller
will assist Buyer in unloading all Buyer Furnished Equipment. Suitable
storage will be provided by Seller for all Buyer Furnished Equipment.
(c) In order to facilitate installation by Seller of the Buyer Furnished
Equipment on the Platform, Buyer shall furnish the Seller with all necessary
information including specifications, plans, drawings, instruction books,
manuals, test reports and certificates. Buyer, if so requested by Seller, shall
without any charge to Seller cause representatives of the manufacturers of the
Buyer Furnished Equipment to assist Seller in installation thereof in or on the
Platform and/or to carry out installation thereof by themselves or to make
necessary adjustments thereof at the Yard. Seller's scope of work under this
Agreement excludes any testing, adjustment of equipment, repair and modification
and supply of all inter-connecting parts.
(d) In the event of a delay in delivery of any Buyer Furnished Equipment,
then Buyer and Seller shall mutually agree on a new installation date of the
delayed Buyer Furnished Equipment. If no agreement is reached between both
parties within fifteen (15) days, then Seller shall have the right to proceed
with the construction of the Platform without installation of the delayed Buyer
Furnished Equipment on the Platform, without prejudice to Seller's other rights
as hereinabove provided, and Buyer shall accept and take delivery of Platform as
so constructed.
(e) On delivery of each consignment of Buyer Furnished Equipment, Seller
shall assist Buyer in the inspection of the consignment delivered. Any and all
of the Buyer Furnished Equipment shall be subject to Seller's reasonable right
of rejection as and if they are found to be unsatisfactory or in improper
condition for installation. In such instances, Seller shall first give adequate
notice to Buyer before being entitled to reject the Buyer Furnished Equipment.
(f) Should Buyer fail to timely deliver the Buyer Furnished Equipment as
provided in this Agreement and such delay results in increased costs to Seller,
Buyer shall reimburse Seller for such increased cost as and when incurred.
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<PAGE>
7. Liens.
Provided Seller is paid all amounts owing to Seller by Buyer under this
Agreement as and when due, Seller shall not place or create or permit to be
placed or created, any liens, charges, or encumbrances on, or security
interests as to, or pledges of, the Platform, and any lien, charge,
encumbrance or security interest so placed or created by or though Seller,
its subcontractors and suppliers, or any of them, shall be forthwith released
by the Seller. The Seller shall release and cause to be discharged any such
lien, charge, encumbrance or security interest. In the event Seller fails to
secure the discharge or release of any such lien, charge, encumbrance or
security interest, after notice to Seller the Buyer may secure the removal of
same, in which event the Seller shall reimburse the Buyer for its costs of
securing such discharge or release (which cost shall include any expenses
incurred in connection therewith) or at Buyer's sole option by deducting such
sum from any payments due or to become due the Seller's under this Agreement.
In the event such cost is in excess of the amount of any such reimbursement
by deductions, the Seller further agrees to pay the amount of such excess to
the Buyer upon demand.
8. Insurance.
Seller shall obtain and maintain during all times hereunder the following
insurances:
(a) Worker's Compensation (including occupational disease), United States
longshoremen Harbor Workers, and employer's liability insurance in accordance
with the applicable statutory requirements of the jurisdiction in which the
Platform is constructed, with maritime and in rem, alternate employer, and
voluntary compensation coverages, with limits on the employer's liability
coverage of not less than U.S. $1,000,000 for bodily injury per person and with
excess liability limits of not less than U.S. $1,000,000 per occurrence.
(b) Broad Form Comprehensive General Liability Insurance covering all of
the operations of Seller, including Contractual Liability and Contractor's
Protective Liability with a combined single limit of not less than U.S.
$1,000,000 per occurrence for bodily injury and/or property damage, including
products and completed operations coverage with excess liability limits of not
less than U.S. $1,000,000 per occurrence.
(c) Each of the foregoing insurance policies shall, either on the face
thereof or by appropriate endorsement name (except for the policies specified in
subparagraph (a) above) Buyer as an additional assured with respect to the
indemnities of Seller assumed under this Agreement, provide that the insurance
policy shall not be cancelled or coverage reduced except upon 30 days prior
written notice to Buyer, contain waivers of subrogation pursuant to which the
insurer waives all express or implied rights of subrogation against Buyer,
provide that Buyer
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shall not be liable for premiums or calls, and be retained in full force and
effect by Seller until the conclusion of the Platform hereunder as provided
below. Seller shall be responsible for all deductibles and self insured
retentions, to the extent the loss or claim would otherwise be covered by
Seller's indemnities contained in this Agreement. Concurrently with the
execution of this Agreement, Seller shall furnish to Buyer certificates or other
evidence satisfactory to the other of the insurance required hereunder.
(d) Until final delivery of the Platform, Seller shall its own cost and
expense, keep the Platform and all materials either delivered to the Yard or
being handled by Seller for the Platform or built into, or installed in or
upon the Platform fully insured under coverage and with underwriters
satisfactory to the Buyer and not more restrictive than the current form of
London or American Institute Clauses for Builder's Risks or equivalent form,
including tests and trials clauses. The Builder's Risks insurance shall
include supplemental coverage for war risks, strikes, lockouts, labor
disturbances, riot or civil commotion, earthquakes, and protection and
indemnity risks. The amount of such insurance coverage shall be in an amount
at least equal to the Contract Price and shall be increased from time to time
to cover the cost of all changes, alterations, or modifications.
(e) The Builders Risks policy shall be taken out in the joint names of
Seller Buyer and all losses under such policy shall be payable to the Seller
in accordance with their respective interests. The policies shall provide
that there shall be no recourse against the Buyer for the payment of premiums
or other charges and shall further provide that at least thirty (30) days'
prior written notice of any material alteration, cancellation, or
cancellation for the non-payment of premiums or other charges shall be given
to the Buyer by the insurance underwriters. Any deductible under this
insurance policy shall be for the account of Seller.
9. Title and Risk of Loss.
(a) Title to the Platform, to the extent completed and all materials
destined for incorporation therein, whether located at Seller's Yard or
elsewhere, shall immediately vest in Buyer when the same is paid for by
Buyer, whether prior to or after incorporation into the Platform. The vesting
of title shall not relieve Seller of its obligation to replace damaged or
defective materials at Seller's expense and to complete and deliver the
Platform in accordance with the provisions of this Agreement. Risk of loss of
the Platform shall pass to Buyer upon delivery and acceptance thereof in
accordance with this Agreement.
(b) To the extent that title to any part of the Platform or the materials
destined for incorporation in the Platform has passed from Seller to Buyer or
Buyer otherwise obtains any rights therein, whether now owned or hereafter
acquired, Buyer as debtor hereby grants to Seller as a secured party a security
interest and lien upon same and all right, title, and interest of Buyer thereto
and the proceeds and products thereto, to secure the performance of Buyer
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under this Agreement and the payment to Seller of all required to be paid by
Buyer to Seller under this Agreement; provided, however, the security interest
granted to the Seller by this Section 9 (b)shall be subordinate to any liens or
security interests granted by Buyer to its lenders on Buyer's interest in this
contract and the Platform. In connection herewith, Seller shall upon Buyer's
default under this Agreement have all rights and remedies of a secured party
under the Uniform Commercial Code of Texas. The security interest and lien
granted to Seller hereunder and the rights and remedies of Seller herein shall
be deemed cumulative and in addition to the rights and remedies otherwise
available to Seller at law or in equity or in contract, including without
limitation the rights of Seller under Article 2 of the Texas Uniform Commercial
Code which shall not be subordinate to any liens or security interests granted
by Buyer to its lenders.
(c) If the Platform or any Buyer Furnished Equipment shall be damaged by
any insured cause whatsoever prior to acceptance thereof by Buyer and such
damage does not constitute an actual or a constructive total loss of the
Platform, Seller and/or Buyer shall apply the amount recovered under the
insurance policy referred to in Paragraph 8(d) of this Agreement to the repair
of such damage and Buyer shall accept the Platform under this Agreement if
completed in accordance with this Agreement and the Specifications. The
Production Schedule including the Scheduled Delivery Date shall be deemed
extended by the time necessary to repair such damage.
(d) In the event of an actual or constructive total loss of the Platform
prior to delivery, this Agreement shall automatically be deemed terminated, and
Seller shall retain all progress payments made pursuant to Paragraph 2(b)
hereinbelow and shall be paid by Buyer for the price for that portion of the
Platform then constructed for which progress payments have not yet been made and
all work in progress (including profit on all to Seller). In the event that the
actual or constructive total loss of the Platform results from the operation of
an insurable risk covered by insurance as required under Paragraph 8(d) of this
Agreement, all of the proceeds of such insurance payable as a result of such
loss shall be paid to the Buyer and the Seller as their interests may appear.
10. Delivery.
(a) Upon completion of the construction of the Platform and the tests and
trials as provided in the Specifications, Seller shall tender delivery of the
Platform to Buyer. Prior to tendering delivery, Seller shall have remedied at
Seller's sole cost and expense any defects discovered by Buyer or Seller in
Seller's workmanship or materials including installation of Buyer Furnished
Equipment or any other nonconformity of the Platform with the requirements of
the Specifications and performed any retests necessary to ensure that such items
have been fully corrected. Buyer shall accept such tender of delivery, and Buyer
shall not have the right to refuse to accept delivery of the Platform provided
the same is substantially completed and
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capable of being utilized by Buyer. Any remaining items shall be completed by
Seller following delivery and prior to departure of the Platform from Seller's
Yard, or Buyer and Seller may mutually agree on an appropriate reduction of the
Contract Price for such remaining items.
(b) On the Delivery Date, Buyer shall pay to Seller all amounts payable
under this Agreement and Seller and Buyer shall execute and deliver a Protocol
of Acceptance and Delivery acknowledging delivery of the Platform. Seller shall
further deliver to Buyer a Bill of Sale confirming the conveyance of title to
the Platform to the Buyer. which Bill of Sale shall (i) generally describe the
Platform as a mobile, self-contained and elevating platform, (ii) contain a
general warranty of title and freedom from liens (except as to matters arising
by, through, or under Buyer) in favor of the Buyer, and (iii) be deemed to
contain the additional warranties and covenants set forth in Section 11
hereinbelow without the necessity of making any reference to such warranties in
the Bill of Sale. Seller shall also deliver to Buyer the remaining delivery
documents set forth in the Specifications.
(c) Seller shall deliver the Platform along side Seller's dock at the
Yard. Following delivery, Buyer shall have the right to dock the Platform at
Seller's Yard for a period not to exceed fourteen (14) days, after which time
the Platform must depart from Seller's Yard. During such post-delivery docking
period, Buyer shall pay to Seller its standard charges for shore power, potable
water, and security guard service. All such charges must be paid by Buyer to
Seller prior to departure of the Platform from Seller's Yard.
11. Warranty.
Seller hereby warrants to Buyer that (i) Seller's workmanship and materials
shall be free from material defects, (ii) that systems designed, supplied, and
installed by Seller will perform the functions intended by this Agreement and
the Specifications, and (iii) that the components of the Equipment manufactured
by LeTourneau shall be free from material defects in LeTourneau's workmanship
and material and shall perform in accordance with the Kit Construction Agreement
and the specifications attached thereto as Annex C in normal use and service.
The warranty set forth in the preceding sentence (hereinafter referred to as the
"Warranty") shall commence on the date of delivery of the Platform to Buyer and
expire twelve (12) months thereafter (provided, however, that if any of the
equipment of the Platform, including without limitation any cranes or winches,
is put into service prior to said delivery, the twelve (12) months warranty
period shall begin with the commencement of such service or operation insofar as
such equipment is concerned) and shall be subject to the following provisions:
(a) The Warranty shall not apply to any part of the Platform which (i) has
been misused or structurally repaired or altered by anyone other than Seller or
its duly authorized representative, or (ii) has been damaged because of it use,
or the use of any other materials or
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equipment, after Buyer (or any other person or firm operating the Platform or
its equipment) has knowledge of such defect. Except for the components of the
Equipment manufactured by LeTourneau as expressly set forth and as limited
herein, equipment or other components of the Platform sold to Buyer pursuant to
this Agreement but not manufactured by Seller are not warranted to any extent,
but Seller shall assign (to the extent same are assignable by Seller) to Buyer,
without recourse, any warranties furnished to Seller by the vendors of such
equipment or other components. Buyer shall seek performance or damages under
such warranties only from such parties and not from Seller. Seller shall use
reasonable efforts to secure the best available warranties available from such
vendors and shall cooperate with Buyer in any resulting dispute Buyer may have
with such vendors.
(b) The extent of Seller's liability for any breach of the Warranty shall
be limited to (i) repairing or replacing (whichever of the two Seller, in its
sole discretion, shall elect) any material defects in Seller's workmanship or
materials, or causing the components of the Equipment manufactured by LeTourneau
to perform in accordance with the Kit Construction Agreement and the
specifications thereto by repairing or replacing (whichever of the two Seller,
in its sole discretion, shall elect) any material defects in LeTourneau's
workmanship or materials, as the case may be, at Seller's Yard or at any other
shipyard of Seller or its affiliates (hereinafter referred to as an "AMFELS
Yard"), with the Platform to be brought to an AMFELS Yard at Buyer's sole risk
and expense, or (ii)reimbursing Buyer for the cost of such repair or replacement
in accordance with the provisions of subparagraph (c) hereinbelow.
(c) Buyer, at its discretion, may elect to cause the necessary repairs
or replacements to be made at a non-AMFELS Yard. In such event, Seller's sole
obligation shall be to reimburse Buyer for the cost of such repairs or
replacements, provided, however, that in no event shall the sum to be paid to
Buyer by Seller exceed the cost that Seller would have borne, based on
Seller's normal rates, if the repairs or replacements had been made at the
Seller's Yard. If Buyer elects to proceed under the provisions of this
subparagraph (c), Buyer shall, as soon as possible after such election (but
in any event prior to the commencement of such repairs or replacements),
notify Seller of the time, place, and estimated cost of such repairs and
replacements. Seller shall have the right to verify, at its sole cost and
expense, by its own representative, the nature and extent of the defects
complained of prior to the time that the repairs or replacements are made,
and if in fact no breach of the Warranty made by Seller herein has occurred,
Buyer shall pay to Seller a per diem fee equal to Sellers then current labor
rate schedule and the reasonable expenses incurred by such representative.
(d) The REMEDIES provided in subparagraphs (b)and (c) hereinabove are
EXCLUSIVE. Buyer further agrees that in no event will Seller's liability to
Buyer for breach of the Warranty set forth in subparagraph (a) with respect to
the components of the Equipment manufactured by LeTourneau exceed such amount as
Seller may actually recover from
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LeTourneau for the same breach of warranty under the Kit Construction Agreement.
Such Warranty shall not include transportation, towage, insurance, or other
incidental expenses. In no event shall the obligation of Seller to repair or
replace (or to reimburse Buyer pursuant to subparagraph (c) hereinabove for the
cost of repairing or replacing defective workmanship or materials be construed
to require Seller to repair or replace more than the actual workmanship or
material that is found to be defective. The Platform as a whole or any other
part thereof shall not be construed to be workmanship or material for the
purposes of the preceding sentence and this Agreement.
(e) The Warranty shall not be effective unless Seller receives from Buyer
a written claim therefor (i) within thirty (30) days after the date of discovery
of such defect and (ii) prior to the expiration of the prescribed Warranty
period.
(f) Any work performed or materials furnished by Seller pursuant to the
Warranty shall be warranted for the remaining term of the original Warranty, and
nothing in subparagraph (b) or (c) shall extend the Warranty period beyond the
Warranty period specified in this Section 11.
(g) THE WARRANTY AS DEFINED HEREINABOVE IS IN LIEU OF ALL OTHER WARRANTIES
(EXCEPT OF TITLE), EXPRESS OR IMPLIED, STATUTORY OR AT COMMON LAW, AND ALL OTHER
LIABILITIES (AT COMMON LAW OR IN CONTRACT, TORT, OR OTHERWISE, RELATING IN ANY
WAY TO THE PLATFORM OR COMPONENTS THEREOF OR SERVICES TO BE PROVIDED UNDER THIS
AGREEMENT INCLUDING, WITHOUT LIMITATION, STRICT LIABILITY AND NEGLIGENCE).
WITHOUT LIMITATION OF THE GENERALITY OF THE IMMEDIATELY PRECEDING SENTENCE,
SELLER EXPRESSLY DISCLAIMS AND NEGATES (i) ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, (ii) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE, (iii) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY TO
MODELS OR SAMPLES (iv) ANY IMPLIED OR EXPRESS WARRANTY OF DILIGENCE, (v) ANY
IMPLIED OR EXPRESS WARRANTY OF WORKMANLIKE SERVICE, (vi) ANY IMPLIED OR EXPRESS
WARRANTY OF SEAWORTHINESS, AND (vii) ALL OTHER LIABILITY, AT COMMON LAW OR IN
CONTRACT OR TORT OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, STRICT LIABILITY
(WHETHER FOUNDED IN SECTION 402(A) OF THE RESTATEMENT OF TORTS OR OTHERWISE) AND
NEGLIGENCE, WHETHER OCCASIONED BY ACTS OR OMISSIONS OF SOLE OR CONCURRENT
NEGLIGENCE OF SELLER, ITS AFFILIATES AND/OR OTHERS. SELLER DISCLAIMS LIABILITY
FOR, AND IN NO EVENT WHATEVER SHALL BE LIABLE FOR, ANY LOSS OF PROFITS OF BUYER
OR OTHERS OR ANY OTHER INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES.
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(h) Seller's liability with respect to the Buyer Furnished Equipment shall
extend only to installation thereof in accordance with the certified equipment
drawings furnished by Buyer in those instances where such Equipment is actually
installed by Seller. In all other instances (including, without limitation,
those instances in which Buyer does not furnish certified equipment drawings to
Seller), the sole risk and responsibility for the proper installation of the
Buyer Furnished Equipment shall, as between Seller and Buyer, be borne by Buyer.
In all instances the sole risk and responsibility for the operability of the
Buyer Furnished Equipment shall, as between Seller and Buyer, be borne by Buyer.
(i) No employee or representative of Seller is authorized to change the
Warranty in any way or to grant any other warranty.
(j) Buyer understands and agrees that any modification to the design of
the Package or modification to the Equipment made by the Buyer are the
responsibility of Buyer and not the responsibility of Seller for any purpose
whatsoever, including claims for damages or other liability asserted by
Buyer, its customers or any third party. In the event such modifications
require regulatory approval, Buyer shall be responsible for obtaining such
approval unless Seller accepts the responsibility by executing a change order
to perform the work as additional work under this Agreement.
(k) Buyer understands and agrees that the information contained in the
Package and relating to the Equipment do not guarantee a fixed or variable
weight of the Platform or designate the use of equipment other than the
Equipment. The fixed and variable weight of the Platform and the selection of
equipment other than the Equipment are decisions of the Buyer, including
outfitting and fabrication decisions. The weight information provided by Seller
is for information only and reflects historical information or estimated and
approximate data. Seller is unable to predict actual weights for the Platform to
be constructed by Seller. Seller does not warrant or represent that Seller's
sale or construction of a Platform will meet the historical or approximate data
supplied to Buyer.
(l) Buyer acknowledges that certain information to be provided by
LeTourneau relate to a LeTourneau 116-C Class Platform rather than to a Super
116 Platform. (See Annex C to the Kit Construction Agreement). Since the
Platform is to be built as a Cypre Platform pursuant to Article 5, LeTourneau
shall supply supplemental information relating to Super 116 designs to Seller
which shall be deemed to be part of the Package for all purposes of this
Agreement, including the provisions of the Confidentiality Agreement referred to
in Section 29 hereinbelow. During the term of this Agreement, LeTourneau may
provide other supplemental information to Seller relating to a Super 116 which
shall, at such time, become part of the Package for purposes of this Agreement.
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12. Indemnification Provisions.
A. SELLER INDEMNITIES
(A) SELLER HEREBY AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS BUYER,
ITS CUSTOMERS, AND THEIR RESPECTIVE PARENT, HOLDING AND AFFILIATED COMPANIES,
AND THEIR EMPLOYEES, OFFICERS, DIRECTORS, AND AGENTS (COLLECTIVELY THE "BUYER
INDEMNITIES"), FROM AND AGAINST ALL LIABILITIES, LOSSES, CLAIMS, DEMANDS OR
CAUSES OF ACTION (COLLECTIVELY "CLAIMS"), BY SELLER OR ITS SUBCONTRACTORS OF
ANY TIER OR THEIR RESPECTIVE EMPLOYEES, OFFICERS AND AGENTS, BASED ON
ILLNESS, INJURY OR DEATH OR DAMAGE OR DESTRUCTION OR LOSS OF USE OF PROPERTY
THEREOF INCLUDING WITHOUT LIMITATION THE YARD, OCCURRING PRIOR TO THE
DELIVERY TO AND ACCEPTANCE BY BUYER OF THE PLATFORM, INCIDENT TO OR CONNECTED
WITH OR ARISING OUT OF OR IN ANY WAY RELATED DIRECTLY OR INDIRECTLY TO THE
PERFORMANCE OF THIS AGREEMENT OR BREACH HEREOF, REGARDLESS OF CAUSE,
INCLUDING THE SOLE OR CONCURRENT NEGLIGENCE OR FAULT OF ANY OF SELLER OR THE
BUYER INDEMNITIES OR THEIR OFFICERS, AGENTS, EMPLOYEES, OR SUBCONTRACTORS OF
ANY TIER OR THEIR EMPLOYEES OR AGENTS, UNSEAWORTHINESS, STRICT LIABILITY, OR
ANY OTHER EVENT OR CONDITION WHETHER OR NOT ANTICIPATED BY ANY PERSON OR
PARTY, REGARDLESS OF WHETHER PREEXISTING THE EXECUTION OF THIS AGREEMENT.
(B) SELLER SHALL BE LIABLE FOR ALL COSTS, EXPENSES, AND REASONABLE
ATTORNEYS FEES INCURRED BY BUYER INDEMNITIES IN DEFENDING ANY COVERED CLAIMS
AND IN ASSERTING THE INDEMNITIES AS SET FORTH HEREIN AGAINST SELLER. SELLER
SHALL BE OBLIGATED TO BEAR THE EXPENSE OF THE INVESTIGATIONS AND EXPENSES OF
ALL CLAIMS ARISING THEREFROM AND TO PAY THE FULL AMOUNT OF ANY JUDGMENT OR
SETTLEMENT RENDERED AGAINST THE BUYER INDEMNITIES, IT BEING STIPULATED THAT
ALL OBLIGATIONS OF INDEMNITY ASSUMED HEREIN SHALL SURVIVE THE TERMINATION OF
THIS AGREEMENT, REGARDLESS OF HOW SUCH TERMINATION IS AFFECTED. THE BUYER
INDEMNITIES SHALL PROVIDE REASONABLE ASSISTANCE TO SELLER IN RELATION TO THE
DEFENSE OF CLAIMS WHICH ARE SUBJECT TO INDEMNITY HEREUNDER.
B.BUYER INDEMNITIES
(A) BUYER HEREBY AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS SELLER AND
LETOURNEAU AND THEIR RESPECTIVE PARENTS,
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HOLDING AND AFFILIATED COMPANIES, AND THEIR RESPECTIVE EMPLOYEES, OFFICERS,
DIRECTORS, AND AGENTS AND THE SUBCONTRACTORS OF LETOURNEAU AND THEIR SERVANTS
(COLLECTIVELY THE "SELLER INDEMNITIES"), FROM AND AGAINST ALL LIABILITIES,
LOSSES, CLAIMS, DEMANDS, COSTS, OR CAUSES OF ACTION (COLLECTIVELY "CLAIMS"), BY
BUYER OR ITS SUBCONTRACTORS OF ANY TIER OR THEIR RESPECTIVE EMPLOYEES, OFFICERS
AND AGENTS, BASED ON ILLNESS, INJURY OR DEATH OR DAMAGE OR DESTRUCTION OR LOSS
OF USE OF PROPERTY OTHER THAN THE PLATFORM, OCCURRING PRIOR TO THE DELIVERY TO.
AND ACCEPTANCE BY BUYER OF THE PLATFORM, INCIDENT TO OR CONNECTED WITH OR
ARISING OUT OF OR IN ANY WAY RELATED DIRECTLY OR INDIRECTLY TO THE PERFORMANCE
OF THIS AGREEMENT OR BREACH HEREOF, REGARDLESS OF CAUSE, INCLUDING THE SOLE OR
CONCURRENT NEGLIGENCE OR FAULT OF ANY OF BUYER OR THE SELLER INDEMNITIES OR
THEIR OFFICERS, AGENTS, EMPLOYEES, OR SUBCONTRACTORS OF ANY TIER OR THEIR
EMPLOYEES OR AGENTS, UNSEAWORTHINESS, STRICT LIABILITY OR ANY OTHER EVENT OR
CONDITION WHETHER OR NOT ANTICIPATED BY ANY PERSON OR PARTY, REGARDLESS OF
WHETHER PREEXISTING THE EXECUTION OF THIS AGREEMENT.
(B) BUYER SHALL BE LIABLE FOR ALL COSTS, EXPENSES, AND REASONABLE
ATTORNEYS FEES INCURRED BY SELLER INDEMNITIES IN DEFENDING ANY COVERED CLAIMS
AND IN ASSERTING THE INDEMNITIES AS SET FORTH IN PARAGRAPH (A) HEREINABOVE
AGAINST BUYER. BUYER SHALL BE OBLIGATED TO BEAR THE EXPENSE OF THE
INVESTIGATIONS AND EXPENSES OF ALL CLAIMS ARISING THEREFROM AND TO PAY THE FULL
AMOUNT OF ANY JUDGMENT OR SETTLEMENT RENDERED AGAINST THE SELLER INDEMNITIES, IT
BEING STIPULATED THAT ALL OBLIGATIONS OF INDEMNITY ASSUMED HEREIN SHALL SURVIVE
THE TERMINATION OF THIS AGREEMENT, REGARDLESS OF HOW SUCH TERMINATION IS
AFFECTED. THE SELLER INDEMNITIES SHALL PROVIDE REASONABLE ASSISTANCE TO BUYER IN
RELATION TO THE DEFENSE OF CLAIMS WHICH ARE SUBJECT TO INDEMNITY HEREUNDER.
C. AS USED HEREIN AND IN SECTIONS 14 AND 24 HEREINBELOW, "AFFILIATES" OR
"AFFILIATED COMPANIES" SHALL MEAN AN ENTITY WHICH, DIRECTLY OR INDIRECTLY,
THROUGH ONE OR MORE INTERMEDIARIES, CONTROLS, IS CONTROLLED BY, OR IS UNDER
COMMON CONTROL WITH, THE PARTY IN QUESTION.
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13. Patent Indemnity.
(a) Seller hereby agrees to defend any claim or suit and to indemnify and
save Buyer harmless from and against any damages (including the costs of the
suit and reasonable attorney's fees) awarded against Buyer in a suit arising out
of any infringement of any U.S. patent by reason of the incorporation into the
Platform in accordance with the Package of any Equipment components manufactured
by LeTourneau; provided, however, that
(i)the indemnity contained in this Section 13 shall not apply to any claim
or suit arising out of the construction or use of (1 ) processes, devices,
apparatus, or equipment specified or furnished by Buyer or anyone else other
than Seller, for which Buyer shall indemnify and defend Seller, and mounted upon
or used in connection with the Platform; and (2) any combination of and falling
within subparagraph (i)(1) herewith of the Equipment or the Platform; and
(ii) Buyer shall give Seller prompt written notice of any such claim or
suit and shall permit Seller to control settlement negotiations and any
litigation in connection therewith; provided, however, no settlement which
purports to acknowledge, on Buyer's behalf the validity of the patent involved
shall be entered into by Seller without Buyer's consent. As to any Equipment
components purchased by Seller, Seller shall assign (to the extent same is
assignable) to Buyer, without recourse, any patent indemnity coverage granted to
Seller by any vendor thereof Buyer shall seek performance of damages under such
warranties and Patent indemnities only from such parties and not from Seller.
(b) Seller makes no representations and extends no warranties that the
manufacture, construction, or commercialization of the Platform will not
infringe the claims of any United States or foreign Letters Patent that are not
included in Article II of the License Agreement, and Seller specifically
excludes any responsibility, liability, or obligation to defend Buyer or to hold
harmless and indemnify Buyer against charges, claims, or suits brought against
Buyer, its affiliates (an "affiliate" of Buyer being an entity which, directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with Buyer), assigns, successors, agents, employees,
representatives, subcontractors, or independent contractors for infringement of
any United States or foreign Letters Patent not included in Article II of the
License Agreement. Buyer further agrees that in no event shall Seller's
liability to indemnify and hold harmless Buyer as provided herein exceed such
amount as Seller may actually recover from LeTourneau for the same obligation to
indemnify and hold harmless under the License Agreement.
(c) Buyer agrees to defend any claim, suit, or proceeding brought against
Seller alleging that the construction or use by Seller, pursuant to this
Agreement, of any process, method of construction, construction equipment,
device, or apparatus (including, without
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limitation; Buyer Furnished Equipment) specified or furnished by Buyer or
mounted upon or used in connection with the Platform constitutes infringement of
any letters patent, and Buyer agrees to indemnify and save Seller harmless from
and against any judgment rendered against Seller as a result of such claim,
suit, or proceeding. Seller shall promptly notify Buyer in writing of any such
claim, suit, or proceeding and shall permit Buyer to control the conduct and
settlement of such claim, suit, or proceeding, provided, however, no settlement
shall be entered into without Seller's consent which purports to acknowledge on
Seller's behalf the validity of any patent. Seller shall provide information and
assistance to Buyer, at Seller's expense, as may be reasonably necessary to aid
in the conduct and settlement of the claim, suit, or proceeding. Seller shall be
entitled to participate, at its own expense, in the conduct and settlement of
such claim, suit, or proceeding through its selected representatives and
attorneys.
14. General Limitation of Liability.
IN NO EVENT SHALL SELLER OR LETOURNEAU OR THEIR AFFILIATES OR THE AGENTS,
OFFICERS, EMPLOYEES, INVITEES, OR REPRESENTATIVES OF SELLER OR ITS AFFILIATES OR
THE SUBCONTRACTORS OF LETOURNEAU OR THEIR SERVANTS BE LIABLE TO BUYER, ITS
AGENTS, OFFICERS, EMPLOYEES, REPRESENTATIVES, SUBCONTRACTORS, INDEPENDENT
CONTRACTORS, OR AFFILIATES, OR TO ANY THIRD PARTIES FOR ANY ECONOMIC LOSS,
PHYSICAL HARM, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES
(INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS AND LOSS OF BUSINESS
OPPORTUNITIES), ARISING OUT OF, RESULTING FROM OR RELATING IN ANY WAY TO THIS
AGREEMENT OR THE LETOURNEAU AGREEMENTS OR ANY ACTIVITIES OR OMISSIONS OR DELAYS
IN CONNECTION HEREWITH OR THEREWITH INCLUDING, WITHOUT LIMITATION, THE
PERFORMANCE (WHETHER TIMELY OR NOT) OR THE NON-PERFORMANCE OF THIS AGREEMENT OR
THE LETOURNEAU AGREEMENTS, BREACH OF ANY WARRANTY, THE DESIGN OF THE PLATFORM OR
ANY PART THEREOF OR, OR THE LOSS OF OR LOSS OF USE OF THE PLATFORM OR ANY PART
THEREOF OR ANY OTHER EQUIPMENT, MATERIALS, OR PROPERTY), REGARDLESS OF CAUSE AND
REGARDLESS OF WHETHER SELLER, LETOURNEAU OR THEIR AFFILIATES, AND/OR THEIR
RESPECTIVE OFFICERS, EMPLOYEES, AGENTS, REPRESENTATIVES, SUBCONTRACTORS, AND/OR
OTHERS MAY BE WHOLLY, PARTIALLY, OR SOLELY NEGLIGENT OR OTHERWISE AT FAULT,
UNSEAWORTHINESS, STRICT LIABILITY, OR ANY DEFECT IN PREMISES, EQUIPMENT, OR
MATERIALS, OR ANY OTHER EVENT OR CONDITION WHETHER OR NOT ANTICIPATED BY ANY
PERSON OR PARTY, REGARDLESS OF WHETHER PREEXISTING THE EXECUTION OF THIS
AGREEMENT.
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15. Force Majeure.
For purposes of this Agreement, events of "force majeure" shall be defined
to mean all causes beyond the reasonable control of the party asserting the
benefit of this Article, and shall include but not be limited to fire,
explosion, breakdown of machinery or equipment, shortage or unavailability of
materials or equipment, delay in transportation, government edict, or other
action, storms, abnormal weather that prevents blasting or painting, strikes or
other labor disturbances, destruction or damage to Seller's Yard or equipment or
any Buyer Furnished Equipment or the Platform or any part thereof from any
cause; acts of Buyer or the classification society or regulatory bodies having
or proporting to have jurisdiction including failure to give timely approvals;
late delivery of Buyer Furnished Equipment or failure to furnish in a timely
manner necessary information concerning the Buyer Furnished Equipment or the
performance of the work; and any other causes or accidents of the same or
similar nature which are beyond the control of the Seller or Buyer or any or
their respective subcontractors or suppliers. In case either party shall be
unable, wholly or in part, because of any such event of force majeure to carry
out its obligations under this Agreement, the time for performance, other than
the obligation to make payments, shall be extended by the period of such actual
delay due to force majeure for which notices are given as provided hereinbelow.
Performance of any obligations suspended while any force majeure is operative
shall be resumed as soon as possible after such force majeure is operative shall
be resumed as soon as possible after such force majeure ceases. The party
seeking benefit of this paragraph shall notify the other of the occurrence of
each event of force majeure within seven (7) days after commencement of such
event. Any increased costs to Seller as the result of events of force majeure
will be compensated to Seller by Buyer. After ninety (90) continuous days of
delay in the construction of the Platform due to force majeure, Seller and Buyer
shall each have the right to terminate this Agreement without further liability
of either party to the other except that Seller shall retain all progress
payments pursuant to Paragraph 2(b) hereinabove and shall be paid by Buyer for
the price for that portion of the Platform then constructed for which progress
payments have not yet been made and all work in process (including profit on all
to Seller).
16. Independent Contractor.
(a) Throughout the entire term of this Agreement, Seller shall be an
independent contractor with full power and authority to select the means,
methods and manner of performing its work hereunder.
(b) All operations shall be conducted in Seller's own name and as an
independent contractor and not in the name of, or as an agent for, Buyer. In the
event Seller shall sublet or subcontract any of the construction of the Platform
provided for herein, Seller nevertheless shall remain primarily responsible for
compliance with all of the provisions hereof and for the portion of the
construction of the Platform performed by the party to whom the work is sublet
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or subcontracted, and Seller shall require such Seller and such Seller's
employees, agents and representatives to comply with all the agreements,
covenants, terms, conditions, and provisions on the part of Seller to be
performed hereunder insofar as applicable to the work to be performed by each
party.
17. Default.
A. Seller's Default
(a) Seller shall be in default of its obligations under this Agreement if
any of the following events occurs:
(i) The failure of the Seller to perform or breach of any of the
covenants, agreements, or undertakings on its part to be performed under this
Agreement, provided that the Buyer shall give notice to the Seller as to such
failure and the Buyer shall not, within thirty (30) days after being so
notified, commence and diligently prosecute remedial action to cure such failure
to perform or breach which shall in any event be cured within ninety (90) days
of the date of such notice from Buyer;
(ii) Seller goes into liquidation, whether voluntary or compulsory, or
enters into a scheme of arrangement, or makes a general assignment of its assets
for the benefit of its creditors, or a receiver or receivers of any kind
whatsoever, whether temporary or permanent, is appointed for the property of
Seller, or Seller institutes proceedings for its reorganization or the
institution of such proceedings by creditors and approval thereof by the court,
whether proposed by a creditor, a stockholder or any other person whomsoever, or
Seller suffers any execution against a major portion of its assets which is not
satisfied within seven (7) days, or Seller fails generally, or admits in writing
its inability, to pay its debts generally as they become due.
(b) If any default by Seller occurs as defined in Subparagraph (a) of this
Paragraph 1 7(A), Buyer, at its election, may upon prompt notice to Seller
terminate this Agreement without prejudice and exercise all rights and remedies
available to Buyer at law, in admiralty, or in equity. Prior to exercise of any
remedy involving or which includes and attempt to take control or possession of
the Platform or any components thereof or work in progress, directly or through
judicial process, if Seller disputes that it is in default, Buyer shall first be
required to post with Seller a corporate surety bond from a first class U.S.
surety acceptable to Seller in a form reasonable satisfactory to Seller. Such
bond shall be in an amount equal to 150% of any sum claimed by Seller under this
Agreement.
B. Buyer's Default
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(a) Buyer shall be in default of its obligations under this Agreement if
any if the following events occurs:
(i) In the event of failure by Buyer to pay to Seller any installments
which are properly payable pursuant to Paragraph 2(b) hereinabove or the failure
of the Seller to perform or breach of any of the other covenants, agreements, or
undertakings on its part to be performed under this Agreement, provided that the
Buyer shall give notice to the Seller as to such failure and the Buyer shall
not, within five (5) days in the case of failure to pay or to take delivery of
the Platform when completed under the terms of this Agreement and thirty (30)
days in the case of other defaults after being so notified, cure such failure to
perform or breach;
(ii) Buyer goes into liquidation, whether voluntary or compulsory, or
enters into a scheme of arrangement, or makes a general assignment of its assets
for the benefit of its creditors, or a receiver or receivers of any kind
whatsoever, whether temporary or permanent, is appointed for the property of
Buyer, or Buyer institutes proceedings for its reorganization or the institution
of such proceedings by creditors and approval thereof by the court, whether
proposed by a creditor, a stockholder or any other person whomsoever, or Buyer
suffers any execution against a major portion of its assets which is not
satisfied within seven (7) days, or Buyer fails generally, or admits in writing
its inability, to pay its debts generally as they become due.
(b) If any default by Buyer occurs as defined in subparagraph (a) of this
Paragraph 17(B), Seller, at its election, may upon prompt notice to Buyer
suspend its performance under this Agreement and at any time thereafter may
terminate this Agreement without prejudice and exercise all rights and remedies
available to Seller at law, in admiralty, or in equity.
18. Litigation.
(a) Buyer and Seller agree that any legal suit, action, or proceeding
arising out of or relating to this Agreement may be instituted only in a state
or federal court in Harris County, Texas, United States of America.
(b) Buyer hereby designates and appoints CT Corporation Systems Inc., 811
Dallas Avenue, Houston, Texas 77002 ("CT") as Buyer's authorized agent and
acknowledges on its behalf service of any and all process and, if through
reasonable efforts, service on CT has been unsuccessful, Buyer hereby designates
and appoints the Secretary of State, State of Texas, as Buyer's authorized agent
to accept and acknowledge on it behalf service of any and all process which may
be served in any such suit, action, or proceeding in any such State or federal
court in the State of Texas and agrees that service of process upon said agent
or the Assistant Secretary of State or any clerk having charge of the
corporation department of the office of said Secretary of State, at his office
in Austin, Texas, and written notice of said service to Buyer, mailed or
delivered to Buyer at the address specified for Buyer in Article 19 of this
Agreement,
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shall be deemed in every respect effective service of process upon Buyer in
any suit, action, or proceeding and shall be taken and held to be valid
personal service upon Buyer, whether or not Buyer shall then be doing, or at
any time shall have done, business within the State of Texas,' and that any
such service of process shall be of the same force and validity as if service
were made upon it according to the laws governing the validity and
requirements of such service in such State, and waives all claims of error by
reason of any such service.
(c) Seller hereby designates and appoints Frank Puglisi, AMFELS, Inc.,
Highway 48, Port of Brownsville, Brownsville, Texas 78523 ("Puglisi") as Buyer's
authorized agent and acknowledges on its behalf service of any and all process
and, if through reasonable efforts, service on Puglisi has been unsuccessful,
Seller hereby designates and appoints the Secretary of State, State of Texas, as
Seller's authorized agent to accept and acknowledge on it behalf service of any
and all process which may be served in any such suit, action, or proceeding in
any such State or federal court in the State of Texas and agrees that service of
process upon said agent or the Assistant Secretary of State or any clerk having
charge of the corporation department of the office of said Secretary of State,
at his office in Austin, Texas, and written notice of said service to Seller,
mailed or delivered to Seller at the address specified for Seller in Article 19
of this Agreement, shall be deemed in every respect effective service of process
upon Seller in any suit, action, or proceeding and shall be taken and held to be
valid personal service upon Seller, whether or not Seller shall then be doing,
or at any time shall have done, business within the State of Texas, and that any
such service of process shall be of the same force and validity as if service
were made upon it according to the laws governing the validity and requirements
of such service in such State, and waives all claims of error by reason of any
such service.
19. Notice.
Any notice provided for under this Agreement must be given in writing, but
may be served by depositing same in the mail, addressed to the party to be
notified, postage paid, and registered or certified with return receipt
requested, or by delivering same in person to such other party, or by pre-paid
telegram, telex, facsimile confirmed by mail, or cable. For purposes of notice,
the addresses of the parties shall be:
If to Buyer: Chiles Offshore LLC
2000 West Loop South, Suite 2130
Houston, Texas 77027
Telephone: (713) 552-1400
Facsimile: (713) 552-9998 Attention: William E. Chiles
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If to Seller: AMFELS, Inc.
P.O. Box 3107
Highway 48
Port of Brownsville
Brownsville, Texas 78523
Telephone: (210) 831-8200
Facsimile: (210) 831 ~220
Attention: Eric Phua
Provided, however, that each party shall have the continuing right to change its
address of notice at any time or times by the giving of 10 days notice in the
manner hereinabove described. Notices shall be deemed given only upon receipt or
by facsimile confirmation.
20. Successors and Assigns.
This Agreement shall inure to the benefit of, and shall be binding
upon, the parties hereto, and their respective successors and assigns. It is
expressly understood and agreed that neither party shall assign any of its
rights, title and interest thereto without the prior written consent of the
other party; provided, however, that Buyer shall have the right to assign this
Agreement to any entity that is controlled through ownership, management, or
contractual rights by William E. Chiles, provided that regardless of any such
assignment Buyer shall remain primarily liable to Seller for the performance of
the obligations of Buyer under this Agreement.
21. Governing Law.
This Agreement shall be deemed to have been made under, shall be construed
and interpreted in accordance with the laws of the State of Texas, excluding any
conflicts of law rule or law which might refer such construction and
interpretation to the laws of another state, republic or country; provided,
however, that all matters relating to the interpretation of any patent or patent
application will be decided in accordance with the laws of the county which
issued the patent to be interpreted or in which the patent applications to be
interpreted have been filed.
22. Modification or Waiver.
This Agreement, which incorporates all prior negotiations and
understandings relating to the subject matter thereof, sets forth the entire
agreement of the parties hereto and shall not be modified except by a written
instrument executed by the duly authorized representatives of Seller and Buyer.
The failure of either party to insist upon strict performance of any provision
hereof shall not constitute a waiver of or estoppel against asserting the right
to require such
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performance in the future, nor shall a waiver or estoppel in any one instance,
constitute a waiver or estoppel with respect to a later breach of a similar
nature or otherwise.
23. Reliance.
AS MORE FULLY SET FORTH IN OTHER PROVISIONS OF THIS AGREEMENT, SELLER AND
BUYER HAVE REACHED EXPRESS AGREEMENT WITH RESPECT TO THE LIMITATION OF THE
LIABILITY OF SELLER AND LETOURNEAU IN CONNECTION WITH THIS AGREEMENT AND THE
WAIVER REFERRED TO IN SECTION 24 HEREINBELOW. SELLER AND BUYER EXPRESSLY
RECOGNIZE THAT (A) THE PRICE FOR WHICH SELLER HAS AGREED TO PERFORM ITS
OBLIGATIONS UNDER THIS AGREEMENT HAS BEEN PREDICATED ON THE AFORESAID LIMITATION
OF LIABILITY AND WAIVER (IT BEING ACKNOWLEDGED THAT BUYER COULD HAVE NEGOTIATED
WITH SELLER FOR MODIFICATIONS TO THE LIMITATION OF SELLER'S AND LETOURNEAU'S
LIABILITY AND THE WAIVER BUT THAT THE PRICE OF THE PLATFORM WOULD HAVE BEEN
INCREASED TO REFLECT SUCH MODIFICATIONS), AND (B) SELLER, IN DETERMINING TO
PROCEED WITH THE PERFORMANCE OF ITS OBLIGATIONS PURSUANT TO THIS AGREEMENT, HAS
EXPRESSLY RELIED ON SUCH LIMITATION OF LIABILITY AND WAIVER AND WOULD NOT HAVE
EXECUTED THIS AGREEMENT BUT FOR SUCH LIMITATION OF LIABILITY AND WAIVER.
24. Waiver of Consumer Rights and Representations of Buyer
BUYER HEREBY WAIVES THE SPECIAL RIGHTS AND PROTECTION PROVIDED BY THE PROVISION
OF THE TEXAS DECEPTIVE TRADE PRACTICE ACTS CONSUMER PROTECTION, CHAPTER 17,
SUBCHAPTER E, SECTIONS 17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN SECTION 17.555
WHICH IS NOT WAIVED), VERNON'S TEXAS CODES ANNOTATED, BUSINESS AND COMMERCE
CODE. TO EVIDENCE ITS ABILITY TO GRANT SUCH WAIVER, BUYER HEREBY REPRESENTS AND
WARRANTS TO SELLER THAT BUYER (a) IS IN THE BUSINESS OF SEEKING OR ACQUIRING, BY
PURCHASE OR LEASE, GOODS OR SERVICES FOR COMMERCIAL OR BUSINESS USE AND IS
ACQUIRING THE GOODS AND SERVICES COVERED BY THIS AGREEMENT FOR COMMERCIAL OR
BUSINESS USE, (b) HAS ASSETS OF $5,000,000 OR MORE ACCORDING TO ITS MOST RECENT
FINANCIAL STATEMENT PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPALS, (c) HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS
THAT ENABLE IT TO EVALUATE THE MERITS AND RISKS OF THE TRANSACTIONS CONTEMPLATED
HEREBY, (d) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION; AND (e) IS
REPRESENTED BY LEGAL COUNSEL IN THIS TRANSACTION WHICH WAS NOT IDENTIFIED,
SUGGESTED OR
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<PAGE>
SELECTED BY SELLER. Buyer's representations and warranties shall survive the
performance of all work in connection with this Agreement and shall remain
effective regardless of any investigation at any time made by or on behalf of
Seller or any information Seller may have with respect thereto. Buyer hereby
agrees to protect, indemnify, and hold Seller, and their respective Affiliates
free and harmless from and against any and all losses, costs (including, without
limitation, the cost of the suit and reasonable attorneys' fees), claims, causes
of action, and liabilities arising out or resulting from, or relating in any way
to the breach of the aforesaid representations and warranties.
25. Export Laws.
In accordance with the Export Administration Regulations issued by the
United States Department of Commerce to enforce the Export Administration Act of
1979, as amended from time to time, Buyer hereby gives written assurance to
Seller that neither the Equipment nor the direct product thereof (including,
without limitation, the Platform) nor any technical data is intended to be
shipped, directly or indirectly, to any country, person, or other entity
contrary to any laws, regulations or administrative orders of the United States
or other jurisdiction applicable to a transaction affecting this Agreement
and/or the LeTourneau Agreements. Buyer further acknowledges that Seller, in
determining to execute this Agreement and perform its obligations under this
Agreement, has expressly relied on the written assurance contained in the
immediately preceding sentence.
26. Licenses.
Notwithstanding anything in this Agreement to the contrary, it is expressly
understood that the obligations of Seller hereunder are subject to and
conditioned upon the timely issuance of all required consents, approvals,
rulings, licenses (including, without limitation, export licenses and reexport
licenses), and orders in form and substance satisfactory to Seller from all
agencies, governments, or other bodies having or purporting to have jurisdiction
or control over any matters covered by or arising out of this Agreement or the
LeTourneau Agreements. Seller shall have no liability (including, without
limitation, any liability for damages, whether special, incidental,
consequential, or otherwise) if Seller is unable to obtain, or is delayed in
obtaining, any such required consent, approval, ruling, license, or order.
27. Computation of Time.
All periods of time shall be computed by including Saturdays, Sundays and
holidays except that if such period terminates on a Saturday, Sunday or holiday
it shall be deemed extended to the business day next succeeding. All references
in this Agreement to days shall mean calendar days.
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<PAGE>
28. Severability.
This Agreement shall cease and terminate if for any reason any of the terms
and conditions of Sections 11(9) and 14 of this Agreement (hereinafter
collectively referred to as the "Limitation of Liability Clauses") are held by
any court of competent jurisdiction to contravene or to be invalid under the
laws of any political body having jurisdiction over the subject matter hereof or
thereof; provided, however, that notwithstanding the termination of this
Agreement, Seller shall retain all progress payments then made and Buyer shall
be obligated to pay to Seller the price for that portion of the Platform then
constructed for which progress payments have not yet been made and all work in
process (including profit on all to Seller) on or before such termination. Buyer
and Seller agree not to take any action either on their own behalf, or by way of
providing assistance to or cooperating with any third party for the purpose of
invalidating any of the Limitations of Liability Clauses. If any of the terms
and conditions of this Agreement other than the terms and conditions referred to
in this Section 28 are held by any court of competent jurisdiction to contravene
or to be Invalid under the laws of any political body having jurisdiction over
the subject matter hereof, such contravention or invalidity shall not invalidate
the entire Agreement, but, instead, this Agreement shall be construed as if not
containing the particular provision or provisions held to be invalid and the
rights and obligations of the parties shall be construed and enforced
accordingly and this Agreement shall thereupon and thereafter remain in full
force and effect.
29. Confidentiality and Ancillary Agreements.
For and in consideration of the mutual covenants and provisions hereof,
Buyer and Seller shall contemporaneously with the execution of this Agreement
execute and deliver to the other a Confidentiality Agreement and Ancillary
Agreement in the forms attached hereto as Exhibits "C" and "D".
30. Construction.
The parties to this Agreement having been represented by legal counsel of
their own choosing in connection with the negotiation and drafting of this
Agreement, this Agreement shall be construed and interpreted for all purposes
without regard to the author of any specific language appearing herein. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
31. Option Platform.
(a)Seller hereby grants to Buyer an option (the "Option"), subject to and
conditioned upon no prior commitment of the production resources of Seller to
other customers before Buyer notifies Seller of its exercise of the Option, to
have Seller construct and sell to Buyer a
26
<PAGE>
mobile, self contained and elevating platform with the same specifications as
the Platform (the "Option Platform") for a fixed purchase price (without the
LeTourneau Kit) of (i) USD $47,000,000.00 (the "Fixed Purchase Price") if the
Option is exercised by December 1, 1997 and LeTourneau commits to deliver the
Kit for the Option Platform not later than June 30, 1999 and with a scheduled
delivery date no later than February 28, 2000 (the "Scheduled Delivery Date").
If either the Option is exercised after December 1, 1997 or LeTourneau commits
to deliver the LeTourneau Kit for the Option Platform after June 30, 1999 or the
components of the LeTourneau Kit are delivered by LeTourneau out of sequence
with Seller's construction schedule, the Fixed Purchase Price shall escalate by
one (1 ) percent per month or part thereof for the period of delay and the
initial Scheduled Delivery Date should be extended by the same number of days.
In consideration for the granting of this Option to Buyer, Buyer hereby agrees
that it will not seek to purchase or have constructed another LeTourneau 116
platform from any other source (not including Seller's affiliated companies)
during the period of the Option. Buyer may terminate this obligation not to
construct or purchase another LeTourneau 1 16 platform at any time after
December 1, 1997 by notice to Seller, but the Option shall thereupon lapse
automatically.
(b) The purchase price excluding the LeTourneau Kit for the Option
Platform shall be paid on the following schedule:
(i) Contract Signing 15%
(ii) Start Fabrication/2000 tons of
steel delivered 15%
(iii) Lay keel 20%
(iv) Install 3rd spud can 20%
(v) Launch 20%
(vi) Delivery 20%
The above milestone payments mentioned above shall become due upon completion of
each event. The price for the LeTourneau Kit for the Option Platform shall be
paid by Buyer to Seller in immediately available funds as and when Seller is
obligated to make payment therefor to LeTourneau.
(c) The Option must be exercised by Buyer by written notice delivered to
the Seller as provided in Section 19 hereinabove by July 31, 1998 or the same
shall automatically terminate. The Option is further subject to and conditioned
on LeTourneau's commitment to a delivery date for the LeTourneau Kit of not
later than March 1, 2000 and ability of Seller due to lack of prior commitments
to deliver the Option Platform before October 31, 2000 and if either or both
condition is not fulfilled, the Option shall automatically terminate.
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<PAGE>
(d) The Option Platform shall be constructed by Seller and purchased by
Buyer pursuant to a Platform Construction Contract containing the terms of
Section 31 (a) above as to price and scheduled delivery date, the terms of
Section 31(b) above as to the payment schedule, and the terms and conditions of
this Agreement as to other provisions.
(e) Buyer's obligation to purchase the Option Platform after exercise of
the Option and Seller's obligation to construct and sell the Option Platform to
Buyer after exercise of the Option shall be subject and conditioned upon:
(i) Presentation by Seller within fifteen (15) days of the exercise
of the Option of written price and delivery schedule for a LeTourneau Kit for
the Option Platform (provided LeTourneau will commit to a firm price
and delivery).
(ii) Commitment in writing by Seller within fifteen (15) days of the
exercise of the Option of a revised purchase price for the Option Platform based
on the LeTourneau Kit price and any other changes to the Option Platform
requested by Buyer.
(iii) Notice by Buyer that within the fifteen (15) day period
referred to in (i) above that after review of the revised price and delivery
schedule referred to in (i) above Buyer, wishes to proceed with the Option. If
Buyer fails to give such notice within the required time or notifies Seller that
it does not wish to proceed with the Option, the Option shall terminate and
Buyer shall have no further rights in or to the Option Platform.
(iv) The negotiation and execution of contracts between Seller and
LeTourneau including an ancillary agreement and confidentiality agreement, in
form and substance satisfactory to Seller, Buyer, and LeTourneau.
(v) Performance by LeTourneau under the LeTourneau Agreements.
(f) As used herein, the LeTourneau Kit shall mean the elevating units, leg
material, cranes, skidding systems, and raw water tower elevating system for a
LeTourneau Super 116 platform.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on their behalf by their respective duly authorized representatives on the date
first shown above.
AMFELS, INC.
By: /s/ G.S. Tan
Name: G.S. Tan
Title: Exec. Vice-President
CHILES OFFSHORE LLC
By: /s/ William E. Chiles
Name: William E. Chiles
Title: President
29
<PAGE>
Exhibit 10.5
ASSIGNMENT, ASSUMPTION, ACKNOWLEDGEMENT AND CONSENT
1. Reference is made to (i) the Platform Construction Agreement, the
Ancillary Agreement and the Confidentiality Agreement, each dated as of April
30, 1997 in each case between AMFELS, INC. ("AMFELS"), and Chiles Offshore
LLC (the "Company"), as assignee of and successor in interest to COI, LLC
(successor by merger to Chiles Offshore, Inc.) pursuant to an instrument of
Assignment and Assumption and Consent to Assignment dated as of August 5,
1997 (collectively, the "Chiles Columbus Agreement") and (ii) the Platform
Construction Agreement dated as of August 5, 1997 between AMFELS and the
Company (the "Chiles Magellan Agreement"; together with the Chiles Columbus
Agreement, the "Construction Agreements").
2. The Company hereby assigns (i) to Chiles Columbus LLC, a Delaware
limited liability company and wholly owned subsidiary of the Company, all of
the rights and benefits of the Company with respect to the Chiles Columbus
Agreement and (iii) to Chiles Magellan LLC, a Delaware limited liability
company and wholly owned subsidiary of the Company, all of the rights and
benefits of the Company, all of the rights and benefits of the Company with
respect to the Chiles Magellan Agreement.
3. Chiles Columbus LLC hereby undertakes, assumes and agrees to pay,
perform or discharge in accordance with their terms, to the extent not
heretofore paid, performed or discharged, all obligations of the Company
under or otherwise with respect to the Chiles Columbus Agreement, and Chiles
Magellan LLC hereby undertakes, assumes and agrees to pay, perform or
discharge in accordance with their terms, to the extent not heretofore paid,
performed or discharged, all obligations of the Company under or otherwise
with respect to the Chiles Magellan Agreement.
4. AMFELS hereby acknowledges the foregoing assignment and assumption
agreement with respect to the Chiles Columbus agreement, and hereby consents
to the assignment by the Company to Chiles Columbus LLC of all of the rights
and benefits of the Company under the Chiles Columbus Agreement, and agrees
that Chiles Columbus LLC may succeed to and assume all of the Company's
rights, benefits, duties and obligations under such agreement, all as set
forth in paragraphs 2 and 3 above.
5. AMFELS hereby acknowledges the foregoing assignment and assumption
agreement with respect to the Chiles Magellan Agreement, and hereby consents
to the assignment by the Company to Chiles Magellan LLC of all of the rights
and benefits of the Company under the Chiles Magellan Agreement, and agrees
that
<PAGE>
Chiles Magellan LLC may succeed to and assume all of the Company's rights,
benefits, duties and obligations under such agreement, all as set forth in
paragraphs 2 and 3 above.
6. The foregoing acknowledgement and consent shall not, with respect
to either Construction Agreement, operate to release the Company from any of
its obligations or liabilities thereunder in the event that Chiles Columbus
LLC or Chiles Magellan LLC, as applicable, shall fail to perform any of its
obligations thereunder. If there is any conflict between the provisions of
this paragraph and any other contained in this document, this paragraph shall
be controlling, and further provided however that nothing herein shall
constitute a subordination or waiver of (i) any rights of AMFELS in or under
the Construction Agreements and associated documents and agreements, at law
or in equity, or (ii) any lien, title or equity of AMFELS, by contract, at
law or in equity, in any Platforms to be constructed pursuant thereto, (iii)
any remedies of AMFELS under the Construction Agreements and associated
documents, at law or in equity, including without limitation the right to
payment, setoff, and deduction of all sums due AMFELS at any time under the
Construction Agreements or associated documents and agreements.
Executed and dated as of April 23, 1998.
CHILES OFFSHORE LLC
BY: /s/ William E. Chiles
-----------------------
Name: William E. Chiles
Title: President
CHILES COLUMBUS LLC
BY: /s/ William E. Chiles
-----------------------
Name: William E. Chiles
Title: President
CHILES MAGELLAN LLC
BY: /s/ William E. Chiles
-----------------------
Name: William E. Chiles
Title: President
AMFELS, INC.
BY: /s/ Eric Phua
-----------------
Name: Eric Phua
Title: VP Commercial
<PAGE>
Exhibit 10.6
Chiles
Offshore
LLC
Dick H . Fagerstal
Senior Vice President and
Chief Financial Officer
December 18, 1997
Mr. John C. Purvis
Vice President - Marketing
AMFELS, Inc.
5177 Richmond Avenue, Suite 1065
Houston, TX 77056
Dear John:
Based on our further discussions and correspondence, enclosed, please
find a revised letter agreement to modify the terms of Chiles' existing
option rig and an agreement to provide Chiles with two further options to
build similar rigs at AMFELS.
Option
Rig No. 1: AMFELS agrees to modify Chiles' existing option in
the contract for Rig No. 2 for one LeTourneau
Super 116, as outlined herein ("Option Rig No.
1"). The price for Option Rig No. 1 is $48.5
million (excluding the "Kit" but including the
design changes which have been contractually
agreed to-date on Rig No. 1 and 2) and the option
will expire on July 31, 1998 but will increase in
price by $1 million on April 30, 1998 unless the
option was previously exercised. AMFELS agrees
to deliver Option Rig. No. 1 on the date which is
the later of: (a) December 15, 1999 or (b) 20
months from the date of entering into a final
contract, subject to timely delivery and
acceptable price of the LeTourneau "Kit" (see
schedule below).
<PAGE>
Option
Rig No. 2: AMFELS agrees to provide Chiles with an option for
one sister rig ("Option Rig No. 2") by entering
into a contract for Option Rig No. 1. Option Rig
No. 2 has to be exercised prior to December 15,
1998. The price is fixed at $48.5 million
(excluding the "Kit" but including the design
changes which have been contractually agreed
to-date on Rig No. 1 and 2) through June 30, 1998
at which time the price of the rig will increase
by $1 million. AMFELS agrees to deliver Option
Rig. No. 2 on the date which is the later of: (a)
April 15, 2000 or (b) 20 months from the date of
entering into a final contract, subject to timely
delivery and acceptable price of the LeTourneau
"Kit" (see schedule below).
Option
Rig No. 3: AMFELS agrees to provide an option for one sister
rig ("Option Rig No. 3") as a result of Chiles
entering into a contract for Option Rig No. 2.
Option Rig No. 3 has to be exercised prior to
March 31, 1999 and the pricing would be the best
price offered by AMFELS to any customer for a
LeTourneau Super 116 at the time for the first
available delivery position on a "first come -
first served" basis.
Contract Form: AMFELS and Chiles agree to enter into an amendment
of the contract for Rig No. 2 substantially in the
form of Clause 31 of the contract, subject to any
and all changes necessary thereto in order to
reflect the terms of this agreement.
The form of contract and amendment shall among
other things provide for the ability to provide a
construction lender with a first preferred
security interest in the rigs during the
construction period.
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<PAGE>
Exclusivity: Chiles agrees that as long as any option described
above remains outstanding and in effect it shall
not order any similar premium jackup rigs at a
competing shipyard without first having received
AMFELS' approval in writing and AMFELS shall
supply the requirements of Chiles for LeTourneau
premium jackup rigs as contemplated by this letter
agreement.
LeTourneaus "Kits"): The above options are based on the following
prices for LeTourneau Kits
Option 1 $22.50 million
Option 2 $24.75 million
Option 3 $27.20 million
If upon exercise of an option, the "Kit" price is
in excess of the respective amounts listed above,
Chiles shall have the right to cancel the option
provided it concurrently exercises its next
option, if any.
If a "Kit" delivery is not available on a timely
basis making it impractical for AMFELS to comply
with the agreed upon delivery date as per the
specific option then Chiles may either accept a
revised delivery schedule by mutual consent of
both parties or cancel the option and concurrently
exercise its next option, if any. The mechanism
for exercising the options shall be modified to
provide that Chiles must exercise its options
after the receipt of the applicable quote from
LeTourneau, subject to qualifications set forth
herein, concerning price and delivery of the
applicable "Kit".
Should you accept this agreement it would allow Chiles to immediately
start the process of raising expansion capital on the basis of the above
described options.
We hope that you find the above in form and substance acceptable.
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<PAGE>
Very truly yours,
CHILES OFFSHORE LLC
/s/ Dick H. Fagerstal
Dick H. Fagerstal
Senior Vice President and
Chief Financial Officer
AGREED AND ACCEPTED THIS
18 DAY OF DECEMBER, 1997.
AMFELS, INC.
By: /s/ John C. Purvis
--------------------------
Name: John C. Purvis
-------------------------
Title: Vice President
------------------------
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<PAGE>
Exhibit 10.7
CHILES OFFSHORE LLC
1998 EQUITY OPTION PLAN
1. PURPOSES
1.1. Chiles Offshore LLC, a Delaware limited liability company (the
"Company"), desires, by means of this 1998 Equity Option Plan (the "Plan") and
options to be granted hereunder, to afford to certain key employees of the
Company, or any Subsidiaries (as hereinafter defined), or consultants to such
companies, who are responsible for increasing the value of the Company, an
opportunity to acquire Membership Interests (as hereinafter defined) in the
Company and, thereby, to create in such persons an increased interest in, and a
greater concern for, the welfare of the Company and its subsidiaries. The
Company, by means of this Plan and options to be granted hereunder, also seeks
to retain the services of persons now holding key positions and to secure the
services of persons capable of filling such positions.
1.2. Options issued pursuant to this Plan ("Options") shall be a matter of
separate inducement for, and are not to be granted in lieu of any salary or
other compensation for, the services of a key employee or consultant.
2. MEMBERSHIP INTERESTS SUBJECT TO OPTIONS
2.1. Options granted under this Plan shall be applicable to the acquisition
of, and only to the acquisition of, (i) Membership Interests created under the
Operating Agreement (as hereinafter defined), with the owners thereof being
designated as "Group D Members," or (ii) any Substitute Interests (as hereafter
defined) delivered after the Effective Date (as hereinafter defined) in exchange
for, or otherwise in respect of such Membership Interests in accordance with the
provisions of paragraph 12.4 of this Plan (collectively, "Group D Membership
Interests").
2.2. In addition, Options may be issued under the Plan only to the extent
that the total amount of all Group D Membership Interests which may be acquired
pursuant to the exercise of Options then and theretofore granted under the Plan
(the "Eligible Membership Interests") shall not exceed, in the aggregate, 5.0%
of the Membership Interests at the time outstanding on a fully diluted basis
(assuming the exercise of all Options); provided, however, that such 5.0%
limitation shall be
<PAGE>
subject to adjustment by the Option Committee as provided in paragraph 12.5
hereof and that any reduction in Membership Interests outstanding shall not
invalidate any already outstanding Options. The Eligible Membership Interests as
of the Effective Date represent interests in the Company's equity that, based on
the Initial Value (as hereinafter defined) of the Company's equity, have a value
of U.S. $3,250,000.
2.3. Options shall initially be granted under this Plan as of the Effective
Date (the "Initial Grant") to certain key executives with respect to an
aggregate amount of Eligible Membership Interests equal to approximately 3.953%
of the Member Interests in the Company as of the Effective Date, having an
Initial Value on the Effective Date of $2,569,450. The Options comprising the
Initial Grant shall expire on the tenth anniversary of the Effective Date.
2.4. This Plan shall be effective beginning as of 9:00 A.M. E.S.T. as of
March 31, 1998 (the "Effective Date"). The "Initial Value" of the Company's
equity for purposes of this Plan has been determined to be U.S. $65 million,
representing the Value (as hereinafter defined) of all the Membership Interests
in the Company on the Effective Date as determined by the Option Committee (as
hereinafter defined).
2.5. Subject to Section 18 hereof, Options under this Plan may be granted
from time to time during the period beginning on the Effective Date and ending
on March 31, 2008 (the "Grant Expiration Date") on the terms and conditions
hereinafter provided, unless and until Options have been granted hereunder for
all the Eligible Membership Interests, and no Options shall be granted after the
Grant Expiration Date.
3. ADMINISTRATION
3.1. The Management Committee of the Company (the "Management Committee")
shall designate from any of its members a committee, which may be the
Compensation Committee of the Management Committee as the same may from time to
time be constituted, to administer this Plan (the "Option Committee"). The
Option Committee shall consist of no fewer than two (2) members, each of whom
(i) shall not be a holder of an Option or a person eligible to receive a grant
of Options hereunder and (ii) if any equity security of the Company is
registered under Section 12 of the Securities Exchange Act of 1934, as amended
and as the same may be amended and any successor provision of law (the "Exchange
Act"), or are subject to the reporting requirements of Section 15(d) of the
Exchange Act, shall be with respect
2
<PAGE>
to the Company "non-employee directors" within the meaning of Rule 16b-3 (or any
successor rule or regulation) promulgated under the Exchange Act. A majority of
the members of the Option Committee shall constitute a quorum for a meeting of
the Option Committee, and the act of a majority of the members of the Option
Committee shall be the act of the Option Committee. The rules and procedures of
the Option Committee shall otherwise be determined by the Management Committee
or the Option Committee. Any member of the Option Committee may be removed at
any time either with or without cause by resolution adopted by the Management
Committee, and any vacancy on the Option Committee at any time may be filled by
resolution adopted by the Management Committee.
3.2. Subject to the express provisions of this Plan, on an annual or more
frequent basis, as the Option Committee or the Management Committee shall
determine, the Option Committee shall determine, in its discretion, the persons
to whom Options shall be granted (together with permitted assigns thereof, the
"Participants"), the units of Eligible Membership Interests which shall be
subject to each Option, the purchase price for Eligible Membership Interests
under each Option, the period(s) during which such Options shall be exercisable
(whether in whole or in part) and the other terms and provisions thereof (which
need not be identical). The Option Committee may establish performance standards
for determining the periods during which Options shall be exercisable, including
without limitation standards based on the earnings of the Company for various
fiscal periods. The Option Committee shall define such performance criteria and,
from time to time, the Option Committee in its sole discretion and in
administering this Plan may make adjustments to such performance criteria for
any fiscal period so that extraordinary or unusual charges or credits,
acquisitions, mergers, consolidations, and other corporate transactions and
other elements of or factors influencing the calculations of earnings or any
other performance standard do not distort or affect the operation of this Plan
and Options granted hereunder in a manner inconsistent with the achievement of
the purposes of this Plan.
3.3. Subject to the express provisions of this Plan, the Option Committee
also shall have authority to construe the terms and conditions of this Plan and
the Options granted thereunder, to amend this Plan and the Options granted
thereunder, to prescribe, amend and rescind rules and regulations relating to
this Plan, and to make all other determinations necessary or advisable for
administering this Plan. The Option Committee may employ such legal counsel,
consultants and agents as it may deem desirable for the administration of this
Plan and may rely upon any opinion or computation received from any such legal
counsel, consultant or agent.
3
<PAGE>
Expenses incurred by the Option Committee in the engagement of such counsel,
consultant or agent shall be paid by the Company. No member or former member of
the Option Committee shall be liable for any action or determination made in
good faith with respect to any grant of Options hereunder or the interpretation
or application of the terms and conditions of the Plan or any Option or
otherwise with respect to this Plan. The determination of the Option Committee
on matters referred to in this Section 3 shall be conclusive.
4. ELIGIBILITY
4.1. Options may be granted only to key employees of the Company or a
Subsidiary thereof, or a consultant providing substantial services thereto, and
shall not be granted to any member of the Option Committee.
4.2. The adoption of this Plan does not create a right in any employee or
consultant to participate in the Plan, nor does it create a right in any
employee or consultant to have any Options granted to him or her under this
Plan.
5. OPTION PRICE, UNITS AND PAYMENT
5.1. For purposes hereof, each unit of Eligible Membership Interest (a
"Unit") shall be equal to 0.001% all the Membership Interests in the Company at
the time of grant. Accordingly, the purchase price of each Unit subject to an
Option granted as part of the Initial Grant shall be $650, representing 0.001%
of the Initial Value on the Effective Date. Upon the exercise of any Option, the
Participant shall receive a Group D Membership Interest that represents the
Group D Membership Interest the Participant would then own if the Participant
had exercised such Option on the date of grant. By way of example, if an Option
is exercised for 10 Units (i.e., representing 0.01% of all Membership Interests
in the Company on the date of grant), the Participant would receive a Group D
Membership Interest representing a 0.01% Percentage Interest in the Company if
there have been no sales or repurchase of Membership Interests by the Company
(or similar events affecting Percentage Interests) between the date of grant and
the date of exercise; however, if the Company for example sold additional
Membership Interests between the date of grant and the date of exercise
resulting in the Members on the date of grant experiencing a 20% dilution of
their Percentage Interests, the optionholder would receive a Group D Membership
Interest representing a 0.008% Percentage Interest in the Company upon such
exercise.
4
<PAGE>
5.2. The purchase price for each Eligible Membership Interest subject to an
Option granted after the Initial Grant shall be such amount, not less than the
Value thereof on the date the Option is granted, as shall be determined by the
Option Committee. For purposes of the Plan, the "Value" of an Eligible
Membership Interest shall be as determined in accordance with this paragraph. If
Eligible Membership Interests of the kind subject to the Option are at the time
listed on a national securities exchange or quoted in an inter-dealer quotation
system, which in either case is authorized under the Exchange Act, then the
Value of an Eligible Membership Interest on any date shall be the last sale
price on such date, if a trading day, or on the most recent past trading day
reported in the transaction reporting system therefor authorized under the
Exchange Act. If the Membership Interests are not so listed or traded, then the
Value of an Eligible Membership Interest shall be the fair market value of such
Eligible Membership Interest, as determined by the Option Committee in good
faith by any means reasonably determined by the Option Committee. For purposes
of this Plan, the determination by the Option Committee of the Value of an
Eligible Membership Interest shall be conclusive.
5.3. Unless a non-cash payment has been approved by the Option Committee,
the purchase price for an Eligible Membership Interest payable upon exercise of
an Option shall be payable, unless otherwise agreed by the Company, in cash, by
certified bank check, in immediately available federal funds delivered to an
account designated by the Company or by personal check of the Participant,
subject to collection; provided that, if paid by personal check of the
Participant, unless waived by the Company, payment shall not be deemed received
until the Company shall have collected thereon.
6. GRANT, VESTING AND OTHER TERMS OF OPTIONS; LIMITATION ON THE RIGHT OF
EXERCISE
6.1. An Option shall vest and be exercisable at such times, in respect of
the Units subject thereto, and at such price or prices and during such period or
periods, and on such other terms and conditions, consistent with the provisions
of this Plan, as the Option Committee shall determine on or before the date of
the grant of such Option; provided, however, that an Option shall not be
exercisable after the expiration of ten (10) years from the date such Option is
granted. A grant of Options hereunder shall be made by the delivery by the
Company to the individual granted the Option of an Option Agreement
substantially in the form attached hereto as Exhibit A, or substantially in such
other form as the Option Committee shall have approved, which Option Agreement
shall specify the time or times at which such Option shall
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vest and shall be exercisable, the Units in respect of which, the price or
prices at which and the period or periods during which such Option shall be
exercisable and any other terms of the Option; provided, however, that, if any
such term (other than the Units for which such Option may be exercisable) is not
so specified, the Option shall (i) subject to Section 11 hereof, have a term
extending from the date of grant to the tenth anniversary of the date of grant,
(ii) subject to Section 6.2, vest and become exercisable in three equal
installments, on the first, second and third anniversaries of the date of grant,
and the number of Units for which such Option shall vest and may be exercised on
such installment dates shall be equal in amount, (iii) the price at which such
Option shall be exercisable shall be the Value of the Units subject thereto on
the date of grant, and (iv) all other terms and conditions of such Option shall
be as provided by this Plan.
6.2. Unless otherwise determined by the Option Committee, no Option may be
exercised prior to the completion of construction of the two premium jackup
drilling rigs (one LeTourneau Enhanced 116-C and one LeTourneau Super 116) that
are currently being constructed for the Company at AMFELS, Inc. (collectively,
the "Initial Premium Jackup Drilling Rigs").
6.3. The Option Committee shall have the right to accelerate, in whole or
in part, from time to time, conditionally or unconditionally, the right to
exercise any Option granted hereunder.
6.4. To the extent that an Option is not exercised within the period of
exercisability specified therein, it shall expire as to the then unexercised
part.
6.5. In no event shall an Option granted hereunder be exercised for a
Membership Interest in an amount less than a Unit or a comparable amount of
Substitute Interests issued pursuant to Section 12 hereof in exchange therefor.
7. EXERCISE OF OPTIONS
7.1. Subject to Section 9 and any additional requirements that may be
provided by an Option Agreement, Options granted under this Plan shall be
exercised by the Participant by the giving of written notice of the exercise
thereof to the Company, Attention: Secretary, at the principal business office
of the Company, specifying the number of Units to be purchased upon such
exercise, such notice to be substantially in the form provided by Exhibit B to
the form of Option Agreement attached hereto as Exhibit A hereto. Unless the
Company shall otherwise agree in
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writing, such notice shall be accompanied by (i) the tender of payment of the
purchase price for the Units to be purchased upon such exercise of the Option,
in accordance with the requirements of Section 5 hereof, and (ii) the Option
Agreement issued with respect to the Option (and not a copy thereof), which in
the case of a permitted partial exercise shall be endorsed by the Company to
reflect such partial exercise and returned to the optionholder (and in the case
of exercise in full shall be retained by the Company). The Company may also
require an optionholder in connection with the exercise of an Option to execute
and deliver to it or to the Company the documents referred to in Section 14
hereof and any documents that may be required under the Operating Agreement in
connection with the admission of a person as a member of the Company or the
transfer of an additional Membership Interest to a person who is already a
member of the Company, as may be appropriate to the circumstances. The Company
shall advise the optionholder of any such additional documentation requirements
in connection with the exercise of an Option promptly after it has received
notice of exercise of the Option. The Company may waive any of the foregoing
requirements respecting the manner of exercise of Options.
7.2. Upon receipt by the Company of notice of exercise of an Option in
accordance with paragraph 7.1 hereof, the Company shall, subject to the terms of
Sections 9, 14 and 15 hereof, cause the Membership Interest purchased upon
exercise to be recorded in the name of the Participant or his designee in
accordance with the Operating Agreement, against payment of the full purchase
price and execution and delivery of any other required documentation, on the
date therefor specified in the notice of exercise (or on such earlier date or by
such other means of delivery as is acceptable to the Company and the
optionholder).
8. CERTAIN DEFINITIONS
For purposes hereof, the following terms shall have the respective meanings
provided below in this Section 8:
8.1. "Affiliate" of a person or entity means any other person or entity
controlled by, controlling or under common control with such person or entity,
for which purpose "control" shall have the same meaning as used in the
Securities Exchange Act.
8.2. "Business Day" shall mean any day except a Saturday, Sunday or other
day on which the principal business office of the Company is closed.
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8.3. "Membership Interest" shall have the meaning set forth in the
Operating Agreement.
8.4. "Operating Agreement" shall mean the Amended and Restated Operating
Agreement of the Company, dated as of December 16, 1997, by and among the
persons signatory thereto and such other persons as may become members in
accordance therewith, as the same may be amended or modified from time to time
in accordance with its terms; provided, however, that, if interests in or
securities of a company other than the Company have been issued in exchange or
substitution for Membership Interests and then outstanding Options become
exercisable for such interests or securities in accordance with Section 12
hereof, then "Operating Agreement" shall refer to the certificate of
incorporation and by-laws, partnership agreement or like constitutive documents
of the issuer of such interests or securities.
8.5. "Subsidiary" shall mean any corporation, partnership, limited
liability company or like entity controlled by the Company of which at least 50%
of the equity interest therein is owned, directly or indirectly, by the Company.
9. REPURCHASE OF OPTIONS
9.1. Following the Company's receipt of a notice of exercise of any Option
by a Participant in accordance with Section 7.1 (the date of such receipt, with
respect to such Option, being referred to as the "Option Exercise Date") other
than a notice of exercise furnished following a termination of employment or of
a consulting engagement due to dismissal of a Participant without Cause as
contemplated by Section 11.1(b), the Company may elect, by written notice to
such Participant given within ten (10) Business Days after the Option Exercise
Date, to repurchase the Options that would otherwise be exercised at a
repurchase price determined in accordance with the provisions of Section 9.2. In
the event that the Company makes such election, the Company shall provide notice
of such repurchase price to the Participant promptly after the determination
thereof, which notice shall specify that such repurchase price is payable in
cash or, in the event that the provisions of Section 9.4 are applicable, the
terms and conditions of such repurchase in accordance therewith. The Participant
shall have the right, exercisable by written notice to the Company within ten
(10) days following receipt of the Company's notice of such repurchase price, to
withdraw his or her notice of exercise. If the Participant waives such right or
does not so withdraw his or her notice of exercise, the Company shall repurchase
the Options to which such notice of exercise relates in accordance with the
provisions of Section 9.3.
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9.2. The repurchase price for each Unit of Eligible Membership Interests
subject to an Option shall be such amount, not less than the Value thereof on
the Option Exercise Date, as shall be determined by the Option Committee. For
purposes of the Plan, the "Value" of any Unit of Eligible Membership Interests
shall be as determined in accordance with this paragraph. If Eligible Membership
Interests of the kind subject to the Option are at the time listed on a national
securities exchange or quoted in an inter-dealer quotation system, which in
either case is authorized under the Exchange Act, then the Value of an Eligible
Membership Interest (or Unit thereof) on any date shall be determined by
reference to the last sale price on such date, if a trading day, or on the most
recent past trading day reported in the transaction reporting system therefor
authorized under the Exchange Act. If Membership Interests of the kind subject
to the Option are not so listed or traded, then the Value of any Unit of
Eligible Membership Interests shall be the fair market value of such Unit, as
determined by the Option Committee in good faith by any means reasonably
determined by the Option Committee; provided, however, that, in determining such
Value, the Option Committee shall give due consideration to the market value of
companies engaged in comparable businesses whose equity securities are at the
time listed on a national securities exchange or quoted in an inter-dealer
quotation system and, provided further, that in no event shall the value of any
Unit of Eligible Membership Interests as so determined to be less than the
Percentage Interest that would be represented by such Unit upon exercise of the
amount, if any, by which (a) the sum of (i) the product of (A) four and (B) the
amount of the Company's consolidated earnings before interest, taxes,
depreciation and amortization for the most recently completed 12 month period
that ended on or prior to the Option Exercise Date, determined in accordance
with generally accepted accounting principles, and (ii) the amount of cash and
value of marketable securities owned by the Company as of the Option Exercise
Date exceeds (b) the aggregate amount of the Company's indebtedness (including
obligations under capitalized leases) and the amount of any reserves for
contingent liabilities established as of the Option Exercise Date. For purposes
of this Plan, the determination by the Option Committee of the Value of any Unit
of Eligible Membership Interests thereof shall be conclusive.
9.3. In the event that any applicable Participant does not withdraw his or
her notice of exercise within the ten-day period following his or her receipt of
the Company's notice of repurchase as provided in Section 9.1 hereof, within
five (5) Business Days after the expiration of such ten-day period, on a
Business Day and at a time during normal business hours designated by the
Company by notice to such Participant, the Company shall repurchase the Options
to be so sold to it by the Participant for cash, certified bank check or
immediately available funds in the
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amount of the repurchase price (or such other consideration as the Company may
have specified in its notice of the repurchase price in the event that the
provisions of Section 9.4 are applicable) against delivery of the Participant's
Option Agreement to the Company at its principal business office for
cancellation or, if only part of Option evidenced by such Option Agreement are
sold, for annotation to such effect. The Participant shall execute and deliver
such documents as the Company may reasonably request to document such
transaction. Upon repurchase by the Company of an Option, the Option shall
automatically expire.
9.4. Notwithstanding anything to the contrary contained herein, the
following provisions shall apply:
(a) The Company's obligations to make payments to any Participant under the
Plan shall at all times and in all respects be subject, subordinate and junior
in right of payment to all borrowings, secured or unsecured, now owing or which
hereafter may become owing, and all leases, of the Company and its Subsidiaries,
and the Company shall not be obligated to make any payment under the Plan if the
Company upon or after such payment would be in default under any instrument or
agreement to which the Company is a party or by which the Company or any of its
assets is materially bound or affected. If the Company does not make any agreed
payment under the Plan by reason of the preceding sentence, such payment shall
be deferred until such time as it may be made without default under any such
instrument or agreement, and in the interim period the deferred amount shall
accrue interest, at the Company's then current cost of borrowed funds, as
determined by the Option Committee.
(b) In repurchasing any Options (or portions thereof), the Company, acting
by the Option Committee, may elect, if the total repurchase price is in excess
of $500,000, to pay such repurchase price in three (3) equal payments equal to
one-third (1/3) of the repurchase price (together with interest at the Company's
then current cost of borrowed funds, as determined by the Option Committee), the
first of such payments to be made within thirty (30) days after the date of
determination of such repurchase price and the additional installments to be
made on the first and second anniversaries of the date of the initial payment.
(c) The Company's obligation to pay any repurchase price, if deferred,
shall be prepayable by the Company, together with accrued interest, in whole or
in part at any time without penalty. Further, in the event of a Change in
Control of the Company as described in Section 12.1, all Participants not
previously
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paid their repurchase prices in full shall on the date of the occurrence of such
Change in Control receive payment in full of the Company's then remaining
obligations to them hereunder. The death or disability of a Participant or any
termination of employment shall not accelerate the Company's payment obligations
under this Section 9.4, which shall continue in effect to the Participant and/or
his or her legal representatives, as the case may be.
10. NON-TRANSFERABILITY OF OPTIONS
No Option granted hereunder shall be transferable, whether by operation of
law or otherwise, other than by will or the laws of descent and distribution,
and any Option granted hereunder shall be exercisable during the lifetime of the
holder only by such holder; provided, however, that an Option may be transferred
by the holder thereof by gift to a member of his or her family or to a trust
principally for the benefit thereof pursuant to such documents respecting such
transfer as are reasonably satisfactory to the Company. Except to the extent
provided above, Options may not be assigned, transferred, pledged, hypothecated
or disposed of in any way (whether by operation of law or otherwise) and shall
not be subject to execution, attachment or similar process, and any purported
assignment in contravention hereof shall be void and of no effect.
11. TERMINATION OF EMPLOYMENT
11.1. Upon termination of the employment of a Participant with the Company
and any Subsidiary thereof or, in the case of a Participant who is a consultant,
termination of all of his consulting engagements with the Company and any
Subsidiary thereof, the following provisions shall, unless otherwise provided in
the Option Agreement, apply to the Participant's Options (including any Options
held by a permitted transferee):
(a) If termination of employment or of the consulting engagement is
due to Cause (as defined below), the Option shall, unless otherwise
specified by the Option Committee in writing not later than the date of
such termination, automatically terminate as of the date of termination of
employment or of the consulting engagement with respect to any then
unexercised portion of the Option.
(b) If termination of employment or of the consulting engagement is
due to dismissal without Cause, the Option, to the extent
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not theretofore exercised, shall become immediately exercisable and shall
be considered vested and the Participant shall have the right to exercise
the Option, to the extent not theretofore exercised, in respect of any or
all the Eligible Membership Interests subject thereto at any time up to and
including the ninetieth (90th) day after the date of such termination (but
subject to paragraphs 6.2 and 11.8 hereof).
(c) If termination of employment or of the consulting engagement is
due to retirement, resignation of the Participant or Disability (as defined
below) and at such time the Participant was entitled to exercise the
Option, the Option to the extent then exercisable shall be considered
vested and the Participant shall have the right to exercise the Option, to
the extent not theretofore exercised, in respect of any or all the Eligible
Membership Interests that such Participant was entitled to purchase
pursuant to the Option at the time of such termination, at any time up to
and including (i) in the case of retirement or resignation, the ninetieth
(90th) day after the date of such termination or (ii) in the case of
termination by reason of Disability, one (1) year after the date of such
termination (but subject to paragraphs 6.2 and 11.8 hereof). All Options
granted to such participant that are not vested as of the date of such
termination shall automatically terminate.
(d) If termination of employment or of the consulting engagement is
due to the death of the Participant and at such time the Participant was
entitled to exercise the Option, the Option to the extent then exercisable
shall be considered vested and the Participant's legal representative, or
the person who acquired the Option by bequest or inheritance upon the death
of the Participant, shall have the right to exercise the Option so granted,
to the extent not theretofore exercised, in respect of any or all the
Eligible Membership Interests that such Participant was entitled to
purchase pursuant to the Option at the time of such Participant's death, at
any time up to and including one (1) year after the date of death (but
subject to paragraphs 6.2 and 11.8 hereof). All Options granted to such
Participant that are not vested as of the date of death shall automatically
terminate.
11.2. If an Option granted hereunder shall be exercised by the legal
representative of a deceased or disabled Participant, or by a person who
acquired an
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Option granted hereunder by bequest or inheritance or by reason of death of any
Participant, written notice of such exercise shall be accompanied by a certified
copy of letters testamentary or equivalent proof of the right of such legal
representative or other person to exercise such Option.
11.3. Upon the occurrence of a termination of a Participant's employment or
of all consulting engagements as described in subparagraphs (b), (c) or (d) of
Section 11.1 above, the Participant (or his legal representative) may, if an
Initial Public Offering has not occurred, direct that the Company repurchase
such Participant's Options on the terms and conditions provided by Section 9
hereof, substituting, however, the date of such termination for the Option
Exercise Date and the most recent month-end of the Company before such
termination as the date of valuation. In such event, the optionholder shall be
required to sell, and the Company shall be required to purchase, the Option on
such terms. For purposes of this Plan, an "Initial Public Offering" means an
initial public offering of Membership Interests or Substitute Interests that is
closed by the sale of Membership Interests or Substitute Interests pursuant to
the Company's first effective Registration Statement for the sale of Membership
Interests or Substitute Interests filed under the Securities Act of 1933, as
amended, and as the same may be amended from time to time, or any successor
provision of law (the "Securities Act").
11.4. For purposes of this Section, the term "Cause" shall mean (A) fraud,
embezzlement or gross insubordination on the part of the Participant or breach
by the Participant of his or her obligations under any Company policy or
procedure; (B) conviction of or the entry of a plea of nolo contendere by the
Participant for any felony; (C) a material breach of, or the willful failure or
refusal by the Participant to perform and discharge, his or her duties,
responsibilities or obligations as an Participant; or (D) any act of moral
turpitude or willful misconduct by the Participant which (A) is intended to
result in substantial personal enrichment of the Participant at the expense of
the Company or any of its subsidiaries or affiliates or (B) has a material
adverse impact on the business or reputation of the Company or any of its
subsidiaries or affiliates; provided, however, that with respect to a
Participant who is a party to a written employment or consulting agreement with
the Company, which agreement contains a definition of "for cause" or "cause" (or
words of like import) for purposes of termination of employment thereunder by
the Company, the term "Cause" shall mean, "for cause" or "cause" as defined in
the most recent of such agreements.
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11.5. For purposes of this Section 11, the term "Disability" shall mean the
inability (as determined in good faith by the Option Committee) of such
Participant, as a result of incapacity due to physical or mental illness or
disability, to perform the duties for which the Participant is employed for six
consecutive months or shorter periods aggregating six months during any
twelve-month period.
11.6. A termination of employment shall not be deemed to occur by reason of
the transfer of a Participant from employment by the Company to a Subsidiary of
the Company. If an individual to whom an Option is granted transfers an Option
as permitted by this Plan, a termination of the employment or consulting
engagement of the individual to whom the Option was granted shall have the same
effect on the Option in the hands of the transferee as it would have had in the
hands of such individual.
11.7. In the case of any Participant who is a consultant and not an
employee, the foregoing provisions of this Section 11 shall be applied with
respect to termination of such Participant's consulting services as the Option
Committee shall determine to be substantially equivalent in respect of such
relationship to the result that would have ensued if such Participant had been
an employee.
11.8. Notwithstanding anything to the contrary contained in this Section
11, in no event shall any person be entitled to exercise any Option after the
expiration of the period of exercisability of such Option as specified herein or
in the Option Agreement relating thereto.
12. EFFECT OF CERTAIN TRANSACTIONS
Change in Control
12.1. For purposes of this Plan, a "Change in Control" of the Company shall
mean any of, and shall be considered to have occurred upon the acquisition by
any person or group of persons acting in concert other than SEACOR Offshore Rigs
Inc. or COI, LLC, or any Affiliate of either such entity, of the right to elect
a majority of the Management Committee (or any successor governing body).
12.2. Upon the occurrence of a Change of Control of the Company, the
Company (or its successor) will give written notice thereof to each Participant
promptly (and in any event within five Business Days) and each Option or portion
of
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an Option that has not vested will vest as of the date of such Change of
Control. Upon the occurrence of a Change of Control of the Company, (i) a
Participant may, by notice to the Company, require the Company (or its
successor) to purchase for cash all or any of his Options in accordance with the
provisions applicable to the purchase of Options under Section 9 hereof, but
based on the Value of the Eligible Membership Interests as of the date of such
Change of Control, and (ii) the Company (or its successor) may, by notice to any
Participant, require such Participant to sell all his Options in accordance with
the same provisions. For purposes of applying Section 9 hereof with respect to
any such purchase, the date of such Change of Control shall be substituted for
the Option Exercise Date. Notice of the exercise of the rights of a Participant
or the Company under this Section 12.2 may be furnished to the other prior to,
on or after (but not later than thirty (30) days after) the date of the Change
of Control. The closing of any purchase and sale of Options pursuant to this
Section 12.2 shall take place at such time and place as shall be specified by
notice in writing from the Company to the Participant.
Initial Public Offering
12.3. In the event an Initial Public Offering occurs, all Options will
continue in effect, and continue to vest and become exercisable in accordance
with the provisions of the Plan and the Option Agreement.
Incorporation or Merger of the Company Into a Successor
12.4. Except in the case of the occurrence of a transaction described in
Section 12.1 hereof (in which case the provisions thereof shall instead be
applicable), in the event of the incorporation of the Company or a merger,
consolidation or like transaction between the Company and another company as a
result of which Membership Interests are exchanged for or converted or changed
into shares of capital stock of a corporation or interests in a partnership,
limited liability company or trust, or notes, debentures, bonds or other debt
instruments or other securities or other property or cash, or any combination
thereof ("Substitute Interests"), the Options outstanding at that time will
continue, whether or not then vested or exercisable, as obligations of the
successor company to issue or deliver, on the terms and conditions of the Plan,
the same Substitute Interests as were exchanged for Membership Interests or into
which Membership Interests were converted or changed in such transaction. Before
entering into any such transaction, the Company shall cause the successor
company to cause there to be reserved sufficient Substitute Interests so that
there will
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be available for delivery upon exercise of all the Options then
outstanding, in lieu of the Membership Interests subject to such Options, such
Substitute Interests as would have been issued in respect of the Membership
Interests subject to such Options if all of such Membership Interests have been
outstanding at the time such transaction occurred. In such circumstances, the
outstanding Options will continue to vest and become exercisable in accordance
with the vesting and exercise schedule and other terms and conditions provided
by this Plan. Notwithstanding any other provision of this Plan, upon the
occurrence of such a transaction, if the Company does not continue in existence,
then its successor shall be deemed the "Company" for all purposes of this Plan
and the Company, before engaging in such a transaction, shall cause the
successor entity to assume all of the Company's obligations under this Plan and
the successor shall have all of the Company's rights and powers under this Plan.
Other Extraordinary Transactions
12.5. In the event of any change in the outstanding Units of Membership
Interests that are subject to Options granted under this Plan, whether as a
result of a merger, consolidation, recapitalization (including any split or
combination of Units), dividend or distribution of any equity interest, debt
instrument or security on such Units, exchange by the Company or any Affiliate
of any equity interest, debt instrument or security for such Units, or other
like change in the capital structure of the Company, unless the provisions of
paragraphs 12.2 or 12.4 or 12.6 hereof are applicable to such change, the Option
Committee shall make such adjustments to each outstanding Option as are, in its
good faith judgment, equitable to prevent any material diminution or enlargement
of the rights of the optionholder. Such adjustments may include, if determined
to be equitable by the Option Committee, the treatment of equity interests, debt
instrument or securities distributed or exchanged for Membership Interests as
Substitute Interests (as provided by paragraph 12.4 hereof) or an increase or
decrease in the exercise price of the Option, among other things. In addition,
in any such event the Option Committee may adjust the maximum number of Units of
Eligible Membership Interests as it considers equitable and consistent with the
purpose of this Plan.
12.6. In the event of any extraordinary distribution of assets of the
Company in respect of Membership Interests that are subject to Options granted
under the Plan or like extraordinary change in the Company's capital structure,
unless the provisions of paragraphs 12.2 or 12.4 or 12.5 hereof are applicable
to such change, the Option Committee shall make such adjustments to each
outstanding Option as are, in its good faith judgment, equitable to prevent any
material diminution or
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enlargement of the rights of the optionholder; provided,
however, that no such adjustment need be made with respect to any Option that
was exercisable at the time of such extraordinary transaction and which the
optionholder had a fair opportunity to exercise such that, if he had done so,
the optionholder would have participated in respect of the Membership Interest
subject to the Option in such transaction. For purposes hereof, a distribution
in any period of six consecutive months of assets of the Company having a fair
market value (as determined in good faith by the Option Committee) of less than
10% of the Value of the Company at the time of the first distribution made
during such period shall not be considered an extraordinary distribution.
13. RIGHT TO TERMINATE EMPLOYMENT
The Plan shall not impose any obligation on the Company or any Subsidiary,
to continue the employment of or any consultancy with any Participant, and it
shall not impose any obligation on the part of any Participant to remain in the
employ of or as a consultant to the Company.
14. SECURITIES LAW MATTERS
14.1. Except as hereinafter provided, the Option Committee may require a
Participant, as a condition of exercise of any Option granted hereunder, to
execute and deliver to the Company a written statement, in form satisfactory to
the Option Committee, in which such Participant represents and warrants that the
Membership Interest is being acquired for such Participant's own account for
investment only and not with a view to the resale or distribution thereof. The
Participant, at the request of the Option Committee, may further be required as
a condition of exercise of any Option, to agree in writing that any subsequent
resale or distribution by the Participant of a Membership Interest acquired by
it pursuant to an Option shall be made only pursuant to either (i) a
Registration Statement on an appropriate form under the Securities Act, which
Registration Statement has become effective and is current with regard to the
Membership Interest being sold, or (ii) a specific exemption from the
registration requirements of the Securities Act, and that in claiming such
exemption the Participant shall, prior to any offer of sale or sale of such
Partner Interest, obtain a prior favorable written opinion of counsel, in form
and substance satisfactory to counsel for the Company, as to the application of
such exemption thereto. The requirements of this paragraph 14.1 shall not apply
to (i) issuances of Membership Interests to Participants pursuant to the
exercise of Options if the Membership Interests being issued are
contemporaneously being registered for
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public offering and sale under the Securities Act or (ii) re-offerings of
Membership Interests by Participants who are considered affiliates of the
Company (as defined in Rule 405 or any successor rule or regulation promulgated
under the Securities Act) if the Membership Interests being re-offered are
registered under the Securities Act and a prospectus in respect thereof is
current.
14.2. In the event the Company registers under the Securities Act
Membership Interests for public offering and sale and at such time any
Participant holds Membership Interests as a result of having exercised Options
and such Participant by reason of his relationship with the Company cannot
lawfully sell the Membership Interests owned by him publicly without
registration thereof under the Securities Act, the Company shall give notice of
said proposed registered public offering to such Participant and, if requested
by the Participant, use its reasonable best efforts to include such
Participant's Membership Interest in said registered public offering so as to
permit such Participant to publicly sell his Membership Interests publicly by
means thereof.
15. WITHHOLDING TAXES
The Company may require, as a condition to the exercise of an Option or as
a condition to effectuating a repurchase of an Option pursuant to Sections 9 or
12 hereof, that the Company be reimbursed in cash for any taxes required by any
government to be withheld or otherwise deducted and paid by the Company in
respect of the issuance or disposition pursuant to the Option of a Membership
Interest or the repurchase by the Company of the Option. In lieu thereof, the
Company or any Affiliate thereof which employs the Participant exercising the
Option shall have the right to withhold the amount of such taxes from any other
sums due or to become due from it to the Participant.
16. USE OF PROCEEDS
The cash proceeds of the sale of Membership Interests pursuant to the Plan
are to be added to the general funds of the Company and shall be used for its
general corporate purposes as the Management Committee shall determine.
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17. AMENDMENT OF THIS PLAN
The Option Committee in its discretion may, from time to time, amend this
Plan in any respect and without the consent of any Participant, provided that no
amendment shall be made that will adversely affect the rights under any Option
granted before amendment of this Plan without the consent of the holder of such
Option.
18. TERMINATION OR SUSPENSION OF THE PLAN
The Management Committee may at any time suspend or terminate the Plan
except with respect to Options then outstanding. This Plan, unless sooner
terminated by action of the Management Committee, shall terminate at the close
of business on the later of the Grant Termination Date or the date all Options
outstanding have been exercised or have expired, provided that the provisions of
paragraph 14.2 of this Plan and the provisions of this Plan regarding
administration shall remain in effect indefinitely. Options may not be granted
while this Plan is suspended or after it has been terminated. Rights and
obligations under any Option granted while this Plan is in effect shall not be
altered or impaired by suspension or termination of this Plan, except upon the
consent of the person to whom the Option was granted. The provisions of this
Plan regarding administration of the Plan, including the power of the Option
Committee to construe and administer any Options granted prior to the
termination or suspension of the Plan, nevertheless shall continue after such
termination or during such suspension.
19. GOVERNING LAW
This Plan and such Options as may be granted thereunder and all related
matters shall be governed by, and construed and enforced in accordance with, the
laws of the State of Delaware from time to time obtaining, without giving effect
to the principles, policies or provisions thereof governing choice or conflict
of laws.
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20. PARTIAL INVALIDITY
The invalidity or illegibility of any provision hereof shall not be deemed
to affect the validity of any other provision.
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Exhibit 10.8
EXECUTION COPY
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ESCROW AGREEMENT
AMONG
U.S. BANK TRUST NATIONAL ASSOCIATION
(AS "ESCROW AGENT")
U.S. BANK TRUST NATIONAL ASSOCIATION
(AS "TRUSTEE" AND "COLLATERAL AGENT")
AND
CHILES OFFSHORE LLC
AND
CHILES OFFSHORE FINANCE CORP.
(AS "ISSUERS")
----------------
DATED AS OF APRIL 29, 1998
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ESCROW AGREEMENT
This ESCROW AGREEMENT ("Agreement"), dated as of April 29, 1998, by and
among U.S. BANK TRUST NATIONAL ASSOCIATION, as escrow agent ("Escrow Agent"),
and U.S. BANK TRUST NATIONAL ASSOCIATION as trustee for the benefit of the
holders of the Notes (as defined below) under the Indenture (as defined below)
and as collateral agent for the benefit of the holders of the Notes under the
Security Agreement (as defined below) (in such capacities, the "Trustee"), and
CHILES OFFSHORE LLC, a Delaware limited liability company, and CHILES OFFSHORE
FINANCE CORP., a Delaware corporation (the "Issuers").
RECITALS
A. Pursuant to that certain Indenture dated as of April 29, 1998, by and
among the Issuers and the Trustee (the "Indenture"), the Issuers have issued
$110,000,000 aggregate principal amount of their 10% Senior Notes due 2008
("Notes").
B. As security for their obligations to repay the Notes, the Issuers have
executed and delivered to the Trustee, in addition to the Indenture, the Escrow
Security Agreement dated as of April 29, 1998 (the "Security Agreement"), in
which the Issuers grant to the Trustee a security interest in the Collateral (as
defined in the Security Agreement).
C. The parties have entered into this Agreement to set forth the conditions
upon which, and the manner in which, funds will be disbursed from the Interest
Escrow Account and Construction Escrow Account (both as defined herein).
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. Capitalized terms used herein but not defined herein
shall have the meaning given 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:
"ACCEPTABLE REPLACEMENT ESCROW AGENT" means a corporation organized and
doing business under the laws of the United States of America or of any state
thereof authorized under such laws to exercise corporate trustee power, subject
to supervision or examination by federal or state authority and having a
combined capital and surplus of at least $100 million as set forth in its most
recent published annual report of condition.
"AFFILIATES" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling,"
<PAGE>
"controlled by" and "under common control with"), as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"AVAILABLE FUNDS" means (a) the sum of (i) the Initial Escrow Amount and
(ii) interest earned or dividends paid on the funds in the Escrow Accounts
(including holdings of Temporary Cash Investments), less (b) the aggregate
disbursements previously made pursuant to this Agreement.
"CONSTRUCTION OVERHEAD" means all costs associated with the Issuers'
personnel overseeing construction of the Rigs at the AMFELS shipyard and general
and administrative expenses (including, without limitation, expenses payable
pursuant to the Management and Administrative Services Agreement dated February
27, 1998, as in effect from time to time, between Chiles Offshore LLC and SEACOR
SMIT Inc.).
"INITIAL ESCROW AMOUNT" means $106.5 million.
"INTEREST PAYMENT DATES" means May 1 and November 1 of each year,
commencing on November 1, 1998 until May 1, 1999 (or if any such day is not a
Business Day the next succeeding Business Day).
"ISSUE DATE" means April 29, 1998.
"MOODY'S" means Moody's Investors Services, Inc.
"OFE" means for the Rigs, the cost of owner furnished equipment, which
includes the major components of the drilling and power systems (including
engines, generators, draw works and top drives).
"PAYING AGENT" means U.S. Bank Trust National Association.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, of
even date herewith, among the Issuers and the Initial Purchasers.
"S&P" means Standard & Poors Ratings Group.
"TEMPORARY CASH INVESTMENTS" means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or
obligations guaranteed by the United States of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $10 million (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such similar
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equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act of 1933) or
any money-market fund sponsored by a registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above, (iv)
investments in commercial paper, maturing not more than 180 days after the date
of acquisition, issued by a corporation (other than an Affiliate of the Issuers)
organized and in existence under the laws of the United States of America or any
foreign country recognized by the United States of America with a rating at the
time as of which any investment therein is made of "P-1" (or higher) according
to Moody's or "A-1" (or higher) according to S&P, and (v) investments in
securities with maturities of six months or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the United
States of America, or by any political subdivision or taxing authority thereof,
and rated at least "A" by S&P or "A" by Moody's.
"UCC" means the Uniform Commercial Code of the State of New York or the
State of Minnesota, as applicable.
2. INTEREST ESCROW ACCOUNT, CONSTRUCTION ESCROW ACCOUNT, ESCROW AGENT.
(a) APPOINTMENT OF ESCROW AGENT. The Issuers and the Trustee at the
direction of the Issuers, hereby appoint Escrow Agent, and Escrow Agent hereby
accepts appointment, as escrow agent under the terms and conditions of this
Agreement. The term "Escrow Agent" shall be deemed to include any substitute
escrow agent pursuant to Section 2(f).
(b) ESTABLISHMENT OF INTEREST ESCROW ACCOUNT AND CONSTRUCTION ESCROW
ACCOUNT. Concurrently with the execution and delivery hereof, Escrow Agent shall
establish the Interest Escrow Account and the Construction Escrow Account (both
as defined in the Indenture, and together the "Escrow Accounts"), each in the
name of the Trustee, at its office at 180 East Fifth Street, St. Paul, Minnesota
55101. Subject to the security interest granted therein for the benefit of the
Trustee, and subject to the other terms and conditions of this Agreement, all
funds accepted by Escrow Agent pursuant to this Agreement shall be held for the
exclusive benefit of the Trustee for the ratable benefit of the holders of the
Notes. All such funds shall be held in the Escrow Accounts until disbursed in
accordance with the terms hereof. The Escrow Accounts, the funds held therein
and any Temporary Cash Investments held by the Escrow Agent shall be under the
sole dominion and control of Escrow Agent and the Trustee for the ratable
benefit of the holders of the Notes, and all such funds shall be held by the
Escrow Agent separate and apart from all other funds of or held by the Escrow
Agent. Concurrently with the execution and delivery hereof, the Issuers shall
deliver the Initial Escrow Amount to the Escrow Agent for deposit into the
Escrow Accounts against the Escrow Agent's written acknowledgment and receipt of
the Initial Escrow Amount as follows: (i) into the Interest Escrow Account, an
amount in cash which will be sufficient to provide for payment in full of the
first two scheduled interest payments on the Notes, and (ii) into the
Construction Escrow Account by the Escrow Agent at its office, the balance, in
cash.
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(c) INSTRUCTIONS REGARDING THE ESCROW ACCOUNTS. Notwithstanding any
other provision hereof to the contrary, the Escrow Agent shall follow the
instructions of the Issuers with respect to the disposition of any and all
monies, instruments and other property deposited or accumulated in the Escrow
Accounts as directed by the Issuers unless and until the Escrow Agent shall have
received written instructions to the contrary from the Trustee ("Trustee
Instructions Notice"), in which case the Escrow Agent shall follow the Trustee
Instructions Notice.
The Escrow Agent agrees, and is hereby authorized and directed by the
Issuers to pay to the Trustee upon its demand, following delivery to the Escrow
Agent of a Trustee Instructions Notice, all funds that may hereafter be
withdrawable or payable out of the Escrow Accounts, and the Escrow Agent will
not release to the Issuers, and the Issuers will not withdraw or attempt to
withdraw any funds or other property from the Escrow Accounts following delivery
of such Trustee Instructions Notice. Following an Event of Default (as defined
in the Indenture) and delivery to the Escrow Agent of a Trustee Instructions
Notice, the Trustee is hereby authorized and fully empowered without further
authority from the Issuers to request the Escrow Agent to remit to the Trustee
any funds that may be due to the Issuers, and the Escrow Agent is hereby
authorized and directed to pay to the Trustee such sums as it shall so request
without the consent of the Issuers.
The Escrow Agent, the Issuers and the Trustee agree that (i) the
Escrow Accounts are "securities accounts" within the meaning of Article 8 of the
UCC; (ii) the Escrow Agent is acting in the capacity of a "securities
intermediary" within the meaning of Article 8 of the UCC; (iii) all assets now
or hereafter comprising the Collateral and held in either of the Escrow Accounts
are "financial assets" within the meaning of Article 8 of the UCC; and (iv) any
Trustee Instructions Notice will be deemed to be an "entitlement order" within
the meaning of Article 8 of the UCC. The Escrow Agent agrees that (x) it will
comply with all entitlement orders originated by the Trustee regarding the
disposition of any Collateral, without further consent by the Issuers, and (y)
it will not comply with any entitlement orders within the meaning of Article 8
of the UCC, except as expressly permitted or required by this Agreement.
(d) APPOINTMENT AS ATTORNEY-IN-FACT. The Issuers hereby constitute
and appoint the Trustee their true, lawful and irrevocable attorney to demand,
receive and enforce payments and to give receipts, releases, satisfactions for,
and to sue for all receipts, releases, satisfactions for, and to sue for all
monies payable to the Issuers and this may be done following delivery to the
Escrow Agent of a Trustee Instructions Notice in the name of the Trustee with
the same force and effect as the Issuers could do had the Issuers not granted a
security interest in the Escrow Accounts to the Trustee pursuant to the Security
Agreement. Any and all monies and payment which may be received by the Issuers
from the Escrow Accounts, to which the Trustee is entitled under and by reason
of such security interest, will be received by the Issuers as trustee for the
Trustee, and will be immediately delivered in kind to the Trustee without
commingling. The Trustee agrees that, except upon the occurrence and during the
continuance of any Event of Default, it will forbear from exercising the power
of attorney or any rights granted to the Trustee pursuant to this paragraph.
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(e) RIGHTS OF THE ISSUERS. Nothing herein contained shall be
construed so as to prevent the Issuers from remaining the owners, subject to the
security interest of the Trustee under the Security Agreement, of the Escrow
Accounts. Until the Trustee elects to the contrary and delivers a Trustee
Instructions Notice in writing to the Escrow Agent, subject to Sections 2(g) and
3 of this Agreement, the Issuers may make such additional transactions in the
Escrow Accounts and with respect to the securities and other instruments on
deposit therein as they shall elect. In the event the Trustee does make such
election and does deliver such Trustee Instructions Notice to the Escrow Agent,
the Issuers shall not thereafter execute any transactions in the Escrow Accounts
or with respect to the securities or other instruments on deposit therein and
the Escrow Agent shall not accept for execution any such transactions without
the concurrence of the Trustee.
Following delivery to the Escrow Agent of a Trustee Instructions
Notice, the Trustee shall be entitled without the consent or concurrence of, or
prior notice to, the Issuers, to direct the Escrow Agent to liquidate any or all
securities or other instruments held in the Escrow Accounts and to direct the
Escrow Agent to pay to the Trustee the credit balance as shall exist in the
Escrow Accounts after such liquidation and after the payment to the Escrow Agent
of all the indebtedness of the Issuers to the Escrow Agent in connection with
transactions in the Escrow Accounts.
Any sums paid by the Escrow Agent from the Escrow Accounts to the
Trustee under the Security Agreement shall be applied by the Trustee to the
payment of the Obligations, to the extent of the Obligations, as such term is
defined in the Security Agreement. The receipt or receipts of the Trustee for
such funds paid to it by the Escrow Agent after delivery to the Escrow Agent of
a Trustee Instructions Notice shall as to the Escrow Agent operate as the
receipt of the Issuers as fully and as completely as if funds had been paid to
the Issuers in person and receipted for by the Issuers.
(f) ESCROW AGENT COMPENSATION.
(i) Escrow Agent shall be compensated pursuant to a separate
agreement between the Issuers and Escrow Agent.
(ii) Escrow Agent shall be entitled to disburse from the
Construction Escrow Account all amounts due to Escrow Agent as compensation
for services to be performed by Escrow Agent under this Agreement (as
determined by agreement with the Issuers pursuant to this Section
2(c)(ii)). The final payment pursuant to this Section 2(c)(ii) shall be
prorated if for a partial month.
The Escrow Agent waives and agrees not to assert, claim or endeavor to
exercise, and by executing this Agreement bars and estops itself from asserting,
claiming or exercising any right of setoff, banker's lien, security interest or
other purported form of claim with respect to the Escrow Accounts and funds from
time to time therein. The Escrow Agent shall have no rights in the Escrow
Accounts or the funds therein until the Trustee notifies the Escrow Agent that
all Obligations (as defined in the Security Agreement) have been paid in full
and the Indenture is no longer in effect. To
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the extent the Escrow Agent may ever have any such rights, the Escrow Agent
hereby expressly subordinates all such rights to all rights of the Trustee.
(g) INVESTMENT OF FUNDS IN ESCROW ACCOUNTS. Funds deposited in the
Escrow Accounts shall be invested and reinvested by the Escrow Agent upon the
following terms and conditions:
(i) ACCEPTABLE INVESTMENTS. Funds deposited in the Escrow
Accounts shall be invested, and all interest earned thereon or other
distributions or amounts paid with respect thereto may be reinvested, as
directed in writing by the Issuers in Temporary Cash Investments which the
Issuers reasonably determine at such time will produce without reinvestment of
the funds so deposited or reinvestment of income produced by such Temporary Cash
Investments and without further deposit by the Issuers, funds sufficient to
cover, (x) in the case of the Interest Escrow Account, all interest due on the
outstanding Notes, as such interest becomes due, for the Interest Payment Dates
occurring on November 1, 1998 and May 1, 1999 and (y) in the case of the
Construction Escrow Account, for such Construction Expenses (as defined below)
as such come due. The Escrow Agent shall have no responsibility for determining
whether funds held in the Escrow Accounts shall have been invested in such a
manner so as to comply with the requirements of this clause (i).
(ii) SECURITY INTEREST IN INVESTMENTS. No investment of funds
in the Escrow Accounts shall be made unless, if requested by the Escrow Agent,
the Issuers have certified to Escrow Agent upon advice of legal counsel that,
upon such investment, the Trustee will have a perfected security interest in the
applicable investment (such advice of legal counsel relating solely to the
manner of perfecting a security interest in a particular type of investment, but
not to whether such perfection has been achieved in the instance). 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. When and if the
Indenture is qualified under the Trust Indenture Act of 1939, as amended (the
"TIA"), on such date and on each anniversary of such date until the date upon
which the balance of the Available Funds shall have been reduced to zero, each
of the Trustee and the Escrow Agent shall receive an opinion of counsel to the
Issuers, dated each such date as applicable, which opinion shall meet the
requirements of Section 314(b) of the TIA.
(iii) INTEREST AND DIVIDENDS. All interest earned and dividends
paid on funds invested in such Temporary Cash Investments shall be deposited in
the Escrow Accounts for the exclusive benefit of the Trustee for the ratable
benefit of the holders of the Notes and shall be reinvested in accordance with
the terms hereof at the Issuers' written instruction and subject to disbursement
as provided herein.
(h) LIMITATION ON ESCROW AGENT'S RESPONSIBILITIES.
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(i) Escrow Agent's duties and responsibilities shall be limited
to those expressly set forth in this Agreement and are purely ministerial in
nature. 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. Escrow Agent
shall not be subject to, or obligated to recognize, any other agreement to which
the Issuers, the Trustee, or either of them may be a party. References in this
Agreement to any such agreement are for identification and definitional purposes
only.
(ii) Escrow Agent shall have no obligation with respect to the
Escrow Accounts other than to follow faithfully instructions contained in this
Agreement or delivered to Escrow Agent in accordance with this Agreement. Escrow
Agent may rely and act upon any written notice, instruction, direction, request,
waiver, consent, receipt, or other paper or document, including any Trustee
Instructions Notice ("Instructions") that it believes in good faith to be
genuine and what it purports to be. Escrow Agent shall be subject to no
liability with respect to the form, execution, or validity of any such
Instruction. The Escrow Agent shall not be liable for verifying the accuracy of
any certifications made by the Issuers in an Officers' Certificate delivered
under Section 3.
(iii) Escrow Agent shall not be liable for any error of judgment,
or for any act done or step taken or omitted by it in good faith, or for any
mistake of fact or law, or for doing anything which, in good faith, it may do or
refrain from doing in connection with the Escrow Accounts, except in each case
in the event of Escrow Agent's gross negligence or wilful misconduct.
(i) SUBSTITUTION OF ESCROW AGENT.
(i) The Issuers shall have the right to cause Escrow Agent to
be relieved of its duties hereunder and to select a substitute escrow agent to
serve hereunder (provided such substitute escrow agent is an Acceptable
Replacement Escrow Agent), upon the expiration of 30 days following delivery of
written notice of substitution to Escrow Agent and the Trustee. Upon selection
of such substitute escrow agent, such substitute escrow agent and the parties
hereto other than the substituted escrow agent shall enter into an agreement
substantially identical to this Agreement and, thereafter, Escrow Agent shall be
relieved of its duties and obligations to perform hereunder, except that Escrow
Agent shall transfer to the substitute escrow agent upon request therefor all
assets held in the Escrow Account and copies of all books, records, plans and
other documents in Escrow Agent's possession relating to such assets or this
Agreement.
(ii) Escrow Agent, or any substitute escrow agent, may at any
time resign and be discharged of its duties and obligations under this Agreement
by giving at least 30 days' notice to the Issuers and the Trustee. The Issuers
shall appoint a substitute escrow agent (provided such substitute escrow agent
shall be an Acceptable Replacement Escrow Agent) within such 30 day period and
such substitute escrow agent and the parties hereto
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(other than the resigning Escrow Agent) shall enter into an agreement
substantially identical to this Agreement.
(iii) If the Issuers fail to appoint a substitute escrow agent as
required under paragraph (ii) above, Escrow Agent shall deliver all assets
held in the Escrow Accounts and copies of all books, records, plans and
other documents in the Escrow Agent's possession relating to such assets or
this Agreement to a substitute escrow agent (provided such substitute
escrow agent shall be an Acceptable Replacement Escrow Agent) of either its
choosing or as appointed by a court upon application therefor.
(iv) Escrow Agent shall be discharged from any further duties
under this Agreement upon its transfer of the assets held in the Escrow
Accounts and copies of all books, records, plans and other documents in the
Escrow Agent's possession relating to such assets or this Agreement to an
Acceptable Replacement Escrow Agent.
(j) INTEREST ESCROW ACCOUNT STATEMENT. At least 30 days prior to each
Interest Payment Date, the Escrow Agent shall deliver to the Issuers and the
Trustee a statement setting forth with reasonable particularity the Collateral
then held by the Escrow Agent, and the manner in which such funds are invested
(the "Interest Escrow Account Statement"). The books and records of the Escrow
Agent with respect to the Interest Escrow Account shall be available upon
written request by the Trustee and the Issuers or their respective
representatives. The parties hereto irrevocably instruct Escrow Agent that on
the first date upon which the balance in the Interest Escrow Account (including
the holdings of all Temporary Cash Investments) is reduced to zero, Escrow Agent
shall deliver to the Issuers and to the Trustee a notice that the balance in the
Interest Escrow Account has been reduced to zero.
(k) CONSTRUCTION ESCROW ACCOUNT STATEMENT. At the first Business Day
of each month, the Escrow Agent shall deliver to the Issuers and the Trustee a
statement setting forth with reasonable particularity the Collateral then held
by the Escrow Agent in the Construction Escrow Account, and the manner in which
such funds are invested (the "Construction Escrow Account Statement"). The books
and records of the Escrow Agent with respect to the Construction Escrow Account
shall be available upon written request by the Trustee and the Issuers or their
respective representatives. The parties hereto irrevocably instruct Escrow Agent
that on the first date upon which the balance in the Construction Escrow Account
(including the holdings of all Temporary Cash Investments) is reduced to zero,
Escrow Agent shall deliver to the Issuers and to the Trustee a notice that the
balance in the Construction Escrow Account has been reduced to zero.
(l) OTHER POWERS OF ESCROW AGENT.
(i) Escrow Agent may register any investments held in the
Escrow Accounts in its nominee name without increase or decrease of
liability.
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(ii) Escrow Agent may consult with and obtain advice from legal
counsel of its selection in the event of any dispute or question as to the
construction of any of the provisions of this Agreement or any of Escrow
Agent's duties under this Agreement, and Escrow Agent shall incur no
liability in acting in good faith in accordance with the advice of such
counsel. The fees and expenses for consultation with a single firm of
attorneys shall be a proper expense chargeable to the Construction Escrow
Account, provided that Escrow Agent provides the Issuers with prior written
notice of any such charge.
(m) INCUMBENCY CERTIFICATE. The Issuers and the Trustee each shall
provide a certificate to Escrow Agent as to the incumbency and signatures of
those individuals authorized to provide from time to time instructions relating
to the Escrow Accounts or to execute documents to be provided to Escrow Agent.
The Issuers and the Trustee also shall promptly notify Escrow Agent of any
changes to such a certificate. Escrow Agent may rely on the accuracy and
completeness of any such certificate unless and until it has received an
acceptable replacement certificate. All certificates provided under this Section
2(m) shall be executed by the applicable party's corporate secretary or
assistant secretary or, if the party does not have a corporate secretary or
assistant secretary, by a comparable officer.
3. DISBURSEMENTS.
(a) The Escrow Agent will make payments from the Interest Escrow
Account as follows: (i) on each of the first two Interest Payment Dates, an
amount equal to the installment then due, to be remitted to the Paying Agent for
the Notes, and (ii) in the event the Issuers are required to repurchase Notes
pursuant to the Indenture, on the repurchase date, an amount equal to the
aggregate amount of accrued interest paid to the holders whose Notes were
repurchased. A failure to pay interest on the Notes in a timely manner through
the first two scheduled Interest Payment Dates will constitute an immediate
Event of Default under the Indenture, with no grace or cure period.
(b) The Escrow Agent will make payments from the Construction Escrow
Account as follows: On the first Business Day of each calendar month beginning
after the date that the Issuers shall have paid an aggregate of at least $50
million for the following: (x) installment payments to AMFELS of the amount
specified under the related Construction Contract as the total purchase price to
be paid to AMFELS of such Rig (the "Purchase Price") PLUS (y) payments for OFE
PLUS (z) Construction Overhead (or, in the case of the first calendar month in
which the Issuers shall have so paid such amount, on any Business Day thereafter
during such calendar month), an amount equal to the sum of (i) each installment
payment of the Purchase Price of the Rigs required to be paid on each Rig
Purchase Installment Date in such calendar month pursuant to the Construction
Contracts, as adjusted for any change orders provided pursuant to the
Construction Contracts, (ii) the aggregate amount estimated in good faith by the
Issuers to be required in such calendar month to pay for the purchase price of
OFE, and Construction Overhead, up to an aggregate amount not to exceed $55.0
million and (iii) with respect to any calendar month beginning on or after the
Delivery Date of the first Rig to be completed (the "First Completed Rig") and
prior to the Delivery Date of
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the second Rig to be completed (the "Second Delivery Date"), an aggregate amount
estimated by the Issuers to be required to fund the working capital in such
calendar month for the operation of the First Completed Rig, not to exceed $10.0
million, ((i) through (iii) above collectively referred to as "Construction
Expenses"); PROVIDED, HOWEVER, that at least three Business Days prior thereto,
the Issuers shall have delivered to the Trustee and the Escrow Agent an
Officers' Certificate setting forth in reasonable detail (i) the amount,
category and purpose of each requested payment, (ii) in the case of any payments
other than installment payments of the Purchase Prices of the Rigs, the amount
available for payment, after giving effect to all previous payments, and (iii) a
reconciliation of payments made from the Construction Escrow Account to actual
expenditures, which reconciliation shall be made on a cumulative basis through
the end of the second calendar month proceeding the month in which such
Officers' Certificate is delivered. Notwithstanding the foregoing, in the event
the Issuers are required to repurchase Notes upon a Contract Termination, the
Escrow Agent will make a payment on the repurchase date, in an amount equal to
the Allocated Portion of the remaining funds in the Construction Escrow Account,
to be deposited with the Paying Agent for application to pay the purchase price
of Notes accepted for repurchase. Pending application of the Collateral so
released from the Construction Escrow Account pursuant to this Agreement, such
Collateral shall be invested in Temporary Cash Investments.
(c) Upon receipt by the Escrow Agent of an Officers' Certificate of
the Issuers that the Issuers have made the first two scheduled interest payments
on the Notes, the Collateral in the Interest Escrow Account shall be released
from the Interest Escrow Account to the order of the Issuers. Upon receipt by
the Escrow Agent of an Officers' Certificate of the Issuers that the Issuers
have made the final installment of the Purchase Price for each of the Rigs in
accordance with the related Construction Contracts, the Collateral in the
Construction Escrow Account will be released from the Construction Escrow
Account to the order of the Issuers. Upon release of all the Collateral from
the Escrow Accounts, the Notes will be unsecured.
(d) The Issuers and the Trustee each shall provide a certificate to
Escrow Agent as to the incumbency and signatures of those individuals authorized
to provide from time to time instructions relating to the Escrow Accounts or to
execute documents to be provided to Escrow Agent. The Issuers and the Trustee
also shall promptly notify the Escrow Agent of any changes to such a
certificate. Escrow Agent may rely on the accuracy and completeness of any such
certificate unless and until it has received an acceptable replacement
certificate. All certificates provided under this Section 3(d) shall be executed
by the applicable party's corporate secretary or assistant secretary or, if the
party does not have a corporate secretary or assistant secretary, by a
comparable officer.
(e) RETIRED NOTES, ETC. In the event that a portion of the Notes has
been retired by the Issuers and submitted to the Trustee for cancellation or, if
additional cash has been deposited into the Interest Escrow Account pursuant to
Section 3(g) below and, thereafter, the Registration Default (as defined in the
Registration Rights Agreement is cured, and there is no Default or Event of
Default under the Indenture, funds representing the lesser of (i) the excess of
the then Available Funds over the amount sufficient to pay interest through and
including May 1, 1999 on the Notes not so retired and (ii) the interest payments
which have not previously been made on such retired Notes
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<PAGE>
for each Interest Payment Date through the Interest Payment Date to occur on May
1, 1999 shall, upon written request of the Trustee to the Escrow Agent. The
Trustee shall provide such notice to the Escrow Agent (A) upon receipt of notice
of similar effect from the Issuers (which notice from the Issuers shall be
accompanied by an agreed upon procedures report by a nationally recognized
independent public accounting or investment banking firm which sets forth the
calculations to determine such lesser amount and recalculates the amounts
remaining in the Interest Escrow Account as sufficient to produce without
reinvestment of the remaining funds or reinvestment of income produced by the
remaining Temporary Cash Investments and without further deposit by the Issuers,
funds sufficient to cover all interest due on the remaining outstanding Notes,
as such interest becomes due, for the Interest Payment Dates occurring on
November 1, 1998 and May 1, 1999) and (B) upon compliance with the release of
collateral provisions of the TIA to the extent required by the Indenture.
(f) EXCESS AMOUNTS. At such time as all interest due on the Notes
through and including May 1, 1999 has been paid to the Holders thereof pursuant
to the Indenture and in accordance herewith, the Escrow Agent shall disburse all
remaining funds in the Interest Escrow Account to the Issuers. The Trustee shall
provide notice to the Escrow Agent to such effect upon receipt of notice from
the Issuers after the time all interest due on the Notes through and including
May 1, 1999 has been paid to the Holders.
(g) ADDITIONAL AMOUNTS. In the event the Issuers become obligated to
pay Additional Interest (as defined in the Registration Rights Agreement) under
the circumstances described in Section 11.1 of the Indenture, the Issuers shall
deposit into the Interest Escrow Account additional cash pursuant to Section
11.1 of the Indenture.
4. ESCROW AGENT. The Escrow Agent's responsibility and liability under
this Agreement shall be limited as follows: (a) the Escrow Agent does not
represent, warrant or guaranty to the holders of the Notes from time to time the
performance of the Issuers or the Trustee; (b) the Escrow Agent shall have no
responsibility to the Issuers or the holders of the Notes or the Trustee from
time to time as a consequence of performance or nonperformance by the Escrow
Agent hereunder, except for any gross negligence or wilful misconduct of the
Escrow Agent; (c) the Issuers shall remain solely responsible for all aspects of
the Issuers' business and conduct; and (d) the Escrow Agent is not obligated to
supervise, inspect or inform the Issuers 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 Temporary Cash Investments
held by it hereunder, including, without limitation any liability for any delay
not resulting from gross negligence or wilful misconduct in such investment,
reinvestment or liquidation, or for any loss of principal or income incident to
any such delay.
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<PAGE>
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 Issuers 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 advice of counsel chosen by it
with respect to any matter relating to this Agreement and (subject to clause (b)
of the first paragraph of 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. Each Issuer shall jointly and severally indemnify, hold
harmless and defend Escrow Agent and the Trustee, and their respective
directors, officers, agents and employees, 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
Escrow Agent's and the Trustee's respective performance under this Agreement,
except to the extent that such liability, expense or claim is directly
attributable to the gross negligence or wilful misconduct of such indemnified
person. In connection with any claim, action, obligation, liability or expense
for which indemnification is sought by the Escrow Agent hereunder, the Escrow
Agent shall be entitled to recover its costs as incurred from funds available in
the Construction Escrow Account.
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<PAGE>
6. INSTRUCTIONS TO ESCROW AGENT.
(a) Each Issuer and the Trustee hereby irrevocably instruct the
Escrow Agent to: (i) maintain all of the Collateral free and clear of all liens,
security interests, safekeeping or other charges, demands and claims against
Escrow Agent of any nature whatsoever now or hereafter existing, in favor of
anyone other than the Trustee; (ii) promptly notify the Trustee if Escrow Agent
becomes aware that any person other than the Trustee has a lien or security
interest upon any portion of the Collateral (other than any claim which Escrow
Agent may have against the Construction Escrow Account for unpaid fees and
expenses); and (iii) immediately disburse all funds held in the Escrow Accounts
to the Trustee and transfer title to all Temporary Cash Investments held by
Escrow Agent hereunder to the Trustee upon written notice by the Trustee to
Escrow Agent that as a result of an Event of Default under the Indenture, the
indebtedness represented by the Notes has been accelerated and has become due
and payable.
(b) Any money and Temporary Cash Investments collected by the Trustee
pursuant to Section 6(a)(iii) shall be applied as provided in the Indenture.
(c) Upon demand, the Issuers 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 will take all
necessary action within its power to preserve and protect the security interest
created hereby as a lien and encumbrance upon the Collateral.
(d) Each Issuer hereby appoints the Trustee as its attorney-in-fact
with full power of substitution to do any act which such Issuer is obligated
hereto to do, except that the Trustee shall not direct the investment of any
monies on deposit in the Escrow Accounts, and the Trustee may exercise such
rights as each Issuer may exercise with respect to the Collateral and take any
action in each Issuer's name to protect the Trustee's security interest
hereunder.
7. TERMINATION. This Agreement shall terminate automatically ten (10)
days following disbursement of all funds remaining in the Escrow Accounts
(including the proceeds of any Temporary Cash Investments), unless sooner
terminated by agreement of the parties hereto (in accordance with the terms
hereof, not in violation of the Indenture), provided, however, that the
obligations of each Issuer under Section 5 of this Agreement shall survive
termination of this Agreement or the resignation or removal of the Escrow Agent;
provided, further, however, that until such tenth day, the Issuers 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
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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. In any event, this Agreement
shall inure to and be binding upon the parties and their successors and
permitted assigns.
(d) BENEFIT. The parties hereto, the holders of the Notes and their
permitted assigns, but no others, shall be bound hereby and entitled to the
benefits hereof.
(e) TIME. Time is of the essence in each provision of this Agreement
of which time is an element.
(f) CHOICE OF LAW. 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 giving effect to conflict of law principles thereof.
(g) ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
agreement among the parties with respect to the subject matter hereof and
supersedes any and all prior agreements, understandings and commitments, whether
oral or written. This Agreement may be amended only by a writing signed by duly
authorized representatives of all parties.
(h) 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: (i) on the day of hand delivery; (ii) upon confirmation when sent by
facsimile transmission; (iii) on the next business day after the day sent when
sent by overnight mail; or (iv) three business days following the day sent, when
sent by United States certified mail, postage and certification fee prepaid,
return receipt requested, addressed as follows:
To Escrow Agent:
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U.S. Bank Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Administration
To the Trustee:
U.S. Bank Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Administration
To the Issuers:
Chiles Offshore LLC
11200 Westheimer, Suite 410
Houston, Texas 30076
Attention: Chief Financial Officer
Chiles Offshore Finance Corp.
11200 Westheimer, Suite 410
Houston, Texas 30076
Attention: Chief Financial Officer
or at such other address as the specified entity most recently may have
designated in writing in accordance with this section to the others.
(i) 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.
(j) 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.
(k) AUTHORITY OF THE ISSUERS; VALID AND BINDING AGREEMENT. Each
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 such Issuer. The execution, delivery and
performance of this Agreement by such Issuer does not violate any applicable law
or regulation to which such Issuer is subject and does not require the consent
of any governmental or other regulatory body to which such Issuer is subject,
except for such consents and approvals as have been obtained and are in full
force and effect.
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(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.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Escrow
Agreement as of the date first above written.
ESCROW AGENT: U.S. BANK TRUST
NATIONAL ASSOCIATION
By: /s/ R. Prokosh
--------------------------------------
Name: R. Prokosh
Title: Assistant Vice President
TRUSTEE AND COLLATERAL AGENT:
U.S. BANK TRUST NATIONAL
ASSOCIATION
By: /s/ R. Prokosh
--------------------------------------
Name: Richard H. Prokosh
Title: Assistant Vice President
ISSUERS:
CHILES OFFSHORE LLC
By: /s/ Dick H. Fagerstal
--------------------------------------
Name: Dick H. Fagerstal
Title: Senior Vice President, Chief
Financial Officer and Secretary
CHILES OFFSHORE FINANCE CORP.
By: /s/ Dick H. Fagerstal
--------------------------------------
Name: Dick H. Fagerstal
Title: Senior Vice President, Chief
Financial Officer and Secretary
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<PAGE>
Exhibit 10.9
- -------------------------------------------------------------------------------
ESCROW SECURITY AGREEMENT
Between
U.S. BANK TRUST NATIONAL ASSOCIATION
("Collateral Agent")
and
CHILES OFFSHORE LLC
and
CHILES OFFSHORE FINANCE CORP.
("Grantors")
April 29, 1998
- -------------------------------------------------------------------------------
<PAGE>
This ESCROW SECURITY AGREEMENT ("Agreement"), dated as of April 29,
1998, by and between U.S. BANK TRUST NATIONAL ASSOCIATION, as secured party
and as Trustee (as defined below) for the benefit of the holders of the Notes
(as defined below) under the Indenture (as defined below) (the "Collateral
Agent"), and CHILES OFFSHORE, LLC, a Delaware limited liability company, and
CHILES OFFSHORE FINANCE CORP, a Delaware corporation, as grantors (together,
"Grantors").
RECITALS
A. Pursuant to that certain Indenture dated as of April 29, 1998
(the "Indenture"), by and among Grantors, their subsidiaries (the "Subsidiary
Guarantors") and U.S. Bank Trust National Association, as trustee (the
"Trustee"), Grantors have issued their 10% Senior Notes due 2008 (the
"Notes").
B. As security for their obligations to repay the Notes, Grantors
are executing and delivering to the Trustee, in addition to the Indenture,
this Agreement, in which Grantors grant to the Trustee a security interest in
the Collateral (as defined below).
C. The Indenture requires that Grantors execute and deliver this
Agreement.
AGREEMENT
In consideration of the premises and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Grantors hereby agree, jointly and severally, with the Collateral Agent as
follows:
1. Definitions. Unless otherwise defined, all terms used herein
shall have the meanings given in the Indenture. The following terms shall
have the respective meanings given:
"Escrow Agreement" means the Escrow Agreement dated as of the date
hereof among U.S. Bank Trust National Association, as Escrow Agent, U.S. Bank
Trust National Association, as Trustee, and Grantors.
"Governmental Authorities" means any national, state or local
government (whether domestic or foreign), any political subdivision thereof
or any other governmental or quasi-governmental, judicial, public or
statutory instrumentality, authority, body, agency, bureau or entity, or any
arbitrator with authority to bind a party at law.
"Person" means any natural person, corporation, partnership, firm,
association, Governmental Authority, or any other entity whether acting in an
individual, fiduciary or other capacity.
2. Assignment, Pledge and Grant of Security Interest.
<PAGE>
(a) To secure the timely payment and performance of the
Obligations (as defined below), each Grantor does hereby assign as
collateral, grant a security interest in, and pledge, to the Collateral Agent
for the benefit of the holders of the Notes, all the estate, right, title and
interest of each such Grantor, whether now owned or hereafter acquired, in,
to and under:
(i) the Interest Escrow Account (as defined in the
Indenture) and all funds and investments held or contained in the
Interest Escrow Account, including all investments of such funds.
(ii) the Construction Escrow Account (as defined in the
Indenture) and all funds and investments held or contained in the
Construction Escrow Account, including all investments of such funds.
(iii) the Escrow Agreement, as amended or modified from
time to time (the "Assigned Agreement").
(iv) the proceeds of all of the foregoing (all of the
collateral described in clauses (i), (ii) and (iii) and this clause (iv)
being herein collectively referred to as the "Collateral"), including
(A) all rights of Grantors to receive moneys due and to become due under
or pursuant to the Collateral, (B) all claims of Grantors for damages
arising out of or for breach of or default under the Assigned Agreement
or any other Collateral, (C) all rights of Grantors under the Assigned
Agreement, including any rights to perform thereunder and to compel
performance and otherwise exercise all remedies thereunder and (D) to
the extent not included in the foregoing, all proceeds receivable or
received when any and all of the foregoing Collateral is sold,
collected, exchanged or otherwise disposed of, whether voluntarily or
involuntarily.
(b) Anything herein contained to the contrary notwithstanding,
each Grantor shall remain liable under the Assigned Agreement, to perform all
of the obligations undertaken by it thereunder, all in accordance with and
pursuant to the terms and provisions thereof, and the Collateral Agent shall
have no obligation or liability under such Assigned Agreement by reason of or
arising out of this Agreement, nor shall the Collateral Agent be required or
obligated in any manner to perform or fulfill any obligations of either
Grantor thereunder or to make any payment, or to make any inquiry as to the
nature or sufficiency of any payment received by it, or present or file any
claim, or take any action to collect or enforce the payment of any amounts
which may have been assigned to it or to which it may be entitled at any time
or times.
(c) Subject to the terms of the Indenture, upon the occurrence
and during the continuance of an Event of Default, each Grantor does hereby
constitute the Collateral Agent, acting for and on behalf of the holders of
the Notes, the true and lawful attorney of such Grantor, irrevocably, with
full power (in the name of such Grantor or otherwise) to ask, require,
demand, receive, compound and give acquittance for any and all moneys and
claims for moneys due and to become due under or arising out of the Assigned
Agreement or any of the other Collateral, to elect
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<PAGE>
remedies thereunder, to endorse any checks or other instruments or orders in
connection therewith and to file any claims or take any action or institute
any proceedings in connection therewith which the Collateral Agent may deem
to be necessary or advisable; provided, however, that the Collateral Agent
shall give each Grantor notice of any action taken by it as such
attorney-in-fact within two (2) Business Days after taking any such action.
(d) If any default by either Grantor under the Assigned
Agreement shall occur, the Collateral Agent shall, at its option, be
permitted (but shall not be obligated) to remedy any such default by giving
written notice of such intent to such Grantor and to the other parties to the
Assigned Agreement. Any curing by the Collateral Agent of such Grantor's
default under the Assigned Agreement shall not be construed as an assumption
by the Collateral Agent of any obligations, covenants or agreements of such
Grantor under such Assigned Agreement, and the Collateral Agent shall not
incur any liability to such Grantor or any other Person as a result of any
actions undertaken by the Collateral Agent in curing or attempting to cure
any such default. This Agreement shall not be deemed to release or to affect
in any way the obligations of such Grantor under the Assigned Agreement.
3. Obligations Secured. This Agreement secures the payment and
performance of all obligations (now existing or hereafter arising) of each
Grantor owing to the holders of the Notes under the Notes and the Indenture
(such obligations being herein called the "Obligations").
4. Events of Default. The occurrence of an Event of Default under
and as defined in the Indenture, whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body,
shall constitute an Event of Default hereunder.
5. Remedies.
(a) If any Event of Default has occurred and is continuing,
the Collateral Agent may, (i) apply the Collateral to any Obligations due and
payable, (ii) proceed to protect and enforce the rights vested in it by this
Agreement, including the right to cause all revenues hereby pledged as
security and all other moneys pledged hereunder to be paid directly to it,
and to enforce its rights hereunder to such payments and all other rights
hereunder by such appropriate judicial proceedings as it shall deem most
effective to protect and enforce any of such rights, either at law or in
equity or otherwise, whether for specific enforcement of any covenant or
agreement contained in the Assigned Agreement, or in aid of the exercise of
any power therein or herein granted, or for any foreclosure hereunder and
sale under a judgment or decree in any judicial proceeding, or to enforce any
other legal or equitable right vested in it by this Agreement or by law;
(iii) cause any action at law or suit in equity or other proceeding to be
instituted and prosecuted to collect or enforce any Obligations or rights
included in the Collateral, or to foreclose or enforce any other agreement or
other instrument by or under or pursuant to which such Obligations are issued
or secured, subject in each case to the provisions and requirements thereof;
(iv) sell or otherwise dispose of any or all
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<PAGE>
of the Collateral or cause the Collateral to be sold or otherwise disposed of
in one or more sales or transactions, at such prices as the Collateral Agent
may deem best, and for cash or on credit or for future delivery, without
assumption of any credit risk, 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 such notice as is required by applicable statute,
rule or regulation and cannot be waived), it being agreed that the Collateral
Agent may be a purchaser on behalf of the holders of Notes at any such sale
and that the Collateral Agent or anyone else who may be the purchaser of any
or all of the Collateral so sold shall thereafter hold the same absolutely,
free from any claim or right of whatsoever kind, including any equity of
redemption, of either Grantor, any such demand, notice or right and equity
being hereby expressly waived and released to the extent permitted by law;
(v) incur expenses, including attorneys' fees, consultants' fees, and other
costs appropriate to the exercise of any right or power under this Agreement;
(vi) perform any obligation of either Grantor hereunder, and make payments,
purchase, contest or compromise any Lien, and pay taxes and expenses,
without, however, any obligation so to do; (vii) take possession of the
Collateral, control and manage the Collateral, collect all income from the
Collateral and apply the same to reimburse the Trustee, Collateral Agent and
the holders of Notes for any cost or expenses incurred hereunder or under the
Indenture and to the payment or performance of each Grantor's obligations
hereunder or under the Indenture, and apply the balance to the Notes as
provided in the Indenture and any remaining excess balance to whomsoever is
legally entitled thereto; (viii) secure the appointment of a receiver of the
assets of either such Grantor or any part thereof and/or the Collateral or
any party thereof; or (ix) exercise any other or additional rights or
remedies granted to a secured party under the Uniform Commercial Code. If,
pursuant to applicable law, rule or regulation prior notice of any such
action is required to be given to either such Grantor, each such Grantor
hereby acknowledges that the minimum time required by such applicable law,
rule or regulation or if no minimum is specified, ten (10) Business Days,
shall be deemed a reasonable notice period.
(b) All costs and expenses (including reasonable attorneys'
fees and expenses) incurred by the Collateral Agent in connection with any
such suit or proceeding, or in connection with the performance by the
Collateral Agent of any of such Grantor's agreements pursuant to any exercise
of its rights or remedies hereunder, including the Assigned Agreement
pursuant to the terms of this Agreement, together with interest thereon (to
the extent permitted by law) computed at a rate per annum equal to the
interest rate on the Notes from the date on which such costs or expenses are
incurred to the date of payment thereof, shall constitute additional
indebtedness secured by this Agreement and shall be paid by such Grantor to
the Collateral Agent on behalf of the holders of Notes on demand.
6. Remedies Cumulative; Delay Not Waiver.
(a) No right, power or remedy herein conferred upon or
reserved to the Collateral Agent is intended to be exclusive of any other
right, power or remedy, and every such right, power and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right,
power 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
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<PAGE>
concurrent assertion or employment of any other appropriate right or remedy.
Resort to any or all security now or hereafter held by the Collateral Agent,
may be taken concurrently or successively and in one or several consolidated
or independent judicial actions or lawfully taken nonjudicial proceedings, or
both.
(b) No delay or omission of the Collateral Agent to exercise
any right or power accruing upon the occurrence and during the continuance of
any Event of Default as aforesaid shall impair any such right or power or
shall be construed to be a waiver of any such Event of Default or an
acquiescence therein; and every power and remedy given by this Agreement may
be exercised from time to time, and as often as shall be deemed expedient, by
the Collateral Agent.
7. Covenants. Each Grantor, jointly and severally, covenants as
follows:
(a) The Grantors shall not, and shall not permit any Affiliate
to, take or knowingly omit to take, any action which action or omission might
or would have the result of materially impairing the security interest with
respect to the Collateral for the benefit of the Collateral Agent, the
Trustee and the holders of the Notes, and the Grantors shall not, and shall
not permit any Affiliate to, grant to any Person other than the Collateral
Agent, for the benefit of the Collateral Agent, the Trustee and the holders
of the Notes, any interest whatsoever in any of the Collateral. Grantors
shall not, and shall not permit any Affiliate to, directly or indirectly,
sell, lease, transfer or otherwise dispose of the Collateral other than in
accordance with this Agreement.
(b) Any action or proceeding to enforce this Agreement or the
Assigned Agreement may be taken by the Collateral Agent either in such
Grantors' names or in the Collateral Agent's name, as the Collateral Agent
may deem necessary.
(c) Grantors shall not modify, amend, terminate, waive or
supplement any provision of the Assigned Agreement if any such modification,
amendment, termination, waiver or supplement would adversely affect the
interest of the Collateral Agent on behalf of the holders of the Notes in a
degree greater than the manner in which it adversely affects Grantor.
(d) Grantors shall pay, before the imposition of any fine,
penalty, interest or cost attached thereto, all taxes, assessments and other
governmental or non-governmental charges or levies now or hereafter assessed
or levied against the Collateral or upon the security interest provided for
herein (except for Liens for taxes and assessments not then delinquent or
which Grantors may, pursuant to the definition of "Permitted Liens" in the
Indenture, permit to remain unpaid or any charge being contested in good
faith for which an adequate reserve has been established), as well as pay, or
cause to be paid, all claims for labor, materials or supplies which, if
unpaid, might become a prior Lien (other than a Permitted Lien) thereon.
8. Representations and Warranties. Grantors represent and warrant,
jointly and severally, as follows:
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<PAGE>
(a) The Assigned Agreement in effect on the date hereof has
been duly authorized, executed and delivered by Grantors and is in full force
and effect and is binding upon and enforceable against Grantors in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the general principles of equity. There
exists no default under the Assigned Agreement by Grantors, or to the best of
Grantors' knowledge, by the other parties thereto.
(b) No effective financing statement or other instrument
similar in effect covering all or any part of Grantors' interest in the
Collateral is on file in any recording office, except such as may have been
filed pursuant to this Agreement or pursuant to the documents evidencing
Permitted Liens. The provisions of this Agreement are effective to create in
favor of the Collateral Agent a valid security interest in the Collateral (to
the extent that the Grantors have rights therein) and, upon the filing of
UCC-1 Financing Statements in the filing offices identified on Schedule I in
respect of such portions of the Collateral in which a security interest may
be perfected as a result of such filing, the Collateral Agent will have a
valid and perfected security interest in the Collateral, to the extent that
the Grantor has rights therein (other than proceeds, to the extent Section
9-306 of the Uniform Commercial Code as in effect in the relevant
jurisdiction(s) is not complied with respect to such proceeds), subject to no
other Liens except Permitted Liens, and first priority except to the extent
of Permitted Liens described in the Indenture.
(c) Grantors is lawfully possessed of ownership of the
Collateral. Grantors have full power and lawful authority to grant and assign
the Collateral hereunder. Grantor will, so long as any Obligations shall be
outstanding, warrant and defend their title to the Collateral against the
claims and demands of all Persons whomsoever.
(d) Grantors have not assigned any of its rights under the
Assigned Agreement except as provided in this Agreement. Grantor will not
make any other assignment of their rights under the Assigned Agreement.
(e) All subsidiaries of Grantors are listed in Paragraph 1 of
Schedule II; all names of Grantors' predecessors-in-interest are listed in
Paragraph 2 of Schedule II; and all names under which Grantors do business
are listed in Paragraph 3 of Schedule II.
(f) Grantors' place of business, or if Grantors have more than
one place of business, Grantors' chief executive office, is set forth in
Paragraph 4 of Schedule II.
(g) Except for the filing or recording of the UCC Financing
Statements described in Section 8(b) and except as otherwise described in
Section 11, no 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 grant by Grantors of the security interest in the
Collateral pursuant to this Agreement or for the execution, delivery or
performance of this Agreement by Grantors, or (ii) for the perfection of such
security interest or the exercise by the Collateral Agent of the rights and
remedies provided for in this Agreement.
6
<PAGE>
(h) The execution, delivery and performance by Grantors of
this Agreement and the consummation of the transactions contemplated hereby
(including the creation of the Liens granted hereunder) will not (i) violate
Grantors' constituent organizational documents, (ii) violate any order,
judgment or decree of any Governmental Authorities binding on Grantors or any
property or assets of Grantors, (iii) violate or conflict with any law, rule,
regulation, or permit applicable to Grantors or any of its properties, (iv)
conflict with, result in a breach of or constitute (with due notice or lapse
of time or both) a default under any agreement, indenture, mortgage, deed of
trust, equipment lease, instrument or other document to which Grantors are a
party or pursuant to which any of its properties or assets are bound, (v)
result in or require the creation or imposition of any Lien upon any material
properties or assets of Grantors (other than the creation of the Liens
granted hereunder, including Permitted Liens described in the Indenture), or
(vi) require any approval or consent of Grantors' owners.
9. Further Assurances.
(a) Each Grantor agrees that from time to time, at the expense
of such Grantor, such Grantor will promptly execute and file such financing
or continuation statements, or amendments thereto, and such other
instruments, endorsements or notices, and take such other actions, as may be
reasonably necessary or as the Collateral Agent may reasonably request, in
order to perfect and preserve the assignments and security interests granted
or purported to be granted hereby.
(b) Each Grantor hereby authorizes the Collateral Agent to
file one or more financing or continuation statements, and amendments
thereto, relative to all or any part of the Collateral without the signature
of such Grantor where permitted by law. Copies of any such statement or
amendment thereto shall promptly be delivered to such Grantor.
(c) Each Grantor shall pay all filing, registration and
recording fees or refiling, re-registration and re-recording fees, and all
expenses incident to the execution and acknowledgment of this Agreement, any
assurance, and all federal, state, county and municipal stamp taxes and other
taxes, duties, imports, assessments and charges arising out of or in
connection with the execution and delivery of this Agreement, any agreement
supplemental hereto and any instruments of further assurance.
10. Place of Perfection. Each Grantor shall give the Collateral
Agent at least thirty (30) business days' notice before it changes the
location of its chief executive office, or its name, identity or
organizational form, and shall at the expense of such Grantor execute and
deliver such instruments and documents as are required to maintain the
priority and perfection of the security interest granted hereby. Each Grantor
shall not change the location of its principal place of business or chief
executive office to any location outside of the United States unless the
Collateral Agent is reasonably satisfied (based upon advice of legal counsel)
that the security interest created under this Agreement will not be adversely
affected or impaired.
7
<PAGE>
11. Miscellaneous.
(a) 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: (i) on the day of hand delivery; (ii) upon confirmation
when sent by facsimile transmission; (iii) on the next business day after the
day sent, when sent by overnight mail; or (iv) on the third business day
after the day sent, when sent by United States certified mail, postage and
certification fee prepaid, return receipt requested, addressed as follows:
To the Collateral Agent:
U.S. Bank Trust National Association
180 East Fifth Street
St. Paul, Minnesota 55101
Attn: Corporate Trust Administration
To Grantors:
Chiles Offshore LLC
11200 Westheimer, Suite 410
Houston, Texas 30076
Attn: Chief Financial Officer
Chiles Offshore Finance Corp.
11200 Westheimer, Suite 410
Houston, Texas 30076
Attn: Chief Financial Officer
or at such other address as the specified entity most recently may have
designated in writing in accordance with this section to the others.
(b) Headings. The headings in this Agreement are for purposes
of reference only and shall not affect the meaning or construction of any
provision of this Agreement.
(c) 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.
(d) Amendments, Waivers and Consents. Any amendment or waiver
of any provision of this Agreement and any consent to any departure by either
Grantor from any provision
8
<PAGE>
of this Agreement shall be effective only if made or given in compliance with
all of the terms and provisions of the Indenture. The Grantors shall not
amend, modify or supplement, or permit or consent to any amendment,
modification or supplement of, this Agreement in any way that would be
adverse to the holders of the Notes.
(e) Interpretation of Agreement. Time is of the essence in
each provision of this Agreement of which time is an element.
(f) Continuing Security Interest. This Agreement shall create
a continuing security interest in the Collateral and shall (i) remain in full
force and effect until the first to occur of (x) the payment and performance
in full of the Obligations and (y) the termination of the Escrow Agreement,
(ii) be binding upon each Grantor, its successors and assigns, and (iii)
inure, together with the rights and remedies of the Collateral Agent
hereunder, to the benefit of the Collateral Agent and its successors,
transferees and assigns.
(g) Reinstatement. To the extent permitted by law, this
Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any amount received out of the proceeds of the Collateral
or otherwise prior to the termination of the Escrow Agreement by the holders
of the Notes, the Collateral Agent or the Trustee in respect of the
Obligations is rescinded or must otherwise be restored or returned by the
Collateral Agent, upon the insolvency, bankruptcy, dissolution, liquidation
or reorganization of either Grantor or upon the appointment of any receiver,
intervenor, conservator, trustee or similar official for either Grantor or
any substantial part of such Grantor's assets, or otherwise, all as though
such payments had not been made.
(h) Survival of Provisions. All representations, warranties
and covenants of each Grantor contained herein shall survive the execution
and delivery of this Agreement, and shall terminate only upon the full and
final payment and performance by Grantors of the Obligations secured hereby.
(i) Authority of the Collateral Agent. The Collateral Agent
shall have and be entitled to exercise all powers hereunder which are
specifically granted to the Collateral Agent by the terms hereof, together
with such powers as are reasonably incident thereto. The Collateral Agent may
perform any of its 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.
Neither the Collateral Agent nor any director, officer, employee, attorney or
agent of the Collateral Agent shall be liable to either Grantor for any
action taken or omitted to be taken by it or them hereunder, except for its
or their own gross negligence or willful misconduct, nor shall the Collateral
Agent be responsible for the validity, effectiveness or sufficiency of this
Agreement or of any document or security furnished pursuant hereto. The
Collateral Agent and its directors, officers, employees, attorneys and agents
shall be entitled to rely on any communication, certificate, instrument or
document reasonably believed by it or them to be genuine and correct and to
have been signed or sent by the proper person or persons. Each Grantor agrees
jointly and severally to indemnify and hold harmless the Collateral Agent
from and against
9
<PAGE>
any and all costs, expenses (including reasonable fees, expenses and
disbursements of attorneys and paralegals (including, without duplication,
reasonable charges of inside counsel)), claims and liabilities incurred by
the Collateral Agent hereunder, unless such claim or liability shall be due
to willful misconduct or gross negligence on the part of the Collateral Agent.
(j) Release; Termination of Agreement. Subject to the
provisions of Section 11(g), this Agreement shall terminate upon the first to
occur of (x) the occurrence of both (i) the payment in full of the first two
scheduled interest payments on the Notes and (ii) the first to occur of the
following (A) the date the Construction Escrow Account has been reduced to
zero in accordance with the Escrow Agreement and (B) the Second Delivery Date
(as defined in the Escrow Agreement) and (y) the termination of the Escrow
Agreement. At such time, the Collateral Agent shall, at the request and
expense of Grantors, promptly reassign and redeliver to Grantors all of the
Collateral hereunder which has not been sold, disposed of, retained or
applied by the Collateral Agent in accordance with the terms hereof and of
the Escrow Agreement. Such reassignment and redelivery shall be without
warranty by or recourse to the Collateral Agent, except as to the absence of
any prior assignments by the Collateral Agent of its interest in the
Collateral, and shall be at the expense of Grantors.
(k) Counterparts. This Agreement may be executed in any number
of counterparts and by different parties hereto on separate counterparts,
each of which, when so executed and delivered, shall be deemed an original
but all of which shall together constitute one and the same agreement.
(l) Waivers. Each Grantor hereby irrevocably and
unconditionally:
(i) except as expressly provided in Section 5(a), waives
all rights of notice and hearing of any kind prior to the exercise by
the Collateral Agent of its rights from and after an Event of Default to
repossess the Collateral with judicial process or to replevy, attach or
levy upon the Collateral. Each Grantor waives the posting of any bond
otherwise required of the Collateral Agent in connection with any
judicial process or proceeding to obtain possession of, replevy, attach
or levy upon collateral, to enforce any judgment or other security for
the Obligations, to enforce any judgment or other court order entered in
favor of such party or to enforce by specific performance, temporary
restraining order, preliminary or permanent injunction, this Agreement;
(ii) waives the right to assert any setoff, counterclaim
or cross-claim in respect of, and all statutes of limitations which may
be relevant to, such action or proceeding;
(iii) waives diligence, demand, presentment and protest
and any notices thereof as well as notice of nonpayment; and
(iv) waives presentment and demand for payment of any of
the Obligations, protest and notice of dishonor or default with respect
to any of the Obligations.
10
<PAGE>
(m) Governing Law. The validity, interpretation and
enforcement of this Agreement shall be governed by the laws of the State of
New York without giving effect to the conflict of law principles thereof.
11
<PAGE>
IN WITNESS WHEREOF, Grantors and the Collateral Agent have caused this
Escrow Security Agreement to be duly executed as of the day and year first
above written.
Chiles Offshore LLC, a Delaware limited
liability company
By: /s/ Dick H. Fagerstal
-------------------------------------
Name: Dick H. Fagerstal
Title: Senior Vice President, Chief
Financial Officer and Secretary
Chiles Offshore Finance Corp., a Delaware
corporation
By: /s/ Dick H. Fagerstal
--------------------------------------
Name: Dick H. Fagerstal
Title: Senior Vice President, Chief
Financial Officer and Secretary
U.S. Bank Trust National Association, as
Collateral Agent
By: /s/ Richard H Prokosel
--------------------------------------
Name: Richard H Prokosel
Title: Assistant Vice President
12
<PAGE>
SCHEDULE I
Office of the Secretary of State of Texas
Office of the Secretary of State of New York
13
<PAGE>
SCHEDULE II
1. Subsidiaries of the Grantors:
Chiles Columbus LLC
Chiles Magellan LLC
2. Predecessors-in-interest of the Grantors:
Chiles Offshore Inc.
3. Names under which Grantors do business:
Chiles Offshore LLC
Chiles Offshore Finance Corp.
4. Grantors' place of business and chief executive office:
Chiles Offshore LLC
11200 Westheimer, Suite 410
Houston, Texas 77042
Chiles Offshore Finance Corp.
11200 Westheimer, Suite 410
Houston, Texas 77042
14
<PAGE>
Exhibit 10.10
SECURITIES INTERMEDIARY AND ACCOUNT AGREEMENT
This Securities Intermediary and Account Agreement (the "Agreement"),
dated as of April 29, 1998, by and among U.S. Bank Trust National
Association, in the capacity of Securities Intermediary ("Securities
Intermediary"), U.S. Bank Trust National Association, in the capacity of
Trustee ("Trustee") for the benefit of the holders of the Notes (as defined
below) under the Indenture (as defined below) and as Collateral Agent (the
"Collateral Agent") for the benefit of the holders of the Notes under the
Security Agreement (as defined below), and Chiles Offshore LLC, a Delaware
limited liability company, and Chiles Offshore Finance Corp., a Delaware
corporation (together, the "Entitlement Holders").
R E C I T A L S
A. Pursuant to that Indenture dated as of April 29, 1998, by and among
the Entitlement Holders, as issuers (the "Issuers"), and the Trustee and
Collateral Agent (the "Indenture"), the Issuers have issued their 10% Senior
Notes due 2008 (the "Notes").
B. As security for their obligations to repay the Notes, the Issuers
have executed and delivered to the Collateral Agent, in addition to the
Indenture, the Escrow Security Agreement, dated as of April 29, 1998 (the
"Security Agreement"), in which the Issuers grant to the Collateral Agent a
security interest in the Collateral (as defined in the Security Agreement), a
portion of which will be held in the Escrow Accounts (as defined below).
C. The parties have entered into that certain Escrow Agreement, dated as
of April 29, 1998 (the "Escrow Agreement"), to set forth the terms and
conditions under which (i) the Securities Intermediary, as Escrow Agent,
shall establish an Interest Escrow Account and a Construction Escrow Account
(together, the "Escrow Accounts") to receive, hold, invest and disburse
certain funds and other property held therein and (ii) the Collateral Agent
shall have control of such funds and other property to perfect its security
interest therein pursuant to the Security Agreement.
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. Capitalized terms used herein but not defined herein
shall have the meaning given in the Escrow Agreement or the Security
Agreement.
2. Securities Accounts. The Escrow Accounts are "securities accounts"
within the meaning of Article 8 of the Minnesota Uniform Commercial Code. All
assets now or hereafter held
<PAGE>
in either of the Escrow Accounts are and will be "financial assets" within the
meaning of Article 8 of the Minnesota Uniform Commercial Code.
3. Securities Intermediary. In performing its duties and functions under
the Escrow Agreement and the Securities Agreement as the Escrow Agent, the
Securities Intermediary is acting in the capacity of a "securities
intermediary" within the meaning of Article 8 of the Minnesota Uniform
Commercial Code.
4. Entitlement Holders. For all purposes relating to the interests of
the Entitlement Holders with respect to all funds and other property held
under the Escrow Agreement in the Escrow Accounts, the Entitlement Holders
shall have and hold "securities entitlements" within the meaning of Article 8
of the Minnesota Uniform Commercial Code.
5. Securities Intermediaries' Jurisdiction. This Agreement and the
Securities Intermediary's performance of its duties and functions as a
securities intermediary, including, without limitation, the perfection and
priority of the securities entitlements created under the Escrow Agreement
and the perfection and priority of the security interest granted under the
Security Agreement, and any adverse claims asserted by any person with
respect to the funds and other property held in the Escrow Accounts, shall be
governed by the law of the State of Minnesota, which shall be the "securities
intermediaries'" jurisdiction for purposes of such matters under the Escrow
Agreement and the Security Agreement.
6. Other Agreements Controlling. Subject only to the specific provisions
of this Agreement expressly applicable to the matters addressed in the Escrow
Agreement and the Security Agreement (which for only such matters the
provision herein shall supersede Section 8(g) of the Escrow Agreement), the
respective rights, interests, functions and duties of the parties hereto with
respect to the creation and administration of the Escrow Accounts and the
receipt, custody, investment disbursement and disposition of funds and other
property held therein and the security interest granted herein, shall be
governed by terms and conditions set forth in the Security Agreement and the
Escrow Agreement.
2
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written:
SECURITIES INTERMEDIARY:
U.S. BANK TRUST NATIONAL
ASSOCIATION
By: /s/ Richard H. Prokosel
---------------------------------
Name: Richard H. Prokosol
Title: Assistant Vice President
TRUSTEE AND COLLATERAL AGENT:
U.S. BANK TRUST NATIONAL
ASSOCIATION
By: /s/ Richard H. Prokosel
---------------------------------
Name: Richard H. Prokosul
Title: Assistant Vice President
ENTITLEMENT HOLDERS:
CHILES OFFSHORE LLC
By: /s/ Dick H. Fagerstal
---------------------------------
Name: Dick H. Fagerstal
Title: Senior Vice President, Chief
Financial Officer and Secretary
CHILES OFFSHORE FINANCE CORP.
By: /s/ Dick H. Fagerstal
--------------------------------
Name: Dick H. Fagerstal
Title: Senior Vice President, Chief
Financial Officer and Secretary
3
<PAGE>
Exhibit 10.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of November
1, 1997 (the "Effective Date"), by and between CHILES OFFSHORE LLC, a Delaware
limited liability company (the "Company"), and WILLIAM E. CHILES (the
"Executive").
The Company desires to employ the Executive and the Executive desires to
accept employment with the Company, on the terms and conditions of this
Agreement.
Accordingly, the parties agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company and Duties. The Company hereby agrees
to employ the Executive for a term commencing on the Effective Date and expiring
at the end of the day on the third anniversary of the Effective Date (such date,
or later date to which this Agreement is extended in accordance with the terms
hereof, the "Termination Date"), unless earlier terminated as provided in
Section 4 or unless extended as provided herein (the "Term"). The Term shall be
automatically extended commencing on the Termination Date and on each
Termination Date thereafter (each such date being a "Renewal Date"), so as to
terminate one (1) year from such Renewal Date, unless and until (i) at least
ninety (90) days prior to a Renewal Date either party hereto gives written
notice to the other that the Term should not be further extended, in which event
the Termination Date shall be the Renewal Date following such notice, or (ii)
less than ninety (90) days prior to a Renewal Date but before the Renewal Date
either party hereto gives written notice to the other that the Term should not
be further extended, in which event the Termination Date shall be the date
ninety (90) days after such written notice is given. If no such written notice
is given by either party prior to the Renewal Date, the Term shall be
automatically extended for another year from such Renewal Date, as provided in
the foregoing sentence. During the Term, the Executive shall serve in the
capacity of President and Chief Executive Officer of the Company, and shall also
serve in those offices and directorships of subsidiaries of the Company. or
their subsidiaries, to which he may from time to time be appointed or elected.
During the Term, the Executive shall devote all reasonable efforts and
substantially all of his business time and services to the Company, subject to
the direction of the Management Committee of the Company (the "Committee"). The
Executive shall not engage in any other business activities except for passive
investments in corporations or partnerships not engaged in the Company Business
(as hereinafter defined) to the extent permitted by Section 3 1.1.
<PAGE>
1.2 Acceptance of Employment by the Executive. The Executive hereby
accepts such employment and shall render the services and perform the duties
described above.
2. Compensation and Other Benefits.
2.1 Annual Salary. The Company shall pay to the Executive an annual
salary at a rate of not less than two hundred thousand dollars ($200,000) per
year (the "Annual Salary"), subject to review and adjustment by the Committee
annually in accordance with industry standards, taking into account the
Executive's performance, the Company's scope of operations, industry conditions
and the overall performance of the Company within the industry. In no event
shall the Executive's Annual Salary be reduced to less than $200,000 per year
without his prior written consent. The Executive hereby expressly acknowledges
that the preceding two sentences shall not be construed as requiring the Company
or the Committee to make any annual increases in the Annual Salary. The Annual
Salary shall be payable in accordance with the payroll policies of the Company
as from time to time in effect, but in no event less frequently than once each
month, less such deductions as shall be required to be withheld by applicable
law and regulations.
2.2 Bonuses. The Executive shall receive an incentive bonus, if
earned, with respect to fiscal years ending during the Term hereof (the
"Incentive Bonus"). The amount of the Incentive Bonus for the fiscal year ending
December 31, 1997 shall be determined by the Committee, in its sole discretion.
The criteria for determining the amount of the Incentive Bonus for each fiscal
year thereafter shall be set forth in a formalized plan which is prepared by the
Committee and approved by the Compensation Committee of the Committee, if any.
The Committee shall use reasonable guidelines for establishing such criteria
based upon the performance of the Executive, including, without limitation, the
extent to which the Company achieves its business plan.
2.3 Vacation Policy. The Executive shall be entitled to a paid
vacation of four weeks during each year of the Term.
2.4 Participation in Employee Benefit Plans. The Company agrees to
permit the Executive during the Term, if and to the extent eligible, to
participate in the group life, hospitalization and disability insurance plans,
health program, pension plan, any similar benefit plan or other so called
"fringe benefits" of the Company (collectively, "Benefits") which may be
available to other executives and employees of the Company on terms no less
favorable to the Executive than the terms offered to such other executives and
employees, to the extent such Benefits are offered by the Company. Provided the
Executive is insurable at standard rates (i) the Company agrees to use its best
efforts to obtain immediate coverage for the Executive upon
2
<PAGE>
the commencement of the Term under its existing or newly adopted medical
expense and hospitalization plan (to the extent offered by the Company) for
employees without premium surcharge and without exclusions for disclosed
preexisting conditions, and (ii) the Company shall increase the coverage
under the Executive's existing ten year level term life insurance policy,
insuring the life of the Executive and with beneficiaries designated pursuant
to the Executive's instructions, to the amount of one million two hundred
thousand dollars (or the Company shall obtain an additional ten year level
term life insurance policy in the amount of two hundred thousand dollars,
such that the total of the existing and new life insurance policies shall be
one million two hundred thousand dollars), and shall pay all premiums under
such policy (or policies) during the Term. During the Term, the Company also
shall provide disability insurance for the Executive, which shall provide for
payments based on 60% of the Annual Salary paid to the Executive for the
prior fiscal year upon his disability; provided, however, that maximum amount
the Company shall pay for such disability insurance shall be five thousand
dollars per year. If such disability insurance premium exceeds five thousand
dollars per year, the Executive may elect to pay the amount in excess of five
thousand dollars per year in order to obtain such disability insurance. If
the Executive does not elect to pay any such excess, the Company's obligation
shall be limited to providing the maximum amount of disability insurance that
may be obtained for five thousand dollars per year in payments. The Executive
shall cooperate with the Company in applying for such coverage, including
submitting to a physical exam and providing all relevant health and personal
data.
2.5 General Business Expenses. The Company shall pay or reimburse
the Executive for all expenses reasonably and necessarily incurred by the
Executive during the Term in the performance of the Executive's services under
this Agreement. Such payment shall be made upon presentation of such
documentation as the Company customarily requires of its senior executive
employees prior to making such payments or reimbursements.
2.6 Club Dues. During the Term, the Company shall pay the Executive
an allowance of eight hundred dollars ($800.00) per month, which the Executive
shall apply to the cost associated with country club dues and expenses at the
Houston Country Club and the Houstonian, or any comparable clubs or
organizations, so long as the Executive is a member of such club or clubs.
3. Non-Competition Confidentiality and Company Property.
3.1 Covenant Against Competition. The Executive acknowledges that
(i) the Company is currently engaged in the business of constructing, owning,
managing and operating offshore drilling rigs and hiring and managing crews to
operate such rigs, which equipment and crews are contracted or hired by third
parties for the purpose of drilling oil and gas wells
3
<PAGE>
offshore (the "Company Business") and (ii) the agreements and covenants
contained in this Section 3 are essential to protect the business and
goodwill of the Company. The Executive further acknowledges that the
agreements and covenants contained in this Section 3 are being given to
induce SEACOR Offshore Rigs Inc. to invest $35,000,000 in the Company.
Accordingly, the Executive covenants and agrees as follows:
3.1.1 Non-Compete. As an independent covenant, and in order
to enforce the provision of Section 3.1.2 hereof and the other provisions of
this Agreement, the Executive agrees that he shall not during the Restricted
Period (as hereinafter defined), directly or indirectly (except in the
Executive's capacity as an officer of the Company or any of its subsidiaries),
(i) engage or participate in the Company Business; (ii) divert, take or solicit
any offshore drilling business of any customer of the Company or its
subsidiaries; (iii) enter the employ of, or render any other services to, any
person engaged in the Company Business except as permitted hereunder; or (iii)
become interested in any such person in any capacity, including, without
limitation, as an individual, partner, shareholder, lender, officer, member,
manager, director, principal, agent or trustee except as permitted hereunder;
provided. however, that the Executive may own, directly or indirectly, solely as
an investment, securities of any person traded on any national securities
exchange or listed on the National Association of Securities Dealers Automated
Quotation System if the Executive is not a controlling person of, or a member of
a group which controls, such person and the Executive does not, directly or
indirectly, own 5% or more of any class of equity securities, or securities
convertible into or exercisable or exchangeable for 5% or more of any class of
equity securities, of such person. As used in this Agreement, the "Restricted
Period" shall mean a period commencing on the date hereof and continuing until
the end of the Term and for such additional period thereafter, if any, during
which the Company is obligated to pay the Severance Payments (as hereinafter
defined), and is making such payments, to the Executive as provided in Section
4.3 hereof.
3.1.2 Property of the Company. All memoranda, notes, lists,
records, engineering drawings, technical specifications and related documents
and other documents or papers (and all copies thereof) relating to the Company
or its subsidiaries, including such items stored in computer memories, computer
disks, microfiche or by any other means, made or compiled by or on behalf of the
Executive during the Restricted Period, or made available to the Executive
during the Restricted Period relating to the Company, its affiliates or its
subsidiaries or any entity which may hereafter become an affiliate or subsidiary
thereof, shall be the property of the Company, and shall be delivered, along
with any copies thereof, to the Company promptly upon the termination of the
Executive's employment with the Company for any reason whatsoever or at any
other time upon request; provided, however, that the Executive's address books,
diaries, chronological correspondence files, rolodex files and
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information regarding the Executive's ownership interest in the Company shall
be deemed to be property of the Executive.
3.1.3 Employees of the Company. During the Restricted Period,
the Executive shall not induce or attempt to influence any employee of the
Company or any of its affiliates or subsidiaries to terminate such employee's
employment.
3.1.4 Confidential Information. The Executive acknowledges
that the Company and its subsidiaries have a legitimate and continuing
proprietary interest in the protection of their confidential information. In
exchange for the Company and its subsidiaries providing the Executive access to
such confidential information, the Executive agrees not to make any unauthorized
use, publication, or disclosure, during or subsequent to his employment by the
Company, of any confidential information, generated or acquired by the Executive
during the course of his employment by the Company, except to the extent that
the disclosure of such confidential information is necessary to fulfill his
responsibilities as an employee of the Company. As used herein, "confidential
information" shall mean information that was not known by the Executive prior to
his employment by the Company and that is not generally known by or available to
persons engaged in the Company Business or to the public, which information
consists of financial information, financial figures, trade secrets, details of
client or consulting contracts, pricing policies, operational methods, marketing
plans or strategies, business acquisition plans, technical processes, designs
and design projects, inventions and research projects, ideas, discoveries,
inventions, improvements, trade secrets and other proprietary information of the
Company or its subsidiaries. This Section 3.1.4 shall survive indefinitely the
termination of this Agreement.
3.1.5 Company's Interest. The Executive agrees that these
covenants are made to protect the legitimate business interests of the Company,
including interests in the Company's property described in and pursuant to
Section 3.1.2, and not to restrict his mobility or to prevent him from utilizing
his general technical skills. The Executive understands as a part of these
covenants that the Company intends to exercise whatever legal recourse against
him for any breach of this Agreement and, in particular, for any breach of these
covenants.
3.2 Rights and Remedies Upon Breach. If the Executive breaches any
of the provisions contained in Section 3.1 of this Agreement (the "Restrictive
Covenants"), the Company shall have the following rights and remedies, each of
which rights and remedies shall be independent of the others and severally
enforceable, and each of which is in addition to, and not in lieu of, any other
rights and remedies available to the Company under law or in equity:
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3.2.1 Specific Performance. The right and remedy to have the
Restrictive Covenants specifically enforced by any court of competent
jurisdiction, it being agreed that any breach of the Restrictive Covenants would
cause irreparable injury to the Company and that money damages would not provide
an adequate remedy to the Company.
3.2.2 Accounting. The right and remedy to require the
Executive to account for and pay over to the Company, all compensation, profits,
monies, accruals, increments or other benefits derived or received by the
Executive as the result of any action constituting a breach of the Restrictive
Covenants.
3.3 Severability of Covenants. The Executive acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in duration and
geographical scope and in all other respects. If any court determines that any
of the Restrictive Covenants, or any part thereof, is invalid or unenforceable,
the remainder of the Restrictive Covenants shall not thereby be affected and
shall be given full effect without regard to the invalid portions.
3.4 Court Review. If any court determines that any of the Restrictive
Covenants, or any part thereof, is unenforceable because of the duration or
geographical scope of, or scope of activities restrained by, such provision,
such court shall have the power to reduce the duration or scope of such
provision, as the case may be, and, in its reduced form, such provision shall
then be enforceable.
3.5 Enforceability in Jurisdictions. The Company and the Executive
intend to and hereby confer jurisdiction to enforce the Restrictive Covenants
upon the courts of any jurisdiction within the geographical scope of such
Restrictive Covenants. If the courts of any one or more of such jurisdictions
hold the Restrictive Covenants unenforceable by reason of the breadth of such
scope or otherwise, it is the intention of the Company that such determination
not bar or in any way affect the right of the Company to the relief provided
above in the courts of any other jurisdiction within the geographical scope of
such Restrictive Covenants, as to breaches of such Restrictive Covenants in such
other respective jurisdictions, such Restrictive Covenants as they relate to
each jurisdiction being, for this purpose, severable into diverse and
independent covenants.
4. Termination.
4.1 Termination Upon Death. If the Executive dies during the Term,
this Agreement shall terminate; provided, however, that in any such event, the
Company shall pay to the Executive's estate (i) any portion of the Annual Salary
and any accrued Incentive Bonuses that shall have been earned by the Executive
prior to the termination but not yet paid,
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(ii) any Benefits that have vested in the Executive at the time of such
termination as a result of his participation in any of the Company's benefit
plans (which shall be paid in accordance with the provisions of such plan),
and (iii) reimbursement for any expenses with respect to which the Executive
is entitled to reimbursement pursuant to Section 2.5 of this Agreement,
within thirty (30) days after such termination. The Executive's right to
indemnification, payment or reimbursement pursuant to Section 6 of this
Agreement shall not be affected by such termination and shall continue in
full force and effect, both with respect to proceedings that are threatened,
pending or completed at the date of such termination and with respect to
proceedings that are threatened, pending or completed after that date.
4.2 Termination With Cause. The Company has the right, at any time
during the Term, subject to all of the provisions hereof, exercisable by serving
notice, effective on or after the date of service of such notice as specified
therein, to terminate the Executive's employment under this Agreement and
discharge the Executive with Cause. If such right is exercised, the Company's
obligation to the Executive shall be limited solely to the payment of unpaid
Annual Salary accrued, together with accrued but unpaid Incentive Bonuses, if
any, and Benefits vested up to the effective date specified in the Company's
notice of termination. As used in this Agreement, the term "Cause" shall mean
and include (i) chronic alcoholism or controlled substance abuse as determined
by a doctor of medicine selected by the Company that is authorized to practice
medicine by the State of Texas and whose practice is located in Houston, Texas,
(ii) an act of proven fraud or dishonesty on the part of the Executive, (iii)
knowing and material failure by the Executive to comply with material applicable
laws and regulations relating to the business of the Company or its
subsidiaries; (iv) the Executive's material and continuing failure to perform
(as opposed to unsatisfactory performance) his duties hereunder or a material
breach by the Executive of this Agreement except) in each case, where such
failure or breach is caused by the illness or other similar incapacity or
disability of the Executive; or (v) conviction of a crime involving moral
turpitude or a felony. Prior to the effectiveness of termination for Cause
under subclause (i), (ii), (iii) or (iv) above, the Executive shall be given 30
days' prior written notice from the Committee specifically identifying the
reasons which are alleged to constitute Cause for any termination hereunder and
an opportunity to be heard by the Committee in the event the Executive disputes
such allegations. This Agreement shall not be terminated for Cause under
subclause (i), (iii) or (iv) above if the reasons which are alleged to
constitute Cause under such subclauses shall no longer exist and shall not be
continuing within thirty (30) days of the receipt of such notice by the
Executive; provided, however, that the Executive shall not have such right to
cure pursuant to the foregoing sentence and prevent termination for Cause if (i)
substantially the same reasons constituting Cause previously occurred and were
the basis for a previous termination notice to the Executive from the Committee,
and (ii) this Agreement was not terminated based on such previous occurrence
because the reasons which were alleged to constitute Cause no
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longer existed and were not continuing within thirty (30) days of the
Executive's receipt of such notice.
4.3 Termination Without Cause. The Company has the right, at any
time during the Term, subject to all of the provisions hereof, exercisable by
serving notice, effective on or after the date of service of such notice as
specified therein, to terminate the Executive's employment under this Agreement
and discharge the Executive without Cause. If the Executive is terminated during
the Term without Cause (including any termination which is deemed to be a
constructive termination without Cause under Section 4.6 hereof), the Company's
obligation to the Executive shall be limited solely to the payment, at the times
and upon the terms provided for herein, of (i) two times the Average
Compensation (as hereinafter defined) and (ii) any unpaid Incentive Bonuses and
Benefits awarded or accrued up to the date of termination. In the event of a
termination by the Company without Cause within nine months before or after a
Change of Control of the Company (as hereinafter defined), including a
constructive termination without Cause pursuant to Section 4.6, the amount due
to the Executive pursuant to clause (i) of the preceding sentence (the
"Severance Payments") shall be increased to three times the Average
Compensation. Any amounts due to the Executive pursuant to clause (ii) of the
second sentence of this Section 4.3 shall be due and payable within thirty (30)
days after the date of termination. The Severance Payments shall be due and
payable in twenty-four (24) equal monthly payments, or in thirty-six (36) equal
monthly payments in the event of a termination by the Company without Cause in
connection with a Change of Control of the Company pursuant to the preceding
sentence, beginning thirty (30) days after the date of termination.
Notwithstanding anything herein to the contrary, the Restricted Period, and the
Company's obligations to pay additional Severance Payments to the Executive,
shall be subject to early termination, and shall terminate immediately, at any
time after the Executive is terminated without Cause upon the earlier to occur
of (a) the Executive giving written notice to the Company that he is terminating
the Restricted Period effective upon receipt of such notice by the Company, or
effective at any designated time thereafter (not to exceed thirty (30) days
after the Company's receipt of such notice), (b) the Executive's violation of
any of the provisions of Section 3, or (c) the end of the twenty-four or
thirty-six month period, as applicable, for payment of the Severance Payments
pursuant to the terms hereof. Upon any termination pursuant to the preceding
clauses(a) or (b) (in either case an "Early Termination"), no further Severance
Payments shall be payable for periods after the effective date of such Early
Termination, except for amounts payable by the Company to the Executive for
periods prior to the effective date of such Early Termination. The Executive
and the Company agree that the foregoing right of the Company to terminate the
Severance Payments shall be enforceable by the Company notwithstanding any
ruling by any court or any arbitrator that one or more of the provisions of
Section 3 are unenforceable for any reason whatsoever. For purposes hereof,
"Average Compensation" shall mean (x) the average of the
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Annual Salary earned by the Executive during the two years preceding the date
of termination, or (y) if this Agreement has been in effect for less than two
years on the date of such early termination, (A) the total Annual Salary
earned by the Executive during the period from the Effective Date to the date
of such termination, divided by (B) the total number of days in such period,
multiplied by (C) 365.
4.4 Termination by the Executive. Any termination of this Agreement
by the Executive during the Term, except such termination as is deemed to be a
constrictive termination without Cause by the Company under Section 4.6 of this
Agreement, shall entitle the Company to discontinue payment of all Annual
Salary, Incentive Bonuses and Benefits not earned and payable prior to the date
of such termination.
4.5 Termination Upon Disability. If during the Term the Executive
becomes physically or mentally disabled, whether totally or partially, as
evidenced by the written statement of a competent physician licensed to practice
medicine in the United States who is mutually acceptable to the Company and the
Executive or his closest relative if he is not then able to make such a choice,
so that the Executive is unable substantially to perform his services hereunder
for (i) a period of four consecutive months, or (ii) for shorter periods
aggregating 120 days during any twelve-month period, the Company may at any time
after the last day of the four consecutive months of disability or the day on
which the shorter periods of disability equal an aggregate of 120 days, by
written notice to the Executive, terminate the Executive's employment hereunder
and discontinue payments of the Annual Salary, Incentive Bonuses and Benefits
accruing from and after the date of such termination. The Executive shall be
entitled to the full compensation payable to him hereunder for periods of
disability shorter than the periods specified in clauses (i) and (ii) of the
previous sentence.
4.6 Constructive Termination Without Cause. Notwithstanding any other
provision of this Agreement, the Executive's employment under this Agreement may
be terminated during the Term by the Executive, which shall be deemed to be
constructive termination by the Company without Cause, if one of the following
events shall occur without the consent of the Executive: (i) a failure to elect
or reelect or to appoint or reappoint the Executive to the office of President
and Chief Executive Officer of the Company or other material change by the
Company of the Executive's functions, duties or responsibilities which change
would reduce the ranking or level, dignity, responsibility, importance or scope
of the Executive's position with the Company from the position and attributes
thereof described in Section 1 above; (ii) the assignment or reassignment by the
Company of the Executive to a location not within 20 miles of the Company's
current location; (iii) the liquidation, dissolution consolidation or merger of
the Company, or transfer of all or substantially all of its assets, other than
(a) a consolidation or merger in which the Company is the sole surviving entity
or
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(b) a transaction in which a successor corporation with a net worth
substantially the same as or greater than that of the Company assumes this
Agreement and all obligations and undertakings of the Company hereunder; (iv) a
reduction in the Executive's fixed salary below $200,000 per year or change by
the Company without the consent of the Executive in the method of determining
the Executive's annual bonus that results in a reduction of such annual bonus;
(v) the failure of the Company to continue to provide the Executive with office
space, related facilities, staff and secretarial assistance that are
commensurate with the Executive's responsibilities to and position with the
Company; (vi) the notification by the Company of the Company's intention not to
observe or perform one or more of the material obligations of the Company under
this Agreement; (vii) the failure by the Company to indemnify, pay or reimburse
the Executive at the time and under the circumstances required by Section 6 of
this Agreement; (viii) failure of the Company to pay the Annual Salary, the
Incentive Bonus or any other compensation or amounts payable hereunder when due;
or (ix) the occurrence of any other material breach of this Agreement by the
Company or any of its subsidiaries. Any such termination shall be made by
written notice to the Committee, specifying the event relied upon for such
termination and given within 90 days after such event. Any constructive
termination shall be effective 30 days after the date the Committee has been
given such written notice setting forth the grounds for such termination with
specificity; provided, however, that the Executive shall not be entitled to
terminate this Agreement in respect of any of the grounds set forth above if
within 30 days after such notice the action constituting such ground for
termination has been cured and is no longer continuing.
4.7 Change of Control. For the purposes hereof, a "Change of Control
of the Company" shall be deemed to have occurred if any person or group of
persons that are directly or indirectly actively engaged, in whole or in part,
in the Drilling Business (as hereinafter defined) acquire, directly or
indirectly, (i) the power to direct or cause the direction of the management or
policies of the Company. whether through the ownership of voting securities or
other equity interests, by contract or otherwise, including without limitation,
the acquisition of membership interests or other securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities; (ii) all or substantially all of the assets of the
Company, including, without limitation, in the case of either of the preceding
subsections (i) and (ii), pursuant to a sale, transfer, assignment or other
conveyance of membership interests or other securities, merger, consolidation,
exchange of securities, sale, transfer, assignment or other conveyance of assets
or plan of liquidation or other reorganization, and whether by operation of law
or otherwise. As used herein, the term "Drilling Business" shall mean the
business of owning, leasing, managing or operating drilling rigs, which drilling
rigs and associated crews are contracted or hired by third parties for the
purpose of drilling oil and gas wells. For purposes of determining if a Change
of Control of the Company has occurred, any person owning less than 10% of the
voting securities or other
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equity interests in the Company shall be excluded from the analysis under the
preceding subclause (i) of this Section 4.7.
4.8 Limitation on Severe payments. Notwithstanding the provisions of
Section 4.3, if any portion of the amounts payable to the Executive pursuant to
Section 4.3 (the "Total Compensation") constitutes an excess parachute payment
subject to tax pursuant to Section 280G of the Internal Revenue Code of 1986, as
amended, or any successor statute, the Total Compensation shall be reduced to
the minimum extent necessary to insure that no portion of the Total Compensation
is a taxable excess parachute payment. Any such reduction shall be made by
reducing the last payment payable to the Executive as part of the Severance
Payments, and, if necessary, reducing such additional payments in the reverse
order that they are due until the reduction required by the preceding sentence
is accomplished.
5. Insurance. The Company may, from time to time, apply for and take
out, in its own name and at its own expense, naming itself or one or more of its
affiliates as the designated beneficiary (which it may change from time to
time), policies for life, health, accident, disability or other insurance upon
the Executive in any amount or amounts that it may deem necessary or appropriate
to protect its interest. The Executive agrees to aid the Company in procuring
such insurance by submitting to medical examinations and by filling out,
executing and delivering such applications and other instruments in writing as
may reasonably be required by an insurance company or companies to which any
application or applications for insurance may be made by or for the Company.
6. Indemnification.
6.1 The Company shall indemnify and hold harmless the Executive from
and against any and all losses, claims, demand, costs, damages, liabilities,
expenses of any nature (including, without limitation, reasonable attorneys'
fees and disbursements), judgments, fines, settlements and other amounts arising
from any and all claims, demands, actions, suits or proceedings, whether civil,
criminal, administrative or investigative, in which the Executive may be
involved, or threatened to be involved, as a party or otherwise, arising out of
or incidental to the business of the Company or its affiliates or subsidiaries,
including, without limitation, liabilities under the federal and state
securities laws, regardless of whether the Executive continues to be employed by
the Company or such affiliate or subsidiary at the time any such liability or
expense is paid or incurred, if (i) the Executive acted in good faith and in a
manner he reasonable believed to be in, or not opposed to, the interests of the
Company and, with respect to any criminal proceeding, had no reason to believe
his conduct was unlawful, and (ii) the Executive's conduct did not constitute
actual fraud, gross negligence or willful or wanton misconduct. The termination
of any action, suit or proceeding by judgment, order,
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settlement, conviction, or upon a plea of nolo contendere, or its equivalent,
shall not, in and of itself, create a presumption or otherwise constitute
evidence that the Executive acted in a manner contrary to that specified in
(i) or (ii) above.
6.2 Expenses (including, without limitation, reasonable legal fees
and expenses) incurred in defending any proceeding subject to Section 6.1 shall
be paid by the Company in advance of the final disposition of such proceeding
upon receipt of a written affirmation by the Executive of his good fifth belief
that he has met the standard of conduct necessary for indemnification under this
Section 6 and a written undertaking (which need not be secured) by or on behalf
of the Executive to repay such amount if it shall be ultimately determined, by a
court of competent jurisdiction or otherwise, that the Executive is not entitled
to be indemnified by the Company as authorized hereunder.
6.3 The indemnification provided by this Section 6 shall be in
addition to any other rights to which the Executive may be entitled under any
agreement or vote of the Committee by the vote of Managers that are
disinterested and unaffiliated with the Executive, as a matter of law or
otherwise, both as to action in the Executive's capacity as an officer and
employee of the Company or as a person serving at the request of the Company and
shall continue after the Executive has ceased to serve in such capacity and
shall inure to the benefit of the heirs, administrators and personal
representatives of the Executive.
6.4 The Company may purchase and maintain directors and officers
insurance or similar coverage for its Managers and officers, including the
Executive, in such amounts and with such deductibles or self-insured retentions
as are customary for persons engaged in businesses similar in size and type to
those ended in by the Company.
6.5 The Executive shall not be denied indemnification in whole or in
part under this Section 6 because the Executive had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement and all material facts
relating to the executive's interest were adequately disclosed to the Committee
at the time the transaction was consummated.
6.6 The provisions of this Section 6 are for the benefit of the
Executive and his heirs, administrators and personal representatives and shall
not be deemed to create any rights for the benefit of any other persons. The
provisions of this Section 6 shall survive termination of this Agreement for any
reason or cause.
7. Other Provisions.
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7.1 Certain Definitions. As used in this Agreement, the following
terms have the following meanings unless the context otherwise requires:
(i) "affiliate" with respect to the Company means any other
person controlled by or under common control with the Company but shall not
include any stockholder or director of the Company, as such.
(ii) "person" means any individual, corporation, limited
liability company, partnership, firm, joint Company, association, joint-stock
company, trust, unincorporated organization, governmental or regulatory body or
other entity.
(iii) "subsidiary" means any corporation or other entity 50%
or more of the voting securities of which are owned directly or indirectly by
the Company.
7.2 Notice. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally, telegraphed, telexed or sent by facsimile transmission or,
if mailed, on the date of actual receipt thereof, as follows:
(i) if to the Company, to:
Chiles Offshore LLC
11200 Westheimer, Suite 410
Houston, Texas 77042
Fax No. (713) 339-3888
With a copy to: Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153-0119
Attn: David Zeltner
Fax No. (212) 310-8007
(ii) if to the Executive, to:
William E. Chiles
5096 Fieldwood Drive
Houston, Texas 77056
Fax No. (713) 850-1203
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With a copy to: Gardere Wynne Sewell & Riggs, L.L.P.
333 Clay Avenue, Suite 800
Houston, Texas 77002
Attn: Mr. N. L. Stevens III
Fax No. (713) 308-5807
Any party may change its address for notice hereunder by notice to the other
party hereto.
7.3 Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof ant supersedes all
prior agreements, written or oral, with respect thereto.
7.4 Waivers and Amendments. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any waiver on the part of any party of any such right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder, preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder.
7.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas (without giving effect to the
choice of law provisions thereof) where the employment of the Executive shall be
deemed, in part, to be performed and, subject to Section 7.11 hereof,
enforcement of this Agreement or any action taken or held with respect to this
Agreement Shall be taken in the courts of appropriate jurisdiction in Houston,
Texas.
7.6 Assignment. This Agreement, and any rights and obligations
hereunder, may not be assigned by the Executive and may be assigned by the
Company (subject to Section 4.6 (iii) hereof) only to a successor by merger or
purchaser of substantially all of the assets of the Company.
7.7 Counterparts. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
7.8 Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
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7.9 No Presumption Against Interest. This Agreement has been
negotiated, drafted, edited and reviewed by the respective parties, and
therefore, no provision arising directly or indirectly herefrom shall be
construed against any party as being drafted by said party.
7.10 Validity Contest. The Company shall promptly pay any and all
legal fees and expenses incurred by the Executive from time to time as a direct
result of the Company's contesting the due execution, authorization, validity or
enforceability of this Agreement.
7.11 Dispute Resolution. If any dispute arises out of or relates to
this Agreement, or the breach thereof, Executive and the Company agree to
promptly negotiate in good faith to resolve such dispute. If the dispute cannot
be settled by the parties through negotiation, Executive and the Company agree
to try in good faith to settle the dispute by mediation under the Commercial
Mediation Rules of the American Arbitration Association before resorting to
arbitration, litigation or any other dispute resolution procedure. If the
parties are unable to settle the dispute by mediation as provided in the
preceding sentence, any claim, controversy or dispute arising out of or relating
to this Agreement, or the breach thereof, shall be settled by binding
arbitration before a panel of three arbitrators in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, The
arbitration shall be conducted in Houston, Harris County, Texas, or such other
location to which the parties mutually agree. The decision of the arbitrator(s)
shall be final and binding and judgment upon the award rendered may be entered
in any court having jurisdiction thereof. The costs of mediation and arbitration
may be awarded to either party by the mediator or the arbitrators and absent
such award shall be borne equally by the parties.
7.12 Binding Agreement. This Agreement shall inure to the benefit of
and be binding upon the Company and its respective successors and assigns and
the Executive and his legal representatives.
7.13 No Third Party Beneficiaries. Notwithstanding anything in this
Agreement to the contrary, express or implied, any right, benefit, or agreement
contained, expressed or implied in this Agreement shall be only for the benefit
of the parties hereto and their respective legal representatives, successors,
heirs, and assigns, and such rights, benefits and other agreements shall not
enure to the benefit of any other person or entitle any such person to any
claim, cause of action, remedy or other rights of any kind, it being the
intention of the parties hereto that no person shall be deemed a third party
beneficiary of this Agreement.
[The remainder of this page has been intentionally left blank.]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
EXECUTIVE
/s/ William E. Chiles
--------------------------
William E. Chiles
COMPANY
CHILES OFFSHORE LLC
By: /s/ Randall Blank
--------------------------
Name: Randall Blank
Title: Vice President
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MANAGEMENT AND ADMINISTRATIVE SERVICES AGREEMENT
This Management and Administrative Services Agreement, dated as of February
27, 1998, is entered into by and between SEACOR SMIT Inc., a Delaware
corporation ("SEACOR"), and Chiles Offshore LLC, a Delaware limited liability
company ("Chiles").
W I T N E S S E T H :
WHEREAS, SEACOR has been providing the services of Dick H. Fagerstal, Vice
President, Finance, of SEACOR ("Mr. Fagerstal"), to assist in the management and
administration of Chiles; and
WHEREAS, the parties hereto desire that (i) SEACOR continue to provide the
services of Mr. Fagerstal to Chiles, (ii) SEACOR provide additional management
or administrative services to Chiles from time to time as needed and (iii)
SEACOR and Chiles formalize their agreement with respect thereto;
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
ARTICLE I
MANAGEMENT AND ADMINISTRATIVE SERVICES
1.1 SEACOR agrees to continue to provide the services of Mr. Fagerstal to
Chiles substantially in accordance with current practice. At the conclusion of
each calendar month, SEACOR shall render an invoice to Chiles for its fee for
such services, which fee shall be equal to $15,000 if Mr. Fagerstal devoted
substantially all of his business time and attention to the business of Chiles
during the applicable month and shall be proportionately reduced to the extent
that Mr. Fagerstal devotes a portion of his business time and attention to other
business matters during such month. Chiles shall pay to SEACOR the amount of
each such monthly invoice promptly following receipt thereof.
1.2 Subject to prior agreement between SEACOR and Chiles as to the specific
nature and extent of services to be provided by SEACOR and the compensation to
be paid to SEACOR therefor, SEACOR will furnish, or cause its
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affiliates to furnish Chiles with such of the following services as may be
requested by Chiles from time to time (such services together with the services
of Mr. Fagerstal referred to in Section 1.1 being referred to collectively as
"Management Services"):
(i) General management and financial services, including, without
limitation, periodic advice and consultation in connection with corporate,
legal, finance, accounting, tax, marketing, operations and such other
matters as may be required in connection with the day-to-day operation of
Chiles; it being hereby understood that such advice and consultation may,
from time to time, be provided by professional advisors engaged by SEACOR or
its affiliates, in which case, the fees and disbursements of such advisors
shall either be billed directly to Chiles or reimbursed to SEACOR, as SEACOR
may direct;
(ii) General administrative services, including without limitation,
secretarial support services, office equipment and facilities, and access to
salaried and non-salaried administrative and executive personnel of SEACOR
or its affiliates;
(iii) Services of specified individuals employed by SEACOR or its
affiliates;
(iv) Investment banking services, including, without limitation,
assisting Chiles in identifying sources of debt and/or equity financing and
in consummating debt or equity financings; and
(v) Such additional services as may be mutually agreed upon from time
to time by the parties hereto.
ARTICLE II
COMPENSATION & REIMBURSEMENT
2. In consideration for any Management Services provided in accordance with
Article I hereof, it is contemplated that Chiles shall pay SEACOR fees that do
not exceed fees charged by unrelated persons for comparable services. Except as
provided in Section 1.1, SEACOR and Chiles shall agree upon the compensation to
be paid to SEACOR by Chiles on or prior to SEACOR's provision of such services;
provided, however, in the event that, at Chiles' request, SEACOR provides
Management Services to Chiles in the absence of an agreement on compensation,
Chiles agrees to pay to SEACOR fees equal to the reasonable value of
2
<PAGE>
the Management Services provided. Chiles further agrees to reimburse SEACOR for
all reasonable out-of-pocket expenses incurred in connection with any Management
Services provided hereunder promptly following receipt of documentation thereof.
ARTICLE III
TERM
3. This Agreement shall commence on the date hereof and shall continue until
terminated by either party hereto upon not less than 60 days' prior written
notice of termination to the other party; provided, however, that the provisions
of Article VI hereof shall continue in full force and effect following any such
termination.
ARTICLE IV
FORCE MAJEURE
4. If, at any time during the term hereof SEACOR is unable to perform
(whether in whole or in part) any of its obligations under this Agreement by
reason of the occurrence of any event or series of events beyond its control,
then, in such case, the performance of such obligations shall be suspended to
the extent and during the time that such performance is so affected; provided,
however, that SEACOR has notified Chiles promptly of such circumstances and has
used its best efforts to perform its obligations hereunder. Compensation payable
by Chiles to SEACOR for Management Services pursuant to this Agreement shall be
proportionately reduced to the extent of the non-performance by SEACOR of its
obligations as provided in this Section 4.
ARTICLE V
OTHER ACTIVITIES OF SEACOR
5. It is hereby acknowledged and understood that officers and employees of
SEACOR (including, without limitation, Mr. Fagerstal) may be subject to
conflicts in the allocation of management and administrative time, services or
functions between Chiles and other entities to which services of the nature
contemplated by this Agreement are provided. Nothing set forth in this Agreement
is intended to, nor shall anything set forth in this Agreement operate to,
restrict
3
<PAGE>
SEACOR, its officers or its employees from providing to other entities
management and administrative services of the nature contemplated by this
Agreement.
ARTICLE VI
INDEMNIFICATION OF SEACOR
6.1 Chiles hereby agrees, to the fullest extent permitted by law, to
indemnify and hold harmless SEACOR, its officers, directors, employees, agents
and "affiliates" (as such term is defined in Rule 12b-2 under the Securities
Exchange Act of 1934, as amended) (collectively, for the purposes of this
Section Six, the "SEACOR Indemnitees") from and against, any and all losses,
claims, demands, costs, damages, liabilities, expenses of any nature (including,
without limitation, reasonable attorneys' fees and disbursements), judgments,
fines, settlements and other amounts arising from any and all claims, demands,
actions, suits or proceedings, whether civil, criminal, administrative or
investigative, in which a SEACOR Indemnitee may be involved, or threatened to be
involved, as a party or otherwise, arising out of, based upon or relating to the
provision of Management Services by SEACOR hereunder (collectively, the
"Indemnified Matters"), except for any such Indemnified Matters that are
adjudged by a court of competent jurisdiction to have resulted from the gross
negligence, bad faith or willful misconduct of SEACOR.
6.2 For purposes of this Article VI, the termination of any proceeding by
settlement shall not, of itself, create a presumption that any SEACOR Indemnitee
acted in a manner which constituted gross negligence, bad faith or willful
misconduct; provided, however, that a SEACOR Indemnitee shall neither settle,
nor arrange for or stipulate to the settlement of, any Indemnified Matters
without the prior written consent of Chiles, which consent shall not be
unreasonably withheld or delayed. It is hereby acknowledged that any SEACOR
Indemnitee's right to the indemnification provided herein shall be cumulative
of, and in addition to, any and all rights to which a SEACOR Indemnitee may
otherwise be entitled by contract or as a matter of law or equity and shall
extend to its successors, assigns and legal representatives.
ARTICLE VII
NOTICE
7. All notices, requests, demands and other communications provided for by
this Agreement shall be made in writing and shall be deemed to have been
4
<PAGE>
given at the time when mailed by registered or certified mail, return receipt
requested, postage prepaid, or given in person or by telecopy and confirmed by
telecopy answerback, to the following addresses of the parties hereto or to such
changed address as such party may have specified by like notice:
If to SEACOR, to:
SEACOR SMIT Inc.
1370 Avenue of the Americas, 25th Flr.
New York, NY 10019
Attention: Chief Financial Officer
Telecopy Number: (212) 582-8522
If to Chiles to:
Chiles Offshore LLC
11200 Westheimer, Suite 410
Houston, TX 77042-3227
Attention: President
Telecopy Number: (713) 339-3888
ARTICLE VIII
MISCELLANEOUS
8.1 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes any and all prior contracts, arrangements or understandings between
them with respect to such subject matter. This Agreement may not be modified or
amended in any manner other than by an instrument in writing signed by each
party hereto, or its respective successors or assigns, or otherwise as provided
herein.
8.2 Choice of Law. This Agreement and the rights of the parties hereunder
shall be governed by and interpreted in accordance with the laws of the State of
New York, without regard to the principles thereof governing conflicts of laws.
5
<PAGE>
8.3 Successors and Assigns. Except as otherwise specifically provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their legal representatives, successors and assigns.
8.4 Captions. Captions contained in this Agreement are inserted only as a
matter of convenience and are not intended to define, limit or extend the scope
or intent of this Agreement or any provision hereof.
8.5 Severability. If any provision of this Agreement, or the application of
such provision to any person or circumstance, shall be held invalid, the
remainder of this Agreement, or the application of such provision to persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
8.6 Counterparts. This Agreement may be executed and delivered in
counterparts, each of which shall be deemed to constitute an original but both
of which taken together as a whole shall constitute but one and the same
instrument.
8.7 Waivers. No provision of this Agreement shall be deemed to have been
waived unless such waiver is made in writing, and no such waiver with respect to
any breach or default hereunder shall be deemed or construed to be a waiver of
any other breach or default of the same provision or any other provision of this
Agreement.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their representatives thereunto duly authorized as of
the day and year first above written.
SEACOR SMIT INC.
By: /s/ Randall Blank
-------------------------------
Name: Randall Blank
Title: Executive Vice President
CHILES OFFSHORE LLC
By: /s/ William E. Chiles
-------------------------------
Name: William E. Chiles
Title: President & CEO
7
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF CHILES OFFSHORE LLC
<TABLE>
<CAPTION>
JURISDICTION OF
SUBSIDIARY ORGANIZATION
- ------------------------------------------------------------------------------------------------ ----------------
<S> <C>
Chiles Offshore Finance Corp. Delaware
Chiles Columbus LLC Delaware
Chiles Magellan LLC Delaware
</TABLE>
None of Chiles Offshore Finance Corp., Chiles Columbus LLC or Chiles Magellan
LLC has any subsidiaries.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated February 11, 1998 in this Registration Statement on Form S-4 of our
audit of the financial statements of Chiles Offshore LLC at December 31, 1997
and for the period from inception (August 5, 1997) to December 31, 1997 and to
all references to our firm included in this registration statement.
/s/ Arthur Andersen LLP
Houston, Texas
June 19, 1998
<PAGE>
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM T-1
Statement of Eligibility Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
U.S. BANK TRUST NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
United States 41-0257700
(State of Incorporation) (I.R.S. Employer
Identification No.)
U.S. Bank Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)
CHILES OFFSHORE LLC
CHILES OFFSHORE FINANCE CORP
CHILES COLUMBUS LLC
CHILES MAGELLAN LLC
(Exact name of Registrant as specified in its charter)
Delaware 76-0547408
Delaware 76-0568691
Delaware 76-0568690
Delaware 76-0568689
(State of Incorporation) (I.R.S. Employer
Identification No.)
11200 Westheimer, Suite 410
Houston, Texas 77042
(Address of Principal Executive Offices) (Zip Code)
10% Senior Notes due 2008
(Title of the Indenture Securities)
<PAGE>
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.
Comptroller of the Currency
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe each
such affiliation.
None
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which the
Trustee acts as Trustee.
16. LIST OF EXHIBITS List below all exhibits filed as a part of this
statement of eligibility and qualification.
1. Copy of Articles of Association.*
2. Copy of Certificate of Authority to Commence Business.*
3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).*
4. Copy of existing By-Laws.*
5. Copy of each Indenture referred to in Item 4. N/A.
6. The consents of the Trustee required by Section 321(b) of the act.
7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority is incorporated by reference to Registration Number 333-42147.
* Incorporated by reference to Registration Number 22-27000.
<PAGE>
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligors, or affiliates, are based
upon information furnished to the Trustee by the obligors. While the Trustee has
no reason to doubt the accuracy of any such information, it cannot accept any
responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, U.S. Bank Trust National Association, an Association organized and
existing under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the City of Saint Paul and State of Minnesota on the 15th day of June, 1998.
U.S. BANK TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
-----------------------
Richard H. Prokosch
Assistant Vice President
/s/ Judith M. Zuzek
- -------------------
Judith M. Zuzek
Assistant Secretary
<PAGE>
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939,
the undersigned, U.S. BANK TRUST NATIONAL ASSOCIATION hereby consents that
reports of examination of the undersigned by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities and
Exchange Commission upon its request therefor.
Dated: June 15, 1998
U.S. BANK TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
-----------------------
Richard H. Prokosch
Assistant Vice President
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER
UNREGISTERED 10% SENIOR NOTES DUE 2008
OF
CHILES OFFSHORE LLC
CHILES OFFSHORE FINANCE CORP.
PURSUANT TO THE EXCHANGE OFFER AND PROSPECTUS DATED , 1998
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1998 (THE "EXPIRATION DATE"), UNLESS THE EXCHANGE
OFFER IS EXTENDED BY THE COMPANY.
- --------------------------------------------------------------------------------
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
U.S. BANK TRUST NATIONAL ASSOCIATION
<TABLE>
<S> <C>
BY FACSIMILE TRANSMISSION BY HAND, MAIL OR OVERNIGHT DELIVERY:
(FOR ELIGIBLE INSTITUTIONS ONLY): U.S. Bank Trust National Association
(612) 244-1537 100 Wall Street
New York, New York 10041
FOR INFORMATION OR or
CONFIRMATION BY TELEPHONE: 180 East Fifth Street
(612) - St. Paul, MN 55101
Attn: Specialized Finance Department
</TABLE>
(Originals of all documents sent by facsimile should be sent promptly by
registered
or certified mail, by hand, or by overnight delivery service.)
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
<PAGE>
IF YOU WISH TO EXCHANGE UNREGISTERED 10% SENIOR NOTES DUE 2008, FOR AN EQUAL
AGGREGATE PRINCIPAL AMOUNT OF REGISTERED 10% SENIOR NOTES DUE 2008, PURSUANT TO
THE EXCHANGE OFFER, YOU MUST VALIDLY TENDER (AND NOT WITHDRAW) OLD NOTES TO THE
EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
SIGNATURES MUST BE PROVIDED
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
DESCRIPTION OF TENDERED OLD NOTES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
AGGREGATE
CERTIFICATE PRINCIPAL AMOUNT
NAME(S) AND ADDRESS(ES) OF REGISTERED OWNER(S) AS IT APPEARS ON THE 10% NUMBER(S) OF OLD OF OLD NOTES
SENIOR NOTES DUE 2008 (PLEASE FILL IN, IF BLANK) NOTES TENDERED
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
TOTAL PRINCIPAL
AMOUNT OF NOTES
TENDERED
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Ladies and Gentlemen:
1. The undersigned hereby tenders to Chiles Offshore LLC, a Delaware
limited liability company ("Chiles"), and Chiles Offshore Finance Corp., a
special purpose Delaware corporation and a wholly owned subsidiary of Chiles, as
co-issuers (collectively, the "Company"), the 10% Senior Notes due 2008 (the
"Old Notes") described above pursuant to the Company's offer of $1,000 principal
amount of 10% Senior Notes due 2008 (the "New Notes") in exchange for each
$1,000 principal amount of the Old Notes, upon the terms and subject to the
conditions contained in the Prospectus dated , 1998 (the "Prospectus"),
receipt of which is hereby acknowledged, and in this Letter of Transmittal
(which together constitute the "Exchange Offer").
2. The undersigned hereby represents and warrants that it has full
authority to tender the Old Notes described above. The undersigned will, upon
request, execute and deliver any additional documents deemed by the Company to
be necessary or desirable to complete the tender of Old Notes.
3. The undersigned understands that the tender of the Old Notes pursuant to
all of the procedures set forth in the Prospectus will constitute an agreement
between the undersigned and the Company as to the terms and conditions set forth
in the Prospectus.
4. The undersigned hereby represents and warrants that:
(i) the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the undersigned,
whether or not the undersigned is the holder;
(ii) neither the undersigned nor any such other person is engaging in or
intends to engage in a distribution of such New Notes;
(iii) neither the undersigned nor any such other person has an
arrangement or understanding with any person to participate in the
distribution of such New Notes; and
(iv) neither the holder nor any such other person is an "affiliate," as
such term is defined under Rule 405 promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), of the
Company.
5. If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
New Notes. If the undersigned is a broker-dealer that will receive New Notes for
its own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and delivering a prospectus, the undersigned will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. If the undersigned is a broker-dealer and Old Notes for its own
account were not acquired as a result of market-making or other trading
activities, such Old Notes cannot be exchanged pursuant to the Exchange Offer.
6. Any obligation of the undersigned hereunder shall be binding upon the
successors, assigns, executors, administrators, trustees in bankruptcy and legal
and personal representatives of the undersigned.
7. Unless otherwise indicated herein under "Special Delivery Instructions,"
the certificates for the New Notes will be issued in the name of the
undersigned.
2
<PAGE>
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTION 1)
To be completed ONLY IF the New Notes are to be issued or sent to someone
other than the undersigned or to the undersigned at an address other than that
provided above.
Mail: / / Issue / / (check appropriate boxes) certificates to:
Name: __________________________________________________________________________
(Please Print)
Address: _______________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Including Zip Code)
SPECIAL BROKER-DEALER INSTRUCTIONS
(SEE ITEM 5)
/ / Check here if you are a broker-dealer and wish to receive 10 additional
copies of the Prospectus and 10 copies of any amendments or supplements thereto.
Name: __________________________________________________________________________
(Please Print)
Address: _______________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Including Zip Code)
<PAGE>
SIGNATURE
To be completed by all exchanging noteholders. Must be signed by
registered holder exactly as name appears on Old Notes. If signature is by
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
please set forth full title. See Instruction 3.
X ____________________________________________________________________________
X ____________________________________________________________________________
Signature(s) of Registered Holder(s) or Authorized Signature
Dated: _______________________________________________________________________
Name(s): _____________________________________________________________________
(Please Type or Print)
Capacity: ____________________________________________________________________
Address: _____________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Including Zip Code)
Area Code and Telephone No.: _________________________________________________
SIGNATURE GUARANTEE (IF REQUIRED BY INSTRUCTION 1)
Certain Signatures Must be Guaranteed by an Eligible Institution
______________________________________________________________________________
(Name of Eligible Institution Guaranteeing Signatures)
______________________________________________________________________________
(Address (including zip code) and Telephone Number (including area code) of
Firm)
______________________________________________________________________________
(Authorized Signature)
______________________________________________________________________________
(Printed Name)
______________________________________________________________________________
(Title)
Dated: _______________________________________________________________________
PLEASE READ THE INSTRUCTIONS BELOW,
WHICH FORM A PART OF THIS LETTER OF TRANSMITTAL.
<PAGE>
INSTRUCTIONS
1. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal must
be guaranteed by an eligible guarantor institution that is a member of or
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program, the Stock Exchange Medallion
Program, or by an "eligible guarantor institution" within the meaning of Rule
17Ad-15 promulgated under the Exchange Act (an "Eligible Institution") unless
the box entitled "Special Registration Instructions" or "Special Delivery
Instructions" above has not been completed or the Old Notes described above are
tendered for the account of an Eligible Institution.
2. DELIVERY OF LETTER OF TRANSMITTAL AND OLD NOTES. The Old Notes, together
with a properly completed and duly executed Letter of Transmittal (or copy
thereof), should be mailed or delivered to the Exchange Agent at the address set
forth above; PROVIDED, HOWEVER, that holders who tender their Old Notes using
The Depository Trust Company's ATOP procedures do not need to mail or deliver a
Letter of Transmittal to the Exchange Agent.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY
REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES, OR
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
3. SIGNATURE ON LETTER OF TRANSMITTAL, BOND POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by a person other than a registered holder
of any Old Notes, such Old Notes must be endorsed or accompanied by appropriate
bond powers, signed by such registered holder exactly as such registered
holder's name appears on such Old Notes.
If this Letter of Transmittal or any Old Notes 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, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted with this Letter of Transmittal.
4. MISCELLANEOUS. All questions as to the validity, form, eligibility
(including time of receipt), acceptance, and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be final and binding on all parties. The Company reserves the absolute
right to reject any or all Old Notes not properly tendered or any Old Notes the
Company's acceptance of which would, in the opinion of counsel for the Company,
be unlawful. The Company also reserves the right to waive any defects,
irregularities, or conditions of tender as to particular Old Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in this Letter of Transmittal) will be final and
binding. Unless waived, any defects or irregularities in connection with tenders
of Old Notes must be cured within such time as the Company shall determine.
Neither the Company, the Exchange Agent, nor any other person shall be under any
duty to give notification of defects in such tenders or shall incur any
liability for failure to give such notification. Tenders of Old Notes will not
be deemed to have been made until such defects or irregularities have been cured
or waived. Any Old Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent to the tendering holder thereof as
soon as practicable following the Expiration Date.
2
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
TO TENDER
UNREGISTERED 10% SENIOR NOTES DUE 2008
(INCLUDING THOSE IN BOOK-ENTRY FORM)
OF
CHILES OFFSHORE LLC
CHILES OFFSHORE FINANCE CORP.
PURSUANT TO THE EXCHANGE OFFER AND PROSPECTUS DATED , 1998
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1998 (THE "EXPIRATION DATE"), UNLESS THE EXCHANGE
OFFER IS EXTENDED BY THE COMPANY.
- --------------------------------------------------------------------------------
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
U.S. BANK TRUST NATIONAL ASSOCIATION
<TABLE>
<S> <C>
BY FACSIMILE TRANSMISSION BY HAND, MAIL OR OVERNIGHT DELIVERY:
(FOR ELIGIBLE INSTITUTIONS ONLY): U.S. Bank Trust National Association
(612) 244-1537 100 Wall Street
New York, New York 10041
FOR INFORMATION OR or
CONFIRMATION BY TELEPHONE: 180 East Fifth Street
(612) - St. Paul, MN 55101
Attn: Specialized Finance Department
</TABLE>
(Originals of all documents sent by facsimile should be sent promptly by
registered
or certified mail, by hand, or by overnight delivery service.)
DELIVERY OF THIS NOTICE TO AN ADDRESS OR TRANSMISSION OF INSTRUCTIONS VIA
FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Chiles Offshore LLC, a Delaware limited
liability company, and Chiles Offshore Finance Corp., a Delaware corporation
(collectively, the "Issuers"), in accordance with the Issuers' offer, upon the
terms and subject to the conditions set forth in the Prospectus dated
, 1998 (the "Prospectus"), and in the accompanying Letter of
Transmittal, receipt of which is hereby acknowledged, $ in aggregate
principal amount of Old Notes pursuant to the guaranteed delivery procedures
described in the Prospectus.
- --------------------------------------------------------------------------------
Name(s) of Registered Holder(s): _____________________________________________
(PLEASE TYPE OR PRINT)
Address: _____________________________________________________________________
______________________________________________________________________________
Area Code & Telephone No.: ___________________________________________________
Certificate Number(s) for
Old Notes (if available): ____________________________________________________
Total Principal Amount
Tendered and Represented
by Certificate(s):$___________________________________________________________
Signature of Registered Holder(s): ___________________________________________
Dated: _______________________________________________________________________
/X/ The Depository Trust Company
(Check if Old Notes will be tendered
by book-entry transfer)
Account Number: _______________________________________________________
--------------------------------------------------------------------------
<PAGE>
THE GUARANTEE BELOW MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, being a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office in the United States, hereby
guarantees (a) that the above named person(s) "own(s)" the Old Notes tendered
hereby within the meaning of Rule 14e-4 ("Rule 14e-4") under the Securities
Exchange Act of 1934, as amended, (b) that such tender of such Old Notes
complies with Rule 14e-4, and (c) to deliver to the Exchange Agent the
certificates representing the Old Notes tendered hereby or confirmation of book-
entry transfer of such Old Notes into the Exchange Agent's account at The
Depository Trust Company, in proper form for transfer, together with the Letter
of Transmittal (or facsimile thereof), properly completed and duly executed,
with any required signature guarantees and any other required documents, within
three New York Stock Exchange trading days after the Expiration Date.
- --------------------------------------------------------------------------------
Name of Firm: ________________________________________________________________
Address: _____________________________________________________________________
_____________________________________________________________________________
Area Code and Telephone No.: _________________________________________________
Authorized Signature: ________________________________________________________
Name: ________________________________________________________________________
Title: _______________________________________________________________________
Dated: _______________________________________________________________________
------------------------------------------------------------------------------
NOTE: DO NOT SEND CERTIFICATES OF OLD NOTES WITH THIS FORM. CERTIFICATES OF
OLD NOTES SHOULD BE SENT ONLY WITH A LETTER OF TRANSMITTAL.
