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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission file number 1-7746
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TRANSOCEAN SEDCO FOREX INC.
(Exact name of registrant as specified in its charter)
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Cayman Islands N/A
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4 Greenway Plaza
Houston, Texas 77046
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (713) 232-7500
Securities registered pursuant to Section 12(b) of the Act:
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<CAPTION>
Title of class Exchange on which registered
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<S> <C>
Ordinary Shares, par value $0.01 per share New York Stock Exchange, Inc.
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
As of February 29, 2000, 210,247,625 ordinary shares were outstanding and
the aggregate market value of such shares held by non-affiliates was
approximately $8.2 billion (based on the reported closing market price of the
ordinary shares on such date of $39 7/16 and assuming that all directors and
executive officers of the Company are "affiliates," although the Company does
not acknowledge that any such person is actually an "affiliate" within the
meaning of the federal securities laws).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement to be filed with
the Securities and Exchange Commission within 120 days of December 31, 1999,
for its 2000 annual general meeting of shareholders are incorporated by
reference into Part III of this Form 10-K.
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TRANSOCEAN SEDCO FOREX INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1999
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Item Page
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PART I
Items 1 through 4
Item 1. Business...................................................... 1
Recent Developments........................................... 1
Merger of Transocean Offshore Inc. and Sedco Forex............ 1
Background of Transocean Offshore Inc. and Sedco Forex........ 2
Drilling Rig Types............................................ 2
Fleet Additions and Upgrades.................................. 4
Fleet Status.................................................. 4
Drilling Services............................................. 7
Drilling Contracts............................................ 7
Significant Clients........................................... 8
Industry Conditions and Competition........................... 8
Markets....................................................... 9
Operating Risks............................................... 9
International Operations...................................... 10
Regulation.................................................... 10
Employees..................................................... 11
Item 2. Properties.................................................... 12
Item 3. Legal Proceedings............................................. 12
Item 4. Submission of Matters to a Vote of Security Holders........... 13
Executive Officers of the Registrant.......................... 14
PART II
Items 5 through 9
Item 5. Market for Registrant's Common Equity and Related Shareholder
Matters...................................................... 16
Item 6. Selected Combined Financial Data.............................. 16
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 17
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.... 28
Item 8. Financial Statements and Supplementary Data................... 30
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure..................................... 58
PART III
Items 10 through 13
Item 10. Directors and Executive Officers of the Registrant............ 58
Item 11. Executive Compensation........................................ 58
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................... 58
Item 13. Certain Relationships and Related Transactions................ 58
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-
K............................................................ 58
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PART I
ITEM 1. Business
On December 31, 1999, Transocean Sedco Forex Inc. (together with its
subsidiaries and predecessors, unless the context requires otherwise, the
"Company") completed its merger with Sedco Forex Holdings Limited ("Sedco
Forex"), the former offshore contract drilling business of Schlumberger.
Effective upon the merger, the Company changed its name from "Transocean
Offshore Inc." to "Transocean Sedco Forex Inc." The merger followed the spin-
off of Sedco Forex to Schlumberger shareholders on December 30, 1999. As a
result of the merger, Schlumberger shareholders exchanged all of the Sedco
Forex shares distributed to them by Schlumberger in the Sedco Forex spin-off
for ordinary shares of the Company, and Sedco Forex became a wholly owned
subsidiary of the Company.
The Company is a leading international provider of offshore contract
drilling services for oil and gas exploration, development and production. As
of March 1, 2000, the Company owns, has partial ownership interests in,
operates or has under construction 73 mobile offshore drilling units. The
Company's active fleet includes 12 high-specification semisubmersibles, 31
second- and third-generation semisubmersibles, one ultra-deepwater Discoverer
Enterprise-class drillship, four other drillships, 16 jackup rigs and three
tenders. The Company also has under construction two additional Discoverer
Enterprise-class drillships, the Discoverer Spirit and the Discoverer Deep
Seas; three Sedco Express-class semisubmersibles, the Sedco Express, Sedco
Energy and Cajun Express; and one independent-leg cantilevered jackup rig, the
Trident 20. In addition to the 73 mobile offshore drilling units, the fleet
includes one multi-purpose service jackup rig, six swamp barges and two land
drilling rigs.
The Company's core business is to contract these drilling rigs, related
equipment and work crews primarily on a dayrate basis to drill offshore wells.
The Company specializes in technically demanding segments of the offshore
drilling business with a particular focus on deepwater and harsh environment
drilling services. The Company also provides additional services, including
international turnkey drilling and management of third-party well service
activities. The Company's ordinary shares are listed on the New York Stock
Exchange under the symbol "RIG".
Transocean Sedco Forex Inc. is a Cayman Islands corporation with offices
located at 4 Greenway Plaza, Houston, Texas 77046. Its telephone number at
that address is (713) 232-7500.
Recent Developments
The Company and Amoco Production Company, a unit of BP Amoco plc, agreed to
terminate the drilling contract for the semisubmersible Transocean Amirante
effective January 4, 2000 and cancel the remaining 14 months of firm contract
time on the rig for a cash settlement of approximately $25 million. The
Transocean Amirante is currently idle in the U.S. Gulf of Mexico.
The Company sold its coiled tubing drilling services business, Transocean
Petroleum Technology, to Schlumberger for approximately $25 million. The sale
closed February 29, 2000 and included 11 coiled tubing units in the United
Kingdom and Norwegian sectors of the North Sea. The Company excluded from the
sale its coiled tubing joint venture, Transocean-Nabors Drilling Technology
LLC, and its drilling services joint venture with Baker Hughes Incorporated,
Deep Vision L.L.C.
Merger of Transocean Offshore Inc. and Sedco Forex
In the merger, Schlumberger shareholders received 0.1936 ordinary shares of
the Company for each share of capital stock of Sedco Forex distributed in the
spin-off of Sedco Forex. The Company issued 109,419,166 ordinary shares to
Schlumberger shareholders in the merger, and issued an additional 145,102
ordinary shares that were sold on the market for cash paid in lieu of
fractional shares. These aggregate issuances of 109,564,268
1
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shares constituted approximately 52% of outstanding Company shares immediately
following the merger. The Company has accounted for the merger using the
purchase method of accounting, with Sedco Forex as the acquiror for accounting
purposes.
On December 31, 1999 following the merger, Sedco Forex repaid indebtedness
to Schlumberger in the aggregate amount of $303.6 million with the proceeds of
an intercompany loan from the Company to Sedco Forex. The Company borrowed the
amount it required to fund this advance under a $400 million term loan
agreement with a group of financial institutions led by SunTrust Bank,
Atlanta.
Background of Transocean Offshore Inc. and Sedco Forex
The Company was founded in 1953 by predecessors of Sonat Inc. and J. Ray
McDermott & Co., Inc. to design and construct the first jackup rig in the Gulf
of Mexico. The Company, then known as "The Offshore Company," began
international drilling operations in the late 1950s and was one of the first
contractors to offer drilling services in the North Sea. The Company was
publicly traded from 1967 until 1978, when it became a wholly owned subsidiary
of Sonat Inc. In June 1993, the Company, then known as "Sonat Offshore
Drilling Inc.," completed an initial public offering of approximately 60
percent of the outstanding shares of its common stock. In July 1995, Sonat
Inc. sold its remaining 40 percent interest in the Company through a secondary
public offering. In September 1996, the Company acquired substantially all of
the outstanding capital shares of Transocean ASA, a Norwegian offshore
drilling company, for an aggregate purchase price of approximately $1.5
billion in common stock and cash, including direct transaction costs and costs
of purchasing minority shares completed in 1997, and changed its name to
"Transocean Offshore Inc." On May 14, 1999, the Company completed a corporate
reorganization by which it changed its place of incorporation from Delaware to
the Cayman Islands.
The offshore contract drilling business of Sedco Forex resulted from the
integration over time by Schlumberger of several drilling companies,
principally Forex (Forages et Exploitations Petroliers) and Sedco Inc., and
other asset acquisitions. Forex was founded in France in 1942 and began as a
land drilling company in France, North Africa and the Middle East. Forex later
moved into the offshore drilling market largely through its Neptune joint
venture formed in the early 1960s with Languedocienne-Forenco. By the early
1970s, Schlumberger had acquired all of the shares of Forex and Neptune and
had integrated their activities. Schlumberger acquired Sedco Inc. in 1984.
Founded in 1947 and originally known as Southeastern Drilling Company, Sedco
Inc. began drilling in shallow water marsh environments in the U.S. in the
early 1950s and then expanded into international operations and deeper water
markets.
At the effective time of the merger, Sedco Forex owned, had an ownership
interest in or operated 40 active mobile offshore drilling rigs. Sedco Forex's
fleet consisted of four high-specification semisubmersibles, 20 other
semisubmersibles, two drillships, 10 jackup rigs and four tenders, as well as
one multi-purpose service jackup rig, six swamp barges and two land drilling
rigs. Sedco Forex also had under construction three Sedco Express-class
semisubmersibles and one independent-leg cantilevered jackup rig.
Drilling Rig Types
The Company principally uses five types of drilling rigs:
. semisubmersibles
. drillships
. jackups
. tenders
. swamp barges
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Semisubmersibles are floating vessels that can be submerged such that a
substantial portion of the lower hull is below the water surface during
drilling operations. They are generally well suited for operations in rough
water conditions. High-specification semisubmersibles are those that were
built or extensively upgraded since 1984 and have one or more of the following
characteristics: larger physical size than other semisubmersibles; rated for
drilling in water depths of over 4,000 feet; year-round harsh environment
capability; variable deck load capability of greater than 4,000 metric tons;
dynamic positioning; and superior motion characteristics. High-specification
semisubmersibles are frequently the most suitable units for operations in deep
water and harsh environments or for development drilling that requires larger
variable loads and the ability to handle large pieces of subsea equipment. The
Company is constructing three advanced semisubmersibles based on its
proprietary Sedco Express design. The Company estimates that the Sedco Express
rigs will be capable of reducing total well construction time by up to 25
percent. In addition to being dynamically positioned, these rigs are equipped
for faster penetration rates, streamlined logistics, extensive mechanization
and parallel tubular handling operations, supported by an integrated well
construction center. Savings contributions are also designed to come from a
high-powered, integrated mud and cement pumping system and built-in electric
wireline logging, measurement while drilling (MWD), logging while drilling
(LWD) and coiled tubing operations.
Drillships are generally self-propelled and designed to drill in the
deepest water in which offshore drilling rigs currently operate. Shaped like
conventional ships, they are the most mobile of the major rig types. The
Company's drillships are either dynamically positioned, which allows them to
maintain position without anchors through the use of their onboard propulsion
and station-keeping systems, or are operated in a moored configuration. The
Company's three Discoverer Enterprise-class drillships are equipped for dual-
activity drilling, which is a well-construction technology developed by the
Company that allows for drilling tasks associated with a single well to be
accomplished in a parallel rather than sequential manner by utilizing two
complete drilling systems under a single derrick. The dual-activity well
construction process is designed to reduce critical path activity and improve
efficiency in both exploration and development drilling. When the technology
is applied in a deepwater environment, the Company estimates that efficiency
improvements of up to 40 percent on development projects and 15 percent on
exploration projects could be obtained. The 100,000 metric-ton displacement
Discoverer Enterprise-class drillships will each possess a large enough
variable deck load (20,000 metric tons) to allow the rigs to carry tubulars
and consumables for the construction of three or more wells.
Jackup rigs are mobile self-elevating drilling platforms equipped with legs
that can be lowered to the ocean floor until a foundation is established to
support the drilling platform. Once a foundation is established, the drilling
platform is then jacked further up the legs so that the platform is above the
highest expected waves. The rig hull includes the drilling rig, jacking
system, crew quarters, loading and unloading facilities, storage areas,
helicopter landing deck and related equipment. These rigs are generally suited
for water depths of 300 feet or less.
Tenders are usually barges or semisubmersibles that are not self-propelled,
but can be moored alongside a platform, and contain quarters, mud pits, mud
pumps, power generation and other equipment. Tenders allow smaller, less
costly platforms to be used for development projects. Self-erecting tenders
carry their own derrick equipment set and have a crane capable of erecting the
derrick on the platform, thereby eliminating the cost associated with a
separate derrick house and related equipment. Tenders are generally suited for
water depths of 460 feet or less.
Swamp barges are usually not self-propelled, but can be moored alongside a
platform, and contain quarters, mud pits, mud pumps, power generation and
other equipment. Like tenders, swamp barges allow smaller, less costly
platforms to be used for development projects. Swamp barges often carry their
own derrick equipment set and crane. Swamp barges are generally suited for
water depths of 25 feet or less.
The Company's drilling equipment is suitable for both exploration and
development drilling, and the Company is normally engaged in both types of
drilling activity. The Company's drilling rigs are mobile and can be moved to
new locations in response to client demand. All of the Company's mobile
offshore drilling units are designed for operations away from port for
extended periods of time and have living quarters for the crews, a helicopter
landing deck and storage space for pipe and drilling supplies.
3
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Fleet Additions and Upgrades
The Discoverer Enterprise, the first of a new class of advanced, ultra-
deepwater drillships employing the Company's dual-activity drilling system,
commenced operations for a unit of BP Amoco under a five-year contract in
December 1999. The rig is equipped with sufficient riser to drill in 8,500
feet of water and is capable of operating in water depths up to 10,000 feet
with additional riser. The Company has two additional Discoverer Enterprise-
class drillships, the Discoverer Spirit and the Discoverer Deep Seas, under
construction. The Discoverer Spirit will be equipped with sufficient riser to
drill in 10,000 feet of water, while the Discoverer Deep Seas will initially
be equipped with sufficient riser to drill in 8,000 feet of water, but will be
capable of drilling in water depths of up to 10,000 feet with additional
riser. The Discoverer Spirit is currently in a U.S. Gulf Coast shipyard for
outfitting with drilling equipment, and the Company expects it to be
operational in the third quarter of 2000, working under a five-year contract
for Spirit Energy 76, a division of Unocal. The Discoverer Deep Seas is under
construction at the Astano shipyard in Spain and is expected to be operational
in the fourth quarter of 2000, working under a five-year contract for Chevron.
The Company expects to spend $69 million and $117 million in 2000 to complete
construction of the Discoverer Spirit and Discoverer Deep Seas, respectively.
The Company has three Sedco Express-class semisubmersible drilling rigs
currently under construction, with two in France, the Sedco Express and Sedco
Energy, and the remaining unit, the Cajun Express, in Singapore. The Trident
20 jackup is also under construction in Azerbaijan. The Sedco Express and
Sedco Energy will be outfitted for operations in water depths of up to 6,000
feet and 7,500 feet, respectively, although each rig's design allows
operations in up to 8,500 feet of water with additional riser. The Sedco
Express is expected to commence a three year contract with Elf in Angola in
the third quarter of 2000. The Sedco Energy is expected to commence a five
year contract with Texaco in Nigeria in the third quarter of 2000. The Company
expects to spend $77 million and $87 million in 2000 to complete construction
of the Sedco Express and Sedco Energy, respectively.
The Cajun Express will be equipped for operations in water depths of up to
8,500 feet, and the Company expects it to commence a three year contract with
Marathon in the Gulf of Mexico in the third quarter of 2000. The Trident 20
jackup is a traditional independent-leg cantilevered jackup, designed for
operations in the Caspian Sea in water depths of up to 300 feet. The rig is
currently in a shipyard in Azerbaijan and is expected to be operational in the
fourth quarter of 2000, working under a three year contract with Elf. The
Company expects to spend $65 million and $32 million in 2000 to complete
construction of the Cajun Express and Trident 20, respectively.
In addition, the Company completed a $41 million life enhancement and
upgrade project during 1999 for the Sedco 709 semisubmersible.
For further discussion, see "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources--Capital Expenditures".
Fleet Status
As of March 1, 2000, all but 25 of the Company's operational drilling rigs
were working or had signed contracts for future operations, with contracts
expiring from 2000 through 2005.
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The following table provides certain information about the Company's
drilling rig fleet as of March 1, 2000.
<TABLE>
<CAPTION>
Year Water Drilling
Entered Depth Depth
Service/ Capability Capability Estimated
Type and Name Upgraded(a) (in feet) (in feet) Location Customer Expiration(b)
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<S> <C> <C> <C> <C> <C> <C>
Sedco Express-class
Semisubmersibles(3)
Cajun Express(e)(j)..... Newbuild 8,500 35,000 Shipyard (Singapore) Marathon August 2003
Sedco Energy(f)(j)...... Newbuild 7,500 25,000 Shipyard (France) Texaco August 2005
Sedco Express(g)(j)..... Newbuild 7,500 25,000 Shipyard (France) Elf August 2003
Other High-Specification
Semisubmersibles(12)
Transocean Marianas..... 1979/1998 7,000 25,000 U.S. Gulf of Mexico Shell September 2003
Sedco 707(j)............ 1976/1997 6,500 25,000 Brazil Petrobras January 2002
Sedco 710(j)............ 1983 6,000 25,000 Brazil Petrobras January 2001
Transocean Richardson... 1988 5,000 25,000 U.S. Gulf of Mexico Kerr McGee March 2000
Anadarko May 2000
Sedco 709(j)............ 1977/1999 5,000 25,000 Nigeria Shell April 2002
Transocean Leader....... 1987/1997 4,500 25,000 U.K. North Sea BP Amoco March 2001
Transocean Rather....... 1988 4,500 25,000 U.S. Gulf of Mexico -- Idle
Sovereign Explorer...... 1984 4,000 25,000 U.K. North Sea Marathon May 2000
Henry Goodrich(d)....... 1985 2,000 30,000 Canada PetroCanada February 2002
Paul B. Loyd, Jr.(d).... 1991/1993 2,000 25,000 U.K. North Sea BP Amoco July 2000
Transocean Arctic(c).... 1986 1,650 25,000 Norwegian North Sea Statoil February 2002
Polar Pioneer........... 1985 1,500 25,000 Norwegian North Sea Norsk Hydro September 2001
Other
Semisubmersibles(31)
Sedco 700............... 1973/1997 3,600 25,000 Gabon (Shipyard) Energy Africa June 2000
Transocean Legend....... 1983 3,500 25,000 Brazil Petrobras June 2000
Transocean Amirante..... 1978/1997 3,500 25,000 U.S. Gulf of Mexico -- Idle
Transocean Driller...... 1991 3,000 25,000 Brazil Petrobras June 2000
Omega(i)(q)............. 1983 3,000 25,000 South Africa -- Idle
Transocean 96........... 1975/1997 2,300 25,000 U.S. Gulf of Mexico Anadarko July 2000
Transocean 97........... 1977/1997 2,300 25,000 U.S. Gulf of Mexico -- Idle
Transocean John
Shaw(q)................ 1982 1,800 25,000 U.K. North Sea -- Idle
Sedco 711............... 1982 1,800 25,000 U.K. North Sea Total March 2000
Enterprise June 2000
Sedco 712............... 1983 1,600 25,000 U.K. North Sea Shell December 2000
Sedco 714............... 1983/1997 1,600 25,000 Canada Huskey November 2000
Actinia................. 1982 1,500 25,000 Malta -- Idle
Drillstar(h)............ 1982 1,500 25,000 U.K. North Sea Chevron November 2000
Sedco 600(q)............ 1983/1994 1,500 25,000 Vietnam -- Idle
Sedco 601............... 1983 1,500 25,000 Indonesia Unocal July 2000
Sedco 602(q)............ 1983 1,500 25,000 Singapore -- Idle
Sedneth 701............. 1972/1993 1,500 25,000 Congo Elf August 2000
Sedco 702............... 1973/1992 1,500 25,000 Australia BHP May 2000
Sedco 703............... 1973/1995 1,500 25,000 Australia INPEX June 2000
Sedco 708............... 1976 1,500 25,000 Angola Chevron April 2000
Transocean Winner(c).... 1983 1,500 25,000 Norwegian North Sea Statoil July 2003
Transocean Searcher(c).. 1983/1988 1,500 25,000 Norwegian North Sea Statoil July 2003
Transocean Prospect(c).. 1983/1992 1,500 25,000 Norwegian North Sea Statoil October 2000
Transocean Wildcat(c)... 1977/1985 1,300 25,000 Norwegian North Sea Statoil June 2001
Transocean Explorer..... 1976 1,250 25,000 U.K. North Sea -- Idle
Transocean Discoverer... 1977/1985 1,250 25,000 U.K. North Sea -- Idle
Sedco 704............... 1974/1993 1,000 25,000 U.K. North Sea Kerr McGee March 2000
Texaco February 2002
Sedco 706............... 1976/1994 1,000 25,000 U.K. North Sea Total June 2000
Sedco Explorer(h)....... 1975/1995 1,000 25,000 U.K. North Sea -- Idle
Sedco I-Orca(i)......... 1970/1987 900 25,000 South Africa Soekor May 2001
Sedco 135D.............. 1966/1977 600 25,000 Brazil -- Idle
Discoverer Enterprise-
class Drillships(3)
Discoverer
Enterprise(j).......... 1999 10,000 35,000 U.S. Gulf of Mexico BP Amoco December 2004
Discoverer
Spirit(j)(k)........... Newbuild 10,000 35,000 Shipyard (U.S.) Unocal July 2005
Discoverer Deep
Seas(j)(l)............. Newbuild 10,000 35,000 Shipyard (Spain) Chevron December 2005
Other Drillships(4)
Discoverer Seven
Seas(j)................ 1976/1997 7,000 25,000 Brazil Petrobras March 2002
Discoverer 534(j)....... 1975/1991 7,000 25,000 U.S. Gulf of Mexico Elf March 2000
BP Amoco October 2000
Joides
Resolution(j)(m)....... 1978 27,000 30,000 Worldwide Texas A&M September 2003
Sagar Vijay(i).......... 1985 2,950 20,000 India ONGC December 2000
</TABLE>
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<TABLE>
<CAPTION>
Year Water Drilling
Entered Depth Depth
Service/ Capability Capability Estimated
Type and Name Upgraded(a) (in feet) (in feet) Location Customer Expiration(b)
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<S> <C> <C> <C> <C> <C> <C>
Jackup Rigs(17)
Transocean Jupiter...... 1981/1997 170 16,000 UAE -- Idle
Offshore Comet.......... 1980 250 20,000 Gulf of Suez, Egypt GUPCO September 2000
Offshore Mercury........ 1969/1998 250 20,000 Gulf of Suez, Egypt GUPCO September 2000
Transocean III.......... 1978/1993 300 20,000 UAE -- Idle
Shelf Explorer.......... 1982 300 25,000 Danish North Sea Maersk August 2000
Transocean Nordic....... 1984 300 25,000 German North Sea Wintershall June 2000
Trident II.............. 1977/1985 300 25,000 India ONGC January 2001
Trident IV.............. 1980/1999 300 25,000 Angola Chevron February 2002
Trident VI.............. 1981 300 21,000 Nigeria -- Idle
Trident VIII(q)......... 1981 300 21,000 Nigeria -- Idle
Trident IX(o)........... 1982 400 21,000 Thailand SOCO March 2000
Trident XII............. 1982/1992 300 25,000 Brunei Shell July 2000
Trident XIV............. 1982/1994 300 20,000 Angola Chevron June 2000
Trident 15.............. 1982 300 25,000 Vietnam Petrovietnam March 2000
Trident 16(o)........... 1982 300 25,000 Thailand PTTEP July 2000
Trident 17.............. 1983 355 25,000 Indonesia Premier August 2000
Trident 20(p)........... Newbuild 300 Shipyard (Azerbaijan) Elf December 2003
Tenders(3)
Searex 9................ 1981 460 21,000 Congo Elf December 2000
Searex 10............... 1983/1994 450 21,000 Angola -- Idle
Searex 11............... 1983 350 20,000 Singapore -- Idle
Multi-Purpose Service
Vessel
Mr. John(n)............. 1985/1993 N/A N/A Nigeria -- Idle
Swamp Barges(6)
Searex 4................ 1981/1989 21 25,000 Nigeria -- Idle
Searex 6................ 1981/1991 22 25,000 Nigeria -- Idle
Searex 7................ 1980 25 20,000 Indonesia -- Idle
Searex 8................ 1985/1989 25 21,000 Indonesia -- Idle
Searex 12............... 1982/1992 25 25,000 Nigeria Shell July 2000
Hibiscus(p)............. 1979/1993 25 16,000 Indonesia Total April 2000
Land Rigs(2)
Rig 1................... 1976/1996 N/A 15,000 Nigeria -- Idle
Rig 54.................. 1981 N/A 15,000 Nigeria -- Idle
</TABLE>
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(a) Dates shown are the original service date and the date of the most recent
upgrade, if any.
(b) Expiration dates represent the Company's current estimate of the earliest
date the contract for each rig is likely to expire. Some rigs have two
contracts in continuation, so the second line shows the estimated earliest
availability. Many contracts permit the client to extend the contract.
(c) Participating in a cooperation agreement with Statoil. See "Drilling
Contracts."
(d) Owned by Arcade Drilling as, a Norwegian company in which the Company has
a 25% interest and which is controlled by a competitor. See Note 13 to the
combined financial statements of the Company.
(e) The Cajun Express is expected to be operational in the third quarter of
2000. The contract provides for termination if the rig is not delivered by
March 31, 2001.
(f) The Sedco Energy is expected to be operational in the third quarter of
2000. If delivery of the rig is delayed beyond the contract delivery date,
the contract provides for a reduction in its term equivalent to the period
of delayed delivery.
(g) The Sedco Express is expected to be operational in the third quarter of
2000. The contract provides for termination if the rig is not made
available by December 28, 2000.
(h) Operated under a bareboat charter with the rig's owner, a wholly owned
subsidiary of Sea Wolf Drilling Limited, in which the Company has a 25%
interest. See Note 13 to the combined financial statements of the Company.
(i) Operated under a management contract with the rig's owner.
(j) Dynamically positioned.
(k) The Discoverer Spirit is in a U.S. Gulf Coast shipyard for outfitting with
drilling equipment. The Company expects it to be operational in the third
quarter of 2000, working under a five-year contract for Spirit Energy 76,
a division of Unocal.
(l) The Discoverer Deep Seas is under construction at the Astano shipyard in
Spain. The Company expects it to be operational in the fourth quarter of
2000, working under a five-year contract for Chevron.
(m) The Joides Resolution is currently engaged in scientific geological coring
activities and is owned by a joint venture in which the Company has a 50%
interest. See Note 13 to the combined financial statements of the Company.
(n) The Mr. John is a multi-purpose service jackup rig capable of being used
for workovers or associated services.
(o) Owned by an unrelated third party and leased by the Company as a part of a
secured rig financing. See "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources--Debt."
(p) Owned by a joint venture owned more than 50% by the Company. The Trident
20 is expected to be operational in the fourth quarter of 2000. The
contract provides for termination if the rig is not delivered by February
12, 2002.
(q) As of March 1, 2000, the client had awarded a letter of intent although
the drilling contract was not yet signed.
6
<PAGE>
Upon the expiration of existing contracts, there can be no assurance that
such contracts will be renewed or extended, that new contracts will be
available or, if contracts are available, that they will provide revenues
adequate to cover all fixed and variable costs associated with the rigs.
As of March 1, 2000, the Company's active fleet was located in the Gulf of
Mexico (8 units), the North Sea (20 units), the Middle East (4 units), Asia
including Australia (14 units), Africa (18 units), Brazil (6 units), India (2
units), Canada (2 units) and Malta (1 unit). Additionally, the Joides
Resolution is contracted for a worldwide research program and as of such date
was in Antartica.
The Company maintains offices, land bases and other facilities worldwide,
including corporate offices in Houston, Texas and regional offices in the
U.S., Brazil, UK, Norway, France, Dubai and Indonesia. The Company's remaining
offices and bases are located in various countries in North America, South
America, Europe, Africa, the Middle East and Asia. Most of these facilities
are leased by the Company.
Drilling Services
The Company uses its engineering and operating expertise to provide
management of third party drilling service activities. These services are
provided through service teams generally consisting of Company personnel and
third-party subcontractors, with the Company frequently serving as lead
contractor. The work generally consists of individual contractual agreements
to meet specific client needs and may be provided on either a dayrate or fixed
price basis. As of March 1, 2000, the Company performed such services under a
contract in the North Sea.
Drilling Contracts
The Company's contracts to provide offshore drilling services are
individually negotiated and vary in their terms and provisions. The Company
obtains most of its contracts through competitive bidding against other
contractors. Drilling contracts generally provide for payment on a dayrate
basis, with higher rates while the drilling unit is operating and lower rates
for periods of mobilization or when drilling operations are interrupted or
restricted by equipment breakdowns, adverse environmental conditions or other
conditions beyond the control of the Company. At times, the Company performs
drilling services under turnkey contracts, which provide for payment of a
fixed price per well. Revenues from dayrate contracts have historically
accounted for substantially more of the Company's revenues than turnkey
contracts.
A dayrate drilling contract generally extends over a period of time
covering either the drilling of a single well or group of wells or covering a
stated term. These contracts typically can be terminated by the client 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, the drilling contracts for certain newbuild rigs contain
termination or term reduction provisions tied to late delivery of these units.
The contract term in some instances may be extended by the client exercising
options for the drilling of additional wells or for an additional term, or by
exercising a right of first refusal. In reaction to depressed market
conditions, the Company's clients may seek renegotiation of firm drilling
contracts to reduce their obligations or may seek to terminate their contracts
by paying a termination fee to the Company.
The Company and Statoil are parties to a cooperation agreement extending
through 2005. Under the cooperation agreement, the Company has committed five
semisubmersibles--the Transocean Arctic, Transocean Prospect, Transocean
Searcher, Transocean Wildcat and Transocean Winner--for varying contract
periods, with Statoil having options to extend the contracts at market rates
in minimum two-year intervals for the remainder of the term of the cooperation
agreement.
Under turnkey contracts, the Company agrees to drill a well to a specified
depth for a fixed price. In general, no payment is received by the Company
unless the well is drilled to the specified depth. The Company must bear the
costs of performing drilling services until the well has been drilled and,
accordingly, such projects may
7
<PAGE>
require significant cash commitments by the Company. In addition,
profitability of the contract is dependent upon keeping expenses within the
estimates used by the Company in determining the contract price. In performing
a turnkey project, the Company employs a drilling unit from its own fleet or
from another contractor under a dayrate contract. Drilling a well under a
turnkey contract offers the possibility of financial gains or losses that are
substantially greater than those which would ordinarily result from drilling
such well under a conventional dayrate contract, because the Company retains
any excess of the fixed price over its expenses (including the drilling unit
dayrate) but must pay any excess of expenses over such price. The financial
results of turnkey contracts depend upon the performance of the drilling unit,
drilling conditions and other factors, some of which are beyond the Company's
control. As of March 1, 2000, the Company had no ongoing turnkey drilling
operations.
Significant Clients
During the past five years, the Company has engaged in offshore drilling
for most of the leading international oil companies (or their affiliates) in
the world, as well as for many government-controlled and independent oil
companies. Principal clients included the Royal Dutch Shell Group, Statoil,
Texaco, BP Amoco, Chevron, Total, Woodside, Unocal, Elf, Pemex, Gulf of Suez
Petroleum Company, Petrobras and Norsk Hydro. The Company's largest
unaffiliated clients in 1999 were Statoil, Royal Dutch Shell Group and
Petrobras, accounting for 16 percent, 15 percent and 11 percent, respectively,
of the Company's 1999 pro forma combined operating revenues. No other
unaffiliated client accounted for ten percent or more of the Company's 1999
pro forma combined operating revenues (see Note 3 to the combined financial
statements of the Company). The loss of any of these significant clients
could, at least in the short term, have a material adverse effect on the
Company.
Industry Conditions and Competition
The Company's business depends on the level of activity in offshore oil and
gas exploration, development and production in markets worldwide. Oil and gas
prices, market expectations of potential changes in these prices and a variety
of political and economic factors significantly affect this level of activity.
Oil and gas prices are extremely volatile and are affected by numerous
factors, including worldwide demand for oil and gas, the ability of the
Organization of Petroleum Exporting Countries (commonly called "OPEC") to set
and maintain production levels and pricing, the level of production of non-
OPEC countries, the policies of the various governments regarding exploration
and development of their oil and gas reserves, advances in exploration and
development technology and the political environment in oil-producing regions.
The offshore contract drilling industry is highly competitive with numerous
industry participants, none of which has a dominant market share. Some of the
Company's competitors may have greater resources than the Company.
Drilling contracts are traditionally awarded on a competitive bid basis.
Intense price competition is often the primary factor in determining which
qualified contractor is awarded a job, although rig availability and the
quality and technical capability of service and equipment may also be
considered.
The Company's industry has historically been cyclical. There have been
periods of high demand, short rig supply and high dayrates, followed by
periods of low demand, excess rig supply and low dayrates. The industry
experienced a period of significantly lower demand in 1999 as a result of
reduced spending for exploration and development by the Company's customers in
response to dramatically lower crude oil prices during 1998. In addition, rig
availability has increased as a result of contract expirations and
construction by other drilling contractors of new rigs that compete with the
Company's rigs. Periods of excess rig supply intensify the competition in the
industry and often result in rigs being idle for long periods of time. See
"Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations--Market Outlook."
The Company requires highly skilled personnel to operate and provide
technical services and support for its drilling units. To the extent demand
for drilling services and the size of the worldwide industry fleet increase,
8
<PAGE>
shortages of qualified personnel could arise, creating upward pressure on
wages. The Company is continuing its recruitment and training programs as
required to meet its anticipated personnel needs.
As of March 1, 2000, the Company had six newbuild rigs in shipyards under
construction or undergoing sea trials. These construction projects are subject
to the risks of delay or cost overruns inherent in large construction
projects, including shipyard availability, shortages of equipment, materials
or skilled labor, unforeseen engineering problems, work stoppages, weather
interference, unanticipated cost increases and difficulty in obtaining
necessary equipment or the requisite permits or approvals. These factors may
contribute to cost variations and delays in the delivery of the Company's
drilling units under construction. Delays in delivery of these units will
result in delays in contract commencements, resulting in a loss of revenue to
the Company. These delays may also cause clients to terminate the drilling
contracts for certain of these rigs pursuant to late delivery termination
clauses. In the event of termination of a drilling contract for one of these
rigs, it is unlikely that the Company would be able to secure a replacement
contract on as favorable terms. See "Item 7. Management Discussion and
Analysis of Financial Condition and Results of Operations--Market Outlook."
Markets
Rigs can be moved from one region to another, but the cost of moving a rig
and the availability of rig-moving vessels may cause the supply and demand
balance to vary somewhat between regions. However, significant variations
between regions do not tend to exist long-term because of rig mobility. Rig
mobility causes markets to be defined more by technical capability than by
region.
In recent years, there has been increased emphasis by oil companies on
exploring for hydrocarbons in deeper waters. This is, in part, because of
technological developments that have made such exploration more feasible and
cost-effective. Shallow water regions have been developed much more than deep
water regions because shallow regions are more accessible and operations there
are less costly to conduct.
Operating Risks
The Company's operations are subject to the usual hazards inherent in the
drilling of oil and gas wells, such as blowouts, reservoir damage, loss of
production, loss of well control, punchthroughs, cratering or fires. The
occurrence of these events could result in the suspension of drilling
operations, damage to or destruction of the equipment involved and injury or
death to rig personnel. Operations also may be suspended because of machinery
breakdowns, abnormal drilling conditions, failure of subcontractors to perform
or supply goods or services or personnel shortages. In addition, offshore
drilling operations are subject to perils peculiar to marine operations,
including capsizing, grounding, collision and loss or damage from severe
weather. Damage to the environment could also result from the Company's
operations, particularly through oil spillage or extensive uncontrolled fires.
The Company maintains broad insurance coverage, including insurance against
general and marine third-party liabilities. The Company's offshore drilling
equipment is covered by physical damage insurance policies, which cover
against marine and other perils, including losses due to capsizing, grounding,
collision, fire, lightning, hurricanes, wind, storms, action of waves,
punchthroughs, cratering, blowouts, explosions and war risks. The Company also
carries employer's liability and other insurance customary in the offshore
contract drilling business.
Consistent with standard industry practice, the Company's clients generally
assume, and indemnify the Company against, well control and subsurface risks
under dayrate contracts. These risks are those associated with the loss of
control of a well, such as blowout or cratering, the cost to regain control or
redrill the well and associated pollution. The Company typically does not
carry insurance against such risks under dayrate contracts. However, the
Company cannot guarantee that these clients will necessarily be financially
able to indemnify it against all these risks.
The Company believes it is adequately insured in accordance with industry
standards against normal risks in its operations; however, such insurance
coverage may not in all situations provide sufficient funds to protect
9
<PAGE>
the Company from all liabilities that could result from its drilling
operations. Although the Company's current practice is to insure its drilling
units for at least the net book value of the units, the Company's insurance
would not cover completely the costs that would be required to replace certain
of its units, including certain of its high specification semisubmersibles and
drillships. Moreover, the Company's insurance coverage in most cases does not
protect against loss of revenues. Accordingly, the occurrence of a casualty or
loss against which the Company is not fully insured could have a material
adverse effect on the Company's financial position and results of operations.
The Company is subject to liability under various environmental laws and
regulations. See "--Regulation." The Company has generally been able to obtain
some degree of contractual indemnification pursuant to which the Company's
client agrees to protect and indemnify the Company from liability for
pollution, well and environmental damages; however, there is no assurance that
the Company can obtain such indemnities in all of its contracts or that, in
the event of extensive pollution and environmental damages, the clients will
have the financial capability to fulfill their contractual obligations to the
Company. No such indemnification is typically available for turnkey
operations. Also, these indemnities may not be enforceable in all instances.
For some contracts where the risk allocation or counterparty risk exposure is
considered high, the Company can purchase additional insurance such as
"operators extra expense insurance" against well control risks.
International Operations
The Company's operations are geographically dispersed in oil and gas
exploration and development areas throughout the world. Because the Company's
drilling rigs are mobile assets and able to be moved according to prevailing
market conditions, the Company cannot predict the percentage of its revenues
that will be derived from particular geographic or political areas in future
periods.
The Company's operations are subject to certain political and other
uncertainties, including risks of war and civil disturbances or other events
that disrupt markets, expropriation of equipment, inability to repatriate
income or capital, taxation policies and the general hazards associated with
governmental sovereignty over certain areas in which operations are conducted.
The Company is protected to a substantial extent against capital loss, but
generally not loss of revenue, from most of such risks through insurance,
indemnity provisions in its drilling contracts, or both. The necessity of
insurance coverage for risks associated with political unrest, expropriation
and environmental remediation for operating areas not covered under the
Company's existing insurance policies is evaluated on an individual contract
basis. As of March 1, 2000, all areas in which the Company was operating were
covered by existing insurance policies.
The Company's operations are also subject to significant government
regulation. Many governments favor or effectively require the awarding of
drilling contracts to local contractors or require foreign contractors to
employ citizens of, or purchase supplies from, a particular jurisdiction.
These practices may adversely affect the Company's ability to compete. The
Company expects to continue to structure its operations in order to remain
competitive in the international markets.
Another risk inherent in the Company's operations is the possibility of
currency exchange losses where revenues are received and expenses are paid in
nonconvertible currencies. The Company may also incur losses as a result of an
inability to collect revenues because of a shortage of convertible currency
available to the country of operations. The Company seeks to limit these risks
by structuring contracts such that compensation is made in freely convertible
currencies and, to the extent possible, by limiting acceptance of blocked
currencies to amounts that match its expense requirements in local currency.
See "Item 7A. Quantitative and Qualitative Disclosures About Market Risk--
Foreign Exchange Risk."
Regulation
The Company's operations are affected from time to time in varying degrees
by governmental laws and regulations. The drilling industry is dependent on
demand for services from the oil and gas exploration industry and,
accordingly, is affected by changing tax and other laws relating to the energy
business generally.
10
<PAGE>
International contract drilling operations are subject to various laws and
regulations in countries in which the Company operates, including laws and
regulations relating to the equipping and operation of drilling units,
currency conversions and repatriation, oil and gas exploration and
development, taxation of offshore earnings and earnings of expatriate
personnel and use of local employees and suppliers by foreign contractors.
Governments in some foreign countries have become increasingly active in
regulating and controlling the ownership of concessions and companies holding
concessions, the exportation of oil and gas and other aspects of the oil and
gas industries in their countries. In addition, government action, including
initiatives by OPEC, may continue to cause oil price volatility. In some areas
of the world, this governmental activity has adversely affected the amount of
exploration and development work done by major oil companies and may continue
to do so.
In the United States, regulations applicable to the Company's operations
include certain regulations controlling the discharge of materials into the
environment, requiring removal and cleanup of materials that may harm the
environment or otherwise relating to the protection of the environment. For
example, the Company, as an operator of mobile offshore drilling units in
navigable United States waters and certain offshore areas, may be liable for
damages and costs incurred in connection with oil spills for which it is held
responsible, subject to certain limitations. Laws and regulations protecting
the environment have become more stringent in recent years, and may in certain
circumstances impose "strict liability," rendering a person liable for
environmental damage without regard to negligence or fault on the part of such
person. Such laws and regulations may expose the Company to liability for the
conduct of or conditions caused by others, or for acts of the Company which
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's financial
position and results of operations.
The U.S. Oil Pollution Act of 1990 ("OPA") and regulations promulgated
pursuant thereto impose a variety of requirements on "responsible parties"
related to the prevention of oil spills and liability for damages resulting
from such spills. Few defenses exist to the liability imposed by the OPA, and
such liability could be substantial. A failure to comply with ongoing
requirements or inadequate cooperation in a spill event could subject a
responsible party to civil or criminal enforcement action.
The U.S. 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. Violations of environmental related lease conditions
or regulations issued pursuant to the Outer Continental Shelf Lands Act can
result in substantial civil and criminal penalties, as well as potential court
injunctions curtailing operations and canceling leases. Such enforcement
liabilities can result from either governmental or citizen prosecution.
Certain of the other countries in whose waters the Company is presently
operating or may operate in the future have regulations covering the discharge
of oil and other contaminants in connection with drilling operations.
Although significant capital expenditures may be required to comply with
these governmental laws and regulations, such compliance has not materially
adversely affected the earnings or competitive position of the Company.
Employees
As of December 31, 1999, the Company had approximately 7,300 employees. The
Company requires highly skilled personnel to operate its drilling units. As a
result, the Company conducts extensive personnel recruiting, training and
safety programs.
On a worldwide basis, the Company had approximately 22 percent of its
employees working under collective bargaining agreements at December 31, 1999,
most of whom were working in Norway and Nigeria.
11
<PAGE>
Of these represented employees, a majority are working under agreements that
are subject to salary negotiation in 2000.
ITEM 2. Properties
The description of the Company's property included under "Item 1. Business"
is incorporated by reference herein.
ITEM 3. Legal Proceedings
During 1997, Kvaerner Installasjon a.s ("Kvaerner") in Norway performed
modification and refurbishment work on a high specification semisubmersible
drilling rig, the Transocean Leader. The amount owed with respect to such work
is in dispute. A letter of credit valued at approximately $27.5 million as of
December 31, 1999 has been posted pending the resolution of the dispute by
agreement between the parties or by final judgment under the Norwegian
judicial process. In September 1998, the Company instituted an action in the
Norwegian courts alleging that it owes no additional amounts and that the
letter of credit should be released. In March 1999, Kvaerner commenced
proceedings in the Norwegian courts seeking judgment for approximately $33
million plus interest. The Company vigorously denies the material allegations
of Kvaerner's petition and expects a trial date to be set in the fourth
quarter of 2000. Although the Company cannot predict with certainty the
outcome of the dispute at this time, the Company does not expect the
liability, if any, resulting from this matter to have a material adverse
effect on its business or financial position.
In 1990 and 1991, two of the Company's subsidiaries were served with
various assessments collectively valued at approximately $7.4 million from the
municipality of Rio de Janeiro, Brazil to collect a municipal tax on services.
The Company believes that neither subsidiary is liable for the taxes and has
contested the assessments in the Brazilian administrative and court systems.
The proceeding with respect to a June 1991 assessment, which was valued at
approximately $6.3 million, is now pending before the Brazil Supreme Court.
The lower courts and the superior court of appeals have rejected the Company's
arguments. An August 1990 assessment also had an unfavorable ruling at the
first and second court levels and is being submitted to the Brazil Supreme
Court. The Company is awaiting a ruling from the Taxpayer's Council as to an
October 1990 assessment. If the Company's defenses are ultimately
unsuccessful, the Company believes that the Brazilian government-controlled
oil company, Petrobras, has a contractual obligation to reimburse the Company
for municipal tax payments required to be paid by them. The Company does not
expect the liability, if any resulting from these assessments to have a
material adverse effect on the Company's business or financial position.
Global Marine Drilling Company ("Global Marine") initiated an arbitration
proceeding in London in December 1997 against a subsidiary of Sedco Forex.
Global Marine alleges a claim for approximately $85 million (plus interest and
costs) for an alleged late return of a chartered rig and for breach of
maintenance obligations under the charter. In February 1998, the tribunal held
that the charter expired January 20, 1998, plus time for physical delivery.
The rig was not redelivered until May 1998 and, accordingly, the Company will
probably be required to pay some dayrate for the period from January 1998
until redelivery. The amount of any damages has not been set and hearings on
various issues are set for later this year. The Company disputes Global
Marine's allegations and is vigorously defending the case. The arrestment
previously placed on the rig, Sovereign Explorer, in connection with the
proceedings has been lifted. Although the Company cannot predict with
certainty the outcome of the dispute at this time, the Company does not expect
that the ultimate liability, if any, resulting from the matter will have a
material adverse effect on its business or financial position.
RIGCO North America, LLC ("RIGCO"), a subsidiary of Tatham Offshore Inc.,
filed suit in Texas state court in July 1999 asserting various claims in
connection with shipyard and rig management contracts for two rigs managed on
behalf of RIGCO. As a result of the merger, Sedco Forex assumed liability for
these claims. RIGCO alleges breach of contract, negligence and fraud and
claims damages of approximately $51 million, plus exemplary damages,
attorney's fees and other unspecified damages. In August 1999, RIGCO filed for
voluntary bankruptcy protection in the U.S. federal bankruptcy court sitting
in Texas. As part of the bankruptcy
12
<PAGE>
proceedings, RIGCO filed a preference action in September 1999. RIGCO seeks to
avoid alleged transfers of approximately $4.2 million and to have those funds
returned to the RIGCO bankruptcy estate. The Company disputes the allegations
and is vigorously defending the case. Although the Company cannot predict with
certainty the outcome of the dispute at this time, the Company does not expect
that the liability, if any, resulting from the matter will have a material
adverse effect on its business or financial position.
The Indian Customs Department, Mumbai, filed a "show cause notice" against
a subsidiary of Sedco Forex and various third parties on July 8, 1999. The
show cause notice alleges that the entry into India and other subsequent
movements of the Trident 2 jackup rig operated by the subsidiary constituted
imports and exports for which proper customs procedures were not followed and
that customs duties should have been paid, and seeks payment of customs
duties, with interest and penalties, and confiscation of the rig. In
connection with these allegations, the customs authorities confiscated the
rig, which confiscation was stayed by application to the High Court, Mumbai,
until one month following the order of the Customs Department in respect of
the show cause notice. In January 2000, the Customs Department issued an order
in respect of the show cause notice, directing the Company to pay an
approximately $3.5 million redemption fee for the rig in lieu of confiscation
and approximately $1.5 million in penalties in addition to the amount of
customs duties owed, which were unspecified in the order. The Company disputes
the ruling and is vigorously defending the case. In February 2000, the Company
filed an appeal with the Customs, Excise, Gold (Exchange), Appellate Tribunal
(CEGAT) and an application with the High Court in Mumbai to have the
confiscation of the rig stayed pending the outcome of the appeal. The Company
does not expect that the ultimate liability, if any, resulting from the matter
will have a material adverse effect on its business or financial position.
The Company and its subsidiaries are involved in a number of other
lawsuits, all of which have arisen in the ordinary course of the Company's
business. The Company does not believe that ultimate liability, if any,
resulting from any such other pending litigation will have a material adverse
effect on its business or financial position.
In January 2000, an anchor from one of the Company's drilling rigs was
accidentally released as a result of an anchor winch failure while the rig was
under tow to a drilling location in the U.S. Gulf of Mexico. The incident
resulted in damage to offshore facilities, including a crude oil pipeline, the
release of hydrocarbons from the damaged section of the pipeline and the
shutdown of the pipeline and affected production platforms. All appropriate
governmental authorities were notified, and the Company cooperated fully with
the operator and relevant authorities in support of the remediation efforts.
Following the incident, the operator of the pipeline and certain other joint
owners and affected producers have notified the Company that they consider the
Company liable for the resulting damages. The Company expects that existing
insurance will substantially cover any potential liability associated with
this matter.
ITEM 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of 1999, the Company submitted to a vote of its
shareholders the proposed merger with Sedco Forex and certain related matters.
These matters were submitted to a vote of the Company's shareholders at an
Extraordinary General Meeting of Shareholders held on December 10, 1999. At
that meeting, the shareholders voted to approve all of the matters presented
to them for consideration. Of the 100,574,790 ordinary shares outstanding at
the time, 69,056,133 were eligible to be voted at the meeting. There were no
broker non-votes. The results were as follows:
Proposal 1: The increase of the Company's authorized ordinary share capital to
$3,000,000, consisting of 300,000,000 ordinary shares, par value
$0.01 per share.
<TABLE>
<S> <C>
For............................................................ 68,486,649
Against........................................................ 434,423
Abstain........................................................ 135,061
</TABLE>
13
<PAGE>
Proposal 2: The issuance of ordinary shares under the terms of the Agreement
and Plan of Merger, dated as of July 12, 1999, among Schlumberger
Limited, Sedco Forex Holdings Limited, Transocean Offshore Inc.
and the Company's wholly owned subsidiary, Transocean SF Limited.
<TABLE>
<S> <C>
For............................................................ 68,489,713
Against........................................................ 381,268
Abstain........................................................ 185,152
</TABLE>
Proposal 3: The change of the Company's name to "Transocean Sedco Forex Inc."
as a special resolution to be implemented only upon the completion
of the merger under the Agreement and Plan of Merger.
<TABLE>
<S> <C>
For............................................................ 68,540,459
Against........................................................ 393,795
Abstain........................................................ 121,879
</TABLE>
Proposal 4: The amendment of the Company's Long-Term Incentive Plan to, among
other things, increase the number of ordinary shares reserved for
issuance under the plan from 6,300,000 to 13,300,000.
<TABLE>
<S> <C>
For............................................................ 63,018,567
Against........................................................ 5,803,364
Abstain........................................................ 234,202
</TABLE>
Proposal 5: The amendment of the Company's Employee Stock Purchase Plan to,
among other things, increase the number of ordinary shares
reserved for issuance under the plan from 250,000 to 750,000.
<TABLE>
<S> <C>
For............................................................ 67,953,930
Against........................................................ 906,652
Abstain........................................................ 195,551
</TABLE>
Executive Officers of the Registrant
<TABLE>
<CAPTION>
As of
Officer Office March 1, 2000
------- ------ -------------
<S> <C> <C>
J. Michael Talbert...... President, Chief Executive Officer and Director 53
Jean P. Cahuzac......... Executive Vice President and President, Europe, 46
Middle East and Africa
W. Dennis Heagney....... Executive Vice President and President, Asia and 52
Americas
Jon C. Cole............. Executive Vice President, Marketing 47
Robert L. Long.......... Executive Vice President, Chief Financial 54
Officer and Treasurer
Donald R. Ray........... Senior Vice President, Technical Services 53
Eric B. Brown........... Vice President, General Counsel and Secretary 48
Barbara S. Vice President and Chief Information Officer 41
Koucouthakis...........
David Mullen............ Vice President, Human Resources 42
Ricardo Rosa............ Vice President and Controller 43
Brian C. Voegele........ Vice President, Finance 40
</TABLE>
Each of the Company's executive officers was elected to his or her current
position effective December 31, 1999 in connection with the Sedco Forex
merger. The officers of the Company are elected annually by the Board of
Directors. There is no family relationship between any of the above-named
executive officers.
J. Michael Talbert has served as the Chief Executive Officer and a member
of the Board of Directors of the Company since August 1994. Mr. Talbert also
served as Chairman of the Board of the Company from August 1994 until the time
of the Sedco Forex merger, at which time he assumed the additional position of
President of the Company. Mr. Talbert is also a director of Equitable
Resources, Inc. Prior to assuming his duties with the Company, Mr. Talbert was
President and Chief Executive Officer of Lone Star Gas Company, a natural gas
distribution company and a division of Ensearch Corporation.
14
<PAGE>
Jean P. Cahuzac is an Executive Vice President and the President, Europe,
Middle East and Africa of the Company. Mr. Cahuzac served as the President of
Sedco Forex from January 1999 until the time of the Sedco Forex merger, at
which time he assumed his current positions with the Company. Mr. Cahuzac
served as Vice President--Operations Manager of Sedco Forex from May 1998 to
January 1999, Region Manager--Europe, Africa and CIS of Sedco Forex from
September 1994 to May 1998 and Vice President/General Manager--North Sea
Region of Sedco Forex from February 1994 to September 1994. He had been
employed by Schlumberger since 1979.
W. Dennis Heagney is an Executive Vice President and the President, Asia
and the Americas of the Company. Mr. Heagney served as a director of the
Company from June 12, 1997 and President and Chief Operating Officer of the
Company from April 1, 1986 until the time of the Sedco Forex merger, at which
time he assumed his current positions. He has been employed by the Company
since 1969 and was elected Vice President in 1983 and Senior Vice President in
1984.
Jon C. Cole is the Executive Vice President, Marketing of the Company. Mr.
Cole served as Senior Vice President of the Company from April 1, 1993 until
the time of the Sedco Forex merger, at which time he assumed his current
position. Mr. Cole joined the Company in 1978 and was elected Vice President
in 1990.
Robert L. Long is an Executive Vice President, Chief Financial Officer and
Treasurer of the Company. Mr. Long has served as Chief Financial Officer of
the Company since August 1996. Mr. Long also served as Senior Vice President
of the Company from May 1, 1990 and Treasurer of the Company from September 1,
1997 until the time of the Sedco Forex merger, at which time he assumed the
additional position as Executive Vice President. Mr. Long has been employed by
the Company since 1976 and was elected Vice President in 1987.
Donald R. Ray is the Senior Vice President, Technical Services of the
Company. Mr. Ray served as Senior Vice President of the Company, with
responsibility for technical services, from December 1, 1996 until the time of
the Sedco Forex merger, at which time he assumed his current position. Mr. Ray
has been employed by the Company since 1972 and has served as a Vice President
of the Company since 1986.
Eric B. Brown has served as the Vice President and General Counsel of the
Company since February 1, 1995 and Secretary of the Company since September
29, 1995. Prior to assuming his current position with the Company, Mr. Brown
served as General Counsel of Coastal Gas Marketing Company.
Barbara S. Koucouthakis is the Vice President and Chief Information Officer
of the Company. Ms. Koucouthakis served as Controller of the Company from
January 1, 1990 and Vice President from April 1, 1993 until the time of the
Sedco Forex merger, at which time she assumed her current position. She has
been employed by the Company since 1982.
David Mullen is the Vice President, Human Resources of the Company. Mr.
Mullen served Schlumberger as Director of Personnel Geco-Prakla from 1998
until the time of the Sedco Forex merger, at which time he assumed his current
position with the Company. Mr. Mullen was elected Managing Director--
Schlumberger (Nigeria) Ltd. in 1996, District Manager--Eastern Venezuela
Schlumberger (Wireline & Testing) in 1994 and had been employed by
Schlumberger since 1983.
Ricardo Rosa is a Vice President and the Controller of the Company. Mr.
Rosa served as Controller of Sedco Forex from September 1995 until the time of
the Sedco Forex merger, at which time he assumed his current positions with
the Company. He was appointed Gas Management Controller in October 1993. Mr.
Rosa had been with Schlumberger since 1983.
Brian C. Voegele has served as Vice President, Finance of the Company since
March 1998. Previously, he served as Director of Tax for the Company from June
1993 until such date. Prior to joining the Company in 1993, he served as Tax
Manager for Sonat Inc. and as a Tax Manager for the accounting firm of Ernst &
Young LLP.
15
<PAGE>
PART II
ITEM 5. Market for Registrant's Common Equity and Related Shareholder Matters
The Company's ordinary shares are listed on the New York Stock Exchange
(the "NYSE") under the symbol "RIG." The following table sets forth the high
and low sales prices of the Company's ordinary shares for the periods
indicated as reported on the NYSE Composite Tape.
<TABLE>
<CAPTION>
Price
--------------
High Low
---- ----
<S> <C> <C>
1998
First Quarter...................................... $54 15/16 $35
Second Quarter..................................... 59 15/16 41 11/16
Third Quarter...................................... 46 3/8 23
Fourth Quarter..................................... 41 1/2 23 9/16
1999
First Quarter...................................... 31 9/16 19 5/8
Second Quarter..................................... 32 1/2 22 5/8
Third Quarter...................................... 36 1/2 25 9/16
Fourth Quarter..................................... 34 3/8 23 7/8
2000
First Quarter (through March 1).................... 42 15/16 29 1/4
</TABLE>
On March 1, 2000, the last reported sales price of the Company's ordinary
shares on the NYSE Composite Tape was $41 1/2 per share. On such date, there
were approximately 32,800 holders of record of the Company's ordinary shares
and 210,257,041 ordinary shares outstanding.
The Company has paid quarterly cash dividends of $0.03 per ordinary share
since the fourth quarter of 1993. Any future declaration and payment of
dividends will be (i) dependent upon the Company's results of operations,
financial condition, cash requirements and other relevant factors, (ii)
subject to the discretion of the Board of Directors of the Company, (iii)
subject to restrictions contained in the Company's bank credit agreements and
note purchase agreement (see "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources--Debt") and (iv) payable only out of the Company's profits or share
premium account in accordance with Cayman Islands law.
ITEM 6. Selected Combined Financial Data
On December 31, 1999, the merger of Transocean Offshore Inc. and Sedco
Forex Holdings Limited ("Sedco Forex") was completed. Sedco Forex was the
offshore contract drilling service business of Schlumberger Limited and was
spun-off immediately prior to the merger transaction. As a result of the
merger, Sedco Forex became a wholly owned subsidiary of "Transocean Offshore
Inc.," which changed its name to Transocean Sedco Forex Inc. The merger was
accounted for as a purchase, with Sedco Forex as the acquiror for accounting
purposes.
The selected combined financial data as of December 31, 1999 and 1998, and
for each of the three years in the period ended December 31, 1999 has been
derived from the audited combined financial statements included elsewhere
herein. The selected combined financial data as of December 31, 1997, and for
the year ended December 31, 1996 has been derived from audited combined
financial statements not included herein. The selected combined financial data
as of December 31, 1996 and 1995, and for the year ended December 31, 1995 are
unaudited. The following data should be read in conjunction with "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the combined financial statements and the notes thereto
included under "Item 8. Financial Statements and Supplementary Data."
16
<PAGE>
The balance sheet data as of December 31, 1999 represents the consolidated
financial position of the merged company. The income statement data and other
financial data for the periods presented, and the balance sheet data for the
periods prior to the merger, reflect the operating results and financial
position of Sedco Forex and not that of historical Transocean Offshore Inc.
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ---- -----------
(In millions, except per share data)
(Unaudited)
<S> <C> <C> <C> <C> <C>
Income Statement Data
Operating Revenues........ $ 648 $1,091 $ 891 $663 $437
Operating Income.......... 49 377 299 163 60
Net Income................ 58 342 260 148 62
Unaudited Pro Forma
Earnings Per Share(a)
Basic................... 0.53 3.12 2.38 1.35 0.57
Diluted................. 0.53 3.12 2.38 1.35 0.57
Other Financial Data(b)
Cash Flows From Operating
Activities............... $ 241 $ 473 $ 318 $236
Capital Expenditures...... 537 425 187 151
EBITDA(c)................. 186 508 420 272
<CAPTION>
(Unaudited)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data (at end
of period)
Total Assets.............. $6,140 $1,473 $1,051 $899 $781
Total Debt................ 1,266 100 160 53 44
Total Equity.............. 3,910 564 363 462 574
</TABLE>
- --------
(a) Unaudited pro forma earnings per share calculated using the Transocean
Sedco Forex shares and options issued pursuant to the merger agreement.
(b) Other Financial Data is not available for the year ended December 31,
1995.
(c) EBITDA (earnings before interest, taxes, depreciation and amortization) is
presented here because it is a widely accepted financial indication of a
company's ability to incur and service debt. EBITDA is not a measurement
presented in accordance with accounting principles generally accepted in
the United States ("GAAP") and is not intended to be used in lieu of GAAP
presentations of results of operations and cash provided by operating
activities.
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following information should be read in conjunction with the
information contained in the combined financial statements and the notes
thereto included under "Item 8. Financial Statements and Supplementary Data"
elsewhere in this annual report.
Overview
On December 31, 1999, the merger of Transocean Offshore Inc. and Sedco
Forex Holdings Limited ("Sedco Forex") was completed. Sedco Forex was the
offshore contract drilling service business of Schlumberger Limited
("Schlumberger") and was spun-off immediately prior to the merger transaction.
As a result of the merger, Sedco Forex became a wholly owned subsidiary of
"Transocean Offshore Inc." which changed its name to Transocean Sedco Forex
Inc. The merger was accounted for as a purchase, with Sedco Forex as the
acquiror for accounting purposes.
Transocean Sedco Forex Inc. (together with its subsidiaries and
predecessors, unless the context requires otherwise, the "Company", "we" or
"our") is a leading international provider of deepwater and harsh environment
contract drilling services for oil and gas wells. As of March 1, 2000, the
Company owns, has partial
17
<PAGE>
ownership interests in, operates or has under construction 73 mobile offshore
drilling units. The Company's active fleet consists of twelve high-
specification semisubmersibles, thirty-one second- and third-generation
semisubmersibles, one Discoverer Enterprise-class drillship, four other
drillships, sixteen jackup rigs and three tenders. The Company has under
construction two Discoverer Enterprise-class drillships, three Sedco Express-
class semisubmersibles and one independent-leg cantilevered jackup. In
addition, the fleet includes one multipurpose service jackup, six swamp barges
and two land drilling rigs. The Company contracts these drilling rigs, related
equipment and work crews primarily on a dayrate basis to drill offshore wells.
The balance sheet as of December 31, 1999 represents the consolidated
financial position of the merged company. The results of operations and cash
flows for the periods presented in the combined financial statements, and the
balance sheets for periods prior to the merger, reflect the operating results
and financial position of Sedco Forex and not that of historical Transocean
Offshore Inc. At the time of the merger, Sedco Forex owned, had ownership
interest in or operated 40 mobile offshore drilling rigs and had four such
rigs under construction.
Historical Operating Results
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------
1999 1998 1997
-------- ---------- --------
(In thousands)
<S> <C> <C> <C>
Operating Revenues............................. $648,236 $1,090,523 $891,334
-------- ---------- --------
Costs and Expenses
Operating and maintenance...................... 450,756 562,565 466,269
Depreciation................................... 131,933 124,707 110,780
General and administrative..................... 16,703 25,986 15,664
-------- ---------- --------
599,392 713,258 592,713
-------- ---------- --------
Operating Income............................... 48,844 377,265 298,621
-------- ---------- --------
Other Income (Expense), Net
Equity in earnings of joint ventures........... 5,610 5,389 4,946
Interest income................................ 5,433 3,361 3,296
Interest expense, net of amounts capitalized... (10,250) (12,950) (19,639)
Other, net..................................... (830) 956 5,235
-------- ---------- --------
(37) (3,244) (6,162)
-------- ---------- --------
Income Before Income Taxes..................... 48,807 374,021 292,459
Income Taxes................................... (9,296) 32,443 32,004
-------- ---------- --------
Net Income..................................... $ 58,103 $ 341,578 $260,455
======== ========== ========
</TABLE>
Historical 1999 compared to 1998
Operating revenues for the year ended December 31, 1999 were $648.2 million
compared to $1,090.5 million for 1998, a decrease of $442.3 million or 41
percent. The decrease in revenues for 1999 resulted primarily from decreased
utilization, which declined from an average of 91 percent in 1998 to 64
percent in 1999, and a decrease in dayrates from an average of approximately
$70,000 in 1998 to approximately $61,000 in 1999.
Operating and maintenance expense for the year ended December 31, 1999 was
$450.8 million compared to $562.6 million for 1998, a decrease of $111.8
million or 20 percent. The decrease in 1999 resulted primarily from reduced
operating activity for rigs during the year. A large portion of operating and
maintenance expense consists of employee-related costs and is fixed or only
semi-variable. Accordingly, operating and maintenance expense does not vary in
direct proportion to activity. Operating and maintenance expense for the years
ended December 31, 1999 and 1998 included charges totaling $42.0 million and
$23.4 million, respectively, relating to severance liabilities, the write-down
of obsolete fixed assets and provisions for legal disputes. In addition, 1999
18
<PAGE>
included expense of $13.4 million related to provision for doubtful accounts
receivable in West Africa and dayrate contract penalties in Brazil.
Depreciation expense increased from $124.7 million in 1998 to $131.9
million in 1999, an increase of $7.2 million or 6 percent. The increase
primarily resulted from the capitalization of equipment associated with rig
life extension and upgrade projects.
General and administrative expense for the year ended December 31, 1999 was
$16.7 million compared to $26.0 million for 1998, a decrease of $9.3 million
or 36 percent. The decrease in 1999 resulted from the lower allocation by
Schlumberger of corporate overhead due to lower revenues. General and
administrative expense included an allocation by Schlumberger that amounted to
approximately $8.0 million for 1999 and $9.4 million for 1998. The general and
administrative expense allocation by Schlumberger was dependent on a number of
factors, including the level of corporate costs and the proportion of revenues
to Schlumberger's worldwide group revenues. Accordingly, the allocation
methods were considered to be reasonable. The level of general and
administrative expenses prior to the merger may not be indicative of ongoing
costs for the Company.
Interest income for the year ended December 31, 1999 was $5.4 million
compared to $3.4 million for 1998, an increase of $2.0 million or 59 percent.
The increase resulted from higher average cash balances during the year.
Interest expense for the year ended December 31, 1999 was $10.3 million
compared to $13.0 million for 1998, a decrease of $2.7 million or 21 percent.
The decrease in 1999 resulted primarily from the capitalization of $27.2
million in interest relating to construction projects compared to $8.7 million
capitalized in 1998, partially offset by increased interest expense on higher
long-term debt balances during the year.
Income tax benefit for the year ended December 31, 1999 was $9.3 million
compared to expense of $32.4 million for 1998. The Company operates in a
number of countries where income tax is charged on a deemed profit basis.
Accordingly, income tax expense does not necessarily vary in direct proportion
with pre-tax income. The decrease in income tax expense in relation to pre-tax
income for 1999 resulted primarily from additional U.K. tax loss carryforwards
for which no valuation allowance was provided and the adjustment of UK tax
loss carryforwards for prior years. These carryforwards, which the Company
believes will be fully utilized, are available to the Company indefinitely.
Net income for the year ended December 31, 1999 was $58.1 million compared
to $341.6 million for 1998, a decrease of $283.5 million or 83 percent. The
decrease in 1999 resulted primarily from lower operating income due to
decreased dayrates and rig utilization.
Historical 1998 compared to 1997
Operating revenues for the year ended December 31, 1998 were $1,090.5
million compared to $891.3 million for 1997, an increase of $199.2 million or
22 percent. The increase in revenues for 1998 resulted primarily from an
increase in dayrates from an average of approximately $56,000 in 1997 to
approximately $70,000 in 1998 and from increased utilization, which improved
from an average of 90 percent in 1997 to 91 percent in 1998. Dayrates
increased in early 1998 as a result of higher market demand converging with
tightening supply.
Operating and maintenance expense for the year ended December 31, 1998 was
$562.6 million compared to $466.3 million for 1997, an increase of $96.3
million or 21 percent. The increase in 1998 resulted primarily from rig
reactivation and mobilization costs and higher maintenance costs and employee
compensation. A large portion of operating expense consists of employee-
related costs and is fixed or only semi-variable. Accordingly, operating and
maintenance expense does not vary in direct proportion to activity. Operating
and maintenance expense for the year ended December 31, 1998 also included
charges totaling $23.4 million relating to severance liabilities, the write-
down of obsolete fixed assets and provisions for legal disputes.
19
<PAGE>
Depreciation expense increased by $13.9 million or 13 percent, from $110.8
million for the year ended December 31, 1997 to $124.7 million for 1998. The
increase was due primarily to additional depreciation resulting from
capitalization of equipment associated with rig life extension and upgrade
projects.
General and administrative expense for the year ended December 31, 1998 was
$26.0 million compared to $15.7 million for 1997, an increase of $10.3 million
or 66 percent. The increase in 1998 resulted from the higher allocation of
corporate overhead by Schlumberger due to higher revenues and from increased
marketing and business development efforts. General and administrative expense
included an allocation by Schlumberger that amounted to approximately $9.4
million for 1998 and $4.4 million for 1997. The general and administrative
expense allocation by Schlumberger was dependent on a number of factors,
including the level of corporate costs and the proportion of revenues to
Schlumberger's worldwide group revenues. Accordingly, the allocation methods
were considered to be reasonable.
Interest expense for the year ended December 31, 1998 was $13.0 million
compared to $19.6 million for 1997, a decrease of $6.6 million or 34 percent.
The decrease in 1998 resulted primarily from the capitalization of $8.7
million in interest relating to construction projects compared to no interest
capitalized in 1997.
Income tax expense for the year ended December 31, 1998 was $32.4 million
compared to $32.0 million for 1997. The Company operates in a number of
countries where income tax is charged on a deemed profit basis. Accordingly,
income tax expense does not necessarily vary in direct proportion with pre-tax
income. The decrease in income tax expense in relation to pre-tax income for
1998 resulted primarily from the release of a valuation allowance relating to
U.K. tax loss carryforwards of $14.5 million. These carryforwards, which the
Company believes will be fully utilized, are available to the Company
indefinitely.
Net income for the year ended December 31, 1998 was $341.6 million compared
to $260.5 million for 1997, an increase of $81.1 million or 31 percent. The
increase in 1998 resulted primarily from higher operating income due to
increased dayrates and rig utilization, partially offset by charges included
in operating and maintenance expense totaling $20.4 million after tax as
discussed above.
1999 and 1998 Charges
Operating and maintenance expense for the years ended December 31, 1999 and
1998 included charges totaling $42.0 million and $23.4 million, respectively.
Reduced exploration and development activity by customers, resulting from a
period of low oil prices from late 1997 through early 1999 and industry
consolidation over the same time period, resulted in a slowdown in the
offshore drilling industry during 1998 and 1999. As a result of this slowdown
approximately 1000 operating personnel were determined to be redundant, and
charges associated with termination and severance benefits of $13.2 million
and $3.6 million were recognized during 1999 and 1998, respectively.
Substantially all of these employees have been terminated and severance and
termination costs have been paid as of December 31, 1999. Provisions for
potential legal claims of $28.8 million and $10.0 million were recognized
during 1999 and 1998, respectively (see Note 10 to the Company's combined
financial statements). Asset impairment charges of $9.8 million were
recognized in 1998 related to assets retired from the active fleet.
1999 Pro Forma Operating Results
Unaudited pro forma combined results for Transocean Sedco Forex Inc. for
the twelve months ended December 31, 1999, reflected net income of $237.9
million or $1.13 per diluted share on pro forma revenues of $1,579.0 million.
The pro forma operating results assume the spin-off and merger was completed
on January 1, 1999. See Note 3 to the combined financial statements. These pro
forma results do not reflect the effects of reduced depreciation expense
related to conforming the estimated lives of Sedco Forex rigs and the
elimination of certain allocated costs from Schlumberger, which will not be
incurred in the future. The pro forma financial data should not be relied on
as an indication of operating results that Transocean Sedco Forex Inc. would
have achieved had the spin-off and merger taken place earlier or of the future
results that Transocean Sedco Forex Inc. may achieve.
20
<PAGE>
Market Outlook
Fleet utilization on a pro forma combined basis, as if the merger had
occurred on January 1, 1999, averaged 69 percent for the fourth quarter of
1999 and 74 percent for the year 1999 for our 62 active, fully owned or
chartered mobile offshore drilling units (i.e., excluding newbuilds under
construction, managed rigs and partially owned rigs). Combined semisubmersible
and drillship ("floater") utilization was 71 percent and 77 percent,
respectively, during the corresponding periods. Average dayrates during 1999
for these 62 rigs were $85,000 fleetwide and $105,300 for floaters.
Fleet activity in 1999 was negatively influenced by a global reduction in
exploration and development spending by our customers, resulting from the
sustained period of dramatically lower oil prices from late 1997 through early
1999 and consolidation activity among major oil producers over the same time
period. Spending levels in 1999 are estimated to have declined by more than 18
percent from levels experienced during 1998. Rig availability also increased
as a result of expiring contracts and delivery of newly constructed drilling
rigs by several offshore drilling contractors. The decline in exploration and
development activity and increased rig availability created a highly
competitive market for contract drilling services throughout 1999, with
corresponding reductions in utilization and dayrates for all classes of
offshore rigs.
With crude oil prices improving 34 percent during 1999 and 80 percent from
lows experienced in 1998, signs of improving fleet activity are emerging in
several operating regions. In February 2000, the semisubmersible Transocean
Richardson returned to work for an estimated 45-day contract in the U.S. Gulf
of Mexico following a brief idle period. In the North Sea, we have recently
secured new work assignments for the semisubmersibles Transocean Leader and
Sovereign Explorer, which are expected to return to work by April 2000 for
firm periods of approximately one year and approximately 60 days,
respectively. Both rigs have been idle since the fourth quarter of 1999. In
West Africa, operator interest in our jackup fleet has strengthened, with
several customers discussing term contracts. Finally, in Southeast Asia, we
currently expect two semisubmersibles and two jackups to begin contracts by
March 31, 2000, which will place all of our semisubmersibles and jackups in
the region on contract. However, these increases in customer interest and
activity have not yet led to significant increases in dayrates.
As of March 1, 2000, 46 of the 62 active and fully owned or chartered
mobile offshore drilling units were either operating or had signed contracts
for future operations, including 30 of 42 floaters. As of that date,
approximately 52 percent of our floater and jackup fleet days were committed
for the remainder of 2000 and 27 percent for the year 2001. Of the idle rigs,
two jackups and two semisubmersibles are currently cold-stacked.
Other Factors Affecting Operating Results
Our business depends on the level of activity in offshore oil and gas
exploration, development and production in markets worldwide. Oil and gas
prices, market expectations of potential changes in these prices and a variety
of political and economic factors significantly affect this level of activity.
Oil and gas prices are extremely volatile and are affected by numerous
factors, including
. worldwide demand for oil and gas;
. the ability of the Organization of Petroleum Exporting Countries,
commonly called "OPEC," to set and maintain production levels and
pricing;
. the level of production in non-OPEC countries;
. the policies of the various governments regarding exploration and
development of their oil and gas reserves;
. advances in exploration and development technology; and
. the political environment in oil-producing regions.
21
<PAGE>
The offshore contract drilling industry is highly competitive with numerous
industry participants, none of which has a dominant market share. Some of our
competitors may have greater financial resources than we do.
Drilling contracts are traditionally awarded on a competitive bid basis.
Intense price competition is often the primary factor in determining which
qualified contractor is awarded a job, although rig availability and the
quality and technical capability of service and equipment may also be
considered.
Our industry has historically been cyclical. There have been periods of
high demand, short rig supply and high dayrates, followed by periods of lower
demand, excess rig supply and low dayrates. The industry experienced a period
of significantly lower demand during 1999 as a result of reduced spending for
exploration and development by the Company's customers in response to
dramatically lower crude oil prices during 1998. In addition, rig availability
has increased as a result of contract expirations and construction by other
drilling contractors of new rigs that are competing with our rigs. Periods of
excess rig supply intensify the competition in the industry and often result
in rigs being idled for long periods of time.
Our customers may terminate some of our term drilling contracts if 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, the drilling contracts for the Sedco Forex newbuild rigs contain
termination or term reduction provisions tied to late delivery of these units.
In reaction to depressed market conditions, our customers may also seek
renegotiation of firm drilling contracts to reduce their obligations.
As of March 1, 2000, we had six new rigs in shipyards under construction or
undergoing sea trials. These construction projects are subject to the risks of
delay or cost overruns inherent in any large construction project resulting
from numerous factors, including the following:
. shipyard unavailability;
. shortages of equipment, materials or skilled labor;
. unscheduled delays in the delivery of ordered materials and equipment;
. engineering problems, including those relating to the commissioning of
newly designed equipment;
. work stoppages;
. weather interference;
. unanticipated cost increases; and
. difficulty in obtaining necessary permits or approvals.
These factors may contribute to cost variations and delays in the delivery
of our drilling units under construction. Delays in delivery of these units
would result in delays in contract commencements, resulting in a loss of
revenue to us, and may also cause customers to terminate or shorten the term
of the drilling contracts for these rigs pursuant to late delivery clauses for
the Sedco Express-class semisubmersibles and the Trident 20. In the event of
termination of a drilling contract for one of these rigs, it is unlikely that
we would be able to secure a replacement contract on as favorable terms.
We operate in various regions throughout the world that may expose us to
political and other uncertainties, including risks of:
. war and civil disturbances;
. expropriation of equipment;
. the inability to repatriate income or capital; and
. changing taxation policies.
22
<PAGE>
We are protected to a substantial extent against loss of capital assets,
but generally not loss of revenue, from most of these risks through insurance,
indemnity provisions in our drilling contracts or both. As of March 1, 2000,
all areas in which we were operating were covered by existing insurance
policies.
The offshore drilling business is subject to significant government
regulations in different jurisdictions. Many governments favor or effectively
require the awarding of drilling contracts to local contractors or require
foreign contractors to employ citizens of, or purchase supplies from, a
particular jurisdiction. These practices may adversely affect our ability to
compete. We expect to continue our efforts to structure our operations in
order to remain competitive in international markets.
Another risk inherent in our operations is the possibility of currency
exchange losses where revenues are received and expenses are paid in
nonconvertible currencies. We may also incur losses as a result of an
inability to collect revenues because of a shortage of convertible currency
available to the country of operation. We seek to limit these risks by
structuring contracts such that compensation is made in freely convertible
currencies and, to the extent possible, by limiting acceptance of blocked
currencies to amounts that match our expense requirements in local currency.
We require highly skilled personnel to operate and provide technical
services and support for our drilling units. To the extent demand for drilling
services and the size of the worldwide industry fleet increase, shortages of
qualified personnel could arise, creating upward pressure on wages. We are
continuing our recruitment and training programs as required to meet our
anticipated personnel needs.
On a worldwide basis, we had approximately 22 percent of our employees
working under collective bargaining agreements at December 31, 1999, most of
whom were working in Norway and Nigeria. Of these represented employees, a
majority are working under agreements that are subject to salary negotiation
in 2000.
The general rate of inflation in the majority of the countries in which we
operate has been moderate over the past several years and has not had a
material impact on our results of operations. The increase in the demand for
offshore drilling rigs experienced in 1996 and 1997 led to higher labor,
transportation and other operating expenses as a result of an increased need
for qualified personnel and services. Because of the decline in demand for
offshore drilling services since 1998, these inflationary pressures have
decreased.
Merger Purchase Price Allocation
The purchase price allocation for the merger of Transocean Offshore Inc.
and Sedco Forex included, at estimated fair value, total assets of $3.8
billion and the assumption of total liabilities of $1.9 billion. The excess of
the purchase price over the estimated fair value of net assets acquired was
approximately $1.1 billion, which has been accounted for as goodwill. As of
December 31, 1999, this goodwill represented approximately 17 percent of total
assets and 27 percent of total shareholders' equity. The goodwill is being
amortized over 40 years based on the nature of the offshore drilling industry,
long-lived drilling equipment and the long-standing relationships with core
customers. Goodwill amortization expense will be approximately $27 million per
year.
Liquidity and Capital Resources
Sources and Uses of Cash
Cash flows provided by operations were $240.6 million for the year ended
December 31, 1999, compared to $473.4 million for 1998, a decrease of $232.8
million. The decrease in cash provided by operations was primarily due to
lower net income during the year ended December 31, 1999, partially offset by
increases provided by net working capital components.
Cash flows used in investing activities decreased $331.3 million from
$421.5 million for the year ended December 31, 1998 to $90.2 million in 1999.
The decrease in cash used in investing activities resulted primarily
23
<PAGE>
from cash acquired in the merger partially offset by an increase in capital
expenditures relating to rig construction and upgrade projects.
Cash flows used in financing activities increased $186.8 million from 1998
to 1999. During 1999, net borrowings from related parties were repaid.
Capital Expenditures
Capital expenditures, including capitalized interest, totaled $537 million
during the year ended December 31, 1999 and include $132 million, $138 million
and $151 million spent on the construction of the Sedco Express, Sedco Energy,
and Cajun Express, respectively. Capital expenditures also included $60
million on the construction of the Trident 20 during 1999. As discussed above,
these capital expenditures do not include amounts expended by Transocean
Offshore Inc.
The Company's investments in its existing fleet and previously announced
fleet additions, including the Sedco Express-class semisubmersibles, the
Trident 20 and the Discoverer Enterprise-class drillships, continue to require
significant capital expenditures and are expected to be approximately $573
million in 2000.
The following table summarizes projected expenditures (including
capitalized interest) during 2000 for the Company's major construction
projects.
<TABLE>
<CAPTION>
Projected
Projected Recorded Value
Expenditures At Completion
------------ --------------
(In millions)
<S> <C> <C>
Sedco Express................................. $ 77 $ 326
Sedco Energy.................................. 87 332
Cajun Express................................. 65 273
Discoverer Spirit............................. 69 310
Discoverer Deep Seas.......................... 117 315
Trident 20.................................... 32 135
---- ------
$447 $1,691
==== ======
</TABLE>
The Company has under construction three Sedco Express-class
semisubmersibles. These semisubmersibles will be capable of ultra-deepwater
drilling operations and are designed to reduce total well construction time by
up to 25 percent through several technological innovations. The Sedco Express
is expected to be operational in the third quarter of 2000, when it will begin
a three-year contract with Elf. The Sedco Energy is expected to be operational
in the third quarter of 2000, when it will begin a five-year contract with
Texaco. The Cajun Express is also expected to be operational in the third
quarter of 2000, when it will begin a three-year contract with Marathon.
The Company has two Discoverer Enterprise-class drillships under
construction. These drillships represent a new class of advanced, ultra-
deepwater drilling rigs employing the Company's dual-activity drilling system
which aims to reduce the cost of deepwater projects by up to 40 percent. The
Discoverer Spirit is expected to be operational in the third quarter of 2000,
when it will begin a five-year contract with Spirit Energy 76, a division of
Unocal. The Discoverer Deep Seas is expected to be operational in the fourth
quarter of 2000, when it will begin a five-year contract with Chevron.
The Company also has an independent-leg cantilevered jackup, the Trident
20, under construction in Azerbaijan. This rig will be 75 percent owned by the
Company through a joint venture. The rig is expected to be operational in the
fourth quarter 2000, when it will begin a three-year contact for Elf.
As with any major construction project that takes place over an extended
period of time, the actual costs, the timing of expenditures and the project
completion date may vary from estimates based on numerous factors,
24
<PAGE>
including actual terms of awarded contracts, weather, exchange rates, shipyard
labor conditions and the market demand for components and resources required
for drilling unit construction. See "--Other Factors Affecting Operating
Results." The Company intends to fund the cash requirements relating to these
capital commitments through available cash balances, borrowings under the
Revolving Credit Agreement referred to below and other commercial bank or
capital market financings.
Debt
Revolving Credit Agreement--The Company is a party to a $540 million
revolving credit agreement, as amended, with a group of banks led by ABN AMRO
Bank, NV, as agent, dated as of July 30, 1996 (the "Revolving Credit
Agreement"). Borrowings under the Revolving Credit Agreement bear interest, at
the option of the Company, at a base rate or LIBOR plus a margin (0.20 percent
per annum at January 31, 2000) that varies depending on the Company's funded
debt to total capital ratio or its public senior unsecured debt rating. The
Revolving Credit Agreement requires compliance with various restrictive
covenants and provisions customary for an agreement of this nature including
an interest coverage ratio that could limit the Company's ability to pay
dividends in the future. The Revolving Credit Agreement has a maturity date of
July 30, 2002. As of December 31, 1999, $235 million was outstanding and $305
million was available for additional borrowings under the Revolving Credit
Agreement.
Term Loan Agreement--The Company is a party to a $400 million unsecured
five-year term loan agreement with a group of banks led by SunTrust Bank,
Atlanta, as agent, dated as of December 16, 1999 (the "Term Loan Agreement").
Borrowings available under the Term Loan Agreement were used to repay
indebtedness to Schlumberger upon completion of the merger and for general
corporate purposes. Amounts outstanding under the Term Loan Agreement bear
interest at the Company's option, at a base rate or LIBOR plus a margin (0.55
percent per annum at December 31, 1999) that varies depending on the Company's
public senior unsecured debt rating. No principal amortization is required for
the first two years, and the Company may prepay some or all of the debt at any
time without premium or penalty. The Term Loan Agreement requires compliance
with various restrictive covenants and provisions customary for an agreement
of this nature including an interest coverage ratio that could limit the
Company's ability to pay dividends in the future.
Secured Loan Agreement--The Company is a party to a $235.2 million secured
five-year term loan agreement with a group of banks led by ABN AMRO Bank, NV,
as agent, dated as of December 22, 1999 (the "Secured Loan Agreement").
Borrowings under the Secured Loan Agreement were used to repay debt incurred
for construction of the Discoverer Enterprise and upgrade of the Transocean
Amirante and were secured by both rigs. At December 31, 1999, both rigs were
operating under term contracts of up to five years with BP Amoco based on
their respective acceptance dates (see below). Cash flow from the BP Amoco
contracts will be used to repay the debt outstanding under the Secured Loan
Agreement in scheduled monthly payments. The Company may prepay some or all of
the debt at any time without premium or penalty. Approximately 92 percent of
the amounts outstanding under the Secured Loan Agreement bear interest at a
commercial paper rate plus a margin (0.31 percent per annum at December 31,
1999) while the remaining 8 percent of the amounts outstanding bear interest
at LIBOR plus a margin (0.65 percent per annum at December 31, 1999). The
floating rates under the Secured Loan Agreement have been converted to a fixed
rate by the interest rate swap agreement described below. (See "Quantitative
and Qualitative Disclosures About Market Risk--Interest Rate Risk"). The
Secured Loan Agreement contains covenants and provisions customary for a
secured agreement of this nature.
In January 2000, the Company agreed to cancel the remaining 14 months of
the contract with BP Amoco for the Transocean Amirante for a cash settlement
of $25 million. The cash received was used to repay borrowings under the
Secured Loan Agreement relating to the Transocean Amirante and the security
interest in the rig was released by the banks. The interest rate swap
agreement was also amended to reflect the reduced amounts subject to the swap.
Public Debt Offering--The Company has outstanding $300 million aggregate
principal amount of senior, unsecured debt securities originally issued in a
public offering. The securities consist of $100 million aggregate
25
<PAGE>
principal amount of 7.45 percent notes due April 15, 2027 (the "Notes") and
$200 million aggregate principal amount of 8.00 percent debentures due April
15, 2027 (the "Debentures"). Holders of the Notes may elect to have all or any
portion of the Notes repaid on April 15, 2007 at 100 percent of the principal
amount. The Notes, at any time after April 15, 2007, and the Debentures, at
any time, may be redeemed at the option of the Company at 100 percent of the
principal amount plus a make-whole premium, if any, equal to the excess of the
present value of future payments due under the Notes and Debentures using a
discount rate equal to the then-prevailing yield of U.S. treasury notes for a
corresponding remaining term plus 20 basis points over the principal amount of
the security being redeemed. Interest is payable on April 15 and October 15 of
each year. The indenture and supplemental indenture relating to the Notes and
the Debentures place limitations on the Company's ability to incur
indebtedness secured by certain liens, engage in certain sale/leaseback
transactions and engage in certain merger, consolidation or reorganization
transactions.
Secured Rig Financing--The Company has outstanding $85.1 million of debt
secured by the Trident IX and the Trident 16 (the "Secured Rig Financing").
Payments under these financing agreements include an interest component of
7.95 percent for the Trident IX and 7.20 percent for the Trident 16. The
Trident IX facility expires in April 2003 while the Trident 16 facility
expires in September 2004. The financing arrangements provide for a call right
on the part of the Company to repay the financing prior to expiration of their
scheduled terms and in some circumstances a put right on the part of the banks
to require the Company to repay the financings. Under either circumstance, the
Company would retain ownership of the rigs.
Notes Payable--The Company has outstanding $20.8 million aggregate
principal amount of unsecured 6.90 percent notes due February 15, 2004
originally issued in a private placement. The note purchase agreement
underlying the notes requires compliance with various restrictive covenants
and provisions customary for an agreement of this nature and on substantially
the same terms as those under the Revolving Credit Agreement, including an
interest coverage ratio that could limit the Company's ability to pay
dividends in the future.
Letters of Credit--The Company had letters of credit outstanding at
December 31, 1999 totaling $124.2 million, including a letter of credit
relating to the legal dispute with Kvaerner Installasjon a.s valued at $27.5
million. See Note 10 to the Company's combined financial statements. The
remaining amount guarantees various insurance, rig construction and contract
bidding activities.
Shelf Registration
The Company has an effective $450 million shelf registration statement on
Form S-3 for the proposed offering from time to time of senior or subordinated
debt securities, preference shares, ordinary shares and warrants to purchase
debt securities, preference shares, ordinary shares or other securities.
Acquisitions and Dispositions
In December 1999, Transocean Sedco Forex issued 109,419,166 ordinary shares
to Schlumberger shareholders in the merger, and issued an additional 145,102
ordinary shares that were sold on the market for cash paid in lieu of
fractional shares.
In February 2000, the Company sold its coiled tubing drilling services
business, Transocean Petroleum Technology, to Schlumberger. The net proceeds
from the sale were approximately $25 million and no gain or loss was
recognized on the sale. The Company's interests in its Transocean-Nabors
Drilling Technology LLC and Deep Vision LLC joint ventures were excluded from
the sale. The proceeds from the sale were used to repay debt and for general
corporate purposes.
The Company, from time to time, reviews possible acquisitions of businesses
and drilling units, and may in the future make significant capital commitments
for such purposes. Any such acquisition could involve the payment by the
Company of a substantial amount of cash and the issuance of a substantial
number of ordinary shares. The Company would expect to fund the cash portion
of any such acquisition through cash balances on hand, the incurrence of
additional debt, sales of assets or ordinary shares or a combination thereof.
26
<PAGE>
Derivative Instruments
The Company, from time to time, may enter into a variety of derivative
financial instruments in connection with the management of its exposure to
fluctuations in foreign exchange rates and interest rates. The Company does
not enter into derivative transactions for speculative purposes; however, for
accounting purposes certain transactions may not meet the criteria for hedge
accounting.
Gains and losses on foreign exchange derivative instruments, which qualify
as accounting hedges, are deferred and recognized when the underlying foreign
exchange exposure is realized. Gains and losses on foreign exchange derivative
instruments, which do not qualify as hedges for accounting purposes, are
recognized currently based on the change in market value of the derivative
instruments. At December 31, 1999, the Company did not have any foreign
exchange derivative instruments not qualifying as hedges.
The Company, from time to time, may use interest rate swap agreements to
effectively convert a portion of its floating rate debt to a fixed rate basis,
reducing the impact of interest rate changes on future income. Interest rate
swaps are designated as a hedge of underlying future interest payments. The
interest rate differential to be received or paid on the swaps is recognized
over the lives of the swaps as an adjustment to interest expense. The interest
rate swap agreements were recorded at fair value as part of the merger. See
"--Liquidity and Capital Resources--Debt--Secured Loan Agreement" and
"Quantitative and Qualitative Disclosures About Market Risk--Interest Rate
Risk."
Sources of Liquidity
The Company believes that its cash and cash equivalents, cash generated
from operations, borrowings available under its Revolving Credit Agreement and
access to other financing sources will be adequate to meet its anticipated
short-term and long-term liquidity requirements, including scheduled debt
repayments and capital expenditures for new rig construction and upgrade
projects.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133 Accounting for
Derivative Instruments and Hedging Activities. In June 1999, the FASB issued
SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities--
Deferral of the Effective Date of FASB 133 to delay the required effective
date for adoption of SFAS No. 133 to fiscal years beginning after June 15,
2000. Because of the Company's limited use of derivatives to manage its
exposure to fluctuations in foreign exchange rates and interest rates,
management does not anticipate that the adoption of the new statement will
have a significant effect on the results of operations or the financial
position of the Company. The Company will adopt SFAS No. 133 as of January 1,
2001.
Year 2000 Issue
Previously we discussed the nature and progress of our plans to become Year
2000 ready. In late 1999, we completed our remediation and testing of systems.
As a result of those planning and implementation efforts, we experienced no
significant disruptions in our operations or information technology systems
and believe we successfully responded to the Year 2000 date change. The cost
of our Year 2000 program was approximately $4 million, including an allocation
from Schlumberger of less than $1 million. We are not aware of any material
problems resulting from Year 2000 issues, whether with our rigs, our internal
systems, or the products and services of third parties. We will continue to
monitor our rig systems, critical computer applications and our suppliers and
vendors throughout the year 2000 to ensure that any latent Year 2000 matter
that may arise is addressed promptly.
Forward-Looking Information
The statements included in this annual report regarding future financial
performance and results of operations and other statements that are not
historical facts are forward-looking statements within the meaning
27
<PAGE>
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Statements to the effect that the Company or management
"anticipates," "believes," "budgets," "estimates," "expects," "forecasts,"
"intends," "plans," "predicts," or "projects" a particular result or course of
events, or that such result or course of events "could," "might," "may" or
"should" occur, and similar expressions, are also intended to identify
forward-looking statements. Forward-looking statements in this annual report
include, but are not limited to, statements involving expected capital
expenditures, results and effects of legal proceedings, liabilities for tax
issues, integration of Transocean Offshore Inc. and Sedco Forex, the timing
and cost of completion of capital projects, and the Company's expectations
with regard to market outlook. Such statements are subject to numerous risks,
uncertainties and assumptions, including but not limited to, uncertainties
relating to the level of activity in offshore oil and gas exploration and
development, exploration success by producers, oil and gas prices, demand for
oil and gas rigs, competition and market conditions in the contract drilling
industry, our ability to successfully integrate the operations of Transocean
Offshore Inc. and Sedco Forex, delays or cost overruns on construction
projects and possible cancellation of drilling contracts as a result of
delays, work stoppages by shipyard workers where our newbuilds are being
constructed, our ability to enter into and the terms of future contracts, the
availability of qualified personnel, labor relations and the outcome of
negotiations with unions representing workers, operating hazards, political
and other uncertainties inherent in non-U.S. operations (including exchange
and currency fluctuations), the impact of governmental laws and regulations,
the adequacy of sources of liquidity, the effect of litigation and
contingencies and other factors discussed in this annual report and in the
Company's other filings with the Securities and Exchange Commission ("SEC"),
which are available free of charge on the SEC's website at www.sec.gov. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
indicated. You should not place undue reliance on forward-looking statements.
Each forward-looking statement speaks only as of the date of the particular
statement, and we undertake no obligation to publicly update or revise any
forward-looking statements.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's long-term debt obligations and interest rate swaps.
The tables below provide information about the Company's derivative financial
instruments and other financial instruments that are sensitive to changes in
interest rates as of December 31, 1999. Prior to the merger, Sedco Forex
believed its exposure to interest rate risk was not material since its long-
term debt obligations consisted solely of fixed rate indebtedness or related
party variable debt that was repaid in connection with the merger. For debt
obligations, the table presents expected cash flows and related weighted-
average interest rates expected by maturity dates. Weighted-average variable
rates are based on estimated LIBOR and commercial paper rates as of December
31, 1999, plus applicable margins. The fair value of fixed rate debt is based
on the estimated yield to maturity for each debt issue as of December 31,
1999.
As of December 31, 1999:
<TABLE>
<CAPTION>
Expected Maturity Date
------------------------------------------------------- Fair Value
2000 2001 2002 2003 2004 Thereafter Total 12/31/99
----- ----- ------ ------ ------ ---------- ------ ----------
(In millions, except interest rate percentages)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-term debt
Fixed Rate(a).......... $21.4 $22.6 $ 24.0 $ 18.8 $ 19.1 $300.0 $405.9 $393.2
Average interest
rate................ 7.5% 7.5% 7.5% 7.4% 7.2% 7.8% 7.7%
Variable Rate.......... $57.2 $43.8 $376.4 $194.6 $198.2 -- $870.2 $870.2
Average interest
rate................ 6.1% 6.1% 6.7% 6.8% 6.8% -- 6.7%
</TABLE>
- --------
(a) Reflects payment of face value of debt and not fair market value of
debt as assumed in the merger of Transocean Offshore Inc. and Sedco Forex.
For interest rate swaps, the table presents notional amounts and weighted-
average interest rates by contractual maturity dates as of December 31, 1999.
These interest rate swaps are those entered into by
28
<PAGE>
Transocean Offshore Inc. as Sedco Forex did not have any interest rate swaps
prior to the merger. Notional amounts are used to calculate the contractual
payments to be exchanged under the interest rate swaps. The average receive
rate under the interest rate swaps is based on estimated commercial paper
rates. The fair value of the interest rate swaps is based on the market value
of similar swap arrangements as of December 31, 1999.
As of December 31, 1999:
<TABLE>
<CAPTION>
Expected Maturity Date
---------------------------------------------------- Fair Value
2000 2001 2002 2003 2004 Thereafter Total 12/31/99
----- ----- ----- ----- ----- ---------- ------ ----------
(In millions, except interest rate percentages)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps
Pay fixed/receive
variable.............. $57.2 $43.8 $41.4 $44.6 $48.2 -- $235.2 $(2.2)
Average pay rate..... 6.9% 6.9% 6.9% 6.9% 6.9% -- 6.9%
Average receive
rate................ 5.7% 5.7% 5.7% 5.7% 5.7% -- 5.7%
</TABLE>
In January 2000 in connection with the repayment of amounts outstanding
under the Secured Loan Agreement, the Company amended the interest rate swaps
to reduce the notional amount to $208.5 million. See "--Liquidity and Capital
Resources--Debt--Secured Loan Agreement."
Foreign Exchange Risk
The Company operates internationally, resulting in exposure to foreign
exchange risk. The Company uses a variety of techniques to minimize the
exposure to foreign exchange risk, including customer contract terms and the
use of foreign exchange derivative instruments or spot purchases. The Company
does not enter into derivative transactions for speculative purposes. At
December 31, 1999 the Company had no material open foreign exchange contracts.
29
<PAGE>
ITEM 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Transocean Sedco Forex Inc.
We have audited the accompanying consolidated balance sheet of Transocean
Sedco Forex Inc. and Subsidiaries as of December 31, 1999, and the related
combined statements of operations, equity, and cash flows for the year then
ended. Our audit also included the financial statement schedule listed in the
Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. 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 consolidated financial position of Transocean
Sedco Forex Inc. and Subsidiaries at December 31, 1999, and the combined
results of their operations and their cash flows for the year then ended in
conformity with accounting principles generally accepted in the United States.
Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Houston, Texas
January 31, 2000
30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Schlumberger Limited
In our opinion, the accompanying combined balance sheet and the related
combined statements of income, of equity and of cash flows present fairly, in
all material respects, the financial position of Transocean Sedco Forex Inc.
(previously Sedco Forex Holdings Limited) at December 31, 1998, and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1998, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of Sedco Forex Holdings Limited's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which 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, assessing the accounting principles used and
significant estimates made by management and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
August 6, 1999
31
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------
1999 1998 1997
-------- ---------- --------
(In thousands, except per
share data)
<S> <C> <C> <C>
Operating Revenues........ $648,236 $1,090,523 $891,334
-------- ---------- --------
Costs and Expenses
Operating and
maintenance............ 450,756 562,565 466,269
Depreciation............ 131,933 124,707 110,780
General and
administrative......... 16,703 25,986 15,664
-------- ---------- --------
599,392 713,258 592,713
-------- ---------- --------
Operating Income.......... 48,844 377,265 298,621
-------- ---------- --------
Other Income (Expense),
Net
Equity in earnings of
joint ventures......... 5,610 5,389 4,946
Interest income......... 5,433 3,361 3,296
Interest expense, net of
amounts capitalized.... (10,250) (12,950) (19,639)
Other, net.............. (830) 956 5,235
-------- ---------- --------
(37) (3,244) (6,162)
-------- ---------- --------
Income Before Income
Taxes.................... 48,807 374,021 292,459
Income Taxes.............. (9,296) 32,443 32,004
-------- ---------- --------
Net Income................ $ 58,103 $ 341,578 $260,455
======== ========== ========
Unaudited Pro Forma
Earnings Per Share
Basic................... $ 0.53 $ 3.12 $ 2.38
-------- ---------- --------
Diluted................. $ 0.53 $ 3.12 $ 2.38
-------- ---------- --------
Unaudited Pro Forma Shares
Outstanding
Basic................... 109,564 109,564 109,564
Diluted................. 109,636 109,636 109,636
</TABLE>
See accompanying notes.
32
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
---------------------
1999 1998
ASSETS ---------- ----------
(In thousands,
except per share
data)
<S> <C> <C>
Cash and Cash Equivalents................................ $ 165,673 $ 174,481
Accounts Receivable
Trade.................................................. 220,066 183,165
Other.................................................. 57,286 51,016
Receivables from Related Parties......................... 15,276 52,620
Materials and Supplies................................... 77,058 45,976
Deferred Income Taxes.................................... 12,562 --
Other Current Assets..................................... 10,945 7,435
---------- ----------
Total Current Assets................................. 558,866 514,693
---------- ----------
Property and Equipment................................... 5,498,116 1,954,961
Less Accumulated Depreciation............................ 1,153,614 1,039,538
---------- ----------
Property and Equipment, net............................ 4,344,502 915,423
---------- ----------
Goodwill, net............................................ 1,067,594 --
Investments in and Advances to Joint Ventures............ 101,892 24,865
Deferred Income Taxes.................................... -- 17,938
Other Assets............................................. 67,316 --
---------- ----------
Total Assets......................................... $6,140,170 $1,472,919
========== ==========
LIABILITIES AND EQUITY
Accounts Payable......................................... $ 129,248 $ 87,425
Accrued Income Taxes..................................... 111,853 41,058
Current Portion of Long-Term Debt........................ 78,584 14,348
Payables to Related Parties.............................. 15,290 32,960
Deferred Gain on Sale of Rigs............................ 26,167 26,000
Other Current Liabilities................................ 167,379 96,193
---------- ----------
Total Current Liabilities............................ 528,521 297,984
---------- ----------
Long-Term Debt........................................... 1,187,578 86,100
Related Party Debt....................................... -- 407,402
Deferred Income Taxes.................................... 383,991 --
Deferred Gain on Sale of Rigs............................ 69,779 97,000
Other Long-Term Liabilities.............................. 60,162 20,051
---------- ----------
Total Long-Term Liabilities.......................... 1,701,510 610,553
---------- ----------
Commitments and Contingencies
Preference Shares, $0.10 par value; 50,000,000 shares
authorized, none issued and outstanding................. --
Ordinary Shares, $0.01 par value; 300,000,000 shares
authorized, 210,119,501 shares issued and outstanding... 2,101
Additional Paid-in Capital............................... 3,908,038
---------- ----------
Total Equity......................................... 3,910,139 564,382
---------- ----------
Total Liabilities and Equity......................... $6,140,170 $1,472,919
========== ==========
</TABLE>
See accompanying notes.
33
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
COMBINED STATEMENTS OF EQUITY
<TABLE>
<CAPTION>
Ordinary
Shares Additional
-------------- Paid-in Pre-Merger Total
Shares Amount Capital Equity Equity
------- ------ ---------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996.. $461,586 $ 461,586
Net income.................. 260,455 260,455
Dividends paid.............. (71,195) (71,195)
Advances to related parties
and other.................. (287,952) (287,952)
------- ------ ---------- -------- ----------
Balance at December 31, 1997.. 362,894 362,894
------- ------ ---------- -------- ----------
Net income.................. 341,578 341,578
Advances to related parties
and other.................. (140,090) (140,090)
------- ------ ---------- -------- ----------
Balance at December 31, 1998.. 564,382 564,382
------- ------ ---------- -------- ----------
Net income.................. 58,103 58,103
Advances from related
parties and other.......... 299,578 299,578
Merger with Transocean
Offshore Inc............... 210,120 $2,101 $3,908,038 (922,063) 2,988,076
------- ------ ---------- -------- ----------
Balance at December 31, 1999.. 210,120 $2,101 $3,908,038 $ -- $3,910,139
======= ====== ========== ======== ==========
</TABLE>
See accompanying notes.
34
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------
1999 1998 1997
--------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income.................................. $ 58,103 $ 341,578 $ 260,455
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation.............................. 131,933 124,707 110,780
Amortization of deferred gain on sale of
rigs..................................... (26,167) (26,000) (8,667)
1999 and 1998 charges..................... 29,409 23,350 --
Deferred income taxes..................... (24,253) (16,039) 501
Equity in earnings of joint ventures...... (5,610) (5,389) (4,946)
Other, net................................ 1,101 -- --
Changes in operating assets and liabilities,
net of effects from the merger with
Transocean Offshore Inc.
Accounts receivable....................... 100,547 (18,297) (41,319)
Accounts payable and accrued liabilities.. (22,505) 27,703 146
Receivables/payables with related parties,
net...................................... 19,460 1,201 (8,761)
Income taxes receivable/payable, net...... (21,504) 15,062 6,788
Other assets and liabilities, net......... 123 5,538 3,507
--------- --------- ---------
Net cash provided by operating activities... 240,637 473,414 318,484
--------- --------- ---------
Cash Flows from Investing Activities
Capital expenditures........................ (537,029) (424,749) (187,411)
Cash acquired in merger with Transocean
Offshore Inc............................... 439,780 -- --
Net proceeds from sale of drilling rigs..... -- -- 174,000
Other, net.................................. 7,096 3,205 (5,842)
--------- --------- ---------
Net cash used in investing activities....... (90,153) (421,544) (19,253)
--------- --------- ---------
Cash Flows from Financing Activities
Advances and other (to) from related
parties.................................... 265,523 (140,090) (287,952)
Proceeds from issuance of related party
debt....................................... 371,720 250,080 40,000
Payments of principal of related party
debt....................................... (779,122) (22,063) (45,118)
Dividends paid.............................. -- -- (71,195)
Proceeds from issuance of long-term debt.... -- -- 120,060
Payments of principal of long-term debt..... (15,303) (59,406) (13,369)
Other, net.................................. (2,110) (1,027) (11,277)
--------- --------- ---------
Net cash provided by (used in) financing
activities................................. (159,292) 27,494 (268,851)
--------- --------- ---------
Net Increase (Decrease) in Cash and Cash
Equivalents.................................. (8,808) 79,364 30,380
--------- --------- ---------
Cash and Cash Equivalents at Beginning of
Period....................................... 174,481 95,117 64,737
--------- --------- ---------
Cash and Cash Equivalents at End of Period.... $ 165,673 $ 174,481 $ 95,117
========= ========= =========
</TABLE>
See accompanying notes.
35
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
Note 1--Principles of Combination
Transocean Sedco Forex Inc. (together with its majority owned subsidiaries
and predecessors, "the Company," unless the context requires otherwise) is a
leading international provider of deepwater and harsh environment contract
drilling services for oil and gas wells. The Company owns, has partial
ownership interests in, operates or has under construction 73 mobile offshore
drilling units. The Company's active fleet consists of twelve high-
specification semisubmersibles, thirty-one second- and third-generation
semisubmersibles, one Discoverer Enterprise-class drillship, four other
drillships, sixteen jackup rigs and three tenders. The Company has under
construction two Discoverer Enterprise-class drillships, three Sedco Express-
class semisubmersibles and one independent-leg cantilevered jackup. In
addition, the fleet includes one multipurpose service jackup, six swamp barges
and two land drilling rigs. The Company contracts these drilling rigs, related
equipment and work crews primarily on a dayrate basis to drill offshore wells.
On December 31, 1999, the merger of Transocean Offshore Inc. and Sedco
Forex Holdings Limited ("Sedco Forex") was completed. Sedco Forex was the
offshore contract drilling service business of Schlumberger Limited
("Schlumberger") and was spun-off immediately prior to the merger transaction.
As a result of the merger, Sedco Forex became a wholly owned subsidiary of
"Transocean Offshore Inc." which changed its name to Transocean Sedco Forex
Inc. The merger was accounted for as a purchase, with Sedco Forex as the
acquiror for accounting purposes.
The balance sheet as of December 31, 1999 represents the consolidated
position of the merged company. The results of operations and cash flows for
the periods presented in these combined financial statements, and the balance
sheet for the period prior to the merger, reflect the results and financial
position of Sedco Forex and not that of historical Transocean Offshore Inc.
Intercompany transactions and accounts have been eliminated. The equity method
of accounting is used for investments in joint ventures owned 50 percent or
less.
The combined financial statements for the period prior to the merger
represent the offshore contract drilling service business of Schlumberger,
which comprised certain businesses, operations, assets and liabilities of
Sedco Forex and its subsidiaries and of Schlumberger and its subsidiaries, as
defined in the distribution agreement (see Note 3). Although Sedco Forex was
not a separate public company prior to the merger, the combined financial
statements are presented as if Sedco Forex had existed as an entity separate
from its parent, Schlumberger. The combined financial statements include the
historical assets, liabilities, revenues and expenses that were directly
related to the offshore contract drilling service business of Schlumberger
during the periods presented and have been prepared using Schlumberger's
historical bases in the assets and liabilities and the historical results of
operations of Sedco Forex.
Certain Schlumberger corporate expenses, including centralized research and
engineering, legal, accounting, employee benefits, real estate, insurance,
information technology services, treasury and other corporate and
infrastructure costs, although not directly attributable to Sedco Forex's
operations, have been allocated to Sedco Forex on bases that Schlumberger and
Sedco Forex considered to be a reasonable reflection of the utilization of
services provided or the benefit received by Sedco Forex (see Note 16).
However, the financial information included herein may not reflect the
combined financial position, operating results, changes in equity and cash
flows of Sedco Forex had Sedco Forex been a separate, stand-alone entity
during the periods presented.
Because Sedco Forex was historically not operated as a separate, stand-
alone entity, and in many cases Sedco Forex's results were included in the
combined financial statements of Schlumberger on a divisional basis, there are
no separate meaningful historical equity accounts for Sedco Forex prior to the
merger. Changes in equity prior to the merger represent Schlumberger's
contribution of its net investment in Sedco Forex after giving effect to the
net earnings of Sedco Forex, dividends paid, plus net cash transfers to and
from Schlumberger and other transfers from Schlumberger.
36
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Certain assets and liabilities included in the financial statements for
periods prior to the merger, primarily associated with employee benefits,
income taxes, and balances due to or from Schlumberger companies other than
Sedco Forex, were retained by Schlumberger in accordance with the distribution
agreement (see Note 3).
Note 2--Summary of Significant Accounting Policies
Accounting Estimates--The preparation of financial statements in conformity
with accounting principles generally accepted in the U. S. 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 these
estimates.
Cash and Cash Equivalents--Cash equivalents are stated at cost plus accrued
interest, which approximates fair value. Cash equivalents are highly liquid
debt instruments with an original maturity of three months or less and consist
of time deposits with a number of commercial banks with high credit ratings,
Eurodollar time deposits, certificates of deposit and commercial paper. The
Company may also invest excess funds in a no-load, open-end, management
investment trust ("mutual fund"). The mutual fund invests exclusively in high
quality money market instruments. Generally, the maturity date of the
Company's investments is the next day of business.
Materials and Supplies--Materials and supplies are carried at average cost
less an allowance for obsolescence.
Property and Equipment--Property and equipment are stated at cost less
accumulated depreciation, which is provided for by charges to income over the
estimated useful lives of the assets by the straight-line method. Expenditures
for renewals, replacements, and improvements are capitalized. Maintenance and
repairs are charged to operating expenses as incurred. Upon sale or other
disposition, the applicable amounts of asset cost and accumulated depreciation
are removed from the accounts and the net amount, less proceeds from disposal,
is charged or credited to income.
Estimated useful lives of rigs range from 10 to 25 years, buildings and
improvements from 10 to 30 years and machinery and equipment from 4 to 12
years. From time to time, major improvements are performed on the rigs which
extend their useful lives. These improvements are amortized over 10 to 15
years.
Goodwill--The excess of the purchase price over the estimated fair value of
net assets acquired is accounted for as goodwill and is amortized on a
straight-line basis over 40 years based on the nature of the offshore drilling
industry, long-lived drilling equipment and the long-standing relationships
with core customers.
Impairment of Long-Lived Assets--The carrying value of long-lived assets,
principally goodwill and property and equipment, is reviewed for potential
impairment when events or changes in circumstances indicate that the carrying
amount of such assets may not be recoverable. For property and equipment, the
determination of recoverability is made based upon the estimated undiscounted
future net cash flows of the related asset. For goodwill, the determination of
recoverability is made based upon a comparison of the Company's net book value
to the value indicated by the market price of its equity securities.
Operating Revenues and Expenses--Operating revenues are recognized as
earned, based on contractual daily rates or on a fixed price basis. Turnkey
profits are recognized on completion of the well and acceptance by the
customer; however, provisions for losses are made on contracts in progress
when losses are anticipated. In connection with drilling contracts, the
Company may receive lump sum fees for the mobilization of equipment and
personnel or for capital improvements to rigs. In connection with contracted
mobilizations, to the extent
37
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
expenses exceed fees received, the net costs are deferred and amortized over
the appropriate periods of benefit, generally the term of the contract.
Profits on mobilizations are recognized based on contractual daily rates or
percentage of completion, depending upon the contract terms. Costs of
relocating drilling units without contracts to more promising market areas are
expensed as incurred. Upon completion of drilling contracts, any
demobilization fees received are reflected in income, as are any related
expenses. Capital upgrade fees received from the client are deferred and
recognized as revenue over the period of the drilling project. The actual cost
incurred for the capital upgrade is depreciated over the estimated useful life
of the asset. The Company incurs periodic survey and drydock costs in
connection with obtaining regulatory certification to operate its rigs on an
ongoing basis. Costs associated with these certifications are deferred and
amortized over the period until the next survey.
Capitalized Interest--Interest costs for the construction and upgrade of
qualifying assets are capitalized. Capitalized interest costs on construction
work in progress were $27.2 million and $8.7 million for the years ended
December 31, 1999 and 1998, respectively (none during 1997).
Derivative Instruments--The Company enters into a variety of derivative
financial instruments in connection with the management of its exposure to
fluctuations in foreign exchange rates and interest rates. The Company does
not enter into derivative transactions for speculative purposes; however, for
accounting purposes certain transactions may not meet the criteria for hedge
accounting (see Note 6).
Foreign Currency Translation--The U.S. dollar is the functional currency
for the Company's foreign operations. Foreign currency exchange gains and
losses are included in other income as incurred. Net foreign currency gains
amounted to $1.0 million and $5.2 million for the years ended December 31,
1998 and 1997, respectively. Net foreign currency gains were less than $0.1
million in 1999.
Income Taxes--Sedco Forex's operating results historically have been
included in Schlumberger's consolidated U.S. and state income tax returns and
in tax returns of Schlumberger's foreign subsidiaries. The provision for
income taxes in the combined financial statements has been determined on a
separate return basis.
Taxes on income are computed in accordance with the tax rules and
regulations of the taxing authorities where the income is earned. The income
tax rates imposed by these taxing authorities vary substantially. Taxable
income may differ from pre-tax income for financial accounting purposes.
Deferred tax assets and liabilities are usually recognized for the expected
tax consequences of temporary differences between the tax bases of assets and
liabilities and their reported amounts in the financial statements. A
valuation allowance is provided if it is more likely than not that some or all
of the deferred tax asset will not be realized.
Stock-Based Compensation--In accordance with the provisions of the
Financial Accounting Standards Board's ("FASB") Statement of Financial
Accounting Standard ("SFAS") No. 123, Accounting for Stock-Based Compensation,
the Company has elected to follow the Accounting Principles Board's Opinion
No. 25, Accounting for Stock Issued to Employees and related interpretations
("APB 25") in accounting for its employee stock-based compensation plans.
Under APB 25, if the exercise price of employee stock options equals or
exceeds the fair value of the underlying stock on the date of grant, no
compensation expense is recognized (see Note 11).
Comprehensive Income--Comprehensive income is reported in accordance with
FASB's Reporting Comprehensive Income, SFAS No. 130. There were no significant
items of comprehensive income for the three years ended December 31, 1999.
New Accounting Pronouncements--In June 1998, the FASB issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. In June 1999,
the FASB issued SFAS No. 137, Accounting for
38
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Derivative Instruments and Hedging Activities--Deferral of the Effective Date
of FASB 133 to delay the required effective date for adoption of SFAS No. 133
to fiscal years beginning after June 15, 2000. Because of the Company's
limited use of derivatives to manage its exposure to fluctuations in foreign
exchange rates and interest rates, management does not anticipate that the
adoption of the new statement will have a significant effect on the results of
operations or the financial position of the Company. The Company will adopt
SFAS No. 133 as of January 1, 2001.
Reclassifications--Certain reclassifications have been made to prior period
amounts to conform with the current year presentation.
Note 3--Distribution, Spin-off and Merger
Pursuant to the Distribution Agreement dated July 12, 1999 between
Schlumberger and Sedco Forex, Schlumberger separated and consolidated its
offshore contract drilling service business under Sedco Forex. In December
1999 Schlumberger made a capital contribution of $226.7 million to Sedco Forex
to adjust Sedco Forex's level of indebtedness and cash balances to those
required by the terms of the Distribution Agreement.
In accordance with the Distribution Agreement, certain Sedco Forex assets
and liabilities, primarily associated with employee benefits, income taxes and
balances due to or from Schlumberger companies other than Sedco Forex were
retained by Schlumberger. The net liabilities retained totaled $30.9 million
and were treated as a capital contribution by Schlumberger.
On December 30, 1999, Schlumberger completed the spin-off of Sedco Forex to
the Schlumberger shareholders by issuing one share of Sedco Forex capital
stock for each share of Schlumberger common stock owned.
On December 31, 1999, the merger of Transocean Offshore Inc. and Sedco
Forex Holdings Limited was completed. Under the terms of the Agreement and
Plan of Merger dated July 12, 1999 among Schlumberger, Sedco Forex, Transocean
Offshore Inc. and Transocean SF Limited, a wholly owned Transocean Offshore
Inc. subsidiary, Transocean SF Limited merged with and into Sedco Forex, and
Schlumberger shareholders exchanged all of the Sedco Forex shares distributed
by Schlumberger for 109,564,268 ordinary shares of the Company, of which
145,102 ordinary shares were sold on the market for cash paid in lieu of
fractional shares.
The merger was accounted for as a purchase, with Sedco Forex as the
acquiror for accounting purposes. The purchase price of $2.99 billion is
comprised of the calculated market capitalization of Transocean Offshore Inc.
of $2.94 billion and the estimated fair value of Transocean Offshore Inc.
stock options at the time of the merger of $0.05 billion. The market
capitalization of Transocean Offshore Inc. was calculated using the average
closing price of Transocean Offshore Inc. ordinary shares over the seven-day
period commencing three days before July 12, 1999, the date the merger was
announced.
The purchase price included, at estimated fair value, current assets of
$638 million, drilling and other property and equipment of $3,029 million,
other assets of $136 million and the assumption of current liabilities of $299
million, other net long-term liabilities of $278 million and long-term debt of
$1,119 million. In addition, a deferred tax liability of $188 million was
recorded primarily for the difference in the basis for tax and financial
reporting purposes of the net assets acquired. The excess of the purchase
price over the estimated fair value of net assets acquired was $1,068 million,
which has been accounted for as goodwill.
39
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Unaudited pro forma combined operating results of Sedco Forex and
Transocean Offshore Inc. for the years ended December 31, 1999 and 1998,
assuming the acquisition had been made as of January 1, 1998, are summarized
as follows:
<TABLE>
<CAPTION>
Year ended December
31,
---------------------
1999 1998
---------- ----------
(In thousands, except
per share data)
<S> <C> <C>
Operating revenues..................................... $1,579,058 $2,180,135
Operating income....................................... 291,147 789,531
Net income............................................. 237,898 654,866
Earnings per share:
Basic................................................ $ 1.13 $ 3.12
Diluted.............................................. 1.13 3.11
</TABLE>
The pro forma information includes adjustments for additional depreciation
based on the fair market value of the drilling and other property and
equipment acquired, the amortization of goodwill arising from the transaction,
decreased interest expense for related party debt replaced by borrowings under
the Term Loan Agreement (see Note 5) and related adjustments for income taxes.
The pro forma information is not necessarily indicative of the results of
operations had the transaction been effected on the assumed date or the
results of operations for any future periods.
Note 4--Upgrade and Expansion of Drilling Fleet
Capital expenditures, including capitalized interest, totaled $537 million
during the year ended December 31, 1999 and include $132 million, $138 million
and $151 million spent on the construction of the Sedco Express, Sedco Energy
and Cajun Express, respectively. Capital expenditures also included $60
million on the construction of the Trident 20 during 1999.
At December 31, 1999, three Sedco Express-class semisubmersibles, the
Trident 20 and two Discoverer Enterprise-class drillships were under
construction.
Note 5--Debt
Debt is comprised of the following:
<TABLE>
<CAPTION>
December 31,
-------------------
1999 1998
---------- --------
(In thousands)
<S> <C> <C>
Term Loan Agreement..................................... $ 400,000 $ --
Secured Loan Agreement.................................. 235,174 --
Revolving Credit Agreement.............................. 235,000 --
8.00% Debentures, at fair value......................... 197,774 --
7.45% Notes, at fair value.............................. 93,916
Secured Rig Financing................................... 85,145 100,448
6.90% Notes Payable, at fair value...................... 19,153 --
---------- --------
Total Debt............................................ 1,266,162 100,448
Less Current Maturities................................. 78,584 14,348
---------- --------
Total Long-Term Debt.................................. $1,187,578 $ 86,100
========== ========
</TABLE>
40
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Term Loan Agreement--The Company is a party to a $400 million unsecured
five-year term loan agreement with a group of banks led by SunTrust Bank,
Atlanta, as agent, dated as of December 16, 1999 (the "Term Loan Agreement").
Amounts outstanding under the Term Loan Agreement bear interest, at the
Company's option, at a base rate or LIBOR plus a margin (0.55 percent per
annum at December 31, 1999) that varies depending on the Company's public
senior unsecured debt rating. No principal amortization is required for the
first two years, and the Company may prepay some or all of the debt at any
time without premium or penalty. The Term Loan Agreement requires compliance
with various restrictive covenants and provisions customary for an agreement
of this nature including an interest coverage ratio that could limit the
Company's ability to pay dividends in the future. The carrying value of the
term loan approximates fair value.
Secured Loan Agreement--The Company is a party to a $235.2 million secured
five-year term loan agreement with a group of banks led by ABN AMRO Bank, NV,
as agent, dated as of December 22, 1999 (the "Secured Loan Agreement"). At
December 31, 1999, the loan was secured by the Discoverer Enterprise and
Transocean Amirante. The Company may prepay some or all of the debt at any
time without premium or penalty. Approximately 92 percent of the amounts
outstanding under the Secured Loan Agreement bear interest at a commercial
paper rate plus a margin (0.31 percent per annum at December 31, 1999) while
the remaining 8 percent of the amounts outstanding bear interest at LIBOR plus
a margin (0.65 percent per annum at December 31, 1999). The floating rates
under the Secured Loan Agreement have been converted to a fixed rate of 6.9
percent per annum by the interest rate swap agreement (see Note 6). The
Secured Loan Agreement contains covenants and provisions customary for a
secured agreement of this nature. The carrying value of the secured loan
approximates fair value.
In January 2000, the Company agreed to cancel the remaining 14 months of a
contract with BP Amoco for its semisubmersible rig, the Transocean Amirante,
for a cash settlement of $25 million. The cash received was used to repay
borrowings under the Secured Loan Agreement relating to the Transocean
Amirante and the security interest in the rig was released by the banks. The
interest rate swap agreement was also amended to reflect the reduced amounts
subject to the swap.
Revolving Credit Agreement--The Company is a party to a $540 million
revolving credit agreement with a group of banks led by ABN AMRO Bank, NV, as
agent, (the "Revolving Credit Agreement"). Borrowings under the Revolving
Credit Agreement bear interest, at the option of the Company, at a base rate
or LIBOR plus a margin (0.20 percent per annum at January 31, 2000) that
varies depending on the Company's funded debt to total capital ratio or its
public senior unsecured debt rating. The Revolving Credit Agreement requires
compliance with various restrictive covenants and provisions customary for an
agreement of this nature including an interest coverage ratio that could limit
the Company's ability to pay dividends in the future. The Revolving Credit
Agreement has a maturity date of July 30, 2002. The carrying amount of the
borrowings under the Revolving Credit Agreement approximates fair value. As of
December 31, 1999, $305 million was available for additional borrowings under
the Revolving Credit Agreement.
Public Debt Offering--The Company has outstanding $300 million aggregate
principal amount of senior, unsecured debt securities originally issued in a
public offering. The securities consist of $100 million aggregate principal
amount of 7.45 percent notes due April 15, 2027 (the "Notes") and $200 million
aggregate principal amount of 8.00 percent debentures due April 15, 2027 (the
"Debentures"). Holders of the Notes may elect to have all or any portion of
the Notes repaid on April 15, 2007 at 100 percent of the principal amount. The
Notes, at any time after April 15, 2007, and the Debentures, at any time, may
be redeemed at the option of the Company at 100 percent of the principal
amount plus a make-whole premium, if any, equal to the excess of the present
value of future payments due under the Notes and Debentures using a discount
rate equal to the then-prevailing yield of U.S. treasury notes for a
corresponding remaining term plus 20 basis points over the principal amount of
the security being redeemed. Interest is payable on April 15 and October 15 of
each year. The indenture and
41
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
supplemental indenture relating to the Notes and the Debentures place
limitations on the Company's ability to incur indebtedness secured by certain
liens, engage in certain sale/leaseback transactions and engage in certain
merger, consolidation or reorganization transactions. The Notes and Debentures
were recorded at fair value as part of the merger.
Secured Rig Financing--The Company has outstanding $85.1 million of debt
secured by the Trident IX and the Trident 16 (the "Secured Rig Financing").
Payments under these financing agreements included an interest component of
7.95 percent for the Trident IX and 7.20 percent for the Trident 16. The
Trident IX facility expires in April 2003 while the Trident 16 facility expires
in September 2004. The financing arrangements provide for a call right on the
part of the Company to repay the financing prior to expiration of their
scheduled terms and in some circumstances a put right on the part of the banks
to require the Company to repay the financings. Under either circumstance, the
Company would retain ownership of the rigs. The estimated fair value of the
Secured Rig Financing at December 31, 1999 was $82.4 million based on the
estimated yield to maturity as of December 31, 1999.
Notes Payable--The Company has outstanding a $20.8 million aggregate
principal amount of unsecured 6.90 percent notes due February 15, 2004
originally issued in a private placement. The note purchase agreement
underlying the notes requires compliance with various restrictive covenants and
provisions customary for an agreement of this nature and on substantially the
same terms as those under the Revolving Credit Agreement, including an interest
coverage ratio that could limit the Company's ability to pay dividends in the
future. The notes payable were recorded at fair value as part of the merger.
Expected maturity of the Company's debt is as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------
2000 2001 2002 2003 2004 Thereafter Total
------- ------- -------- -------- -------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Term Loan Agreement..... $ -- $ -- $100,000 $150,000 $150,000 $ -- $ 400,000
Secured Loan Agreement.. 57,159 43,831 41,431 44,601 48,152 -- 235,174
Revolving Credit
Agreement.............. -- -- 235,000 -- -- -- 235,000
8.00% Debentures, at
fair value............. -- -- -- -- -- 197,774 197,774
7.45% Notes, at fair
value.................. -- -- -- -- -- 93,916 93,916
Secured Rig Financing... 16,810 18,001 19,381 14,212 16,741 -- 85,145
6.90% Notes Payable, at
fair value............. 4,615 4,615 4,615 4,615 693 -- 19,153
------- ------- -------- -------- -------- -------- ----------
Total Debt............. $78,584 $66,447 $400,427 $213,428 $215,586 $291,690 $1,266,162
======= ======= ======== ======== ======== ======== ==========
</TABLE>
Letters of Credit--The Company had letters of credit outstanding at
December 31, 1999 totaling $124.2 million, including a letter of credit
relating to the legal dispute with Kvaerner Installasjon a.s valued at $27.5
million (see Note 10). The remaining amount guarantees various insurance, rig
construction and contract bidding activities .
Note 6--Financial Instruments and Risk Concentration
Foreign Exchange Risk--The Company operates internationally, resulting in
exposure to foreign exchange risk. This risk is primarily associated with
compensation costs denominated in currencies other than the U.S. dollar and
with purchases from foreign suppliers. The Company uses a variety of techniques
to minimize the exposure to foreign exchange risk, including customer contract
payment terms and the use of foreign exchange derivative instruments.
The Company's primary foreign exchange risk management strategy involves
structuring customer contracts to provide for payment in both U.S. dollars and
local currency. The payment portion denominated in local
42
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
currency is based on anticipated local currency requirements over the contract
term. Foreign exchange derivative instruments, specifically, foreign exchange
forward contracts, may be used to minimize foreign exchange risk in instances
where the primary strategy is not attainable. A foreign exchange forward
contract obligates the Company to exchange predetermined amounts of specified
foreign currencies at specified exchange rates on specified dates or to make
an equivalent U.S. dollar payment equal to the value of such exchange.
Gains and losses on foreign exchange derivative instruments which qualify
as accounting hedges are deferred and recognized when the underlying foreign
exchange exposure is realized. At December 31, 1999 and 1998, there were no
material unrealized gains or losses on open foreign exchange derivative
hedges. Gains and losses on foreign exchange derivative instruments which do
not qualify as hedges for accounting purposes are recognized currently based
on the change in market value of the derivative instruments. As of December
31, 1999 and 1998, the Company had no foreign exchange derivative instruments
not qualifying as accounting hedges.
Interest Rate Risk--The Company uses interest rate swap agreements to
effectively convert a portion of its floating rate debt to a fixed rate basis,
reducing the impact of interest rate changes on future income. Interest rate
swaps are designated as hedges of underlying future payments. These agreements
involve the exchange of amounts based on variable interest rates for amounts
based on a fixed interest rate over the life of the agreement without an
exchange of the notional amount upon which the payments are based. The
interest rate differential to be received or paid on the swaps is recognized
over the lives of the swaps as an adjustment to interest expense. Gains and
losses on terminations of interest rate swap agreements are deferred as an
adjustment to interest expense related to the debt over the remaining term of
the original contract life of the terminated swap agreement. In the event of
the early extinguishment of a designated debt obligation, any realized or
unrealized gain or loss from the swap would be recognized in income. The
interest rate swap agreements were recorded at fair value as part of the
merger.
Credit Risk--Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily cash and cash equivalents and
trade receivables. It is the Company's practice to place its cash and cash
equivalents in time deposits at commercial banks with high credit ratings or
mutual funds which invest exclusively in high quality money market
instruments. In foreign locations, local financial institutions are generally
utilized for local currency needs. The Company limits the amount of exposure
to any one institution and does not believe it is exposed to any significant
credit risk.
The Company derives the majority of its revenue from services to
international oil companies and government-owned and government-controlled oil
companies. There are concentrations of receivables in various countries (see
Note 14). The Company maintains an allowance for uncollectible accounts
receivable based upon expected collectibility. This allowance was
approximately $27.1 million and $0.8 million at December 31, 1999 and 1998,
respectively. The Company is not aware of any significant credit risks
relating to its customer base and does not generally require collateral or
other security to support customer receivables.
Labor Agreements--On a worldwide basis, the Company had approximately 22
percent of its employees working under collective bargaining agreements at
December 31, 1999, most of whom were working in Norway and Nigeria. Of these
represented employees, a majority are working under agreements that are
subject to salary negotiation in 2000.
43
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Note 7--Other Current Liabilities
Other current liabilities are comprised of the following:
<TABLE>
<CAPTION>
December 31,
----------------
1999 1998
-------- -------
(In thousands)
<S> <C> <C>
Accrued Payroll and Employee Benefits...................... $ 55,542 $66,421
Contract Disputes and Legal Claims......................... 50,454 10,000
Deferred Revenue........................................... 17,763 --
Accrued Taxes, Other than Income........................... 13,433 13,565
Accrued Interest........................................... 10,056 --
Other...................................................... 20,131 6,207
-------- -------
$167,379 $96,193
======== =======
</TABLE>
Note 8--Supplemental Cash Flow Information
Non-cash financing activities for the year ended December 31, 1999 included
$2.99 billion related to the ordinary shares held by Transocean Offshore Inc.
shareholders at the time of the merger. Also included was $34.1 million of
non-cash increases in equity advances from Schlumberger relating to balances
retained under the Distribution Agreement (see Note 3). Non-cash investing
activities for the year ended December 31, 1999 included $2.55 billion of net
assets acquired in the merger.
Cash payments for interest were $39.8 million, $21.4 million and $19.2
million for the years ended December 31, 1999, 1998 and 1997, respectively.
Cash payments for income taxes, net, were $35.3 million, $30.0 million and
$26.2 million for the years ended December 31, 1999, 1998 and 1997,
respectively.
Note 9--Income Taxes
Income taxes have been provided based upon the tax laws and rates in the
countries in which operations are conducted and income is earned. There is no
expected relationship between the provision for or benefit from income taxes
and income or loss before income taxes because each country has taxation
regimes which vary not only with respect to nominal rate, but also due to the
availability of deductions, credits and other benefits. Variations also arise
because income earned in and subject to tax by any particular country or
countries fluctuates from year to year. Sedco Forex, a British Virgin Islands
company, is not subject to income tax in that jurisdiction. The effective tax
rate for the years ended December 31, 1999, 1998 and 1997 was (19.0) percent,
8.7 percent and 10.9 percent, respectively.
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------
1999 1998 1997
-------- -------- -------
(In thousands)
<S> <C> <C> <C>
Current provision............................... $ 14,957 $ 48,482 $31,503
Deferred provision (benefit).................... (24,253) (16,039) 501
-------- -------- -------
Income Taxes.................................... $( 9,296) $ 32,443 $32,004
======== ======== =======
</TABLE>
44
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Significant components of deferred tax assets and liabilities as of
December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
December 31,
------------------
1999 1998
--------- -------
(In thousands)
<S> <C> <C>
Deferred Tax Assets--Current
Accrued personnel taxes.................................. $ 1,204 $ --
Accrued workers' compensation insurance.................. 422 --
Other accruals........................................... 8,877 --
Retirement and benefit plan accruals..................... 2,831 --
Insurance accruals....................................... 420 --
Other.................................................... 929 --
--------- -------
Total Current Deferred Tax Assets...................... 14,683 --
--------- -------
Deferred Tax Liabilities--Current
Deferred drydock......................................... (2,121) --
--------- -------
Total Current Deferred Tax Liabilities................. (2,121) --
--------- -------
Net Current Deferred Tax Assets ....................... $ 12,562 $ --
========= =======
Deferred Tax Assets--Noncurrent
Net operating loss carry forward......................... $ 28,205 $14,549
Retirement and benefit plan accruals..................... 5,218 3,129
Other accruals........................................... 13,574 226
Deferred income and other................................ 171 34
--------- -------
Total Noncurrent Deferred Tax Assets................... 47,168 17,938
--------- -------
Deferred Tax Liabilities--Noncurrent
Depreciation and amortization............................ (358,705) --
Deferred gains........................................... (39,774) --
Investment in subsidiaries............................... (27,213) --
Other.................................................... (5,467) --
--------- -------
Total Noncurrent Deferred Tax Liabilities.............. (431,159) --
--------- -------
Net Noncurrent Deferred Tax Assets (Liabilities)....... $(383,991) $17,938
========= =======
</TABLE>
The Company has not provided a valuation allowance to offset the deferred
tax assets because, in the opinion of management, it is more likely than not
that all deferred tax assets will be realized. In the fourth quarter of 1998,
the Company released the valuation allowance related to its UK tax loss
carryforwards. These carryforwards, which the Company believes will be fully
utilized, are available to the Company indefinitely. Prior to 1998, the
Company had recorded a 100 percent valuation allowance on these tax loss
carryforwards.
Transocean Sedco Forex Inc., a Cayman Islands company, is not subject to
income taxes in the Cayman Islands. As of December 31, 1999, there is no
Cayman Islands income or profits tax, withholding tax, capital gains tax,
capital transfer tax, estate duty or inheritance tax payable by a Cayman
Islands company or its shareholders. The Company has obtained an assurance
from the Cayman Islands government under the Tax Concessions Law (1995
Revision) that, in the event that any legislation is enacted in the Cayman
Islands imposing tax computed on profits or income, or computed on any capital
assets, gain or appreciation, or any tax in the nature of estate duty or
inheritance tax, such tax shall not, until June 1, 2019, be applicable to the
Company or to any of its operations or to the shares, debentures or other
obligations of the Company. Therefore, under present law there will be no
Cayman Islands tax consequences affecting distributions.
45
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
The Company's income tax returns are subject to review and examination in
the various jurisdictions in which the Company operates. Certain tax
authorities have questioned the amounts of income and expense subject to tax
in their jurisdiction for prior periods. The Company is currently contesting
additional assessments which have been asserted and may contest any future
assessments. In the opinion of management, the ultimate resolution of these
asserted income tax liabilities will not have a material adverse effect on the
Company's business, financial position or results of operations.
In connection with the distribution of Sedco Forex to the Schlumberger
shareholders, Sedco Forex and Schlumberger entered into a Tax Separation
Agreement. In accordance with the terms of the Tax Separation Agreement,
Schlumberger agreed to indemnify Sedco Forex for any tax liabilities incurred
directly in connection with the preparation of Sedco Forex for this
distribution. In addition, Schlumberger agreed to indemnify Sedco Forex for
tax liabilities associated with Sedco Forex operations conducted through
Schlumberger entities prior to the merger and any tax liabilities associated
with Sedco Forex assets retained by Schlumberger.
Transocean Offshore Inc. was included in the consolidated federal income
tax returns filed by a former parent, Sonat Inc. ("Sonat") during all periods
in which Sonat's ownership was greater than or equal to 80 percent
("Affiliation Years"). Transocean Offshore Inc. and Sonat entered into a Tax
Sharing Agreement providing for the manner of determining payments with
respect to federal income tax liabilities and benefits arising in the
Affiliation Years. Under the Tax Sharing Agreement, Transocean Offshore Inc.
will pay to Sonat an amount equal to Transocean Offshore Inc.'s share of the
Sonat consolidated federal income tax liability, generally determined on a
separate return basis. In addition, Sonat will pay Transocean Offshore Inc.
for utilization by Sonat of deductions, losses and credits which are
attributable to Transocean Offshore Inc. and in excess of that which would be
utilized on a separate return basis. Transocean Offshore Inc. has been
notified that the IRS will commence an examination of the last Affiliation
Year, the short taxable year ended June 4, 1993.
Note 10--Commitments and Contingencies
Leases--The Company has operating lease commitments expiring at various
dates, principally for real estate, office space, office equipment and rig
bareboat charters. In addition to rental payments, some leases provide that
the Company pay a pro rata share of operating costs applicable to the leased
property. At December 31, 1999, future minimum payments for noncancellable
operating leases are as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
2000....................................................... $29,575
2001....................................................... 23,262
2002....................................................... 1,997
2003....................................................... 1,924
2004....................................................... 1,661
Thereafter................................................. 13,151
-------
Total.................................................... $71,570
=======
</TABLE>
Rental expense for all operating leases, including leases with terms of
less than one year, was $37 million, $56 million and $30 million for the years
ended December 31, 1999, 1998 and 1997, respectively.
Upgrade and Expansion of Drilling Fleet--The Company's investments in its
previously announced fleet additions continue to require significant capital
expenditures. At December 31, 1999, the Company had firm commitments related
to rig construction (see Note 4) totaling $242.3 million.
Legal Proceedings--During 1997, Kvaerner Installasjon a.s ("Kvaerner") in
Norway performed modification and refurbishment work on a high specification
semisubmersible drilling rig, the Transocean
46
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Leader. The amount owed with respect to such work is in dispute. A letter of
credit valued at approximately $27.5 million as of December 31, 1999 has been
posted pending the resolution of the dispute by agreement between the parties
or by final judgment under the Norwegian judicial process. In September 1998,
the Company instituted an action in the Norwegian courts alleging that it owes
no additional amounts and that the letter of credit should be released. In
March 1999, Kvaerner commenced proceedings in the Norwegian courts seeking
judgment for approximately $33 million plus interest. The Company vigorously
denies the material allegations of Kvaerner's petition and expects a trial
date to be set in the fourth quarter of 2000. Although the Company cannot
predict with certainty the outcome of the dispute at this time, the Company
does not expect the liability, if any, resulting from this matter to have a
material adverse effect on its business or financial position.
In 1990 and 1991, two of the Company's subsidiaries were served with
various assessments collectively valued at approximately $7.4 million from the
municipality of Rio de Janeiro, Brazil to collect a municipal tax on services.
The Company believes that neither subsidiary is liable for the taxes and has
contested the assessments in the Brazilian administrative and court systems.
The proceeding with respect to a June 1991 assessment, which was valued at
approximately $6.3 million, is now pending before the Brazil Supreme Court.
The lower courts and the superior court of appeals have rejected the Company's
arguments. An August 1990 assessment also had an unfavorable ruling at the
first and second court levels and is being submitted to the Brazil Supreme
Court. The Company is awaiting a ruling from the Taxpayer's Council as to an
October 1990 assessment. If the Company's defenses are ultimately
unsuccessful, the Company believes that the Brazilian government-controlled
oil company, Petrobras, has a contractual obligation to reimburse the Company
for municipal tax payments required to be paid by the Company. The Company
does not expect the liability, if any, resulting from these assessments to
have a material adverse effect on the Company's business or financial
position.
Global Marine Drilling Company ("Global Marine") initiated an arbitration
proceeding in London in December 1997 against a subsidiary of Sedco Forex.
Global Marine alleges a claim for approximately $85 million (plus interest and
costs) for an alleged late return of a chartered rig and for breach of
maintenance obligations under the charter. In February 1998, the tribunal held
that the charter expired January 20, 1998, plus time for physical delivery.
The rig was not redelivered until May 1998 and, accordingly, the Company will
probably be required to pay some dayrate for the period from January 1998
until redelivery. The amount of any damages has not been set and hearings on
various issues are set for later this year. The Company disputes Global
Marine's allegations and is vigorously defending the case. The arrestment
previously placed on the rig, Sovereign Explorer, in connection with the
proceedings has been lifted. Although the Company cannot predict with
certainty the outcome of the dispute at this time, the Company does not expect
that the ultimate liability, if any, resulting from the matter will have a
material adverse effect on its business or financial position.
RIGCO North America, LLC ("RIGCO"), a subsidiary of Tatham Offshore Inc.,
filed a lawsuit in Texas state court in July 1999 asserting various claims in
connection with shipyard and rig management contracts for two rigs managed on
behalf of RIGCO. As a result of the merger, Sedco Forex assumed liability for
these claims. RIGCO alleges breach of contract, negligence and fraud and
claims damages of approximately $51 million, plus exemplary damages,
attorney's fees and other unspecified damages. In August 1999, RIGCO filed for
voluntary bankruptcy protection in the U.S. federal bankruptcy court sitting
in Texas. As part of the bankruptcy proceedings, RIGCO filed a preference
action in September 1999. RIGCO seeks to avoid alleged transfers of
approximately $4.2 million and to have those funds returned to the RIGCO
bankruptcy estate. The Company disputes the allegations and is vigorously
defending the case. Although the Company cannot predict with certainty the
outcome of the dispute at this time, the Company does not expect that the
liability, if any, resulting from the matter will have a material adverse
effect on its business or financial position.
The Indian Customs Department, Mumbai, filed a "show cause notice" against
a subsidiary of Sedco Forex and various third parties on July 8, 1999. The
show cause notice alleges that the original entry into India and
47
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
other subsequent movements of the Trident 2 jackup rig operated by the
subsidiary constituted imports and exports for which proper customs procedures
were not followed and that customs duties should have been paid, and seeks
payment of customs duties, with interest and penalties, and confiscation of
the rig. In connection with these allegations, the customs authorities
confiscated the rig, which confiscation was stayed by application to the High
Court, Mumbai, until one month following the order of the Customs Department
in respect of the show cause notice. In January 2000, the Customs Department
issued an order in respect of the show cause notice, directing the Company to
pay approximately a $3.5 million redemption fee for the rig in lieu of
confiscation and approximately $1.5 million in penalties in addition to the
amount of customs duties owed, which were unspecified in the order. The
Company disputes the ruling and is vigorously defending the case. In February
2000, the Company filed an appeal with the Customs, Excise, Gold (Exchange),
Appellate Tribunal (CEGAT) and an application with the High Court in Mumbai to
have the confiscation of the rig stayed pending the outcome of the appeal. The
Company does not expect that the ultimate liability, if any, resulting from
the matter will have a material adverse effect on its business or financial
position.
In January 2000, an anchor from one of the Company's drilling rigs was
accidentally released as a result of an anchor winch failure while the rig was
under tow to a drilling location in the U.S. Gulf of Mexico. The incident
resulted in the release of hydrocarbons from the damaged section of the
pipeline, damage to offshore facilities, including a crude oil pipeline, and
the shutdown of the pipeline and affected production platforms. All
appropriate governmental authorities were notified, and the Company cooperated
fully with the operator and relevant authorities in support of the remediation
efforts. Following the incident, the operator of the pipeline and certain
other joint owners and affected producers have notified the Company that they
consider the Company liable for the resulting damages. The Company expects
that existing insurance will substantially cover any potential liability
associated with this matter.
Other--The Company has other contingent liabilities resulting from
litigation, claims and commitments incidental to the ordinary course of
business. Management believes that the probable resolution of such
contingencies will not materially affect the business or financial position of
the Company.
Note 11--Stock-Based Compensation Plans
Prior to the spin-off, key employees of Sedco Forex were granted stock
options at various dates under the Schlumberger stock option plans. For all of
the stock options granted under such plans, the exercise price of each option
equaled the market price of Schlumberger stock on the date of grant; each
option's maximum term was ten years, and they generally vested in 20 percent
increments over five years. Fully vested options held by Sedco Forex employees
at the date of the spin-off will lapse in accordance with their provisions.
Non-vested options were terminated and fully vested stock options to purchase
ordinary shares of Transocean Sedco Forex Inc. were granted under a new plan
(the "SF Plan"). Certain Sedco Forex employees did not join the Company;
therefore, their options remained unchanged under the Schlumberger stock
option plans.
Incentive Plan--The Company has an incentive plan for key employees and
outside directors (the "Incentive Plan"). Under the Incentive Plan, awards can
be granted in the form of stock options, restricted stock, stock appreciation
rights ("SARs") and cash performance awards. Under the Incentive Plan, the
Company is authorized to grant up to (i) 12.9 million ordinary shares to
employees; (ii) 400,000 ordinary shares to outside directors; and (iii)
250,000 freestanding SARs to employees or directors. Options issued under the
Incentive Plan have a ten-year term and become exercisable in three equal
annual installments after the date of grant. On December 31, 1999, all
unvested stock options and SARs and all unvested restricted shares granted
after April 1996 became fully vested as a result of the merger. At December
31, 1999, there were 8.6 million total shares available for future grants.
48
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
The following table summarizes option activities:
<TABLE>
<CAPTION>
Weighted-
Number of Average
Shares Exercise
Under Option Price
------------ ---------
<S> <C> <C>
Schlumberger Options
Outstanding at December 31, 1996...................... 720,400 $33.18
Granted............................................... 167,000 81.51
Exercised............................................. (89,080) 30.43
--------- ------
Outstanding at December 31, 1997...................... 798,320 43.60
Granted............................................... 14,500 78.38
Exercised............................................. (49,900) 30.31
--------- ------
Outstanding at December 31, 1998...................... 762,920 45.13
Granted............................................... 121,250 56.83
Exercised............................................. (216,616) 33.38
Unvested options terminated........................... (282,000) 61.23
Options retained by Schlumberger...................... (385,554) 48.56
--------- ------
-- --
========= ======
Transocean Sedco Forex Inc. Options
Options outstanding at time of merger................. 2,747,773 25.04
Options issued under the SF Plan...................... 491,645 34.09
Options issued under the Incentive Plan............... 20,000 33.69
--------- ------
Outstanding at December 31, 1999...................... 3,259,418 $26.46
========= ======
Exercisable at December 31, 1997...................... 367,220 $31.28
Exercisable at December 31, 1998...................... 444,220 $35.80
Exercisable at December 31, 1999...................... 3,239,418 $26.41
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Range of Weighted-Average ---------------------------- ----------------------------
Exercise Remaining Number Weighted-Average Number Weighted-Average
Prices Contractual Life Outstanding Exercise Price Outstanding Exercise Price
-------- ---------------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$ 8.38--$19.17 4.69 years 570,645 $ 9.99 570,645 $ 9.99
$23.44--$34.63 7.96 years 2,115,914 $25.98 2,095,914 $25.90
$36.94--$56.31 8.11 years 572,859 $44.64 572,859 $44.64
</TABLE>
On December 31, 1999, there were 135,057 restricted shares and 86,585 stock
appreciation rights outstanding under the Incentive Plan.
Stock Purchase Plan--The Company provides a stock purchase plan (the "Stock
Purchase Plan") for certain full-time employees. Under the terms of the Stock
Purchase Plan, employees can choose each year to have between two and twenty
percent of their annual base earnings withheld to purchase up to $25,000 of
the Company's ordinary shares. The purchase price of the stock is 85 percent
of the lower of its beginning-of-year or end-of-year market price. Up to
750,000 ordinary shares are reserved for issuance pursuant to the Plan.
49
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
As discussed in Note 2, APB 25 and related interpretations are applied in
accounting for stock-based compensation plans. If compensation expense for
stock options granted under Schlumberger stock option plans was recognized
using the alternative fair value method of accounting under SFAS No. 123, net
income and unaudited pro forma earnings per share would have been reduced to
the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------
1999 1998 1997
------- -------- --------
(In thousands)
<S> <C> <C> <C>
Net Income:
As Reported..................................... $58,103 $341,578 $260,455
Pro Forma....................................... 56,274 339,537 259,244
Unaudited Pro Forma Earnings Per Share:
Basic
As Reported..................................... $ 0.53 $ 3.12 $ 2.38
SFAS 123 Pro Forma.............................. 0.51 3.10 2.37
Diluted
As Reported..................................... $ 0.53 $ 3.12 $ 2.38
SFAS 123 Pro Forma.............................. 0.51 3.10 2.36
</TABLE>
The above pro forma information is not indicative of future pro forma
results. The fair value of each option grant under the Schlumberger stock
option plans is estimated on the date of grant using the multiple option
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1999, 1998 and 1997, respectively: dividend
yields of 0.75 percent; expected volatility of 26-27 percent, 21-25 percent
and 21 percent; risk free interest rates of 4.86-5.22 percent, 4.35-5.62
percent and 5.80-6.77 percent; and expected lives of 5.60 years, 5.02 and 5.09
years. The weighted-average fair value of options granted was $18.31, $23.18
and $24.04 for the years ended December 31, 1999, 1998 and 1997, respectively.
Note 12--Retirement Plans and Other Postemployment Benefits
Qualified Defined Benefit Pension Plans--Prior to the spin-off of Sedco
Forex, Schlumberger sponsored several defined benefit pension plans that
covered substantially all U.S. employees (the "Sedco Forex Plans"). Pursuant
to the distribution agreement (see Note 3), Schlumberger and the Company
entered into an employee matters agreement concerning personnel and employee
benefit matters. Pursuant to this agreement, Schlumberger retained the
benefit-related liabilities of former Sedco Forex employees under the Sedco
Forex Plans. The benefits under these plans are based on years of service and
compensation on a career-average pay basis. These plans are substantially
fully funded with trustees in respect to past and current service. Charges to
expense were based upon costs computed by independent actuaries. The funding
policy is to contribute annually amounts that are allowable for U.S. federal
income tax purposes. These contributions are intended to provide for benefits
earned to date and those expected to be earned in the future.
50
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
The change in benefit obligation, fair value of plan assets and funded
status for the Sedco Forex Plans for the year ended December 31, 1998 is shown
in the table below. These changes are not presented for the year ended
December 31, 1999 because Schlumberger retained the benefit obligation and
plan assets related to the Sedco Forex Plans.
<TABLE>
<CAPTION>
Pension Benefits
----------------
December 31,
1998
----------------
(In thousands)
<S> <C>
Change in benefit obligation
Benefit obligation at beginning of year..................... $6,297
Service cost................................................ 396
Interest cost............................................... 460
Actuarial losses............................................ 467
Benefits paid............................................... (277)
------
Benefit obligation at end of year......................... 7,343
------
Change in plan assets
Fair value of plan assets at beginning of year.............. 6,336
Actual return on plan assets................................ 1,049
Company contributions....................................... 315
Benefits paid............................................... (277)
------
Fair value of plan assets at end of year.................. 7,423
------
Funded status............................................... 80
Unrecognized net transition asset........................... (17)
Unrecognized net actuarial gain............................. (366)
Unrecognized prior service cost............................. 402
------
Prepaid pension cost........................................ $ 99
======
</TABLE>
<TABLE>
<CAPTION>
Pension Benefits
------------------
As of
December 31,
------------
Weighted-average assumptions of the Sedco Forex Plans 1999 1998
----------------------------------------------------- -------- --------
<S> <C> <C>
Discount rate........................................... 7.75% 7.5%
Expected return on plan assets.......................... 9.0% 9.0%
Rate of compensation increase........................... 4.5% 4.5%
</TABLE>
Net pension cost for the Sedco Forex Plans included the following
components:
<TABLE>
<CAPTION>
Pension Benefits
-------------------
Years ended
December 31,
-------------------
1999 1998 1997
----- ----- -----
(In thousands)
<S> <C> <C> <C>
Components of Net Periodic Benefit Cost
Service cost............................................ $ 689 $ 396 $ 243
Interest cost........................................... 548 460 416
Expected return on plan assets.......................... (575) (485) (392)
Amortization of transition asset........................ (6) (6) (6)
Amortization of prior service cost...................... 44 43 40
Early retirement charge................................. 134 -- --
----- ----- -----
Benefit cost.......................................... $ 834 $ 408 $ 301
===== ===== =====
</TABLE>
51
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Pursuant to the employee matters agreement, Schlumberger will continue to
maintain various non-U.S. defined benefit and defined contribution plans.
Expenses for these funds were immaterial for each of the three years ended
December 31, 1999.
The Company provides a qualified defined benefit pension plan (the
"Retirement Plan"), which covers substantially all U.S. employees of the
Company. The Company also maintains a plan (the "Supplemental Benefit Plan")
which provides certain eligible employees with benefits in excess of those
allowed under the Retirement Plan (together, the "U.S. Plans"). Annual
retirement benefits under the U.S. Plans are based on a combination of
participants' years of service and compensation. The amount of funding to the
Retirement Plan is determined on a year-to-year basis, with amounts consistent
with minimum and maximum funding requirements established by various
governmental bodies. The Supplemental Benefit Plan is not funded.
In addition, the Company provides several defined benefit plans, primarily
group pension schemes with life insurance companies covering non-U.S.
employees (the "non-U.S. Plans"). Benefits are based on compensation once
eligibility is reached. Certain of the pension schemes are financed in part by
contributions from employees. Employer contributions are determined primarily
by the respective life insurance companies based upon plan terms. For
insurance-based schemes, annual premium payments are considered to represent a
reasonable approximation of the service costs of benefits earned during the
period, and the amounts owed for the employer's portion of the social security
tax are expensed in the period of payment. The U.S. Plans and the non-U.S.
Plans comprise the pension benefits provided by the Company (together, the
"TSF Plans").
The aggregate benefit obligation, fair value of plan assets and funded
status of the TSF Plans were $129.1 million, $135.4 million and $6.3 million,
respectively, at December 31, 1999.
The aggregate projected benefit obligation and fair value of plan assets
for the TSF Plans with projected benefit obligations in excess of plan assets
were $42.2 million and $11.7 million, respectively, at December 31, 1999.
The aggregate accumulated benefit obligation and fair value of plan assets
for the TSF Plans with accumulated benefit obligations in excess of plan
assets were $16.2 million and $5.4 million, respectively, at December 31,
1999.
Postretirement Benefits Other Than Pensions--Prior to the spin-off, Sedco
Forex provided certain health care benefits to former employees who have
retired under the Sedco Forex Plans (the "Sedco Forex Other Benefit Plan").
52
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
The change in benefit obligation for the Sedco Forex Other Benefit Plan for
the year ended December 31, 1998 is shown in the table below. This change is
not presented for the year ended December 31, 1999 because Schlumberger
retained the postretirement benefit obligation for retirees and fully eligible
participants of the plan, which amounted to approximately $4 million at
December 31, 1999.
<TABLE>
<CAPTION>
Other Benefits
--------------
December 31,
1998
--------------
(In thousands)
<S> <C>
Change in benefit obligation
Benefit obligation at beginning of year....................... $4,056
Service cost.................................................. 136
Interest cost................................................. 295
Actuarial losses.............................................. 283
Benefits paid................................................. (232)
------
Benefit obligation at end of year............................. 4,538
------
Unrecognized net actuarial gain............................... 972
Unrecognized prior service cost............................... 68
------
Postretirement benefit liability............................ $5,578
======
</TABLE>
<TABLE>
<CAPTION>
Other Benefits
----------------
As of
December 31,
----------------
Weighted-average assumptions of the Sedco Forex Other
Benefit Plans 1999 1998
----------------------------------------------------- ------- -------
<S> <C> <C>
Discount rate............................................ 7.75% 7.5%
</TABLE>
For measurement purposes, the rate of increase in the per capita costs of
covered health care benefits was assumed to be 6.7 percent in 1999.
Net cost for the Sedco Forex Other Benefit Plan included the following
components:
<TABLE>
<CAPTION>
Other Benefits
----------------
Years ended
December 31,
----------------
1999 1998 1997
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Components of Net Periodic Benefit Cost
Service cost............................................... $207 $136 $ 80
Interest cost.............................................. 346 295 291
Amortization of prior service cost......................... (4) (4) (4)
Amortization of unrecognized net gain...................... (41) (61) (67)
---- ---- ----
$508 $366 $300
==== ==== ====
</TABLE>
The Company maintains plans that provide for non-contractual limited health
care and life insurance benefits to U.S. office employees and certain other
U.S. field employees when they retire (the "TSF Other Benefit Plans").
The aggregate accumulated benefit obligation, fair value of plan assets and
funded status of the TSF Other Benefit Plans were $8.7 million, $0.6 million
and $(8.1) million at December 31, 1999.
53
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Defined Contribution Plans--The Company provides a defined contribution
pension and savings plan covering senior non-U.S. field employees working
outside the United States. Contributions and costs are determined as 4.5
percent to 6.5 percent of each covered employee's salary, based on years of
service. In addition, the Company sponsors a U.S. defined contribution savings
plan. It covers certain employees and limits Company contributions to no more
than 4.5 percent of each covered employee's salary, based on the employee's
contribution. The Company also sponsors various other defined contribution
plans worldwide.
Deferred Compensation Plan--The Company provides a Deferred Compensation
Plan (the "Plan"). The Plan's primary purpose is to provide tax-advantageous
asset accumulation for a select group of management, highly compensated
employees and non-employee members of the Board of Directors of the Company.
Eligible employees who enroll in the Plan may elect to defer up to a
maximum of 90 percent of base salary, 100 percent of any future performance
awards, 100 percent of any special payments and 100 percent of directors'
meeting fees and annual retainers; however, the Administrative Committee
(three individuals appointed by the Compensation Committee of the Board of
Directors) may, at its discretion, establish minimum amounts that must be
deferred by anyone electing to participate in the plan. In addition, the
Compensation Committee may authorize employer contributions to participants,
and the Chief Executive Officer of the Company (with Compensation Committee
approval) may enter into "Deferred Compensation Award Agreements" with such
participants.
Note 13--Investments in and Advances to Joint Ventures
The Company has a 25 percent interest in Sea Wolf Drilling Limited ("Sea
Wolf"). In September 1997, Sedco Forex sold two semisubmersible rigs, the
Drillstar and the Sedco Explorer, to Sea Wolf. The rigs are operated by the
Company under bareboat charters. The sale resulted in a deferred gain of $157
million which is being amortized to operating and maintenance expense over the
six year life of the bareboat charter.
The Company also has a 50 percent interest in Overseas Drilling Limited
("ODL"), which owns the drillship Joides Resolution. The drillship is
contracted to perform drilling and coring operations in deep waters worldwide
for the purpose of scientific research. The Company manages and operates the
vessel on behalf of ODL.
The Company has a 24.89 percent interest in Arcade Drilling as ("Arcade"),
a Norwegian offshore drilling company. Arcade owns two high specification
semisubmersible rigs, the Henry Goodrich and the Paul B. Loyd, Jr. The
investment in Arcade was recorded at fair value as part of the merger.
Note 14--Segments, Geographical Analysis and Major Customers
The Company operates in one industry segment, offshore contract drilling
services. For the years ended December 31, 1999, 1998 and 1997, the Royal
Dutch Shell Group accounted for approximately 16.2 percent, 19.2 percent, and
24.1 percent, respectively, of total revenue. The loss of this or other
significant customers could have a material adverse effect on the Company's
results of operations.
54
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Revenues and long-lived assets by country are as follows:
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------
1999 1998 1997
---------- ---------- --------
(In thousands)
<S> <C> <C> <C>
Operating Revenues
United Kingdom............................... $ 124,918 $ 344,061 $312,141
Indonesia.................................... 88,158 124,904 104,229
Nigeria...................................... 69,326 118,935 97,140
Australia.................................... 62,347 91,108 78,184
Brazil....................................... 60,607 79,780 40,980
Angola....................................... 53,107 75,529 73,781
Rest of the World............................ 189,773 256,206 184,879
---------- ---------- --------
Total Operating Revenues..................... $ 648,236 $1,090,523 $891,334
========== ========== ========
Long-Lived Assets
United States................................ $1,372,224 $ 37,658 $ 31,735
Norway....................................... 705,122 -- --
United Kingdom............................... 630,086 148,808 147,936
France....................................... 492,400 225,000 --
Brazil....................................... 386,568 84,126 100,174
Angola....................................... 25,740 51,552 62,687
Congo........................................ 35,519 59,785 73,616
Thailand..................................... 3,055 3,318 73,951
Goodwill(a).................................. 1,067,594 -- --
Other........................................ 862,996 347,979 162,175
---------- ---------- --------
Total Long-Lived Assets...................... $5,581,304 $ 958,226 $652,274
========== ========== ========
</TABLE>
- --------
(a)Goodwill resulting from the merger has not been allocated to individual
countries.
A substantial portion of the Company's assets are mobile. Asset locations
at the end of the period are not necessarily indicative of the geographic
distribution of the earnings generated by such assets during the periods.
The Company's international operations are subject to certain political and
other uncertainties, including risks of war and civil disturbances (or other
events that disrupt markets), expropriation of equipment, repatriation of
income or capital, taxation policies, and the general hazards associated with
certain areas in which operations are conducted.
Note 15--1999 and 1998 Charges
Operating and maintenance expense for the years ended December 31, 1999 and
1998 included charges totaling $42.0 million and $23.4 million, respectively.
Reduced exploration and development activity by customers, resulting from a
period of low oil prices from late 1997 through early 1999 and industry
consolidation over the same time period, resulted in a slowdown in the
offshore drilling industry during 1998 and 1999. As a result of this slowdown
approximately 1000 operating personnel were determined to be redundant, and
charges associated with termination and severance benefits of $13.2 million
and $3.6 million were recognized during 1999 and 1998, respectively.
Substantially all of these employees have been terminated and severance and
termination costs have been paid as of December 31, 1999. Provisions for
potential legal claims of $28.8 million and $10.0 million were recognized
during 1999 and 1998, respectively (see Note 10). Asset impairment charges of
$9.8 million were recognized in 1998 related to assets retired from the active
fleet.
55
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
Note 16--Related Party Transactions
In certain countries prior to the merger, Sedco Forex participated in
Schlumberger's centralized treasury and cash processes. In these countries,
cash was managed either through zero balance accounts or an interest-bearing
offsetting mechanism. Cash disbursements for operations, acquisitions and
other investments were funded as needed from Schlumberger.
Certain Schlumberger corporate expenses, including centralized research and
engineering, legal, accounting, employee benefits, real estate, insurance,
information technology services, treasury and other corporate and
infrastructure costs have been allocated to Sedco Forex on bases that
Schlumberger and Sedco Forex considered to be a reasonable reflection of the
utilization of services provided or the benefit received by Sedco Forex. The
allocation methods include relative revenues, headcount, square footage,
transaction processing costs, adjusted operating expenses and others. These
allocations resulted in charges being recorded in the combined statements of
operations, as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1999 1998 1997
-------- ------- -------
(In thousands)
<S> <C> <C> <C>
Operating and maintenance.......................... $ 56,184 $78,350 $44,539
General and administrative......................... 7,978 9,433 4,416
-------- ------- -------
$ 64,162 $87,783 $48,955
======== ======= =======
</TABLE>
On December 31, 1999, the Company repaid indebtedness to Schlumberger in
the aggregate amount of $303.6 million with the proceeds from the $400 million
unsecured five-year term loan (see Note 5). At December 31, 1998, Sedco Forex
had long-term debt due to Schlumberger of $407 million. These loans bore
interest at rates based on fifty basis points over LIBOR and were used to
finance both Sedco Forex's existing fleet of rigs and ongoing major
construction projects. Interest expense on related party indebtedness
aggregated $26 million, $11 million and $10 million for 1999, 1998 and 1997,
respectively.
The related party receivables and payables balances included in the
combined balance sheets represent amounts arising from transactions entered
into by the Company to settle outstanding customer and trade receivables and
payables with other Schlumberger entities.
Note 17--Unaudited Pro Forma Earnings Per Share
Sedco Forex did not have a separate capital structure prior to the spin-off
from Schlumberger and merger with Transocean Offshore Inc. Accordingly,
historical earnings per share has not been presented (see Note 1). Unaudited
pro forma earnings per share for each period presented was calculated using
the Transocean Sedco Forex shares issued pursuant to the merger agreement and
the dilutive effect of Transocean Sedco Forex stock options granted under the
SF Plan (see Note 11), as applicable.
56
<PAGE>
TRANSOCEAN SEDCO FOREX INC. AND SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
The reconciliation of the numerator and denominator used for the
computation of basic and diluted pro forma earnings per share is as follows:
<TABLE>
<CAPTION>
Years ended December 31,
--------------------------------------
1999 1998 1997
------------ ------------ ------------
(In thousands, except per share data)
<S> <C> <C> <C>
Net income for basic and diluted
earnings per share..................... $ 58,103 $ 341,578 $ 260,455
------------ ------------ ------------
Pro forma shares for basic earnings per
share.................................. 109,564 109,564 109,564
Effect of dilutive securities:
Employee stock options................ 72 72 72
------------ ------------ ------------
Adjusted pro forma shares and assumed
conversions for diluted earnings
per share.............................. 109,636 109,636 109,636
============ ============ ============
Unaudited pro forma basic earnings per
share.................................. $ 0.53 $ 3.12 $ 2.38
------------ ------------ ------------
Unaudited pro forma diluted earnings per
share.................................. $ 0.53 $ 3.12 $ 2.38
------------ ------------ ------------
</TABLE>
Note 18--Quarterly Results (Unaudited)
Shown below are selected unaudited quarterly data:
<TABLE>
<CAPTION>
Quarter
---------------------------------------
First Second Third Fourth
--------- --------- --------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
1999
Operating Revenues.................. $ 189,158 $ 162,432 $ 165,250 $ 131,396
Operating Income(a)................. 7,767 32,402 29,293 (20,618)
Net Income(a)....................... 11,336 27,358 31,804 (12,395)
Unaudited Pro Forma Earnings Per
Share(a)(c)
Basic............................. $ 0.10 $ 0.25 $ 0.29 $ (0.11)
Diluted........................... 0.10 0.25 0.29 (0.11)
Unaudited Pro Forma Shares
Outstanding(c)
Basic............................. 109,564 109,564 109,564 109,564
Diluted........................... 109,636 109,636 109,636 109,636
1998
Operating Revenues.................. $ 257,935 $ 276,453 $ 290,093 $ 266,042
Operating Income(b)................. 83,442 104,490 104,780 84,553
Net Income(b)....................... 67,264 91,001 92,199 91,114
Unaudited Pro Forma Earnings Per
Share(b)(c)
Basic............................. $ 0.61 $ 0.83 $ 0.84 $ 0.83
Diluted........................... 0.61 0.83 0.84 0.83
Unaudited Pro Forma Shares
Outstanding(c)
Basic............................. 109,564 109,564 109,564 109,564
Diluted........................... 109,636 109,636 109,636 109,636
</TABLE>
- --------
(a) First quarter 1999 included charges totaling $42.0 million ($32.5 million
after taxes) for severance costs and provisions for potential legal
claims. Fourth quarter 1999 included charges totaling $13.4 million for
provisions for doubtful accounts receivable in West Africa and contract
penalties.
(b) Third quarter 1998 included charges totaling $13.4 million after taxes for
severance costs and asset impairments. Fourth quarter 1998 included a $7.0
million after tax provision for a potential legal claim.
(c) Unaudited pro forma earnings per share calculated using the Transocean
Sedco Forex shares and options issued pursuant to the merger agreement.
57
<PAGE>
ITEM 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
The Company has not had a change in or disagreement with its accountants
within twenty-four months prior to the date of its most recent financial
statements or in any period subsequent to such date.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
ITEM 11. Executive Compensation
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
ITEM 13. Certain Relationships and Related Transactions
The information required by Items 10, 11, 12 and 13 is incorporated herein
by reference to the Company's definitive proxy statement for its 2000 annual
general meeting of shareholders, which will be filed with the Securities and
Exchange Commission pursuant to Regulation 14A under the Securities Exchange
Act of 1934 within 120 days of December 31, 1999. Certain information with
respect to the executive officers of the Company is set forth in Item 4 of
this annual report under the caption "Executive Officers of the Registrant."
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)Index to Financial Statements, Financial Statement Schedules and
Exhibits
(1) Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Included in Part II of this report:
Report of Independent Auditors......................................... 30
Report of Independent Accountants...................................... 31
Combined Statements of Operations...................................... 32
Combined Balance Sheets................................................ 33
Combined Statements of Equity.......................................... 34
Combined Statements of Cash Flows...................................... 35
Notes to Combined Financial Statements................................. 36
</TABLE>
Financial statements of 50 percent or less owned joint ventures are not
presented herein because such joint ventures do not meet the significance
test.
58
<PAGE>
(2) Financial Statement Schedules
Transocean Sedco Forex and Subsidiaries
Schedule II--Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Additions
---------------------------------
Balance at Charged to Other
Beginning Charged to Costs Accounts-- Deductions-- Balance at
of Period and Expenses Describe Describe End of Period
---------- ---------------- ---------------- ------------ -------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1997
Reserves and allowances
deducted from asset
accounts:
Allowance for doubtful
accounts receivable.. 1,137 605 80(3) 1,662
Allowance for obsolete
materials and
supplies............. 9,348 193 315(4) 9,226
Year Ended December 31,
1998
Reserves and allowances
deducted from asset
accounts:
Allowance for doubtful
accounts receivable.. 1,662 2,216 3,049(3) 829
Allowance for obsolete
materials and
supplies............. 9,226 1,962 994(4) 10,194
Year Ended December 31,
1999
Reserves and allowances
deducted from asset
accounts:
Allowance for doubtful
accounts receivable.. 829 13,839 12,564(1) 123(3) 27,109
Allowance for obsolete
materials and
supplies............. 10,194 1,795 12,582(2) 1,439(4) 23,132
</TABLE>
- --------
(1) Amount includes $10,464 relating to the allowance for doubtful accounts
receivable assumed in the merger with Transocean Offshore Inc. and $2,100
in receivable reserves reclassifications.
(2) Amount includes $12,582 relating to the allowance for obsolete materials
and supplies assumed in the merger with Transocean Offshore Inc.
(3) Uncollectible accounts receivable written off, net of recoveries.
(4) Obsolete materials and supplies written off, net of scrap.
Other schedules are omitted either because they are not required or are not
applicable, or because the required information is included in the financial
statements or notes thereto.
59
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON THE
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Schlumberger Limited
Our audits of the combined financial statements referred to in our report
dated August 6, 1999 appearing in the 1999 Annual Report to Shareholders of
Transocean Sedco Forex Inc. (which report and combined financial statements
are incorporated by reference in this Annual Report on Form 10-K) also
included an audit of the financial statement schedule listed in Item 14(a)(2)
of this Form 10-K. In our opinion, this financial statement schedule presents
fairly, in all material respects, the information set forth therein, as of and
for the two years ended December 31, 1998, when read in conjunction with the
related combined financial statements.
PricewaterhouseCoopers LLP
New York, New York
August 6, 1999
60
<PAGE>
(3) Exhibits
The following exhibits are filed in connection with this Report:
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
2.1 Agreement and Plan of Merger dated as of July 12, 1999 among
Schlumberger Limited, Sedco Forex Holdings Limited, Transocean Offshore
Inc. and Transocean SF Limited (incorporated by reference to Annex A to
the Joint Proxy Statement/Prospectus dated October 27, 1999 included in
the Company's Registration Statement on Form S-4 (Registration No. 333-
89727))
2.2 Distribution Agreement dated as of July 12, 1999 between Schlumberger
Limited and Sedco Forex Holdings Limited (incorporated by reference to
Annex B to the Joint Proxy Statement/Prospectus dated October 27, 1999
included in the Company's Registration Statement on Form S-4
(Registration No. 333-89727))
2.3 Agreement and Plan of Merger and Conversion dated as of March 12, 1999
between Transocean Offshore Inc. and Transocean Offshore (Texas) Inc.
(incorporated by reference to Exhibit 2.1 to the Registration Statement
on Form S-4 of Transocean Offshore (Texas) Inc. filed on April 8, 1999
(Registration No. 333-75899))
3.1 Memorandum of Association of Transocean Sedco Forex Inc., as amended
(incorporated by reference to Exhibit 4.1 to the Company's Form 8-K
dated January 12, 2000)
3.2 Articles of Association of Transocean Sedco Forex Inc., as amended
(incorporated by reference to Exhibit 4.2 to the Company's Form 8-K
dated January 12, 2000)
4.1 Credit Agreement dated as of July 30, 1996 among Sonat Offshore
Drilling Inc., the Lenders party thereto, ABN AMRO Bank, as Agent, and
the Co-Agents listed therein (incorporated by reference to Exhibit 10-
(1) to the Company's Form 10-Q for the quarter ending June 30, 1996)
4.2 First Amendment to Credit Agreement dated as of April 24, 1997
(incorporated by reference to Exhibit 4.1 to the Company's Form 10-Q
for the quarter ending March 31, 1997)
4.3 Second Amendment to Credit Agreement dated as of December 19, 1997
(incorporated by reference to Exhibit 4.4 to the Company's Form 10-K
for the year ending December 31, 1997)
4.4 Third Amendment to Credit Agreement dated May 22, 1998 (incorporated by
reference to Exhibit 4.9 to the Company's Form 10-Q for the quarter
ending June 30, 1998)
+4.5 Secured Loan Agreement dated as of December 21, 1999 among Transocean
Enterprise Inc., the Liquidity Providers party thereto and ABN AMRO
Bank, as Agent and Enhancer
+4.6 Credit Agreement dated as of December 16, 1999 among Transocean
Offshore Inc., the Lenders party thereto, and SunTrust Bank, Atlanta,
as Agent
4.7 Indenture dated as of April 15, 1997 between the Company and Texas
Commerce Bank National Association, as trustee (incorporated by
reference to Exhibit 4.1 to the Company's Form 8-K dated April 29,
1997)
4.8 First Supplemental Indenture dated as of April 15, 1997 between the
Company and Texas Commerce Bank National Association, as trustee,
supplementing the Indenture dated as of April 15, 1997 (incorporated by
reference to Exhibit 4.2 to the Company's Form 8-K dated April 29,
1997)
4.9 Second Supplemental Indenture dated as of May 14, 1999 between the
Company and Chase Bank of Texas, National Association, as trustee
(incorporated by reference to Exhibit 4.5 to the Company's Post-
Effective Amendment No. 1 to Registration Statement on Form S-3
(Registration No. 333-59001-99))
4.10 Form of Note (incorporated by reference to Exhibit 4.3 to the Company's
Form 8-K dated April 29, 1997)
</TABLE>
61
<PAGE>
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
4.11 Form of Debenture (incorporated by reference to Exhibit 4.4 to the
Company's Form 8-K dated April 19, 1997)
10.1 Tax Sharing Agreement between Sonat Inc. and Sonat Offshore Drilling
Inc. dated June 3, 1993 (incorporated by reference to Exhibit 10-(3)
to the Company's Form 10-Q for the quarter ending June 30, 1993)
*10.2 Performance Award and Cash Bonus Plan of Sonat Offshore Drilling Inc.
(incorporated by reference to Exhibit 10-(5) to the Company's Form 10-
Q for quarter ending June 30, 1993)
*10.3 Form of Sonat Offshore Drilling Inc. Executive Life Insurance Program
Split Dollar Agreement and Collateral Assignment Agreement
(incorporated by reference to Exhibit 10-(9) to the Company's Form 10-
K for the year ending December 31, 1993)
10.4 Purchase Agreement dated as of April 1, 1987 among Sonat Offshore
Drilling Inc., Sonat Offshore Ventures Inc., Dixilyn-Field Drilling
Company and Panhandle Eastern Corporation (incorporated by reference
to Exhibit 10-(9) to the Company's Registration Statement on Form S-1
(Registration No. 33-60992) dated April 13, 1993)
10.5 Agreement dated as of June 14, 1995, among Sonat Offshore Ventures
Inc., Sonat Offshore Drilling Inc., Dixilyn-Field Drilling Company and
Panhandle Eastern Corporation (incorporated by reference to Exhibit
10-(8) to the Company's Form 10-K for the year ending December 31,
1995)
*10.6 Employee Stock Purchase Plan, as amended and restated effective
January 1, 2000 (incorporated by reference to Exhibit 4.4 to the
Company's Registration Statement on Form S-8 (Registration No.
333-94551) filed January 12, 2000)
+*10.7 Long-Term Incentive Plan of Transocean Sedco Forex Inc., as amended
and restated effective January 1, 2000
*10.9 Form of Employment Agreement dated May 14, 1999 between J. Michael
Talbert, W. Dennis Heagney, Robert L. Long, Jon C. Cole, Donald R.
Ray, Eric B. Brown, Barbara S. Koucouthakis and Alan A. Broussard,
individually, and the Company (incorporated by reference to Exhibit
10.1 to the Company's Form 10-Q for the quarter ending June 30, 1999)
+*10.10 Deferred Compensation Plan of Transocean Offshore Inc., as amended and
restated effective January 1, 2000
10.12 Employment Matters Agreement dated as of December 13, 1999 among
Schlumberger Limited, Sedco Forex Holdings Limited and Transocean
Offshore Inc. (incorporated by reference to Exhibit 4.3 to the
Company's Registration Statement on Form S-8 (Registration No. 333-
94551) filed January 12, 2000)
*10.13 Sedco Forex Employees Option Plan of Transocean Sedco Forex Inc.
effective December 31, 1999 (incorporated by reference to Exhibit 4.5
to the Company's Registration Statement on Form S-8 (Registration No.
333-94569) filed January 12, 2000)
+21 Subsidiaries of the Company
+23.1 Consent of Ernst & Young LLP
+23.2 Consent of PricewaterhouseCoopers LLP
+24 Powers of Attorney
+27(1) Financial Data Schedule
</TABLE>
- --------
* Compensatory plan or arrangement.
+ Filed herewith.
Exhibits listed above as previously having been filed with the Securities
and Exchange Commission are incorporated herein by reference pursuant to Rule
12b-32 under the Securities Exchange Act of 1934 and made a part hereof with
the same effect as if filed herewith.
62
<PAGE>
Certain instruments relating to long-term debt of the Company and its
subsidiaries have not been filed as exhibits since the total amount of
securities authorized under any such instrument does not exceed 10 percent of
the total assets of the Company and its subsidiaries on a combined basis. The
Company agrees to furnish a copy of each such instrument to the Commission upon
request.
(b) Reports on Form 8-K
During the quarter ended December 31, 1999 the Company filed a Current
Report on Form 8-K on November 9, 1999. Items 5 and 7 were reported and the
following financial statements were filed: Unaudited Condensed Pro Forma
Combined Financial Statements for Transocean Sedco Forex Inc. and Sedco Forex
Holdings Limited Combined Financial Statements.
63
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on March 20, 2000.
TRANSOCEAN SEDCO FOREX INC.
/s/ Robert L. Long
By: _________________________________
Robert L. Long
Executive Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities indicated on March 20, 2000.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Victor E. Grijalva Chairman of the Board of Directors
______________________________________
Victor E. Grijalva
/s/ J. Michael Talbert President, Chief Executive Officer
______________________________________ and Director (Principal Executive
J. Michael Talbert Officer)
/s/ Robert L. Long Executive Vice President and Chief
______________________________________ Financial Officer
Robert L. Long (Principal Financial Officer)
/s/ Ricardo Rosa Vice President and Controller
______________________________________ (Principal Accounting Officer)
Ricardo Rosa
* Director
______________________________________
Richard D. Kinder
* Director
______________________________________
Ronald L. Kuehn, Jr.
* Director
______________________________________
Arthur Lindenauer
* Director
______________________________________
Martin B. McNamara
* Director
______________________________________
Roberto Monti
* Director
______________________________________
Alain Roger
* Director
_____________________________________
Kristian Siem
* Director
_____________________________________
Ian C. Strachan
</TABLE>
/s/ William E. Turcotte
*By______________________________
William E. Turcotte
(Attorney-in-Fact)
64
<PAGE>
EXHIBIT 4.5
================================================================================
Secured Loan Agreement
(Amoco Contracts)
Dated as of December 21, 1999
among
Transocean Enterprise Inc.,
as the Borrower,
ABN AMRO Bank N.V.,
as the Agent and the Collateral Agent,
the Liquidity Providers
from time to time party hereto,
ABN AMRO Bank N.V.,
as the Enhancer,
and
Amsterdam Funding Corporation
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Article I Definitions.................................................... 1
Article II Loans to Borrower and Repayments............................... 21
Section 2.1. The Refinancing Loan........................................... 21
Section 2.2. Selection of Interest Rate Types and Interest Periods.......... 23
Section 2.3. Maturity of Loans.............................................. 24
Section 2.4. Optional Prepayments........................................... 25
Section 2.5. Mandatory Prepayments.......................................... 26
Section 2.6. Applicable Interest Rates...................................... 31
Section 2.7. Default Rate................................................... 32
Section 2.8. Fees and Other Costs and Expenses.............................. 32
Section 2.9. Reduction in Commitments....................................... 32
Section 2.10. The Note....................................................... 33
Section 2.11. Extensions of Scheduled Termination Date....................... 33
Article III Sales to and from Amsterdam; Allocations....................... 34
Section 3.1. Required Purchases from Amsterdam.............................. 34
Section 3.2. Allocations and Distributions.................................. 37
Article IV Indemnification................................................ 38
Section 4.1. Legal Fees, Other Costs and Indemnification.................... 38
Section 4.2. Change of Law.................................................. 40
Section 4.3. Unavailability of Deposits or Inability to Ascertain LIBOR..... 41
Section 4.4. Increased Cost and Reduced Return.............................. 41
Section 4.5. Lending Offices................................................ 43
Section 4.6. Discretion of Lender as to Manner of Funding................... 43
Section 4.7. Withholding Taxes.............................................. 43
Article V Conditions Precedent........................................... 46
Section 5.1. Conditions to Closing.......................................... 46
Section 5.2. Conditions to Advance of Each Loan on Funding Date............. 48
Article VI Representations and Warranties................................. 49
Section 6.1. Representations and Warranties................................. 49
Article VII Covenants...................................................... 52
Section 7.1. Covenants of the Borrower...................................... 52
</TABLE>
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<TABLE>
<S> <C> <C>
Article VII Events of Default.............................................. 67
Section 8.1. Events of Default.............................................. 67
Section 8.2. Non-Bankruptcy Defaults........................................ 70
Section 8.3. Bankruptcy Defaults............................................ 71
Section 8.4. Notice of Default.............................................. 71
Article IX The Agents..................................................... 71
Section 9.1. Appointment and Authorization.................................. 71
Section 9.2. Delegation of Duties........................................... 71
Section 9.3. Exculpatory Provisions......................................... 71
Section 9.4. Reliance by Agent.............................................. 72
Section 9.5. Assumed Payments............................................... 72
Section 9.6. Notice of Defaults or Put Events............................... 72
Section 9.7. Non-Reliance on Agent and Other Lenders........................ 73
Section 9.8. Agent and Affiliates........................................... 73
Section 9.9. Indemnification................................................ 73
Section 9.10. Successor Agent................................................ 74
Article X Miscellaneous.................................................. 74
Section 10.1. Termination.................................................... 74
Section 10.2. Notices........................................................ 74
Section 10.3. Payments and Computations...................................... 75
Section 10.4. Setoff......................................................... 75
Section 10.5. Amendments, Waivers and Consents............................... 76
Section 10.6. Waivers........................................................ 76
Section 10.7. Successors and Assigns......................................... 77
Section 10.8. Participations and Assignments................................. 77
Section 10.9. Intended Tax Characterization.................................. 81
Section 10.10. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial 81
Section 10.11. Confidentiality................................................ 82
Section 10.12. Confidentiality of Agreement................................... 83
Section 10.13. Agreement Not to Petition...................................... 83
Section 10.14. Excess Funds................................................... 83
Section 10.15. No Recourse.................................................... 84
Section 10.16. Limitation of Liability........................................ 84
Section 10.17. Headings; Counterparts......................................... 84
Section 10.18. Cumulative Rights and Severability............................. 84
Section 10.19. Entire Agreement............................................... 85
Section 10.20. Change in Accounting Principles, Fiscal Year or Tax Laws....... 85
Section 10.21. Officer's Certificates......................................... 85
Section 10.22. Effect of Inclusion of Exceptions.............................. 85
Section 10.23. Non-Recourse Obligation........................................ 85
Section 10.24. Lease Securitization Facility.................................. 86
Section 10.25. Amoco Quiet Enjoyment; Transocean Replaced Parts............... 86
</TABLE>
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SCHEDULES DESCRIPTION
Schedule I Committed Lenders and Commitments of Committed Lenders
Schedule II Amortized Value of Vessels
Schedule 2.3 Scheduled Principal Payments and Vessel Amortization Payments
Schedule 6.1(r) Environmental Matters
EXHIBITS DESCRIPTION
Exhibit A Form of Borrowing Request
Exhibit B Form of Notification of Assignment from Amsterdam to the
Liquidity Providers and the Enhancer
Exhibit C Form of Notification of Assignment from the Liquidity Providers
and the Enhancer to Amsterdam
Exhibit 2.10 Form of Note
Exhibit 5.1B Form of Letter of Acceptance
Exhibit 10.8 Assignment Agreement
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SECURED LOAN AGREEMENT
(AMOCO CONTRACTS)
Secured Loan Agreement (Amoco Contracts), dated as of December 21, 1999,
among Transocean Enterprise Inc., a Delaware corporation (the "Borrower"), the
liquidity providers party hereto (the "Liquidity Providers"), Amsterdam Funding
Corporation, a Delaware corporation ("Amsterdam"), ABN AMRO Bank N.V., as
provider of the Program LOC (the "Enhancer"), and ABN AMRO Bank N.V., as agent
for the Lenders (the "Agent") and continuing its role as collateral agent (the
"Collateral Agent") originally established pursuant to the Secured Credit
Agreement.
The parties hereto agree as follows:
Article I
DEFINITIONS
The following terms used herein have the meanings set forth, or referred
to, below:
"ABN AMRO" means ABN AMRO Bank N.V. in its individual capacity and not in
its capacity as the Agent.
"Affiliate" means, for any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Person. For purposes of this definition, "control" means the power,
directly or indirectly, to either (i) vote ten percent (10%) or more of the
securities having ordinary voting power for the election of directors of a
Person or (ii) cause the direction of the management and policies of a Person.
"Agent" is defined in the first paragraph hereof.
"Agent's Account" means the Agent's account designated as such to the
Borrower and the Lenders by the Agent.
"Aggregate Commitment" means Two Hundred Thirty Nine Million Eight Hundred
Seventy Seven Thousand Fifty Six Dollars and 94/100 ($239,877,056.94), as such
amount may be reduced pursuant to Section 2.9.
"Aggregate Principal Amount" means, at any time, the sum of all Principal
Amounts then outstanding.
"Amoco" means Amoco Production Company, a Delaware corporation. Should
Amoco be succeeded by merger or consolidation, references in this Agreement and
the other Credit Documents to Amoco shall be deemed to be to the successor
corporation or other entity.
"Amoco Contracts" means the Amoco Drillship Contract and the Amoco Rig
Contract.
<PAGE>
"Amoco Drillship Contract" means that certain Amoco Production Company
Offshore Drilling/Workover/Completion Contract with respect to the Drillship
dated December 10, 1999, as amended, restated or supplemented from time to time.
"Amoco Letter of Acceptance" means a letter from Amoco accepting the
Drillship or the Rig, as the case may be, pursuant to the terms of the Amoco
Drillship Contract or the Amoco Rig Contract, as the case may be, each such
letter to be substantially in the form of Exhibit 5.1.
"Amoco Rig Contract" means that certain Amoco Production Company Offshore
Drilling/Workover/Completion Contract with respect to the Rig dated as of
November 5, 1996, as amended by Letter Agreement dated December 6, 1996, each by
and between Amoco and Transocean, as assigned to the Borrower pursuant to that
certain Transocean Amirante Drilling Contract Assignment Agreement dated as of
January 10, 1997, as amended by Amendment No. 2 dated February 27, 1997,
Amendment No. 3 dated September 16, 1997 and Amendment No. 4 dated as of April
29, 1998, each by and between Amoco (or its permitted assignee) and the
Borrower, and as subsequently amended, restated or supplemented from time to
time.
"Amortization Date" is defined in Section 2.3.
"Amortized Value of Vessels" means, at any time, an amount equal to (x) the
sum of (i) the amount set forth on Schedule II hereof under the heading
"Amortized Value of Drillship" (or, if the Vessel Amortization Payments relating
to the Drillship have been prepaid in full under Section 2.5(a), all other
amounts owed under such Section 2.5(a) have been paid, and the corresponding
payments related to the Drillship have been prepaid in full and all other
amounts then owed have been paid, under the corresponding provision of the
Transocean Contracts Loan Agreement, $0) and (ii) the amount set forth on
Schedule II hereof under the heading "Amortized Value of Rig" (or, if the Vessel
Amortization Payments relating to the Rig have been prepaid in full under
Section 2.5(a) or (b), as applicable, and the corresponding payments related to
the Rig have been prepaid in full under the corresponding provision of the
Transocean Contracts Loan Agreement, $0) minus (y) the amount of any Casualty
Proceeds applied to the reduction of the Vessel Amortization Payments hereunder
or under the Transocean Contracts Loan Agreement.
"Amsterdam" is defined in the first paragraph hereof.
"Amsterdam Termination Date" means the earliest of (a) the Business Day
designated as the Amsterdam Termination Date by the Borrower with no less than
five (5) Business Days prior notice to the Agent, (b) the Business Day
designated as the Amsterdam Termination Date by Amsterdam at any time to the
Borrower and (c) the Liquidity Termination Date.
"Amsterdam Transfer" is defined in the definition of "Purchase Price."
"Assignment Agreement" is defined in Section 10.8.
"Assignments of Amoco Contracts" means the Collateral Assignment of Amoco
Drillship Contract and the Collateral Assignment of Amoco Rig Contract, each
dated as of January 17,
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1997, by and between the Borrower and the Collateral Agent, as amended, restated
or supplemented from time to time.
"Assignment of Bank Guarantees" means the Collateral Assignment of Bank
Guarantees dated as of January 17, 1997, by and between the Borrower and the
Collateral Agent, as amended, restated or supplemented from time to time.
"Assignments of O&M Contracts" means the Collateral Assignment of Drillship
Operating and Maintenance Contract and the Collateral Assignment of Rig
Operating and Maintenance Contract, each dated as of January 17, 1997, by and
between the Borrower and the Collateral Agent, as amended, restated or
supplemented from time to time.
"Assignments of Shipyard Construction Contracts" means the Collateral
Assignment of Drillship Shipyard Construction Contract and the Collateral
Assignment of Rig Shipyard Construction Contract, each dated as of January 17,
1997, by and between the Borrower and the Collateral Agent, as amended, restated
or supplemented from time to time.
"Assignments of Transocean Contracts" means the Collateral Assignment of
Transocean Drillship Contract and the Collateral Assignment of Transocean Rig
Contract, each dated as of January 17, 1997, by and between the Borrower and the
Collateral Agent, as amended, restated or supplemented from time to time.
"Bankruptcy Event" means, for any Person, that (a) such Person makes a
general assignment for the benefit of creditors or any proceeding is instituted
by or against such Person seeking to adjudicate it bankrupt or insolvent, or
seeking the liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee or other
similar official for it or any substantial part of its property or (b) such
Person takes any corporate action to authorize any such action.
"Base Rate" means, for any period, the daily average during such period of
the greater of (a) the floating commercial Dollar loan rate per annum of ABN
AMRO (which rate is a reference rate and does not necessarily represent the
lowest or best rate actually charged to any customer by ABN AMRO) announced from
time to time, changing as and when said rate changes and (b) the Federal Funds
Rate plus 0.50% per annum.
"Borrower" is defined in the first paragraph hereof.
"Borrower Account" means any account designated by the Borrower to the
Agent from time to time.
"Borrowing" means a Loan or Loans allocated to a single Interest Period
pursuant to Section 2.1(b) or 2.2(a) or (b). Each Loan of a Lender for a
specific Interest Period is, in the case of Amsterdam, a Borrowing or, in the
case of a Committed Lender, its portion of a Borrowing. A Borrowing is
"advanced" on the Funding Date when the applicable Lender(s) advance(s)
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funds comprising such Borrowing, is "continued" on the date a new Interest
Period commences for the same type of Borrowing, and is "converted" (in the case
of a Borrowing from the Committed Lenders) when such Borrowing is changed to a
different type of Borrowing for an Interest Period or otherwise. The "type" of a
Borrowing is its status as a (i) CP Borrowing, (ii) Eurodollar Borrowing or
(iii) Base Rate Borrowing depending whether interest accrues on the principal
amount thereof during its Interest Period based on a (i) CP Rate, (ii)
Eurodollar Rate, or (iii) Base Rate.
"Borrowing Amount" is defined in Section 2.1(b).
"Borrowing Base" means, at any time the same is to be determined, 81% of
the Amortized Value of the Vessels as then determined.
"Borrowing Limit" means, at any time, the amount set forth on Schedule 2.3
as the "Borrowing Limit" for the Funding Date, at all times before the first
Amortization Date, and thereafter for the then most recent Amortization Date.
"Business Day" means any day other than (a) a Saturday, Sunday or other day
on which banks in New York City, Chicago, Illinois or Houston, Texas are
authorized or required to close, (b) a holiday on the Federal Reserve calendar
and, (c) solely for matters relating to a Eurodollar Loan, a day on which
dealings in Dollars are not carried on in the London, England interbank market.
"Capitalized Lease Obligations" means, for any Person, the amount of such
Person's liabilities under all leases of real or personal property (or any
interest therein) which is required to be capitalized on the balance sheet of
such Person as determined in accordance with GAAP.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof having maturities of not more than twelve (12) months
from the date of acquisition, (ii) time deposits and certificates of deposits
maturing within one year from the date of acquisition thereof or repurchase
agreements with financial institutions whose short-term unsecured debt rating is
A-1 or above as obtained from either S&P or Moody's, (iii) commercial paper or
Eurocommercial paper with a rating of at least A-1 by S&P or at least P-1 by
Moody's, with maturities of not more than twelve (12) months from the date of
acquisition, (iv) repurchase obligations entered into with any Lender, or any
other Person whose short-term senior unsecured debt rating from S&P is at least
A-1 or from Moody's is at least P-1, which are secured by a fully perfected
security interest in any obligation of the type described in (i) above and has
market value at the time such repurchase is entered into of not less than 100%
of the repurchase obligation of such Lender or such other Person thereunder, (v)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within twelve (12) months from the date of
acquisition thereof or providing for the resetting of the interest rate
applicable thereto not less often than annually and, at the time of acquisition,
having one of the two highest ratings obtainable from either S&P or Moody's, and
(vi) money market funds which have at least $1,000,000,000 in assets and which
invest primarily in securities of the types described in clauses (i) through (v)
above.
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"Cash Flow Reserve" is defined in Section 7.1(m).
"Casualty Event" means an event resulting in destruction or damage to
either of the Drillship or the Rig other than as a result of an Event of Loss.
"Casualty Proceeds" means all compensation, damages and other payments,
including, without limitation, any insurance proceeds from insurance required to
be provided hereunder and provided by Amoco pursuant to the Amoco Contracts,
Transocean pursuant to the Transocean Contracts or any other Person pursuant to
the Substitute Contracts, if any, received by the Borrower, the Agent, the
Collateral Agent or any of the Lenders, jointly or severally, from any
governmental authority or other Person with respect to or in connection with a
Casualty Event, net of all reasonable out-of-pocket costs and expenses incurred
by such recipient in connection therewith; provided, however, Casualty Proceeds
shall not include any "sue and labor reimbursement" expenses received by the
Borrower or Transocean under any hull insurance policy required pursuant to
Section 7.1(f).
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means all property and assets of the Borrower in which the
Collateral Agent is granted a Lien for the benefit of the Lenders, the "Lenders"
under the Transocean Contracts Loan Agreement and the Swap Parties, under the
terms of a Security Document.
"Collateral Agent" means ABN AMRO acting in its capacity as collateral
agent for the Lenders, the "Lenders" under the Transocean Contracts Loan
Agreement and the Swap Parties, and any successor collateral agent appointed
hereunder pursuant to Section 9.10.
"Collateral Agreement" means the Collateral Agreement dated as of January
17, 1997, among the Borrower, the Collateral Agent, the Agent, the "Agent" under
the Transocean Contracts Loan Agreement and the Swap Parties, as amended,
restated or supplemented from time to time.
"Collateral Termination Date" means the first date when (i) no Loans or
Commitments remain outstanding hereunder and no other Obligation is due and
payable hereunder, (ii) no "Loans" or "Commitments" remain outstanding under the
Transocean Contracts Loan Agreement and no other Transocean Contracts Obligation
is due and payable under the Transocean Contracts Loan Agreement and (iii) the
Borrower has no obligation to make any further interest rate swap payments to
any Swap Party under any Interest Rate Protection Agreement entered into in
accordance with Section 7.1(j) and no other obligations of the Borrower are due
and payable under any such Interest Rate Protection Agreement.
"Combined Aggregate Principal Amount" means the sum of the Aggregate
Principal Amount and the Transocean Contracts Aggregate Principal Amount.
"Committed Lender" means any Liquidity Provider and the Enhancer.
"Committed Lenders" means, collectively, each Liquidity Provider and the
Enhancer.
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"Commitment" means, for each Committed Lender, the amount set forth on
Schedule I, as adjusted in accordance with Sections 2.9, 2.11(b) and 10.8.
"Consenting Lender" is defined in Section 2.11(b).
"Construction Loan" means the "Construction Loan" advanced under the
Secured Credit Agreement and payable on the "Conversion Date" defined therein.
The "B Portion" of the Construction Loan means the principal amount of the
Construction Loan eligible to be converted into the "Tranche B Term Loan" under
the Secured Credit Agreement.
"CP Dealer" means, at any time, each Person Amsterdam then engages as a
placement agent or commercial paper dealer.
"CP Loan" means a Loan outstanding from Amsterdam that has been advanced or
continued for an Interest Period.
"CP Rate" means, for any Interest Period for a CP Borrowing, a rate per
annum equal to (a) the weighted average of the rates per annum at which
commercial paper notes having a term equal to such Interest Period are sold on
the first day of such Interest Period by any CP Dealer selected by Amsterdam, as
agreed between each such CP Dealer and Amsterdam, plus (b) on or after the
occurrence, and during the continuance, of an Event of Default, 2% per annum.
If such rate is a discount rate, the CP Rate shall be the rate resulting from
Amsterdam's converting such discount rate to an interest-bearing equivalent rate
per annum. If Amsterdam determines that it is not able, or that it is
impractical, to issue commercial paper notes for any period of time, then the CP
Rate shall be the Base Rate for such period of time. The CP Rate shall include
all costs and expenses to Amsterdam of issuing the related commercial paper
notes, including all dealer commissions and note issuance costs in connection
therewith.
"Credit Documents" means this Agreement, the Fee Letter, the Pricing Letter
and the Security Documents.
"Credit Party" means the Borrower or Transocean.
"Debt Rating" means, for any Person, the credit rating provided by Moody's
or S&P, as applicable, to such Person's long-term, unsecured, non-third party
credit enhanced senior debt.
"Default" means any Event of Default or any event or condition that with
the lapse of time or giving of notice, or both, would constitute an Event of
Default.
"Direct Lender" means any Funding Liquidity Provider, Funding Replaceable
Committed Lender or Non-Consenting Lender that has an outstanding Loan or Loans
that have not been repaid with the proceeds of a Loan advanced by Amsterdam
pursuant to Section 2.1.
"Dollar" and "$" mean lawful currency of the United States of America.
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"Drillship" means the dynamically positioned dual activity drillship known
as the Discoverer Enterprise, which has been contracted to Amoco pursuant to the
Amoco Drillship Contract for the drilling of offshore wells.
"Drillship Documents" is defined in Section 2.5(e).
"Drillship Shipyard Construction Contract" means the Contract for
Construction of a Dynamically Positioned Drilling Unit dated as of July 24,
1996, by and between Transocean and Astilleros Y Talleres del Noroeste, S.A., a
corporation organized under the laws of Spain, as assigned to the Borrower
pursuant to that certain Shipyard Contract Assignment Agreement between
Transocean and the Borrower dated as of January 17, 1997, and as amended,
restated or supplemented from time to time.
"Early Payment Fee" means, if (i) any Eurodollar Borrowing is not advanced
or continued (or created through a conversion from a Base Rate Borrowing) after
the Borrower so requests pursuant to Section 2.1(b) or 2.2(a), other than
because of a default by a Lender, or (ii) any CP Borrowing or Eurodollar
Borrowing, or portion thereof, is repaid (as opposed to purchased pursuant to
Section 3.1) or any Eurodollar Borrowing is purchased, in whole or in part, by
Amsterdam pursuant to Section 2.2(c) (unless the Borrower requests Amsterdam to
pay to the Committed Lenders all interest scheduled to become due on such
Borrowing during its current Interest Period), in each case before the last day
of its Interest Period (the amount so repaid or purchased being referred to as
the "Prepaid Amount"), the cost to the relevant Lender of such reduction in the
CP or Eurodollar Loan it holds (or was scheduled to hold, in the case of a
Eurodollar Borrowing not advanced, continued or created through conversion),
which (a) for a CP Borrowing means any compensation payable in prepaying the
related commercial paper (in respect of unamortized discount or unaccrued
interest, as the case may be) or, if such commercial paper is not prepaid, any
shortfall between the amount that will be available to Amsterdam on the maturity
date of the related commercial paper from reinvesting the Prepaid Amount in
Permitted Investments and the Face Amount of such commercial paper and (b) for a
Eurodollar Borrowing will be determined based on the difference between the
LIBOR applicable to such Borrowing and the LIBOR applicable for a period equal
to the remaining maturity of the Borrowing on the date (x) the Borrowing is not
advanced, continued or converted, in the case of clause (i) above, or (y) the
Prepaid Amount is received, in the case of clause (ii) above.
"Effective Date" means the date on which all conditions precedent set forth
in Section 5.1 have been satisfied.
"Enhancer" is defined in the first paragraph hereof and any of its
successors or assigns.
"Enhancer Commitment Percentage" means ten percent (10%).
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of non-
compliance or violation, investigations or proceedings relating to any
Environmental Law or any permit issued under any Environmental Law ("Claims"),
including, without limitation, (i) any and all Claims by governmental or
regulatory authorities for enforcement, cleanup, removal, response, remedial or
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other actions or damages pursuant to any applicable Environmental Law, and (ii)
any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Hazardous Materials or arising from alleged injury or threat of injury to the
environment.
"Environmental Law" means any federal, state, local or foreign statute,
law, rule, regulation, ordinance, code, policy or rule of common law now or
hereafter in effect, including any judicial, administrative or arbitral order,
consent, decree or judgment, relating to the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Eurodollar Rate" means, for any Interest Period for a Eurodollar
Borrowing, the sum of (a) LIBOR for such Interest Period divided by 1 minus the
`Reserve Requirement" and (b) (i) for the Loans from a Liquidity Provider, the
rate specified in the Pricing Letter, or (ii) for any Loans from the Enhancer
(other than in its capacity as a Liquidity Provider), the rate specified in the
Fee Letter; where "Reserve Requirement" means, for any Interest Period for a
Eurodollar Borrowing, the daily average during such Interest Period of the
percentage in effect on each day of such Interest Period, if any, as prescribed
by the Board of Governors of the Federal Reserve System (or any successor
thereto) for determining the maximum reserve requirements (including, without
limitation, any supplemental, marginal and emergency reserves) applicable to
"eurocurrency liabilities" of member banks of the Federal Reserve System in New
York City with deposits exceeding $1,000,000,000 pursuant to Regulation D of the
Board of Governors of the Federal Reserve System or any other then applicable
regulation of the Board of Governors (or any successor thereto) which prescribes
reserve requirements applicable to "Eurocurrency Liabilities" as presently
defined in such Regulation D.
"Event of Default" is defined in Section 8.1.
"Event of Loss" means any of the following events: (a) an event that
results in an insurance settlement on the basis of an actual or constructive
total loss of either the Drillship or the Rig; (b) theft, illegal confiscation
or disappearance of either of the Drillship or the Rig for a period of time
sufficient to allow Amoco or any Person under a Substitute Contract, as
applicable, to terminate or cancel, or that results in a termination or
cancellation of, the Amoco Contract or a Substitute Contract, as applicable,
for such vessel; or (c) condemnation or other taking of title of either of the
Drillship or the Rig by a governmental authority or the requisition or taking of
use of either of the Drillship or the Rig by a governmental authority, in each
case for a period of time sufficient to allow Amoco or any Person under a
Substitute Contract, as applicable, to terminate or cancel, or that results in
the termination or cancellation of, the Amoco Contract or a Substitute Contract,
as applicable, for such vessel.
"Event of Loss Proceeds" means all compensation, damages and other
payments, including, without limitation, any insurance proceeds from insurance
required to be provided hereunder and provided by Amoco pursuant to the Amoco
Contracts, Transocean pursuant to the Transocean Contracts or any other Person
pursuant to the Substitute Contracts, if any, received by the Borrower,
Transocean, the Agent, the Collateral Agent or any of the Lenders, jointly or
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severally, from any governmental authority or other Person with respect to or in
connection with an Event of Loss, net of all reasonable out-of-pocket costs and
expenses incurred by such recipient in connection therewith; provided, however,
Event of Loss Proceeds shall not include any "sue and labor" reimbursement
expense payments received by the Borrower or Transocean under any hull insurance
policy required pursuant to Section 7.1(f).
"Excess Cash Flow" means for any calendar month beginning the first full
calendar month after the Funding Date, all sums paid to the Borrower under the
Amoco Contracts, the Transocean Contracts or the Substitute Contracts during the
period from the date of the prior Excess Cash Flow calculation (or for the first
calculation thereof, from the Funding Date) to two (2) Business Days prior to
the Amortization Date falling during such calendar month in excess of the sum of
(i) (x) with respect to the Drillship during the term of the Amoco Drillship
Contract or any Substitute Drillship Contract, $181,000 per day for the number
of days in the period to which the payment relates, or (y) with respect to the
Drillship during the term of the Transocean Drillship Contract, the operating
dayrate contained therein (express or implicit) for the number of days in the
period to which the payment relates, plus (ii) with respect to the Rig during
the term of the Amoco Rig Contract or any Substitute Rig Contract, the operating
dayrate in the Amoco Rig Contract as of the Funding Date, and with respect to
the Rig during the term of the Transocean Rig Contract, the operating dayrate
contained therein (express or implicit), as applicable, in each case for the
number of days in the period to which the payment relates, and in the case of
all of the foregoing, without giving effect to any amendment thereto which
reduces the stated operating dayrate and excluding any portion of any such sum
paid to the Borrower that is, or is attributable to, (i) cost reimbursements
(including, without limitation, for capital expenditures), (ii) employee
performance bonuses, or other third party bonuses paid or payable to a third
party which is not an Affiliate of the Borrower or Transocean, (iii) any sums
paid to the Borrower pursuant to any increase in the stated operating dayrate
under the stated contract for the Drillship or the Rig as a result of cost
escalations or capital expenditures, as demonstrated to the reasonable
satisfaction of the Agent, (iv) stated operating dayrate income paid under any
Substitute Contract during any period of cancellation of the Amoco Contract for
the same vessel during which Amoco is required to pay cancellation fees, to the
extent over and above the stated operating dayrate under the Amoco Contract,
which is required to be paid to Amoco under the applicable Amoco Contract, and
(v) income paid to the Borrower during any period of assignment of an Amoco
Contract to the extent required to be paid to Amoco under the applicable Amoco
Contract. To the extent the Borrower or Transocean funds or replenishes the
Cash Flow Reserve or the Insurance Reserve pursuant to the provisions of Section
7.1(f)(iii) or Section 7.1(m), as applicable, the Borrower shall recoup the
amount so funded or replenished (to the extent not already recouped by the
Borrower out of any excess Casualty Proceeds released to the Borrower pursuant
to the terms of Section 2.5(d)) before calculating Excess Cash Flow, and the
Excess Cash Flow in contemporaneous and subsequent months shall be deemed
reduced (but not below zero) until the entire amount so funded or replenished is
so recouped.
"Face Amount" means the face amount of any Amsterdam commercial paper
issued on a discount basis or, if not issued on a discount basis, the principal
amount of such note and interest scheduled to accrue thereon to its stated
maturity.
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"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal, for each day during such period, to the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the immediately preceding Business Day)
by the Federal Reserve Bank of New York or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for such
transactions received by ABN AMRO as of approximately 10:00 a.m. (Chicago time)
on such day from three federal funds brokers of recognized standing selected by
it.
"Fee Letter" means the letter agreement relating to this Agreement dated as
of the date hereof among the Borrower, the Agent, Amsterdam and the Enhancer.
"First Mortgages" means the First Naval Mortgage covering the Drillship
dated as of August 6, 1998 between Transocean Hull No. 275 S. de R.L. and the
Collateral Agent, as assumed by the Borrower and the First Naval Mortgage
covering the Rig dated as of January 17, 1997, between the Borrower and the
Collateral Agent, as each mortgage may be amended, restated or supplemented from
time to time.
"Fixed Operating Expenses" means the monthly Fixed Operating Expenses for
each of the Drillship and the Rig at the applicable time as defined in the
applicable O&M Contract.
"Force Majeure" with respect to the Drillship and the Rig, as applicable,
has the meaning ascribed to such term in the applicable Amoco Contract,
Transocean Contract or Substitute Contract.
"Free Cancellation Right" is defined in Section 2.3(b).
"Functional Requirements" means the specifications and requirements for the
design, construction and performance capabilities of the Drillship and the Rig
as set forth in the Amoco Drillship Contract and the Amoco Rig Contract,
respectively.
"Funding Date" means the Business Day selected by the Borrower pursuant to
Section 2.1(b) as the date for the Lenders to advance funds hereunder.
"Funding Liquidity Provider" means each Liquidity Provider which on the
Funding Date does not have a short-term debt rating of at least "A-1" by S&P and
"P-1" by Moody's.
"Funding Party" is defined in Section 4.4(b).
"Funding Replaceable Committed Lender" is defined in Section 10.8(c).
"GAAP" means generally accepted accounting principles from time to time in
effect as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the statements and pronouncements of the Financial Accounting Standards Board or
in such other statements, opinions and
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pronouncements by such other entity as may be approved by a significant segment
of the U.S. accounting profession.
"Governmental Authority" means any (a) Federal, state, municipal or other
governmental entity, board, bureau, agency or instrumentality, (b)
administrative or regulatory authority (including any central bank or similar
authority) or (c) court, judicial authority or arbitrator, in each case, whether
foreign or domestic.
"Guaranty" by any Person means all contractual obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business) of such Person guaranteeing any Indebtedness, dividend or other
obligation (including, without limitation, obligations in connection with sales
of any property) of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without limitation, all obligations
incurred through an agreement, contingent or otherwise, by such Person: (i) to
purchase such Indebtedness or obligation, or to purchase any property or assets
constituting security therefor, primarily for the purpose of assuring the owner
of such Indebtedness or obligation of the ability of the primary obligor to make
payment of such Indebtedness or obligation; or (ii) to advance or supply funds
(x) for the purchase or payment of such Indebtedness or obligation, or (y) to
maintain working capital or other balance sheet condition, or otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, in each case primarily for the purpose of assuring the owner of
such Indebtedness or obligation of the ability of the primary obligor to make
payment of such Indebtedness or obligation; or (iii) to lease property, or to
purchase securities or other property or services, of the primary obligor,
primarily for the purpose of assuring the owner of such Indebtedness or
obligation of the ability of the primary obligor to make payment of such
Indebtedness or obligation; or (iv) otherwise to assure the owner of such
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purpose of all computations made under this Agreement, the
amount of a Guaranty in respect of any obligation shall be deemed to be equal to
the amount that would apply if such obligation were the direct obligation of
such Person rather than the primary obligor or, if less, the maximum aggregate
potential liability of such Person under the terms of such Guaranty.
"Hazardous Material" has the meaning assigned to that term in the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Acts of 1986, and shall
also include Hydrocarbons or any other substance defined as "hazardous" or
"toxic" or words with similar meaning and effect under any Environmental Law
applicable to the Borrower.
"Hydrocarbons" means oil, gas and other liquid or gaseous hydrocarbons.
"Indebtedness" means, for any Person, the following obligations of such
Person, without duplication: (i) obligations of such Person for borrowed money;
(ii) obligations of such Person representing the deferred purchase price of
property or services other than accounts payable arising in the ordinary course
of business and other than amounts which are being contested in good faith and
for which reserves in conformity with GAAP have been provided; (iii) obligations
of such Person evidenced by bonds, notes, bankers acceptances, debentures or
other similar
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instruments of such Person or arising, whether absolute or contingent, out of
letters of credit issued for such Person's account or pursuant to such Person's
application; (iv) obligations of other Persons, whether or not assumed, secured
by Liens (other than Permitted Liens) upon property or payable out of the
proceeds or production from property now or hereafter owned or acquired by such
Person, but only to the extent of such property's fair market value; (v)
Capitalized Lease Obligations of such Person; (vi) obligations under (x)
Interest Rate Protection Agreements, (y) commodity hedge, swap, exchange,
forward, future, collar or cap arrangements, fixed price commodity agreements
and all other agreements or arrangements, in each case designed primarily to
protect against fluctuations in commodity prices, and (z) futures agreements,
arrangements or options designed primarily to protect against fluctuations in
currency exchange rates; and (vii) obligations of such Person pursuant to a
Guaranty of any of the foregoing of another Person. For purposes of this
Agreement, the Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture to the extent such Indebtedness is recourse to such
Person.
"Instructing Group" means the Enhancer and Liquidity Providers having
Commitments that together with the Enhancer's Commitment constitute a majority
of the Commitments and, unless the Amsterdam Termination Date has occurred and
Amsterdam has no outstanding Borrowings, Amsterdam.
"Insurance Reserve" is defined in Section 7.1(f).
"Insurance Reserve Required Amount" is defined in Section 7.1(f).
"Intended Tax Characterization" is defined in Section 10.9.
"Interest Period" means the period commencing on the date a Borrowing is
advanced pursuant to Section 2.1 or continued or converted pursuant to Section
2.2 and ending: (a) in the case of Base Rate Borrowings, the last Business Day
of the calendar quarter in which such Base Rate Borrowing is advanced pursuant
to Section 2.1 or continued or converted pursuant to Section 2.2; (b) in the
case of Eurodollar Borrowings, on the next Amortization Date; and (c) in the
case of CP Borrowings, 1-45 days thereafter, as requested by the Borrower, if
acceptable to Amsterdam, or as established by the Agent; provided, however,
that:
(a) any Interest Period for a Base Rate Borrowing that would
otherwise end after the last Amortization Date shall end on such
Amortization Date;
(b) an Interest Period for a CP Borrowing that would extend beyond
an Amortization Date may not be selected if, as a result, the aggregate
principal amount of CP and Eurodollar Borrowings scheduled to be
outstanding with Interest Periods ending after such Amortization Date would
exceed the principal amount of Loans scheduled to be outstanding after such
Amortization Date;
(c) whenever the last day of any Interest Period would otherwise be
a day that is not a Business Day, the last day of such Interest Period
shall be extended to the next succeeding Business Day, but, if such
extension would cause the last day of an Interest
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Period for a Eurodollar Borrowing to occur in the following calendar month,
the last day of such Interest Period shall be the immediately preceding
Business Day; and
(d) for purposes of determining an Interest Period for a Eurodollar
Borrowing, a month means a period starting on one day in a calendar month
and ending on the numerically corresponding day in the next calendar month;
provided, however, that if there is no numerically corresponding day in the
month in which such an Interest Period is to end or, if such an Interest
Period begins on the last Business Day of a calendar month, then such
Interest Period shall end on the last Business Day of the calendar month in
which such Interest Period is to end.
"Interest Rate Protection Agreement" means any interest rate swap, interest
rate cap, interest rate collar, or other interest rate hedging agreement or
arrangement designed to protect against fluctuations in interest rates.
"Lenders" means the Liquidity Providers and the Enhancer (whether in their
capacities as such or as Committed Lenders) and Amsterdam.
"Lending Office" means the branch, office or affiliate of a Committed
Lender specified on the appropriate signature page hereof, or designated
pursuant to Section 4.5 or 10.8, as the office through which it will make its
Loans hereunder for each type of Loan available from it hereunder.
"LIBOR" means, for any Interest Period for a Eurodollar Borrowing or any
other period, the rate per annum (rounded upwards, if necessary, to the next
higher one hundred-thousandth of a percentage point) for deposits in Dollars for
a period equal to such Interest Period or other period, which appears on Page
3750 of the Telerate Service (or any successor page or successor service that
displays the British Bankers' Association Interest Settlement Rates for Dollar
deposits) as of 11:00 a.m. (London, England time) two Business Days before the
commencement of such Interest Period or other period for a period approximately
equal to such Interest Period or other period and in an amount equal or
comparable to the aggregate principal amount of the Eurodollar Loans to which
such Interest Period relates. If the foregoing Telerate rate is unavailable for
any reason, then such rate shall be determined by the Agent from the Reuters
Screen LIBOR page, or if such rate is also unavailable on such service, on any
other interest rate reporting service of recognized standing selected by the
Agent after consultation with the Borrower.
"License Agreement" means the License Agreement dated as of January 17,
1997 by and between Transocean and the Borrower, as amended, restated or
supplemented from time to time.
"Lien" means any interest in any property or asset in favor of a Person
other than the owner of such property or asset and securing an obligation owed
to, or a claim by, such Person, whether such interest is based on the common
law, statute or contract, including, but not limited to, the security interest
lien arising from a mortgage, encumbrance, pledge, conditional sale, security
agreement or trust receipt, or a lease, consignment or bailment for security
purposes.
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"Liquidity Providers" is defined in the first paragraph hereof together
with those Persons that become Liquidity Providers pursuant to Section 10.8.
"Liquidity Termination Date" means the earliest of (a) the date of the
occurrence of an Event of Default described in clause (g) or (h) of the
definition of Event of Default, (b) the date designated by the Agent to the
Borrower at any time after the occurrence of, and during the continuation of,
any other Event of Default, (c) the Business Day designated by the Borrower with
no less than five (5) Business Days prior notice to the Agent and (d) the
Scheduled Termination Date. The Liquidity Termination Date establishes the last
day on which the Liquidity Providers are obligated to acquire Loans from
Amsterdam. The maturity of Loans is established pursuant to Sections 2.3, 2.4,
2.5 (in the case of mandatory prepayments), and Article VIII (in the case of an
accelerated maturity).
"Loan" means any funds advanced to the Borrower pursuant to Section 2.1(a).
Although all Loans are advanced on the Funding Date, and the aggregate principal
amount of Loans outstanding never thereafter increases, the Loans held by a
Lender at any time are comprised of (a) before the end of its initial Interest
Period, each Loan it advances to the Borrower on the Funding Date as part (or
all) of a single Borrowing, and (b) after such initial Interest Period, each
Loan it continues, establishes through conversion from a different type of
Borrowing, or purchases from another Lender pursuant to Section 2.2(c) or 3.1,
in each case as part (or all) of a single Borrowing (but disregarding under both
(a) and (b) any portion of any such Loan transferred to another Lender pursuant
to Section 2.2(c) or 3.1). Each Loan from a Committed Lender is a Eurodollar
Loan or Base Rate Loan depending whether it is part of a Eurodollar Borrowing or
Base Rate Borrowing.
"Material Adverse Effect" means an effect that results in a material
adverse (i) change, since the Effective Date (in each case except to the extent
resulting from transactions expressly permitted under any Credit Document), in
(x) the business, properties, assets or financial condition of the Borrower or
the prospects of the Borrower during the scheduled term of the Loans, (y) so
long as the Transocean Performance Guaranty is in force and effect, the
business, properties, assets or financial condition of Transocean and its
Subsidiaries taken as a whole, or (z) the ability of the Borrower or the
Borrower and Transocean taken as a whole to perform their Obligations under the
Operative Documents to which they are a party, or (ii) change in the rights and
remedies of the Lenders or the Agent under the Credit Documents (other than in
accordance with the express terms thereof).
"Matured Aggregate Loan Amount" means, at any time, the Matured Value of
Amsterdam's outstanding Loans plus the aggregate principal amount of all Loans
then outstanding from the other Lenders.
"Matured Value" means, of any Loan (or portion thereof), the sum of the
principal amount of such Loan (or portion thereof) plus all interest scheduled
to become due (whether or not then due) on such Loan (or portion thereof) during
its current Interest Period and then unpaid.
"Monthly Report" is defined in Section 7.1(g).
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"Moody's" means Moody's Investors Service, Inc.
"Non-Consenting Lender" is defined in Section 2.11(a).
"Note" is defined in Section 2.10.
"Obligations" means all obligations of the Borrower and Transocean to pay
fees, costs and expenses, principal or interest on Loans and to pay any other
obligations to the Agent or any Lender arising under any Credit Document.
"O&M Contracts" means the Drillship Operation and Maintenance Contract and
the Rig Operation and Maintenance Contract, each dated as of January 17, 1997,
by and between Transocean and the Borrower, as amended, restated or supplemented
from time to time.
"Operative Documents" means the Amoco Contracts, the Transocean Contracts,
the Substitute Contracts, the O&M Contracts, the License Agreement and the
Credit Documents.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Permitted Distribution Sources" is defined in Section 7.1(k).
"Permitted Indebtedness" is defined in Section 7.1(o).
"Permitted Investments" means (a) evidences of indebtedness, maturing
within thirty (30) days after the date of purchase thereof, issued by, or the
full and timely payment of which is guaranteed by the full faith and credit of,
the federal government of the USA, (b) repurchase agreements with banking
institutions or broker-dealers registered under the Securities Exchange Act of
1934 which are fully secured by obligations of the kind specified in clause (a),
(c) money market funds (i) rated not lower than the highest rating category from
both Moody's and S&P or (ii) which are otherwise acceptable to the Rating
Agencies or (d) commercial paper issued by any corporation incorporated under
the laws of the USA and rated at least "A-1" (or the equivalent) by S&P and at
least "P-1" (or the equivalent) by Moody's.
"Permitted Liens" is defined in Section 7.1(n).
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization or any other entity or
organization, including a government or any agency or political subdivision
thereof.
"Plan" means an employee pension benefit plan covered by Title IV of ERISA
or subject to the minimum funding standards under Section 412 of the Code that
is either (i) maintained by the Borrower, or (ii) maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which the Borrower is then making or
accruing an obligation to make contributions or has within the preceding five
(5) plan years made or had an obligation to make contributions.
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"Pricing Letter" means the letter agreement dated as of the date hereof
among the Liquidity Providers, the Agent and the Borrower.
"Principal Amount" means, for any Lender at any time, the aggregate unpaid
principal amount of all Loans then held by such Lender, whether made directly by
such Lender or acquired from another Lender.
"Program LOC" means the irrevocable transferable letter of credit No.
S550115, dated November 3, 1995, issued by the Enhancer at the request of
Amsterdam, and each letter of credit issued in substitution or replacement
therefor.
"Program Unreimbursed Draw Amount" means the sum of all draws under the
Program LOC in connection with this Agreement which have not been reimbursed
(whether through the payment of cash or the exchange of assets), together with
all interest thereon and all other amounts, if any, payable in connection
therewith.
"Purchase Price" means, for each Committed Lender (other than a Direct
Lender) for any Put (any such Put being an "Amsterdam Transfer"), such Lender's
Purchased Percentage for such Amsterdam Transfer multiplied by the sum of (a)
(i) for the Enhancer, the principal amount of Loans from Amsterdam being
transferred pursuant to such Amsterdam Transfer (the "Transferred Principal")
and (ii) for each Liquidity Provider (other than a Direct Lender), the lesser of
(A) the Transferred Principal and (B) the product of (1) the Transferred
Principal divided by the aggregate principal amount of all Loans outstanding
from Amsterdam (before giving effect to such Amsterdam Transfer), (2)
Amsterdam's Share of Outstanding Loans at such time (before giving effect to
such Amsterdam Transfer), and (3) the Borrowing Base as then determined and
computed, plus (b) (i) all unpaid interest owed to Amsterdam (whether or not
then due) on the Transferred Principal to the end of the current Interest Period
for each Loan (or portion thereof) included in such Transferred Principal, (ii)
all accrued but unpaid fees (whether or not then due) payable to Amsterdam in
connection herewith at the time of such purchase and (iii) all accrued and
unpaid costs, expenses and indemnities due to Amsterdam from the Borrower in
connection herewith. Amsterdam shall calculate the Purchase Price on the date
of such Amsterdam Transfer based on the information then available to it, and,
regardless of whether such information is complete, such calculation shall be
conclusive and binding absent manifest error; provided, however, that if such
purchase occurs due to the occurrence of a Put Event, the Borrowing Base shall
be determined as of the date immediately preceding the occurrence of such Put
Event, adjusted to reflect amounts received by Amsterdam. In making any such
calculation, Amsterdam shall be entitled to rely on information provided to it
by the Borrower without any obligation to investigate the accuracy or
completeness of such information.
"Purchased Percentage" means, for any Amsterdam Transfer, for each
Committed Lender (other than a Direct Lender), its Ratable Share (calculated
without giving effect to the Commitments of the Direct Lenders) or such lesser
percentage as is necessary to prevent the Purchase Price of such Lender from
exceeding its Unused Commitment (unless, in the case of the Enhancer, it elects
not to reduce its Purchased Percentage in whole or in part).
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"Put" is defined in Section 3.l(a).
"Put Event" means: (i) the occurrence of any Event of Default, (ii) the
Combined Aggregate Principal Amount 80.5% or more of the Amortized Value of
Vessels as then determined, or (iii) the long term, senior, unsecured, non-
credit enhanced indebtedness of BP Amoco PLC, a corporation organized under the
laws of England, ceases to be rated at least BBB- from S&P and at least Baa3
from Moody's (or S&P or Moody's withdraws or suspends either such rating).
Should BP Amoco PLC be succeeded by a merger or consolidation, reference in this
Agreement and the other Operative Documents to BP Amoco PLC shall be deemed to
be to the successor corporation or other entity.
"Ratable Share" means, for each Committed Lender, such Lender's Commitment
divided by the Aggregate Commitment. If, however, on the date any Amsterdam
Transfer is to take place, the Enhancer has outstanding Principal Amount plus
Program Unreimbursed Draw Amount in excess of its Ratable Share of the
outstanding Principal Amount and Program Unreimbursed Draw Amount of all
Committed Lenders, then for purposes of such Amsterdam Transfer the Ratable
Share of each Committed Lender shall be replaced with a percentage equal for
each Committed Lender to (a) its Commitment minus the sum of (i) its Principal
Amount and (ii) Program Unreimbursed Draw Amount before such Amsterdam Transfer
(the sum of the amounts in clauses (a)(i) and (a)(ii) being its "Existing
Outstanding Principal Amount") divided by (b) the Aggregate Commitment minus the
sum of the Existing Outstanding Principal Amount of all Committed Lenders.
"Rating Agency" means Moody's, S&P and any other rating agency Amsterdam
chooses to rate its commercial paper notes.
"Ratings" means the ratings by the Rating Agencies of the indebtedness for
borrowed money of Amsterdam.
"Replaceable Committed Lender" is defined in Section 10.8(c).
"Replacement Committed Lender" is defined in Section 10.8(b).
"Required Coverage Payment" means, in connection with any mandatory
prepayment of Loans pursuant to Section 2.5, the excess, if any, of the Combined
Aggregate Principal Amount over the Borrowing Base.
"Required Liquidity Providers" means Liquidity Providers having Commitments
of at least 51% of the Commitments of all Liquidity Providers without including
the Commitment of any Defaulting Lender, either for voting purposes or for
calculating the Commitments of all Liquidity Providers, so long as such
Defaulting Lender has not satisfied any Unpaid Amount owed by it under Section
3.1(b).
"Rig" means the third-generation semisubmersible drilling rig known as the
Transocean Amirante which has been contracted to Amoco pursuant to the Amoco Rig
Contract for the drilling of offshore wells for hydrocarbons.
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"Rig Documents" is defined in Section 2.5(e).
"Rig Shipyard Construction Contract" means the Master Service Contract for
the Rig by and between Transocean and Amfels, Inc., a Texas corporation, dated
as of June 7, 1996, as amended and assigned to the Borrower pursuant to the
Master Service Contract Amendment and Assignment Agreement dated as of January
10, 1997 by and among Transocean, Amfels, Inc. and the Borrower, together with
all work orders issued thereunder, as amended, restated or supplemented from
time to time.
"Scheduled Principal Payments" is defined in Section 2.3.
"Scheduled Termination Date" means December 19, 2000 or the later date, if
any, most recently established pursuant to Section 2.11.
"SEC" means the Securities and Exchange Commission.
"Secured Credit Agreement" means that certain Secured Credit Agreement
dated as of January 17, 1997 among the Borrower, the Lenders party thereto, and
the Agent and Co-Agents named therein, as amended by the First Amendment to
Secured Credit Agreement dated as of December 21, 1998, the Second Amendment to
Secured Credit Agreement dated as of August 13, 1999 and the Third Amendment to
Secured Credit Agreement dated as of October 22, 1999.
"Security Agreement" means the Security Agreement, dated as of January 17,
1997, by and between the Borrower and the Collateral Agent, as amended, restated
or supplemented from time to time.
"Security Documents" means the First Mortgages, the Security Agreement, the
Assignments of Shipyard Construction Contracts, the Assignments of Amoco
Contracts, the Assignments of Transocean Contracts, the Assignments of O&M
Contracts, any collateral assignment of any Substitute Contract, Section 2 of
the Collateral Agreement and all other security agreements, mortgages and like
agreements or instruments delivered by the Borrower or any other Person granting
a Lien on any of such Person's property to the Collateral Agent for the benefit
of the Lenders, the "Lenders" under the Transocean Contracts Loan Agreement and
the Swap Parties to secure (without limitation) the Obligations, as any of the
same may be amended, restated or supplemented from time to time.
"Senior Officer" means the president, any vice president, the chief
financial officer, the treasurer or the controller of the Borrower.
"Share of Outstanding Loans" means, at any time, for a Lender or group of
Lenders, a percentage equal to such Lender's then outstanding Principal Amount
or, as applicable, such group of Lenders' aggregate outstanding Principal
Amounts, divided, in each case, by the sum of (x) the Aggregate Principal Amount
and (y) the Transocean Contracts Aggregate Principal Amount then outstanding.
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"Special Transaction Subaccount" means the special transaction subaccount
established for this Agreement pursuant to Amsterdam's depositary agreement and
referred to in Section 3.1(d).
"S&P" means Standard & Poor's Ratings Group.
"Subsidiary" means, for any Person, any other Person of which more than
fifty percent (50%) of the outstanding stock or comparable equity interests
having ordinary voting power for the election of the board of directors of such
corporation, any managers of such limited liability company or similar governing
body (irrespective of whether or not at the time stock or other equity interests
of any other class or classes of such corporation or other entity shall have or
might have voting power by reason of the happening of any contingency), is at
the time directly or indirectly owned by such former Person or by one or more of
its Subsidiaries; provided, however, if the definition of "Subsidiary" shall be
amended (but not deleted) in the Transocean Credit Facility, the definition of
"Subsidiary" herein shall be deemed amended in the same respect.
"Substitute Contracts" means the Substitute Drillship Contract and the
Substitute Rig Contract.
"Substitute Drillship Contract" means any contract for the use of the
Drillship entered into by and between the Borrower and another Person
(including, without limitation, Amoco) in replacement of the Transocean
Drillship Contract as described in Section 7.1(r), provided that no such
contract shall be deemed to constitute a Substitute Drillship Contract unless
and until the Borrower terminates the Transocean Drillship Contract.
"Substitute Rig Contract" means any contract for the use of the Rig entered
into by and between the Borrower and another Person (including, without
limitation, Amoco) in replacement of the Transocean Rig Contract as described in
Section 7.1(r), provided that no such contract shall be deemed to constitute a
Substitute Rig Contract unless and until the Borrower terminates the Transocean
Rig Contract.
"Swap Obligations" means all obligations of the Borrower to pay fees, costs
and expenses, interest rate swap payments or other obligations to any Swap Party
under any Interest Rate Protection Agreement heretofore or hereafter entered
into by the Borrower.
"Swap Party" means each counterparty to an Interest Rate Protection
Agreement heretofore or hereafter entered into by the Borrower in accordance
with Section 6.10 of the Secured Credit Agreement and/or Section 7.1(j) that is
or was a Lender or an Affiliate of a Lender at the time such Interest Rate
Protection Agreement is or was entered into.
"Taxes" is defined in Section 6.1(k).
"Termination Date" means (a) for Amsterdam, the Amsterdam Termination Date,
(b) for the Liquidity Providers, the Liquidity Termination Date and (c) for the
Enhancer, the earlier of
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(i) the third (3rd) Business Day following the Liquidity Termination Date and
(ii) Scheduled Termination Date.
"Transfer" means a sale, transfer, conveyance, assignment or other
disposition (or a series of related dispositions), including, without
limitation, any transfer pursuant to an option to purchase, any sale or
assignment (with or without recourse) of any accounts receivable and any sale
and leaseback of assets, of an asset having a net book value as established in
accordance with GAAP in excess of $250,000, but excluding any involuntary
transfer by operation of law and any transfers of an asset pursuant to any
casualty or theft with respect to such asset.
"Transocean" means Transocean Offshore Inc., a Cayman Islands exempted
company, as successor by merger and conversion to Transocean Offshore Inc., a
Delaware corporation.
"Transocean Contracts" means the Transocean Drillship Contract and the
Transocean Rig Contract.
"Transocean Contracts Aggregate Principal Amount" means, at any time, the
aggregate unpaid principal amount of all "Loans" then outstanding under the
Transocean Contracts Loan Agreement.
"Transocean Contracts Loan Agreement" means the Secured Loan Agreement
relating to the Transocean Contracts dated as of even date herewith among the
Borrower, the Agent, and the lenders party thereto, as amended, restated or
supplemented from time to time, if executed. If such Secured Loan Agreement is
not executed all references herein to the Transocean Contracts Loan Agreement,
Transocean Contract Loans, Transocean Contracts Obligations and other related
definitions shall be deemed to be deleted.
"Transocean Contracts Loans" means the "Loans" to the Borrower outstanding
under and as defined in the Transocean Contracts Loan Agreement.
"Transocean Contracts Obligations" means the "Obligations" of the Borrower
under and as defined in the Transocean Contracts Loan Agreement.
"Transocean Credit Facility" means that certain Secured Credit Agreement
dated as of July 30, 1996, by and among Transocean, ABN AMRO, as Agent, and
certain lenders parties thereto, as amended, restated or supplemented from time
to time.
"Transocean Drillship Contract" means the Transocean Drillship Lease
Agreement dated as of January 17, 1997 by and between Transocean and the
Borrower, as amended, restated or supplemented from time to time.
"Transocean Performance Guaranty" means the Amended and Restated Transocean
Performance Guaranty dated as of December 21, 1998 issued by Transocean, as
amended, restated or supplemented from time to time.
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"Transocean Rig Contract" means the Transocean Rig Lease Agreement dated as
of January 17, 1997 by and between Transocean and the Borrower, as amended,
restated or supplemented from time to time.
"UCC" means, for any state, the Uniform Commercial Code as in effect in
such state.
"USA" means the United States of America (including all states and
political subdivisions thereof).
"Unfunded Vested Liabilities" means, for any Plan at any time, the amount
(if any) by which the present value of all vested nonforfeitable accrued
benefits under such Plan exceeds the fair market value of all Plan assets
allocable to such benefits, determined as of the then most recent valuation date
for such Plan, but only to the extent that such excess represents a potential
liability of the Borrower to the PBGC or such Plan.
"Unused Commitment" means, for any Committed Lender at any time, the
difference between its Commitment and its Loans then outstanding.
"Unused Aggregate Commitment" means, at any time, the difference between
the Aggregate Commitment then in effect and the outstanding Matured Aggregate
Loan Amount.
"Vessel Amortization Payments" is defined in Section 2.3.
"Vessel Financing Termination" is defined in Section 2.5(b).
"Vessel Percentage" shall have the meaning ascribed to such term in Section
7.1(f)(iii).
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms. Unless otherwise inconsistent with the
terms of this Agreement, all accounting terms used herein shall be interpreted,
and all accounting determinations hereunder shall be made, in accordance with
GAAP.
Article II
LOANS TO BORROWER AND REPAYMENTS
Section 2.1. The Refinancing Loan.
(a) Amsterdam Loan Option and Other Lenders' Commitments. Subject to the
terms and conditions hereof, Amsterdam may advance one or more Loans to the
Borrower on the Funding Date, and, if Amsterdam chooses not to so advance one or
more Loans to the Borrower on the Funding Date (subject to Section 5.2 and the
other terms and conditions hereof) each Liquidity Provider (other than the
Funding Liquidity Providers) and the Enhancer severally hereby agrees to,
advance one or more Loans to the Borrower on the Funding Date. Subject to the
terms and conditions hereof, each Funding Liquidity Provider severally agrees to
advance one or more Loans to the Borrower on the Funding Date. Each Borrowing
from Amsterdam shall be comprised of a Loan advanced or continued solely by
Amsterdam. Each Borrowing
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from the Committed Lenders (other than the Funding Liquidity Providers) shall be
advanced, continued or converted through a Loan from each Committed Lender
(other than the Funding Liquidity Providers) based on its Ratable Share of all
Borrowings required to be made on the Funding Date. Each Borrowing from the
Funding Liquidity Providers shall be advanced, continued or converted through a
Loan from each Funding Liquidity Provider based on its Ratable Share of all
Borrowings required to be made. After the Funding Date, Loans may only be
continued or converted pursuant to Section 2.2 or acquired pursuant to Sections
3.1 or 10.8(c), and no additional Loans shall be advanced. At any time the
short-term debt rating of a Funding Liquidity Provider is "A-1" or higher by S&P
and "P-1" or higher by Moody's, Amsterdam may advance a Loan to the Borrower in
an amount up to the aggregate principal amount of the outstanding Loans from
such Funding Liquidity Provider. The proceeds of such Loan shall be deposited
with such Funding Liquidity Provider to repay solely Loans then owed such
Funding Liquidity Provider without thereby reducing the aggregate principal
amount of outstanding Loans. No Lender shall be permitted or required to
advance, continue or convert a Loan if, after giving effect thereto, (i) the
Aggregate Principal Amount would thereby exceed the Borrowing Limit, (ii) the
Matured Aggregate Loan Amount would thereby exceed the Aggregate Commitment,
(iii) the product of (x) Lenders' Share of Outstanding Loans at such time and
(y) the Borrowing Base then in effect would be less than the Aggregate Principal
Amount, or (iv) in the case of an advance of a Loan by a Committed Lender, such
Committed Lender's Principal Amount (after giving effect to such advance) would
thereby exceed its Commitment. At no time will Amsterdam have any obligation to
advance or continue any Loan.
(b) Manner of Borrowing on Funding Date. The Borrower shall provide to
the Agent an irrevocable written request (including by telecopier or other
facsimile communication) substantially in the form of Exhibit A by 11:00 a.m.
(Chicago time) (i) three (3) Business Days before the requested Funding Date to
request a Eurodollar Borrowing and (ii) one (1) Business Day before the
requested Funding Date to request a Base Rate Borrowing or CP Borrowing. For
each requested Borrowing, the Borrower shall specify whether it is requested
from Amsterdam or from the Funding Liquidity Providers or from the other
Committed Lenders, the requested Funding Date and the requested amount (the
"Borrowing Amount") of such Borrowing, which must be in a minimum amount of
$1,000,000 and multiples thereof (provided that one Borrowing may be for an
amount equal to $1,000 or any amount in excess thereof), and a requested
Interest Period for such Borrowing (provided that in all events the Agent shall
be entitled to establish the Interest Period for a Borrowing from Amsterdam).
The Agent shall promptly notify the contents of such request to each Lender from
which the advance of a Borrowing is requested. If a Borrowing is requested from
Amsterdam on the Funding Date and Amsterdam determines, in its sole discretion,
to advance the requested Borrowing, Amsterdam shall transfer to the Agent's
Account the amount of such Borrowing on the requested Funding Date. If a
Borrowing is requested from the Funding Liquidity Providers on the Funding Date,
subject to Section 5.2 and the other terms and conditions hereof, each Funding
Liquidity Provider shall transfer its Ratable Share of the requested Borrowing
Amount into the Agent's Account by no later than 12:00 noon (Chicago time) on
the Funding Date. If a Borrowing is requested from any Committed Lender (other
than a Funding Liquidity Provider) on the Funding Date, subject to Section 5.2
and the other terms and conditions hereof, each such Committed Lender shall
transfer its Ratable Share of the requested Borrowing Amount into the Agent's
Account by no later than 12:00 noon (Chicago time) on the Funding Date. To the
extent Amsterdam does not deliver to the Agent's
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Account by 12:00 noon (Chicago time) on the Funding Date any portion of a
Borrowing Amount requested from it, the Agent shall promptly notify each
Committed Lender and the Borrower of such circumstance, and the Borrower shall
be deemed to have requested from the Committed Lenders (other than Funding
Liquidity Providers) a Base Rate Borrowing in the amount of such deficiency (the
"Unfunded Amount"), unless the Borrower notifies the Agent (including, at its
option, by telephone) that it does not require the proceeds of such Borrowing to
repay fully the B Portion of the Construction Loan. Subject to Section 5.2 and
the other terms and conditions hereof, each Committed Lender (other than Funding
Liquidity Providers) shall remit to the Agent's Account by no later than 2:00
p.m. (Chicago time) on the Funding Date its Ratable Share of any such Borrowing
of an Unfunded Amount. The Agent shall transfer to the Borrower Account the
proceeds of any Borrowing delivered into the Agent's Account. The Borrower
agrees to request Borrowings from the Funding Liquidity Providers in an
aggregate principal amount equal to the Funding Liquidity Provider's Ratable
Share of all the Loans advanced on the Funding Date.
Section 2.2. Selection of Interest Rate Types and Interest Periods.
(a) The Loan(s) included in each Borrowing advanced on the Funding Date shall
bear interest initially at the type of rate specified in the Borrower's notice
requesting such Borrowing pursuant to Section 2.1(b) or as otherwise established
by the third to last sentence of Section 2.1(b). Thereafter, the Borrower may
request Amsterdam to continue for an additional Interest Period part or all of
any CP Borrowing by giving the Agent notice of such requested continuation by no
later than 11:00 a.m. (Chicago time) one Business Day before the end of the
current Interest Period for such Borrowing. At any time that any Borrowings are
outstanding from the Committed Lenders, the Borrower may from time to time elect
to change or continue the type of interest rate borne by each such Borrowing or,
subject to the minimum amount of each Borrowing required by the first sentence
of Section 2.1(b) (or, for any Committed Lender that makes a Loan pursuant to
Section 10.8(c) or 2.11(b) in a principal amount less than such minimum amount,
the principal amount of such Loan), any portion thereof, as follows: (i) if
such Borrowing is a Eurodollar Borrowing, the Borrower may continue part or all
of such Borrowing as a Eurodollar Borrowing for an Interest Period specified by
the Borrower or convert part or all of such Borrowing into a Base Rate Borrowing
on the last day of the Interest Period applicable thereto, or the Borrower may
earlier convert part or all of such Borrowing into a Base Rate Borrowing so long
as it pays the Early Payment Fee provided in Section 2.8(b); and (ii) if such
Borrowing is a Base Rate Borrowing, on any Business Day the Borrower may convert
all or part of such Borrowing into a Eurodollar Borrowing. All such requests to
continue or convert part or all of a Borrowing from the Committed Lenders must
be delivered to the Agent by no later than 11:00 a.m. (Chicago time) three (3)
Business Days before the requested conversion or continuation through a written
notice (including by telecopier or other facsimile communication). All
Borrowings (i) from Amsterdam shall be CP Borrowings and (ii) from the Committed
Lenders may be Eurodollar or Base Rate Borrowings, in all cases for an Interest
Period. During the pendency of an Event of Default, the Borrower may not
request any Eurodollar Borrowings and all outstanding Eurodollar Borrowings
shall convert into Base Rate Borrowings on the last day of their Interest
Periods if any Event of Default is continuing at such time.
(b) If, by the time required in Section 2.2(a), the Borrower fails to
request an Interest Period for any Borrowing from Amsterdam or the requested
Interest Period is unacceptable to
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Amsterdam, the Agent may, in its sole discretion, select such Interest Period.
If, by the time required in Section 2.2(a), the Borrower fails to select the
type of Borrowing or Interest Period therefor from the Committed Lenders, such
Borrowing shall continue at the end of its then current Interest Period as a
Base Rate Borrowing. Any portion of a Borrowing from Amsterdam transferred to
Committed Lenders pursuant to Section 3.1 shall thereupon be deemed to have been
converted to a Base Rate Borrowing.
(c) In addition to transfers of Borrowings from Amsterdam to the Committed
Lenders, at any time a Borrowing is outstanding from the Committed Lenders, the
Borrower may request Amsterdam to purchase all, but not less than all, of the
outstanding Borrowing(s) then held by the Committed Lenders (other than Direct
Lenders). If Amsterdam, in its sole discretion, determines to acquire such
Borrowing(s) and is able to fund its acquisition of all or any part of such
Borrowing(s), Amsterdam may purchase such Borrowing(s), or the portion thereof
for which it is able to receive funding, at a purchase price equal to the
Matured Value of the Loans comprising each Borrowing (or portion thereof) so
purchased (or, so long as all Early Payment Fees payable to the Committed
Lenders in connection with such purchase are paid by the Borrower, the principal
amount of, and all accrued and unpaid interest on, such Borrowing or portion
thereof); provided that, if more than one Borrowing from the Committed Lenders
(other than Direct Lenders) is outstanding, Amsterdam may purchase each
Borrowing on the last day of the Interest Period applicable to such Borrowing.
Any such purchase of a Borrowing by Amsterdam from the Committed Lenders shall
be accomplished through a notification in the form of Exhibit B hereto and shall
be subject to the limitations in Section 2.1(a), and such sale shall be made by
each Committed Lender without recourse, representation or warranty except for
the representation and warranty by each applicable Committed Lender that each
Loan sold by such Committed Lender is free and clear of any Liens created or
granted by such Committed Lender and that such Committed Lender has not suffered
any Bankruptcy Event.
Section 2.3. Maturity of Loans. (a) The Borrower shall repay a
portion of the Borrowings on the last Business Day of each calendar month,
commencing on the last Business Day of the first full calendar month after the
Funding Date (except that the first payment date may be the last Business Day in
the calendar month in which the Loans are first advanced to the Borrower) (each
an "Amortization Date"), in the principal amounts set forth opposite each
Amortization Date on Schedule 2.3 under the heading "Scheduled Principal
Payments" (the "Scheduled Principal Payments") (or, if less, the aggregate
principal amount of Loans then outstanding). Each Scheduled Principal Payment
shall be allocated between a payment related to the Rig and a payment related to
the Drillship as set forth opposite each Amortization Date on Schedule 2.3 under
the heading "Vessel Amortization Payments" (the unpaid portion of such payments
at any date may be referred to as "Vessel Amortization Payments").
(b) The Agent shall, after consultation with the Borrower and Transocean,
reset the sizing of the Loans and the Transocean Contract Loans (keeping the
aggregate principal amount of the Loans and the Transocean Contract Loans
outstanding the same), the amortization payments for the Loans and the
Transocean Contract Loans, the rent payable under the Transocean Contracts, to
the extent any such contract remains effective pursuant to the terms hereof, and
the allocation of payments required on each Amortization Date between the Rig
and the Drillship (all in accordance with the Sizing Methodology defined in the
Secured Credit
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Agreement as last in effect before the repayment of the Construction Loans on or
before the Funding Date) within ten (10) Business Days from when (i) the
effective date with respect to a Substitute Contract shall have occurred, (ii)
the Borrower provides evidence reasonably satisfactory to the Agent that Amoco
is then required to pay under the terms and provisions of the applicable Amoco
Contract the stated operating dayrate contained therein as opposed to any
cancellation fee for the remaining term of such contract (or, if earlier, until
the last Amortization Date for the Loans), or (iii) if Amoco does not cancel a
portion of the term of the Amoco Rig Contract (pursuant to the right to do so
with no obligation to pay a cancellation fee (the "Free Cancellation Right"))
prior to the commencement of the fourth year, fifth year or last eighteen (18)
month period, respectively, of the term of the Amoco Rig Contract. The Borrower
shall provide written notice to the Agent of any event described in (iii) above,
and the Agent shall promptly provide any such notice to all Lenders. The Agent
shall, after consultation with the Borrower and Transocean, also reset downwards
the rent payable under the Transocean Contracts, to the extent any such contract
remains effective pursuant to the terms hereof, within ten (10) Business Days
from any prepayment of the Transocean Contract Loans pursuant to Section 2.4 or
2.5 of the Transocean Contracts Loan Agreement, all in accordance with the
Sizing Methodology defined in the Secured Credit Agreement as last in effect
before the repayment of the Construction Loans on or before the Funding Date.
Section 2.4. Optional Prepayments. Except pursuant to Section
2.5, the Borrower may not prepay any Borrowing unless all Transocean Contracts
Loans have been repaid in full. Subject to the immediately preceding sentence,
the Borrower shall have the privilege of prepaying (x) Base Rate Borrowings
without premium or penalty at any time in whole or at any time and from time to
time in part (but, if in part, then in an amount which is equal to or greater
than $1,000,000), so long as the Borrower shall have given notice of such
prepayment to the Agent (which shall in turn provide such notice promptly to the
Lenders) no later than 12:00 noon (Chicago time) on the date of such prepayment,
and (y) Eurodollar Borrowings or CP Borrowings without premium or penalty in
whole or in part (but, if in part, then in an amount which is equal to or
greater than $5,000,000) (i) only on the last Business Day of an Interest Period
for such a Borrowing, and (ii) at any other time so long as any Early Payment
Fee then due pursuant to Section 2.8(b) are paid; provided, however, that the
Borrower shall have given notice of such prepayment to the Agent (which shall in
turn provide such notice promptly to the Lenders) no later than 11:00 a.m.
(Chicago time) (I) with respect to Base Rate Borrowings, on the date of such
prepayment or (II) with respect to Eurodollar Borrowings or CP Borrowings, at
least three (3) Business Days before the proposed prepayment date. Each such
optional prepayment shall be accompanied by a payment of all accrued and unpaid
interest on the Loans prepaid and any Early Payment Fee then due pursuant to
Section 2.8(b). Optional prepayments under this Section 2.4 shall be applied to
the remaining Scheduled Principal Payments in the inverse order of maturity.
Each payment applied to a Scheduled Principal Payment shall be applied ratably
between the Vessel Amortization Payments comprising such Scheduled Principal
Payment. Amounts prepaid on the Loans under Section 2.4 or 2.5 may not be
reborrowed.
Section 2.5. Mandatory Prepayments.
(a) Event of Loss. Within three (3) days of receipt by the
Borrower, Transocean, the Agent, the Collateral Agent or any of the Lenders
of any casualty
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insurance proceeds or any condemnation or other similar proceeds from any
governmental authority or other Person from any Event of Loss (the
"Insurance Receipt Date"), the Borrower may, upon written notice to the
Agent (who shall promptly provide such notice to the Lenders), elect to
reconstruct the Drillship or the Rig, as applicable, with the Event of Loss
Proceeds so long as (i) such reconstruction can be completed within
eighteen (18) months from the date of such Event of Loss, as reasonably
determined by the Borrower at such time and as demonstrated to the
reasonable satisfaction of the Agent, (ii) such Event of Loss has not
caused and is not reasonably likely to cause either of the Amoco Contracts
or any Substitute Contract to terminate or cancel (with no obligation to
pay a cancellation fee and other than pursuant to the Free Cancellation
Right) and Amoco or such substitute contracting party, as applicable,
provides written confirmation to the Agent that it will continue to lease
the applicable vessel at the end of such reconstruction period pursuant and
subject to the terms of such applicable contract for the full stated term
thereof, (iii) the Collateral Agent (for the benefit of the Lenders, the
"Lenders" under the Transocean Contracts Loan Agreement and the Swap
Parties) is provided a security interest in any construction contract and
any letter of credit or other collateral provided to the Borrower or
Transocean in connection therewith on terms substantially similar to the
applicable Security Documents and otherwise as reasonably satisfactory to
the Agent, (iv) Transocean executes and delivers a new performance guaranty
of the reconstruction thereof containing terms substantially similar to the
applicable portions of the Transocean Performance Guaranty and otherwise as
reasonably satisfactory to the Agent, (v) the Borrower shall be able to
obtain loss of hire insurance for such vessel after the reconstruction
period therefor as then reasonably determined by the Borrower and as
demonstrated to the reasonable satisfaction of the Agent, and (vi) the
Borrower shall demonstrate to the reasonable satisfaction of the Agent that
it shall be able to timely pay its Obligations hereunder and any "true up"
costs and expenses payable to any Swap Parties as a result of such Event of
Loss and such reasonably determined reconstruction period under the
Interest Rate Protection Agreements as required pursuant to Section 7.1(j)
and no Default shall have occurred and be continuing, in which event all
Event of Loss Proceeds shall be segregated and held by the Collateral Agent
and made available by the Collateral Agent to the Borrower (x) for such
reconstruction, using contractors, plans and specifications and methods
substantially in accordance with the Functional Requirements as reasonably
satisfactory to the Agent and the Instructing Group, and (y) for the
payment of the Obligations, the Transocean Contracts Obligations and the
Swap Obligations, as provided below. If the Borrower elects not to, or is
unable pursuant to the terms and conditions hereof to, reconstruct the
applicable vessel with any such Event of Loss Proceeds, the Borrower shall
within three (3) days of the Insurance Receipt Date, make a mandatory
principal prepayment of (i) the remaining unpaid Vessel Amortization
Payments for the Drillship or the Rig, as applicable, (ii) the remaining
unpaid "Vessel Amortization Payments" under the Transocean Contracts Loan
Agreement for the Drillship or the Rig, as applicable, and (iii) after
giving effect to the preceding clause (ii), (x) any unpaid Transocean
Contracts Aggregate Principal Amount in the amount of any Required Coverage
Payment (or, if less, the remaining unpaid Transocean Contracts Aggregate
Principal Amount) and (y) if such outstanding Transocean Contracts
Aggregate Principal Amount is less than the Required Coverage Payment,
Loans outstanding hereunder in the amount of such
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difference. Prepayments made under clause (iii) of the preceding sentence
shall be applied to the "Scheduled Principal Payments" under the Transocean
Contracts Loan Agreement, or to the Scheduled Principal Payments, as the
case may be, in the inverse order of maturity. Each such mandatory payment
shall be accompanied by a payment of all accrued and unpaid interest on the
Loans and the Transocean Aggregate Principal Amount prepaid and any Early
Payment Fee pursuant to Section 2.8(b) and the comparable provisions of the
Transocean Contracts Loan Agreement. Any Event of Loss Proceeds received at
any time by the Borrower, Transocean, the Agent, the Collateral Agent or
any of the Lenders shall (i) if received by any such Person other than the
Collateral Agent, forthwith be turned over to the Collateral Agent or (ii)
if received by the Collateral Agent (or turned over to the Collateral Agent
pursuant to clause (i)), be applied as directed by the Borrower from time
to time to the payment of Obligations, Transocean Contract Obligations, or
Swap Obligations (including, without limitation, to mandatory payments of
the amounts provided in clauses (i)-(iii) of the second preceding sentence
or to the payment of costs incurred in connection with the reconstruction
of the Drillship or the Rig, as applicable, if undertaken in accordance
with this Section 2.5(a)). Any Event of Loss Proceeds held by the
Collateral Agent (i) after such reconstruction is completed, as evidenced
by a certificate from the Borrower certifying the completion of such
reconstruction or repair in form and substance reasonably satisfactory to
the Agent, or (ii) after the mandatory prepayment of amounts owed hereunder
and under the Transocean Contracts Loan Agreement, as described above,
shall be released by the Collateral Agent to the Borrower upon demand.
(b) Vessel Financing Termination. The Borrower may for any reason
at any time elect to terminate the financing arrangements provided in this
Agreement and the Transocean Contracts Loan Agreement for the Rig (a
"Vessel Financing Termination"). The Borrower shall give the Agent at
least three (3) Business Days' notice of the date on which it intends to
effect a Vessel Financing Termination. The Agent shall promptly provide
any such notice to the Lenders. On the date so specified, the Borrower
shall make a prepayment of amounts owing hereunder and under the Transocean
Contracts Loan Agreement as it would be required under clauses (i)-(iii) of
the second sentence in Section 2.5(a) if the Rig were subject to an Event
of Loss and were not reconstructed.
(c) Excess Cash Flow. On each Amortization Date, if there are no
outstanding Transocean Contracts Obligations, the Borrower shall make a
mandatory prepayment of the outstanding Loans in an amount equal to 50% of
Excess Cash Flow received during the preceding calendar month, for
application to the Scheduled Principal Payments in the inverse order of
maturity, applied ratably between the Vessel Amortization Payments due on
each such date based on their principal amounts.
(d) Casualty Event. The Borrower shall use any Casualty Proceeds
aggregating less than $15,000,000 from any Casualty Event to repair the
Drillship or the Rig, as applicable, so long as no Default shall have
occurred and be continuing, provided that the Collateral Agent shall hold
any such Casualty Proceeds so long as a Default shall have occurred and
then be continuing and (i) shall release such Casualty Proceeds to the
Borrower to be used for such repair when and if such Default shall have
been cured or
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waived pursuant to the terms hereof or (ii) if so directed by the Borrower,
shall apply such Casualty Proceeds against the Obligations, Transocean
Contract Obligations and/or Swap Obligations as set forth below in this
Section 2.5(d). The Borrower shall use any Casualty Proceeds aggregating
$15,000,000 or more to repair the Drillship or the Rig, as applicable,
using such contractors, plans and specifications and methods substantially
in accordance with the Functional Requirements as reasonably determined by
the Borrower so long as (i) such repair can be completed within eighteen
(18) months from the date of such Casualty Event as reasonably determined
by the Borrower at such time, (ii) such Casualty Event shall have not
caused, and is not reasonably likely to cause, either of the Amoco
Contracts or the Substitute Contracts, if any, to terminate or cancel (with
no obligation to pay a cancellation fee and other than pursuant to the Free
Cancellation Right), (iii) Transocean executes and delivers a new
performance guaranty of the repair thereof containing terms substantially
similar to the applicable portions of the Transocean Performance Guaranty
and otherwise as reasonably satisfactory to the Agent, provided that the
damages for failure to perform such guaranty shall be limited to the amount
of the aggregate Casualty Proceeds received by the Borrower or Transocean
from such Casualty Event and such guaranty of repair shall be deemed
satisfied when Amoco or any other Person party to a Substitute Contract, as
applicable, shall have commenced making scheduled stated operating dayrate
payments with respect to the applicable vessel after such repairs have been
completed, and (iv) the Borrower shall demonstrate to the reasonable
satisfaction of the Agent that it shall be able to timely pay its
Obligations hereunder during the anticipated repair period as reasonably
determined by the Borrower, and any "true up" costs and expenses payable to
any Swap Parties as a result of such Casualty Event and such repair period
under the Interest Rate Protection Agreement as required pursuant to
Section 7.1(j) and no Default shall have occurred and be continuing. If the
Borrower elects not to (for any Casualty Event whose Casualty Proceeds
aggregate more than $15,000,000), or is unable pursuant to the terms and
conditions hereof to, repair the applicable vessel with any such Casualty
Proceeds, the Borrower shall within three (3) days of receipt by the
Borrower, Transocean, the Agent, the Collateral Agent or any of the Lenders
of any casualty insurance proceeds or any condemnation or other similar
proceeds from any governmental authority or any other Person, make a
mandatory principal prepayment of the Loans and/or Transocean Contracts
Loans, as determined below, in an aggregate amount such that the sum of the
aggregate principal payment, plus the other amounts that will become
payable as a result of such mandatory prepayment as set forth in the
following two sentences and the corresponding provisions of the Transocean
Contracts Loan Agreement, equals the Casualty Proceeds. Each such mandatory
prepayment shall be accompanied by a payment of all accrued and unpaid
interest on the Loans and Transocean Contracts Loans prepaid and any Early
Payment Fee then due pursuant to Section 2.8(b) or the comparable provision
of the Transocean Contracts Loan Agreement. So long as the Amoco Contract
or the Substitute Contract, as applicable, for the vessel subject to such
Casualty Event remains in effect, each such prepayment shall be applied to
the Transocean Contracts Loans in inverse order of maturity and, only after
their payment in full, to the Loans in inverse order of maturity (and, with
respect to such particular remaining Scheduled Principal Payment to which
such prepayment is so allocated, shall be further suballocated between the
two Vessel Amortization Payments comprising each such Scheduled Principal
Payment, ratably
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according to the amount of each such Vessel Amortization Payment). If the
Amoco Contract or the Substitute Contract, as applicable, for such vessel
subject to the Casualty Event does not remain in effect, such prepayment
shall be applied ratably to the Vessel Amortization Payments for the
applicable vessel and the "Vessel Amortization Payments" under the
Transocean Contracts Loan Agreement for the applicable vessel, ratably
based on their aggregate amounts, in inverse order of their maturities. Any
Casualty Proceeds received at any time by the Borrower, Transocean, the
Agent, the Collateral Agent or any of the Lenders shall (i) if received by
any such Person other than the Collateral Agent, forthwith be turned over
to the Collateral Agent, or (ii) if received by the Collateral Agent (or
turned over to the Collateral Agent pursuant to clause (i)), be applied as
directed by the Borrower from time to time to the payment of amounts
payable hereunder and/or under the Transocean Contracts Loan Agreement
(including, without limitation, to the mandatory prepayment provided for in
this Section 2.5(d), if any) and/or Swap Obligations, or to the payment of
costs incurred in connection with the repair of the Drillship or the Rig,
as applicable, if undertaken in accordance with this Section 2.5(d)). Any
Casualty Proceeds held by the Collateral Agent after any such repair is
completed, as evidenced by a certificate from the Borrower certifying the
completion of such repair in form and substance reasonably satisfactory to
the Agent, shall be released by the Collateral Agent to the Borrower upon
demand.
(e) Adjustments to Operative Documents. Any term of this Agreement
or any other Security Document to the contrary notwithstanding, upon the
making of payments pursuant to Section 2.5(a) or (b), (i) the Collateral
Agent shall execute and deliver to the Agent such instruments as are
necessary to release the applicable vessel and any Collateral related
thereto from any Lien thereon under any Security Document, and the Borrower
and the Collateral Agent shall enter into such instruments as are necessary
to terminate the applicability of the Credit Documents to the applicable
vessel and any such related Collateral, (ii) without limitation of clause
(i), if the Drillship is the applicable vessel, references herein to the
Drillship or to the Amoco Drillship Contract, the Transocean Drillship
Contract, the Substitute Drillship Contract, the Drillship O&M Contract,
the Drillship Shipyard Construction Contract, the Assignment of Bank
Guarantees and any other Credit Documents relating solely to the Drillship
(collectively, the "Drillship Documents"), other than references to any of
the foregoing in Section 2.5(a) or (b), as applicable, and other than
specific references to the Drillship as the applicable vessel pursuant to
Section 2.5(a) or (b), as applicable, and except to the extent otherwise
expressly provided in provisions making specific reference to this Section
2.5(e), shall be deemed to be deleted, references in the Credit Documents
that are not Drillship Documents to the Drillship or any of the Drillship
Documents, other than specific references therein to the Drillship as the
applicable vessel pursuant to Section 2.5(a) or (b), as applicable, and
except to the extent otherwise expressly provided in provisions making
specific reference to this Section 2.5(e), shall be deemed to be deleted,
the Credit Documents that are Drillship Documents shall be terminated and
the Borrower shall be free to act in its sole discretion with respect to
the Drillship (and related assets) and the Drillship Documents that are not
Credit Documents, (iii) without limitation of clause (i), if the Rig is the
applicable vessel, references herein to the Rig or to the Amoco Rig
Contract, the Transocean Rig Contract, the Substitute Rig Contract, the
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Rig O&M Contract, the Rig Shipyard Construction Contract and any other
Credit Documents relating solely to the Rig (collectively, the "Rig
Documents"), other than references to any of the foregoing in Section
2.5(a) or (b), as applicable, and other than specific references to the Rig
as the applicable vessel pursuant to Section 2.5(a) or (b), as applicable,
and except to the extent otherwise expressly provided in provisions making
specific reference to this Section 2.5(e), shall be deemed to be deleted,
references in the Credit Documents that are not Rig Documents to the Rig or
any of the Rig Documents, other than specific references therein to the Rig
as the applicable vessel pursuant to Section 2.5(a) or (b), as applicable,
and except to the extent otherwise expressly provided in provisions making
specific reference to this Section 2.5(e), shall be deemed to be deleted,
the Credit Documents that are Rig Documents shall be terminated and the
Borrower shall be free to act in its sole discretion with respect to the
Rig (and related assets) and the Rig Documents that are not Credit
Documents, and (iv) any amount in the Insurance Reserve with respect to
such vessel as determined pursuant to Section 7.1(f)(iii) shall be released
by the Collateral Agent to the Borrower. Notwithstanding anything to the
contrary contained in this Section 2.5(e), the applicable vessel and any
related Collateral shall not be released from any Lien thereon under any
Security Documents unless and until the Borrower shall have effected a
"true-up" of the financial terms of the Interest Rate Protection Agreement
or Agreements in effect at such time to the extent necessary to eliminate
any over-hedged position at such time as a result of any such prepayments
or, if no Default or Event of Default shall have occurred and be continuing
under the Transocean Credit Facility, the Borrower shall have assigned its
rights and obligations under such Interest Rate Protection Agreement or
Agreements to Transocean to the extent of such prepayment pursuant to
documentation in form and substance reasonably satisfactory to the affected
Swap Party.
(f) "Sue and Labor" Reimbursement Insurance Proceeds. The
Collateral Agent shall promptly turn over to Transocean any "sue and labor"
reimbursement expense payments received by it so long as (or when) no
Default shall have occurred and be continuing (or, if so directed by
Transocean, apply such payments against the Obligations, the Transocean
Contract Obligations and/or Swap Obligations).
(g) Early Payment Fee. If any payments made under this Section 2.5
would result in the reduction of any CP or Eurodollar Borrowing before the
last day of its Interest Period, in order to avoid the need to pay an Early
Payment Fee under Section 2.8(b), so long as no Event of Default then
exists, the Borrower may direct the Agent to invest the funds required to
be applied to make such payment in Permitted Investments, through an
investment account in the Agent's name and sole control, and apply the
proceeds of such investments to repay CP or Eurodollar Borrowings on the
last day of the Interest Period applicable thereto. Interest shall
continue to accrue on such CP or Eurodollar Borrowings until payments are
applied to reduce such Borrowings.
(h) Drillship Dayrate Differential. If the stated operating dayrate
(excluding any incentive or bonus rates) to be paid by Amoco pursuant to
the terms of the Amoco Drillship Contract is less than $181,000 per day as
a result of one or more agreements of the parties thereto to an incentive
program, then the Borrower shall give prompt written
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notice thereof to the Agent (which the Agent will in turn forward promptly
to the Lenders) and the Agent shall on or prior to the date ten (10) days
after any such agreement becomes effective so as to reduce the operating
day rate thereunder, after consultation with the Borrower and Transocean,
reasonably determine the reduced size of the Loans and the principal amount
of each required payment of each Loan on each remaining Amortization Date,
in each case using the Sizing Methodology defined in the Secured Credit
Agreement as last in effect before the repayment of the Construction Loans
on or before the Funding Date. The remaining required amortization payments
for the Loans shall be such that the Loans (after taking into account the
Fixed Operating Expenses attributable to each of the Rig and the Drillship)
are fully amortized to $0 by the last Amortization Date on Schedule 2.3.
The Borrower will, on or prior to the date fifteen (15) days after any such
agreement becomes effective so as to reduce the operating dayrate
thereunder, prepay the principal amount of the Loans in an amount equal to
the difference between the outstanding principal balance of the Loans and
such reduced size of the Loans appropriately using the Sizing Methodology.
Such mandatory prepayment shall be accompanied by a payment of all accrued
and unpaid interest on the principal amount of Loans so prepaid and any
applicable breakage fees and funding losses pursuant to Section 2.8(b).
Section 2.6. Applicable Interest Rates. (a) Base Rate Borrowings.
Each Base Rate Borrowing shall bear interest (computed on the basis of a
365/366-day year and actual days elapsed excluding the date of repayment) on the
unpaid principal amount thereof from the date such Borrowing is advanced,
continued or created through conversion until the last day of its Interest
Period, conversion to a Eurodollar Borrowing or maturity (whether by
acceleration or otherwise), at a rate per annum equal to the Base Rate from time
to time in effect, payable on such last day of its Interest Period, date of
conversion or at maturity (whether by acceleration or otherwise).
(b) Eurodollar Borrowings. Each Eurodollar Borrowing shall bear interest
(computed on the basis of a 360-day year and actual days elapsed, excluding the
date of repayment) on the unpaid principal amount thereof from the date such
Borrowing is advanced, continued or created through conversion until the last
day of its Interest Period, conversion to a Base Rate Borrowing or maturity
(whether by acceleration or otherwise), at a rate per annum equal to the
Eurodollar Rate applicable to such Borrowing, payable on such last day of its
Interest Period, conversion to a Base Rate Borrowing or at maturity (whether by
acceleration or otherwise).
(c) CP Borrowings. Each CP Borrowing shall bear interest (computed on the
basis of a 360-day year and actual days elapsed, excluding the date of
repayment) on the unpaid principal amount thereof from the date such Borrowing
is advanced or continued until the last day of its Interest Period (whether by
acceleration or otherwise) at a rate per annum equal to the CP Rate for such
Borrowing, payable on the last day of its Interest Period and when required by
Section 3.1(c).
(d) Rate Determinations. The Agent shall determine each interest rate
applicable to each Borrowing and such determination shall be conclusive and
binding except in the case of the Agent's manifest error or willful misconduct.
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Section 2.7. Default Rate. If any payment of principal on any
Borrowing from the Committed Lenders is not made when due after the expiration
of the grace period therefor provided in Section 8.1(a) (whether by acceleration
or otherwise), such Borrowing shall bear interest (computed on the basis of a
year of 360, 365 or 366 days, as applicable for the relevant type of rate, and
actual days elapsed) after such grace period expires until such principal then
due is paid in full, payable on demand, at a rate per annum equal to:
(i) for any Base Rate Borrowing, the sum of two percent (2%) per
annum plus the Base Rate from time to time in effect (but not less than the
Base Rate in effect at maturity); and
(ii) for any Eurodollar Borrowing, the sum of two percent (2%) per
annum plus the rate of interest in effect thereon at the time of such
default until the end of the Interest Period for such Borrowing and,
thereafter, at a rate per annum equal to the sum of two percent (2%) per
annum plus the Base Rate from time to time in effect (but not less than the
Base Rate in effect at maturity).
Section 2.8. Fees and Other Costs and Expenses. (a) The Borrower
shall pay to the Agent (i) for the ratable benefit of the Liquidity Providers,
such amounts as agreed to with the Liquidity Providers and the Agent in the
Pricing Letter, and (ii) for the account of the Enhancer and the Agent, such
amounts as agreed to with the Enhancer and the Agent in the Fee Letter.
(b) If (x) any portion of a CP Borrowing or Eurodollar Borrowing is repaid
(as opposed to purchased) or, in the case of a Eurodollar Borrowing, purchased
by Amsterdam pursuant to Section 2.2(c) (unless the Borrower requests Amsterdam
to pay to the Committed Lenders all interest scheduled to become due on such
Borrowing during its current Interest Period), in each case, before the last day
of its Interest Period or (y) a Eurodollar Borrowing is not advanced or
continued, or created by conversion, as requested by the Borrower pursuant to
Section 2.1(b) or 2.2(a), the Borrower shall pay the Early Payment Fee to each
Lender that had its Loan so repaid or purchased or not so advanced, continued,
or created by conversion (other than as a result of such Lender's default).
Section 2.9. Reduction in Commitments. The Borrower may, upon
thirty days' notice to the Agent (which shall promptly notify each Lender),
reduce the Borrowing Limit and/or Aggregate Commitment in increments of
$1,000,000, so long as the Aggregate Commitment at all times equals at least the
Matured Aggregate Loan Amount and at least 102% of the Borrowing Limit then in
effect. At the time any Scheduled Principal Payment or mandatory prepayment is
received by the Agent in full, or any optional prepayment is received, the
Borrowing Limit shall automatically reduce by the amount of such payment (if not
already reduced by such amount on Schedule 2.3) and the Aggregate Commitment
shall automatically reduce to an amount equal to 102% of the Borrowing Limit
then in effect or, if larger, the Matured Aggregate Loan Amount then in effect.
Each reduction in the Aggregate Commitment shall reduce the Commitment of each
Committed Lender in accordance with its Ratable Share.
Section 2.10. The Note. The Loans outstanding to the Borrower
from the Lenders shall be evidenced by a single promissory note of the Borrower
payable to the order of the Agent, for the
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benefit of the Lenders, in the form of Exhibit 2.10 (the "Note"). The Agent
shall record on its books and records or on a schedule to the Note the amount of
each Loan held by a Lender, all payments of principal and interest and the
principal balance from time to time owed to each Lender, the type of each Loan
and the Interest Period and interest rate applicable thereto. Such record,
whether shown on the books and records of the Agent or on a schedule to the
Note, shall be prima facie evidence as to all such matters; provided, however,
that the failure of the Agent to record any of the foregoing or any error in any
such record shall not limit or otherwise affect the obligation of the Borrower
to repay all Loans outstanding to it hereunder together with accrued interest
thereon.
Section 2.11. Extensions of Scheduled Termination Date.
(a) Not more than 90 days before the Scheduled Termination Date then in
effect, the Borrower may request that each Committed Lender (other than a Direct
Lender that previously was a Non-Consenting Lender) extend its Commitment for an
additional 364 days. Each such Committed Lender shall respond to such request
within 30 days of receiving such request or, if later, on the date 45 days
before the then Scheduled Termination Date. If, by the date 45 days before the
then Scheduled Termination Date, any such Committed Lender (a "Non-Consenting
Lender") has not notified the Agent it agrees to so extend its Commitment for an
additional 364 day period, unless (in the case of a Liquidity Provider) any
other Liquidity Provider or Providers (including any Person who thereby becomes
a Liquidity Provider) assumes the Commitment of such Non-Consenting Lender,
including any Loans made by a Direct Lender, in accordance with Section 10.8(b)
on or before the date 30 days before the then Scheduled Termination Date and
agrees to extend such Commitment for an additional 364 day period, the Scheduled
Termination Date shall not be extended, unless the Scheduled Termination Date is
extended pursuant to Section 2.11(b). If all such Committed Lenders agree to
extend the Scheduled Termination Date, or if the Commitment of each Non-
Consenting Lender that is a Liquidity Provider is assumed by another Lender
pursuant to the preceding sentence, the Scheduled Termination Date shall be
extended for an additional 364 day period. Otherwise, subject to Section
2.11(b), the Scheduled Termination Date shall take place as scheduled.
(b) If the Enhancer and Liquidity Providers having Commitments that
together with the Enhancer's Commitment constitute a majority of the Commitments
have agreed (each such Lender being a "Consenting Lender"), pursuant to Section
2.11(a), to extend their Commitments (including the assumption of Commitments
pursuant to Section 2.11(a)) for an additional 364 day period, but one or more
Non-Consenting Lenders have not had their Commitment(s), including any Loan made
by a Direct Lender, assumed as contemplated by Section 2.11(a), the Borrower may
by notice to the Agent either (i) reduce the Aggregate Commitment by an amount
up to the amount of the Unused Commitment(s) of the Liquidity Provider(s) that
were Non-Consenting Lender(s) either by requiring each such Non-Consenting
Lender to advance one or more Loans and/or by terminating all or any portion of
each such Non-Consenting Lender's Commitment, if such reduction in the Aggregate
Commitment is permitted under Section 2.9 (without giving effect to the minimum
amount or required increment for such reductions, neither of which shall apply
in such instance) or (ii) repay on the then Scheduled Termination Date all or a
portion of the Loans advanced by any Committed Lenders that were Non-Consenting
Lenders, with each such payment to be allocated pro rata solely to the Non-
Consenting Lenders that are
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Committed Lenders. Such reduction in the Aggregate Commitments shall thereupon
become effective with the reduction allocated pro rata solely to the Non-
Consenting Lender(s) with its or their Unused Commitment(s) reduced by an amount
designated by the Borrower and any repayment of Loans shall be allocated pro
rata solely to the Non-Consenting Lenders in accordance with the aggregate
principal amount of all outstanding Loans owed to the Non-Consenting Lenders.
Any previously advanced Loans then outstanding from such Non-Consenting
Lender(s) shall remain outstanding subject to the terms of this Agreement. If
Loans are then outstanding from Amsterdam, then the Borrower may elect to (i)
extend the Scheduled Termination Date for each Consenting Lender by delivering a
notice to the Agent of such election and (ii) require each Non-Consenting Lender
(that is not a Direct Lender) to advance on or before the then Scheduled
Termination Date one or more Loans (each a "Non-Consenting Lender Loan") on a
pro rata basis equal, in each case, to an amount specified in the Borrower's
election that is no greater than such Non-Consenting Lender's Unused Commitment.
The proceeds of any such Non-Consenting Lender Loans shall be deposited with the
Agent and applied on the next Amortization Date to repay solely Loans then owed
Amsterdam without thereby reducing the aggregate principal amount of outstanding
Loans. Thereafter, such Non-Consenting Lender Loans and any outstanding Loans of
a Direct Lender that is or was a Non-Consenting Lender shall be repaid to the
extent provided pursuant to Sections 2.3 and 3.2 for Loans of a Liquidity
Provider. If an extension of the Scheduled Termination Date is agreed to by the
Enhancer and Liquidity Providers having Commitments that together with the
Enchancer's Commitment constitute a majority of the Commitments and such
extension takes place pursuant to this Section 2.11(b), the Scheduled
Termination Date shall be extended for the Enhancer and the Consenting Lenders
(or replacement Lenders, as applicable) for an additional 364 day period.
ARTICLE III
SALES TO AND FROM AMSTERDAM; ALLOCATIONS
Section 3.1. Required Purchases from Amsterdam. (a) Amsterdam
may, at any time on or prior to the Liquidity Termination Date, and, on the
earlier of the Amsterdam Termination Date and upon the Agent and Amsterdam
learning of a continuing Put Event, Amsterdam shall, sell to the Committed
Lenders (other than the Direct Lenders) any percentage designated by Amsterdam
of Amsterdam's Principal Amount (each, a "Put"). If the Put occurs due to the
Amsterdam Termination Date or a Put Event, the designated percentage shall be
100% or such lesser percentage as is necessary to obtain the maximum available
Purchase Price from each such Committed Lender. Immediately upon notice of a
Put from Amsterdam to the Agent, the Agent shall deliver to each such Committed
Lender and the Borrower a notification of assignment in substantially the form
of Exhibit C by not later than 12:30 p.m. (Chicago time), and each such
Committed Lender shall purchase from Amsterdam its Purchase Percentage of
Amsterdam's Principal Amount subject to such Put by transferring to the Agent's
Account an amount equal to such Lender's Purchase Price by not later than 1:00
p.m. (Chicago time) on the date such funds are requested; provided, however,
that the Enhancer may exchange for part or all of the Purchase Price payable by
it an equal amount of the Program Unreimbursed Draw Amount.
(b) If a Liquidity Provider fails to transfer to the Agent its full
Purchase Price when required by Section 3.1(a) (each such Liquidity Provider
being a "Defaulting Lender" and the aggregate amount not made available to the
Agent by each such Liquidity Provider being the
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"Unpaid Amount"), then, upon notice from the Agent by not later than 1:15 p.m.
(Chicago time), each Liquidity Provider not owing an Unpaid Amount shall
transfer to the Agent's Account, by not later than 1:45 p.m. (Chicago time), an
amount equal to the lesser of such Liquidity Provider's proportionate share
(based on its Commitment divided by the Commitments of all Liquidity Providers
that have not so failed to pay their full Purchase Price) of the Unpaid Amount
and the unused portion of its Commitment. If the Agent does not then receive the
Unpaid Amount in full, upon notice from the Agent by not later than 2:00 p.m.
(Chicago time) on such day, each Liquidity Provider that has not failed to fund
any part of its obligations on such day under this Section 3.1 shall pay to the
Agent, by not later than 2:30 p.m. (Chicago time), its proportionate share
(determined as described above) of the amount of such remaining deficiency up to
the amount of the unused portion of its Commitment. Any Defaulting Lender that
fails to make a payment under this Section 3.1 relating to such Unpaid Amount on
the date of a Put shall pay on demand to each other Liquidity Provider that
makes a payment under this subsection (b) the amount of such payment, together
with interest thereon, for each day from the date such payment was made until
the date such other Liquidity Provider has been paid such amount in full, at a
rate per annum equal to the Federal Funds Rate plus two percent (2%) per annum.
In addition, without prejudice to any other rights Amsterdam may have under
applicable law, any Defaulting Lender shall pay on demand to Amsterdam the
difference between such unpaid Purchase Price and the amount paid by other
Liquidity Providers or the Agent to cover such failure, together with interest
thereon, for each day from the date such Purchase Price was due until the date
paid, at a rate per annum equal to the Federal Funds Rate plus two percent (2%)
per annum. Notwithstanding anything in Section 3.2 or elsewhere in this
Agreement to the contrary, no Defaulting Lender shall receive any payment of
principal, interest or any other amount hereunder until the Unpaid Amount owed
by such Defaulting Lender is recovered by Amsterdam or, if funded by the other
Liquidity Providers pursuant to this subsection (b), by such Liquidity
Providers. For such purposes, all amounts otherwise payable to such Defaulting
Lender hereunder shall be applied to satisfy its obligations to Amsterdam and/or
the Liquidity Providers until such obligations are fully satisfied, with such
payments by the Borrower nevertheless discharging the obligations owed to the
Defaulting Lender that otherwise would have been satisfied by such payment, and
each Defaulting Lender is hereby directing such use of funds received for its
benefit hereunder to satisfy any Unpaid Amount owed by such Defaulting Lender.
(c) Any portion of Amsterdam's Principal Amount purchased by a Committed
Lender (including any purchased under Section 3.1(b) in fulfillment of another
Committed Lender's obligation unless such purchase is reimbursed in full, with
interest, by such other Committed Lender under Section 3.1(b)) shall be
considered part of such Lender's Principal Amount from the date of the relevant
Put. Each such sale by Amsterdam to a Committed Lender shall be without
recourse, representation or warranty except for the representation and warranty
that such Principal Amount and related amounts are being sold by Amsterdam free
and clear of any Lien created or granted by Amsterdam. Immediately upon any
purchase by the Committed Lenders of any portion of Amsterdam's Principal
Amount, the Borrower shall pay to the Agent (for the ratable benefit of such
Lenders) an amount equal to the sum of the amount calculated for all such
Lenders pursuant to clause (b) of the definition of Purchase Price. Such
payment shall discharge the obligations described in such clause (b).
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(d) The proceeds from each Put received by Amsterdam (other than amounts
described in clauses (b)(ii) and (iii) of the definition of Purchase Price)
shall be transferred into the Special Transaction Subaccount and used solely to
pay that portion of the outstanding commercial paper of Amsterdam issued to fund
or maintain the Principal Amount of Amsterdam so transferred.
(e) The obligation of each Committed Lender (other than the Direct
Lenders) to make any purchase from Amsterdam pursuant to this Section 3.1 or
Section 2.2(c) shall be several, not joint, and shall be absolute and
unconditional; provided, however, that no such Committed Lender shall have any
obligation to make such a purchase at a time that (i) Amsterdam shall have
voluntarily commenced any proceeding or filed any petition under any bankruptcy,
insolvency or similar law seeking the dissolution, liquidation or reorganization
of Amsterdam or (ii) involuntary proceedings or an involuntary petition shall
have been commenced or filed against Amsterdam under any bankruptcy, insolvency
or similar law seeking the dissolution, liquidation or reorganization of
Amsterdam and such proceeding or petition shall not have been dismissed or
stayed for a period of thirty (30) days, or any of the actions sought in such
proceeding or petition (including the entry of an order for relief against, or
the appointment of a receiver, trustee, custodian or other similar official for,
Amsterdam or for any substantial part of Amsterdam's property) shall occur.
(f) Each Funding Liquidity Provider, by its acceptance hereof, severally
agrees to purchase from each other Committed Lender that has purchased a portion
of Amsterdam's Principal Amount, and each Committed Lender purchasing a portion
of Amsterdam's Principal Amount hereby agrees to sell to each such Funding
Liquidity Provider, an undivided percentage participating interest in an amount
equal to the amount calculated for such Committed Lender pursuant to clause (b)
of the definition of Purchase Price. Such participating interests shall be
purchased and sold to the extent necessary to cause the amount of each Funding
Liquidity Provider's participating interest in such amount to be equal to its
Ratable Share of such amount. After the payment by the relevant Committed
Lenders of the Purchase Price of any Put, each Funding Liquidity Provider shall,
not later than the Business Day it receives a request therefor from a Committed
Lender (given directly or through the Agent) to such effect, if such request is
received before 1:00 P.M. (New York City time), or not later than the following
Business Day, if such request is received after such time, pay to the Agent for
the account of the Committed Lenders an amount equal to its Ratable Share of
such amount, together with interest on such amount accrued from the date the
payment was made by the Committed Lenders to the date of such payment by such
Funding Liquidity Provider at a rate per annum equal to (i) from the date the
related payment was made by the Committed Lenders to the date two (2) Business
Days after payment by such Funding Liquidity Provider is due hereunder, the
Federal Funds Rate for each such day and (ii) from the date two (2) Business
Days after such payment is due from such Funding Liquidity Providers to the date
such payment is made by such Funding Liquidity Providers, the Base Rate in
effect for each such day. Each such Funding Liquidity Providers shall
thereafter be entitled to receive its Ratable Share of each payment received in
respect of the relevant amount and of interest paid thereon, with each Committed
Lender retaining its Ratable Share.
The several obligations of the Funding Liquidity Providers to each
Committed Lender under this Section 3.1(f) shall be absolute, irrevocable and
unconditional under any and all
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circumstances whatsoever and shall not be subject to any set-off, counterclaim
or defense to payment which any Funding Liquidity Providers may have or have had
against the Borrower, any Committed Lender or any other Person whatsoever.
Without limiting the generality of the foregoing, such obligations shall not be
affected by any Default or by any reduction or termination of any Commitment of
any Committed Lender. The Agent shall be entitled to offset amounts received for
the account of Committed Lenders under this Section against unpaid amounts due
from Committed Lenders hereunder (whether as fundings of participations,
indemnities or otherwise) but shall not be entitled to offset against amounts
owed to the Agent by any Committed Lender arising outside this Agreement.
Section 3.2. Allocations and Distributions.
(a) Before Amsterdam Termination Date. Subject to Section 3.2(d), at all
times before the Amsterdam Termination Date payments received hereunder on the
Obligations, other than payments of principal, shall be distributed to the
Lenders ratably in payment of amounts then due and owing to each Lender
hereunder and payments of principal received on the Loans hereunder shall be
distributed to the Lenders in payment of such Borrowings, in whole or in part,
as the Borrower identifies to the Agent for repayment (or, in the absence of
such designation, to the Borrowing(s) that have their Interest Period(s) ending
on or the soonest after such date, with the Agent selecting such applications in
its sole discretion if more than one Borrowing satisfies such criteria).
Notwithstanding anything in this Section 3.2(a) to the contrary, all payments of
Borrowings from Committed Lenders will be applied ratably to the Loans held by
such Committed Lenders that comprise such Borrowing.
(b) Amsterdam Termination Date. Subject to Section 3.2(d), at all times
on and after the Amsterdam Termination Date that the Liquidity Termination Date
has not occurred, all payments of principal received on the Loans shall be
applied first to repay Loans then held by Amsterdam, as selected by the Agent,
and thereafter in accordance with Section 3.2(a) and all other payments received
on the Obligations shall be distributed as provided in Section 3.2(a).
(c) Liquidity Termination Date. Subject to Section 3.2(d), at all times
on and after the Liquidity Termination Date, all payments of principal received
on the Loans shall be applied ratably between Borrowings outstanding from
Amsterdam and the Liquidity Providers, as designated by the Agent, and all other
payments received on the Obligations shall be distributed in accordance with
Section 3.2(a).
(d) Acceleration; Shortfalls. At any time the maturity of any Loans has
been accelerated pursuant to Section 8.2 or 8.3 or any payment is received on
the Obligations representing less than the total amount then due and owing
hereunder, all payments received on the Obligations, including from the
Collateral Agent as proceeds of Collateral, shall be applied as follows:
(i) first, to Amsterdam and to the Liquidity Providers (ratably,
based on the Matured Value of the Loans they hold) as payments of principal
and interest on their Loans until all such principal and interest owed to
the Liquidity Providers and Amsterdam has been paid in full;
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(ii) second, to the Enhancer as payments of principal and interest
on its Loans until all such principal and interest owed to the Enhancer has
been paid in full;
(iii) third, to the Lenders (ratably based on the remaining
Obligations owed to each) as payment of all other Obligations not covered
in clauses (i) and (ii) above owed to Lenders until all such Obligations
have been paid in full;
(iv) fourth, to the Agent as payment of Obligations owed to it until
all such Obligations have been paid in full; and
(v) fifth, to the Borrower (or as otherwise required by applicable
law).
ARTICLE IV
INDEMNIFICATION
Section 4.1. Legal Fees, Other Costs and Indemnification. (a) The
Borrower, upon demand by the appropriate Person, agrees to pay the reasonable
out-of-pocket costs and expenses (i) of the Agent and the Collateral Agent,
including, without limitation the reasonable fees and disbursements of legal
counsel to the Agent and the Collateral Agent, in connection with the
preparation and execution of the Credit Documents, and any amendment, waiver or
consent related thereto, whether or not the transactions contemplated therein
are consummated, and (ii) of the Agent, the Collateral Agent and the Lenders in
connection with advising the Agent, the Collateral Agent and the Lenders of
their rights and responsibilities under the Credit Documents during any Default
or in connection with the enforcement by the Lenders, the Agent and the
Collateral Agent of any of the Credit Documents against either Credit Party,
provided that the Agent, the Collateral Agent and the Lenders agree to the
extent feasible and to the extent a conflict of interest does not exist in the
reasonable opinion of any of the foregoing, to use the same single counsel in
connection with the foregoing to the extent they seek reimbursement for the
expenses thereof from the Borrower. The Borrower further agrees to indemnify
each Lender, the Agent, the Collateral Agent and their respective directors,
officers, employees and attorneys (in each case in their capacities as such)
(collectively, the "Indemnified Parties"), against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including, without limitation,
all reasonable attorneys' fees and other reasonable expenses of litigation or
preparation therefor, whether or not such Indemnified Party is a party thereto,
but excluding any Taxes and excluding any losses, claims, damages, penalties,
judgments, liabilities or expenses of the nature described in Sections 2.8(b)
and 4.4 (regardless of whether indemnified pursuant to such sections)) which any
of them may pay or incur arising out of or relating to (x) any action, suit or
proceeding by any Person not a party to this Agreement (a "third party") or
governmental authority against such Indemnified Party and relating to the
execution, delivery or performance (or non-performance) of any Credit Document
by either Credit Party, the Loans or the application or proposed application by
the Borrower of the proceeds of any Loan, REGARDLESS OF WHETHER SUCH CLAIMS OR
ACTIONS ARE FOUNDED IN WHOLE OR IN PART UPON THE ALLEGED SIMPLE OR CONTRIBUTORY
NEGLIGENCE OF ANY OF THE INDEMNIFIED PARTIES AND/OR ANY OF THEIR RESPECTIVE
DIRECTORS, OFFICERS, EMPLOYEES OR ATTORNEYS, (y) any investigation of any third
party or any governmental authority involving any Lender (as a lender hereunder)
or the Agent or the Collateral Agent (in such capacity hereunder) and related to
any use made or
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proposed to be made by the Borrower of the proceeds of the Borrowings, or any
transaction financed or to be financed in whole or in part, directly or
indirectly with the proceeds of any Borrowing, and (z) any investigation of any
third party or any governmental authority, litigation or proceeding involving
any Lender (as a lender hereunder) or the Agent or the Collateral Agent (in such
capacity hereunder) and related to any environmental cleanup, audit or
compliance with respect to the Borrower or its properties, or any other matter
relating to any Environmental Law or the presence of any Hazardous Material
(including, without limitation, any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under any Environmental Law) with
respect to the Borrower or its properties, regardless of whether caused by, or
within the control of, the Borrower; provided, however, that the Borrower shall
not be obligated to indemnify any Indemnified Party for any of the foregoing
arising out of such Indemnified Party's, or the Agent's or the Collateral
Agent's, as the case may be, gross negligence, willful misconduct or breach of
any material provision of any Credit Document or the gross negligence or wilful
misconduct of, or the breach of any material provision of any Credit Document
by, any other Indemnified Party with respect to the same Lender. The Borrower,
upon demand by the Agent or the Collateral Agent at any time, shall reimburse
the applicable Indemnified Party for any reasonable legal or other expenses
incurred in connection with investigating or defending against any of the
foregoing except if the same is excluded from indemnification pursuant to the
provisions of the preceding sentence.
(b) Promptly after receipt by an Indemnified Party of notice of the
commencement of any action, suit or proceeding against such Indemnified Party
relating to any of the matters described in Section 4.1(a), such Indemnified
Party shall give written notice to the Borrower of the commencement thereof, but
the failure so to notify the Borrower shall not relieve it of any liability that
it may have to any Indemnified Party except to the extent the Borrower
demonstrates that the defense of such action is prejudiced thereby. The
Borrower shall be entitled to participate therein and, to the extent that it
shall elect, to assume the defense thereof with counsel reasonably satisfactory
to such Indemnified Party and, after notice from the Borrower to such
Indemnified Party of its election so to assume the defense thereof, the Borrower
shall not be liable to such Indemnified Party hereunder for any fees of other
counsel or any other expenses, in each case subsequently incurred by such
Indemnified Party in connection with the defense thereof, other than reasonable
costs of investigation. If the Borrower assumes the defense of such action,
suit or proceeding, (i) no compromise or settlement thereof may be effected by
the Borrower without the applicable Indemnified Party's consent (which shall not
be unreasonably withheld) unless (x) there is no finding or admission of any
violation of law or any violation of the rights of any Person, no fine or
penalty is assessed against, or payable by, such Indemnified Party and there are
no other claims that may be made by the claimant in such action, suit or
proceeding against such Indemnified Party, in each case as a result of such
compromise or settlement, and (y) the sole relief provided is monetary damages
that are paid in full by the Borrower, and (ii) the Borrower shall have no
liability with respect to any compromise or settlement thereof effected without
its consent (which shall not be unreasonably withheld). If notice is given to
the Borrower of the commencement of any action, suit or proceeding and it does
not, within ten (10) days after the notice is given, give written notice to such
Indemnified Party of its election to assume the defense thereof, the Borrower
shall be bound by any determination made in such action or any compromise or
settlement thereof effected by such Indemnified Party. Notwithstanding the
foregoing, if an Indemnified Party determines in good
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faith that there is a reasonable probability that an action may adversely affect
it or its Affiliates other than as a result of monetary damages, such
Indemnified Party may, by notice to the Borrower, assume the exclusive right to
defend, compromise or settle such action, suit or proceeding, but the Borrower
shall not be bound by any determination of an action so defended or any
compromise or settlement thereof effected without its consent (which shall not
be unreasonably withheld). Nothing in this Section 4.1(b) shall require the
Borrower to make any payment that it is not required to make under Section
4.1(a).
Section 4.2. Change of Law. (a) Notwithstanding any other
provisions of this Agreement, if at any time any change, after the date hereof
(or, if later, after the date the applicable Committed Lender becomes a Lender),
in applicable law or regulation or in the interpretation thereof makes it
unlawful for any Committed Lender to make or continue to maintain Eurodollar
Loans, such Committed Lender shall promptly give written notice thereof and of
the basis therefor in reasonable detail to the Borrower and such Lender's
obligations to advance, continue or convert Loans into Eurodollar Loans under
this Agreement shall thereupon be suspended until it is no longer unlawful for
such Committed Lender to make or maintain Eurodollar Loans.
(b) Upon the giving of the notice to Borrower referred to in subsection
(a) above, (i) any outstanding Eurodollar Loan of such Lender shall be
automatically converted to a Base Rate Loan on the last day of the Interest
Period then applicable thereto or on such earlier date as required by law, and
(ii) such Lender shall maintain its funding of its Loan that is part of any
requested Borrowing of Eurodollar Loans as a Base Rate Loan, which Base Rate
Loan shall, for all other purposes, be considered part of such Borrowing.
(c) Any Committed Lender that has given any notice pursuant to Section
4.2(a) shall, upon determining that it would no longer be unlawful for it to
fund Eurodollar Loans, give prompt written notice thereof to the Borrower and
the Agent, and upon giving such notice, its obligation to advance, allow
conversions into and continue Eurodollar Loans shall be reinstated.
Section 4.3. Unavailability of Deposits or Inability to Ascertain LIBOR.
If on or before the first day of any Interest Period for any Eurodollar
Borrowing the Agent determines in good faith (after consultation with the
Committed Lenders) that, due to changes in circumstances since the Effective
Date, adequate and fair means do not exist for determining the Eurodollar Rate
or such rate will not accurately reflect the cost to the Instructing Group of
funding Eurodollar Loans for such Interest Period, the Agent shall give written
notice (in reasonable detail) of such determination and of the basis therefor to
the Borrower and the Committed Lenders, whereupon until the Agent notifies the
Borrower and Committed Lenders that the circumstances giving rise to such
suspension no longer exist (which the Agent shall do promptly after they do not
exist), (i) the obligations of the Committed Lenders to advance, continue or
convert Loans into Eurodollar Loans shall be suspended and (ii) each Eurodollar
Loan will, automatically on the last day of the then existing Interest Period
therefor, convert into a Base Rate Loan.
Section 4.4. Increased Cost and Reduced Return. (a) If, on or
after the date hereof (or, if later, after the date the applicable Committed
Lender becomes a Committed Lender), the adoption of or any change in any
applicable law, rule or regulation, or any change in the
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interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Committed Lender (or its Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency exercising control over banks or
financial institutions generally issued after the date hereof (or, if later,
after the date such Committed Lender becomes a Committed Lender) (other than any
request or directive requesting or in effect requiring compliance with any
applicable law, rule or regulation imposing or in effect imposing a fine or
penalty for any failure to comply with any such law, rule or regulation):
(i) subjects any Committed Lender (or its Lending Office) to any
tax, duty or other similar charge related to any Eurodollar Loan, or its
participation in any thereof, or its obligation to advance or maintain
Eurodollar Loans or to participate therein, or shall change the basis of
taxation of payments to any Committed Lender (or its Lending Office) of the
principal of or interest on its Eurodollar Loans or participations therein,
or any other amounts due under this Agreement related to its Eurodollar
Loans or participations therein, or its obligation to advance or maintain
Eurodollar Loans or acquire participations therein (except for changes with
respect to income or franchise taxes excluded from indemnification pursuant
to Section 4.7); or
(ii) imposes, modifies or deems applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding for any Eurodollar Loan any such requirement included
in an applicable Reserve Requirement) against assets of, deposits with or
for the account of, or credit extended by, any Committed Lender (or its
Lending Office) or imposes on any Committed Lender (or its Lending Office)
or on the interbank market any other condition affecting its Eurodollar
Loans owed to it, or its participation in any thereof, or its obligation to
advance or maintain Eurodollar Loans or participate in any thereof;
and the result of any of the foregoing is to increase in the future the cost to
such Committed Lender (or its Lending Office) of advancing or maintaining any
Eurodollar Loan or participating therein, or to reduce the amount of any sum
received or receivable by such Committed Lender (or its Lending Office) in
connection therewith under this Agreement, by an amount deemed by such Committed
Lender to be material, then, subject to Section 4.4(c), from time to time,
within thirty (30) days after receipt of a certificate from such Committed
Lender (with a copy to the Agent) pursuant to subsection (c) below setting forth
in reasonable detail such determination and the basis thereof, the Borrower
shall be obligated to pay to such Committed Lender such additional amount or
amounts as will compensate such Committed Lender for such future increased cost
or reduction.
(b) If, after the date hereof (or, if later, the date any such Funding
Party becomes a Funding Party), the Agent or any Lender (collectively, the
"Funding Parties") shall have reasonably determined that (i) the adoption after
the date hereof of (x) any applicable law, rule or regulation regarding capital
adequacy, or (y) any change therein (including, without limitation, any revision
after the date hereof in the Final Risk-Based Capital Guidelines of the Board of
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Governors of the Federal Reserve System (12 CFR Part 208, Appendix A; 12 CFR
Part 225, Appendix A) or of the Office of the Comptroller of the Currency (12
CFR Part 3, Appendix A), or in any other applicable capital adequacy rules
heretofore adopted and issued by any governmental authority), (ii) any change
after the date hereof in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration of any such applicable law, rule or regulation
regarding capital adequacy, or (iii) compliance by any Funding Party or its
Lending Office with any request or directive of general applicability issued
after the date hereof regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency (other
than any request or directive requiring or in effect requiring compliance with
any applicable law, rule or regulation regarding capital adequacy or imposing
fines or penalties for any failure to comply with any such law, rule or
regulation), has or would have the effect of reducing in the future the rate of
return on such Funding Party's capital, or on the capital of any corporation
controlling such Funding Party, as a consequence of its obligations hereunder to
a level below that which such Funding Party or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration
such Funding Party's or its controlling corporation's policies with respect to
capital adequacy in effect immediately before such adoption, change or
compliance) by an amount reasonably deemed by such Funding Party to be material,
then, subject to Section 4.4(c), from time to time, within thirty (30) days
after its receipt of a certificate from such Funding Party (with a copy to the
Agent) pursuant to subsection (c) below setting forth in reasonable detail such
determination and the basis thereof, the Borrower shall pay to such Funding
Party such additional amount or amounts as will compensate such Funding Party or
such corporation for such future reduced return or the Borrower may prepay all
Eurodollar Loans of such Committed Lender.
(c) Any Funding Party that determines to seek compensation under this
Section 4.4 shall give written notice to the Borrower and, in the case of a
Funding Party other than a Funding Party which is the Agent, the Agent of the
circumstances that entitle the Agent or such Funding Party to such compensation
no later than ninety (90) days after such Funding Party receives actual notice
or obtains actual knowledge of the law, rule, order or interpretation or
occurrence of another event giving rise to a claim hereunder. In any event the
Borrower shall not have any obligation to pay any amount with respect to claims
accruing, or for periods, prior to the ninetieth day preceding such written
demand. The Agent and each Funding Party shall use reasonable efforts to avoid
the need for, or reduce the amount of, such compensation and any payment under
Section 4.7, including, without limitation, the designation of a different
Lending Office, if such action or designation will not, in the sole judgment of
the Agent or such Funding Party made in good faith, be otherwise disadvantageous
to it; provided that the foregoing shall not in any way affect the rights of any
Funding Party or the obligations of the Borrower under this Section 4.4, and
provided further that no Committed Lender shall be obligated to make its
Eurodollar Loans hereunder at any office located in the United States of America
and the Enhancer, in its capacity as issuer of the Program LOC, shall not have
any obligation to change the office from which it issues and maintains the
Program LOC. A certificate of the Agent or any Funding Party, as applicable,
claiming compensation under this Section 4.4 and setting forth the additional
amount or amounts to be paid to it hereunder and accompanied by a statement
prepared by the Agent or such Funding Party, as applicable, describing in
reasonable detail the calculations thereof shall be rebuttable presumptive
evidence thereof in the absence of manifest
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error. In determining such amount, such Person may use any reasonable averaging
and attribution methods.
Section 4.5. Lending Offices. Each Committed Lender may, at its option,
elect to make and maintain its Loans hereunder at the Lending Office for
each type of Loan available from it hereunder or at such other of its branches,
offices or affiliates as it may from time to time elect and designate in a
written notice to the Borrower and the Agent, provided that, except that in the
case of any such transfer to another of its branches, offices or affiliates made
at the request of the Borrower, the Borrower shall not be responsible for the
costs arising under Section 4.7 or 4.4 resulting from any such transfer to the
extent not otherwise applicable to such Committed Lender prior to such transfer.
Section 4.6. Discretion of Lender as to Manner of Funding. Subject to the
other provisions of this Agreement, each Lender shall be entitled to fund and
maintain its funding of all or any part of its Loans in any manner it sees fit.
Section 4.7. Withholding Taxes. (a) Payments Free of Withholding.
Except as otherwise required by law and subject to Section 4.7(b), each payment
by the Borrower or Transocean to any Lender or the Agent under this Agreement or
any other Credit Document shall be made without withholding for or on account of
any present or future taxes imposed by or within the jurisdiction in which the
Borrower or Transocean is domiciled, any jurisdiction from which the Borrower or
Transocean makes any payment, or (in each case) any political subdivision or
taxing authority thereof or therein, excluding, in the case of each Lender and
the Agent, taxes, assessments or other governmental charges:
(i) imposed on, based upon, or measured by its income, and branch
profits, franchise and similar taxes imposed on it, by any jurisdiction in
which such Lender or the Agent, as the case may be, is incorporated or
maintains its principal place of business or Lending Office or which
subjects such Lender or the Agent to tax by reason of a connection between
the taxing jurisdiction and such Lender or the Agent (other than a
connection resulting from the transactions contemplated by this Agreement);
(ii) imposed as a result of a connection between the taxing
jurisdiction and such Lender or the Agent, as the case may be, other than a
connection resulting from the transactions contemplated by this Agreement;
(iii) imposed as a result of the transfer by such Lender of its
interest in this Agreement or any other Credit Document or a designation by
such Lender (other than pursuant to Section 4.4(c)) of a new Lending Office
(other than taxes imposed as a result of any change in treaty, law or
regulation after such transfer of such Lender's interest in this Agreement
or any other Credit Document or designation of a new Lending Office);
(iv) imposed by the United States of America upon a Lender organized
under the laws of a jurisdiction outside of the United States, except to
the extent that such tax is imposed or increased as a result of any change
in applicable law, regulation or treaty (other than any addition of or
change in any "anti-treaty shopping," "limitation of
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benefits," or similar provision applicable to a treaty) after the date
hereof, in the case of each Lender originally a party hereto or, in the
case of any other Lender, after the date on which it becomes a Lender; or
(v) which would not have been imposed but for (A) the failure of any
Lender or the Agent, as the case may be, to provide an Internal Revenue
Service Form W-8BEN or W-8ECI, as the case may be, or any substitute or
successor form prescribed by the Internal Revenue Service, pursuant to
Section 4.7(b), or any other certification, documentation or proof which is
reasonably requested by the Borrower, or (B) a determination by a taxing
authority or a court of competent jurisdiction that a certification,
documentation or other proof provided by such Lender or the Agent to
establish an exemption from such tax, assessment or other governmental
charge is false.
(all such non-excluded taxes, assessments or other governmental charges and
liabilities being herein referred to as "Indemnified Taxes"). If any such
withholding is so required, the Borrower or Transocean, as applicable, shall
make the withholding, pay the amount withheld to the appropriate governmental
authority before penalties attach thereto or interest accrues thereon and
forthwith pay such additional amount as may be necessary to ensure that the net
amount actually received by each Lender and the Agent is free and clear of such
Indemnified Taxes (including Indemnified Taxes on such additional amount) and is
equal to the amount that such Lender or the Agent (as the case may be) would
have received had such withholding not been made. If the Agent or any Lender
pays any amount in respect of any Indemnified Taxes, penalties or interest, the
Borrower or Transocean, as applicable, shall reimburse the Agent or that Lender
for such payment on demand in the currency in which such payment was made. If
the Borrower or Transocean pays any Indemnified Taxes, or penalties or interest
in connection therewith, it shall deliver official tax receipts evidencing the
payment or certified copies thereof, or other satisfactory evidence of payment
if such tax receipts have not yet been received by the Borrower or Transocean
(with such tax receipts to be promptly delivered when actually received), to the
Lender or Agent on whose account such withholding was made (with a copy to the
Agent if not the recipient of the original) within fifteen (15) days of such
payment. Each such Lender shall make written demand on the Borrower for
indemnification or compensation hereunder no later than ninety (90) days after
the earlier of (i) the date on which such Lender or the Agent makes payment of
Indemnified Taxes, and (ii) the date on which the relevant taxing authority or
other governmental authority makes written demand upon such Lender or the Agent
for payment of Indemnified Taxes. In the event that such Lender or the Agent
fails to give the Borrower timely notice as provided herein, the Borrower shall
not have any obligation to pay such claim for compensation or indemnification.
(b) U.S. Withholding Tax Exemptions. Each Lender that is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code) shall
submit to the Borrower and the Agent on or before the Funding Date, two duly
completed and signed copies of either Form W-8BEN (entitling such Lender to a
complete exemption from withholding under the Code on all amounts to be received
by such Lender, including fees, pursuant to the Credit Documents) or Form W-8ECI
(relating to all amounts to be received by such Lender, including fees, pursuant
to the Credit Documents) of the United States Internal Revenue Service.
Thereafter and from time to time, each such Lender shall submit to the Borrower
and the Agent
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such additional duly completed and signed copies of one or the other of such
forms (or such successor forms as shall be adopted from time to time by the
relevant United States taxing authorities) as may be (i) notified by the
Borrower, directly or through the Agent, to such Lender, and (ii) required under
then-current United States law or regulations to avoid United States withholding
taxes on payments in respect of all amounts to be received by such Lender,
including fees, pursuant to the Credit Documents. Upon the request of the
Borrower, each Lender that is a United States person shall submit to the
Borrower a certificate to the effect that it is a United States person.
(c) Inability of Lender to Submit Forms. If any Lender determines, as a
result of any change in applicable law, regulation or treaty, or in any official
application or interpretation thereof, that it is unable to submit to the
Borrower or Agent any form or certificate that such Lender is obligated to
submit pursuant to subsection (b) of this Section 4.7 or that such Lender is
required to withdraw or cancel any such form or certificate previously submitted
or any such form or certificate otherwise becomes ineffective or inaccurate,
such Lender shall promptly notify the Borrower and Agent of such fact and such
Lender shall to that extent not be obligated to provide any such form or
certificate and will be entitled to withdraw or cancel any affected form or
certificate, as applicable.
(d) Refund of Taxes. If any Lender or the Agent receives a refund of any
Indemnified Tax or any documentary, stamp or similar taxes with respect to which
the Borrower or Transocean has paid any amount pursuant to this Section 4.7,
such Lender or the Agent shall promptly notify the Borrower and Transocean and
shall pay the amount of such refund (including any interest received with
respect thereto) to the Borrower or Transocean.
ARTICLE V
CONDITIONS PRECEDENT
Section 5.1. Conditions to Closing. This Agreement shall become
effective on the first date all conditions in this Section 5.1 are satisfied
(and the advance of the first Loan hereunder shall conclusively establish the
effectiveness of this Agreement for all purposes). (1) On or before such date,
the Borrower shall deliver to the Agent the following documents in form,
substance and quantity acceptable to the Agent:
(a) A certificate of the Secretary or Assistant Secretary of each of
the Borrower and Transocean certifying (i) the resolutions of each Credit
Party's board of directors approving each Credit Document to which it is a
party, (ii) the name, signature, and authority of each officer who executes
on the Borrower's or Transocean's behalf a Credit Document (on which
certificate the Agent and each Lender may conclusively rely until a revised
certificate is received), (iii) the Borrower's and Transocean's certificate
or articles of incorporation certified by the Secretary of State of its
state of incorporation, (iv) a copy of the Borrower's and Transocean's by-
laws and (v) good standing certificates issued by the Secretaries of State
of each jurisdiction where the Borrower or Transocean has material
operations as and to the extent agreed with the Agent.
(b) The Security Documents and the Collateral Agreement.
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(c) All instruments and other documents required, or deemed
desirable by the Agent, to perfect the Collateral Agent's first priority
(subject to Permitted Liens) security interest for the benefit of the
Lenders and the Swap Parties in the Collateral in all appropriate
jurisdictions, including, without limitation, a certificate from the
Collateral Agent confirming that it holds a security interest for the
benefit (without limitation) of the Lenders in the Drillship, the Rig, the
Amoco Contracts and the other Collateral under the Security Documents and
the Collateral Agreement as collateral security for (without limitation)
the obligations of the Borrower under this Agreement.
(d) UCC search reports and any other lien search or title reports
from all jurisdictions the Agent requests showing no Liens against the
Collateral other than Permitted Liens.
(e) (i) Executed copies of all documents evidencing any necessary
corporate action, consents and government authorizations taken or obtained
by the Borrower or Transocean in connection with the Credit Documents, (ii)
an executed pro forma Monthly Report setting forth the Excess Cash Flow
calculation and demonstrating compliance with the Borrowing Base, in each
case as of the Effective Date, and (iii) executed copies of each Credit
Document.
(f) Favorable opinions of counsel to the Borrower and Transocean
(and, if requested by Amsterdam, the Enhancer or any Liquidity Provider and
then at the expense of the Borrower) covering such matters as Amsterdam or
the Agent may request.
(g) An insurance certificate on behalf of the Borrower dated within
ten (10) days of the Funding Date from the Borrower describing in
reasonable detail the insurance maintained by the Borrower as required by
the Credit Documents.
(h) Such other approvals, opinions or documents as the Agent or
Amsterdam may request.
(2) The construction of the Drillship and the upgrade of the Rig shall
have been completed substantially in accordance with the Functional Requirements
therefor (as certified to the Agent and the Lenders by ABS Marine Services, Inc.
or such other engineer selected by the Agent with the consent of the Borrower,
which consent shall not be unreasonably withheld).
(3) The Borrower shall have delivered to the Agent a copy of the Amoco
Letter of Acceptance for each of the Drillship and the Rig in substantially the
form of Exhibit 5.1B.
(4) The Borrower shall have furnished to the Agent a certificate executed
on behalf of the Borrower by a Senior Officer, which indicates that it is made
in favor of and for the benefit of the Agent and each of the Lenders certifying,
representing and warranting that:
(A) the Drillship and the Rig have been constructed substantially in
compliance with the Functional Requirements therefor;
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(B) all amounts (other than amounts being contested in good faith by
the Borrower and for which reserves in conformity with GAAP have been
provided) then due and owing by the Borrower and/or Transocean to third
parties for the construction of the Drillship and the upgrade of the Rig,
including, without limitation, all amounts (other than amounts being
contested in good faith by the Borrower and for which reserves in
conformity with GAAP have been provided) due and owing by the Borrower
and/or Transocean under the Drillship Shipyard Construction Contract, under
the Rig Shipyard Construction Contract and for all other construction
costs, have been paid in full;
(C) the Borrower owns each of the Drillship and the Rig, free and
clear of all Liens other than Permitted Liens;
(D) (I) neither the Borrower nor Transocean has received written
notice from or on behalf of Amoco that (x) any default or event of default
(in each case, as defined in the relevant Amoco Contract) under either of
the Amoco Contracts has occurred and any such alleged default or event of
default is continuing (it being understood and agreed that such default or
event of default shall cease to be "continuing" for the purposes of this
Agreement when it shall cease to constitute a continuing default or event
of default under the applicable Amoco Contract for any reason (including,
without limitation, as a result of the curing thereof or any waiver or
modification thereunder)), (y) Amoco intends to take or has taken any steps
to cancel or terminate either of the Amoco Contracts (other than, with
respect to the Amoco Rig Contract, if a cancellation fee or termination fee
is to be paid pursuant to the terms thereof or other than the free
cancellation provided in such contract), or (z) either of the Amoco
Contracts is otherwise no longer in full force and effect; and (II) the
Borrower is not aware, of any default or event of default (in each case, as
defined in the relevant Amoco Contract) under either of the Amoco Contracts
has occurred and is continuing (it being understood and agreed that such
default or event of default shall cease to be "continuing" for the purposes
of this Agreement when it shall cease to constitute a continuing default or
event of default under the applicable Amoco Contract for any reason
(including, without limitation, as a result of the curing thereof or any
waiver or modification thereunder)) after any applicable grace period; and
(E) the Borrower has obtained loss of hire insurance with respect to
each of the Drillship and the Rig as required by Section 7.1(f).
Section 5.2. Conditions to Advance of Each Loan on Funding Date.
The obligation of each Committed Lender to make any Loan, and the right of the
Borrower to request or accept any Loan, on the Funding Date are subject to the
conditions (and each Borrowing shall evidence the Borrower's representation and
warranty that each such condition has been satisfied) that on the date of such
Borrowing before and after giving effect to the Borrowing:
(a) on the Funding Date the Construction Loans and the "Tranche A
Loans" as defined in the Secured Credit Agreement are repaid in full;
(b) no Default shall then exist or shall occur as a result of such
Borrowing;
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(c) the Liquidity Termination Date has not occurred;
(d) the representations and warranties of the Borrower in Section
6.1 and in the other Credit Documents, and of Transocean in Sections 2.1,
2.2 and 2.3 of the Transocean Performance Guaranty, are true and correct in
all material respects on and as of such date (except to the extent that any
of such representations or warranties are not true and correct as a result
of transactions expressly permitted hereunder, under the Transocean
Contracts Loan Agreement or under the Secured Credit Agreement and except
to the extent such representations and warranties relate solely to an
earlier date in which case it shall have been true and correct in all
material respects as of such earlier date); and
(e) each of the Borrower and Transocean is in full compliance with
its covenants and agreements in the Credit Documents (including all
covenants and agreements in Article VII and the limitations on each
Lender's Principal Amount, the Aggregate Principal Amount, and the Matured
Aggregate Loan Amount set forth in Section 2.1(a)).
Nothing in this Article V limits the obligations (including those in Section
3.1) of each Committed Lender to Amsterdam.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Section 6.1. Representations and Warranties. The Borrower
represents and warrants to each Lender and the Agent that, except to the extent
that any of the following is not true and correct as a result of transactions
expressly permitted under the Secured Credit Agreement, each of the following
statements is true and correct in all material respects:
(a) Corporate Organization. The Borrower (i) is a duly organized and
existing corporation in good standing under the laws of the State of Delaware;
(ii) has all necessary corporate power to construct, own and operate each of the
Drillship and the Rig and to carry on its business contemplated in connection
therewith; and (iii) is duly licensed or qualified and in good standing in each
jurisdiction in which the nature of the business transacted by it or the nature
of the property owned or leased by it makes such licensing or qualification
necessary.
(b) Corporate Power and Authority; Validity. Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Credit Documents to which it is a party and to consummate the
transactions contemplated hereby and has taken all necessary corporate action to
authorize the execution, delivery and performance of such Credit Documents and
to consummate the transactions contemplated hereby. Each Credit Party has duly
executed and delivered each Credit Document to which it is a party and each such
Credit Document constitutes the legal, valid and binding obligation of such
Credit Party enforceable against it in accordance with its terms, subject as to
enforcement only to bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
equitable principles.
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(c) No Violation. Neither the execution, delivery or performance by any
Credit Party of the Credit Documents to which it is a party nor compliance by it
with the terms and provisions thereof, nor the consummation by it of the
transactions contemplated herein or therein, will (i) assuming the timely
obtaining and making of all necessary permits, licenses, consents, approvals and
other authorizations of, and filings with, governmental authorities, contravene
in any material respect any applicable provision of any law, statute, rule or
regulation, or any applicable order, writ, injunction or decree of any court or
governmental instrumentality, including, without limitation, all applicable laws
with respect to the location of the Drillship and the Rig, (ii) conflict with or
result in any breach of any term, covenant, condition or other provision of, or
constitute a default under, or result in the creation or imposition of (or the
obligation to create or impose) any Lien other than any Permitted Lien upon any
of the property or assets of any Credit Party under, the terms of any material
contractual obligation to which any Credit Party is a party or by which any of
them or any of their properties or assets is bound or to which any of them may
be subject, or (iii) violate or conflict with any provision of the certificate
of incorporation or by-laws of any Credit Party.
(d) Litigation. There are no actions, suits, proceedings or counterclaims
(including, without limitation, arbitration, derivative or injunctive actions)
pending or, to the knowledge of the Borrower, threatened against the Borrower
that are reasonably likely to have a Material Adverse Effect.
(e) Use of Proceeds; Margin Regulations. (i) The proceeds of the Loans
shall only be used to repay the Construction Loans and accrued and unpaid
interest thereon.
(ii) The Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying margin stock. No proceeds of any
Loan will be used for a purpose which violates Regulation U or X of the
Board of Governors of the Federal Reserve System. After application of the
proceeds of any of the Borrowings, none of the assets of the Borrower
consists of "margin stock" (as defined in Regulation U of the Board of
Governors of the Federal Reserve System).
(f) Investment Company Act. The Borrower is not an "investment company"
or a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
(g) Public Utility Holding Company Act. The Borrower is not a "holding
company," or a "subsidiary company" of a "holding company," or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company," within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
(h) True and Complete Disclosure. All factual information (taken as a
whole) furnished by the Borrower and Transocean in writing to the Agent or any
Lender in connection with any Credit Document or any transaction contemplated
therein is, disregarding any updated, corrected, supplemented, superseded or
otherwise modified information except as so updated, corrected, supplemented,
superseded or otherwise modified, and all other such factual information
hereafter furnished by any such Persons in writing to the Agent or any Lender in
connection herewith, or
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with any of the other Credit Documents or the Loans, will be, on the date of
such information, true and accurate in all material respects and not incomplete
by omitting to state any material fact necessary to make such information (taken
as a whole) not misleading at such time in light of the circumstances under
which such information was provided.
(i) No Material Adverse Change. There has occurred no event or effect,
other than any event specifically permitted, contemplated or provided for under
any Credit Document, that has had or is reasonably likely to have a Material
Adverse Effect.
(j) Labor Controversies. There are no labor controversies pending or, to
the best knowledge of the Borrower, threatened against the Borrower that are
reasonably likely to have a Material Adverse Effect.
(k) Taxes. The Borrower has filed, if any, all United States federal
income tax returns, and all other material tax returns required to be filed,
whether in the United States or in any foreign jurisdiction, and has paid, if
any, all governmental taxes, rates, assessments, fees, charges and levies
(collectively, "Taxes") shown to be due and payable on such returns or on any
assessments made against Borrower or any of its properties (other than any such
assessments which can thereafter be paid without penalty or which are being
contested in good faith by appropriate proceedings and for which reserves have
been provided in conformity with GAAP).
(l) ERISA. With respect to each Plan, the Borrower has fulfilled, if any,
its obligations under the minimum funding standards of, and is in compliance in
all material respects with, ERISA and the Code to the extent applicable to it,
and has not incurred any liability under Title IV of ERISA to the PBGC or a Plan
other than a liability to the PBGC for premiums under Section 4007 of ERISA, in
each case with such exceptions as are not reasonably likely to have a Material
Adverse Effect. As of the Effective Date, the Borrower has no contingent
liabilities with respect to any post-retirement benefits under a welfare plan
subject to ERISA.
(m) Security Interests. Each of the Security Documents creates in favor
of the Collateral Agent for the benefit of (without limitation) the Lenders and
the Swap Parties as security for (without limitation) the Obligations a valid
and enforceable perfected (to the extent that perfection may be achieved by the
filing of proper financing statements (or similar instruments in foreign
jurisdictions), the Security Documents and/or other customary documents in the
appropriate jurisdictions) first priority (subject only to Permitted Liens)
security interest in and Lien on all of the Collateral described therein,
subject to no other Liens except Permitted Liens.
(n) Consents. At the time of consummation thereof, all consents and
approvals of, and filings and registrations with, and all other actions of, all
governmental agencies, authorities or instrumentalities required to have been
obtained or made by the Borrower prior to such time in order to consummate the
Borrowings hereunder, and to execute, deliver and perform the Credit Documents,
have been or will have been obtained or made and are or will be in full force
and effect.
(o) Intellectual Property. The Borrower owns or holds valid licenses to
use (or will, at the time required, own or hold valid licenses to use) all the
material patents, trademarks, permits,
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service marks, and trade names that are necessary to the operation of the
business of the Borrower with such exceptions which are not reasonably likely to
have a Material Adverse Effect.
(p) Ownership of Property. The Borrower owns the Rig and the Drillship,
in each case subject to no Liens except Permitted Liens.
(q) Compliance with Statutes, Etc. The Borrower is in compliance with all
applicable statutes, regulations and orders of, and all applicable restrictions
imposed by, all governmental bodies, domestic and foreign, including, without
limitation, all applicable laws with respect to the location of the Drillship
and the location of the Rig, in respect of the conduct of its business as
currently conducted by it and the ownership and operation of its properties as
currently operated by it, except for such instances of non-compliance as are not
reasonably and likely to, individually or in the aggregate, have a Material
Adverse Effect, and has all necessary permits and licenses, and other necessary
authorizations, with respect thereto with such exceptions (if any) as are not
reasonably likely to, individually or in the aggregate, have a Material Adverse
Effect.
(r) Environmental Matters. Except as disclosed in Schedule 6.1(r), the
Borrower is in compliance with all applicable Environmental Laws and the
requirements of any permits issued under such Environmental Laws, except for
such instances of non-compliance (if any) as are not reasonably likely to have a
Material Adverse Effect. To the best knowledge of the Borrower, there are no
pending, past or threatened Environmental Claims against the Borrower on any
property owned or operated by the Borrower except as disclosed in Schedule
6.1(r) or except as are not reasonably likely to have a Material Adverse Effect.
To the best knowledge of the Borrower, there are no conditions or occurrences on
any property owned or operated by the Borrower or on any property adjoining or
in the vicinity of any such property that are reasonably likely to form the
basis of an Environmental Claim against the Borrower or any such property that
individually or in the aggregate are reasonably likely to have a Material
Adverse Effect. To the best of the Borrower's knowledge, (i) Hazardous
Materials have not at any time been generated, used, treated or stored on, or
transported to or from, any property owned or operated by the Borrower in a
manner that has violated or could reasonably be expected to violate any
Environmental Law, and (ii) Hazardous Materials have not at any time been
released on or from any property owned or operated by the Borrower, in the case
of both (i) and (ii), with such exceptions as are not reasonably likely to have
a Material Adverse Effect.
(s) Existing Indebtedness. The Borrower has no existing Indebtedness
outstanding as of the Effective Date other than the Obligations hereunder and
other Permitted Indebtedness.
(t) Year 2000. The Borrower has reviewed the areas within its business
and operations which could reasonably be expected to be materially and adversely
affected by, and Transocean has developed or is developing a program to address
on a timely basis, the "Year 2000 Problem" (that is, the risk that computer
applications used by Transocean and the Borrower may be unable to recognize and
perform properly date-sensitive functions involving certain dates prior to and
any date on or after December 31, 1999), has made or is making related inquiry
of material suppliers and vendors, and based on such review and program, the
Borrower believes that the
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"Year 2000 Problem" will not have a Material Adverse Effect. The foregoing
statement constitutes "year 2000 readiness disclosure" as such term in defined
is the Year 2000 Information and Readiness Disclosure Act.
ARTICLE VII
COVENANTS
Section 7.1. Covenants of the Borrower. The Borrower hereby
covenants and agrees that, so long as any Commitment is outstanding hereunder or
any other Obligation is due and payable hereunder:
(a) Corporate Existence. The Borrower will preserve and maintain its
corporate existence. The Borrower shall not form any subsidiaries or enter into
any partnerships, joint ventures or any other business combinations.
(b) Maintenance of Drillship and Rig. Subject to the terms, conditions,
restrictions and limitations set forth in the Operative Documents, the Borrower
shall take, or shall cause to be taken, all actions necessary for the
performance and satisfaction of all of its obligations under the Operative
Documents, including:
(i) enforcing, or causing to be enforced, performance by the
builders of the Drillship and the Rig and each other party to any
construction contract with the Borrower and/or Transocean with respect to
the construction of the Drillship and the upgrade of the Rig of their
respective warranties and other construction obligations with respect to
the design, engineering and construction thereof and pursuing remedies with
respect to the breach of any of these obligations;
(ii) obtaining and maintaining all material permits, licenses,
consents, approvals and other authorizations, including those required
under all applicable laws, from all governmental authorities necessary to
be obtained by it in connection with the operation and maintenance of the
Drillship and the Rig as required by the Amoco Contracts, the Transocean
Contracts or the Substitute Contracts, as applicable;
(iii) operating and maintaining the Drillship and the Rig in
accordance with the requirements of the Amoco Contracts, the Transocean
Contracts or the Substitute Contracts, as applicable; and
(iv) maintaining all books and records with respect to the operation
and maintenance of the Drillship and the Rig as required by the Amoco
Contracts, the Transocean Contracts or the Substitute Contracts, as
applicable;
all of the foregoing subject to such exceptions as are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect; provided
that this Section 7.1(b) shall not require the Borrower to perform any
obligation under any contract to which it is a party if it shall be contesting
such obligation in good faith and if reserves in conformity with GAAP have been
provided therefor. The Borrower will, in all material respects, maintain each
of the Drillship and
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the Rig in as good an operating condition as at the date of the Amoco Letter of
Acceptance (ordinary wear and tear excepted), in compliance with all applicable
laws and regulations regarding maintenance and operation and in accordance with
manufacturer's warranties and recommended maintenance procedures, if any. In no
event shall the Drillship or the Rig be maintained or serviced in all material
respects to a lesser standard of maintenance than employed by Transocean or its
Affiliates for similar drillships or rigs, as the case may be, owned or leased
by it in similar locations or jurisdictions.
(c) Taxes. The Borrower will duly pay and discharge all Taxes upon or
against it or its properties before penalties accrue thereon, unless and to the
extent that the same is being contested in good faith and by appropriate
proceedings and reserves have been established in conformity with GAAP.
(d) ERISA. The Borrower will timely pay and discharge all obligations and
liabilities arising under ERISA or otherwise with respect to each Plan of a
character which if unpaid or unperformed might result in the imposition of a
material Lien against any properties or assets of the Borrower and will promptly
notify the Agent upon an officer of the Borrower becoming aware thereof, of (i)
the occurrence of any reportable event (as defined in ERISA) relating to a Plan,
other than any such event with respect to which the PBGC has waived notice by
regulation; (ii) receipt of any notice from PBGC of its intention to seek
termination of any Plan or appointment of a trustee therefor; (iii) the
Borrower's intention to terminate or withdraw from any Plan if such termination
or withdrawal would result in liability under Title IV of ERISA; and (iv) the
receipt by the Borrower of notice of the occurrence of any event that is
reasonably likely to result in the incurrence of any liability (other than for
benefits), fine or penalty to the Borrower that would be material to the
Borrower or any Plan amendment that is reasonably likely to materially increase
the contingent liability of the Borrower in connection with any post-retirement
benefit under a welfare plan subject to ERISA.
(e) Burdensome Restrictions, Etc. Promptly upon any officer of the
Borrower becoming aware thereof, the Borrower shall give to the Agent written
notice of (i) the adoption of any new requirement of law which is reasonably
likely to have a Material Adverse Effect, and (ii) the existence or occurrence
of any strike, slow down or work stoppage which is reasonably likely to have a
Material Adverse Effect.
(f) Insurance. (i) Types of Insurance Required. The Borrower shall
maintain, or cause to be maintained, with reputable insurance companies
reasonably acceptable to the Agent, the types of insurance required to be
maintained by it under the Amoco Contracts, the Transocean Contracts or the
Substitute Contracts, as applicable, in at least the amounts required thereunder
and, at a minimum, the following types of insurance in at least the following
amounts:
(1) Workmen's Compensation and Employer's Liability insurance which
shall fully comply with the laws of the State of Louisiana (and such other
states, countries or jurisdictions where the Borrower shall operate), such
policy to contain the following endorsements covering:
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(x) United States Longshoremen's and Harbor Workers'
Compensation Act;
(y) Employer's Liability covering marine operations with
minimum limits of liability of $1,000,000 for deaths or injuries
arising out of one occurrence; and
(z) United States Longshoremen's and Harbor Workers'
Compensation Act as applicable to the Outer Continental Shelf Lands
Act (if applicable).
(2) Comprehensive General Liability or Commercial General Liability
(or equivalent coverage) insurance including Contractual Liability and
suitably endorsed to cover maritime operations with minimum limits of
$1,000,000 per occurrence for deaths or injuries and property damage
arising out of one accident (if this contract is governed by the laws of
the State of Texas, the minimum limits for contractual liability insurance
shall be no less than $500,000).
(3) Automobile Public Liability and Property Damage insurance with a
minimum limit of $1,000,000 for injury or death of one person, $1,000,000
for injuries or deaths arising out of one accident and $1,000,000 property
damage arising out of one accident.
(4) Vessel Insurance: The Drillship and the Rig, and any other
vessels owned, chartered or operated in performance of any operations of
the Borrower, shall be covered with (x) P&I Insurance (on SP23 Form or
equivalent) including crew, which may be part of Transocean's policy, in
amounts equal to the greater of the coverage afforded under Transocean's
policy as in effect from time to time and the amount that would be obtained
by reasonably prudent operators of the general expertise of Transocean
owning and operating vessels such as the Drillship and Rig and (y) hull
insurance (on a current American Institute or equivalent hull form),
including wreck removal coverage (legal, contractual and voluntary) and
full collision coverage (floating and stationary). The hull policy with
respect to the Drillship shall have a minimum limit of not less than the
book value of such vessel based upon a 30 year straight line amortization
and the hull policy with respect to the Rig shall have a minimum limit of
an amount to be agreed by the Agent and the Borrower as of the Effective
Date and each anniversary thereafter based upon the remaining Vessel
Amortization Payments and "Vessel Amortization Payments" under the
Transocean Contracts Loan Agreement for the Rig.
(5) Mortgagee's Interest/Breach of Warranty Insurance (on a current
London Institute mortgagees interest clause - hulls form) on each of the
Drillship and the Rig in a minimum limit of not less than $250,000,000 for
the Drillship and in an amount to be agreed by the Agent and the Borrower
for the Rig as of the Effective Date and each anniversary thereafter based
upon the remaining Vessel Amortization Payments, and the remaining "Vessel
Amortization Payments" under the Transocean Contracts Loan
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Agreement, for the Rig. Such insurance may be obtained through an
endorsement to the required hull insurance.
(6) Umbrella or Excess Liability insurance with a limit of at least
$50,000,000, following the form of all underlying liability policies.
(7) If the Drillship or the Rig shall at any time be located in war-
endangered waters or in other waters which may under the hull policy be
considered excluded by any "free of capture and seizure" clause, the
Borrower shall give prompt prior written notice thereof to the Agent, and
at the request of the Agent shall insure (through a separate policy or by
endorsement to the applicable hull policy) such vessel against war and
political risks in the amount required to be maintained under the hull
policy with respect thereto.
No deductible under any of such policies shall exceed $250,000, unless such
deductible amount under any such policy shall become unavailable on commercially
reasonable terms. The Borrower shall not self-insure any of such risks. The
hull policies (including any war and political risk coverage) shall each name
the Collateral Agent as a named assured and a loss payee (provided that the
Collateral Agent need not be named as a loss payee with respect to any "sue and
labor" coverage), the liability insurance policies required herein shall name
the Collateral Agent as a named assured and the mortgagee's interest/breach of
warranty policy or endorsement shall name only the Collateral Agent as a named
assured and loss payee. Each of such policies shall be reasonably acceptable to
the Agent and shall provide that the Collateral Agent shall have no
responsibility for payment of premium and that it shall not terminate without at
least thirty (30) days' (or such fewer days, if any, in the case of cancellation
pursuant to any war and related risk termination clauses contained in such
policies) advance written notice to the Collateral Agent.
(ii) Loss of Hire. From and after the Funding Date and during the term of
the Amoco Contract or any Substitute Contract with respect to the Drillship and
the Rig, respectively, the Borrower shall maintain loss of hire insurance for a
period of at least eighteen (18) months (or, if less, for the then remaining
scheduled term of such Amoco Contract or Substitute Contract, as the case may
be) and in an amount equal to at least $137,000 (reduced by the amount of any
reduction in the stated operating dayrate to be paid by Amoco under the Amoco
Drillship Contract to the extent the Borrower, as a result of such reduction, is
required to make a prepayment of the Loans pursuant to Section 2.5(g)) per day
with respect to the Drillship and $68,600 (or $50,000, if the operating dayrate
is reduced to $75,000 per day pursuant to the terms of the Amoco Rig Contract)
per day with respect to the Rig for such period (subject to a maximum ninety
(90) day deductible). If the Borrower shall make a mandatory prepayment of the
remaining Vessel Amortization Payments for either the Drillship or the Rig as
provided in Section 2.5(a) or (b), as applicable, together with all other
amounts required to be paid therein, the Borrower shall no longer be required to
maintain loss of hire insurance with respect to the affected vessel. Such loss
of hire policy shall be reasonably acceptable to the Agent, shall name the
Collateral Agent as a named assured and a loss payee and shall provide it shall
not terminate without at least thirty (30) days' advance written notice to the
Collateral Agent.
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(iii) Insurance Reserve. On the Funding Date, the Borrower shall
establish (but not then be required to fund) a single insurance reserve account
with the Collateral Agent for both this Agreement and the Transocean Contracts
Loan Agreement (the "Insurance Reserve"). As used herein, the term "Insurance
Reserve Required Amount" shall mean, at any date of computation, an amount equal
to the aggregate of $137,000 (reduced by the amount of any reduction in the
stated operating dayrate to be paid by Amoco under the Amoco Drillship Contract
to the extent the Borrower, as a result of such reduction, is required to make a
prepayment of the Loans pursuant to Section 2.5(g)) with respect to the
Drillship and $68,600 (or $50,000, if the operating dayrate is reduced to
$75,000 per day pursuant to the terms of the Amoco Rig Contract) with respect to
the Rig times the number of days in the period of any deductible under the
applicable loss of hire policy or policies maintained by the Borrower pursuant
to Section 7.1(f)(ii), subject to the reduction as set forth herein. If the
Borrower shall make a mandatory prepayment of the remaining Vessel Amortization
Payments for either the Drillship or the Rig as provided in Section 2.5(a) or
(b), as applicable, together with all other amounts required to be paid therein,
the Insurance Reserve Required Amount shall permanently be reduced by a
percentage, the numerator of which is the product of (i) either $137,000
(reduced by the amount of any reduction in the stated operating dayrate to be
paid by Amoco under the Amoco Drillship Contract to the extent the Borrower, as
a result of such reduction, is required to make a prepayment of the Loans
pursuant to Section 2.5(g)) with respect to the Drillship or $68,600 (or
$50,000, if the operating dayrate is reduced to $75,000 per day pursuant to the
terms of the Amoco Rig Contract) with respect to the Rig, whichever is
applicable, times (ii) the number of days in the period of any deductible under
the loss of hire policy then in effect for the applicable vessel, and the
denominator of which is the Insurance Reserve Required Amount immediately in
effect before such prepayment (the "Vessel Percentage"). If a loss of hire
event of a nature covered by the loss of hire insurance policy or policies
maintained pursuant to Section 7.1(f)(ii) shall occur with respect to the
Drillship or the Rig during the term of the Amoco Contract or any Substitute
Contract for the applicable vessel, the Borrower shall deposit (or cause to be
deposited) into the Insurance Reserve, as and when necessary for the Borrower to
be able to pay timely and in full its Obligations and the Transocean Contracts
Obligations becoming due and payable, an aggregate amount equal to the amount of
loss of hire insurance proceeds foregone with respect to such loss of hire event
as a result of any deductible under the loss of hire insurance policy then in
effect, provided that the Borrower shall not be obligated to make any deposit
into the Insurance Reserve (pursuant to any provision of this Section
7.1(f)(iii) or any comparable provision of the Transocean Contracts Loan
Agreement) to the extent that, after giving effect to such deposit, the
aggregate amount theretofore at any time deposited by or on behalf of the
Borrower into the Insurance Reserve (pursuant to any provision of this Section
7.1(f)(iii) or any comparable provision of the Transocean Contracts Loan
Agreement) would exceed an amount equal to the Insurance Reserve Required Amount
then in effect less the aggregate amount of any prior deposits (pursuant to any
provision of this Section 7.1(f)(iii) or any comparable provision of the
Transocean Contracts Loan Agreement) into the Insurance Reserve to the extent
not repaid by the Borrower to Transocean pursuant to the terms and conditions
hereof or (without duplication) recouped out of Excess Cash Flow pursuant to the
last sentence of the definition thereof. The Borrower shall thereafter use (and
the Collateral Agent shall make available to the Borrower) the funds in the
Insurance Reserve and then the loss of hire insurance proceeds to pay its
Obligations, its Transocean Contracts Obligations and/or its Swap Obligations as
they become due under the relevant documents. The Borrower (or Transocean on
behalf of the Borrower) also
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in its discretion may make deposits into the Insurance Reserve from time to time
(and such deposits shall constitute funding or replenishment of the Insurance
Reserve for purposes of the last sentence of the definition of the term "Excess
Cash Flow"). If an Event of Loss or a Casualty Loss shall occur, the Borrower
shall fund the Insurance Reserve as set forth in the third preceding sentence,
and shall thereafter use (and the Collateral Agent shall make available to the
Borrower) the funds in the Insurance Reserve, as necessary, to pay its
Obligations, its Transocean Contracts Obligations and/or its Swap Obligations as
they become due under the relevant documents. If the amount of funds in the
Insurance Reserve shall at any time exceed the Insurance Reserve Required Amount
for any reason (such as, for example, the lowering of the deductible under the
loss of hire insurance policies), the Collateral Agent shall upon request of the
Borrower release the excess amount to the Borrower. The Collateral Agent shall
invest and reinvest the amounts in the Insurance Reserve in such Cash
Equivalents as the Borrower may specify from time to time, and shall liquidate
such investments as it may be directed from time to time by the Borrower (unless
an Event of Default shall have occurred and be continuing hereunder, in which
event the Borrower hereby authorizes the Collateral Agent to liquidate any such
investments in its sole discretion without any further direction or
authorization from the Borrower), and all such investments shall be deemed to
constitute part of the Insurance Reserve for all purposes of this Agreement. On
the Collateral Termination Date, all amounts in the Insurance Reserve shall be
released to the Borrower.
(iv) Insurance Certificate. The Borrower will (i) on or before March 31st
of each calendar year and (ii) on the request of the Agent, furnish to the Agent
a certificate from a Senior Officer of the Borrower setting forth the nature and
extent of the insurance and the amount of the Insurance Reserve maintained
pursuant to this Section 7.1(f).
(g) Financial Reports and Other Information. (i) The Borrower will
maintain a system of accounting in such manner as will enable preparation of
financial statements in accordance with GAAP and will furnish to the Lenders and
their respective authorized representatives such information about the business
and financial condition of the Borrower as any Lender may reasonably request;
and, without any request, will furnish to the Agent:
(x) within sixty (60) days after the end of each of the first three
(3) fiscal quarters of each fiscal year of the Borrower, the balance sheet
of the Borrower as at the end of such fiscal quarter and the related
statements of income and retained earnings and of cash flows for such
fiscal quarter and for the portion of the fiscal year ended with the last
day of such fiscal quarter, all of which shall be in reasonable detail and
certified by the chief financial officer of the Borrower that they fairly
present the financial condition of the Borrower and as of the dates
indicated and the results of its operations and changes in its cash flows
for the periods indicated and that they have been prepared in accordance
with GAAP, in each case, subject to normal year-end audit adjustments and
the omission of footnotes;
(y) within one hundred twenty (120) days after the end of each
fiscal year of the Borrower, the balance sheet of the Borrower as at the
end of such fiscal year and the related statements of income and retained
earnings and of cash flows for such fiscal year and setting forth
consolidated comparative figures as of the end of and for the preceding
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fiscal year, audited (in the case of each full calendar year from and after
the Funding Date) by an independent nationally-recognized accounting firm;
and
(z) on each Amortization Date, a written certificate (the "Monthly
Report") signed by the Borrower's chief financial officer (or other
financial officer of the Borrower), in his or her capacity as such, (i)
showing in reasonable detail the Excess Cash Flow calculation for the
preceding calendar month and (ii) showing in reasonable detail the
calculation of the Borrowing Base as of the date of such certificate.
The Agent will forward promptly to the Lenders the information provided by the
Borrower pursuant to (x), (y) and (z) above.
(ii) Each financial statement furnished to the Agent pursuant to
subsections (x) and (y) of Section 7.1(g)(i) shall be accompanied by a
written certificate signed by the Borrower's chief financial officer (or
other financial officer of the Borrower), in his or her capacity as such,
(i) to the effect that no Default then exists or, if any such Default
exists as of the date of such certificate, setting forth a description of
such Default and specifying the action, if any, taken by the Borrower to
remedy the same, (ii) stating the then outstanding principal amount, if
any, of any loan or advance from Transocean to the Borrower to fund the
Cash Flow Reserve or the Insurance Reserve and the remaining obligation of
Transocean to fund each of the Cash Flow Reserve and the Insurance Reserve,
and (iii) stating that the Year 2000 remediation efforts of the Borrower
are proceeding as scheduled.
(iii) Promptly upon receipt thereof, the Borrower will provide the
Agent with a copy of each report or "management letter" submitted to the
Borrower by its independent accountants or auditors in connection with any
annual, interim or special audit made by them of the books and records of
the Borrower and each "management letter" submitted to the Borrower by its
independent accountants or auditors and any report by any regulator
regarding the Year 2000 exposure, program or progress of Transocean and its
Subsidiaries;
(iv) Promptly after any officer of the Borrower obtains knowledge of
any of the following, the Borrower will provide the Agent with written
notice in reasonable detail of:
(x) any pending or threatened material Environmental Claim
against the Borrower or any property owned or operated by the
Borrower;
(y) any condition or occurrence on any property owned or
operated by the Borrower that results in material noncompliance by the
Borrower with any Environmental Law; and
(z) the taking of any material remedial action in response to
the actual or alleged presence of any Hazardous Material on any
property owned or operated by the Borrower other than in the ordinary
course of business.
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(v) The Borrower will promptly, and in any event within five (5)
days, after a Senior Officer has knowledge thereof, give written notice to
the Agent of (who will in turn provide notice to the Lenders of): (i) the
occurrence of any Default; (ii) any litigation or governmental proceeding
of the type described in Section 6.1(d); (iii) any circumstance that has
had or reasonably threatens a Material Adverse Effect, including, without
limitation, the revocation, change, modification or reconsideration of any
license, consent or approval which has had or reasonably threatens a
Material Adverse Effect; (iv) the downgrading, withdrawal or suspension of
any rating by any Rating Agency of any indebtedness of Amoco; (v) any
investigation of the Drillship or the Rig for a violation of applicable
law; or (vi) any assignment by Amoco, or any assignee of Amoco, of its
rights and obligations under either the Amoco Drillship Contract or the
Amoco Rig Contract.
If the Agent receives such a notice, the Agent shall promptly give notice
thereof to each Lender and, until Amsterdam has no Loans outstanding after the
Amsterdam Termination Date, to each CP Dealer and each Rating Agency.
(h) Lender Inspection Rights. Upon reasonable notice from the Agent or
any Lender, the Borrower will permit the Agent or any Lender (and such Persons
as the Agent or such Lender may reasonably designate) during normal business
hours at such entity's sole expense unless a Default shall have occurred and be
continuing, in which event at the Borrower's expense, to visit and inspect any
of the properties of the Borrower, to examine all of its books and records, to
make copies and extracts therefrom, and to discuss its affairs, finances and
accounts with its officers and independent public accountants (and by this
provision the Borrower authorizes such accountants to discuss with the Agent and
any Lender (and such Persons as the Agent or such Lender may reasonably
designate) the affairs, finances and accounts of the Borrower), all as often,
and to such extent, as may be reasonably requested. The chief financial officer
of the Borrower and/or his or her designee shall be afforded the opportunity to
be present at any meeting of the Agent or the Lenders and such accountants. The
Agent agrees to use reasonable efforts to minimize, to the extent practicable,
the number of separate requests from the Lenders to exercise their rights under
this Section 7.1(h) and/or Section 7.1(g) and to coordinate the exercise by the
Lenders of such rights.
(i) Conduct of Business. The Borrower will not engage in any line of
business other than the construction, ownership and operation of the Drillship
and the Rig.
(j) Interest Rate Protection. The Borrower will maintain its outstanding
Interest Rate Protection Agreements (and/or other Interest Rate Protection
Agreements providing the same interest protection) in effect for the term of the
applicable Loans hereunder. If an Event of Default shall have occurred and be
continuing and the Instructing Group shall have elected to take action with
respect thereto (unless not required hereunder because of an insolvency event),
the Borrower shall effect a "true-up" of the financial terms of the Interest
Rate Protection Agreement or Agreements in effect at such time to the extent
necessary to eliminate any over-hedged position at such time as a result of any
prior optional or mandatory prepayment of the Obligations. If the Agent or a
Lender is the counterparty to an Interest Rate Protection
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Agreement, any obligations of the Borrower thereunder shall be secured pari
passu by the Collateral.
(k) Limitation on Dividends; Negative Pledges. The Borrower will not pay
any dividends or make any other distributions on its capital stock so long as a
Default shall have occurred and be continuing, and it shall only make dividends
or distributions on its capital stock out of (i) its portion of Excess Cash
Flow, (ii) any excess Event of Loss Proceeds, Casualty Proceeds or loss of hire
insurance proceeds after compliance in full with Sections 2.5(a), 7.1(f) and
7.1(j) as applicable, (iii) the amount of the stated operating dayrate (express
or implicit) in any Substitute Contract paid to the Borrower above the stated
dayrate (express or implicit) in the Transocean Contract for the applicable
vessel but below the stated operating dayrate in the Amoco Rig Contract in
effect on the Funding Date with respect to the Rig or below $181,000 with
respect to the Drillship or (iv) in the event that any optional prepayments of
the Loans are made, out of any other funds (provided that dividends pursuant to
this clause (iv) shall not exceed in the aggregate the aggregate amount of all
such optional prepayments) (all such permitted sources, the "Permitted
Distribution Sources"). The Borrower may not redeem, purchase or otherwise
acquire any shares of its capital stock or make any deposit for such purpose.
The Borrower shall not enter into any agreement (other than the Operative
Documents) expressly and directly prohibiting the creation or assumption of any
Lien upon its properties, revenues or assets, whether now owned or hereafter
acquired, or prohibiting or restricting the ability of the Borrower from
amending or otherwise modifying any Credit Document, except that the Borrower
(x) may do so (l) in connection with the incurrence or assumption of any
Indebtedness permitted to exist pursuant to Section 7.1(o)(other than, subject
to clause (y) below, Section 7.1(o)(iv)), or (2) with respect to any particular
property or asset (or the revenues associated therewith), in connection with any
permitted transaction involving such property or asset (including, without
limitation, prohibitions in agreements on the assignment or granting of a Lien
thereon) and (y) may enter into any agreement with Transocean prohibiting or
restricting the ability of the Borrower from amending or otherwise modifying
this Agreement or any other Credit Documents.
(l) Restrictions on Fundamental Changes. The Borrower shall not be a
party to any merger into or consolidation with, or purchase or otherwise acquire
all or substantially all of the assets or any of the stock of, any other Person,
or (subject to Section 2.5(e)) sell the Drillship or the Rig or any of its stock
unless any such merger or consolidation is with Transocean or any such sale is
to Transocean and Transocean assumes the Borrower's Obligations hereunder, and
Transocean delivers to the Agent a legal opinion in form and substance
satisfactory to the Agent with respect to such merger, consolidation or sale.
(m) Cash Flow Reserve. On the Funding Date, the Borrower shall establish
(but not then be required to fund) a single cash flow reserve account with the
Collateral Agent for both this Agreement and the Transocean Contracts Loan
Agreement (the "Cash Flow Reserve"). As used herein, the term "Cash Flow
Reserve Required Amount" shall mean (i) $20,630,000 during the ninety (90) day
period immediately following the Funding Date, and (ii) $8,300,000 thereafter,
in each case subject to reduction as set forth herein; provided, however, that
for purposes of the calculation in the proviso to the next sentence, any amounts
deposited by the Borrower into the Cash Flow Reserve up to $12,330,000 in the
aggregate during the period that
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the Cash Flow Reserve Amount is $20,630,000 shall not be counted as having been
previously so deposited once the Cash Flow Reserve Amount is reset to
$8,300,000. If the Borrower shall be unable for any reason to pay timely and in
full any of its Obligations or Transocean Contracts Obligations becoming due and
payable, the Borrower shall deposit (or cause to be deposited) into the Cash
Flow Reserve the incremental amount necessary for Borrower to be able to pay
timely and in full such Obligations and Transocean Contracts Obligations
becoming due and payable, provided that the Borrower shall not be obligated to
make any deposit into the Cash Flow Reserve (pursuant to any provision of this
Section 7.1(m) or any comparable provision of the Transocean Contracts Loan
Agreement), to the extent that, after giving effect to such deposit, the
aggregate amount theretofore at any time deposited by or on behalf of the
Borrower into the Cash Flow Reserve (pursuant to any provision of this Section
7.1(m) or any comparable provision of the Transocean Contracts Loan Agreement)
would exceed an amount equal to the Cash Flow Reserve Required Amount then in
effect less the aggregate amount of any prior deposits into the Cash Flow
Reserve (pursuant to any provision of this Section 7.1(m) or any comparable
provision of the Transocean Contracts Loan Agreement), to the extent not repaid
by the Borrower to Transocean pursuant to the terms and conditions hereof or
(without duplication) recouped by the Borrower pursuant to the last sentence of
the definition of the term "Excess Cash Flow." The Borrower shall use (and the
Collateral Agent shall make available to the Borrower) the funds in the Cash
Flow Reserve to pay its Obligations, its Transocean Contracts Obligations and/or
its Swap Obligations as they become due under the relevant documents, provided
that the funds in the Insurance Reserve shall first be used by the Borrower if a
loss of hire event, an Event of Loss or a Casualty Event shall have occurred.
The Borrower also may in its discretion fund or replenish the Cash Flow Reserve
from time to time from any source of funds to any extent (and such deposits
shall constitute funding or replenishment of the Cash Flow Reserve for purposes
of the last sentence of the definition of the term "Excess Cash Flow"). If the
Borrower shall elect a Vessel Financing Termination or if an Event of Loss shall
occur with respect to either the Drillship or the Rig, and the Borrower shall
make a mandatory prepayment of its Vessel Amortization Payments for the
applicable vessel as provided in Section 2.5(a) or (b), as applicable and its
"Vessel Amortization Payments" for the applicable vessel as provided in the
comparable provisions of the Transocean Contracts Loan Agreement, then the Cash
Flow Reserve Required Amount shall permanently be reduced by the Vessel
Percentage thereof. The Collateral Agent shall invest and reinvest the amounts
in the Cash Flow Reserve in such Cash Equivalents as the Borrower may specify
from time to time, and shall liquidate such investments as it may be directed
from time to time by the Borrower (unless an Event of Default shall have
occurred and be continuing, in which event the Borrower hereby authorizes the
Collateral Agent to liquidate any such investments in its sole discretion
without any further direction or authorization from the Borrower), and all such
investments shall be deemed to constitute part of the Cash Flow Reserve for all
purposes of this Agreement. If the amount of funds in the Cash Flow Reserve
shall at any time exceed the Cash Flow Reserve Required Amount (such as, for
example, as a result of a prepayment of the Loans pursuant to Section 2.5(a) the
Collateral Agent shall upon the request of the Borrower release the excess
amount to the Borrower. On the Collateral Termination Date, all amounts in the
Cash Flow Reserve shall be released to the Borrower.
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(n) Liens. The Borrower shall not create, incur, assume or suffer to
exist any Lien of any kind on any property or asset of any kind of the Borrower,
except the following (collectively, the "Permitted Liens"):
(i) Liens arising in the ordinary course of business by operation of
law, deposits, pledges or other Liens in connection with workers'
compensation, unemployment insurance, old age benefits, social security
obligations, taxes, assessments, public or statutory obligations or other
similar charges, good faith deposits, pledges or other Liens in connection
with (or to obtain letters of credit in connection with) bids, performance,
return-of-money or payment bonds, contracts or leases to which the Borrower
is a party or other deposits required to be made in the ordinary course of
business; provided that in each case the obligation secured is not for
Indebtedness for borrowed money and is not overdue or, if overdue, is being
contested in good faith by appropriate proceedings and reserves in
conformity with GAAP have been provided therefor;
(ii) mechanics', workmen's, materialmen's, landlords', carriers',
maritime or other similar Liens arising in the ordinary course of business
(or deposits to obtain the release of such Liens) related to obligations
not overdue for more than thirty (30) days, or, if so overdue, that are
being contested in good faith by appropriate proceedings and reserves in
conformity with GAAP have been provided therefor;
(iii) Liens for Taxes which are being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP have been
provided therefor;
(iv) Liens imposed by ERISA (or comparable foreign laws) which are
being contested in good faith by appropriate proceedings and reserves in
conformity with GAAP have been provided therefor;
(v) Liens arising out of judgments or awards against the Borrower or
in connection with surety or appeal bonds or the like in connection with
bonding such judgments or awards, the time for appeal from which or
petition for rehearing of which shall not have expired or for which the
Borrower shall be prosecuting an appeal or proceeding for review, and for
which it shall have obtained (within thirty (30) days with respect to a
judgment or award rendered in the United States or within sixty (60) days
with respect to a judgment or award rendered in a foreign jurisdiction
after entry of such judgment or award or expiration of any previous such
stay, as applicable) a stay of execution or the like pending such appeal or
proceeding for review; provided, that the aggregate amount of uninsured or
underinsured liabilities (including interest, costs, fees and penalties, if
any) of the Borrower secured by such Liens shall not exceed $5,000,000 at
any one time outstanding;
(vi) rights reserved to or vested in any municipality or
governmental, statutory or public authority by the terms of any right,
power, franchise, grant, license or permit, or by any provision of law, to
terminate such right, power, franchise, grant, license or permit
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or to purchase, condemn, expropriate or recapture or to designate a
purchaser of any of the property of a Person;
(vii) rights reserved to or vested in any governmental, statutory
or public authority to control, regulate or use any property of a Person;
(viii) Liens arising under Environmental Laws; and
(ix) Liens created by the Operative Documents or the "Operative
Documents" under the Transocean Contracts Loan Agreement.
(o) Indebtedness. The Borrower shall not incur, assume or suffer to exist
any Indebtedness, except the following (collectively, the "Permitted
Indebtedness"):
(i) Indebtedness under the Credit Documents or the Transocean
Contracts Loan Agreement;
(ii) Indebtedness incurred, assumed or existing in connection with
the Liens permitted by Section 7.1(n);
(iii) Interest Rate Protection Agreements as required by Section
7.1(j); and
(iv) unsecured Indebtedness to Transocean or any of its Subsidiaries
so long as (A) payment of such Indebtedness is subordinated to payment of
the Borrower's Obligations hereunder during the continuance of any Default,
no payments of principal, interest or fees on such Indebtedness are
scheduled to be made before the Collateral Termination Date except for (w)
repayments of any amounts paid by Transocean or any of its Subsidiaries in
connection with (1) the design, engineering, construction and equipment of
the Drillship and the acquisition, design, engineering, upgrade and
equipping of the Rig as contemplated by the Amoco Drillship Contract and
the Amoco Rig Contract, respectively, (2) insurance premiums or binder
deposits under the insurance policies required or heretofore required to be
maintained by the Borrower pursuant to any Operative Document or any
"Operative Document" under the Transocean Contracts Loan Agreement, (3) the
Interest Rate Protection Agreements required or heretofore required by
Section 7.1(j) or by Section 6.10 of the Secured Credit Agreement
(including, without limitation, any true-up costs or expenses with respect
thereto) and (4) flagging costs and costs of obtaining certification of the
Drillship and the Rig, (x) repayments of the principal of, and accrued
interest on, any borrowings from Transocean or any of its Subsidiaries to
fund Amoco or any substitute contracting party directed or requested
capital expenditures out of payments therefor by Amoco or any substitute
contracting party in excess of Fixed Operating Expenses, as applicable, (y)
payments out of any Permitted Distribution Sources, or (z) repayments of
the principal of, and accrued interest on, any borrowings from Transocean
or any of its Subsidiaries to fund or replenish the Cash Flow Reserve or
the Insurance Reserve (even if such funding of any such reserve was not at
the time required), out of any incentive or bonus payments under the Amoco
Drillship Contract or any Permitted Distribution Source or any Event of
Loss Proceeds,
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Casualty Proceeds or loss of hire insurance proceeds paid over to the
Borrower pursuant to Section 7.1(f), in each case so long as no Default
shall have occurred and be continuing, and (B) the documentation with
respect to such Indebtedness otherwise is reasonably satisfactory to the
Agent.
(p) Use of Property and Facilities; Environmental Laws. The Borrower
shall comply in all material respects with all Environmental Laws applicable to
or affecting the properties or business operations of the Borrower, where the
failure to comply is reasonably likely to have a Material Adverse Effect.
(q) Advances, Investments and Loans. The Borrower shall not lend money or
make advances to any Person, guaranty any obligations of any Person or purchase
or acquire any stock, indebtedness, obligations or securities of, or any other
interest in, or make any capital contribution to, any other Person (any of the
foregoing, an "Investment") except:
(i) Investments (including, without limitation, of the Cash Flow
Reserve and the Insurance Reserve) in Cash Equivalents and deposit
accounts;
(ii) receivables owing to the Borrower created or acquired in the
ordinary course of business and payable on customary trade terms of the
Borrower;
(iii) Investments received in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of delinquent
obligations of, and other disputes with, customers and suppliers arising in
the ordinary course of business;
(iv) Interest Rate Protection Agreements entered into in compliance
with Section 7.1(j);
(v) deposits and progress payments made in the ordinary course of
business;
(vi) unsubordinated demand loans to Transocean out of any Permitted
Distribution Sources; and
(vii) temporary Investments of cash not otherwise permitted above
to the extent the same is being held to fund reasonably anticipated working
capital needs, not to exceed the equivalent of $5,000,000 in the aggregate.
(r) Modifications of Corporate Documents and Contracts. (i) The Borrower
shall not amend, modify or change in any way materially adverse to the interests
of the Lenders, its certificate of incorporation, by-laws or other corporate
governance documents.
(ii) The Borrower shall not amend, modify or change in any way any of the
Amoco Contracts, the Transocean Contracts or the Substitute Contracts (except as
specifically contemplated thereby) so as to reduce the length of the term
thereof, change in any respect materially adverse to the interests of the
Lenders any of the time and manner, or reduce the amount of, any of the payments
to be made thereunder by any party thereto other than the
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Borrower, reduce in any respect materially adverse to the interests of the
Lenders any of the insurance required to be maintained thereunder or change in
any respect materially adverse to the interests of the Lenders any of the terms
thereof, in each case, without the consent of the Instructing Group; provided,
however, that (i) the Borrower may amend, modify or change in any way the
Functional Requirements for the Drillship or the Rig with the consent of Amoco
so long as such amendment, modification or change does not materially diminish
the value, useful life or anticipated utility of the applicable vessel and (ii)
the Borrower and Transocean may terminate either or both of the Transocean
Contracts if either (x) the Transocean Contracts Loans, together with all
accrued and unpaid interest thereon and any breakage fees due under the
Transocean Contracts Loan Agreement, shall have been paid in full, or (y) the
Borrower enters into a substitute contract (whether through an extension of
either of the Amoco Contracts or a new contract with Amoco or with another
Person) providing for the lease or employment of the Drillship or the Rig, as
applicable, the anticipated cash flow under which is no less than that under the
relevant Transocean Contract containing collateral assignment provisions no less
favorable to the Borrower than the provisions of the applicable Amoco Contract
and containing non-financial terms and provisions (including, without
limitation, with respect to the operating dayrates, cost reimbursements, the
term, insurance, force majeure and defaults thereunder), that overall are no
less favorable to the Borrower than the non-financial terms and provisions of
the applicable Amoco Contract and otherwise are reasonably satisfactory to the
Agent, with Amoco or with another Person which has an investment grade rating of
at least BBB from S&P and Baa2 from Moody's and not on credit watch for a
downgrade of such ratings to below either such level, as applicable, and if the
Borrower provides to the Collateral Agent (for the benefit of, without
limitation, the Lenders) a Lien upon the Borrower's interest in any such
Substitute Contract pursuant to an assignment in substantially the form of the
Assignments of Amoco Contracts and obtains the consent of the substitute
contracting party to such assignment in form and substance reasonably
satisfactory to the Agent. Any such Substitute Contract shall be substituted for
the applicable Transocean Contract (i) when it shall have become effective, and
(ii) when it shall have been reasonably accepted by the Agent as a Substitute
Contract in compliance with the criteria contained herein as evidenced by a
consent from the Agent to the Borrower. The Agent shall promptly provide the
Lenders with a copy of any Substitute Rig Contract or Substitute Drillship
Contract and its consent thereto.
(iii) The Borrower shall not, without the consent of the Instructing
Group, amend, modify or supplement, in each case in any way materially adverse
to the interests of the Lenders, the License Agreement or the O&M Contracts.
(iv) The Borrower shall not, after the date hereof, enter into, or amend
or modify, any Operative Document, Substitute Contract or Interest Rate
Protection Agreement without the prior written consent of Transocean.
(s) Transfers of Assets. The Borrower shall not permit any Transfer of an
asset (other than the Rig and related assets in connection with a Vessel
Financing Termination) except:
(i) the Transfer of equipment and other assets in the ordinary
course of business including the repayment of the Loans;
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(ii) the retirement or replacement of assets in the ordinary course
of business;
(iii) any Investment permitted by Section 7.1(q);
(iv) the Liens permitted by Section 7.1(n);
(v) the Transfer of assets that are obsolete, worn out or no longer
useful in the business of the Borrower;
(vi) exchanges of assets that are of a like kind and value;
(vii) any Transfer of the Drillship or the Rig to Transocean
pursuant to Section 7.1(r); and
(viii) any Transfer permitted or effected under the O&M Contracts
or the Transocean Contracts.
(t) Transactions with Affiliates. Except as otherwise specifically
permitted herein, the Borrower shall not enter into or engage in any material
transaction or arrangement or series of related transactions or arrangements
which in the aggregate would be material with any Affiliate, but excluding the
transactions and arrangements contemplated by the Operative Documents and
excluding any tax-sharing agreement between Transocean and the Borrower,
including, without limitation, the purchase from, sale to or exchange of
property with, or the rendering of any service by or for, any Affiliate, except
pursuant to the requirements of the Borrower's business and unless such
transaction or arrangement or series of related transactions or arrangements,
taken as a whole, is fair and equitable to the Borrower.
(u) Compliance with Laws. Without limiting any of the other covenants of
the Borrower in this Article VII, the Borrower shall conduct its business, and
otherwise be, in compliance with all applicable laws, regulations, ordinances
and orders of any governmental or judicial authorities; provided, however, that
this Section 7.1(u) shall not require the Borrower to comply with any such law,
regulation, ordinance or order if (x) it shall be contesting such law,
regulation, ordinance or order in good faith by appropriate proceedings and
reserves in conformity with GAAP have been provided therefor, or (y) the failure
to comply therewith is not reasonably likely to have a Material Adverse Effect.
(v) Bank Accounts. The Borrower shall maintain separate bank accounts
from Transocean and its Subsidiaries.
(w) Notice of Change of Definitions. The Borrower shall give written
notice to the Agent of any change of any of the definitions in the Transocean
Credit Facility that would cause any change in any of the definitions contained
herein within five (5) days of any such change. The Agent shall in turn
promptly provide such notice to the Lenders.
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ARTICLE VIII
EVENTS OF DEFAULT
Section 8.1. Events of Default. Any one or more of the
following shall constitute an Event of Default:
(a) default by the Borrower in the payment of the principal amount of any
Loan, any interest thereon or any fees payable hereunder within two (2) Business
Days following the date when due;
(b) default by the Borrower in the observance or performance of any
covenant set forth in Section 7.1(g)(v)(i) (if the Borrower shall have failed to
give the applicable written notice contemplated by Section 7.1(g)(v)(i) within
five (5) days after a Senior Officer of the Borrower first having knowledge of
the occurrence of any Default), 7.1(k), 7.1(l), 7.1(r) or 7.1(s);
(c) any event of default or default described in a Security Document, any
of the O&M Contracts or the License Agreement, other than any Events of Default
specifically provided in this Section 8.1, shall occur and remain unremedied
after any applicable grace period therefor, or if no grace period is provided
therein, the applicable grace period for purposes hereof shall be thirty (30)
days following notice to the Borrower by the Agent of the occurrence of such
event of default or default;
(d) default by any Credit Party in the observance or performance of any
provision hereof or of any other Credit Document not mentioned in (a), (b) or
(c) above, which is not remedied within thirty (30) days after notice thereof to
the Borrower by the Agent;
(e) any representation or warranty made or deemed made herein or in any
other Credit Document by the Borrower or Transocean proves untrue in any
material respect as of the date of the making, or deemed making, thereof;
(f) default occurs in the payment when due of Indebtedness in an aggregate
principal amount of $5,000,000 or more when aggregated with any Indebtedness
described in Section 8.1(1) which is then in default, of the Borrower (other
than Indebtedness to Transocean or any of its Subsidiaries) after any applicable
grace period therefor, and such default, if in payment when due of Indebtedness,
continues for a period of time sufficient to permit the holder or beneficiary of
such Indebtedness, or a trustee therefor, to cause the acceleration of the
maturity of any such Indebtedness or any mandatory unscheduled prepayment,
purchase, or other early funding thereof;
(g) the Borrower, Transocean, Amoco (during the stated term (other than
any portion thereof cancelled pursuant to the Free Cancellation Right) of either
Amoco Contract) or any substitute contracting party under a Substitute Contract
(during the stated term of any such Substitute Contract) (i) has entered
involuntarily against it an order for relief under the United States Bankruptcy
Code or a comparable action is taken under any bankruptcy or insolvency law of
another country or political subdivision of such country, (ii) generally does
not pay, or admits its inability generally to pay, its debts as they become due,
(iii) makes a general assignment for
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the benefit of creditors, (iv) applies for, seeks, consents to, or acquiesces
in, the appointment of a receiver, custodian, trustee, liquidator or similar
official for it or any substantial part of its property under the Bankruptcy
Code or under the bankruptcy or insolvency laws of another country or a
political subdivision of such country, (v) institutes any proceeding seeking to
have entered against it an order for relief under the United States Bankruptcy
Code or any comparable law, to adjudicate it insolvent, or seeking dissolution,
winding up, liquidation, reorganization, arrangement, adjustment or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fails to file an answer or other pleading
denying the material allegations of or consents to or acquiesces in any such
proceeding filed against it, (vi) makes any board of directors resolution in
direct furtherance of any matter described in clauses (i)-(v) above, or (vii)
fails to contest in good faith any appointment or proceeding described in this
Section 8.1(g);
(h) a custodian, receiver, trustee, liquidator or similar official is
appointed for the Borrower, Transocean, Amoco (during the stated term (other
than any portion thereof cancelled pursuant to the Free Cancellation Right) of
either Amoco Contract), or any substitute contracting party under a Substitute
Contract (during the stated term of any such Substitute Contract), or any
substantial part of its property under the Bankruptcy Code or under the
bankruptcy or insolvency laws of another country or a political subdivision of
such country, or a proceeding described in Section 8.1(g)(v) is instituted
against the Borrower, Transocean, Amoco or such substitute lessee, and such
appointment continues undischarged or such proceeding continues undismissed and
unstayed for a period of sixty (60) days (or one hundred twenty (120) days in
the case of any such event occurring outside the United States of America);
(i) the Borrower or Transocean fails within thirty (30) days with respect
to a judgment or order that is rendered in the United States or sixty (60) days
with respect to a judgment or order that is rendered in a foreign jurisdiction
(or such earlier date as any execution on such judgment or order shall take
place) to vacate, pay, bond or otherwise discharge any judgment or order for the
payment of money the uninsured portion of which is in excess of $5,000,000 with
respect to the Borrower and $15,000,000 with respect to Transocean and which is
not stayed on appeal or otherwise being appropriately contested in good faith in
a manner that stays execution;
(j) the Borrower fails to pay when due an amount aggregating in excess of
$5,000,000 that it is liable to pay to the PBGC or to a Plan under Title IV of
ERISA; or a notice of intent to terminate a Plan having Unfunded Vested
Liabilities of the Borrower in excess of $5,000,000 (a "Material Plan") is filed
under Title IV of ERISA; or the PBGC institutes proceedings under Title IV of
ERISA to terminate or to cause a trustee to be appointed to administer any
Material Plan or a proceeding is instituted by a fiduciary of any Material Plan
against the Borrower or to collect any liability under Section 515 or 4219(c)(5)
of ERISA, and in each case such proceeding is not dismissed within thirty (30)
days thereafter; or a condition exists by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any Material Plan must be
terminated;
(k) any Credit Party or any Person authorized to act on behalf of a Credit
Party challenges the validity of any Credit Document or such Credit Party's
obligations thereunder in any material respect, or any Credit Document ceases,
other than in accordance with its terms, to
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be valid and binding or ceases, in any material respect, other than in
accordance with its terms, to give to the Agent and the Lenders the Liens,
rights, and powers purported to be granted in their favor thereby;
(l) the Borrower shall default in any payment under any Interest Rate
Protection Agreement required pursuant to Section 7.1(j) when obligated to make
such payment, whether by acceleration or otherwise, and such payment default
shall continue after any applicable grace period and be in an amount in excess
of $5,000,000 when aggregated with all Indebtedness described in Section 8.1(f)
which is then in default as described in Section 8.1(f);
(m) Transocean shall fail to directly or indirectly own one hundred
percent (100%) of the stock of the Borrower;
(n) any event of default under the Transocean Performance Guaranty shall
occur and shall be continuing (it being understood and agreed that such event of
default shall cease to be "continuing" for the purposes of this Agreement when
it shall cease to constitute a continuing event of default under the Transocean
Performance Guaranty for any reason (including without limitation as a result of
the curing thereof or any waiver or modification thereunder)) after any
applicable cure period therefor;
(o) any event of default under the Transocean Contracts Loan Agreement
shall occur and shall be continuing (it being understood and agreed that such
event of default shall cease to be "continuing" for the purposes of this
Agreement when it shall cease to constitute a continuing event of default under
the Transocean Contracts Loan Agreement for any reason (including, without
limitation, as a result of the curing thereof or any waiver or modification
thereunder)) after any applicable grace period therefor;
(p) any event of default shall occur under the Transocean Credit Facility
and shall be continuing (it being understood and agreed that such event of
default shall cease to be "continuing" for the purposes of this Agreement when
it shall cease to constitute a continuing event of default under the Transocean
Credit Facility for any reason (including, without limitation, as a result of
the curing thereof or any waiver or modification thereunder)) after any
applicable grace period therefor; provided that such event shall not be an Event
of Default hereunder so long as (i) the Cash Flow Reserve and the Insurance
Reserve shall be funded to the maximum extent that the Borrower then could be
required to fund such accounts pursuant to Section 7.1(f)(iii) or 7.1(m), (ii)
the Borrower has effected a "true-up" of the financial terms of the Interest
Rate Protection Agreement or Agreements in effect at such time to the extent
necessary to eliminate any over-hedged position at such time as a result of any
prior optional or mandatory prepayment of the Obligations and (iii) the stated
operating dayrate reduction described in Section 2.5(h) shall not have occurred,
or if such event shall have occurred, the Borrower or Transocean shall have made
the mandatory prepayment required in Section 2.5(h) as a result thereof; or
(q) any default (as defined in the applicable contract) or event of
default (as defined in the applicable contract) under any of the Amoco
Contracts, the Transocean Contracts or the Substitute Contracts shall occur and
shall be continuing (it being understood and agreed that
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such default or event of default shall cease to be "continuing" for the purposes
of this Agreement when it shall cease to constitute a continuing default or
event of default under any such agreement for any reason (including without
limitation as a result of the curing thereof or any waiver or modification
thereunder)) after any applicable grace period therefor, or any of such
contracts shall be cancelled or terminated (other than if a cancellation fee or
termination fee is to be paid pursuant to the terms thereof, other than the free
cancellation provided in the Amoco Rig Contract and other than any termination
of a Transocean Contract in accordance with Section 7.1(r)) or otherwise no
longer in full force and effect prior to the stated term thereof, including,
without limitation, as a result of an Event of Loss or Casualty Loss (unless the
Borrower is in compliance with Section 2.5(a) or (b), as applicable and Sections
7.1(f)(iii) and 7.1(m)) or an event of Force Majeure; provided, that it shall
not be an Event of Default hereunder if the Borrower shall be contesting in good
faith any dispute in connection with any of such contracts so long as reserves
in accordance with GAAP are established and all Obligations of the Borrower are
being timely paid hereunder.
Section 8.2. Non-Bankruptcy Defaults. When any Event of Default
(other than those described in Section 8.1(g) or (h) with respect to the
Borrower) has occurred and is continuing, the Agent shall, by notice to the
Borrower: (a) if so directed by the Instructing Group, terminate the remaining
Commitments to the Borrower hereunder on the date stated in such notice (which
may be the date thereof); and (b) if so directed by the Instructing Group,
declare the principal of and the accrued interest on all outstanding Loans to be
forthwith due and payable and thereupon all outstanding Loans, including both
principal and interest thereon, shall be and become immediately due and payable
together with all other accrued amounts payable under the Credit Documents
without further demand, presentment, protest or notice of any kind, including,
but not limited to, notice of intent to accelerate and notice of acceleration,
each of which is expressly waived by the Borrower. The Agent, after giving
notice to the Borrower pursuant to this Section 8.2, shall also promptly send a
copy of such notice to the other Lenders, but the failure to do so shall not
impair or annul the effect of such notice.
Section 8.3. Bankruptcy Defaults. When any Event of Default
described in Section 8.1(g) or (h) has occurred and is continuing with respect
to the Borrower, then all outstanding Loans shall immediately become due and
payable together with all other accrued amounts payable under the Credit
Documents without presentment, demand, protest or notice of any kind, each of
which is expressly waived by the Borrower; and all Commitments of the Lenders
hereunder shall immediately terminate.
Section 8.4. Notice of Default. The Agent shall give notice to
the Borrower under Section 8.2 promptly upon being requested to do so by the
Instructing Group and shall thereupon notify all the Lenders thereof.
ARTICLE IX
THE AGENTS
Section 9.1. Appointment and Authorization. Each Lender hereby
irrevocably designates and appoints ABN AMRO Bank N.V. as the "Agent" and the
"Collateral Agent" hereunder and under the other Credit Documents and authorizes
the Agent and the Collateral Agent to take such
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actions and to exercise such powers as are delegated to the Agent and the
Collateral Agent hereby and under any Credit Document and to exercise such other
powers as are reasonably incidental thereto. Neither the Agent nor the
Collateral Agent shall have any duties other than those expressly set forth
herein or any fiduciary relationship with any Lender, and no implied obligations
or liabilities shall be read into this Agreement, or otherwise exist, against
the Agent or the Collateral Agent. Neither the Agent nor the Collateral Agent
assumes, nor shall it be deemed to have assumed, any obligation to, or
relationship of trust or agency with, the Borrower.
Section 9.2. Delegation of Duties. The Agent and the Collateral
Agent may execute any of their duties through agents or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties. Neither the Agent nor the Collateral Agent shall be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
Section 9.3. Exculpatory Provisions. Neither the Agent nor the
Collateral Agent nor any of their directors, officers, agents or employees shall
be liable for any action taken or omitted (i) with the consent or at the
direction of the Instructing Group or (ii) in the absence of such Person's gross
negligence or willful misconduct. Neither the Agent nor the Collateral Agent
shall be responsible to any Lender or other Person for (i) any recitals,
representations, warranties or other statements made by the Borrower, Transocean
or any of their Affiliates, (ii) the value, validity, effectiveness,
genuineness, enforceability or sufficiency of any Credit Document, (iii) any
failure of the Borrower, Transocean or any of their Affiliates to perform any
obligation or (iv) the satisfaction of any condition specified in Article V
except the receipt of documents to be received by it as provided therein.
Neither the Agent nor the Collateral Agent shall have any obligation to any
Lender to ascertain or inquire about the observance or performance of any
agreement contained in any Credit Document or to inspect the properties, books
or records of the Borrower, Transocean or any of their Affiliates.
Section 9.4. Reliance by Agent. The Agent and the Collateral
Agent shall in all cases be entitled to rely, and shall be fully protected in
relying, upon any document, other writing or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
and upon advice and statements of legal counsel (including counsel to the
Borrower), independent accountants and other experts selected by the Agent and
the Collateral Agent. The Agent and the Collateral Agent shall in all cases be
fully justified in failing or refusing to take any action under any Credit
Document unless it shall first receive such advice or concurrence of the
Lenders, and assurance of its indemnification, as it deems appropriate.
Section 9.5. Assumed Payments. Unless the Agent shall have
received notice from the applicable Lender before the date of any Put or of any
Borrowing that such Lender will not make available to the Agent the amount it is
scheduled to remit as part of such Put or Borrowing the Agent may assume such
Lender has made such amount available to the Agent when due (an "Assumed
Payment") and, in reliance upon such assumption, the Agent may (but shall have
no obligation to) make available such amount to the appropriate Person. If and
to the extent that any Lender shall not have made its Assumed Payment available
to the Agent, such Lender (and the Borrower in the case of any Borrowing) hereby
agrees to pay the Agent forthwith on demand such unpaid portion of such Assumed
Payment up to the amount of funds actually paid by the
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Agent, together with interest thereon for each day from the date of such payment
by the Agent until the date the requisite amount is repaid to the Agent, at a
rate per annum equal to the Federal Funds Rate plus 2%.
Section 9.6. Notice of Defaults or Put Events. Neither the Agent
nor the Collateral Agent shall be deemed to have knowledge or notice of the
occurrence of any Default or Put Event unless the Agent and the Collateral Agent
have received notice from any Lender or the Borrower stating that a Default or
Put Event has occurred hereunder and describing such Default or Put Event. The
Agent and the Collateral Agent shall take such action concerning a Default or
Put Event as may be directed by the Instructing Group (or, if required for such
action, all of the Lenders), but until the Agent and the Collateral Agent
receive such directions, the Agent and the Collateral Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, as the
Agent and the Collateral Agent deem advisable and in the best interests of the
Lenders.
Section 9.7. Non-Reliance on Agent and Other Lenders. Each Lender
expressly acknowledges that neither the Agent, the Collateral Agent nor any of
their officers, directors, employees, agents, attorneys-in-fact or Affiliates
has made any representations or warranties to it and that no act by the Agent or
the Collateral Agent hereafter taken, including any review of the affairs of the
Borrower or Transocean, shall be deemed to constitute any representation or
warranty by the Agent or the Collateral Agent. Each Lender represents and
warrants to the Agent and the Collateral Agent that, independently and without
reliance upon the Agent or the Collateral Agent or any other Lender and based on
such documents and information as it has deemed appropriate, it has made and
will continue to make its own appraisal of and investigation into the business,
operations, property, prospects, financial and other conditions and
creditworthiness of the Borrower, Transocean, and the Amoco Contracts and its
own decision to enter into this Agreement and to take, or omit to take, action
under any Credit Document. The Agent shall deliver each month to any Lender
that so requests a copy of any report received covering the preceding calendar
month. Except for items specifically required to be delivered hereunder,
neither the Agent nor the Collateral Agent shall have any duty or responsibility
to provide any Lender with any information concerning the Borrower, Transocean
or any of their Affiliates that comes into the possession of the Agent or the
Collateral Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
Section 9.8. Agent and Affiliates. The Agent and the Collateral
Agent and their Affiliates may extend credit to, accept deposits from and
generally engage in any kind of business with the Borrower, Transocean or any of
their Affiliates and, in its roles as a Liquidity Provider and the Enhancer, ABN
AMRO may exercise or refrain from exercising its rights and powers as if it were
not the Agent or the Collateral Agent. The parties acknowledge that ABN AMRO
acts as agent for Amsterdam and subagent for Amsterdam's management company in
various capacities, as well as providing credit facilities and other support for
Amsterdam not contained in the Credit Documents.
Section 9.9. Indemnification. Each Committed Lender shall indemnify
and hold harmless the Agent and the Collateral Agent and their officers,
directors, employees, representatives and agents (to the extent not reimbursed
by the Borrower and without limiting the
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obligation of the Borrower to do so), ratably in accordance with its Ratable
Share from and against any and all liabilities, obligations, losses, damages,
penalties, judgments, settlements, costs, expenses and disbursements of any kind
whatsoever (including in connection with any investigative or threatened
proceeding, whether or not the Agent or the Collateral Agent or such Person
shall be designated a party thereto) that may at any time be imposed on,
incurred by or asserted against the Agent or the Collateral Agent or such Person
as a result of or related to any of the transactions contemplated by the Credit
Documents or the execution, delivery or performance of the Credit Documents or
any other document furnished in connection therewith (but excluding any such
liabilities, obligations, losses, damages, penalties, judgments, settlements,
costs, expenses or disbursements resulting solely from the gross negligence or
willful misconduct of the Agent or the Collateral Agent or such Person as
finally determined by a court of competent jurisdiction).
Section 9.10. Successor Agent. The Agent or the Collateral Agent
may, upon at least thirty (30) days' notice to the Borrower and each Lender,
resign as Agent or the Collateral Agent. Such resignation shall not become
effective until a successor agent is appointed by an Instructing Group and has
accepted such appointment. Upon such acceptance of its appointment as the Agent
or the Collateral Agent hereunder by a successor Agent or Collateral Agent, such
successor Agent or Collateral Agent shall succeed to and become vested with all
the rights and duties of the retiring Agent or Collateral Agent, and the
retiring Agent or Collateral Agent shall be discharged from its duties and
obligations under the Credit Documents. After any retiring Agent's or
Collateral Agent's resignation hereunder, the provisions of Article IV and this
Article IX shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was the Agent or the Collateral Agent.
ARTICLE X
MISCELLANEOUS
Section 10.1. Termination. Amsterdam shall cease to be a party
hereto when the Amsterdam Termination Date has occurred, Amsterdam holds no Loan
and all amounts payable to it hereunder have been indefeasibly paid in full, and
thereafter Amsterdam shall have no rights hereunder (except to the extent that
any right of Amsterdam survives the termination of this Agreement by the express
terms hereof) and all references to Amsterdam shall be disregarded (except for
references to Amsterdam in any provision relating to the survival of rights
hereunder). This Agreement shall terminate following the Liquidity Termination
Date when no Loans are held by a Lender and all other amounts payable hereunder
have been indefeasibly paid in full, but the rights and remedies of the Agent
and each Lender concerning any covenant made by the Borrower under Article IV,
and under Section 9.9, shall survive such termination.
Section 10.2. Notices. Unless otherwise specified, all notices
and other communications hereunder shall be in writing (including by telecopier
or other facsimile communication), given to the appropriate Person at its
address or telecopy number set forth on the signature pages hereof or at such
other address or telecopy number as such Person may specify, and effective when
received at the address specified by such Person. Each party hereto, however,
authorizes the Agent to act on telephone notices of Loans, Puts, and interest
rate and Interest Period selections from any person the Agent in good faith
believes to be acting on behalf of the relevant party and,
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at the Agent's option, to tape record any such telephone conversation. Each
party hereto agrees to deliver promptly to the Agent a confirmation of each
telephone notice given or received by such party (signed by an authorized
officer of such party), but the absence of such confirmation shall not affect
the validity of the telephone notice. The Agent's records of all such
conversations shall be deemed correct absent manifest error and, if the
confirmation of a conversation differs in any material respect from the action
taken by the Agent, the records of the Agent shall govern absent manifest error.
The number of days for any advance notice required hereunder may be waived
(orally or in writing) by the Person receiving such notice and, in the case of
notices to the Agent, the consent of each Person to which the Agent is required
to forward such notice.
Section 10.3. Payments and Computations. Notwithstanding anything
herein to the contrary, any amounts to be paid or transferred by the Borrower
to, or for the benefit of, any Lender, or any other Person shall be paid or
transferred to the Agent (for the benefit of such Lender or other Person). The
Agent shall promptly (and, if reasonably practicable, on the day it receives
such amounts) forward each such amount to the Person entitled thereto and such
Person shall apply the amount in accordance herewith. All amounts to be paid or
deposited hereunder shall be paid or transferred on the day when due in
immediately available Dollars (and, if due from the Borrower, by 11:00 a.m.
(Chicago time), with amounts received after such time being deemed paid on the
Business Day following such receipt). To the fullest extent permitted by
applicable law, the Borrower hereby authorizes the Agent to debit the Borrower
Account for application to any amounts due and payable by the Borrower
hereunder. Except as otherwise expressly provided in Section 2.7, the Borrower
shall, to the extent permitted by law, pay to the Agent upon demand, for the
account of the applicable Person, interest on all amounts not paid or
transferred by the Borrower when due hereunder at a rate equal to the Base Rate
plus 2% per annum, calculated from the date any such amount became due until the
date paid in full. Any payment or other transfer of funds scheduled to be made
on a day that is not a Business Day shall be made on the next Business Day, and
any interest rate accruing on such amount to be paid or transferred shall
continue to accrue to such next Business Day.
Section 10.4. Setoff. In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
upon the occurrence of, and throughout the continuance of, any Event of Default,
each Lender is hereby authorized by the Borrower at any time or from time to
time, to the extent permitted by law, without notice to the Borrower or any
other Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special, including,
but not limited to, Indebtedness evidenced by certificates of deposit, whether
matured or unmatured, but not including trust accounts, and in whatever currency
denominated) and any other Indebtedness at any time owing by that Lender or that
subsequent holder to or for the credit or the account of the Borrower, whether
or not matured, against and on account of the due and unpaid obligations and
liabilities of the Borrower to that Lender or that subsequent holder under the
Credit Documents, irrespective of whether or not that Lender or that subsequent
holder shall have made any demand hereunder. Each Lender shall promptly give
notice to the Borrower of any action taken by it under this Section 10.4,
provided that any failure of such Lender to give such notice to the Borrower
shall not affect the validity of such setoff. Each Lender agrees with each
other Lender a party hereto that if such Lender receives and retains any
payment, whether by setoff or
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application of deposit balances or otherwise, on any of the Loans in excess of
the share of payments to which such Lender is entitled under Section 3.2 on all
such Obligations then owed to the Lenders hereunder, then such Lender shall
purchase for cash at face value, but without recourse, ratably from each of the
other Lenders such amount of the Loans, or participations therein, held by each
such other Lender as shall be necessary to cause such Lender to share such
excess payment ratably with all the other Lenders; provided, however, that if
any such purchase is made by any Lender, and if such excess payment or part
thereof is thereafter recovered from such purchasing Lender, the related
purchases from the other Lenders shall be rescinded ratably and the purchase
price restored as to the portion of such excess payment so recovered, but
without interest.
Section 10.5. Amendments, Waivers and Consents. Subject to Sections
10.11 and 10.25, any provision of the Credit Documents may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed
(and/or consented to) by (a) the Borrower, (b) the Instructing Group, and (c) if
the rights or duties of the Agent or the Collateral Agent are affected thereby,
the Agent or the Collateral Agent, as the case may be, provided that:
(i) no amendment or waiver shall (A) increase the Aggregate
Commitment without the consent of all Lenders or increase any Commitment of
any Lender without the consent of such Lender or extend the Liquidity
Termination Date with respect to a Lender without the consent of such
Lender, (B) postpone any Amortization Date without the consent of all
Lenders or reduce the amount (other than pursuant to Section 2.3(b)) of or
postpone the date for any Scheduled Principal Payment or any scheduled
payment of any interest on any Loan or any fee payable hereunder to any
Lender without the consent of each Lender owed any such Obligation, (C)
release any Collateral for any Obligation (including, without limitation,
the Transocean Performance Guaranty) without the consent of all Lenders
(except in connection with Transfers permitted under the Security
Documents), or (D) amend or waive any provision of Article III without the
consent of all Lenders; and
(ii) no amendment or waiver shall, unless signed by each Lender,
change the provisions of this Section 10.5 or the definition of Instructing
Group or of Required Liquidity Providers or the number of Lenders required
to take any action under any other provision of the Credit Documents.
To the extent that any amendment or waiver of any provision of any Operative
Document (other than any Credit Document) requires any consent of the Lenders,
such Operative Document may so be amended or waived if, but only if, such
amendment or waiver is consented to by the Instructing Group.
Section 10.6. Waivers. No failure or delay of the Agent or any
Lender in exercising any power, right, privilege or remedy hereunder shall
operate as a waiver thereof, nor (to the fullest extent permitted by applicable
law) shall any single or partial exercise of any such power, right, privilege or
remedy preclude any other or further exercise thereof or the exercise of any
other power, right, privilege or remedy. Any waiver hereof shall be effective
only in the specific instance and for the specific purpose for which such waiver
was given. After any waiver, the
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Borrower, the Lenders and the Agent shall be restored to their former position
and rights and any Default or Put Event waived shall be deemed to be cured and
not continuing, but no such waiver shall extend to (or impair any right
consequent upon) any subsequent or other Default or Put Event. Any additional
interest that has accrued after an Event of Default before the execution of a
waiver thereof, solely as a result of the occurrence of such an Event of
Default, may be waived by the Agent at the direction of the Lender entitled
thereto or, in the case of interest owing to the Liquidity Providers, of the
Required Liquidity Providers.
Section 10.7. Successors and Assigns. This Agreement shall be
binding upon the Borrower, each of the Lenders, the Agent, the Collateral Agent
and their respective successors and assigns, and shall inure to the benefit of
the Borrower, each of the Lenders, the Agent, the Collateral Agent and their
respective successors and assigns; provided, however, the Borrower may not
assign any of its rights or obligations under this Agreement or any other Credit
Document without the written consent of all Lenders, the Agent and the
Collateral Agent, and the Agent and the Collateral Agent may not assign any of
their respective rights or obligations under this Agreement or any Credit
Document except in accordance with Section 9 and no Committed Lender may assign
any of its rights or obligations under this Agreement or any other Credit
Document except in accordance with Section 10.8. Any Committed Lender may at
any time pledge or assign all or any portion of its rights under this Agreement
to a Federal Reserve Bank to secure extensions of credit by such Federal Reserve
Bank to such Committed Lender; provided that no such pledge or assignment shall
release a Committed Lender from any of its obligations hereunder or substitute
any such Federal Reserve Bank for such Committed Lender as a party hereto.
Section 10.8. Participations and Assignments. (a) Participations.
Any Committed Lender may at any time sell to one or more commercial banking
institutions ("Participants") participating interests in any Borrowing owing to
such Committed Lender, any Commitment of such Committed Lender or any other
interest of such Committed Lender hereunder, provided that no Committed Lender
may sell any participating interests in any such Borrowing, Commitment or other
interest hereunder without also selling to such Participant the appropriate pro
rata share of all its Borrowings, Commitments and other interests hereunder, and
provided further that no Committed Lender shall transfer, grant or assign any
participation under which the Participant shall have rights to vote upon or to
consent to any matter to be decided by the Committed Lenders or the Instructing
Group hereunder or under any other Operative Document or to approve any
amendment to or waiver of this Agreement or any other Operative Document except
to the extent such amendment or waiver would (i) increase the amount of such
Committed Lender's Commitment and such increase would affect such Participant,
(ii) reduce the principal of, or interest on, any of such Committed Lender's
Loans, or any fees or other amounts payable to such Committed Lender hereunder
and such reduction would affect such Participant, (iii) postpone any date fixed
for any scheduled payment of principal of, or interest on, any of such Committed
Lender's Loans, or any fees or other amounts payable to such Committed Lender
hereunder and such postponement would affect such Participant, (iv) release any
Collateral for any Obligation, except as otherwise specifically provided in any
Credit Document or (v) extend the Liquidity Termination Date with respect to
such Participant. In the event of any such sale by a Committed Lender of
participating interests to a Participant, such Committed Lender's obligations
under this Agreement to the other parties to this Agreement shall remain
unchanged,
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such Committed Lender shall remain solely responsible for the performance
thereof, the Borrower and the Agent shall continue to deal solely and directly
with such Committed Lender in connection with such Committed Lender's rights and
obligations under this Agreement and such Committed Lender shall retain the sole
right (as between itself and the Participant) to enforce the obligations of any
Credit Party under any Credit Document. The Borrower agrees that if amounts
outstanding under this Agreement shall have been declared or shall have become
due and payable in accordance with Section 8.2 or 8.3 upon the occurrence of an
Event of Default, each Participant shall be deemed to have the right of setoff
in respect of its participating interest in amounts owing under this Agreement
to the same extent as if the amount of its participating interest were owing
directly to it as a Committed Lender under this Agreement, provided that such
right of setoff shall be subject to the obligation of such Participant to share
with the Committed Lenders, and the Committed Lenders agree to share with such
Participant, as provided in Section 10.4. The Borrower also agrees that each
Participant shall be entitled to the benefits of Sections 2.8(b), 4.7 and 4.4
with respect to its participation in the Commitments and the Borrowings
outstanding from time to time, provided that no Participant shall be entitled to
receive any greater amount pursuant to such Sections than the transferor
Committed Lender would have been entitled to receive in respect of the amount of
the participation transferred if no participation had been transferred and
provided, further, that Sections 4.4(c) and 10.8(c) shall apply to the
transferor Committed Lender with respect to any claim by any Participant
pursuant to Section 2.8(b), 4.7 or 4.4 as fully as if such claim was made by
such Committed Lender. Anything herein to the contrary notwithstanding, the
Borrower shall not, at any time, be obligated to pay to any Committed Lender any
sum in excess of the sum the Borrower would have been obligated to pay to such
Committed Lender hereunder if such Committed Lender had not sold any
participation in its rights and obligations under this Agreement or any other
Credit Document.
(b) Assignments. Any Committed Lender may at any time sell to (i) any
other Committed Lender, or any affiliate thereof, that is a commercial banking
institution not subject to Regulation T of the Board of Governors of the Federal
Reserve System so long as such entity has a short-term rating of A-1 from S&P
and P-1 from Moody's (unless otherwise agreed by the Agent, the Borrower and
Transocean), (ii) with the prior written consent of the Agent and the Borrower
(which shall not be unreasonably withheld or delayed), to one or more commercial
banking institutions not subject to Regulation T of the Board of Governors of
the Federal Reserve System and which has a short-term rating of A-1 from S&P and
P-1 from Moody's (unless otherwise agreed by the Agent, the Borrower and
Transocean), (any of (i) or (ii), a "Replacement Committed Lender"), all or any
part of its rights and obligations under this Agreement and the other Credit
Documents, pursuant to an Assignment Agreement in the form attached as Exhibit
10.8, executed by such Replacement Committed Lender and such transferor
Committed Lender (and, in the case of a Replacement Committed Lender which is
not then a Committed Lender or an affiliate thereof, by the Borrower and the
Agent) and delivered to the Agent; provided that each such sale to a Replacement
Committed Lender shall be in an amount of $10,000,000 or more, or if in a lesser
amount or if as a result of such sale the sum of the unfunded Commitment of such
Committed Lender plus the aggregate principal amount of such Committed Lender's
Loans would be less than $10,000,000, such sale shall be of all of such
Committed Lender's rights and obligations under this Agreement and all of the
other Credit Documents payable to it to one Replacement Committed Lender.
Notwithstanding the
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requirement of the Borrower's consent set forth above, but subject to all of the
other terms and conditions of this Section 10.8(b), any Committed Lender may
sell to one or more commercial banking institutions not subject to Regulation T
of the Board of Governors of the Federal Reserve System, all or any part of its
rights and obligations under this Agreement and the other Credit Documents with
only the consent of the Agent (which shall not be unreasonably withheld or
delayed) if the Loans have been accelerated pursuant to Section 8.2 or 8.3. No
Committed Lender may sell any Loans to a Replacement Committed Lender without
also selling to such Replacement Committed Lender the appropriate pro rata share
of (i) all of its Loans, Commitments and other interests hereunder and (ii) all
of its Transocean Contracts Loans and "Commitments" under the Transocean
Contracts Loan Agreement. Upon such execution, delivery and acceptance, from and
after the effective date of the transfer determined pursuant to such Assignment
Agreement, (x) the Replacement Committed Lender thereunder shall be a party
hereto and, to the extent provided in such Assignment Agreement, have the rights
and obligations of a Committed Lender hereunder with a Commitment as set forth
herein and (y) the transferor Committed Lender thereunder shall, to the extent
provided in such Assignment Agreement, be released from its obligations under
this Agreement (and, in the case of an Assignment Agreement covering all or the
remaining portion of a transferor Committed Lender's rights and obligations
under this Agreement, such transferor Committed Lender shall cease to be a party
hereto (except as to Sections 4.1, 4.4 and 4.7 for periods prior to the
effective date of such assignment). Such Assignment Agreement shall be deemed to
amend this Agreement to the extent, and only to the extent, necessary to reflect
the addition of such Replacement Committed Lender and the resulting adjustment
of Commitments and Percentages arising from the purchase by such Replacement
Committed Lender of all or a portion of the rights and obligations of such
transferor Committed Lender under this Agreement and the other Credit Documents.
(c) Replaceable Committed Lenders. If any Committed Lender (a
"Replaceable Committed Lender") (i) shall demand compensation or give notice of
its intention to demand compensation under Section 4.4, (ii) shall cease to have
a short-term debt rating of "A-1" by S&P and "P-1" by Moody's (unless otherwise
agreed by the Agent, the Borrower and Transocean), (iii) shall require the
Borrower to pay any additional amount to any Committed Lender under Section
2.8(b), (iv) is unable to submit any form or certificate required under Section
4.7(b) or withdraws or cancels any previously submitted form with no
substitution therefor, (v) gives notice of any change in law or regulations, or
in the interpretation thereof, pursuant to Section 4.2, (vi) has been declared
insolvent or a receiver or conservator has been appointed for a material portion
of its assets, business or properties, (vii) is a Defaulting Lender or shall
seek to avoid its obligation to make Loans hereunder for any reason, including,
without limitation, reliance upon 12 U.S.C. (S) 1821(e) or (n)(1)(B), (viii)
shall require withholding or deductions by the Borrower or payment by the
Borrower of additional amounts to such Lender, or other reimbursement or
indemnification of such Committed Lender, as a result of any taxes referred to
in Section 4.7 having been levied or imposed (or if such Taxes have been imposed
or levied on such Committed Lender or if the Borrower determines in good faith
that there is a substantial likelihood that such Taxes will be levied or imposed
with respect to such Committed Lender), or (ix) shall decline to consent to a
modification or waiver of the terms of this Agreement or any other Operative
Document requested by the Borrower, the Borrower (and/or, in the case of an
event described in the foregoing clause (ii), Amsterdam) may designate a
Replacement Committed Lender reasonably satisfactory to the Agent and
satisfactory to
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Amsterdam, in its sole discretion, to which such Replaceable Committed Lender
shall, subject to its receipt of an amount equal to its Principal Amount and
accrued interest and fees thereon (plus, from the Borrower, any Early Payment
Fee that would have been payable if such transferred Principal Amount had been
paid on such date) and all amounts due and payable to it under Section 4.4,
promptly assign all of its rights, obligations and Commitment hereunder,
together with all of its Principal Amount, to the Replacement Committed Lender
in accordance with Section 10.8(b). In the case of an event described in clause
(ii) of the preceding sentence, if a Replacement Committed Lender, has not
assumed the Replaceable Committed Lender's Commitment within 30 days of such
rating cessation, the Replaceable Committed Lender (a "Funding Replaceable
Committed Lender") shall make a Loan in the principal amount of its then Unused
Commitment. The proceeds of such Loan shall be deposited with the Agent and
applied on the next Amortization Date to repay solely Loans then owed Amsterdam
without thereby reducing the aggregate principal amount of outstanding Loans.
Thereafter, such Loan from the Replaceable Committed Lender shall be repaid to
the extent provided pursuant to Section 3.2 for Loans from a Liquidity Provider.
(d) Registration and Processing Fee. Upon its receipt of an Assignment
Agreement executed by a transferor Committed Lender, a Replacement Committed
Lender and the Agent (and, in the case of a Replacement Committed Lender that is
not then a Committed Lender or an affiliate thereof, by the Borrower), together
with payment by the transferor Committed Lender to the Agent hereunder of a
registration and processing fee of $3,500 (unless (x) the Borrower is replacing
such Committed Lender pursuant to the terms hereof, in which event such fee
shall be paid by the Borrower, or (y) Amsterdam is replacing such Committed
Lender pursuant to the terms hereof, in which event no such fee shall be
payable), the Agent shall (i) promptly accept such Assignment Agreement, and
(ii) on the effective date of the transfer determined pursuant thereto give
notice of such acceptance and recordation to the Committed Lenders and the
Borrower. The payment of a registration and processing fee by the Borrower or
the transferor Committed Lender under any comparable provision of the Transocean
Contracts Loan Agreement shall satisfy the obligation of the Borrower or the
transferor Committed Lender, as applicable, to pay a registration and processing
fee under this Section 10.8(d). The Borrower shall not be responsible for such
registration and processing fee or any costs or expenses incurred by any
Committed Lender, any Replacement Committed Lender or the Agent in connection
with such assignment except as provided above.
(e) Withholding Taxes. If, pursuant to this Section 10.8 any interest in
this Agreement or the Note is transferred to any transferee which is organized
under the laws of any jurisdiction other than the United States of America or
any State thereof, the transferor Committed Lender shall cause such transferee,
concurrently with the effectiveness of such transfer, (i) to represent to the
transferor Committed Lender (for the benefit of the transferor Committed Lender,
the Agent and the Borrower) that under applicable law and treaties no taxes will
be required to be withheld by the Agent, the Borrower or the transferor
Committed Lender with respect to any payments to be made to such transferee in
respect of the Loans, (ii) to furnish to the transferor Committed Lender (and,
in the case of any Replacement Committed Lender, the Agent and the Borrower) two
duly completed and signed copies of either U.S. Internal Revenue Service Form
W-8ECI or U.S. Internal Revenue Service Form W-8BEN or such successor forms as
shall be adopted from time to time by the relevant United States taxing
authorities (wherein such
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transferee claims entitlement to complete exemption from U.S. federal
withholding tax on all interest payments hereunder), and (iii) to agree (for the
benefit of the transferor Committed Lender, the Agent and the Borrower) to
provide the transferor Committed Lender (and, in the case of any Replacement
Committed Lender, the Agent and the Borrower) new forms as contemplated by
Section 4.7(b) upon the expiration or obsolescence of any previously delivered
form and comparable statements in accordance with applicable U.S. laws and
regulations and amendments duly executed and completed by such transferee, and
to comply from time to time with all applicable U.S. laws and regulations with
regard to such withholding tax exemption.
(f) Prohibition of Transfer in Violation of Securities Laws.
Notwithstanding any other provisions of this Section 10.8, no transfer or
assignment of the interests of any Committed Lender hereunder or any grant of
participations therein shall be permitted if such transfer, assignment or grant
would require the Borrower or Transocean to file a registration statement with
the SEC or to qualify the Loans, the Note or any other Obligations under the
securities laws of any jurisdiction.
(g) Assignment by Amsterdam. Each party hereto agrees and consents (i) to
Amsterdam's assignment, participation, grant of security interests in or other
transfers of any portion of, or any of its beneficial interest in, the Loans
held by Amsterdam and (ii) to the complete assignment by Amsterdam of all of its
rights and obligations hereunder to ABN AMRO or any other Person, and upon such
assignment Amsterdam shall be released from all obligations and duties
hereunder; provided, however, that Amsterdam may not, without the prior consent
of the Instructing Group, transfer any of its rights under Section 3.1 to cause
the Liquidity Providers or the Enhancer to purchase the Amsterdam Principal
Amount unless the assignee (i) is a corporation whose principal business is the
purchase of assets similar to the Amoco Contracts, (ii) has ABN AMRO as its
administrative agent and (iii) issues commercial paper with credit ratings
substantially comparable to the Ratings, and further provided that any such
assignment, participation or transfer shall be subject to the limitations and
requirements set forth in Section 10.8(a), (b), (e) and (f). Amsterdam shall
promptly notify each party hereto of any such assignment. Upon such an
assignment of any portion of the Amsterdam Principal Amount, the assignee shall
have all of the rights of Amsterdam hereunder relating to such Amsterdam
Principal Amount.
(h) Opinions of Counsel. If required by the Agent or to maintain the
Ratings, each Assignment Agreement must be accompanied by an opinion of counsel
of the assignee as to such matters as the Agent may reasonably request.
Section 10.9. Intended Tax Characterization. It is the intention
of the parties hereto that, for the purposes of all Taxes, the transactions
contemplated hereby shall be treated as a loan by the Lenders (through the
Agent) to the Borrower that is secured by the Amoco Contracts (the "Intended Tax
Characterization"). The parties hereto agree to report and otherwise to act for
the purposes of all Taxes in a manner consistent with the Intended Tax
Characterization.
Section 10.10. Governing Law; Submission to Jurisdiction; Waiver of
Jury Trial. (A) THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES
HERETO, SHALL BE
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CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
(B) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO
AGREE THAT ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
THE AGENT OR THE COLLATERAL AGENT, THE LENDERS OR THE BORROWER MAY BE BROUGHT
AND MAINTAINED IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF
MANHATTAN OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION
WITH SUCH LITIGATION. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE
BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS, BY REGISTERED
MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW
YORK. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER HEREBY
EXPRESSLY AND IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER
MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY
ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF THE STATE OF NEW YORK
SITTING IN THE BOROUGH OF MANHATTAN OR THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK OR FROM ANY LEGAL PROCESS WITH RESPECT TO ANY
ACTION COMMENCED IN ANY SUCH COURT (WHETHER THROUGH SERVICE OF NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH
RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS.
(C) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR UNDER ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY BANKING
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER CREDIT
DOCUMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
Section 10.11. Confidentiality. Each Lender agrees it will not
disclose (and will cause its affiliates not to disclose) without the Borrower's
consent any information concerning the Borrower, Transocean or any direct or
indirect Subsidiaries of Transocean furnished pursuant to, or otherwise in
connection with, any of the Credit Documents (including without limitation any
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information concerning the intellectual property that is the subject of the
License Agreement); provided that any Lender may disclose any such information
(a) to its employees, auditors, counsel or other professional advisors who are
or are expected to be involved in the evaluation of such information in
connection with the transactions contemplated by this Agreement, each of whom
will be informed of, and shall abide by the provisions of, this Section 10.11,
(b) to any other Lender or to any affiliate of such Lender, (c) that has become
generally available to the public, (d) if required or appropriate in any
examination or audit by, or report, statement or testimony submitted to, any
federal or state regulatory body having or claiming to have jurisdiction over
such Lender, (e) if required or appropriate in response to any summons or
subpoena or in connection with any litigation, (f) in order to comply with the
mandatory provisions of any law, order, regulation or ruling applicable to such
Lender, (g) to any prospective or actual permitted transferee in connection with
any contemplated or actual permitted transfer of any of the Borrowings or any
interest therein by such Lender (provided that such actual or prospective
transferee executes an agreement with such Lender (and expressly for the benefit
of the Borrower and Transocean) containing provisions substantially identical to
those contained in this Section 10.11 prior to such transferee's receipt of any
such information), (h) in connection with the exercise of any remedies by the
Agent or any Lender, (i) to any rating agency, (j) to any surety, guarantor or
credit or liquidity enhancer to Amsterdam who in each case agree for the benefit
of the Borrower and Transocean to be bound by the provisions of this Section
10.11, (k) to any entity organized to purchase, or make loans secured by,
financial assets for which ABN AMRO provides managerial services or acts as an
administrative agent and who agrees for the benefit of the Borrower and
Transocean to be bound by the provisions of this Section 10.11, and (l) to
Amsterdam's administrator, management company, referral agents, issuing agents
or depositaries or CP Dealers, each of which will be informed of, and shall
abide by the provisions of, this Section 10.11. Each Lender hereby irrevocably
constitutes Transocean as, and agrees that Transocean shall be, an intended
third party beneficiary of the covenant of such Lender contained in this Section
10.11 and, without limitation of the foregoing, agrees that Transocean may
enforce such Lender's covenant set forth in this Section 10.11 without any
requirement that any action also be taken by the Borrower. This Section 10.11
may not be amended, modified or supplemented without the written consent of
Transocean.
Section 10.12. Confidentiality of Agreement. Unless otherwise
consented to by the Agent, the Borrower hereby agrees that it will not disclose
the contents of any Credit Document, or any other confidential or proprietary
information furnished by the Agent or any Lender, to any Person other than to
Transocean, the auditors and attorneys of the Borrower or Transocean, or as
required by (i) applicable law or (ii) listing agreements with, or applicable
rules or regulations of, any securities exchange or organization (in each case,
as determined in good faith by the Borrower or Transocean).
Section 10.13. Agreement Not to Petition. Each party hereto
agrees, for the benefit of the holders of the privately or publicly placed
indebtedness for borrowed money for Amsterdam, not, prior to the date which is
one (1) year and one (1) day after the payment in full of all such indebtedness,
to acquiesce, petition or otherwise, directly or indirectly, invoke, or cause
Amsterdam to invoke, the process of any Governmental Authority for the purpose
of (a) commencing or sustaining a case against Amsterdam under any federal or
state bankruptcy, insolvency or similar law (including the Federal Bankruptcy
Code), (b) appointing a receiver,
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liquidator, assignee, trustee, custodian, sequestrator or other similar official
for Amsterdam, or any substantial part of its property, or (c) ordering the
winding up or liquidation of the affairs of Amsterdam.
Section 10.14. Excess Funds. Other than amounts payable under
Section 10.4, Amsterdam shall be required to make payment of the amounts
required to be paid pursuant hereto only if Amsterdam has Excess Funds (as
defined below). If Amsterdam does not have Excess Funds, the excess of the
amount due hereunder (other than pursuant to Section 10.4) over the amount paid
shall not constitute a "claim" (as defined in Section 101(5) of the Federal
Bankruptcy Code) against Amsterdam until such time as Amsterdam has Excess
Funds. If Amsterdam does not have sufficient Excess Funds to make any payment
due hereunder (other than pursuant to Section 10.4), then Amsterdam may pay a
lesser amount and make additional payments that in the aggregate equal the
amount of deficiency as soon as possible thereafter. The term "Excess Funds"
means the excess of (a) the aggregate projected value of Amsterdam's assets and
other property (including cash and cash equivalents), over (b) the sum of (i)
the sum of all scheduled payments of principal, interest and other amounts
payable on publicly or privately placed indebtedness of Amsterdam for borrowed
money, plus (ii) the sum of all other liabilities, indebtedness and other
obligations of Amsterdam for borrowed money or owed to any credit or liquidity
provider, together with all unpaid interest then accrued thereon, plus (iii) all
taxes payable by Amsterdam to the Internal Revenue Service, plus (iv) all other
indebtedness, liabilities and obligations of Amsterdam then due and payable, but
the amount of any liability, indebtedness or obligation of Amsterdam shall not
exceed the projected value of the assets to which recourse for such liability,
indebtedness or obligation is limited. Excess Funds shall be calculated once
each Business Day.
Section 10.15. No Recourse. The obligations of Amsterdam, its
management company, its administrator and its referral agents (each a "Program
Administrator") under any Credit Document or other document relating to
Amsterdam (each, a "Program Document") to which a Program Administrator is a
party in such capacity are solely the corporate obligations of such Program
Administrator and no recourse shall be had for such obligations against any
Affiliate, director, officer, member, manager, employee, attorney or agent of
any Program Administrator.
Section 10.16. Limitation of Liability. No Person shall make a
claim against the Agent or any Lender (or their respective Affiliates,
directors, officers, members, managers, employees, attorneys or agents) for any
special, indirect, consequential or punitive damages under any claim for breach
of contract or other theory of liability in connection with the Credit Documents
or the transactions contemplated thereby, and the Borrower (for itself and all
other Persons claiming by or through the Borrower) hereby waives any claim for
any such damages.
Section 10.17. Headings; Counterparts. Article and section
headings in this Agreement are for reference only and shall not affect the
construction of this Agreement. This Agreement may be executed by different
parties on any number of counterparts, each of which shall constitute an
original and all of which, taken together, shall constitute one and the same
agreement.
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Section 10.18. Cumulative Rights and Severability. To the extent
permitted by applicable law, all rights and remedies of the Lenders and Agent
hereunder shall be cumulative and non-exclusive of any rights or remedies such
Persons have under law or otherwise. Any provision hereof that is prohibited or
unenforceable in any jurisdiction shall, in such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof and without affecting such provision in any other
jurisdiction.
Section 10.19. Entire Agreement. The Credit Documents constitute
the entire understanding of the parties thereto concerning the subject matter
thereof. Any previous or contemporaneous agreements, whether written or oral,
concerning such matters are superseded thereby.
Section 10.20. Change in Accounting Principles, Fiscal Year or Tax
Laws. If (i) any change in accounting principles from those applicable to
the Borrower as of the date hereof is hereafter occasioned by the promulgation
of rules, regulations, pronouncements and opinions by or required by the
Financial Accounting Standards Board or the American Institute of Certified
Public Accounts (or successors thereto or agencies with similar functions) other
than changes mandated by SFAS 106 and such change materially affects the
calculation of any component of any standard or term found in this Agreement, or
(ii) there is a material change in federal or foreign tax laws which materially
affects the Borrower's ability to comply with the standards or terms found in
this Agreement, the Borrower and the Instructing Group agree to enter into
negotiations in order to amend such provisions so as to equitably reflect such
changes with the desired result that the criteria for evaluating the Borrower's
financial condition shall be the same after such changes as if such changes had
not been made. Unless and until such provisions have been so amended, the
provisions of this Agreement shall govern.
Section 10.21. Officer's Certificates. It is not intended that
any certificate of any officer of the Borrower or Transocean delivered to the
Agent or any Lender pursuant to this Agreement shall give rise to any personal
liability on the part of such officer.
Section 10.22. Effect of Inclusion of Exceptions. It is not
intended that the specification of any exception to any covenant herein shall
imply that the excepted matter would, but for such exception, be prohibited or
required.
Section 10.23. Non-Recourse Obligation. The Obligations of the
Borrower under the Credit Documents shall be non-recourse to Transocean and its
Subsidiaries (excluding the Borrower) other than as expressly provided in the
Operative Documents. No recourse with respect to any Credit Document, any
amount payable or which may be payable by the Borrower under any Credit Document
or any representation, warranty, covenant, obligation, liability or agreement of
the Borrower contained in, made or incurred pursuant to or in any way arising
out of or resulting from any Credit Document (collectively, the "Non-Recourse
Obligations") (including without limitation under any judgment obtained against
the Borrower or by the enforcement of any assessment or by any legal or
equitable proceeding by virtue of any constitution or statute or otherwise or
under any other circumstances) shall be had against any incorporator,
shareholder, Affiliate, director, officer or employee, past, present or future,
of the Borrower (or any Person directly or indirectly controlling any of the
foregoing Persons)
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(collectively, the "Released Persons"), either directly or through the Borrower.
Any and all personal liability of every nature, whether at common law or in
equity or by statute or by constitution or otherwise, of any such Released
Person (i) to respond by reason of any act or omission on its part or otherwise,
for the payment to any Lender, the Agent and/or the Collateral Agent or for or
to the Borrower or any receiver thereof, of any sum that may remain due and
unpaid under or on account of any Non-Recourse Obligation, and (ii) otherwise in
respect of the Non-Recourse Obligations, is hereby expressly waived and released
by the Lenders, the Agent and the Collateral Agent as a condition of and as
consideration for the execution of this Agreement by the Borrower. Nothing in
this Section 10.23 releases Transocean from, or modifies in any respect, any
liability or obligation, past, present or future, of Transocean under the
express terms of any Credit Document to which it is or hereafter becomes a party
(by executing the same).
Section 10.24. Lease Securitization Facility. This Agreement is
part of the "Lease Securitization Facility" referred to in the Secured Credit
Agreement and the other Credit Documents.
Section 10.25. Amoco Quiet Enjoyment; Transocean Replaced Parts.
(a) The Lenders, the Agent and the Collateral Agent each hereby (i) acknowledge
and consent to the provisions of Section 2(h) of each of the O&M Contracts and
Section 7(b) of each of the Transocean Contracts and (ii) agree, for the benefit
of Transocean, that, any term of any Credit Document to the contrary
notwithstanding, unless and until the Collateral Agent shall terminate any such
contract in accordance with its terms, (x) any replaced "Part" (as such term is
defined in such contracts) that, in accordance with the terms of any such
contract, is to become the property of Transocean shall so become the property
of Transocean, free and clear of the Liens of the Security Documents, and (y)
the Collateral Agent shall execute such instruments as Transocean reasonably may
request from time to time to give effect to, or evidence, the release of any
such replaced "Part" from the Liens of the Security Documents.
(b) The Lenders, the Agent and the Collateral Agent each hereby (i)
acknowledge and consent to the provisions of the Amoco Contracts, and (ii)
agree, with respect to each Amoco Contract, that, any term of any Credit
Document to the contrary notwithstanding, during the term of each Amoco Contract
and so long as Amoco shall be in compliance in all material respects with its
obligations set forth in such Amoco Contracts, it shall not take any action
under any Credit Document that would result in any material breach by
"Contractor" under such Amoco Contract or otherwise interfere with Amoco's
rights under such Amoco Contract.
(c) Transocean hereby is constituted as, and each party hereto hereby
agrees that Transocean shall be, an intended third party beneficiary of this
Section 10.25 and, without limitation of the foregoing, any term of this
Agreement to the contrary notwithstanding, this Section 10.25 may not be
amended, modified or supplemented without the written consent of Transocean.
References in this Section 10.25 to Transocean include Transocean Offshore Inc.,
its successors and, with respect to any O&M Contract or Transocean Contract, its
permitted assigns thereunder.
-85-
<PAGE>
In Witness Whereof, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date hereof.
<TABLE>
<S> <C>
ABN AMRO Bank N.V., as the Agent ABN AMRO Bank N.V., as the Enhancer
By: /s/ Stuart Murray By: /s/ Stuart Murray
------------------------------------- ---------------------------------
Title: Vice President Title: Vice President
--------------------------------- -----------------------------
By: /s/ Robert J. Cunningham By: /s/ Robert J. Cunningham
------------------------------------- ---------------------------------
Title: Group Vice President Title: Group Vice President
--------------------------------- -----------------------------
Address: Structured Finance, Address: Structured Finance,
Asset Securitization Asset Securitization
135 South LaSalle Street 135 South LaSalle Street
Chicago, Illinois 60674-9135 Chicago, Illinois 60674-9135
Attention: Lender Agent- Attention: Enhancer-Amsterdam
Amsterdam Telephone: (312) 904-2737
Telephone: (312) 904-2737 Telecopy: (312) 904-6376
Telecopy: (312) 904-6376
ABN AMRO Bank N.V., with a copy to:
as a Liquidity Provider
ABN AMRO Bank N.V.
Address: Structured Finance,
Asset Securitization
By: /s/ Stuart Murray 135 South LaSalle Street
------------------------------------------ Chicago, Illinois 60674-9135
Attention: Administrator - Amsterdam
Title: Vice President Telephone: (312) 904-2737
--------------------------------------- Telecopy: (312) 904-6376
By: /s/ Robert J. Cunningham
------------------------------------------
Title: Group Vice President
--------------------------------------
Address: Three Riverway, Suite 1700
Houston, Texas 77056
Attention: Stuart Murray
Telephone: (713) 964-3358
Telecopy: (713) 629-7533
</TABLE>
-86-
<PAGE>
AMSTERDAM FUNDING CORPORATION
By: /s/ Andrew L. Stidd
-----------------------------------------
Title: President
--------------------------------------
Address: c/o Global Securitization Services, LLC
114 West 47th Street, Suite 1715
New York, New York 10036
Attention: Andrew L. Stidd,
Vice President
Telephone: (212) 302-8330
Telecopy: (212) 302-8767
TRANSOCEAN ENTERPRISE INC.
By: /s/ Brian C. Voegele
-----------------------------------------
Title: Vice President
--------------------------------------
Address: Transocean Enterprise Inc.
4 Greenway Plaza
Houston, Texas 77046
Attention: Robert L. Long
Telephone: (713) 232-7500
Telecopy: (713) 232-7028
TRANSOCEAN OFFSHORE INC.
Address: Transocean Enterprise Inc.
4 Greenway Plaza
Houston, Texas 77046
Attention: Nicolas J. Evanoff
Telephone: (713) 232-7601
Telecopy: (713) 232-7026
-87-
<PAGE>
AUSTRALIA AND NEW ZEALAND BANKING GROUP
LIMITED, as a Liquidity Provider
By: /s/ Claude Devillers
-------------------------------------------
Title: Director Oil and Gas Americas
-------------------------------------------
Address: 1177 Avenue of the Americas
6th Floor
New York, New York 10036-2798
Attention: David Giacalone
Telephone: (212) 801-9814
Telecopy: (212) 556-4814
-88-
<PAGE>
THE BANK OF NOVA SCOTIA, ATLANTA AGENCY, as a
Liquidity Provider
By: /s/ F.C.H. Ashby
------------------------------------------
Title: Senior Manager Loan Operations
Address: Houston Representative Office
1100 Louisiana Street, Suite 3000
Houston, Texas 77002
Attention: Spencer Smith
Telephone: (713) 759-2425
Telecopy: (713) 759-3439
-89-
<PAGE>
BANK OF TOKYO - MITSUBISHI, LTD., HOUSTON
AGENCY, as a Funding Liquidity Provider
By: /s/ Michael G. Meiss
------------------------------------------
Title: Vice President and Manager
-----------------------------------
Address: 1100 Louisiana Street, Suite 2800
Houston, Texas 77002
Attention: Mike Meiss
Telephone: (713) 655-3814
Telecopy: (713) 658-0116
-90-
<PAGE>
WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK
BRANCH,
as a Liquidity Provider
By: /s/ Jonathan Berman
-----------------------------------------
Title: Managing Director
----------------------------------
By: /s/ Jared Brenner
-----------------------------------------
Title: Director
----------------------
Address: 1211 Avenue of the Americas
23rd Floor
New York, New York 10036
Attention: Richard Newman
Telephone: (212) 852-6120
Telecopy: (212) 852-6307
-91-
<PAGE>
BAYERISCHE HYPO-UND VEREINSBANK AG, NEW YORK
BRANCH, as a Liquidity Provider
By: /s/ Steven Atwell
----------------------------------------
Title: Director
---------------------------------
By: /s/ Pamela J. Gillons
----------------------------------------
Title: Associate Director
----------------------------------
Address: 150 East 42nd Street
New York, New York 10017
Attention: Steve Atwell
Telephone: (212) 672-5458
Telecopy: (212) 672-5530
-92-
<PAGE>
SUNTRUST BANK, ATLANTA, as a Liquidity Provider
By: /s/ John A. Fields, Jr.
------------------------------------------
Title: Vice President
-------------------------------------------
Address: 25 Park Place
24th Floor, Center 120
Atlanta, Georgia 30303
Attention: Steve Newby
Telephone: (404) 658-4916
Telecopy: (404) 827-6270
-93-
<PAGE>
BANK ONE, NA,
(Main Office Chicago)
as a Liquidity Provider
By: /s/ Karen Patterson
------------------------------------------
Title: First Vice President
-----------------------------------
Address: One Bank One Plaza, IL1-0634
Chicago, Illinois 60670
Attention: William P. Laird
with a copy to:
910 Travis, 6th Floor
Houston, Texas 77002
Attention: Helen Carr
Telephone: (713) 751-3731
Telecopy: (713) 751-3760
-94-
<PAGE>
THE BANK OF NEW YORK, as a Liquidity Provider
By: /s/ Helen L. Sarro
------------------------------------------
Title: Vice President
------------------------------------------
Address: One Wall Street, 22nd Floor
New York, New York 10286
Attention: Helen L. Sarro
Telephone: (212) 635-6898
Telecopy: (212) 635-6434
-95-
<PAGE>
ROYAL BANK OF CANADA, as a Liquidity Provider
By: /s/ Gil J. Benard
------------------------------------------
Title: Senior Manager
------------------------------------------
Address: 12450 Greenspoint Drive, Suite 1450
Houston, Texas 77060
Attention: Gil Benard
Telephone: (281) 874-5662
Telecopy: (281) 874-0081
with a copy to:
South Tower
Royal Bank Plaza
Toronto, Canada M5J2J5
Attention: Sue Tyler
Telephone: (416) 974-1778
Telecopy: (416) 974-0680
-96-
<PAGE>
KBC BANK, N.V., as a Liquidity Provider
By: /s/ Robert Snauffer
-------------------------------------------
Title: First Vice President
-------------------------------------
By: /s/ Raymond F. Murray
-------------------------------------------
Title: First Vice President
------------------------------------
Address: Two Midtown Plaza, Suite 1759
1349 West Peachtee Street
Atlanta, Georgia 30309
Attention: Mike Sawicki
Telephone: (404) 876-2556
Telecopy: (404) 876-3212
-97-
<PAGE>
ROYAL BANK OF SCOTLAND, as a Liquidity Provider
By: /s/ Scott Barton
-----------------------------------------
Title: Vice President
----------------------------------
Address: 88 Pine Street, 26th Floor
New York, New York 10005
Attention: Scott Barton
Telephone: (212) 269-1706
Telecopy: (212) 480-0791
-98-
<PAGE>
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, as a
Liquidity Provider
By: /s/ Ki Allen
-----------------------------------------
Title: Vice President
----------------------------------
Address: 600 Travis Street, 20th Floor
Houston, Texas 77002
Attention: Ki Allen
Telephone: (713) 216-3657
Telecopy: (713) 216-4227
-99-
<PAGE>
EXHIBIT 2.10
TO
SECURED LOAN AGREEMENT
FORM OF NOTE
__________________, ____
For Value Received, the undersigned, Transocean Enterprise Inc., a Delaware
corporation (the "Borrower"), promises to pay to the order of ABN AMRO Bank
N.V., as Agent under the hereinafter defined Loan Agreement (the "Agent"), for
the benefit of the Lenders at the office of the Agent in Chicago, Illinois, in
immediately available funds, the Loans outstanding under the hereinafter defined
Loan Agreement at the times and in the amounts specified on Schedule 2.3 of the
hereinafter defined Loan Agreement, together with interest on the unpaid
principal amount of each Loan from time to time outstanding at the rates, and
payable in the manner and on the dates, specified in the Loan Agreement.
The Agent shall record on its books and records or on the schedule attached
to this Note, which is a part hereof, each Loan made by each Lender to the
Borrower under the Loan Agreement, together with all payments of principal and
interest and the principal balances from time to time outstanding hereon,
whether the Loans are Base Rate Loans, Eurodollar Loans or CP Loans and the
interest rate and Interest Period applicable thereto, provided that prior to the
transfer of this Note all such amounts shall be recorded on the schedule
attached to this Note. The record thereof, whether shown on such books and
records or on the schedule to this Note, shall be prima facie evidence of the
same, provided, however, that the failure of the Agent to record any of the
foregoing or any error in any such record shall not limit or otherwise affect
the obligation of the Borrower to repay all Loans made to it pursuant to the
Loan Agreement together with accrued interest thereon.
This Note is the Note referred to in the Secured Loan Agreement (Amoco
Contracts) dated as of December 21, 1999, between the Borrower, the Agent, and
the Lenders (the "Loan Agreement"), and this Note and the holder hereof are
entitled to all the benefits and security provided for thereby or referred to
therein, to which Loan Agreement reference is hereby made for a statement
thereof. All defined terms used in this Note, except terms otherwise defined
herein, shall have the same meaning as in the Loan Agreement. This Note shall
be governed by and construed in accordance with the internal laws of the State
of New York.
Prepayments may or shall be made hereon and this Note may be declared due
prior to the expressed maturity hereof, all in the events, on the terms and in
the manner as provided for in the Loan Agreement.
<PAGE>
To the extent permitted under applicable law, the Borrower hereby waives
demand, presentment, protest or notice of any kind hereunder.
Transocean Enterprise Inc.
By _____________________________________
Its _________________________________
-2-
<PAGE>
EXHIBIT 10.8
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment Agreement (this "Agreement") dated as of ________, ____, is
by and among ____________________ (the "Assignor"), ___________________ (the
"Assignee"), Transocean Enterprise Inc., a Delaware corporation (the
"Borrower"), and ABN AMRO Bank N.V., as Agent for the Lenders (as hereinafter
defined) (in such capacity, the "Agent").
W I T N E S S E T H:
Whereas, the Borrower and the Agent have entered into that certain Secured
Loan Agreement (Amoco Contracts) (as amended, supplemented and restated from
time to time, the "Secured Loan Agreement") dated as of December 21, 1999, by
and among the Borrower, the lenders from time to time parties thereto
(collectively, the "Lenders"), Amsterdam Funding Corporation, and the Agent, as
agent for the Lenders;
Whereas, on a pro rata basis, the Assignor proposes to sell and assign to
the Assignee, and the Assignee proposes to buy and accept from the Assignor, a
____ percent (_____%) interest (the "Assigned Interest") in the rights and
obligations of the Assignor under the Credit Documents with the effect that the
Assignee will have a maximum Commitment of $_________, resuling in a Percentage
of _______%;
Whereas, the Assignor has agreed to make certain Loans to the Borrower in
accordance with the terms of the Secured Loan Agreement, with the maximum
aggregate amount of the Assignor's Loans not to exceed the Assignor's
Commitment; and
Now, Therefore, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:
Section 1. Defintions. Any term defined in the Secured Loan
Agreement and used in this Agreement shall have the meaning ascribed to it in
the Secured Loan Agreement. Section 1.1 of the Secured Loan Agreement is hereby
incorporated into this Agreement by reference.
Section 2. Assignment. The Assignor hereby assigns and sells,
without recourse to or warranty by the Assignor except as specifically set forth
herein, to the Assignee the Assigned Interest in the rights and obligations of
the Assignor under the Credit Documents. The Assignee hereby purchases and
accepts, without recourse to or warranty by the Assignor except as specifically
set forth herein, from the Assignor all of such rights and obligations of the
Assignor, including the corresponding portion of the principal amount of the
Loans made by the Assignor. As of the date hereof, the Assignee's Percentage of
the outstanding principal balance of the Loans is $_________. Subject to the
execution and delivery hereof by the Assignor, the Assignee, the Borrower and
the Agent as of the date hereof, (a) the Assignee shall succeed, on a
<PAGE>
pro rata basis, to the rights and interests, and be obligated to perform the
obligations, of a Lender under the Credit Documents with a Percentage of
______%, and shall be considered a Lender for all purposes; (b) the Assignee
shall deliver to the Assignor, in immediately available funds, the Assignee's
Percentage of the outstanding Loans, and (c) the Percentage of the Assignor as
of the date hereof shall be reduced by the Percentage acquired by the Assignee,
and the Assignor shall be released from its obligations under the Credit
Documents which have been so assigned to and accepted by the Assignee.
Section 3. Payments. Commitment fees accrued to the date hereof with
respect to the Assignor's Percentage of the Commitment pursuant to Section 2.8
of the Secured Loan Agreement are for the account of the Assignor and such fees
accruing from and including the date hereof with respect to the Assigned
Interest are for the account of the Assignee. All payments of principal of and
accrued interest on the Loans are to be made by the Borrower to the Agent. The
Agent shall divide such payments among the Lenders as their interests may
appear, with all interest accruing on the Loans of the Assignor before the date
hereof to belong to the Assignor. Each of the Assignor and the Assignee hereby
agrees that if it receives any amount from the Borrower under the Credit
Documents which is for the account of the other party hereto, it shall receive
the same for the account of such other party to the extent of such other party's
interest therein and shall promptly pay the same to such other party. The
rights of the Assignor and the Assignee under this Section are in addition to
other rights and remedies which the Assignor or the Assignee may have.
Section 4. Consent of the Borrower and the Agent. This Agreement is
conditioned upon the consent of the Borrower and the Agent to the extent
required by Section 10.8(b) of the Secured Loan Agreement. The execution of
this Agreement by the Borrower and the Agent is evidence of any such consent.
Section 5. The Assignor. The Assignor (a) represents and warrants to
the Assignee that it is the legal and beneficial owner of the Assigned Interest
and that such Assigned Interest is free and clear of any Lien; (b) makes no
representation or warranty and assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the
Credit Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Documents or any document
furnished pursuant thereto or (ii) the financial condition of the Borrower or
any other Credit Party or the performance or observance by the Borrower or any
other Credit Party of any of its obligations under the Credit Documents.
Section 6. The Assignee. The Assignee (a) confirms that is has
received a copy of the Credit Documents, together with such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Agreement; (b) agrees that it will, independently
and without reliance upon the Agent, the Assignor or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Documents; (c) appoints and authorizes the Agent to take such action
as agent on behalf of the Assignee and to exercise such powers under the Credit
Documents as are delegated to the Agent by the terms thereof, together with such
power as are reasonably incidental thereto; and (d) agrees that it will
-2-
<PAGE>
perform in accordance with their terms all of the obligations which by the terms
of the Credit Documents are required to be performed by it as a Lender. If the
Assignee is organized under the laws of any jurisdiction other than the United
States of America or any State thereof, the Assignee hereby (a) represents to
the Assignor, the Agent and the Borrower that under applicable law and treaties
no taxes will be required to be withheld by the Agent, the Borrower or the
Assignor with respect to any payments to be made to the Assignee in respect of
the Loans, (b) furnishes to the Assignor, the Agent and the Borrower the forms
required by Section 10.8(e) of the Secured Loan Agreement, either U.S. Internal
Revenue Service Form W-8ECI or U.S. Internal Revenue Service Form W-8BEN
(wherein the Assignee claims entitlement to complete exemption from U.S. federal
withholding tax on all interest payments under the Credit Documents), and (c)
agrees for the benefit of the Assignor, the Agent and the Borrower to provide
the Assignor, the Agent and the Borrower from time to time new forms as required
by Section 10.8(e)(iii) and 4.7(b) of the Secured Loan Agreement, and to comply
from time to time with all applicable U.S. laws and regulations with regard to
such withholding tax exemption.
Section 7. Notices and Payment Instructions. All notices in
connection herewith shall be given in accordance with Section 10.2 of the
Secured Loan Agreement. The address of the Assignee for notices hereunder and
thereunder, together with payment instructions for amounts to be paid to the
Assignee under the Secured Loan Agreement, shall be initially as set forth on
the signature pages hereof.
Section 8. Miscellaneous. This Agreement (a) embodies the entire
agreement and understanding between the parties with respect to the subject
matter hereof and supersedes all prior agreements, consents and understandings
relating to such subject matter, (b) is a Credit Document, and (c) shall be
governed by and construed in accordance with the laws of the State of New York.
[The Borrower is hereby agreed to be, and is hereby constituted, an express,
intended third-party beneficiary of this Agreement. Without limitation of the
preceding sentence, this Agreement may not be amended, modified or supplemented
without the written consent of the Borrower, and the Borrower may enforce the
terms hereof as fully as if it were a signatory hereto.]/1/
In Witness Whereof, the parties have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date first above
written.
_________________
/1/ Insert bracketed language if the Borrower's execution hereof is not
required under Section 10.8(b) of the Secured Loan Agreement.
-3-
<PAGE>
[NAME OF ASSIGNOR]
By: ________________________________
Name: __________________________
Title: _________________________
[NAME OF ASSIGNEE]
By: ________________________________
Name: __________________________
Title: _________________________
[INSERT ADDRESS]____________________
________________________________
________________________________
Attention: _________________________
Telecopy No.: (___) _______________
Answerback No.: (___) _____________
Telex No.: (___) ___________________
Send payments to:
________________________________
________________________________
________________________________
[REFERENCE: TRANSOCEAN ENTERPRISE INC.]
-4-
<PAGE>
[TRANSOCEAN ENTERPRISE INC.]
By: ________________________________
Name: __________________________
Title: _________________________
ABN AMRO Bank N.V., as Agent
By: ________________________________
Name: __________________________
Title: _________________________
By: ________________________________
Name: __________________________
Title: _________________________
-5-
<PAGE>
EXHIBIT 4.6
______________________________________________________________________________
CREDIT AGREEMENT
Dated as of
December 16, 1999
Among
TRANSOCEAN OFFSHORE INC.,
THE LENDERS PARTY HERETO,
SUNTRUST BANK, ATLANTA,
as Administrative Agent,
ROYAL BANK OF CANADA,
as Syndication Agent,
BANK OF AMERICA, N.A.,
as Documentation Agent,
And
BANK ONE, NA
And
PARIBAS,
as Senior Managing Agents
______________________________________________________________________________
SUNTRUST EQUITABLE SECURITIES CORPORATION,
as Lead Arranger
<PAGE>
CREDIT AGREEMENT (the "Agreement"), dated as of December 16, 1999, among
TRANSOCEAN OFFSHORE INC. (the "Borrower"), a Cayman Islands company, the lenders
from time to time parties hereto (each a "Lender" and collectively, the
"Lenders"), SUNTRUST BANK, ATLANTA ("STBA"), a Georgia banking corporation, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), ROYAL BANK OF CANADA, a bank chartered under the laws of Canada, as
syndication agent for the Lenders (in such capacity, the "Syndication Agent"),
BANK OF AMERICA, N.A., a U.S. national banking association, as documentation
agent for the Lenders (in such capacity, the "Documentation Agent"), and BANK
ONE, NA (Main Office Chicago), a U.S. national banking association, and PARIBAS,
a bank chartered under the laws of France, as senior managing agents for the
Lenders (in such capacity, each a "Senior Managing Agent" and collectively, the
"Senior Managing Agents").
WITNESSETH:
WHEREAS, the Borrower desires to obtain from the Lenders a term loan in the
aggregate principal amount of $400,000,000; and
WHEREAS, the Lenders are willing to make such a term loan to the Borrower
on the terms and subject to the conditions and requirements hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE 1. DEFINITIONS; INTERPRETATION.
Section 1.1. Definitions. Unless otherwise defined herein, the following
terms shall have the following meanings, which meanings shall be equally
applicable to both the singular and plural forms of such terms:
"Adjusted LIBOR" means, for any portions of the Term Loan consisting of
Eurodollar Loans, a rate per annum determined in accordance with the following
formula:
LIBOR Rate
Adjusted LIBOR = ------------------------------------
1.00 - Eurodollar Reserve Percentage
"Administrative Agent" means SunTrust Bank, Atlanta, acting in its capacity
as Administrative Agent for the Lenders, and any successor Administrative Agent
appointed hereunder pursuant to Section 9.7.
"Agreement" means this Credit Agreement, as the same may be amended,
restated and supplemented from time to time.
<PAGE>
"Applicable Margin" means, for any day, at such times as a debt rating
(either express or implied) by S&P or Moody's (or in the event that both cease
the issuance of debt ratings generally, such other ratings agency agreed to by
the Borrower and the Administrative Agent) is in effect on the Borrower's senior
unsecured long-term debt, the percentage per annum set forth opposite such debt
rating:
Debt Rating Percentage
----------- ----------
A+/A1 or above 0.350%
A/A2 0.450%
A-/A3 0.550%
BBB+/Baa1 0.700%
BBB/Baa2 0.850%
BBB-/Baa3 1.100%
BB+/Ba1 or below 1.475%
If the ratings issued by S&P and Moody's differ (i) by one rating, the higher
rating shall apply to determine the Applicable Margin, (ii) by two ratings, the
rating which falls between them shall apply to determine the Applicable Margin,
or (iii) by more than two ratings, the rating immediately above the lower of the
two ratings shall apply to determine the Applicable Margin. The Borrower shall
give written notice to the Administrative Agent of any changes to such ratings,
within three (3) Business Days thereof, and any change to the Applicable Margin
shall be effective on the date of the relevant change. Notwithstanding the
foregoing, (i) the Applicable Margin in effect at all times during the first six
months after the Borrowing Date shall in no event be less than a percentage per
annum equal to 0.550%, and (ii) if the Borrower shall at any time fail to have
in effect such a debt rating on the Borrower's senior unsecured long-term debt,
the Borrower shall seek and obtain (if not already in effect), within thirty
(30) days after such debt rating first ceases to be in effect, a corporate
credit rating or a bank loan rating from Moody's or S&P, or both, and the
Applicable Margin shall thereafter be based on such ratings in the same manner
as provided herein with respect to the Borrower's senior unsecured long-term
debt rating (with the Applicable Margin in effect prior to the issuance of such
corporate credit rating or bank loan rating being the same as the Applicable
Margin in effect at the time the senior unsecured long-term debt rating ceases
to be in effect).
"Assignment Agreement" means an agreement in substantially the form of
Exhibit 10.10 whereby a Lender conveys part or all of its Commitment or its
portion of the Term Loan to another Person that is, or thereupon becomes, a
Lender, pursuant to Section 10.10.
"Base Rate" means for any day the greater of:
(i) the fluctuating commercial loan rate announced by the Lender
which is the Administrative Agent from time to time at its Atlanta, Georgia
office (or other corresponding office, in the case of any successor
Administrative Agent) as its base rate for U.S. Dollar loans in the United
States of America in effect on such day (which base rate may not be the lowest
rate charged by such Lender on loans to any of its customers), with any change
in the Base Rate
2
<PAGE>
resulting from a change in such announced rate to be effective on the date of
the relevant change; and
(ii) the sum of (x) the rate per annum (rounded upwards, if
necessary, to the nearest 1/16th of 1%) equal to the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the next Business Day, provided that
(A) if such day is not a Business Day, the rate on such transactions on the
immediately preceding Business Day as so published on the next Business Day
shall apply, and (B) if no such rate is published on such next Business Day, the
rate for such day shall be the average of the offered rates quoted to the
Administrative Agent by two (2) federal funds brokers of recognized standing on
such day for such transactions as selected by the Administrative Agent, plus
(y) a percentage per annum equal to (I) for the period from December 1, 1999
through January 31, 2000, one and one-half percent (1 1/2%) per annum, and (II)
at all other times, one-half of one percent (1/2%) per annum.
"Base Rate Loan" means any portion of the Term Loan bearing interest prior
to maturity at the rate specified in Section 2.6(a).
"Borrower" means Transocean Offshore Inc., a company organized under the
laws of the Cayman Islands, and its successors.
"Borrowing" means any extension of credit made by the Lenders by way of a
portion of the Term Loan, including any Borrowing advanced, continued or
converted. A Borrowing is "advanced" on the day the Lenders advance funds
comprising a portion of the Term Loan to the Borrower, is "continued" (in the
case of Eurodollar Loans) on the date a new Interest Period commences for such
Borrowing, and is "converted" when such Borrowing is changed from one type of
Loan to the other, all as requested by the Borrower pursuant to Section 2.3(a).
"Borrowing Date" means the date on which all conditions precedent set forth
herein to the initial Borrowings have been satisfied or waived in writing and
the funding of the Term Loan hereunder has occurred, which date shall be no
later than January 31,2000.
"Business Day" means any day other than a Saturday or Sunday on which banks
are not authorized or required to close in Atlanta, Georgia, Houston, Texas, or
New York, New York and, if the applicable Business Day relates to the advance or
continuation of, conversion into, or payment on, a Eurodollar Borrowing, on
which banks are dealing in U.S. Dollar deposits in the interbank eurocurrency
market in London, England.
"Capitalized Lease Obligations" means, for any Person, the aggregate amount
of such Person's liabilities under all leases of real or personal property (or
any interest therein) which is required to be capitalized on the balance sheet
of such Person as determined in accordance with GAAP.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof having maturities of
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not more than twelve (12) months from the date of acquisition, (ii) time
deposits and certificates of deposits maturing within one year from the date of
acquisition thereof or repurchase agreements with financial institutions whose
short-term unsecured debt rating is A or above as obtained from either S&P or
Moody's, (iii) commercial paper or Eurocommercial paper with a rating of at
least A-1 by S&P or at least P-1 by Moody's, with maturities of not more than
twelve (12) months from the date of acquisition, (iv) repurchase obligations
entered into with any Lender, or any other Person whose short-term senior
unsecured debt rating from S&P is at least A-1 or from Moody's is at least P-1,
which are secured by a fully perfected security interest in any obligation of
the type described in (i) above and has a market value of the time such
repurchase is entered into of not less than 100% of the repurchase obligation of
such Lender or such other Person thereunder, (v) marketable direct obligations
issued by any state of the United States of America or any political subdivision
of any such state or any public instrumentality thereof maturing within twelve
(12) months from the date of acquisition thereof or providing for the resetting
of the interest rate applicable thereto not less often than annually and, at the
time of acquisition, having one of the two highest ratings obtainable from
either S&P or Moody's, and (vi) money market funds which have at least
$1,000,000,000 in assets and which invest primarily in securities of the types
described in clauses (i) through (v) above.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" means, relative to any Lender, such Lender's obligations to
fund a portion of the Term Loan pursuant to Section 2.1 in the amount and
percentage set forth opposite its signature hereto or pursuant to Section 10.10,
as such commitment may be reduced from time to time or terminated pursuant to
this Agreement.
"Commitment Fee" means the fee payable to each Lender as provided in
Section 3.1(a).
"Commitment Termination Date" means the earliest of (i) funding of the Term
Loan on the Borrowing Date, and (ii) January 31, 2000.
"Compliance Certificate" means a certificate in the form of Exhibit 6.6.
"Confidential Information Memorandum" shall mean the Confidential
Information Memorandum of the Borrower dated October 1999, as the same may be
amended, restated and supplemented from time to time and distributed to the
Lenders prior to the Effective Date.
"Consolidated EBITDA" means, for any period, for the Borrower and its
Subsidiaries, the sum of (a) net income or net loss (before discontinued
operations and income or loss resulting from extraordinary items), plus (b) the
sum of (i) Consolidated Interest Expense, (ii) income tax expense, (iii)
depreciation expense, (iv) amortization expense, and (v) other non-cash charges,
all determined in accordance with GAAP on a consolidated basis for the Borrower
and its Subsidiaries (excluding, in the case of the foregoing clauses (a) and
(b), any net income or net loss and expenses and charges of any SPVs or other
Persons that are not Subsidiaries), plus (c) dividends or distributions received
during such period by the Borrower and its Subsidiaries from SPVs and any other
Persons that are not Subsidiaries.
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"Consolidated Indebtedness" means all Indebtedness of the Borrower and its
Subsidiaries that would be reflected on a consolidated balance sheet of such
Persons prepared in accordance with GAAP.
"Consolidated Indebtedness to Total Capitalization Ratio" means, at any
time, the ratio of Consolidated Indebtedness at such time to Total
Capitalization at such time.
"Consolidated Interest Expense" means, for any period, total interest
expense of the Borrower and its Subsidiaries on a consolidated basis for such
period, in connection with Indebtedness, all as determined in accordance with
GAAP, but excluding capitalized interest expense and interest expense
attributable to expected federal income tax settlements.
"Consolidated Net Assets" means, as of any date of determination, an amount
equal to the aggregate book value of the assets of the Borrower, its
Subsidiaries and, to the extent of the equity interest of the Borrower and its
Subsidiaries therein, SPVs at such time, minus the current liabilities of the
Borrower and its Subsidiaries, all as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Worth" means, as of any date of determination,
consolidated shareholders equity of the Borrower and its Subsidiaries determined
in accordance with GAAP (but excluding the effect on shareholders equity of
cumulative foreign exchange translation adjustments). For purposes of this
definition, SPVs shall be accounted for pursuant to the equity method of
accounting.
"Controlling Affiliate" means for the Borrower, (i) any other Person that
directly or indirectly through one or more intermediaries controls, or is under
common control with, the Borrower (other than Persons controlled by the
Borrower), and (ii) any other Person owning beneficially or controlling ten
percent (10%) or more of the equity interests in the Borrower. As used in this
definition, "control" means the power, directly or indirectly, to direct or
cause the direction of management or policies of a Person (through ownership of
voting securities or other equity interests, by contract or otherwise).
"Credit Documents" means this Agreement, the Notes, and any Subsidiary
Guaranties in effect from time to time.
"Default" means any event or condition the occurrence of which would, with
the passage of time or the giving of notice, or both, constitute an Event of
Default.
"Documentation Agent" shall mean Bank of America, N.A., in its capacity as
Documentation Agent for the Lenders, and any successor Documentation Agent
appointed pursuant to Section 9.7; provided, however, that no such Documentation
Agent shall have any duties, responsibilities, or obligations hereunder in such
capacity.
"Dollar" and "U.S. Dollar" and the sign "$" mean lawful money of the United
States of America.
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"Effective Date" means the date this Agreement shall become effective as
defined in Section 10.16.
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of non-
compliance or violation, investigations or proceedings relating to any
Environmental Law ("Claims") or any permit issued under any Environmental Law,
including, without limitation, (i) any and all Claims by governmental or
regulatory authorities for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law, and
(ii) any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Hazardous Materials or arising from alleged injury or threat of injury to the
environment.
"Environmental Law" means any federal, state or local statute, law, rule,
regulation, ordinance, code, policy or rule of common law now or hereafter in
effect, including any judicial or administrative order, consent, decree or
judgment, relating to the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Eurodollar Loan" means a portion of the Term Loan bearing interest before
maturity at the rate specified in Section 2.6(b).
"Eurodollar Reserve Percentage" means, with respect to each Interest Period
for a Eurodollar Loan, a percentage (expressed as a decimal) equal to the daily
average during such Interest Period of the percentages in effect on each day of
such Interest Period, if any, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor thereto), for determining the maximum
reserve requirements (including, without limitation, any supplemental, marginal
and emergency reserves) applicable to "Eurocurrency Liabilities" of member banks
of the Federal Reserve System in New York City with deposits exceeding
$1,000,000,000 pursuant to Regulation D of the Board of Governors of the Federal
Reserve System or any other then applicable regulation of the Board of Governors
which prescribes reserve requirements applicable to "Eurocurrency Liabilities"
as presently defined in Regulation D.
"Event of Default" means any of the events or circumstances specified in
Section 7.1.
"Foreign Plan" means any pension, profit sharing, deferred compensation, or
other employee benefit plan, program or arrangement maintained by any foreign
Subsidiary of the Borrower which, under applicable local law, is required to be
funded through a trust or other funding vehicle, but shall not include any
benefit provided by a foreign government or its agencies.
"GAAP" means generally accepted accounting principles from time to time in
effect as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the statements and
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pronouncements of the Financial Accounting Standards Board or in such other
statements, opinions and pronouncements by such other entity as may be approved
by a significant segment of the U.S. accounting profession.
"Guarantor" means any Subsidiary of the Borrower required to execute and
delivery a Subsidiary Guaranty hereunder pursuant to Section 6.12, in each case
unless and until the relevant Subsidiary Guaranty is released pursuant to
Section 6.12.
"Guaranty" by any Person means all contractual obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business) of such Person guaranteeing any Indebtedness of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (i) to purchase such Indebtedness or to purchase any
property or assets constituting security therefor, primarily for the purpose of
assuring the owner of such Indebtedness of the ability of the primary obligor to
make payment of such Indebtedness; or (ii) to advance or supply funds (x) for
the purchase or payment of such Indebtedness, or (y) to maintain working capital
or other balance sheet condition, or otherwise to advance or make available
funds for the purchase or payment of such Indebtedness, in each case primarily
for the purpose of assuring the owner of such Indebtedness of the ability of the
primary obligor to make payment of such Indebtedness; or (iii) to lease
property, or to purchase securities or other property or services, of the
primary obligor, primarily for the purpose of assuring the owner of such
Indebtedness of the ability of the primary obligor to make payment of such
Indebtedness; or (iv) otherwise to assure the owner of such Indebtedness of the
primary obligor against loss in respect thereof. For the purpose of all
computations made under this Agreement, the amount of a Guaranty in respect of
any Indebtedness shall be deemed to be equal to the amount that would apply if
such Indebtedness was the direct obligation of such Person rather than the
primary obligor or, if less, the maximum aggregate potential liability of such
Person under the terms of the Guaranty.
"Hazardous Material" shall have the meaning assigned to that term in the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Acts of 1986, and shall
also include petroleum, including crude oil or any fraction thereof, or any
other substance defined as "hazardous" or "toxic" or words with similar meaning
and effect under any Environmental Law applicable to the Borrower or any of its
Subsidiaries.
"Highest Lawful Rate" means the maximum nonusurious interest rate, if any,
that any time or from time to time may be contracted for, taken, reserved,
charged or received on any portions of the Term Loan, under laws applicable to
any of the Lenders which are presently in effect or, to the extent allowed by
applicable law, under such laws which may hereafter be in effect and which allow
a higher maximum nonusurious interest rate than applicable laws now allow.
Determination of the rate of interest for the purpose of determining whether any
portions of the Loan are usurious under all applicable laws shall be made by
amortizing, prorating, allocating, and spreading, in equal parts during the
period of the full stated term of the Term Loan, all interest at any time
contracted for, taken, reserved, charged or received from the Borrower in
connection with the Term Loan.
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"Indebtedness" means, for any Person, the following obligations of such
Person, without duplication: (i) obligations of such Person for borrowed money;
(ii) obligations of such Person representing the deferred purchase price of
property or services other than accounts payable and accrued liabilities arising
in the ordinary course of business and other than amounts which are being
contested in good faith and for which reserves in conformity with GAAP have been
provided; (iii) obligations of such Person evidenced by bonds, notes, bankers
acceptances, debentures or other similar instruments of such Person or arising,
whether absolute or contingent, out of letters of credit issued for such
Person's account or pursuant to such Person's application securing Indebtedness;
(iv) obligations of other Persons, whether or not assumed, secured by Liens
(other than Permitted Liens) upon property or payable out of the proceeds or
production from property now or hereafter owned or acquired by such Person, but
only to the extent of such property's fair market value; (v) Capitalized Lease
Obligations of such Person; (vi) obligations under Interest Rate Protection
Agreements, and (vii) obligations of such Person pursuant to a Guaranty of any
of the foregoing obligations of another Person; provided, however, Indebtedness
shall exclude Non-recourse Debt. For purposes of this Agreement, the
Indebtedness of any Person shall include the Indebtedness of any partnership or
joint venture to the extent such Indebtedness is recourse to such Person.
"Interest Coverage Ratio" means, as of the end of any fiscal quarter, the
ratio of (i) Consolidated EBITDA for the four fiscal quarter period then ended,
minus all dividends paid to shareholders of the Borrower during such four fiscal
quarter period and all cash income taxes paid during such four fiscal quarter
period, to (ii) Consolidated Interest Expense for the four fiscal quarter period
then ended. In any four fiscal quarter period for which the Interest Coverage
Ratio is being determined which includes the fiscal quarter during which the
Sedco Forex Merger occurred, Consolidated EBITDA and Consolidated Interest
Expense for those fiscal quarters included in such period ending on or before
December 31, 1999 shall be for the Borrower and its Subsidiaries as existing
prior to the Sedco Forex Merger and, in addition, if the Sedco Forex Merger
shall occur on or after April 1, 2000, Consolidated EBITDA and Consolidated
Interest Expense for the fiscal quarter ending March 31, 2000 shall also be for
the Borrower and its Subsidiaries as existing prior to the Sedco Forex Merger.
Other fiscal quarters during any such four-quarter period shall be for the
Borrower and its Subsidiaries as existing after consummation of the Sedco Forex
Merger.
"Interest Payment Date" means (i) for each Base Rate Loan, the last
Business Day of each calendar quarter during which such Loan is outstanding,
whether during all or any portion of such calendar quarter, and (ii) for each
Eurodollar Loan, the last Business Day of each Interest Period for such Loan
and, during any Interest Period of six (6) months, the next Business Day
occurring three (3) months after the commencement of such Interest Period.
"Interest Period" means the period commencing on the date that a Borrowing
of Eurodollar Loans is advanced, continued or created by conversion and, subject
to Section 2.4, ending on the date 1, 2, 3 or 6 months thereafter as selected by
the Borrower pursuant to the terms of this Agreement.
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"Interest Rate Protection Agreement" shall mean any interest rate swap,
interest rate cap, interest rate collar, or other interest rate hedging
agreement or arrangement designed to protect against fluctuations in interest
rates.
"Lead Arranger" means SunTrust Equitable Securities Corporation, acting in
its capacity as lead arranger for the Term Loan.
"Lender" is defined in the preamble.
"Lending Office" means the branch, office or affiliate of a Lender
specified on the appropriate signature page hereof, or designated pursuant to
Sections 8.4 or 10.10, as the office through which it will make its portion of
the Term Loan hereunder for each type of Loan available hereunder.
"LIBOR Rate" means, relative to any Interest Period for each Eurodollar
Loan comprising part of the same Borrowing, a rate of interest per annum
(rounded upwards, if necessary, to the nearest whole multiple of 1/16 of 1%),
equal to the arithmetic mean of the "LIBOR" rates of interest per annum
appearing on Telerate Page 3750 (or any successor publication) for Dollars two
(2) Business Days before the commencement of such Interest Period for delivery
on the first day of such Interest Period, at or about 11:00 a.m. (London,
England time) for a period approximately equal to such Interest Period and in an
amount equal or comparable to the aggregate principal amount of the Eurodollar
Loans to which such Interest Period relates. If the foregoing Telerate rate is
unavailable for any reason, then such rate shall be determined by the
Administrative Agent from the Reuters Screen LIBOR page, or if such rate is also
unavailable on such service, on any other interest rate reporting service of
recognized standing selected by the Administrative Agent after consultation with
the Borrower.
"Lien" means any interest in any property or asset in favor of a Person
other than the owner of such property or asset and securing an obligation owed
to, or a claim by, such Person, whether such interest is based on the common
law, statute or contract, including, but not limited to, the security interest
lien arising from a mortgage, encumbrance, pledge, conditional sale, security
agreement or trust receipt, or a lease, consignment or bailment for security
purposes.
"Loan" mean a Base Rate Loan or Eurodollar Loan, each of which is a "type"
of Loan hereunder, outstanding as a portion of the Term Loan.
"Material Adverse Effect" means a material adverse effect on (i) the
business, assets, operations or condition of the Borrower and its Subsidiaries
taken as a whole, or (ii) the Borrower's ability to perform any of its payment
obligations under the Agreement or the Notes.
"Maturity Date" means the fifth anniversary of the Borrowing Date.
"Moody's" means Moody's Investors Service, Inc., or any successor thereto.
"Non-recourse Debt" means with respect to any Person (i) obligations of
such Person against which the obligee has no recourse to such Person except as
to certain named or described
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present or future assets or interests, and (ii) the obligations of SPVs to the
extent the obligee thereof has no recourse to the Borrower or any of its
Subsidiaries.
"Note" means any of the promissory notes of the Borrower defined in Section
2.10.
"Obligations" means all obligations of the Borrower to pay fees, costs and
expenses hereunder, to pay principal or interest on the Term Loan, and to pay
any other obligations to the Administrative Agent or any Lender arising under
any Credit Document.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto.
"Percentage" means, for each Lender, prior to funding of the Term Loan, the
percentage of the Commitments represented by such Lender's Commitment, and on
and after the funding of the Term Loan, the percentage of the Term Loan held by
such Lender.
"Performance Guaranties" means all Guaranties of the Borrower or any of its
Subsidiaries delivered in connection with the construction financing of drill
ships, offshore mobile drilling units or offshore drilling rigs for which firm
drilling contracts have been obtained by the Borrower, any of its Subsidiaries
or a SPV.
"Performance Letters of Credit" means all letters of credit for the account
of the Borrower, any Subsidiary or a SPV issued as support for Non-recourse Debt
or a Performance Guaranty.
"Permitted Business" has the meaning ascribed to such term in Section 6.8.
"Permitted Liens" means the Liens permitted as described in Section 6.11.
"Person" means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization or any other entity or
organization, including a government or any agency or political subdivision
thereof.
"Plan" means an employee pension benefit plan covered by Title IV of ERISA
or subject to the minimum funding standards under Section 412 of the Code that
is either (i) maintained by the Borrower or any of its Subsidiaries, or (ii)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
the Borrower or any of its Subsidiaries is then making or accruing an obligation
to make contributions or has within the preceding five (5) plan years made or
had an obligation to make contributions.
"Principal Payment Date" shall have the meaning set forth in Section 2.5.
"Required Lenders" means, prior to funding of the Term Loan, Lenders then
holding in the aggregate at least fifty-one percent (51%) of the Commitments,
and on and after funding of the Term Loan, Lenders then holding portions of the
Term Loan representing in the aggregate at least fifty-one percent (51%) of the
total principal amount of the Term Loan then outstanding.
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"Reuters Screen" means, when used in connection with any designated page
and the "LIBOR" rate, the display page so designated on the Reuter Money 2000
Service (or such other page as may replace that page on that service or on any
replacement Reuter Service for the purpose of displaying rates comparable to the
"LIBOR" rate).
"Sale-Leaseback Transaction" means any arrangement whereby the Borrower or
a Subsidiary shall sell or transfer any property, real or personal, used or
useful in its business, whether now owned or hereafter acquired, and thereafter
rent or lease property that it intends to use for substantially the same purpose
or purposes as the property sold or transferred.
"Schlumberger" means Schlumberger Limited, a company incorporated in the
Netherlands Antilles.
"SEC" means the Securities and Exchange Commission.
"Sedco Forex" means Sedco Forex Holdings Limited, a wholly owned Subsidiary
of Schlumberger under which the offshore contract drilling business of
Schlumberger is to be consolidated prior to the Sedco Forex Distribution as
described in the Transocean Schlumberger Joint Proxy Statement.
"Sedco Forex Distribution" means the distribution of the capital stock of
Sedco Forex to the shareholders of Schlumberger pursuant to the Sedco Forex
Distribution Agreement.
"Sedco Forex Distribution Agreement" means the distribution agreement dated
as of July 12, 1999, between Schlumberger and Sedco Forex, as the same may be
amended, restated or supplemented from time to time.
"Sedco Forex Merger" means the merger of Sedco Forex and Sedco Forex Merger
Sub, pursuant to which Sedco Forex and the Subsidiaries of Sedco Forex shall
become wholly owned Subsidiaries of the Borrower as described in the Transocean
Schlumberger Joint Proxy Statement.
"Sedco Forex Merger Agreement" means the merger agreement dated as of July
12, 1999, among the Borrower, Sedco Forex Merger Sub, Schlumberger, and Sedco
Forex, as the same may be amended, restated or supplemented from time to time.
"Sedco Forex Merger Sub" means Transocean SF Limited, a wholly owned
Subsidiary of the Borrower that will merge with and into Sedco Forex, with Sedco
Forex surviving as a wholly owned Subsidiary of the Borrower.
"Senior Managing Agents" means each of Bank One, NA (Main Office Chicago)
and Paribas in their capacities as senior managing agents for the Lenders, and
any successor senior managing agents appointed pursuant to Section 9.7;
provided, however, that no such senior managing agents shall have any duties,
responsibilities, or obligations hereunder in such capacities.
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"S&P" means Standard & Poor's Ratings Group or any successor thereto.
"SPV" means any Person that is designated by the Borrower as a SPV,
provided that the Borrower shall not designate as a SPV any Subsidiary that
owns, directly or indirectly, any other Subsidiary that has total assets
(including assets of any Subsidiaries of such other Subsidiary, but excluding
any assets that would be eliminated in consolidation with the Borrower and its
Subsidiaries) which equates to at least five percent (5%) of the Borrower's
Total Assets, or that had net income (including net income of any Subsidiaries
of such other Subsidiary, all before discontinued operations and income or loss
resulting from extraordinary items, all determined in accordance with GAAP, but
excluding revenues and expenses that would be eliminated in consolidation with
the Borrower and its Subsidiaries) during the most recently completed fiscal
year of the Borrower in excess of the greater of (i) $1,000,000, and
(ii) fifteen percent (15%) of the net income (before discontinued operations and
income or loss resulting from extraordinary items) for the Borrower and its
Subsidiaries, all as determined on a consolidated basis in accordance with GAAP
during such fiscal year of the Borrower. The Borrower may elect to treat any
Subsidiary as a SPV (provided such Subsidiary would otherwise qualify as such),
and may rescind any such prior election, by giving written notice thereof to the
Administrative Agent specifying the name of such Subsidiary or SPV, as the case
may be, and the effective date of such election, which shall be a date within
sixty (60) days after the date such notice is given. The election to treat a
particular Person as a SPV may only be made once.
"Significant Subsidiary" has the meaning ascribed to it under Regulation
S-X promulgated under the Securities Exchange Act of 1934, as amended.
"Subsidiary" means, for any Person, any other Person (other than, except in
the context of Section 6.6(a), a SPV) of which more than fifty percent (50%) of
the outstanding stock or comparable equity interests having ordinary voting
power for the election of the board of directors of such corporation, any
managers of such limited liability company or similar governing body
(irrespective of whether or not at the time stock or other equity interests of
any other class or classes of such corporation or other entity shall have or
might have voting power by reason of the happening of any contingency), is at
the time directly or indirectly owned by such former Person or by one or more of
its Subsidiaries.
"Subsidiary Debt Basket Amount" has the meaning ascribed to such term in
Section 6.12(i).
"Subsidiary Guaranty" means any Guaranty of any Subsidiary delivered
pursuant to Section 6.12(j).
"Syndication Agent" shall mean Royal Bank of Canada, acting in its capacity
as Syndication Agent for the Lenders, and any successor Syndication Agent
appointed hereunder pursuant to Section 9.7; provided, however, that no such
Syndication Agent shall have any duties, responsibilities, or obligations
hereunder in such capacity.
"Taxes" has the meaning set forth in Section 5.12.
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"Telerate" means, when used in connection with any designated page and the
"LIBOR" rate, the display page so designated on the Dow Jones Telerate Service
(or such other page as may replace that page on that service or on any
replacement Dow Jones Service for the purpose of displaying rates comparable to
the "LIBOR" rate).
"Term Loan" means the $400,000,000 principal amount term loan made by the
Lenders to the Borrower pursuant to Section 2.1.
"Total Assets" means, as of any date of determination, the aggregate book
value of the assets of the Borrower and its Subsidiaries determined on a
consolidated basis in accordance with GAAP as of such date.
"Total Capitalization" means, as of any date of determination, the sum of
Consolidated Indebtedness plus Consolidated Net Worth as of such date.
"Transocean Schlumberger Joint Proxy Statement" means the joint proxy
statement/prospectus of the Borrower and Schlumberger dated October 27, 1999, as
the same may be amended or supplemented from time to time.
"Unfunded Vested Liabilities" means, for any Plan at any time, the amount
(if any) by which the present value of all vested nonforfeitable accrued
benefits under such Plan exceeds the fair market value of all Plan assets
allocable to such benefits, determined as of the then most recent valuation date
for such Plan, but only to the extent that such excess represents a potential
liability of the Borrower or any of its Subsidiaries to the PBGC or such Plan.
Section 1.2. Interpretation. The foregoing definitions shall be equally
applicable to the singular and plural forms of the terms defined. All references
to times of day in this Agreement shall be references to New York, New York time
unless otherwise specifically provided.
Section 1.3. Sedco Forex and Subsidiaries. Except as otherwise expressly
provided herein, references in this Agreement and the other Credit Documents to
any Subsidiary or Subsidiaries of the Borrower shall, from and after the time of
the Sedco Forex Merger, be deemed to include and refer to Sedco Forex and any
Subsidiaries of Sedco Forex, but shall not be deemed to include or refer to
Sedco Forex or any of its Subsidiaries prior to the Sedco Forex Merger.
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ARTICLE 2. THE TERM LOAN FACILITY.
Section 2.1. Borrowing of the Term Loan . Subject to the terms and
conditions hereof, each Lender severally and not jointly agrees to make to the
Borrower on the Borrowing Date a portion of the Term Loan in an aggregate
principal amount equal to its Commitment. Funding of the Term Loan may be by one
or more Borrowings as provided in Sections 2.2 and 2.3. Each Borrowing in
respect of the Term Loan shall be made ratably from the Lenders in proportion to
their respective Percentages. Amounts paid or prepaid in respect of the Term
Loan may not be reborrowed.
Section 2.2. Types of Loans and Minimum Borrowing Amounts . Borrowings in
respect of the Term Loan may be outstanding as either Base Rate Loans or
Eurodollar Loans, as selected by the Borrower pursuant to Section 2.3. Each
Borrowing of Base Rate Loans shall be in an amount of not less than $1,000,000
and each Borrowing of Eurodollar Loans shall be in an amount of not less than
$10,000,000.
Section 2.3. Manner of Borrowing.
(a) Notice to the Administrative Agent. The Borrower shall give notice to
the Administrative Agent by no later than 12:00 p.m. (i) at least three (3)
Business Days before the Borrowing Date, with respect to those portions of the
Term Loan to be funded with a Borrowing or Borrowings of Eurodollar Loans, and
(ii) at least one (1) Business Day before the Borrowing Date, with respect to
any portions of the Term Loan to be funded with a Borrowing of Base Rate Loans,
in each case pursuant to a duly executed Borrowing Request substantially in the
form of Exhibit 2.3 (a "Borrowing Request"). The Loans included in each
Borrowing shall bear interest initially at the type of rate specified in the
Borrowing Request with respect to such Borrowing. Thereafter, the Borrower may
from time to time elect to change or continue the type of interest rate borne by
each Borrowing or, subject to the minimum amount requirement for each
outstanding Borrowing as set forth in Section 2.2, a portion thereof, as
follows: (i) if such Borrowing is of Eurodollar Loans, the Borrower may continue
part or all of such Borrowing as Eurodollar Loans for an Interest Period
specified by the Borrower or convert part or all of such Borrowing into Base
Rate Loans on the last day of the Interest Period applicable thereto, or the
Borrower may earlier convert part or all of such Borrowing into Base Rate Loans
so long as it pays the breakage fees and funding losses provided in Section
2.11; and (ii) if such Borrowing is of Base Rate Loans, the Borrower may convert
all or part of such Borrowing into Eurodollar Loans for an Interest Period
specified by the Borrower on any Business Day. The Borrower may select multiple
Interest Periods for the Eurodollar Loans constituting any particular Borrowing,
provided that at no time shall the number of different Interest Periods for
outstanding Eurodollar Loans exceed eight (it being understood for such purposes
that (x) Interest Periods of the same duration, but commencing on different
dates, shall be counted as different Interest Periods and (y) all Interest
Periods commencing on the same date and of the same duration shall be counted as
one Interest Period regardless of the number of Borrowings or Eurodollar Loans
involved). Notices of the continuation of a Borrowing of Eurodollar Loans for an
additional Interest Period or of the conversion of part or all of a Borrowing of
Eurodollar Loans into Base Rate Loans or of Base Rate Loans into Eurodollar
Loans must be given by no later than 12:00 p.m. at least three
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(3) Business Days before the date of the requested continuation or conversion.
The Borrower shall give such notices concerning the continuation or conversion
of a Borrowing by telephone or facsimile (which notice shall be irrevocable once
given and, if by telephone, shall be promptly confirmed in writing) pursuant to
a Borrowing Request which shall specify the date of the requested continuation
or conversion (which shall be a Business Day), the amount of the affected
Borrowing, the type of Loans to comprise such continued or converted Borrowing
and, if such Borrowing is to be comprised of Eurodollar Loans, the Interest
Period applicable thereto. The Borrower agrees that the Administrative Agent may
rely on any such telephonic or facsimile notice given by any person it in good
faith believes is an authorized representative of the Borrower without the
necessity of independent investigation and that, if any such notice by telephone
conflicts with any written confirmation, such telephonic notice shall govern if
the Administrative Agent has acted in reliance thereon.
(b) Notice to the Lenders. The Administrative Agent shall give prompt
telephonic, telex or facsimile notice to each Lender of any notice received
pursuant to Section 2.3(a) relating to a Borrowing. The Administrative Agent
shall give notice to the Borrower and each Lender by like means of the interest
rate applicable to each Borrowing of Eurodollar Loans (but, if such notice is
given by telephone, the Administrative Agent shall confirm such rate in writing)
promptly after the Administrative Agent has made such determination.
(c) Borrower's Failure to Notify. If the Borrower fails to give notice
pursuant to Section 2.3(a) of the continuation or conversion of any outstanding
principal amount of a Borrowing of Eurodollar Loans, and has not notified the
Administrative Agent by 12:00 p.m. at least three (3) Business Days before the
last day of the Interest Period for any Borrowing of Eurodollar Loans that it
intends to continue or convert such Borrowing, the Borrower shall be deemed to
have requested the continuation of such Borrowing as a Eurodollar Loan with an
Interest Period of one (1) month, so long as no Event of Default shall have
occurred and be continuing or would occur as a result of such Borrowing. Upon
the occurrence and during the continuance of any Event of Default, each
Eurodollar Loan will automatically, on the last day of the then existing
Interest Period therefor, convert into a Base Rate Loan.
(d) Disbursement of Loans. Not later than 12:00 p.m. with respect to
Eurodollar Loans, and not later than 1:00 p.m. with respect to Base Rate Loans
on the Borrowing Date each Lender, subject to all other provisions hereof, shall
make available its Loan comprising its ratable share of such Borrowing in funds
immediately available in Atlanta, Georgia for the benefit of the Administrative
Agent and according to the disbursement instructions of the Administrative
Agent. The Administrative Agent shall make the proceeds of each such Borrowing
available in immediately available funds to the Borrower (or as directed in
writing by Borrower) on such date. In the event that any Lender does not make
such amounts available to the Administrative Agent by the time prescribed above,
but such amount is received later that day, such amount may be credited to the
Borrower in the manner described in the preceding sentence on the next Business
Day (with interest on such amount to begin accruing hereunder on such next
Business Day) provided that acceptance by the Borrower of any such late amount
shall not be deemed a waiver by the Borrower of any rights it may have against
such Lender. No Lender shall be responsible to the Borrower for any failure by
another Lender to fund its portion
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of a Borrowing, and no such failure by a Lender shall relieve any other Lender
from its obligation, if any, to fund its portion of a Borrowing.
(e) Administrative Agent Reliance on Lender Funding. Unless the
Administrative Agent shall have been notified by a Lender before the Borrowing
Date (which notice shall be effective upon receipt) that such Lender does not
intend to make such payment, the Administrative Agent may assume that such
Lender has made such payment when due and in reliance upon such assumption may
(but shall not be required to) make available to the Borrower the proceeds of
the Loans to be made by such Lender and, if any Lender has not in fact made such
payment to the Administrative Agent, such Lender shall, on demand, pay to the
Administrative Agent the amount made available to the Borrower attributable to
such Lender together with interest thereon for each day during the period
commencing on the date such amount was made available to the Borrower and ending
on (but excluding) the date such Lender pays such amount to the Administrative
Agent at a rate per annum equal to the Administrative Agent's cost of funds. If
such amount is not received from such Lender by the Administrative Agent
immediately upon demand, the Borrower will, on demand, repay to the
Administrative Agent the proceeds of the Loans attributable to such Lender with
interest thereon at a rate per annum equal to the interest rates applicable to
the relevant Loans, but the Borrower shall in no event be liable for breakage
fees pursuant to Section 2.11 in connection with such repayment. Nothing in this
subsection shall be deemed to relieve any Lender from its obligation to fund its
Commitment hereunder or to prejudice any rights which the Borrower may have
against any Lender as a result of any default by such Lender hereunder.
(f) Conversion. If the Borrower shall elect to convert any particular
Borrowing from one Type of Loan to the other only in part, then, from and after
the date on which such conversion shall be effective, such particular Borrowing
shall, for all purposes of this Agreement (including, without limitation, for
purposes of subsequent application of this sentence) be deemed to instead
constitute two Borrowings (each originally initiated on the same date as such
particular Borrowing), one comprised of (subject to subsequent conversion in
accordance with this Agreement) Eurodollar Loans in an aggregate principal
amount equal to the portion of such Borrowing so elected by the Borrower to be
comprised of Eurodollar Loans and the second comprised of (subject to subsequent
conversion in accordance with this Agreement) Base Rate Loans in an aggregate
principal amount equal to the portion of such particular Borrowing so elected by
the Borrower to be comprised of Base Rate Loans. If the Borrower shall elect to
have multiple Interest Periods apply to any particular Borrowing comprised of
Eurodollar Loans, then, from and after the date such multiple Interest Periods
commence, such particular Borrowing shall, for all purposes of this Agreement
(including, without limitation, for purposes of subsequent application of this
sentence), be deemed to constitute a number of separate Borrowings (each
originally advanced on the same date as such particular Borrowing) equal to the
number of, and corresponding to, the different Interest Periods so elected, each
such deemed separate Borrowing corresponding to a particular selected Interest
Period comprised of (subject to subsequent conversion in accordance with this
Agreement) Eurodollar Loans in an aggregate principal amount equal to the
portion of such particular Borrowing so elected by the Borrower to have such
Interest Period. This Section 2.3(f) shall be applied appropriately in the event
that the Borrower shall make the elections described in the two preceding
sentences at the same time with respect to the same particular Borrowing.
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Section 2.4. Interest Periods . As provided in Section 2.3(a), at the time
of each request for the advance or continuation of, or conversion into, a
Borrowing of Eurodollar Loans, the Borrower shall select an Interest Period
applicable to such Loans from among the available options subject to the
limitations in Section 2.3(a); provided, however, that:
(i) the Borrower may not select an Interest Period for a Borrowing of
Loans that extends beyond the Maturity Date;
(ii) no Interest Period shall extend beyond any Principal Payment Date
unless the aggregate principal amount of Base Rate Loans, and Eurodollar
Loans that have Interest Periods which will expire on or before the
Principal Payment Date, is equal to or in excess of the amount of any such
principal amount required to be paid on the Principal Payment Date;
(iii) whenever the last day of any Interest Period would otherwise be a
day that is not a Business Day, the last day of such Interest Period shall
either be (i) extended to the next succeeding Business Day, or (ii) reduced
to the immediately preceding Business Day if the next succeeding Business
Day is in the next calendar month; and
(iv) for purposes of determining an Interest Period, a month means a
period starting on one day in a calendar month and ending on the
numerically corresponding day in the next calendar month; provided,
however, that if there is no such numerically corresponding day in the
month in which an Interest Period is to end or if an Interest Period begins
on the last Business Day of a calendar month, then such Interest Period
shall end on the last Business Day of the calendar month in which such
Interest Period is to end.
Section 2.5. Repayment of the Term Loan. The Borrower shall repay the
principal amount of the Term Loan in full in twelve (12) consecutive quarterly
principal payments, such payments to commence twenty-seven (27) months following
the Borrowing Date, and continuing every three (3) months thereafter, with the
final principal payment being due and payable on the Maturity Date (each such
payment being due on the same calendar day of the month as the Borrowing Date,
and each such quarterly payment date being referred to herein as a "Principal
Payment Date"). The first four (4) such quarterly payments in respect of the
Term Loan shall each be in a principal amount equal to $25,000,000; and the
remaining eight (8) such quarterly payments shall each be in the principal
amount of $37,500,000. Any other unpaid principal amounts in respect of the
Term Loan, and any interest thereon, and any fees, expenses, or other
Obligations then outstanding under the Credit Documents shall be due and payable
in full on the Maturity Date.
Section 2.6. Applicable Interest Rates; Interest Payments.
(a) Base Rate Loans. Each Base Rate Loan shall bear interest (computed on
the basis of a 365 or 366-day year and actual days elapsed excluding the date of
repayment) on the unpaid principal amount thereof from the date such Loan is
made until maturity (whether by
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acceleration or otherwise) or conversion to a Eurodollar Loan, at a rate per
annum equal to the lesser of (i) the Highest Lawful Rate, or (ii) the Base Rate
from time to time in effect.
(b) Eurodollar Loans. Each Eurodollar Loan shall bear interest (computed on
the basis of a 360-day year and actual days elapsed, excluding the date of
repayment) on the unpaid principal amount thereof from the date such Loan is
made until maturity (whether by acceleration or otherwise) or conversion to a
Base Rate Loan at a rate per annum equal to the lesser of (i) the Highest Lawful
Rate, or (ii) the sum of Adjusted LIBOR plus the Applicable Margin.
(c) Rate Determinations. The Administrative Agent shall determine each
interest rate applicable to the Eurodollar Loans hereunder insofar as such
interest rate involves a determination of Adjusted LIBOR and such determination
shall be conclusive and binding except in the case of the Administrative Agent's
manifest error or willful misconduct. The Administrative Agent shall promptly
give notice to the Borrower and each Lender of each determination of Adjusted
LIBOR with respect to each Eurodollar Loan.
(d) Interest Payments. The Borrower shall pay interest on all outstanding
Base Rate Loans and Eurodollar Loans comprising the Term Loan on the respective
Interest Payment Dates for such Base Rate Loans and Eurodollar Loans, upon the
conversion of any Eurodollar Loans to Base Rate Loans, and at maturity (whether
by acceleration or otherwise).
Section 2.7. Default Rate. If any payment of principal on the Term Loan is
not made when due after the expiration of the grace period therefor provided in
Section 7.1(a) (whether by acceleration or otherwise), such principal amount
shall bear interest (computed on the basis of a year of 360, 365 or 366 days, as
applicable, and actual days elapsed) after such grace period expires until such
principal amount then due is paid in full, payable on demand, at a rate per
annum equal to:
(a) for any Base Rate Loan the lesser of (i) the Highest Lawful Rate, or
(ii) the sum of two percent (2%) per annum plus the Base Rate from
time to time in effect (but not less than the Base Rate in effect at
the time such payment was due); and
(b) for any Eurodollar Loan the lesser of (i) the Highest Lawful Rate, or
(ii) the sum of two percent (2%) per annum plus the rate of interest
in effect thereon at the time of such default until the end of the
Interest Period for such Loan and, thereafter, at a rate per annum
equal to the sum of two percent (2%) per annum plus the Base Rate from
time to time in effect (but not less than the Base Rate in effect at
the time such payment was due).
It is the intention of the Administrative Agent and the Lenders to conform
strictly to usury laws applicable to them. Accordingly, if the transactions
contemplated hereby or the Loans would be usurious as to any of the Lenders
under laws applicable to it (including the laws of the United States of America
and the State of New York or any other jurisdiction whose laws may be
mandatorily applicable to such Lender notwithstanding the other provisions of
this Agreement, the Notes or any other Credit Document), then, in that event,
notwithstanding anything to the
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contrary in this Agreement, the Notes or any other Credit Document, it is agreed
as follows: (i) the aggregate of all consideration which constitutes interest
under laws applicable to such Lender that is contracted for, taken, reserved,
charged or received by such Lender under this Agreement, the Notes or any other
Credit Document or otherwise shall under no circumstances exceed the Highest
Lawful Rate, and any excess shall be credited by such Lender on the principal
amount of the Notes (or, if the principal amount of the Notes shall have been
paid in full, refunded by such Lender to the Borrower); and (ii) in the event
that the maturity of the Notes is accelerated by reason of an election of the
holder or holders thereof resulting from any Event of Default hereunder or
otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest under laws applicable to such Lender may
never include more than the Highest Lawful Rate, and excess interest, if any,
provided for in this Agreement, the Notes, any other Credit Document or
otherwise shall be automatically canceled by such Lender as of the date of such
acceleration or prepayment and, if theretofore paid, shall be credited by such
Lender on the principal amount of the Notes (or if the principal amount of the
Notes shall have been paid in full, refunded by such Lender to the Borrower). To
the extent that the Texas Finance Code is relevant to the Administrative Agent
and the Lenders for the purpose of determining the Highest Lawful Rate, the
Administrative Agent and the Lenders hereby elect to determine the applicable
rate ceiling under such Article by the weekly rate ceiling from time to time in
effect, subject to their right subsequently to change such method in accordance
with applicable law. In the event the Loans are paid in full by the Borrower
prior to the full stated term of the Term Loan and the interest received for the
actual period of the existence of the Term Loan exceeds the Highest Lawful Rate,
the Lenders shall refund to the Borrower the amount of the excess or shall
credit the amount of the excess against amounts owing under the Term Loan or
otherwise in respect of the Obligations, and none of the Administrative Agent or
the Lenders shall be subject to any of the penalties provided by law for
contracting for, taking, reserving, charging or receiving interest in excess of
the Highest Lawful Rate.
Section 2.8. Optional Prepayments. The Borrower shall have the privilege
of prepaying Base Rate Loans without premium or penalty at any time in whole or
at any time and from time to time in part (but, if in part, then in an amount
which is equal to or greater than $1,000,000); provided, however, that the
Borrower shall have given notice of such prepayment to the Administrative Agent
not less than three (3) Business Days prior to the date of such prepayment. The
Borrower shall have the privilege of prepaying Eurodollar Loans (a) without
premium or penalty in whole or in part (but, if in part, then in an amount which
is equal to or greater than $5,000,000) only on the last Business Day of an
Interest Period for such Loan, and (b) at any other time so long as the breakage
fees and funding losses provided for in Section 2.11 are paid; provided,
however, that the Borrower shall have given notice of such prepayment to the
Administrative Agent not less than three (3) Business Days prior to the last
Business Day of such Interest Period or the proposed prepayment date. Any such
prepayments shall be made by the payment of the principal amount to be prepaid
and accrued and unpaid interest thereon to the date of such prepayment.
Prepayments of principal shall be applied pro rata to the principal payments
thereafter remaining to be paid as set forth in Section 2.5.
Section 2.9. Mandatory Prepayment of Term Loan. If funding of the Term Loan
occurs prior to the time of the Sedco Forex Merger, and the Sedco Forex Merger
has not been consummated as provided in the Sedco Forex Merger Agreement prior
to April 30, 2000, then
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the Borrower shall prepay in full the entire outstanding principal amount of the
Term Loan on May 1, 2000, together with all interest accrued and unpaid thereon
(including payment of all breakage fees and funding losses provided for in
Section 2.11), and all fees, expense reimbursements, indemnity payments, and
other Obligations then outstanding under this Agreement and the other Credit
Documents. Except for the foregoing amounts, such prepayment shall be made by
the Borrower without penalty or premium.
Section 2.10. The Notes.
(a) The portion of the Term Loan outstanding to the Borrower from each
Lender shall be evidenced by a promissory note of the Borrower payable to such
Lender in the form of Exhibits 2.10 (each a "Note").
(b) Each holder of a Note shall record on its books and records or on a
schedule to its appropriate Note (and prior to any transfer of its Notes shall
endorse thereon or on schedules forming a part thereof appropriate notations to
evidence) the amount of each Loan outstanding from it to the Borrower, all
payments of principal and interest and the principal balance from time to time
outstanding thereon, the type of such Loan and, if a Eurodollar Loan, the
Interest Period and interest rate applicable thereto. Such record, whether shown
on the books and records of a holder of a Note or on a schedule to its Note,
shall be prima facie evidence as to all such matters; provided, however, that
the failure of any holder to record any of the foregoing or any error in any
such record shall not limit or otherwise affect the obligation of the Borrower
to repay all Loans outstanding to it hereunder together with accrued interest
thereon. At the request of any holder of a Note and upon such holder tendering
to the Borrower the Note to be replaced, the Borrower shall furnish a new Note
to such holder to replace any outstanding Note and at such time the first
notation appearing on the schedule on the reverse side of, or attached to, such
new Note shall set forth the aggregate unpaid principal amount of all Loans, if
any, then outstanding thereon.
Section 2.11. Breakage Fees. If any Lender incurs any loss, cost or
expense (excluding loss of anticipated profits and other indirect or
consequential damages) by reason of the liquidation or re-employment of deposits
or other funds acquired by such Lender to fund or maintain any Eurodollar Loan
as a result of any of the following events (other than any such occurrence as a
result of a change of circumstance described in Sections 8.1 or 8.2):
(a) any payment, prepayment or conversion of a Eurodollar Loan on a
date other than the last day of its Interest Period (whether by
acceleration, mandatory or optional prepayment or otherwise);
(b) any failure to make a principal payment of a Eurodollar Loan on
the due date therefor; or
(c) any failure by the Borrower to borrow, continue or prepay, or
convert to, a Eurodollar Loan on the date specified in a notice given
pursuant to Section 2.3(a) (other than by reason of a default of such
Lender),
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then the Borrower shall pay to such Lender such amount as will reimburse such
Lender for such loss, cost or expense. If any Lender makes such a claim for
compensation, it shall provide to the Borrower a certificate executed by an
officer of such Lender setting forth the amount of such loss, cost or expense in
reasonable detail (including an explanation of the basis for and the computation
of such loss, cost or expense) no later than ninety (90) days after the event
giving rise to the claim for compensation, and the amounts shown on such
certificate shall be prima facie evidence of such Lender's entitlement thereto.
Within ten (10) days of receipt of such certificate, the Borrower shall pay
directly to such Lender such amount as will compensate such Lender for such
loss, cost or expense as provided herein, unless such Lender has failed to
timely give notice to the Borrower of such claim for compensation as provided
herein, in which event the Borrower shall not have any obligation to pay such
claim.
ARTICLE 3. FEES AND PAYMENTS.
Section 3.1. Fees.
(a) Commitment Fees. The Borrower shall pay to the Administrative Agent,
for the ratable benefit of each Lender, a commitment fee on such Lender's
Commitment, calculated at the rate of 0.125% per annum for the period commencing
on the fourteenth (14th) day after the Effective Date and ending on the day
prior to the earlier of (i) the Borrowing Date, and (ii) the Commitment
Termination Date, at which time all such commitment fees shall be due and
payable in full.
(b) Administrative Agent Fees. The Borrower shall pay to the Administrative
Agent the fees from time to time agreed to by the Borrower and the
Administrative Agent.
Section 3.2. Place and Application of Payments.
(a) All payments of principal of and interest on the Loans and of all other
amounts payable by the Borrower under the Credit Documents shall be made by the
Borrower to the Administrative Agent by no later than 2:30 p.m. on the due date
thereof at the office of the Administrative Agent in Atlanta, Georgia (or such
other location in the United States as the Administrative Agent may designate to
the Borrower) for the benefit of the Lenders entitled to such payments. Any
payments received by the Administrative Agent from the Borrower after 2:30 p.m.
shall be deemed to have been received on the next Business Day. The
Administrative Agent will, on the same day each payment is received or deemed to
have been received in accordance with this Section 3.2, cause to be distributed
like funds to each Lender owed an Obligation for which such payment was
received, pro rata based on the respective amounts of such type of Obligation
then owing to each Lender.
(b) If any payment received by the Administrative Agent under any Credit
Document is insufficient to pay in full all amounts then due and payable to the
Administrative Agent and the Lenders under the Credit Documents, such payment
shall be distributed by the Administrative Agent and applied by the
Administrative Agent and the Lenders in the order set forth in Section 7.5. In
calculating the amount of Obligations owing each Lender other than for principal
and interest on the Loans and fees under Section 3.1, the Administrative Agent
shall
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only be required to include such other Obligations that Lenders have certified
to the Administrative Agent in writing are due to such Lenders.
Section 3.3. Withholding Taxes.
(a) Payments Free of Withholding. Except as otherwise required by law, each
payment by the Borrower to any Lender or the Administrative Agent under this
Agreement or any other Credit Document shall be made without withholding for or
on account of any present or future taxes imposed by or within the jurisdiction
in which the Borrower is incorporated, any jurisdiction from which the Borrower
makes any payment, or (in each case) any political subdivision or taxing
authority thereof or therein, excluding, in the case of each Lender and the
Administrative Agent, the following taxes:
(i) taxes imposed on, based upon, or measured by its net income or
profits, and branch profits, franchise, and similar taxes imposed on it;
(ii) taxes imposed on it as a result of a present or former connection
between the taxing jurisdiction and such Lender or the Administrative
Agent, or any affiliate thereof, as the case may be, other than a
connection resulting solely from the transactions contemplated by this
Agreement;
(iii) taxes imposed as a result of the transfer by such Lender of its
interest in this Agreement or any other Credit Document or a designation by
such Lender (other than pursuant to Section 8.3(c)) of a new Lending Office
(other than taxes imposed as a result of any change in treaty, law or
regulation after such transfer of such Lender's interest in this Agreement
or any other Credit Document or designation of a new Lending Office);
(iv) taxes imposed by the United States of America (or any political
subdivision thereof or tax authority therein) upon a Lender organized under
the laws of a jurisdiction outside of the United States, except to the
extent that such tax is imposed as a result of any change in applicable
law, regulation or treaty (other than any addition of or change in any
"anti-treaty shopping," "limitation of benefits," or similar provision
applicable to a treaty) after the date hereof, in the case of each Lender
originally a party hereto or, in the case of any Purchasing Lender (as
defined in Section 10.10), after the date on which it becomes a Lender; or
(v) taxes which would not have been imposed but for (a) the failure of
any Lender or the Administrative Agent, as the case may be, to provide
(I) an Internal Revenue Service Form 1001 or 4224, as the case may be,
or any substitute or successor form prescribed by the Internal Revenue
Service, pursuant to Section 3.3(b), or (II) any other certification,
documentation or proof which is reasonably requested by the Borrower, or
(b) a determination by a taxing authority or a court of competent
jurisdiction that a certification, documentation or other proof provided by
such Lender or the Administrative Agent to establish an exemption from such
tax is false;
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(all such present or future taxes, excluding only the taxes described in the
preceding clauses (i) through (v), being hereinafter referred to as "Indemnified
Taxes"). If any such withholding is so required, the Borrower shall make the
withholding, pay the amount withheld to the appropriate governmental authority
before penalties attach thereto or interest accrues thereon and forthwith pay
such additional amount as may be necessary to ensure that the net amount
actually received by each Lender and the Administrative Agent is free and clear
of any Indemnified Taxes (including Indemnified Taxes on such additional amount)
and is equal to the amount that such Lender or the Administrative Agent (as the
case may be) would have received had withholding of any Indemnified Taxes not
been made. If the Borrower pays any Indemnified Taxes, or any penalties or
interest in connection therewith, it shall deliver official tax receipts
evidencing the payment or certified copies thereof, or other evidence of payment
if such tax receipts have not yet been received by the Borrower (with such tax
receipts to be delivered within fifteen (15) days after being actually
received), to the Lender or Administrative Agent on whose account such
withholding was made (with a copy to the Administrative Agent if not the
recipient of the original) within fifteen (15) days of such payment. If the
Administrative Agent or any Lender pays any Indemnified Taxes, or any penalties
or interest in connection therewith, upon the Borrower's failure to withhold and
pay such Indemnified Taxes, penalties or interest, Borrower shall reimburse the
Administrative Agent or that Lender for the payment on demand in the currency in
which such payment was made. The Administrative Agent or such Lender shall make
written demand on the Borrower for reimbursement hereunder no later than ninety
(90) days after the earlier of (i) the date on which such Lender or the
Administrative Agent makes payment of the Indemnified Taxes, penalties or
interest, and (ii) the date on which the relevant taxing authority or other
governmental authority makes written demand upon such Lender or the
Administrative Agent for payment of the Indemnified Taxes, penalties or
interest. Any such demand shall describe in reasonable detail such Indemnified
Taxes, penalties or interest, including the amount thereof if then known to such
Lender or the Administrative Agent, as the case may be. In the event that such
Lender or the Administrative Agent fails to give the Borrower timely notice as
provided herein, the Borrower shall not have any obligation to pay such claim
for reimbursement.
(b) U.S. Withholding Tax Exemptions. Upon the request of the Borrower or
the Administrative Agent, each Lender that is not a United States person (as
such term is defined in Section 7701(a)(30) of the Code) shall submit to the
Borrower and the Administrative Agent, promptly after written request from the
Borrower, two duly completed and signed copies of either Form 1001 (entitling
such Lender to a complete exemption from withholding under the Code on all
amounts to be received by such Lender, including fees, pursuant to the Credit
Documents) or Form 4224 (relating to all amounts to be received by such Lender,
including fees, pursuant to the Credit Documents) of the United States Internal
Revenue Service. Thereafter and from time to time, each such Lender shall submit
to the Borrower and the Administrative Agent such additional duly completed and
signed copies of one or the other of such forms (or such successor forms as
shall be adopted from time to time by the relevant United States taxing
authorities) as may be required under then-current United States law or
regulations to avoid United States withholding taxes on payments in respect of
all amounts to be received by such Lender, including fees, pursuant to the
Credit Documents. Upon the request of the Borrower, each Lender that is a United
States person shall submit to the Borrower a certificate to the effect that it
is such a United States person.
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(c) Inability of Lender to Submit Forms. If any Lender determines in good
faith, as a result of any change in applicable law, regulation or treaty, or in
any official application or interpretation thereof, that (i) it is unable to
submit to the Borrower or Administrative Agent any form or certificate that such
Lender is obligated to submit pursuant to subsection (b) of this Section 3.3,
(ii) it is required to withdraw or cancel any such form or certificate
previously submitted, or (iii) any such form or certificate otherwise becomes
ineffective or inaccurate, such Lender shall promptly notify the Borrower and
Administrative Agent of such fact and the Lender shall to that extent not be
obligated to provide any such form or certificate and will be entitled to
withdraw or cancel any affected form or certificate, as applicable.
(d) Refund of Taxes. If any Lender or the Administrative Agent receives a
refund of any Indemnified Tax or any tax referred to in Section 10.3 with
respect to which the Borrower has paid any amount pursuant to this Section 3.3
or Section 10.3, such Lender or the Administrative Agent shall pay the amount of
such refund (including any interest received with respect thereto) to the
Borrower within fifteen (15) days after receipt thereof. A Lender or the
Administrative Agent shall provide, at the sole cost and expense of the
Borrower, such assistance as the Borrower may reasonably request in order to
obtain such a refund; provided, however, that neither the Administrative Agent
nor any Lender shall in any event be required to disclose any information to the
Borrower with respect to the overall tax position of the Administrative Agent or
such Lender.
ARTICLE 4. CONDITIONS PRECEDENT.
Section 4.1. Initial Borrowing. The obligation of each Lender to advance
its portion of the Term Loan hereunder on the Borrowing Date is subject to the
satisfaction of the following requirements and conditions precedent:
(a) The Administrative Agent shall have received the following, all in form
and substance reasonably satisfactory to the Administrative Agent (which shall
be evidenced by the making of such Term Loan) all in sufficient number of signed
counterparts, where applicable, to provide one for each Lender (except for the
Notes, of which only one original shall be signed for each Lender):
(i) Notes. The duly executed Notes of the Borrower;
(ii) Certificates of Officers. Certificates of the Secretary or
Assistant Secretary of the Borrower containing specimen signatures of the
persons authorized to execute Credit Documents on the Borrower's behalf or
any other documents provided for herein or therein, together with (x)
copies of resolutions of the Board of Directors or other appropriate body
of the Borrower authorizing the execution and delivery of the Credit
Documents, (y) copies of the Borrower's Memorandum and Articles of
Association and other publicly filed organizational documents in its
jurisdiction of organization and bylaws and other governing documents, and
(z) a certificate of incorporation and good standing from the appropriate
governing agency of the Borrower's jurisdiction of organization;
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(iii) Regulatory Filings and Approvals. Copies of all necessary
governmental and third party approvals, registrations, and filings in
respect of the transactions contemplated by this Agreement and, if the
Sedco Forex Merger has been consummated on or prior to the Borrowing Date,
in respect of the transactions contemplated by the Sedco Forex Merger
Agreement, together with evidence that any waiting periods in respect of
any of the foregoing shall have expired or terminated, in each case without
any action being taken by any competent authority that restrains, prevents
or imposes materially adverse conditions on the consummation of the Sedco
Forex Merger;
(iv) Insurance Certificate. An insurance certificate dated not more
than ten (10) days prior to the Borrowing Date from the Borrower describing
in reasonable detail the insurance maintained by the Borrower and its
Subsidiaries as required by this Agreement;
(v) Borrowing Request. The Borrowing Request required by Section
2.3(a);
(vi) Opinions of Counsel. The opinions of (x) Baker & Botts, counsel
for the Borrower, in the form of Exhibit 4.1A, (y) Nicolas J. Evanoff,
Associate General Counsel of the Borrower, in the form of Exhibit 4.1B, and
(z) Walkers, Cayman Islands counsel for the Borrower, in the form of
Exhibit 4.1C;
(vii) Closing Certificate. Certificate of the President or a Vice
President of the Borrower as to the satisfaction of all conditions set
forth in this Section 4.1, including without limitation, where the Sedco
Forex Merger has occurred on or prior to the Borrowing Date, consummation
of the Sedco Forex Merger on substantially the terms as set forth in the
Sedco Forex Merger Agreement and in the proxy statements submitted to the
shareholders of the Borrower and Schlumberger/Sedco Forex in respect of
such transaction; and
(viii) Escrow Agreement. If the Borrowing Date occurs prior to the Sedco
Forex Merger, the escrow agreement as described in Section 4.2.
(b) Each of the representations and warranties of the Borrower and its
Subsidiaries (which representations and warranties shall, if the Sedco Forex
Merger has occurred on or prior to the Borrowing Date, be deemed to include and
refer to Sedco Forex and its Subsidiaries) set forth herein and in the other
Credit Documents shall be true and correct in all material respects as of the
time of such Borrowing, except to the extent that any such representation or
warranty relates solely to an earlier date, in which case it shall have been
true and correct in all material respects as of such earlier date;
(c) No Default or Event of Default shall have occurred and be continuing or
would occur as a result of such Borrowing;
(d) There shall be no pending or, to the knowledge of the Borrower,
threatened actions, suits or proceedings at law or in equity or by or before any
governmental authority
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against or affecting the Borrower or any of its Subsidiaries or any of their
respective businesses, properties or rights which, if adversely determined,
could reasonably be expected to result in a Material Adverse Effect;
(e) There shall not exist or have occurred any change in the financial
condition, results of operations, business, assets, or operations of the
Borrower and its Subsidiaries, taken as a whole, which could reasonably be
expected to result in a Material Adverse Effect; and
(f) Payment of all fees and all expenses incurred through the Effective
Date then due and owing to the Administrative Agent, the Lenders, and the Lead
Arranger pursuant to this Agreement and as otherwise agreed in writing by the
Borrower.
The acceptance by the Borrower of the proceeds of the Term Loan (whether or not
such proceeds are then subject to being released to the Borrower pursuant to
Section 4.2) shall be deemed to be a representation and warranty by the Borrower
on the date of such Borrowing that all conditions precedent to such Borrowing
set forth in this Section 4.1 with respect to the Borrowing hereunder have
(except to the extent waived in accordance with the terms hereof) been satisfied
or fulfilled unless the Borrower gives to the Lenders written notice to the
contrary, in which case none of the Lenders shall be required to fund any
portion of the Term Loan unless the Required Lenders (or, if required pursuant
to Section 10.11, all the Lenders) shall have previously waived in writing such
non-compliance.
Section 4.2. Funding of Term Loan Prior to Sedco Forex Merger; Release of
Term Loan Proceeds . If the Borrowing Date occurs prior to the Sedco Forex
Merger, that portion of the Term Loan proceeds to be used by the Borrower for
the purposes of refinancing Indebtedness of Sedco Forex and its Subsidiaries
promptly after consummation of the Sedco Forex Merger, as specified by the
Borrower in the Borrowing Request described in Section 4.1(a)(v), shall be
funded into an escrow arrangement with the Administrative Agent in accordance
with the terms of an escrow agreement in the form of Exhibit 4.2 attached
hereto. All such Term Loan proceeds shall be deemed funded by the Lenders to the
Borrower on the Borrowing Date and shall bear interest from and after the
Borrowing Date at the rates, and shall be payable at the times, specified
herein. All such Term Loan proceeds shall be held pursuant to such escrow
arrangement, shall be held or invested in cash or Cash Equivalents during the
term of such escrow arrangement, and shall be subject to release from such
escrow arrangement to the Borrower on or after December 29, 1999, upon
satisfaction of the following terms and conditions:
(a) The Administrative Agent shall have received copies of all governmental
and third party approvals, registrations, and consents necessary to consummate
the Sedco Forex Merger, together with evidence that any waiting periods in
respect thereof shall have expired or terminated, other than the passage of time
to the effective date of the Sedco Forex Merger set forth in the articles of
merger filed with the appropriate governmental authority in the British Virgin
Islands, in each case without any action then having been taken by any competent
authority that restrains, prevents or imposes materially adverse conditions on
the consummation of the Sedco Forex Merger;
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(b) The shareholders of Schlumberger shall have approved the Sedco Forex
Distribution and the shareholders of the Borrower shall have approved the Sedco
Forex Merger, in each case as described in the terms of the Transocean
Schlumberger Joint Proxy Statement, and the articles of merger in respect of the
merger of Sedco Forex and Sedco Forex Merger Sub shall have been filed in the
appropriate government office of the British Virgin Islands without conditions
to the effectiveness thereof other than the passage of time to the effective
date of the Sedco Forex Merger;
(c) The Sedco Forex Merger is then scheduled to occur within the two
Business Days immediately following the date of the requested release of the
escrowed funds;
(d) Each of the representations and warranties of the Borrower and its
Subsidiaries (which representations and warranties shall be deemed to include
and refer to Sedco Forex and its Subsidiaries with the same effect as if the
Sedco Forex Merger had been consummated immediately prior to such time) set
forth herein and in the other Credit Documents shall be true and correct in all
material respects as of the time of such requested release of such Term Loan
proceeds, except to the extent that any such representation or warranty relates
solely to an earlier date, in which case it shall have been true and correct in
all material respects as of such earlier date; and
(e) The Administrative Agent shall have received a Certificate of the
President or Vice President of the Borrower as to the satisfaction of all
conditions set forth in this Section 4.2, and that the Sedco Forex Merger
Agreement has not been terminated and remains in force and effect.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to each Lender and the Administrative
Agent as follows:
Section 5.1. Corporate Organization . The Borrower and each of its material
Subsidiaries: (i) is duly organized and existing in good standing under the laws
of the jurisdiction of its organization; (ii) has all necessary company power
and authority to own the property and assets it uses in its business and
otherwise to carry on its present business; and (iii) is duly licensed or
qualified and in good standing in each jurisdiction in which the nature of the
business transacted by it or the nature of the property owned or leased by it
makes such licensing or qualification necessary, except where the failure to be
so licensed or qualified or to be in good standing, as the case may be, would
not have a Material Adverse Effect.
Section 5.2. Power and Authority; Validity . The Borrower has the
organizational power and authority to execute, deliver and carry out the terms
and provisions of the Credit Documents and has taken all necessary company
action to authorize the execution, delivery and performance of such Credit
Documents. The Borrower has duly executed and delivered each Credit Document
and each such Credit Document constitutes the legal, valid and binding
obligation of the Borrower enforceable against it in accordance with its terms,
subject as to
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enforcement only to bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights generally and
equitable principles.
Section 5.3. No Violation. Neither the execution, delivery or performance
by the Borrower of the Credit Documents nor compliance by it with the terms and
provisions thereof, nor the consummation by it of the transactions contemplated
herein or therein, will (i) contravene in any material respect any applicable
provision of any law, statute, rule or regulation, or any applicable order,
writ, injunction or decree of any court or governmental instrumentality,
(ii) conflict with or result in any breach of any term, covenant, condition
or other provision of, or constitute a default under, or result in the creation
or imposition of (or the obligation to create or impose) any Lien other than any
Permitted Lien upon any of the property or assets of the Borrower or any of its
Subsidiaries under, the terms of any material contractual obligation to which
the Borrower or any of its Subsidiaries is a party or by which they or any of
their properties or assets are bound or to which they may be subject, or
(iii) violate or conflict with any provision of the Memorandum and Articles of
Association, charter, articles or certificate of incorporation, partnership or
limited liability company agreement, by-laws, or other applicable governance
documents of the Borrower or any of its Subsidiaries.
Section 5.4. Litigation. There are no actions, suits, proceedings or
counterclaims (including, without limitation, derivative or injunctive actions)
pending or, to the knowledge of the Borrower, threatened against the Borrower or
any of its Subsidiaries that are reasonably likely to have a Material Adverse
Effect.
Section 5.5. Use of Proceeds; Margin Regulations.
(a) The proceeds of the Term Loan shall only be used (i) to refinance
Indebtedness of Sedco Forex and its Subsidiaries promptly after consummation of
the Sedco Forex Merger, and (ii) for general corporate purposes of the Borrower
and its Subsidiaries.
(b) Neither the Borrower nor any of its Subsidiaries is engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock. No proceeds of the Term Loan will be used for a purpose which violates
Regulations T, U or X of the Board of Governors of the Federal Reserve System.
After application of the proceeds of the Term Loan and any acquisitions
permitted hereunder, less than 25% of the assets of each of the Borrower and its
Subsidiaries consists of "margin stock" (as defined in Regulation U of the Board
of Governors of the Federal Reserve System).
Section 5.6. Investment Company Act . Neither the Borrower nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
Section 5.7. Public Utility Holding Company Act . Neither the Borrower nor
any of its Subsidiaries is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
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Section 5.8. True and Complete Disclosure. All factual information (taken
as a whole) furnished by the Borrower or any of its Subsidiaries in writing to
the Administrative Agent or any Lender in connection with any Credit Document or
the Confidential Information Memorandum or any transaction contemplated therein
did not, as of the date such information was furnished (or, if such information
expressly related to a specific date, as of such specific date), contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein (taken as a whole), in light of the circumstances
under which such information was furnished, not misleading, except for such
statements, if any, as have been updated, corrected, supplemented, superseded or
modified pursuant to a written correction or supplement furnished to the Lenders
prior to the date of this Agreement.
Section 5.9. Financial Statements.
(a) The financial statements heretofore delivered to the Lenders for the
Borrower's fiscal year ending December 31, 1998, and for the Borrower's fiscal
quarter and year-to-date period ending September 30, 1999, have been prepared in
accordance with GAAP applied on a basis consistent, except as otherwise noted
therein, with the Borrower's financial statements for the previous fiscal year.
Such annual and quarterly financial statements fairly present on a consolidated
basis the financial position of the Borrower as of the dates thereof, and the
results of operations for the periods indicated, subject in the case of interim
financial statements, to normal year-end audit adjustments and omission of
certain footnotes (as permitted by the SEC). As of the Effective Date, the
Borrower and its Subsidiaries, considered as a whole, had no material contingent
liabilities or material Indebtedness required under GAAP to be disclosed in a
consolidated balance sheet of the Borrower that were not disclosed in the
financial statements referred to in this Section 5.9(a) or in the notes thereto
or disclosed in writing to the Administrative Agent (with a request to the
Administrative Agent to distribute such disclosure to the Lenders).
(b) The Borrower has heretofore delivered to the Lenders audited combined
financial statements for Sedco Forex and its Subsidiaries as of the dates and
for the periods ended December 31, 1996, December 31, 1997, and December 31,
1998, and unaudited combined financial statements for Sedco Forex and its
Subsidiaries as of and for the six month periods ended June 30, 1998 and June
30, 1999 (the "Sedco Forex Historical Financial Statements"). To the best of the
Borrower's knowledge and belief, the Sedco Forex Historical Financial Statements
(i) have been prepared in accordance with GAAP consistently applied throughout
the periods presented, and (ii) fairly present in all material respects the
combined assets, liabilities, financial position, results of operations and cash
flows of Sedco Forex and its Subsidiaries as of the dates and for the periods
indicated, subject in the case of interim financial statements to normal year-
end audit adjustments and omission of certain footnotes (as permitted by the
SEC).
Section 5.10. No Material Adverse Change. There has occurred no event or
effect that has had or could reasonably be expected to have a Material Adverse
Effect.
Section 5.11. Labor Controversies. There are no labor controversies pending
or, to the best knowledge of the Borrower, threatened against the Borrower or
any of its Subsidiaries that could reasonably be expected to have a Material
Adverse Effect.
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Section 5.12. Taxes. The Borrower and its Subsidiaries have filed all
United States federal income tax returns, and all other material tax returns
required to be filed, whether in the United States or in any foreign
jurisdiction, and have paid all governmental taxes, rates, assessments, fees,
charges and levies (collectively, "Taxes") shown to be due and payable on such
returns or on any assessments made against Borrower and its Subsidiaries or any
of their properties (other than any such assessments, fees, charges or levies
that are not more than ninety (90) days past due, or which can thereafter be
paid without penalty, or which are being contested in good faith by appropriate
proceedings and for which reserves have been provided in conformity with GAAP,
or which the failure to pay could not reasonably be expected to have a Material
Adverse Effect).
Section 5.13. ERISA. With respect to each Plan, the Borrower and its
Subsidiaries have fulfilled their obligations under the minimum funding
standards of, and are in compliance in all material respects with, ERISA and
with the Code to the extent applicable to it, and have not incurred any
liability under Title IV of ERISA to the PBGC other than a liability to the PBGC
for premiums under Section 4007 of ERISA, except as described in Schedule 5.13
and in each case with such exceptions as could not reasonably be expected to
have a Material Adverse Effect. As of the Effective Date, neither the Borrower
nor any of its Subsidiaries has any material contingent liability with respect
to any post-retirement benefits under a welfare plan subject to ERISA, other
than liability for continuation coverage described in Part 6 of Title I of ERISA
and as disclosed in the financial statements of the Borrower for the fiscal
quarter ending September 30, 1999, described in Section 5.9(a), or any other
liability that could not reasonably be expected to have a Material Adverse
Effect.
Section 5.14. Year 2000. The Borrower has reviewed the areas within its
business and operations, and the business and operations of its Subsidiaries
that could reasonably be expected to be materially and adversely affected by,
and has developed or is developing a program to address on a timely basis, the
"Year 2000 Problem" (that is, the risk that computer applications used by the
Borrower and its Subsidiaries and SPVs may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
on or after December 31, 1999), has made or is making related inquiry of
material suppliers and vendors, and based on such review and program, the
Borrower believes that the "Year 2000 Problem" could not reasonably be expected
to have a Material Adverse Effect. The foregoing statement constitutes "year
2000 readiness disclosure" as such term is defined in the Year 2000 Information
and Readiness Disclosure Act.
Section 5.15. Consents. On the Borrowing Date, all consents and approvals
of, and filings and registrations with, and all other actions of, all
governmental agencies, authorities or instrumentalities required to have been
obtained or made by the Borrower in order to borrow the Term Loan hereunder have
been or will have been obtained or made and are or will be in full force and
effect.
Section 5.16. Insurance. The Borrower and its material Subsidiaries
currently maintain in effect, with responsible insurance companies, insurance
against any loss or damage to all insurable property and assets owned by it,
which insurance is of a character and in or in excess of
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such amounts as are customarily maintained by companies similarly situated and
operating like property or assets (subject to self-insured retentions and
deductibles), and insurance with respect to employers' and public and product
liability risks (subject to self-insured retentions and deductibles).
Section 5.17. Intellectual Property. The Borrower and its Subsidiaries own
or hold valid licenses to use all the patents, trademarks, permits, service
marks, and trade names that are necessary to the operation of the business of
the Borrower and its Subsidiaries as presently conducted, except where the
failure to own, or hold valid licenses to use, such patents, trademarks,
permits, service marks, and trade names could not reasonably be expected to have
a Material Adverse Effect.
Section 5.18. Ownership of Property. The Borrower and its Subsidiaries have
good title to or a valid leasehold interest in all of their real property and
good title to, or a valid leasehold interest in, all of their other property,
subject to no Liens except Permitted Liens, except where the failure to have
such title or leasehold interest in such property could not reasonably be
expected to have a Material Adverse Effect.
Section 5.19. Compliance with Statutes, Etc. The Borrower and its
Subsidiaries are in compliance with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic and foreign, in respect of the conduct of their businesses and the
ownership of their properties, except for such instances of non-compliance as
could not reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect.
Section 5.20. Environmental Matters.
(a) Except as described in Schedule 5.20, the Borrower and its Subsidiaries
are in compliance with all applicable Environmental Laws and the requirements of
any permits issued under such Environmental Laws, except for such instances of
non-compliance as could not reasonably be expected to have a Material Adverse
Effect. To the best knowledge of the Borrower, there are no pending, past or
threatened Environmental Claims against the Borrower or any of its Subsidiaries
on any property owned or operated by the Borrower or any of its Subsidiaries
except as described in Schedule 5.20 or except as could not reasonably be
expected to have a Material Adverse Effect. To the best knowledge of the
Borrower, there are no conditions or occurrences on any property owned or
operated by the Borrower or any of its Subsidiaries or on any property adjoining
or in the vicinity of any such property that could reasonably be expected to
form the basis of an Environmental Claim against the Borrower or any of its
Subsidiaries or any such property that individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect.
(b) To the best of the Borrower's knowledge, (i) Hazardous Materials have
not at any time been generated, used, treated or stored on, or transported to or
from, any property owned or operated by the Borrower or any of its Subsidiaries
in a manner that has violated or could reasonably be expected to violate any
Environmental Law, and (ii) Hazardous Materials have not at any time been
released on or from any property owned or operated by the Borrower or any of
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its Subsidiaries, in the case of both (i) and (ii), with such exceptions as
could not reasonably be expected to have a Material Adverse Effect.
Section 5.21. Existing Indebtedness. Schedule 5.21 contains a complete and
accurate list of all Indebtedness outstanding as of the Effective Date, both
with respect to the Borrower and its Subsidiaries and, to the best of the
Borrower's knowledge and belief, with respect to Sedco Forex and its
Subsidiaries after giving effect to the Sedco Forex Distribution, in a principal
amount of $20,000,000 or more (other than the Obligations hereunder and
Indebtedness permitted by Section 6.12(b) through (k)) and permitted by Section
6.12(a), in each case showing the aggregate principal amount thereof, the name
of the respective borrower and any other entity which directly or indirectly
guaranteed such Indebtedness, and the scheduled payments of such Indebtedness.
Section 5.22. Existing Subsidiary Restrictions. Schedule 5.22 contains a
complete and accurate list of all contractual restrictions in effect on the
Effective Date, both with respect to the Borrower and its Subsidiaries and, to
the best of the Borrower's knowledge and belief, with respect to Sedco Forex and
its Subsidiaries after giving effect to the Sedco Forex Distribution,
restricting or impairing the ability of any Subsidiaries of the Borrower, or
Sedco Forex or any Subsidiaries of Sedco Forex, to (i) pay dividends or make any
other distributions to the Borrower or any of its Subsidiaries, SPVs or
Affiliates on the Borrower's or such Subsidiary's capital stock, partnership or
limited liability company interests, or other equity or ownership interests, as
the case may be, or any other interest or participation in its profits, (ii) pay
any Indebtedness owed to the Borrower or any of its Subsidiaries, or (iii) make
loans or advances to the Borrower or any of its Subsidiaries, in each case where
any such restriction restricts or impairs the payment or making of such
distributions, dividends, loans, interests or participations in profits, or
payments of Indebtedness (other than restrictions permitted by Section 6.9(b)
through (m)) and permitted by Section 6.9(a), in each case showing the aggregate
amount so restricted or impaired, the name of the Person subject to such
restrictions, and the basis for and terms of such restriction.
Section 5.23. Existing Liens . Schedule 5.23 contains a complete and
accurate list of all Liens outstanding as of the Effective Date, both with
respect to the Borrower and its Subsidiaries and, to the best of the Borrower's
knowledge and belief, with respect to Sedco Forex and its Subsidiaries after
giving effect to the Sedco Forex Distribution, where the Indebtedness or other
obligations secured by such Lien is in a principal amount of $20,000,000 or more
(other than the Liens permitted by Section 6.11(b) through (r)), and permitted
by Section 6.11(a), in each case showing the name of the Person whose assets are
subject to such Lien, the aggregate principal amount of the Indebtedness secured
thereby, and a description of the Agreements or other instruments creating,
granting, or otherwise giving rise to such Lien.
ARTICLE 6. COVENANTS.
The Borrower covenants and agrees that, so long as any Note or Commitment
is outstanding hereunder, or any other Obligation is due and payable hereunder:
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Section 6.1. Corporate Existence. Each of the Borrower and its material
Subsidiaries will preserve and maintain its organizational existence, except (i)
for the dissolution of any material Subsidiaries whose assets are transferred to
the Borrower or any of its Subsidiaries, (ii) where the failure to preserve,
renew or keep in full force and effect the existence of any Subsidiary could not
reasonably be expected to have a Material Adverse Effect, or (iii) as otherwise
expressly permitted in this Agreement.
Section 6.2. Maintenance. Each of the Borrower and its material
Subsidiaries will maintain, preserve and keep its properties and equipment
necessary to the proper conduct of its business in reasonably good repair,
working order and condition (normal wear and tear excepted) and will from time
to time make all reasonably necessary repairs, renewals, replacements, additions
and betterments thereto so that at all times such properties and equipment are
reasonably preserved and maintained, in each case with such exceptions as could
not, individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect; provided, however, that nothing in this Section 6.2 shall
prevent the Borrower or any material Subsidiary from discontinuing the operation
or maintenance of any such properties or equipment if such discontinuance is, in
the judgment of the Borrower or any material Subsidiary, as applicable,
desirable in the conduct of their businesses.
Section 6.3. Taxes. Each of the Borrower and its Subsidiaries will duly
pay and discharge all Taxes upon or against it or its properties before
penalties accrue thereon (or, if later, within ninety (90) days of becoming past
due), unless and to the extent that (i) the same is being contested in good
faith and by appropriate proceedings and reserves have been established in
conformity with GAAP, or (ii) the failure to effect such payment or discharge
could not reasonably be expected to have a Material Adverse Effect.
Section 6.4. ERISA. Each of the Borrower and its Subsidiaries will timely
pay and discharge all obligations and liabilities arising under ERISA or
otherwise with respect to each Plan of a character which if unpaid or
unperformed might result in the imposition of a material Lien against any
properties or assets of the Borrower or any material Subsidiary and will
promptly notify the Administrative Agent upon an officer of the Borrower
becoming aware thereof, of (i) the occurrence of any reportable event (as
defined in ERISA) relating to a Plan (other than a multi-employer plan, as
defined in ERISA), so long as the event thereunder could reasonably be expected
to have a Material Adverse Effect, other than any such event with respect to
which the PBGC has waived notice by regulation; (ii) receipt of any notice from
PBGC of its intention to seek termination of any Plan or appointment of a
trustee therefor; (iii) Borrower's or any of its Subsidiaries' intention to
terminate or withdraw from any Plan if such termination or withdrawal would
result in liability under Title IV of ERISA, unless such termination or
withdrawal could not reasonably be expected to have a Material Adverse Effect;
and (iv) the receipt by the Borrower or its Subsidiaries of notice of the
occurrence of any event that could reasonably be expected to result in the
incurrence of any liability (other than for benefits), fine or penalty to the
Borrower and/or to the Borrower's Subsidiaries, or any plan amendment that could
reasonably be expected to increase the contingent liability of the Borrower and
its Subsidiaries, taken as a whole, in connection with any post-retirement
benefit under a welfare plan (subject to ERISA), unless such event or amendment
could not reasonably be expected to have a Material Adverse Effect. The Borrower
will also promptly notify the Administrative Agent of (i) any
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material contributions to any Foreign Plan that have not been made by the
required due date for such contribution if such default could reasonably be
expected to have a Material Adverse Effect; (ii) any Foreign Plan that is not
funded to the extent required by the law of the jurisdiction whose law governs
such Foreign Plan based on the actuarial assumptions reasonably used at any time
if such underfunding (together with any penalties likely to result) could
reasonably be expected to have a Material Adverse Effect, and (iii) any material
change anticipated to any Foreign Plan that could reasonably be expected to have
a Material Adverse Effect.
Section 6.5. Insurance. Each of the Borrower and its material Subsidiaries
will maintain or cause to be maintained, with responsible insurance companies,
insurance against any loss or damage to all insurable property and assets owned
by it, such insurance to be of a character and in or in excess of such amounts
as are customarily maintained by companies similarly situated and operating like
property or assets (subject to self-insured retentions and deductibles) and will
(subject to self-insured retentions and deductibles) maintain or cause to be
maintained insurance with respect to employers' and public and product liability
risks.
Section 6.6. Financial Reports and Other Information.
(a) The Borrower, its Subsidiaries and any SPVs will maintain a system of
accounting in such manner as will enable preparation of financial statements in
accordance with GAAP and will furnish to the Lenders and their respective
authorized representatives such information about the business and financial
condition of the Borrower, its Subsidiaries and any SPVs as any Lender may
reasonably request; and, without any request, will furnish to the Administrative
Agent:
(i) within sixty (60) days after the end of each of the first three
(3) fiscal quarters of each fiscal year of the Borrower, the consolidated
balance sheet of the Borrower and its Subsidiaries as at the end of such
fiscal quarter and the related consolidated statements of income and
retained earnings and of cash flows for such fiscal quarter and for the
portion of the fiscal year ended with the last day of such fiscal quarter,
all of which shall be in reasonable detail or in the form filed with the
SEC, and certified by the chief financial officer of the Borrower that they
fairly present the financial condition of the Borrower and its Subsidiaries
as of the dates indicated and the results of their operations and changes
in their cash flows for the periods indicated and that they have been
prepared in accordance with GAAP, in each case, subject to normal year-end
audit adjustments and the omission of any footnotes as permitted by the SEC
(delivery to the Administrative Agent of a copy of the Borrower's Form 10-Q
filed with the SEC (without exhibits) in any event will satisfy the
requirements of this subsection subject to Section 6.6(b));
(ii) within one hundred twenty (120) days after the end of each fiscal
year of the Borrower, the consolidated balance sheet of the Borrower and
its Subsidiaries as at the end of such fiscal year and the related
consolidated statements of income and retained earnings and of cash flows
for such fiscal year and setting forth consolidated comparative figures as
of the end of and for the preceding fiscal year, audited by an independent
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nationally-recognized accounting firm and in the form filed with the SEC
(delivery to the Administrative Agent of a copy of the Borrower's Form 10-K
filed with the SEC (without exhibits) in any event will satisfy the
requirements of this subsection subject to Section 6.6(b));
(iii) commencing with fiscal year 2000, to the extent actually prepared
and approved by the Borrower's board of directors, a projection of
Borrower's consolidated balance sheet and consolidated income, retained
earnings and cash flows for its current fiscal year showing such projected
budget for each fiscal quarter of the Borrower ending during such year; and
(iv) within ten (10) days after the sending or filing thereof, copies
of all financial statements, projections, documents and other
communications that the Borrower sends to its stockholders generally or
files with the SEC or any similar governmental authority (and is publicly
available).
The Administrative Agent will forward promptly to the Lenders the information
provided by the Borrower pursuant to (i) through (iv) above.
(b) Each financial statement furnished to the Lenders pursuant to
subsections (i) and (ii) of Section 6.6(a) shall be (i) accompanied by
additional information setting forth calculations excluding the effects of any
SPVs and containing such calculations for any SPVs as reasonably requested by
the Administrative Agent, and (ii) accompanied by (x) a written certificate
signed by the Borrower's chief financial officer (or other financial officer of
the Borrower), in his or her capacity as such, to the effect that no Default or
Event of Default then exists or, if any such Default or Event of Default exists
as of the date of such certificate, setting forth a description of such Default
or Event of Default and specifying the action, if any, taken by the Borrower to
remedy the same, and (y) a Compliance Certificate in the form of Exhibit 6.6
showing the Borrower's compliance with certain of the covenants set forth
herein.
(c) Promptly upon receipt thereof, the Borrower will provide the
Administrative Agent with a copy of each report or "management letter" submitted
to the Borrower, any of its material Subsidiaries or any SPVs by its independent
accountants or auditors in connection with any annual, interim or special audit
made by them of the books and records of the Borrower, any of its material
Subsidiaries or any SPVs.
(d) Promptly after any officer of the Borrower obtains knowledge of any of
the following, the Borrower will provide the Administrative Agent with written
notice in reasonable detail of any of the following that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect:
(i) any pending or threatened Environmental Claim against the
Borrower, any of its Subsidiaries or any SPV or any property owned or
operated by the Borrower, any of its Subsidiaries or any SPV;
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(ii) any condition or occurrence on any property owned or operated by
the Borrower, any of its Subsidiaries or any SPV that results in
noncompliance by the Borrower, any of its Subsidiaries or any SPV with any
Environmental Law; and
(iii) the taking of any material remedial action in response to the
actual or alleged presence of any Hazardous Material on any property owned
or operated by the Borrower, any of its Subsidiaries or any SPV other than
in the ordinary course of business.
(e) The Borrower will promptly, and in any event within five (5) Days,
after an officer of the Borrower has knowledge thereof, give written notice to
the Administrative Agent of (who will in turn provide notice to the Lenders of):
(i) the occurrence of any Default or Event of Default; (ii) any litigation or
governmental proceeding of the type described in Section 5.4; (iii) any
circumstance that has had or could reasonably be expected to have a Material
Adverse Effect; (iv) the occurrence of any event which has resulted in a breach
of, or is likely to result in a breach of, Sections 6.17 or 6.18; and (v) any
notice received by it, any Subsidiary or any SPV from the holder(s) of
Indebtedness of the Borrower, any Subsidiary or any SPV in an amount which, in
the aggregate, exceeds $30,000,000, where such notice states or claims the
existence or occurrence of any default or event of default with respect to such
Indebtedness under the terms of any indenture, loan or credit agreement,
debenture, note, or other document evidencing or governing such Indebtedness.
Section 6.7. Lender Inspection Rights. Upon reasonable notice from the
Administrative Agent or any Lender, the Borrower will permit the Administrative
Agent or any Lender (and such Persons as the Administrative Agent or such Lender
may reasonably designate) during normal business hours at such entity's sole
expense unless a Default or Event of Default shall have occurred and be
continuing, in which event at the Borrower's expense, to visit and inspect any
of the properties of the Borrower or any of its Subsidiaries, to examine all of
their books and records, to make copies and extracts therefrom, and to discuss
their respective affairs, finances and accounts with their respective officers
and independent public accountants (and by this provision the Borrower
authorizes such accountants to discuss with the Administrative Agent and any
Lender (and such Persons as the Administrative Agent or such Lender may
reasonably designate) the affairs, finances and accounts of the Borrower and its
Subsidiaries), all as often, and to such extent, as may be reasonably requested.
The chief financial officer of the Borrower and/or his or her designee shall be
afforded the opportunity to be present at any meeting of the Administrative
Agent or the Lenders and such accountants. The Administrative Agent agrees to
use reasonable efforts to minimize, to the extent practicable, the number of
separate requests from the Lenders to exercise their rights under this Section
6.7 and/or Section 6.6 and to coordinate the exercise by the Lenders of such
rights.
Section 6.8. Conduct of Business. The Borrower and its Subsidiaries will at
all times remain primarily engaged in (i) the contract drilling business,
(ii) the provision of services to the energy industry, (iii) other existing
businesses described in the Borrower's current SEC reports and in the Transocean
Schlumberger Joint Proxy Statement, and (iv) any related businesses (each a
"Permitted Business").
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Section 6.9. Limitation on Certain Restrictions on Subsidiaries. The
Borrower and its Subsidiaries will not, directly or indirectly, create or
otherwise permit to exist or become effective any contractual restriction on the
ability of any Subsidiaries of the Borrower to (i) pay dividends or make any
other distributions to the Borrower or any of its Subsidiaries, SPVs or
Affiliates on the Borrower's or such Subsidiary's capital stock, partnership or
limited liability company interests, or other equity or ownership interests, or
any other interest or participation in its profits, or pay any Indebtedness owed
to the Borrower or any of its Subsidiaries, or (ii) make loans or advances to
the Borrower or any of its Subsidiaries, except for:
(a) Existing restrictions as to Subsidiaries of the Borrower (including
Sedco Forex and its Subsidiaries) as described on Schedule 5.22 hereto;
(b) Restrictions existing as to Sedco Forex and its Subsidiaries at the
time of the Sedco Forex Merger, provided that such restrictions do not restrict
or impair the payment or making of such distributions, dividends, loans,
interests or participations in profits, or payments of Indebtedness by Sedco
Forex and such Subsidiaries in an aggregate amount greater than ten percent
(10%) of Consolidated EBITDA for the most recently ended fiscal year of the
Borrower and Sedco Forex and their respective Subsidiaries on a pro forma
combined basis;
(c) Restrictions imposed by law or this Agreement;
(d) Customary restrictions contained in agreements relating to the sale of
a Subsidiary or its assets pending such sale, provided such restrictions apply
only to such Subsidiary or such assets to be sold;
(e) Restrictions applicable to SPVs or the stock of SPVs;
(f) Customary restrictions in contracts as to the assignment thereof;
(g) Restrictions relating to any assets acquired after the Effective Date
of this Agreement, provided such restrictions relate only to the assets so
acquired and are not created in anticipation of such acquisition;
(h) Restrictions relating to any acquired Indebtedness of any Subsidiary at
the date on which such Subsidiary was acquired by the Borrower or any Subsidiary
(other than Indebtedness incurred in anticipation of such acquisition), provided
such restriction relates only to such acquired Indebtedness and Subsidiary;
(i) Restrictions imposed in connection with a refinancing or assumption of
Indebtedness that is subject to similar restrictions otherwise permitted by this
Agreement;
(j) Restrictions on the sale or other disposition of any property securing
any Non-recourse Debt or any Indebtedness as a result of a Permitted Lien on
such property;
(k) Customary restrictions on cash or other deposits imposed by customers
under contracts entered into in the ordinary course of business;
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(l) Restrictions contained in agreements or instruments relating to
Indebtedness that prohibit the transfer of all or substantially all of the
assets of the obligor thereunder unless the transferee shall assume the
obligations of the obligor under such agreement or instrument; and
(m) Agreements as to formalities required to declare or make a dividend or
distribution or that require retention of reasonable cash reserves for working
capital purposes.
Section 6.10. Restrictions on Fundamental Changes. The Borrower shall not
merge or consolidate with any other Person, or cause or permit any dissolution
of the Borrower or liquidation of its assets, or sell, transfer or otherwise
dispose of all or substantially all of the Borrower's assets, except that:
(a) The Borrower or any of its Subsidiaries may merge into, or consolidate
with, any other Person if upon the consummation of any such merger or
consolidation the Borrower or such Subsidiary is the surviving corporation to
any such merger or consolidation (or the other Person is, or will thereby
become, a Subsidiary of the Borrower), and
(b) The Borrower may sell or transfer all or substantially all of its
assets (including stock in its Subsidiaries) to any Person if such Person is a
Subsidiary of the Borrower (or a Person who will contemporaneously therewith
become a Subsidiary of the Borrower);
provided in the case of any transaction described in the preceding clauses (a)
and (b), (x) the Borrower or any such Subsidiary complies with the provisions of
Section 6.9 to the extent applicable, and (y) no Default or Event of Default
shall exist immediately prior to, or after giving effect to, such transaction.
Section 6.11. Liens . The Borrower and its Subsidiaries shall not create,
incur, assume or suffer to exist any Lien of any kind on any property or asset
of any kind of the Borrower or any Subsidiary, except the following
(collectively, the "Permitted Liens"):
(a) Liens existing on the date hereof (each such Lien, to the extent it
secures Indebtedness or other obligations in an aggregate amount of $20,000,000
or more, being described on Schedule 5.23 attached hereto);
(b) Liens arising in the ordinary course of business by operation of law,
deposits, pledges or other Liens in connection with workers' compensation,
unemployment insurance, old age benefits, social security obligations, taxes,
assessments, public or statutory obligations or other similar charges, good
faith deposits, pledges or other Liens in connection with (or to obtain letters
of credit in connection with) bids, performance, return-of-money or payment
bonds, contracts or leases to which the Borrower or its Subsidiaries are parties
or other deposits required to be made in the ordinary course of business;
provided that in each case the obligation secured is not for Indebtedness for
borrowed money and is not overdue or, if overdue, is being contested in good
faith by appropriate proceedings and reserves in conformity with GAAP have been
provided therefor;
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(c) mechanics', workmen's, materialmen's, landlords', carriers' or other
similar Liens arising in the ordinary course of business (or deposits to obtain
the release of such Liens) related to obligations not overdue for more than
thirty (30) days if such Liens arise with respect to domestic assets and for
more than ninety (90) days if such Liens arise with respect to foreign assets,
or, if so overdue, that are being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP have been provided therefor, or
if such Liens otherwise could not reasonably be expected to have a Material
Adverse Effect;
(d) Liens for Taxes not more than ninety (90) days past due or which can
thereafter be paid without penalty or which are being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP have been provided
therefor, or if such Liens otherwise could not reasonably be expected to have a
Material Adverse Effect;
(e) Liens imposed by ERISA (or comparable foreign laws) which are being
contested in good faith by appropriate proceedings and reserves in conformity
with GAAP have been provided therefor, or if such Liens otherwise could not
reasonably be expected to have a Material Adverse Effect;
(f) Liens arising out of judgments or awards against the Borrower or any of
its Subsidiaries, or in connection with surety or appeal bonds or the like in
connection with bonding such judgments or awards, the time for appeal from which
or petition for rehearing of which shall not have expired or for which the
Borrower or such Subsidiary shall be prosecuting on appeal or proceeding for
review, and for which it shall have obtained (within thirty (30) days with
respect to a judgment or award rendered in the United States or within sixty
(60) days with respect to a judgment or award rendered in a foreign jurisdiction
after entry of such judgment or award or expiration of any previous such stay,
as applicable) a stay of execution or the like pending such appeal or proceeding
for review; provided, that the aggregate amount of uninsured or underinsured
liabilities (net of customary deductibles, and including interest, costs, fees
and penalties, if any) of the Borrower and its Subsidiaries secured by such
Liens shall not exceed $30,000,000 at any one time outstanding;
(g) Liens on fixed or capital assets and related inventory and intangible
assets acquired, constructed, improved, altered or repaired by the Borrower or
any Subsidiary; provided that (i) such Liens secure Indebtedness otherwise
permitted by this Agreement, (ii) such Liens and the Indebtedness secured
thereby are incurred prior to or within 365 days after such acquisition or the
later of the completion of such construction, improvement, alteration or repair
or the date of commercial operation of the assets constructed, improved, altered
or repaired, (iii) the Indebtedness secured thereby does not exceed the cost of
acquiring, constructing, improving, altering or repairing such fixed or capital
assets, as the case may be, and (iv) such Lien shall not apply to any other
property or assets of the Borrower or any Subsidiary;
(h) Liens securing Interest Rate Protection Agreements or foreign exchange
hedging obligations incurred in the ordinary course of business and not for
speculative purposes;
(i) Liens on property existing at the time such property is acquired by the
Borrower or any Subsidiary of the Borrower and not created in contemplation of
such acquisition (or on
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repairs, renewals, replacements, additions, accessions and betterments thereto),
and Liens on the assets of any Person at the time such Person becomes a
Subsidiary of the Borrower and not created in contemplation of such Person
becoming a Subsidiary of the Borrower (or on repairs, renewals, replacements,
additions, accessions and betterments thereto;
(j) any extension, renewal or replacement (or successive extensions,
renewals or replacements) in whole or in part of any Lien referred to in the
foregoing subsections (a) through (i), provided, however, that the principal
amount of Indebtedness secured thereby does not exceed the principal amount
secured at the time of such extension, renewal or replacement (other than
amounts incurred to pay costs of extension, renewal or replacement), and that
such extension, renewal or replacement is limited to the property already
subject to the Lien so extended, renewed or replaced;
(k) rights reserved to or vested in any municipality or governmental,
statutory or public authority by the terms of any right, power, franchise,
grant, license or permit, or by any provision of law, to terminate such right,
power, franchise, grant, license or permit or to purchase, condemn, expropriate
or recapture or to designate a purchaser of any of the property of a Person;
(l) rights reserved to or vested in any municipality or governmental,
statutory or public authority to control, regulate or use any property of a
Person;
(m) rights of a common owner of any interest in property held by a Person
and such common owner as tenants in common or through other common ownership;
(n) encumbrances (other than to secure the payment of Indebtedness),
easements, restrictions, servitudes, permits, conditions, covenants, exceptions
or reservations in any property or rights-of-way of a Person for the purpose of
roads, pipelines, transmission lines, transportation lines, distribution lines,
removal of gas, oil, coal, metals, steam, minerals, timber or other natural
resources, and other like purposes, or for the joint or common use of real
property, rights-of-way, facilities or equipment, or defects, irregularity and
deficiencies in title of any property or rights-of-way;
(o) zoning, planning and environmental laws and ordinances and municipal
regulations;
(p) financing statements filed by lessors of property (but only with
respect to the property so leased);
(q) Liens on property securing Non-recourse Debt;
(r) Liens on the stock or assets of SPVs (including Transocean Enterprise,
Inc. and the Transocean Amirante and the Discoverer Enterprise); and
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(s) Liens (not otherwise permitted by this Section 6.11) on property securing
Indebtedness (or other obligations) not exceeding $100,000,000 in the
aggregate at any time outstanding.
Section 6.12. Indebtedness. The Borrower and its Subsidiaries shall not
incur, assume or suffer to exist any Indebtedness, except:
(a) existing Indebtedness outstanding on the Effective Date (such
Indebtedness, to the extent the principal amount thereof is $20,000,000 or more,
being described on Schedule 5.21 attached hereto), and any subsequent
extensions, renewals or refinancings thereof so long as such Indebtedness is not
increased in amount, the scheduled maturity date thereof (if prior to the
Maturity Date) is not accelerated, the interest rate per annum applicable
thereto is not increased, any scheduled amortization of principal thereunder
prior to the Maturity Date is not shortened and the payments thereunder are not
increased;
(b) Indebtedness under the Credit Documents;
(c) intercompany loans and advances to the Borrower or its Subsidiaries,
and intercompany loans and advances from any of such Subsidiaries or SPVs to the
Borrower or any other Subsidiaries of the Borrower;
(d) Indebtedness under any Interest Rate Protection Agreements and under
foreign exchange futures agreements, arrangements or options designed to protect
against fluctuations in currency exchange rates;
(e) Indebtedness of the Borrower that may be incurred, assumed or suffered
to exist without violating any section of this Agreement, including, without
limitation, Sections 6.17 and 6.18 hereof;
(f) Indebtedness of any Subsidiary of the Borrower (i) under overdraft
lines of credit or for working capital purposes in foreign countries with
financial institutions on terms no more favorable to the lenders thereunder than
under this Agreement, and (ii) arising from the honoring by a bank or other
Person of a check, draft or similar instrument inadvertently drawing against
insufficient funds, all such Indebtedness not to exceed $50,000,000 in the
aggregate at any time outstanding, provided that amounts under overdraft lines
of credit or outstanding as a result of drawings against insufficient funds
shall be outstanding for one (1) Business Day before being included in such
aggregate amount;
(g) Indebtedness of a Person existing at the time such Person becomes a
Subsidiary of the Borrower or is merged with or into the Borrower or any
Subsidiary of the Borrower and not incurred in contemplation of such
transaction;
(h) Indebtedness of the Borrower or any Subsidiary of the Borrower
(i) under Performance Guaranties and Performance Letters of Credit, and
(ii) with respect to letters of credit issued in the ordinary course of
business;
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(i) Indebtedness of any Subsidiaries of the Borrower in an aggregate
principal amount for all Subsidiaries not to exceed an amount equal to ten
percent (10%) of Consolidated Net Assets (the "Subsidiary Debt Basket Amount")
in the aggregate at any time outstanding;
(j) other Indebtedness of any Subsidiary of the Borrower so long as such
Subsidiary has in force a Subsidiary Guaranty in substantially the form of
Exhibit 6.12, provided that such Subsidiary Guaranty shall contain a provision
that such Subsidiary Guaranty and all obligations thereunder of the Guarantor
party thereto shall be terminated upon delivery to the Administrative Agent by
the Borrower of a certificate stating that (x) the aggregate principal amount of
Indebtedness of all Subsidiaries outstanding pursuant to the preceding clause
(i) and this clause (j) is equal to or less than the Subsidiary Debt Basket
Amount, and (y) no Default or Event of Default has occurred and is continuing;
and
(k) extensions, renewals or replacements of Indebtedness permitted by
this Section 6.12 that do not increase the amount of such Indebtedness.
Section 6.13. Use of Property and Facilities; Environmental Laws. The
Borrower and its Subsidiaries shall comply in all material respects with all
Environmental Laws applicable to or affecting the properties or business
operations of the Borrower or any Subsidiary of the Borrower, where the failure
to comply could reasonably be expected to have a Material Adverse Effect.
Section 6.14. Transactions with Affiliates. Except as otherwise
specifically permitted herein, the Borrower and its Subsidiaries shall not
(except pursuant to contracts outstanding as of (i) with respect to the
Borrower, the Effective Date or (ii) with respect to any Subsidiary of the
Borrower, the Effective Date or, if later, the date such Subsidiary first became
a Subsidiary of the Borrower) enter into or engage in any material transaction
or arrangement or series of related transactions or arrangements which in the
aggregate would be material with any Controlling Affiliate, including without
limitation, the purchase from, sale to or exchange of property with, any merger
or consolidation with or into, or the rendering of any service by or for, any
Controlling Affiliate, except pursuant to the requirements of the Borrower's or
such Subsidiary's business and unless such transaction or arrangement or series
of related transactions or arrangements, taken as a whole, is fair and equitable
to the Borrower or such Subsidiary.
Section 6.15. Sale and Leaseback Transactions. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into, assume, or suffer to
exist any Sale-Leaseback Transaction, except any such transaction that may be
entered into, assumed or suffered to exist without violating any other provision
of this Agreement, including without limitation, Sections 6.17 and 6.18.
Section 6.16. Compliance with Laws. Without limiting any of the other
covenants of the Borrower in this Article 6, the Borrower and its Subsidiaries
shall conduct their business, and otherwise be, in compliance with all
applicable laws, regulations, ordinances and orders of any governmental or
judicial authorities; provided, however, that this Section 6.16 shall not
require the Borrower or any Subsidiary of the Borrower to comply with any such
law, regulation, ordinance or order if (x) it shall be contesting such law,
regulation, ordinance or order in good
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faith by appropriate proceedings and reserves in conformity with GAAP have been
provided therefor, or (y) the failure to comply therewith could not reasonably
be expected to have a Material Adverse Effect.
Section 6.17. Interest Coverage Ratio. The Borrower will not permit the
Interest Coverage Ratio as of the end of each fiscal quarter of the Borrower to
be less than 3:00 to 1:00.
Section 6.18. Indebtedness to Total Capitalization Ratio. The Borrower
will maintain, as of the end of each fiscal quarter of the Borrower, a ratio
(expressed as a percentage) of Consolidated Indebtedness to Total Capitalization
of no greater than 40%.
ARTICLE 7. EVENTS OF DEFAULT AND REMEDIES.
Section 7.1. Events of Default. Any one or more of the following shall
constitute an Event of Default:
(a) default by the Borrower in the payment of any principal amount of the
Term Loan, any interest thereon or any fees payable hereunder, within two (2)
Business Days following the date when due;
(b) default by the Borrower in the observance or performance of any
covenant set forth in Sections 6.10, 6.11, 6.17, or 6.18;
(c) default by the Borrower in the observance or performance of any
provision hereof or of any other Credit Document not mentioned in clauses (a) or
(b) above, which is not remedied within thirty (30) days after notice thereof to
the Borrower by the Administrative Agent;
(d) any representation or warranty made or deemed made herein or in any
other Credit Document by the Borrower or any Subsidiary proves untrue in any
material respect as of the date of the making, or deemed making, thereof;
(e) (x) Indedtedness in the aggregate principal amount of $30,000,000 of
the Borrower and its Subsidiaries ("Material Indebtedness") shall (i) not be
paid at maturity (beyond any applicable grace periods), or (ii) be declared to
be due and payable or required to be prepaid, redeemed or repurchased prior to
its stated maturity, or (y) any default in respect of Material Indedtedness
shall occur which permits the holders thereof, or any trustees or agents on
their behalf, to accelerate the maturity of such Indedtedness or requires such
Indedtedness to be prepaid, redeemed, or repurchased prior to its stated
maturity;
(f) the Borrower or any Significant Subsidiary (i) has entered involuntarily
against it an order for relief under the United States Bankruptcy Code or a
comparable action is taken under any bankruptcy or insolvency law of
another country or political subdivision of such country, (ii) generally
does not pay, or admits its inability generally to pay, its debts as they
become due, (iii) makes a general assignment for the benefit of creditors,
(iv) applies for, seeks, consents to, or acquiesces in, the appointment of
a receiver, custodian, trustee, liquidator or
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similar official for it or any substantial part of its property under the
Bankruptcy Code or under the bankruptcy or insolvency laws of another country or
a political subdivision of such country, (v) institutes any proceeding seeking
to have entered against it an order for relief under the United States
Bankruptcy Code or any comparable law, to adjudicate it insolvent, or seeking
dissolution, winding up, liquidation, reorganization, arrangement, adjustment or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors or fails to file an answer or other
pleading denying the material allegations of or consents to or acquiesces in any
such proceeding filed against it, (vi) makes any board of directors resolution
in direct furtherance of any matter described in clauses (i)-(v) above, or
(vii) fails to contest in good faith any appointment or proceeding described
in this Section 7.1(f);
(g) a custodian, receiver, trustee, liquidator or similar official is
appointed for the Borrower or any Significant Subsidiary or any substantial part
of its property under the Bankruptcy Code or under the bankruptcy or insolvency
laws of another country or a political subdivision of such country, or a
proceeding described in Section 7.1(f)(v) is instituted against the Borrower or
any Significant Subsidiary, and such appointment continues undischarged or such
proceeding continues undismissed and unstayed for a period of sixty (60) days
(or one hundred twenty (120) days in the case of any such event occurring
outside the United States of America);
(h) the Borrower or any Subsidiaries of the Borrower fail within thirty
(30) days with respect to any judgments or orders that are rendered in the
United States or sixty (60) days with respect to any judgments or orders that
are rendered in foreign jurisdictions (or such earlier date as any execution on
such judgments or orders shall take place) to vacate, pay, bond or otherwise
discharge any judgments or orders for the payment of money the uninsured portion
of which is in excess of $30,000,000 in the aggregate and which are not stayed
on appeal or otherwise being appropriately contested in good faith in a manner
that stays execution;
(i) (x) the Borrower or any Subsidiary of the Borrower fails to pay when
due an amount that it is liable to pay to the PBGC or to a Plan under Title IV
of ERISA; or a notice of intent to terminate a Plan having Unfunded Vested
Liabilities of the Borrower or any of its Subsidiaries in excess of $30,000,000
(a "Material Plan") is filed under Title IV of ERISA; or the PBGC institutes
proceedings under Title IV of ERISA to terminate or to cause a trustee to be
appointed to administer any Material Plan or a proceeding is instituted by a
fiduciary of any Material Plan against any Borrower or any Subsidiary to collect
any liability under Section 515 or 4219(c)(5) of ERISA, and in each case such
proceeding is not dismissed within thirty (30) days thereafter; or a condition
exists by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated, and (y) the occurrence
of one or more of the matters in the preceding clause (x) could reasonably be
expected to have a Material Adverse Effect; or
(j) any Person or group of Persons acting in concert (as such terms are
used in Rule 13d-5 under the Securities Exchange Act of 1934, as amended, which
the Borrower and the Lenders acknowledge would not include the public
shareholders of Schlumberger/Sedco Forex receiving shares of the Borrower in the
Sedco Forex Merger) shall own, directly or indirectly, beneficially or of
record, securities of the Borrower (or other securities convertible into such
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securities) representing fifty percent (50%) or more of the combined voting
power of all outstanding securities of the Borrower entitled to vote in the
election of directors, other than securities having such power only by reason of
the happening of a contingency.
Section 7.2. Non-Bankruptcy Defaults. When any Event of Default (other than
those described in subsections (f) or (g) of Section 7.1 with respect to the
Borrower) has occurred and is continuing, the Administrative Agent shall, by
notice to the Borrower: (a) if so directed by the Required Lenders, terminate
any Commitments to the Borrower in effect hereunder on the date stated in such
notice (which may be the date thereof); and (b) if so directed by the Required
Lenders, declare the principal of and the accrued interest on all outstanding
Notes to be forthwith due and payable and thereupon all outstanding Notes,
including both principal and interest thereon, shall be and become immediately
due and payable together with all other accrued amounts payable under the Credit
Documents without further demand, presentment, protest or notice of any kind,
including, but not limited to, notice of intent to accelerate and notice of
acceleration, each of which is expressly waived by the Borrower. The
Administrative Agent, after giving notice to the Borrower pursuant to this
Section 7.2, shall also promptly send a copy of such notice to the other
Lenders, but the failure to do so shall not impair or annul the effect of such
notice.
Section 7.3. Bankruptcy Defaults. When any Event of Default described in
subsections (f) or (g) of Section 7.1 has occurred and is continuing with
respect to the Borrower, then all outstanding Notes shall immediately become due
and payable together with all other accrued amounts payable under the Credit
Documents without presentment, demand, protest or notice of any kind, each of
which is expressly waived by the Borrower; and all obligations of the Lenders
shall immediately terminate.
Section 7.4. Notice of Default. The Administrative Agent shall give notice
to the Borrower under Section 7.2 promptly upon being requested to do so by the
Required Lenders and shall thereupon notify all the Lenders thereof.
Section 7.5. Expenses The Borrower agrees to pay to the Administrative
Agent and each Lender all reasonable out-of-pocket expenses incurred or paid by
the Administrative Agent or such Lender, including reasonable attorneys' fees
and court costs, in connection with any Default or Event of Default by the
Borrower hereunder or in connection with the enforcement of any of the Credit
Documents.
Section 7.6. Distribution and Application of Proceeds. After the occurrence
of and during the continuance of an Event of Default, any payment to the
Administrative Agent or any Lender hereunder or otherwise shall be paid to the
Administrative Agent to be distributed and applied as follows (unless otherwise
agreed by the Borrower, the Administrative Agent and all Lenders):
(a) First, to the payment of any and all reasonable out-of-pocket costs and
expenses of the Administrative Agent, including without limitation, reasonable
attorneys' fees and out-of-pocket costs and expenses, as provided by this
Agreement or by any other Credit Document, incurred in connection with the
collection of such payment or in respect of the enforcement of
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any rights of the Administrative Agent or the Lenders under this Agreement or
any other Credit Document;
(b) Second, to the payment of any and all reasonable out-of-pocket costs
and expenses of the Lenders, including, without limitation, reasonable
attorneys' fees and out-of-pocket costs and expenses, as provided by this
Agreement or by any other Credit Document, incurred in connection with the
collection of such payment or in respect of the enforcement of any rights of the
Lenders under this Agreement or any other Credit Document, pro rata in the
proportion in which the amount of such costs and expenses unpaid to each Lender
bears to the aggregate amount of the costs and expenses unpaid to all Lenders
collectively, until all such fees, costs and expenses have been paid in full;
(c) Third, to the payment of any due and unpaid fees to the Administrative
Agent or any Lender as provided by this Agreement or any other Credit Document,
pro rata in the proportion in which the amount of such fees due and unpaid to
the Administrative Agent and each Lender bears to the aggregate amount of the
fees due and unpaid to the Administrative Agent and all Lenders collectively,
until all such fees have been paid in full;
(d) Fourth, to the payment of accrued and unpaid interest on the Notes to
the date of such application, pro rata in the proportion in which the amount of
such interest, accrued and unpaid to each Lender bears to the aggregate amount
of such interest accrued and unpaid to all Lenders collectively, until all such
accrued and unpaid interest has been paid in full;
(e) Fifth, to the payment of the outstanding due and payable principal
amount of each of the Notes, pro rata in the proportion in which the outstanding
principal amount of such Notes owing to each Lender bears to the aggregate
amount of all outstanding Notes;
(f) Sixth, to the payment of any other outstanding Obligations then due and
payable, pro rata in the proportion in which the outstanding Obligations owing
to each Lender bears to the aggregate amount of such Obligations until all such
Obligations have been paid in full; and
(g) Seventh, to the Borrower or to such other Person as may be lawfully
entitled thereto.
ARTICLE 8. CHANGE IN CIRCUMSTANCES.
Section 8.1. Change of Law.
(a) Notwithstanding any other provisions of this Agreement or any Note, if
at any time any change, after the date hereof (or, if later, after the date the
Administrative Agent, the Documentation Agent, the Syndication Agent, any Senior
Managing Agent or a Lender becomes the Administrative Agent, the Documentation
Agent, the Syndication Agent, a Senior Managing Agent or a Lender), in
applicable law or regulation or in the interpretation thereof makes it unlawful
for any Lender to make or maintain Eurodollar Loans, such Lender shall promptly
give written notice thereof and of the basis therefor in reasonable detail to
the Borrower and such Lender's obligations to fund Eurodollar Loans or make,
continue or convert Loans as or into
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Eurodollar Loans under this Agreement shall thereupon be suspended until it is
no longer unlawful for such Lender to make or maintain Eurodollar Loans.
(b) Upon the giving of the notice to Borrower referred to in subsection (a)
above, (i) any outstanding Eurodollar Loan of such Lender shall be automatically
converted to a Base Rate Loan on the last day of the Interest Period then
applicable thereto or on such earlier date as required by law, and (ii) such
Lender shall make or continue its portion of any requested Borrowing of
Eurodollar Loans as a Base Rate Loan, which Base Rate Loan shall, for all other
purposes, be considered part of such Borrowing.
(c) Any Lender that has given any notice pursuant to Section 8.1(a) shall,
upon determining that it would no longer be unlawful for it to make Eurodollar
Loans, give prompt written notice thereof to the Borrower and the Administrative
Agent, and upon giving such notice, its obligation to make, allow conversions
into and maintain Eurodollar Loans shall be reinstated.
Section 8.2. Unavailability of Deposits or Inability to Ascertain LIBOR
Rate. If on or before the first day of any Interest Period for any Borrowing of
Eurodollar Loans the Administrative Agent determines in good faith (after
consultation with the other Lenders) that, due to changes in circumstances since
the date hereof, adequate and fair means do not exist for determining the
Adjusted LIBOR Rate or such rate will not accurately reflect the cost to the
Required Lenders of funding Eurodollar Loans for such Interest Period, the
Administrative Agent shall give written notice (in reasonable detail) of such
determination and of the basis therefor to the Borrower and the Lenders,
whereupon until the Administrative Agent notifies the Borrower and Lenders that
the circumstances giving rise to such suspension no longer exist (which the
Administrative Agent shall do promptly after they do not exist), (i) the
obligations of the Lenders to make, continue or convert Loans as or into
Eurodollar Loans, or to convert Base Rate Loans into Eurodollar Loans, shall be
suspended and (ii) each Eurodollar Loan will automatically on the last day of
the then existing Interest Period therefor, convert into a Base Rate Loan.
Section 8.3. Increased Cost and Reduced Return.
(a) If, on or after the date hereof, the adoption of or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its Lending Office), with any request or directive (whether or
not having the force of law) of any such authority, central bank or comparable
agency exercising control over banks or financial institutions generally issued
after the date hereof (or, if later, after the date the Administrative Agent,
the Documentation Agent, a Syndication Agent, a Senior Managing Agent or Lender
becomes the Administrative Agent, the Documentation Agent, the Syndication
Agent, a Senior Managing Agent or Lender):
(i) subjects any Lender (or its Lending Office) to any tax, duty or
other charge related to any Eurodollar Loan or its obligation to advance or
maintain Eurodollar Loans, or shall change the basis of taxation of
payments to any Lender (or its Lending
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Office) of the principal of or interest on its Eurodollar Loans, or any
other amounts due under this Agreement related to its Eurodollar Loans, or
its obligation to make Eurodollar Loans (except for changes with respect to
taxes that are not Indemnified Taxes pursuant to Section 3.3); or
(ii) imposes, modifies or deems applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding for any Eurodollar Loan any such requirement included
in an applicable Eurodollar Reserve Percentage) against assets of, deposits
with or for the account of, or credit extended by, any Lender (or its
Lending Office) or imposes on any Lender (or its Lending Office) or on the
interbank market any other condition affecting its Eurodollar Loans or its
participation in any thereof, or its obligation to advance or maintain
Eurodollar Loans;
and the result of any of the foregoing is to increase the cost to such Lender
(or its Lending Office) of advancing or maintaining any Eurodollar Loan or to
reduce the amount of any sum received or receivable by such Lender (or its
Lending Office) in connection therewith under this Agreement or its Note, by an
amount deemed by such Lender to be material, then, subject to Section 8.3(c),
from time to time, within thirty (30) days after receipt of a certificate from
such Lender (with a copy to the Administrative Agent) pursuant to subsection (c)
below setting forth in reasonable detail such determination and the basis
thereof, the Borrower shall be obligated to pay to such Lender such additional
amount or amounts as will compensate such Lender for such increased cost or
reduction.
(b) If, after the date hereof, the Administrative Agent or any Lender
shall have reasonably determined that the adoption after the date hereof of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein (including, without limitation, any revision in the Final Risk-Based
Capital Guidelines of the Board of Governors of the Federal Reserve System (12
CFR Part 208, Appendix A; 12 CFR Part 225, Appendix A) or of the Office of the
Comptroller of the Currency (12 CFR Part 3, Appendix A), or in any other
applicable capital adequacy rules heretofore adopted and issued by any
governmental authority), or any change after the date hereof in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Administrative Agent or any Lender (or its Lending
Office) with any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on such
Lender's capital, or on the capital of any corporation controlling such Lender,
as a consequence of its obligations hereunder to a level below that which such
Lender could have achieved but for such adoption, change or compliance (taking
into consideration such Lender's or its controlling corporation's policies with
respect to capital adequacy in effect immediately before such adoption, change
or compliance) by an amount reasonably deemed by such Lender to be material,
then, subject to Section 8.3(c), from time to time, within thirty (30) days
after its receipt of a certificate from such Lender (with a copy to the
Administrative Agent) pursuant to subsection (c) below setting forth in
reasonable detail such determination and the basis thereof, the Borrower shall
pay to such Lender such additional amount or amounts as will
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compensate such Lender for such reduction or the Borrower may prepay all
Eurodollar Loans of such Lender.
(c) The Administrative Agent and each Lender that determines to seek
compensation under this Section 8.3 shall give written notice to the Borrower
and, in the case of a Lender other than the Administrative Agent, the
Administrative Agent of the circumstances that entitle the Administrative Agent
or such Lender to such compensation no later than ninety (90) days after such
Lender receives actual notice or obtains actual knowledge of the law, rule,
order or interpretation or occurrence of another event giving rise to a claim
hereunder. In any event the Borrower shall not have any obligation to pay any
amount with respect to claims accruing prior to the ninetieth day preceding such
written demand. The Administrative Agent and each Lender shall use reasonable
efforts to avoid the need for, or reduce the amount of, such compensation and
any payment under Section 3.3, including, without limitation, the designation of
a different Lending Office, if such action or designation will not, in the sole
judgment of the Administrative Agent or such Lender made in good faith, be
otherwise disadvantageous to it; provided that the foregoing shall not in any
way affect the rights of any Lender or the obligations of the Borrower under
this Section 8.3, and provided further that no Lender shall be obligated to make
its Eurodollar Loans hereunder at any office located in the United States of
America. A certificate of the Administrative Agent or any Lender, as applicable,
claiming compensation under this Section 8.3 and setting forth the additional
amount or amounts to be paid to it hereunder and accompanied by a statement
prepared by the Administrative Agent or such Lender, as applicable, describing
in reasonable detail the calculations thereof shall be rebuttable presumptive
evidence thereof in the absence of manifest error. In determining such amount,
such Lender may use any reasonable averaging and attribution methods.
Section 8.4. Lending Offices. The Administrative Agent and each Lender may,
at its option, elect to make or maintain its Loans hereunder at the Lending
Office for each type of Loan available hereunder or at such other of its
branches, offices or affiliates as it may from time to time elect and designate
in a written notice to the Borrower and the Administrative Agent, provided that,
except in the case of any such transfer to another of its branches, offices or
affiliates made at the request of the Borrower, the Borrower shall not be
responsible for the costs arising under Section 3.3 or 8.3 resulting from any
such transfer to the extent not otherwise applicable to such Lender prior to
such transfer.
Section 8.5. Discretion of Lender as to Manner of Funding. Subject to the
other provisions of this Agreement, each Lender shall be entitled to fund and
maintain its funding of all or any part of its Loans in any manner it sees fit.
Section 8.6. Substitution of Lender. If (a) any Lender has demanded
compensation or given notice of its intention to demand compensation under
Section 8.3, (b) the Borrower is required to pay any additional amount to any
Lender under Section 2.11, (c) any Lender is unable to submit any form or
certificate required under Section 3.3(b) or withdraws or cancels any previously
submitted form with no substitution therefor, (d) any Lender gives notice of any
change in law or regulations, or in the interpretation thereof, pursuant to
Section 8.1, (e) any Lender has been declared insolvent or a receiver or
conservator has been appointed for a material portion of its assets, business or
properties or (f) any Lender shall seek to avoid its obligation to
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make or maintain Loans hereunder for any reason, including, without limitation,
reliance upon 12 U.S.C. (S) 1821(e) or (n) (1) (B), (g) any taxes referred to in
Section 3.3 have been levied or imposed (or the Borrower determines in good
faith that there is a substantial likelihood that such taxes will be levied or
imposed) so as to require withholding or deductions by the Borrower or payment
by the Borrower of additional amounts to any Lender, or other reimbursement or
indemnification of any Lender, as a result thereof, or (h) any Lender shall
decline to consent to a modification or waiver of the terms of this Agreement or
any other Credit Documents requested by the Borrower, then and in such event,
upon request from the Borrower delivered to such Lender and the Administrative
Agent, such Lender shall assign, in accordance with the provisions of Section
10.10 and an appropriately completed Assignment Agreement, all of its rights and
obligations under the Credit Documents to another Lender or a commercial banking
institution selected by the Borrower and (in the case of a commercial banking
institution) reasonably satisfactory to the Administrative Agent, in
consideration for the payments set forth in such Assignment Agreement and
payment by the Borrower to such Lender of all other amounts which such Lender
may be owed pursuant to this Agreement, including, without limitation, Sections
2.11, 3.3, 8.3 and 10.13.
ARTICLE 9. THE ADMINISTRATIVE AGENTS.
Section 9.1. Appointment and Authorization of Administrative Agent,
Syndication Agent, Documentation Agent and Senior Managing Agents. Each Lender
hereby appoints SunTrust Bank, Atlanta as the Administrative Agent, Royal Bank
of Canada as the Syndication Agent, Bank of America, N.A. as the Documentation
Agent, and each of Bank One, NA and Paribas as Senior Managing Agents, under the
Credit Documents and hereby authorizes the Administrative Agent, the Syndication
Agent, the Documentation Agent and the Senior Managing Agents to take such
action as Administrative Agent, Syndication Agent, Documentation Agent and
Senior Managing Agents on each of its behalf and to exercise such powers under
the Credit Documents as are delegated to the Administrative Agent, the
Syndication Agent, the Documentation Agent and the Senior Managing Agents,
respectively, by the terms thereof, together with such powers as are reasonably
incidental thereto.
Section 9.2. Rights and Powers. The Administrative Agent, the Syndication
Agent, the Documentation Agent and the Senior Managing Agents shall have the
same rights and powers under the Credit Documents as any other Lender and may
exercise or refrain from exercising such rights and power as though it were not
an Administrative Agent, a Syndication Agent, a Documentation Agent or a Senior
Managing Agent, and the Administrative Agent, the Syndication Agent, the
Documentation Agent and the Senior Managing Agents and their respective
Controlling Affiliates may accept deposits from, lend money to, and generally
engage in any kind of business with the Borrower or any of its Subsidiaries or
Controlling Affiliates as if it were not an Administrative Agent, a Syndication
Agent, a Documentation Agent or a Senior Managing Agent under the Credit
Documents. The term Lender as used in all Credit Documents, unless the context
otherwise clearly requires, includes the Administrative Agent, the Syndication
Agent, the Documentation Agent and each Senior Managing Agent in their
respective individual capacities as a Lender.
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Section 9.3. Action by Administrative Agent, Syndication Agent,
Documentation Agent and Senior Managing Agents. The obligations of the
Administrative Agent, the Syndication Agent, the Documentation Agent and the
Senior Managing Agents under the Credit Documents are only those expressly set
forth therein. Without limiting the generality of the foregoing, the
Administrative Agent shall not be required to take any action concerning any
Default or Event of Default, except as expressly provided in Sections 7.2 and
7.4. Unless and until the Required Lenders (or, if required by Section 10.11,
all of the Lenders) give such direction the Administrative Agent may, except as
otherwise expressly provided herein or therein, take or refrain from taking such
actions as it deems appropriate and in the best interest of all the Lenders. In
no event, however, shall the Administrative Agent, the Syndication Agent, the
Documentation Agent or any Senior Managing Agent be required to take any action
in violation of applicable law or of any provision of any Credit Document, and
each of the Administrative Agent, the Syndication Agent, the Documentation Agent
and the Senior Managing Agents shall in all cases be fully justified in failing
or refusing to act hereunder or under any other Credit Document unless it first
receives any further assurances of its indemnification from the Lenders that it
may require, including prepayment of any related expenses and any other
protection it requires against any and all costs, expenses, and liabilities it
may incur in taking or continuing to take any such action. The Administrative
Agent shall be entitled to assume that no Default or Event of Default, other
than non-payment of any scheduled principal or interest payment due hereunder,
exists unless notified in writing to the contrary by a Lender or the Borrower.
In all cases in which the Credit Documents do not require the Administrative
Agent, the Syndication Agent, the Documentation Agent or any Senior Managing
Agent to take specific action, the Administrative Agent, each of the Syndication
Agent, the Documentation Agent and the Senior Managing Agents shall be fully
justified in using its discretion in failing to take or in taking any action
thereunder. Any instructions of the Required Lenders, or of any other group of
Lenders called for under specific provisions of the Credit Documents, shall be
binding on all the Lenders and holders of Notes.
Section 9.4. Consultation with Experts. Each of the Administrative Agent,
the Syndication Agent, the Documentation Agent and the Senior Managing Agents
may consult with legal counsel, independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the advice of such counsel,
accountants or experts.
Section 9.5. Indemnification Provisions; Credit Decision. Neither the
Administrative Agent, the Syndication Agent, the Documentation Agent, the Senior
Managing Agents nor any of their directors, officers, agents, or employees shall
be liable for any action taken or not taken by them in connection with the
Credit Documents (i) with the consent or at the request of the Required Lenders
(or, if required by Section 10.11, all of the Lenders), or (ii) in the absence
of their own gross negligence or willful misconduct. Neither the Administrative
Agent, the Syndication Agent, the Documentation Agent, the Senior Managing
Agents nor any of their directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in connection with this Agreement,
any other Credit Document or any Borrowing; (ii) the performance or observance
of any of the covenants or agreements of the Borrower or any Subsidiary
contained herein or in any other Credit Document; (iii) the satisfaction of any
condition specified in Article 4, except
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receipt of items required to be delivered to the Administrative Agent; or
(iv) the validity, effectiveness, genuineness, enforceability, value, worth or
collectability hereof or of any other Credit Document or of any other documents
or writings furnished in connection with any Credit Document; and the
Administrative Agent, the Syndication Agent, the Documentation Agent and the
Senior Managing Agents make no representation of any kind or character with
respect to any such matters mentioned in this sentence. The Administrative
Agent, the Syndication Agent, the Documentation Agent and the Senior Managing
Agents may execute any of their duties under any of the Credit Documents by or
through employees, agents, and attorneys-in-fact and shall not be answerable to
the Lenders or any other Person for the default or misconduct of any such agents
or attorneys-in-fact selected with reasonable care. The Administrative Agent,
the Syndication Agent, the Documentation Agent and the Senior Managing Agents
shall not incur any liability by acting in reliance upon any notice, consent,
certificate, other document or statement (whether written or oral) believed by
it to be genuine or to be sent by the proper party or parties. In particular and
without limiting any of the foregoing, the Administrative Agent and the
Documentation Agent shall have no responsibility for confirming the accuracy of
any Compliance Certificate or other document or instrument received by any of
them under the Credit Documents. The Administrative Agent, the Syndication
Agent, the Documentation Agent and the Senior Managing Agents may treat the
payee of any Note as the holder thereof until written notice of transfer shall
have been filed with such Administrative Agent signed by such owner in form
satisfactory to such Administrative Agent. Each Lender acknowledges that it has
independently, and without reliance on the Administrative Agent, the Syndication
Agent, the Documentation Agent or any of the Senior Managing Agents or any other
Lender, obtained such information and made such investigations and inquiries
regarding the Borrower and its Subsidiaries as it deems appropriate, and based
upon such information, investigations and inquiries, made its own credit
analysis and decision to extend credit to the Borrower in the manner set forth
in the Credit Documents. It shall be the responsibility of each Lender to keep
itself informed about the creditworthiness and business, properties, assets,
liabilities, condition (financial or otherwise) and prospects of the Borrower
and its Subsidiaries, and the Administrative Agent, the Syndication Agent, the
Documentation Agent and the Senior Managing Agents shall have no liability
whatsoever to any Lender for such matters. The Administrative Agent, the
Syndication Agent, the Documentation Agent and the Senior Managing Agents shall
have no duty to disclose to the Lenders information that is not required by any
Credit Document to be furnished by the Borrower or any Subsidiaries to such
Agent at such time, but is voluntarily furnished to such Agent (either in their
respective capacity as Administrative Agent, the Syndication Agent, the
Documentation Agent or the Senior Managing Agents or in their individual
capacity).
Section 9.6. Indemnity. The Lenders shall ratably, in accordance with their
Percentages, indemnify and hold the Administrative Agent, the Syndication Agent,
the Documentation Agent, the Senior Managing Agents, and their directors,
officers, employees, agents and representatives harmless from and against any
liabilities, losses, costs or expenses suffered or incurred by it under any
Credit Document or in connection with the transactions contemplated thereby,
regardless of when asserted or arising, except to the extent they are promptly
reimbursed for the same by the Borrower and except to the extent that any event
giving rise to a claim was caused by the gross negligence or willful misconduct
of the party seeking to
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be indemnified. The obligations of the Lenders under this Section 9.6 shall
survive termination of this Agreement.
Section 9.7. Resignation of Agents and Successor Agents. The Administrative
Agent, the Syndication Agent, the Documentation Agent and any Senior Managing
Agent may resign at any time and shall resign upon any removal thereof as a
Lender pursuant to the terms of this Agreement upon at least thirty (30) days'
prior written notice to the Lenders and the Borrower. Any resignation of the
Administrative Agent shall not be effective until a replacement therefor is
appointed pursuant to the terms hereof. Upon any such resignation of the
Administrative Agent, the Syndication Agent, the Documentation Agent or any
Senior Managing Agent, the Required Lenders and, so long as no Event of Default
shall then exist, with the consent of the Borrower (which consent shall not be
unreasonably withheld or delayed) shall have the right to appoint a successor
Administrative Agent, Syndication Agent, Documentation Agent or Senior Managing
Agent, as the case may be. If no successor Administrative Agent, Syndication
Agent, Documentation Agent or Senior Managing Agent, as the case may be, shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within thirty (30) days after the retiring Administrative Agent's,
Syndication Agent's, Senior Managing Agent's or Documentation Agent's giving of
notice of resignation, then the retiring Administrative Agent, Syndication
Agent, Documentation Agent or Senior Managing Agent, as the case may be, may, on
behalf of the Lenders and, so long as no Event of Default shall then exist, with
the consent of the Borrower (which consent shall not be unreasonably withheld or
delayed) appoint a successor Administrative Agent, Syndication Agent,
Documentation Agent or Senior Managing Agent, as the case may be, which shall be
any Lender hereunder or any commercial bank organized under the laws of the
United States of America or of any State thereof and having a combined capital
and surplus of at least $1,000,000,000. Upon the acceptance of its appointment
as the Administrative Agent, the Syndication Agent, the Documentation Agent or
any Senior Managing Agent hereunder, such successor Administrative Agent,
Syndication Agent, Documentation Agent or Senior Managing Agent, as the case may
be, shall thereupon succeed to and become vested with all the rights and duties
of the retiring Administrative Agent, Syndication Agent, Documentation Agent or
Senior Managing Agent, as the case may be, under the Credit Documents, and the
retiring Administrative Agent, Syndication Agent, Documentation Agent or any
Senior Managing Agent shall be discharged from its duties and obligations
thereunder. After any retiring Administrative Agent's, Syndication Agent's,
Documentation Agent's or Senior Managing Agent's resignation hereunder as
Administrative Agent, Syndication Agent, Documentation Agent or Senior Managing
Agent, as the case may be, the provisions of this Article 9 and all protective
provisions of the other Credit Documents shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Administrative Agent,
Syndication Agent, Documentation Agent or Senior Managing Agent, as the case may
be.
ARTICLE 10. MISCELLANEOUS.
Section 10.1. No Waiver. No delay or failure on the part of the
Administrative Agent or any Lender, or on the part of the holder or holders of
any Notes, in the exercise of any power, right or remedy under any Credit
Document shall operate as a waiver thereof or as an acquiescence in any default,
nor shall any single or partial exercise thereof preclude any other or further
exercise of any other power, right or remedy. To the fullest extent permitted
by
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applicable law, the powers, rights and remedies under the Credit Documents of
the Administrative Agent, the Lenders and the holder or holders of any Notes are
cumulative to, and not exclusive of, any powers, rights or remedies any of them
would otherwise have.
Section 10.2. Non-Business Day. Subject to Section 2.4, if any payment of
principal or interest on any portion of the Term Loan or of any other Obligation
shall fall due on a day which is not a Business Day, interest or fees (as
applicable) at the rate, if any, such portion of the Term Loan or other
Obligation bears for the period prior to maturity shall continue to accrue in
the manner set forth herein on such Obligation from the stated due date thereof
to the next succeeding Business Day, on which the same shall instead be payable.
Section 10.3. Documentary Taxes. The Borrower agrees that it will pay any
documentary, stamp or similar taxes payable with respect to any Credit Document,
including interest and penalties, in the event any such taxes are assessed
irrespective of when such assessment is made, other than any such taxes imposed
as a result of any transfer of an interest in a Credit Document. Each Lender
that determines to seek compensation under this Section 10.3 shall give written
notice to the Borrower and, in the case of a Lender other than the
Administrative Agent, the Administrative Agent of the circumstances that entitle
such Lender to such compensation no later than ninety (90) days after such
Lender receives actual notice or obtains actual knowledge of the law, rule,
order or interpretation or occurrence of another event giving rise to a claim
hereunder. In any event, the Borrower shall not have any obligation to pay any
amount with respect to claims accruing prior to the 90th day preceding such
written demand.
Section 10.4. Survival of Representations. All representations and
warranties made herein or in certificates given pursuant hereto shall survive
the execution and delivery of this Agreement and the other Credit Documents, and
shall continue in full force and effect with respect to the date as of which
they were made as long as the Borrower has any Obligation hereunder or any
Commitment hereunder is in effect.
Section 10.5. Survival of Indemnities. All indemnities and all provisions
relative to reimbursement to the Lenders of amounts sufficient to protect the
yield of the Lenders with respect to the Term Loan, including, but not limited
to, Section 2.11, Section 3.3, Section 7.5, Section 8.3 and Section 10.13
hereof, shall, subject to Section 8.3(c), survive the termination of this
Agreement and the other Credit Documents and the payment of the Term Loan and
all other Obligations and, with respect to any Lender, any replacement by the
Borrower of such Lender pursuant to the terms hereof, in each case for a period
of one (1) year.
Section 10.6. Setoff. In addition to any rights now or hereafter granted
under applicable law and not by way of limitation of any such rights, upon the
occurrence of, and throughout the continuance of, any Event of Default, each
Lender and each subsequent holder of any Note is hereby authorized by the
Borrower at any time or from time to time, without notice to the Borrower or any
other Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special, including,
but not limited to, Indebtedness evidenced by certificates of deposit, whether
matured or unmatured, but not including trust accounts, and in whatever currency
denominated) and any other Indebtedness at any time owing by that Lender or that
subsequent holder to or for the credit or the account of the
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Borrower, whether or not matured, against and on account of the due and unpaid
obligations and liabilities of the Borrower to that Lender or that subsequent
holder under the Credit Documents, irrespective of whether or not that Lender or
that subsequent holder shall have made any demand hereunder. Each Lender shall
promptly give notice to the Borrower of any action taken by it under this
Section 10.6, provided that any failure of such Lender to give such notice to
the Borrower shall not affect the validity of such setoff. Each Lender agrees
with each other Lender a party hereto that if such Lender receives and retains
any payment, whether by setoff or application of deposit balances or otherwise,
in respect of the Term Loan in excess of its ratable share of payments on all
such Obligations then owed to the Lenders hereunder, then such Lender shall
purchase for cash at face value, but without recourse, ratably from each of the
other Lenders such amount of the Term Loan held by each such other Lender as
shall be necessary to cause such Lender to share such excess payment ratably
with all the other Lenders; provided, however, that if any such purchase is made
by any Lender, and if such excess payment or part thereof is thereafter
recovered from such purchasing Lender, the related purchases from the other
Lenders shall be rescinded ratably and the purchase price restored as to the
portion of such excess payment so recovered, but without interest.
Section 10.7. Notices. Except as otherwise specified herein, all notices
under the Credit Documents shall be in writing (including cable, telecopy or
telex) and shall be given to a party hereunder at its address, telecopier number
or telex number set forth below or such other address, telecopier number or
telex number as such party may hereafter specify by notice to the Administrative
Agent and the Borrower, given by courier, by United States certified or
registered mail, by telegram or by other telecommunication device capable of
creating a written record of such notice and its receipt. Notices under the
Credit Documents to the Lenders and the Administrative Agent shall be addressed
to their respective addresses, telecopier or telex number, or telephone numbers
set forth on the signature pages hereof, and to the Borrower to:
Transocean Offshore Inc.
4 Greenway Plaza
Houston, Texas 77046
Attention: Brian C. Voegele
Telephone No.: (713) 232-7587
Fax No.: (713) 232-7033
With a copy to:
Baker & Botts, L.L.P.
One Shell Plaza
Houston, Texas 77002-4995
Attention: Stephen Krebs
Telephone No. (713) 229-1467
Fax No.: (713) 229-1522
Each such notice, request or other communication shall be effective (i) if given
by telecopier, when such telecopy is transmitted to the telecopier number
specified in this Section 10.7, on the signature pages hereof or pursuant to
Section 10.10 and a confirmation of receipt of such
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telecopy has been received by the sender, (ii) if given by courier, when
delivered, (iii) if given by mail, five (5) days after such communication is
deposited in the mail, certified or registered with return receipt requested, or
(iv) if given by any other means, when delivered at the addresses specified in
this Section 10.7, on the signature pages hereof or pursuant to Section 10.10;
provided that any notice given pursuant to Article 2 shall be effective only
upon receipt and, provided further, that any notice that but for this proviso
would be effective after the close of business on a Business Day or on a day
that is not a Business Day shall be effective at the opening of business on the
next Business Day.
Section 10.8. Counterparts. This Agreement may be executed in any number of
counterparts, and by the different parties on different counterpart signature
pages, each of which when executed shall be deemed an original, but all such
counterparts taken together shall constitute one and the same Agreement.
Section 10.9. Successors and Assigns. This Agreement shall be binding upon
the Borrower, each of the Lenders, the Administrative Agent, the Syndication
Agent, the Documentation Agent, the Senior Managing Agents, and their respective
successors and assigns, and shall inure to the benefit of the Borrower, each of
the Lenders, the Administrative Agent, the Syndication Agent, the Documentation
Agent, the Senior Managing Agents, and their respective successors and assigns,
including any subsequent holder of any Note; provided, however, the Borrower may
not assign any of its rights or obligations under this Agreement or any other
Credit Document without the written consent of all Lenders, the Administrative
Agent, the Syndication Agent, the Documentation Agent and the Senior Managing
Agents, and the Administrative Agent, the Syndication Agent, the Documentation
Agent and the Senior Managing Agents may not assign any of their respective
rights or obligations under this Agreement or any Credit Document except in
accordance with Article 9 and no Lender may assign any of its rights or
obligations under this Agreement or any other Credit Document except in
accordance with Section 10.10. Any Lender may at any time pledge or assign all
or any portion of its rights under this Agreement and the Notes issued to it to
a Federal Reserve Bank to secure extensions of credit by such Federal Reserve
Bank to such Lender; provided that no such pledge or assignment shall release a
Lender from any of its obligations hereunder or substitute any such Federal
Reserve Bank for such Lender as a party hereto.
Section 10.10. Sales and Transfers of Portions of Term Loan and Notes;
Participations in Portions of Term Loan and Notes.
(a) Any Lender may at any time sell to one or more commercial banking or
other financial or lending institutions ("Participants") participating interests
in any portion of the Term Loan held by such Lender, any Note held by such
Lender, any Commitment of such Lender or any other interest of such Lender
hereunder, provided that no Lender shall transfer, grant or assign any
participation under which the Participant shall have rights to vote upon or to
consent to any matter to be decided by the Lenders or the Required Lenders
hereunder or under any other Credit Document or to approve any amendment to or
waiver of this Agreement or any other Credit Document, except to the extent such
amendment or waiver would (i) increase the amount of such Lender's Commitment
and such increase would affect such Participant, (ii) reduce the principal of,
or interest on, any portion of the Term Loan held by such Lender, or any fees or
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other amounts payable to such Lender hereunder, and such reduction would affect
such Participant, (iii) postpone any date fixed for any scheduled payment of
principal of, or interest on, any portion of the Term Loan held by such Lender,
or any fees or other amounts payable to such Lender hereunder, and such
postponement would affect such Participant, or (iv) release any collateral
security for any Obligation, except as otherwise specifically provided in any
Credit Document. In the event of any such sale by a Lender of participating
interests to a Participant, such Lender's obligations under this Agreement to
the other parties to this Agreement shall remain unchanged, such Lender shall
remain solely responsible for the performance thereof, such Lender shall remain
the holder of any such Note for all purposes under this Agreement, the Borrower
and the Administrative Agent shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under this
Agreement, and such Lender shall retain the sole right to enforce the
obligations of the Borrower under any Credit Document. The Borrower agrees that
if amounts outstanding under this Agreement and the Notes shall have been
declared or shall have become due and payable in accordance with Section 7.2 or
7.3 upon the occurrence of an Event of Default, each Participant shall be deemed
to have the right of setoff in respect of its participating interest in amounts
owing under this Agreement and any Note to the same extent as if the amount of
its participating interest were owing directly to it as a Lender under this
Agreement or any Note, provided that such right of setoff shall be subject to
the obligation of such Participant to share with the Lenders, and the Lenders
agree to share with such Participant, as provided in Section 10.6. The Borrower
also agrees that each Participant shall be entitled to the benefits of Sections
2.11, 3.3 and 8.3 with respect to its participation in the Commitments and the
Term Loan amounts outstanding from time to time, provided that no Participant
shall be entitled to receive any greater amount pursuant to such Sections than
the transferor Lender would have been entitled to receive in respect of the
amount of the participation transferred if no participation had been
transferred, and provided further, that Sections 8.3(c) and 8.6 shall apply to
the transferor Lender with respect to any claim by any Participant pursuant to
Section 2.11, 3.3 or 8.3 as fully as if such claim was made by such Lender.
Anything herein to the contrary notwithstanding, the Borrower shall not, at any
time, be obligated to pay to any Lender any sum in excess of the sum the
Borrower would have been obligated to pay to such Lender hereunder if such
Lender had not sold any participation in its rights and obligations under this
Agreement or any other Credit Document.
(b) Any Lender may at any time sell to (i) any other Lender or any
affiliate thereof that is a commercial banking or other financial or lending
institution, and, (ii) with the prior written consent of the Administrative
Agent and the Borrower (which shall not be unreasonably withheld or delayed), to
one or more commercial banking or other financial or lending institutions (any
of (i) or (ii), a "Purchasing Lender"), all or any part of its rights and
obligations under this Agreement and the other Credit Documents, pursuant to an
Assignment Agreement in the form attached as Exhibit 10.10, executed by such
Purchasing Lender and such transferor Lender (and, in the case of a Purchasing
Lender which is not then a Lender or an affiliate thereof, by the Borrower and
the Administrative Agent) and delivered to the Administrative Agent; provided
that each such sale to a Purchasing Lender shall be in an amount of $5,000,000
or more, or if in a lesser amount or if as a result of such sale the Commitment
of such Lender or the aggregate principal amount of the portion of the Term Loan
held by such Lender would be less than $5,000,000, such sale shall be of all of
such Lender's rights and obligations under this Agreement and all of the other
Credit Documents payable to it to one Purchasing Lender.
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Notwithstanding the requirement of the Borrower's consent set forth above, but
subject to all of the other terms and conditions of this Section 10.10(b), any
Lender may sell to one or more commercial banking or other financial or lending
institutions all or any part of their rights and obligations under this
Agreement and the other Credit Documents with only the consent of the
Administrative Agent (which shall not be unreasonably withheld or delayed) if an
Event of Default shall have occurred and be continuing. Upon such execution,
delivery and acceptance, from and after the effective date of the transfer
determined pursuant to such Assignment Agreement, (x) the Purchasing Lender
thereunder shall be a party hereto and, to the extent provided in such
Assignment Agreement, have the rights and obligations of a Lender hereunder with
a Commitment as set forth herein and (y) the transferor Lender thereunder shall,
to the extent provided in such Assignment Agreement, be released from its
obligations under this Agreement (and, in the case of an Assignment Agreement
covering all or the remaining portion of a transferor Lender's rights and
obligations under this Agreement, such transferor Lender shall cease to be a
party hereto). Such Assignment Agreement shall be deemed to amend this Agreement
to the extent, and only to the extent, necessary to reflect the addition of such
Purchasing Lender and the resulting adjustment of Commitments and Percentages
arising from the purchase by such Purchasing Lender of all or a portion of the
rights and obligations of such transferor Lender under this Agreement, the Notes
and the other Credit Documents. On or prior to the effective date of the
transfer determined pursuant to such Assignment Agreement, the Borrower, at its
own expense, shall execute and deliver to the Administrative Agent in exchange
for any surrendered Note, a new Note as appropriate to the order of such
Purchasing Lender in an amount equal to the Commitment assumed by it pursuant to
such Assignment Agreement, and, if the transferor Lender has retained a
Commitment or any portion of the Term Loan hereunder, a new Note to the order of
the transferor Lender in an amount equal to the Commitment or such portion of
the Term Loan retained by it hereunder. Such new Notes shall be dated the
Borrowing Date and shall otherwise be in the form of the Notes replaced thereby.
The Notes surrendered by the transferor Lender shall be returned by the
Administrative Agent to the Borrower marked "cancelled."
(c) Upon its receipt of an Assignment Agreement executed by a transferor
Lender, a Purchasing Lender and the Administrative Agent (and, in the case of a
Purchasing Lender that is not then a Lender or an affiliate thereof, by the
Borrower), together with payment by the transferor Lender to the Administrative
Agent hereunder of a registration and processing fee of $3,000 (unless the
Borrower is replacing such Lender pursuant to the terms hereof, in which event
such fee shall be paid by the Borrower), the Administrative Agent shall
(i) promptly accept such Assignment Agreement, and (ii) on the effective date
of the transfer determined pursuant thereto give notice of such acceptance and
recordation to the Lenders and the Borrower. The Borrower shall not be
responsible for such registration and processing fee or any costs or expenses
incurred by any Lender, any Purchasing Lender or the Administrative Agent in
connection with such assignment except as provided above.
(d) If, pursuant to this Section 10.10 any interest in this Agreement or
any Note is transferred to any transferee which is organized under the laws of
any jurisdiction other than the United States of America or any State thereof,
the transferor Lender shall cause such transferee, concurrently with the
effectiveness of such transfer, (i) to represent to the transferor Lender (for
the benefit of the transferor Lender, the Administrative Agent and the Borrower)
that under
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applicable law and treaties no taxes will be required to be withheld by the
Administrative Agent, the Borrower or the transferor Lender with respect to any
payments to be made to such transferee in respect of any portion of the Term
Loan, (ii) to furnish to the transferor Lender (and, in the case of any
Purchasing Lender, the Administrative Agent and the Borrower) two duly completed
and signed copies of either U.S. Internal Revenue Service Form 4224 or U.S.
Internal Revenue Service Form 1001 or such successor forms as shall be adopted
from time to time by the relevant United States taxing authorities (wherein such
transferee claims entitlement to complete exemption from U.S. federal
withholding tax on all interest payments hereunder), and (iii) to agree (for the
benefit of the transferor Lender, the Administrative Agent and the Borrower) to
provide the transferor Lender (and, in the case of any Purchasing Lender, the
Administrative Agent and the Borrower) new forms as contemplated by Section
3.3(b) upon the expiration or obsolescence of any previously delivered form and
comparable statements in accordance with applicable U.S. laws and regulations
and amendments duly executed and completed by such transferee, and to comply
from time to time with all applicable U.S. laws and regulations with regard to
such withholding tax exemption.
(e) Notwithstanding any other provisions of this Section 10.10, no transfer
or assignment of the interests of any Lender hereunder or any grant of
participations therein shall be permitted if such transfer, assignment or grant
would require the Borrower to file a registration statement with the SEC or to
qualify the Term Loan, the Notes or any other Obligations under the securities
laws of any jurisdiction.
Section 10.11. Amendments, Waivers and Consents. Any provision of the
Credit Documents may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by (a) the Borrower, (b) the Required
Lenders, and (c) if the rights or duties of the Administrative Agent, the
Syndication Agent, the Documentation Agent or the Senior Managing Agents are
affected thereby, the Administrative Agent, the Syndication Agent, the
Documentation Agent or the Senior Managing Agents, as the case may be, provided
that:
(i) no amendment or waiver shall (A) increase the Commitments without
the consent of all Lenders or increase any Commitment of any Lender without
the consent of such Lender, or (B) postpone the Maturity Date without the
consent of all Lenders, or reduce the amount of or postpone the date for
any scheduled payment of any principal of or interest (including, without
limitation, any reduction in the rate of interest unless such reduction is
otherwise provided herein) on any portion of the Term Loan or of any fee
payable hereunder, without the consent of each Lender owed any such
Obligation; and
(ii) no amendment or waiver shall, unless signed by each Lender, change
the provisions of this Section 10.11 or the definition of Required Lenders
or the number of Lenders required to take any action under any other
provision of the Credit Documents.
Section 10.12. Headings. Section headings used in this Agreement are for
reference only and shall not affect the construction of this Agreement.
Section 10.13. Legal Fees, Other Costs and Indemnification. The Borrower,
upon demand by the Administrative Agent, agrees to pay the reasonable fees and
disbursements of
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legal counsel to the Administrative Agent in connection with the preparation and
execution of the Credit Documents (which shall be in an amount agreed in writing
by the Borrower), and any amendment, waiver or consent related thereto, whether
or not the transactions contemplated therein are consummated. The Borrower
further agrees to indemnify each Lender, the Administrative Agent, the
Syndication Agent, the Documentation Agent, the Senior Managing Agents, and
their respective directors, officers, employees and attorneys (collectively, the
"Indemnified Parties"), against all losses, claims, damages, penalties,
judgments, liabilities and expenses (including, without limitation, all
reasonable attorneys' fees and other reasonable expenses of litigation or
preparation therefor, whether or not such Indemnified Party is a party thereto)
which any of them may pay or incur as a result of (a) any action, suit or
proceeding by any third party or governmental authority against such Indemnified
Party and relating to any Credit Document, the Term Loan or the application or
proposed application by any of the Borrower of the proceeds of the Term Loan,
REGARDLESS OF WHETHER SUCH CLAIMS OR ACTIONS ARE FOUNDED IN WHOLE OR IN PART
UPON THE ALLEGED SIMPLE OR CONTRIBUTORY NEGLIGENCE OF ANY OF THE INDEMNIFIED
PARTIES AND/OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES OR
ATTORNEYS, (b) any investigation of any third party or any governmental
authority involving any Lender (as a lender hereunder) or the Administrative
Agent, the Syndication Agent, the Documentation Agent or the Senior Managing
Agents (in such capacity hereunder) and related to any use made or proposed to
be made by the Borrower of the proceeds of the Term Loan, or any transaction
financed or to be financed in whole or in part, directly or indirectly with the
proceeds of the Term Loan, and (c) any investigation of any third party or any
governmental authority, litigation or proceeding involving any Lender (as a
lender hereunder) or the Administrative Agent, the Syndication Agent, the
Documentation Agent or the Senior Managing Agents (in such capacity hereunder)
and related to any environmental cleanup, audit, compliance or other matter
relating to any Environmental Law or the presence of any Hazardous Material
(including, without limitation, any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under any Environmental Law) with
respect to the Borrower, regardless of whether caused by, or within the control
of, the Borrower; provided, however, that the Borrower shall not be obligated to
indemnify any Indemnified Party for any of the foregoing arising out of such
Indemnified Party's gross negligence or willful misconduct, as determined
pursuant to a final nonappealable judgment of a court of competent jurisdiction
or as expressly agreed in writing by such Indemnified Party. The Borrower, upon
demand by the Administrative Agent, the Syndication Agent, the Documentation
Agent, a Senior Managing Agent or a Lender at any time, shall reimburse the
Administrative Agent or such Lender for any reasonable legal or other expenses
incurred in connection with investigating or defending against any of the
foregoing, except if the same is excluded from indemnification pursuant to the
provisions of the preceding sentence. Each Indemnified Party agrees to contest
any indemnified claim if requested by the Borrower, in a manner reasonably
directed by the Borrower, with counsel selected by the Indemnified Party and
approved by the Borrower, which approval shall not be unreasonably withheld or
delayed. Any Indemnified Party that proposes to settle or compromise any such
indemnified claim shall give the Borrower written notice of the terms of such
proposed settlement or compromise reasonably in advance of settling or
compromising such claim or proceeding and shall obtain the Borrower's prior
written consent thereto, which consent shall not be unreasonably withheld or
delayed; provided that the Indemnified Party shall not be
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restricted from settling or compromising any such claim if the Indemnified Party
waives its right to indemnity from the Borrower in respect of such claim.
Section 10.14. Governing Law; Submission to Jurisdiction; Waiver of Jury
Trial.
(A) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS, AND THE RIGHTS AND
DUTIES OF THE PARTIES THERETO, SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
(B) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO
AGREE THAT ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
THE ADMINISTRATIVE AGENT, THE DOCUMENTATION AGENT, THE SENIOR MANAGING AGENTS,
THE SYNDICATION AGENT, THE LENDERS OR THE BORROWER MAY BE BROUGHT AND MAINTAINED
IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN OR
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR
THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO
BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION.
THE BORROWER HEREBY IRREVOCABLY DESIGNATES CT CORPORATION SYSTEM, 111 8TH
AVENUE, NEW YORK, NEW YORK 10011, AS THE DESIGNEE, APPOINTEE AND AGENT OF THE
BORROWER TO RECEIVE, FOR AND ON BEHALF OF THE BORROWER, SERVICE OF PROCESS IN
SUCH JURISDICTION IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT HERETO. TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS, BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY
WAIVES ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF
VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY
CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO
THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OF
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THE BORROWER HEREBY
IRREVOCABLY WAIVES
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TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, SUCH IMMUNITY IN RESPECT OF
ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS.
(C) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
Section 10.15. Confidentiality. The Lenders agree to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (i) to their respective affiliates and to prospective
Purchasing Lenders and Participants and their respective directors, officers,
employees and agents, including accountants, legal counsel and other advisors
who have reason to use such Information in connection with the evaluation of the
transactions contemplated by this Agreement (subject to similar confidentiality
provisions as provided herein) solely for purposes of evaluating such
Information, (ii) to the extent requested by any regulatory authority, (iii) to
the extent required by applicable law or regulation or by any subpoena or
similar legal process, (iv) in connection with the exercise of any remedies
hereunder or any proceedings relating to this Agreement or the other Credit
Documents, (v) with the consent of the Borrower, or (vi) to the extent such
Information (x) becomes publicly available other than as a result of a breach of
this Section 10.15, or (y) becomes available on a non-confidential basis from a
source other than the Borrower or its affiliates or the Lenders or their
respective affiliates. For purposes hereof, "Information" means all information
received by the Lenders from the Borrower relating to the Borrower or its
business, other than any such information that is available to the Lenders on a
non-confidential basis prior to disclosure by the Borrower. The Lenders shall
be considered to have complied with their respective obligations if they have
exercised the same degree of care to maintain the confidentiality of such
Information as they would accord their own confidential information.
Section 10.16. Effectiveness. This Agreement shall become effective on the
date (the "Effective Date") on which the Borrower, the Administrative Agent, and
each Lender have signed and delivered to the Administrative Agent a counterparty
signature page hereto or, in the case of a Lender, the Administrative Agent has
received a facsimile notice that such a counterpart has been signed and mailed
to the Administrative Agent.
Section 10.17. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
62
<PAGE>
Section 10.18. Currency Conversion. All payments of Obligations under this
Agreement, the Notes or any other Credit Document shall be made in U.S. Dollars.
If any payment of any Obligation, whether through payment by the Borrower or the
proceeds of any collateral, shall be made in a currency other than U.S. Dollars
as required hereunder, such amount shall be converted into U.S. Dollars at the
official rate for the purchase of U.S. Dollars with the currency in which such
obligation was paid, as quoted by the Lender who is the Administrative Agent in
accordance with the methods customarily used by such Lender for such purposes as
of the close of business on the date of determination. The parties hereto hereby
agree, to the fullest extent that they may effectively do so under applicable
law, that (i) if for the purposes of obtaining any judgment or award it becomes
necessary to convert from any currency other than U.S. Dollars into U.S. Dollars
any amount in connection with the Obligations, then the conversion shall be made
as provided above on the Business Day before the day on which the judgment or
award is given, (ii) in the event that there is a change in the rate of exchange
prevailing between the Business Day before the day on which the judgment or
award is given and the date of payment, the Borrower will pay to the
Administrative Agent, for the benefit of the Lenders, such additional amounts
(if any) as may be necessary, and the Administrative Agent, on behalf of the
Lenders, will pay to the Borrower such excess amounts (if any) as result from
such change in the rate of exchange, to assure that the amount paid on such date
is the amount in such other currency, which when converted at the rate of
exchange described herein on the date of payment, is the amount then due in U.S.
Dollars, and (iii) any amount due from the Borrower under this Section 10.18
shall be due as a separate debt and shall not be affected by judgment or award
being obtained for any other sum due.
Section 10.19. U.S. Dollar Equivalent Combinations. Unless otherwise
provided herein, to the extent that the determination of compliance with any
requirement of this Agreement requires the conversion to U.S. Dollars of foreign
currency amounts, such U.S. Dollar amount shall be computed using the U.S.
Dollar equivalent of the amount of such foreign currency at the time such item
is to be calculated or is incurred, created, transferred or sold for purposes of
this Agreement. The U.S. Dollar equivalent shall be determined by converting
such currency involved in such computation into Dollars at the spot rate for the
purchase of U.S. Dollars with the applicable currency as quoted by the Lender
who is the Administrative Agent in accordance with the methods customarily used
by such Lender for such purposes as of the close of business on the date of
determination thereof specified herein or, if the date of determination thereof
is not otherwise specified herein, on the date two (2) Business Days prior to
such determination.
Section 10.20. Change in Accounting Principles, Fiscal Year or Tax Laws.
If (i) any change in accounting principles from those used in the preparation of
the financial statements of the Borrower referred to in Section 5.9 is hereafter
occasioned by the promulgation of rules, regulations, pronouncements and
opinions by or required by the Financial Accounting Standards Board or the
American Institute of Certified Public Accounts (or successors thereto or
agencies with similar functions), and such change materially affects the
calculation of any component of any financial covenant, standard or term found
in this Agreement, or (ii) there is a material change in federal or foreign tax
laws which materially affects any of the Borrower and its Subsidiaries' ability
to comply with the financial covenants, standards or terms found in this
Agreement, the Borrower and the Lenders agree to enter into negotiations in
order to amend such provisions (with the agreement of the Required Lenders or,
if required by Section 10.11, all of
63
<PAGE>
the Lenders) so as to equitably reflect such changes with the desired result
that the criteria for evaluating any of the Borrower's and its Subsidiaries'
financial condition shall be the same after such changes as if such changes had
not been made. Unless and until such provisions have been so amended, the
provisions of this Agreement shall govern.
Section 10.21. Notice. The Credit Documents constitute the entire
understanding among the Credit Parties, the Lenders, and the Administrative
Agent and supersede all earlier or contemporaneous agreements, whether written
or oral, concerning the subject matter of the Credit Documents. THIS WRITTEN
AGREEMENT TOGETHER WITH THE OTHER CREDIT DOCUMENTS REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 10.22. Officer's Certificates. It is not intended that any
certificate of any officer of the Borrower delivered to the Administrative Agent
or any Lender pursuant to this Agreement shall give rise to any personal
liability on the part of such officer.
Section 10.23. Effect of Inclusion of Exceptions. It is not intended that
the specification of any exception to any covenant herein shall imply that the
excepted matter would, but for such exception, be prohibited or required.
64
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their duly authorized officers as of the day and
year first above written.
BORROWER:
TRANSOCEAN OFFSHORE INC.,
a Cayman Islands Company
By: /s/ Brian C. Voegele
---------------------------
Name: Brian C. Voegele
Title: Vice President, Finance
65
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SUNTRUST BANK, ATLANTA,
As Administrative Agent and Lender
By: /s/ John A. Fields, Jr.
-------------------------------
Name: John A. Fields, Jr.
Title: Vice President
COMMITMENT AMOUNT: $45,000,000
PERCENTAGE: 11.250%
Address for Notices:
- -------------------
SunTrust Bank, Atlanta
SunTrust Plaza
303 Peachtree Street, N.E., 3rd Floor
Atlanta, GA 30308
Attn: Mr. John Fields
Telephone No.: 404/724-3667
Telecopy No.: 404/827-6270
Lending Office:
- --------------
SunTrust Bank, Atlanta
SunTrust Plaza
303 Peachtree Street, N.E., 3rd Floor
Atlanta, GA 30308
Attn: Mr. John Fields
Telephone No.: 404/724-3667
Telecopy No.: 404/827-6270
Payment Instructions:
- --------------------
Bank Name: SunTrust Bank, Atlanta
ABA Number: 061 000 104
City, State: Atlanta, Georgia
Account Number: 908 8000 112
Attention: Pat Etheridge 404-588-8358
Reference: Transocean Offshore Inc.
66
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ROYAL BANK OF CANADA,
As Syndication Agent and Lender
By: /s/Gil J. Bernard
--------------------------
Name: Gil J. Bernard
Title: Senior Manager
COMMITMENT AMOUNT: $45,000,000
PERCENTAGE: 11.250%
Address for Notices:
- -------------------
Royal Bank of Canada
c/o New York Branch
One Liberty Plaza, 4th Floor
New York, NY 10006-1404
Attn: Aurora Lanteigne
Telephone No.: 212/428-6338
Telecopy No.: 212/428-2372
with a copy to:
- --------------
Royal Bank of Canada
12450 Greenspoint Drive, Suite 1450
Houston, TX 77060
Attn: Gil Benard, Senior Manager
Telephone No.: 281/874-0191
Telecopy No.: 281/874-0081
Lending Office:
- --------------
Royal Bank of Canada, New York
One Liberty Plaza, 4th Floor
New York, NY 10006
Attn: Aurora Lanteigne
Telephone No.: 212/428-6338
Telecopy No.: 212/428-2372
67
<PAGE>
ROYAL BANK OF CANADA (cont)
Payment Instructions:
- --------------------
Bank Name: Chase Manhattan Bank, N.A.
ABA Number: 021-00-0021
City/State: Manhattan, NY
Account Name: Royal Bank of Canada, New York
Account Number: 920-1-033363
Benef. Acct. Name: Royal Bank of Canada, New York
Benef. Account #: For Further Credit to Account #218-599-9
Attention: Aurora Lanteigne
Reference: Transocean Sedco Forex (Please specify purpose for each wire)
68
<PAGE>
BANK OF AMERICA, N.A.,
As Documentation Agent and Lender
By: /s/ Paul L. Colon
-----------------------------
Name: Paul L. Colon
Title: Vice President
COMMITMENT AMOUNT: $45,000,000
PERCENTAGE: 11.250%
Address for Notices:
- -------------------
Bank of America, N.A.
333 Clay Street, Suite 4550
Houston, TX 77002
Attn: Paul Colon
Vice President
Telephone No.: 713/651-4834
Telecopy No.: 713/651-4808
Lending Office:
- --------------
Bank of America, N.A.
501 Main Street
Dallas, TX 75202
Attn: Ramon Garcia
Customer Service Representative
Telephone No.: 214/209-2119
Telecopy No.: 214/290-9462
with a copy to:
- --------------
Bank of America, N.A.
333 Clay Street, Suite 4550
Houston, TX 77002
Attn: Thelma Johnson
Telephone No.: 713/651-4864
Telecopy No.: 713/651-4902
69
<PAGE>
BANK OF AMERICA, N.A. (cont)
Payment Instructions:
- --------------------
Fedwire
Bank Name: Bank of America, N.A.
City/State: Dallas, TX 75202
ABA Number: ABA # 111000012
Account Number: 1282000883
Account Name: Transocean Offshore Inc.
In Favor Of: Corp. Loan Funds
70
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BANK ONE, NA
(MAIN OFFICE CHICAGO),
As Senior Managing Agent and Lender
By: /s/Karen Patterson
-----------------------------
Name: Karen Patterson
Title: First Vice President
COMMITMENT AMOUNT: $37,500,000
PERCENTAGE: 9.375%
Address for Notices:
- -------------------
Bank One, NA
910 Travis, 6th Floor
Houston, TX 77002
Attn: Karen Patterson
Telephone No.: 713/751-3863
Telecopy No.: 713/751-3760
Lending Office:
- --------------
Bank One, NA
1 Bank One Plaza
10th Floor, Suite 0634
Chicago, IL 60670
Attn: Bill Laird
Telephone No.: 312/732-5635
Telecopy No.: 312/732-4840
Payment Instructions:
- --------------------
Bank Name: Bank One, Chicago
ABA Number: ABA Transit No.:071000013
Name of Account: LSII Incoming Clearing A/c
Account No.: 481152860000
Attn: Bill Laird
Re: Transocean (SunTrust)
71
<PAGE>
PARIBAS,
As Senior Managing Agent and Lender
By: /s/Marian Livingston
--------------------------------
Name: Marian Livingston
Title: Vice President
By: /s/John H. Roberts
--------------------------------
Name: John H. Roberts
Title: Vice President
COMMITMENT AMOUNT: $37,500,000
PERCENTAGE: 9.375%
Address for Notices:
- -------------------
Paribas
1200 Smith Street, Suite 3100
Houston, TX 77002
Attn: John Roberts
Vice President
Gabe Ellisor
Associate
Telephone No.: 713/659-4811
Telecopy No.: 713/659-6915
Lending Office:
- --------------
Paribas
1200 Smith Street, Suite 3100
Houston, TX 77002
Attn: Leah Evans Hughes, Loan Operations Manager
Telephone No.: 713/982-1126
Attn: Doug Straiton/Candace Grayson
Loan Assistants
Telephone No.: 713/982-1127/713/982-1120
Telecopy No.: 713/659-5305
72
<PAGE>
PARIBAS (cont'd)
Payment Instructions:
- --------------------
Bank Name: Bankers Trust Company New York
ABA Number: ABA# 021001033
For Account 04202195 - Paribas New York
For Further Credit to A/C # 2144-001545 Paribas Houston Agency
Ref: Transocean
73
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THE BANK OF NEW YORK,
As Lender
By: /s/Helen L. Sarro
---------------------------
Name: Helen L. Sarro
Title: Vice President
COMMITMENT AMOUNT: $32,500,000
PERCENTAGE: 8.125%
Address for Notices:
- -------------------
The Bank of New York
One Wall Street, 22nd Floor
New York, NY 10286
Attn: Helen L. Sarro
Telephone No.: 212/635-6898
Telecopy No.: 212/635-6434
Lending Office:
- --------------
The Bank of New York
One Wall Street, 19th Floor
New York, NY 10286
Attn: Theresa A. Foran
A.A.
Telephone No.: 212/635-7921
Telecopy No.: 212/635-7923
Payment Instructions:
- --------------------
Bank Name: The Bank of New York
ABA Number: ABA #021 000 018
City/State: New York, NY
Account Name: Comm Loans Dept
Account Number: GLA/111556
Attention: Bill Barbiero
Reference:
74
<PAGE>
DEN NORSKE BANK ASA,
As Lender
By: /s/Barbara Gronquist
----------------------------
Name: Barbara Gronquist
Title: First Vice President
By: /s/Chr. Tobias Backer
----------------------------
Name: Chr. Tobias Backer
Title: Assistant Vice President
COMMITMENT AMOUNT: $32,500,000
PERCENTAGE: 8.125%
Address for Notices:
- -------------------
Den norske Bank ASA
200 Park Avenue
New York, NY 10166
Attn: Chr. Tobias Backer
Assistant Vice President
Telephone No.: 212/681-3871
Telecopy No.: 212/681-3900
Lending Office:
- --------------
Den norske Bank ASA
200 Park Avenue
New York, NY 10166
Attn: Anny Peralta
Assistant Treasurer
Telephone No.: 212/681-3842
Telecopy No.: 212/681-4123
Payment Instructions:
- --------------------
Bank Name: Unibank
ABA Number: 026 005 694
City/State: New York, NY
Account Name: Transocean Offshore Inc.
Account Number: 100768999
Attention: Anny Peralta
Reference:
75
<PAGE>
THE ROYAL BANK OF SCOTLAND PLC,
As Lender
By: /s/Scott Barton
-------------------------
Name: Scott Barton
Title: Vice President
COMMITMENT AMOUNT: $32,500,000
PERCENTAGE: 8.125%
Address for Notices:
- -------------------
The Royal Bank of Scotland plc
88 Pine Street
New York, NY 10005
Attn: Scott Barton
Vice President Lending
Telephone No.: 212/269-1706
Telecopy No.: 212/480-0791
Lending Office:
- --------------
The Royal Bank of Scotland plc
Wall Street Plaza, 26th Floor
New York, NY 10005
Attn: Jeanne De Quar
Supv Operations
Telephone No.: 212/269-1700, Ext. 260
Telecopy No.: 212/344-4065
Payment Instructions:
- --------------------
Bank Name: Northern Trust International New York
ABA Number: 026-001-122
City/State: Swift Address (NCR US33
Account Name: The Royal Bank of Scotland plc
Account Number: 104083-20230
Attention:
Reference: Transocean Offshore Inc.
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<PAGE>
WELLS FARGO BANK (TEXAS), N.A.,
As Lender
By: /s/Frank W. Schageman
---------------------------
Name: Frank W. Schageman
Title: Vice President, Manager
COMMITMENT AMOUNT: $32,500,000
PERCENTAGE: 8.125%
Address for Notices:
- -------------------
Wells Fargo Bank (Texas), N.A.
1000 Louisiana, 3rd Floor
Houston, TX 77002
Attn: Frank Schageman
Vice President
Telephone No.: 713/319-1365
Telecopy No.: 713/739-1087
Lending Office:
- --------------
Wells Fargo Bank
201 3rd Street, 8th Floor
San Francisco, CA 94103
Attn: Stephen Eiring
Telephone No.: 415/477-5425
Telecopy No.: 415/979-0675
Payment Instructions:
- --------------------
Bank Name: Wells Fargo Bank
ABA Number: 1210000248
City/State: San Francisco, CA
Account Name: Syndicated Loans
Account Number: 2712507201
Attention: Stephen Elring
Reference: Transocean Offshore
77
<PAGE>
THE BANK OF TOKYO-MITSUBISHI, LTD.
As Lender
By: /s/Michael G. Meiss
----------------------------------
Name: Michael G. Meiss
Title: VP & Manager
COMMITMENT AMOUNT: $20,000,000
PERCENTAGE: 5.000%
Address for Notices:
- -------------------
The Bank of Tokyo-Mitsubishi, Ltd.
1100 Louisiana Street
Suite 2800
Houston, TX 77002
Attn: Michael Meiss
Vice President and Manager
Telephone No.: 713/655-3815
Telecopy No.: 713/655-3855
Lending Office:
- --------------
The Bank of Tokyo-Mitsubishi, Ltd.
1100 Louisiana Street
Suite 2800
Houston, TX 77002
Attn: Nadra Breir
Telephone No.: 713/655-3847
Telecopy No.: 713/658-0116
Payment Instructions:
- --------------------
Bank Name: The Bank of Tokyo-Mitsubishi, Ltd. - New York
ABA Number: 026009632
City/State: New York, New York
Account Name: The Bank of Tokyo-Mitsubishi, Ltd. - Houston Agency
Account Number: 30001710
Attention: Nadra Breir
Reference: Transocean Offshore Inc.
78
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NEDSHIP BANK (AMERICA), N.V.,
As Lender
By: /s/R.J.L. van Heel /s/J.S. Klep
--------------------------------------
Name: R.J.L. van Heel J.S. Klep
Title: Managing Managing
Director Director
COMMITMENT AMOUNT: $20,000,000
PERCENTAGE: 5.000%
Address for Notices:
- -------------------
Nedship Bank International Inc.
(As Agents for Nedship Bank (America) N.V.)
66 Field Point Rd.
Greenwich, CT 06830
Attn: Anthony Gurnee
President
Telephone No.: 203/422-2300
Telecopy No.: 203/422-2320
Lending Office:
- --------------
Nedship Bank (America) N.V.
Scharlooweg 55
Willemstad, Curacao NA
Telephone No.: 5999 465-2311
Telecopy No.: 5999 465-2366
Attn: Richard van Heel
Managing Director
with a copy to:
- --------------
Nedship Bank International Inc.
(As Agents for Nedship Bank (America) N.V.)
66 Field Point Rd.
Greenwich, CT 06830
Attn: John Hartigan
Controller
Telephone No.: 203/422-2300
79
<PAGE>
Telecopy No.: 203/422-2320
80
<PAGE>
NEDSHIP BANK (AMERICA), N.V. (CONT)
Payment Instructions:
- --------------------
Bank Name: Republic National Bank of New York
ABA Number: 021004823
City/State: New York, NY
Account Name: Nedship Bank (America) N.V.
Account Number: 608202444
Attention:
Reference: Transocean Offshore Inc.
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WESTDEUTSCHE LANDESBANK
GIROZENTRALE, As Lender
By: /s/Felicia La Forgia
--------------------------------
Name: Felicia La Forgia
Title: Vice President
By: /s/Thomas Lee
--------------------------------
Name: Thomas Lee
Title: Associate
COMMITMENT AMOUNT: $20,000,000
PERCENTAGE: 5.000%
Address for Notices:
- -------------------
Westdeutsche Landesbank Girozentrale, New York Branch
1211 Avenue of the Americas
New York, NY 10036
Attn: Richard Newman
Telephone No.: 212/852-6120
Telecopy No.: 212/852-6307
Westdeutsche Landesbank Girozentrale, New York Branch
1211 Avenue of the Americas
New York, NY 10036
Attn: Thomas Lee
Telephone No.: 212/852-6204
Telecopy No.: 212/852-6148
Lending Office:
- --------------
Westdeutsche Landesbank Girozentrale, New York Branch
1211 Avenue of the Americas
New York, NY 10036
Attn: Richard Newman
Telephone No.: 212/852-6120
Telecopy No.: 212/852-6307
82
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WESTDEUTSCHE LANDESBANK
GIROZENTRALE (CONT)
Payment Instructions:
- --------------------
Bank Name: Chase Manhattan Bank N.A.
ABA Number: 021-000-021
City/State: New York, NY
Account Name: Westdeutsche Landesbank Girozentrale, New York Branch
Account Number: 920-1-060663
Attention: Loan Administration
Reference: Transocean Offshore Inc.
83
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EXHIBIT 10.7
LONG-TERM INCENTIVE PLAN
OF
TRANSOCEAN SEDCO FOREX INC.
(As Amended and Restated Effective January 1, 2000)
I. GENERAL
1.1 PURPOSE OF THE PLAN
The Long-Term Incentive Plan (the "Plan") of Transocean Sedco Forex Inc., a
Cayman Islands exempted company (the "Company"), is intended to advance the best
interests of the Company and its subsidiaries by providing Directors and
employees with additional incentives through the grant of options ("Options") to
purchase ordinary shares, par value US $0.01 per share of the Company ("Ordinary
Shares"), share appreciation rights ("SARs"), restricted Ordinary Shares
("Restricted Shares") and cash performance awards ("Cash Awards"), thereby
increasing the personal stake of such Directors and employees in the continued
success and growth of the Company.
1.2 ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Executive Compensation Committee
or other designated committee (the "Committee") of the Board of Directors of the
Company (the "Board of Directors") which shall consist of at least two
Directors, all of whom (i) are not eligible for awards under Articles II and III
of the Plan, (ii) are "non-employee directors" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, and (iii) are outside directors
satisfying the requirements of Section 162(m) of the Internal Revenue Code of
1986, as amended, or any successor thereto ("the Code"). The Committee shall
have authority to interpret conclusively the provisions of the Plan, to adopt
such rules and regulations for carrying out the Plan as it may deem advisable,
to decide conclusively all questions of fact arising in the application of the
Plan, and to make all other determinations necessary or advisable for the
administration of the Plan. Notwithstanding the foregoing, the Committee shall
have no power or discretion to vary the amount or terms of awards under Article
IV of the Plan, except as provided in Section 6.2. All decisions and acts of the
Committee shall be final and binding upon all affected Plan participants.
(b) The Committee shall designate the eligible employees, if any, to be
granted awards under Articles II and III and the type and amount of such awards
and the time when awards will be granted. All awards granted under the Plan
shall be on the terms and subject to the conditions hereinafter provided.
1.3 ELIGIBLE PARTICIPANTS
Employees, including officers, of the Company and its subsidiaries, and of
partnerships or joint ventures in which the Company and its subsidiaries have a
significant ownership interest as determined by the Committee (all of such
subsidiaries,
1
<PAGE>
partnerships and joint ventures being referred to as "Subsidiaries") shall be
eligible for awards under Articles II, III and V of the Plan. Directors who are
not employees of the Company or its Subsidiaries shall not be eligible for
awards under Articles II, III and V.
Each Director of the Company who is not an officer or employee of the
Company or any of its subsidiaries (an "Eligible Director") shall automatically
be granted awards under Article IV of the Plan. Each Eligible Director to whom
Options or SARs are granted under Article IV is hereinafter referred to as a
"Participant."
1.4 AWARDS UNDER THE PLAN
Awards to employees under Articles II and III may be in the form of (i)
Options to purchase Ordinary Shares, (ii) Share Appreciation Rights which may be
either freestanding or issued in tandem with Options, (iii) Restricted Ordinary
Shares, (iv) Supplemental Payments which may be awarded with respect to Options,
Share Appreciation Rights and Restricted Ordinary Shares, or (v) any combination
of the foregoing. Awards to employees under Article V will be in the form of
performance awards payable in cash.
Awards to Eligible Directors under Article IV shall be in the form of (i)
Options to purchase Ordinary Shares and Supplemental Payments with respect
thereto, or (ii) solely in the case of Eligible Directors residing in Norway,
freestanding SARs.
1.5 SHARES SUBJECT TO THE PLAN
The aggregate number of Ordinary Shares which may be issued with respect to
awards made under Articles II and III shall not exceed 12,900,000 shares,
reduced by the number of shares which have been issued pursuant to such Articles
prior to the date of this Amendment and Restatement. In addition, the aggregate
number of Ordinary Shares which may be issued with respect to awards made under
Article IV shall not exceed 400,000, reduced by the number of shares which have
been issued pursuant to such Article prior to the date of this Amendment and
Restatement. At no time shall the number of shares issued plus the number of
shares estimated by the Committee to be ultimately issued with respect to
outstanding awards under the Plan exceed the number of shares that may be issued
under the Plan. No employee shall be granted Share Options, freestanding Share
Appreciation Rights, or Restricted Ordinary Shares, or any combination of the
foregoing, with respect to more than 600,000 Ordinary Shares in any fiscal year
(subject to adjustment as provided in Section 6.2). No employee shall be
granted a Supplemental Payment in any fiscal year with respect to more than the
number of Ordinary Shares covered by Share Options, freestanding Share
Appreciation Rights or Restricted Ordinary Shares awards granted to such
employee in such fiscal year. Shares distributed pursuant to the Plan may
consist of authorized but unissued shares or treasury shares of the Company, as
shall be determined from time to time by the Board of Directors.
If any Option under the Plan shall expire, terminate or be canceled
(including cancellation upon the holder's exercise of a related Share
Appreciation Right) for any
2
<PAGE>
reason without having been exercised in full, or if any Restricted Ordinary
Shares shall be forfeited to the Company, the unexercised Options and forfeited
Restricted Ordinary Shares shall not count against the above limit and shall
again become available for grants under the Plan (regardless of whether the
holder of such Options or shares received dividends or other economic benefits
with respect to such Options or shares). Ordinary Shares equal in number to the
shares surrendered in payment of the option price, and Ordinary Shares which are
withheld in order to satisfy federal, state or local tax liability, shall not
count against the above limit and shall again become available for grants under
the Plan. Only the number of Ordinary Shares actually issued upon exercise of a
Share Appreciation Right or payment of a Supplemental Payment shall count
against the above limit, and any shares which were estimated to be used for such
purposes and were not in fact so used shall again become available for grants
under the Plan.
Freestanding Share Appreciation Rights which may be settled solely in cash
shall be issued with respect to no more than an aggregate of 250,000 underlying
shares. Such SARs shall not count against the limits set forth above on the
number of Ordinary Shares which may be issued under the Plan. If any
freestanding SAR shall expire, terminate, or be canceled for any reason without
having been exercised in full, the unexercised SARs shall not count against this
limit and shall again become available for grants under the Plan.
1.6 OTHER COMPENSATION PROGRAMS
The existence and terms of the Plan shall not limit the authority of the
Board of Directors in compensating Directors and employees of the Company and
its subsidiaries in such other forms and amounts, including compensation
pursuant to any other plans as may be currently in effect or adopted in the
future, as it may determine from time to time.
II. SHARE OPTIONS AND SHARE APPRECIATION RIGHTS
2.1 TERMS AND CONDITIONS OF OPTIONS
Subject to the following provisions, all Options granted under the Plan to
employees of the Company and its Subsidiaries shall be in such form and shall
have such terms and conditions as the Committee, in its discretion, may from
time to time determine.
(a) Option Price. The option price per share shall not be less than the
fair market value of the Ordinary Shares (as determined by the Committee) on the
date the Option is granted. Notwithstanding the foregoing, the option price per
share with respect to any Option granted by the Committee within 90 days of the
closing of the initial public offering of the Company's Ordinary Shares shall be
at the initial public offering price for such Shares.
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(b) Term of Option. The term of an Option shall not exceed ten years from
the date of grant, except as provided pursuant to Section 2.1(g) with respect to
the death of an optionee. No Option shall be exercised after the expiration of
its term.
(c) Exercise of Options. Options shall be exercisable at such time or times
and subject to such terms and conditions as the Committee shall specify in the
Option grant. The Committee shall have discretion to at any time declare all or
any portion of the Options held by any optionee to be immediately exercisable.
An Option may be exercised in accordance with its terms as to any or all shares
purchasable thereunder.
(d) Payment for Shares. The Committee may authorize payment for shares as
to which an Option is exercised to be made in cash, Ordinary Shares or in such
other manner as the Committee in its discretion may provide.
(e) Nontransferability of Options. No Option or any interest therein shall
be transferable by the optionee other than by will or by the laws of descent and
distribution. During an optionee's lifetime, all Options shall be exercisable
only by such optionee or by the guardian or legal representative of the
optionee.
(f) Shareholder Rights. The holder of an Option shall, as such, have none
of the rights of a shareholder.
(g) Termination of Employment. The Committee shall have discretion to
specify in the Option grant or an amendment thereof, provisions with respect to
the period during which the Option may be exercised following the optionee's
termination of employment. Notwithstanding the foregoing, the Committee shall
not permit any Option to be exercised beyond the term of the Option established
pursuant to Section 2.1(b), except that the Committee may provide that,
notwithstanding such Option term, an Option which is outstanding on the date of
an optionee's death shall remain outstanding and exercisable for up to one year
after the optionee's death.
(h) Change of Control. Notwithstanding the exercisability schedule
governing any Option, upon the occurrence of a Change of Control (as defined in
Section 6.10) all Options outstanding at the time of such Change of Control and
held by optionees who are employees of the Company or its Subsidiaries at the
time of such Change of Control shall become immediately exercisable and, unless
the optionee agrees otherwise in writing, shall remain exercisable for the
remainder of the Option term.
2.2 SHARE APPRECIATION RIGHTS IN TANDEM WITH OPTIONS
(a) The Committee may, either at the time of grant of an Option or at any
time during the term of the Option, grant Share Appreciation Rights with respect
to all or any portion of the Ordinary Shares covered by such Option. A tandem
Share Appreciation Right may be exercised at any time the Option to which it
relates is then exercisable, but only to the extent the Option to which it
relates is exercisable, and shall be subject to the conditions applicable to
such Option. When a tandem Share Appreciation Right is exercised, the Option to
which it relates shall cease to be exercisable to the extent of the number of
shares with respect to which the tandem Share Appreciation Right is
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exercised. Similarly, when an Option is exercised, the tandem Share Appreciation
Rights relating to the shares covered by such Option exercise shall terminate.
Any tandem Share Appreciation Right which is outstanding on the last day of the
term of the related Option (as determined pursuant to Section 2.1(b)) shall be
automatically exercised on such date for cash without any action by the
optionee.
(b) Upon exercise of a tandem Share Appreciation Right, the holder shall
receive, for each share with respect to which the tandem Share Appreciation
Right is exercised, an amount (the "Appreciation") equal to the amount by which
the fair market value (as defined below) of an Ordinary Share on the date of
exercise of the Share Appreciation Right exceeds the option price per share of
the Option to which the tandem Share Appreciation Right relates. For purposes of
the preceding sentence, the fair market value of an Ordinary Share shall be the
average of the high and low prices of such share as reported on the consolidated
reporting system. The Appreciation shall be payable in cash, Ordinary Shares, or
a combination of both, at the option of the Committee, and shall be paid within
30 days of the exercise of the tandem Share Appreciation Right.
(c) Notwithstanding the foregoing, if a tandem Share Appreciation Right is
exercised within 60 days of the occurrence of a Change of Control, (i) the
Appreciation and any Supplemental Payment (as defined in Section 2.4) to which
the holder is entitled shall be payable solely in cash, and (ii) in addition to
the Appreciation and the Supplemental Payment (if any), the holder shall
receive, in cash, (1) the amount by which the greater of (a) the highest market
price per Ordinary Share during the 60-day period preceding exercise of the
tandem Share Appreciation Right or (b) the highest price per Ordinary Share (or
the cash-equivalent thereof as determined by the Board of Directors) paid by an
acquiring person during the 60-day period preceding a Change of Control, exceeds
the fair market value of an Ordinary Share on the date of exercise of the tandem
Share Appreciation Right, plus (2) if the holder is entitled to a Supplemental
Payment, an additional payment, calculated under the same formula as used for
calculating such holder's Supplemental Payment, with respect to the amount
referred to in clause (1) of this sentence.
2.3 FREESTANDING SHARE APPRECIATION RIGHTS
The Committee may grant Freestanding Share Appreciation Rights to employees
of the Company and its Subsidiaries, in such form and having such terms and
conditions as the Committee, in its discretion, may from time to time determine,
subject to the following provisions.
(a) Base Price and Appreciation. Each freestanding SAR shall be granted
with a base price, which shall not be less than the fair market value of the
Ordinary Shares (as determined by the Committee) on the date the SAR is granted.
Upon exercise of a freestanding SAR, the holder shall receive, for each share
with respect to which the SAR is exercised, an amount (the "Appreciation") equal
to the amount by which the fair market value (as defined below) of an Ordinary
Share on the date of exercise of the SAR exceeds the base price of the SAR. For
purposes of the preceding
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sentence, the fair market value of an Ordinary Share shall be the average of the
high and low prices of such share as reported on the New York Stock Exchange
composite tape. The Appreciation shall be payable in cash and shall be paid
within 30 days of the exercise of the SAR.
(b) Term of SAR. The term of a freestanding SAR shall not exceed ten years
from the date of grant, except as provided pursuant to Section 2.3(f) with
respect to the death of the grantee. No SAR shall be exercised after the
expiration of its term. Any freestanding SAR which is outstanding on the last
day of its term (as such term may be extended pursuant to Section 2.3(f)) and as
to which the Appreciation is a positive number on such date shall be
automatically exercised on such date for cash without any action by the grantee.
(c) Exercise of SARs. Freestanding SARs shall be exercisable at such time
or times and subject to such terms and conditions as the Committee may specify
in the SAR grant. The Committee shall have discretion to at any time declare all
or any portion of the freestanding SARs then outstanding to be immediately
exercisable. A freestanding SAR may be exercised in accordance with its terms in
whole or in part.
(d) Nontransferability of SARs. No SAR or any interest therein shall be
transferable by the grantee other than by will or by the laws of descent and
distribution. During a grantee's lifetime, all SARs shall be exercisable only by
such grantee or by the guardian or legal representative of the grantee.
(e) Shareholder Rights. The holder of an SAR shall, as such, have none of
the rights of a shareholder.
(f) Termination of Employment. The Committee shall have discretion to
specify in the SAR grant or an amendment thereof, provisions with respect to the
period during which the SAR may be exercised following the grantee's termination
of employment. Notwithstanding the foregoing, the Committee shall not permit any
SAR to be exercised beyond the term of the SAR established pursuant to Section
2.3(b), except that the Committee may provide that, notwithstanding such SAR
term, an SAR which is outstanding on the date of a grantee's death shall remain
outstanding and exercisable for up to one year after the grantee's death.
(g) Change of Control. Notwithstanding the exercisability schedule
governing any SAR, upon the occurrence of a Change of Control (as defined in
Section 6.10) all SARs outstanding at the time of such Change of Control and
held by grantees who are employees of the Company or its Subsidiaries at the
time of such Change of Control shall become immediately exercisable and, unless
the grantee agrees otherwise in writing, shall remain exercisable for the
remainder of the SAR term. In addition, the Committee may provide that if a
freestanding SAR is exercised within 60 days of the occurrence of a Change of
Control, in addition to the Appreciation the holder shall receive, in cash, the
amount by which the greater of (a) the highest market price per Ordinary Share
during the 60-day period preceding exercise of the SAR or (b) the highest price
per Ordinary Share (or the cash equivalent thereof as determined by the
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Board of Directors) paid by an acquiring person during the 60-day period
preceding a Change of Control, exceeds the fair market value of an Ordinary
Share on the date of exercise of the SAR.
2.4 SUPPLEMENTAL PAYMENT ON EXERCISE OF OPTIONS OR SHARE APPRECIATION RIGHTS
The Committee, either at the time of grant or at the time of exercise of
any Option or tandem Share Appreciation Right, may provide for a supplemental
payment (the "Supplemental Payment") by the Company to the optionee with respect
to the exercise of any Option or tandem Share Appreciation Right. The
Supplemental Payment shall be in the amount specified by the Committee, which
shall not exceed the amount necessary to pay the income tax payable to the
national government with respect to both exercise of the Option or tandem Share
Appreciation Right and receipt of the Supplemental Payment, assuming the
optionee is taxed at the maximum effective income tax rate applicable thereto.
The Committee shall have the discretion to grant Supplemental Payments that are
payable solely in cash or Supplemental Payments that are payable in cash,
Ordinary Shares, or a combination of both, as determined by the Committee at the
time of payment. The Supplemental Payment shall be paid within 30 days of the
date of exercise of an Option or Share Appreciation Right (or, if later, within
30 days of the date on which income is recognized for federal income tax
purposes with respect to such exercise).
2.5 STATUTORY OPTIONS
Subject to the limitations on Option terms set forth in Section 2.1, the
Committee shall have the authority to grant (i) incentive stock options within
the meaning of Section 422 of the Code and (ii) Options containing such terms
and conditions as shall be required to qualify such Options for preferential tax
treatment under the Code as in effect at the time of such grant. Options
granted pursuant to this Section 2.4 may contain such other terms and conditions
permitted by Article II of this Plan as the Committee, in its discretion, may
from time to time determine (including, without limitation, provision for Share
Appreciation Rights and Supplemental Payments), to the extent that such terms
and conditions do not cause the Options to lose their preferential tax
treatment. To the extent the Code and Regulations promulgated thereunder
require a plan to contain specified provisions in order to qualify options for
preferential tax treatment, such provisions shall be deemed to be stated in this
Plan.
III. RESTRICTED ORDINARY SHARES
3.1 TERMS AND CONDITIONS OF RESTRICTED ORDINARY SHARES AWARDS
Subject to the following provisions, all awards of Restricted Ordinary
Shares under the Plan to employees of the Company and its Subsidiaries shall be
in such form and shall have such terms and conditions as the Committee, in its
discretion, may from time to time determine.
(a) The Restricted Ordinary Shares award shall specify the number of
Restricted Ordinary Shares to be awarded, the price, if any, to be paid by the
recipient
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of the Restricted Ordinary Shares, and the date or dates on which the Restricted
Ordinary Shares will vest. The vesting of Restricted Ordinary Shares may be
conditioned upon the completion of a specified period of service with the
Company or its Subsidiaries, upon the attainment of specified performance goals,
or upon such other criteria as the Committee may determine in its sole
discretion.
(b) Share certificates representing the Restricted Ordinary Shares granted
to an employee shall be registered in the employee's name. Such certificates
shall either be held by the Company on behalf of the employee, or delivered to
the employee bearing a legend to restrict transfer of the certificate until the
Restricted Ordinary Shares have vested, as determined by the Committee. The
Committee shall determine whether the employee shall have the right to vote
and/or receive dividends on the Restricted Ordinary Shares before they have
vested. No Restricted Ordinary Shares may be sold, transferred, assigned, or
pledged by the employee until they have vested in accordance with the terms of
the Restricted Ordinary Shares award. In the event of an employee's termination
of employment before all of his Restricted Ordinary Shares have vested, or in
the event other conditions to the vesting of Restricted Ordinary Shares have not
been satisfied prior to any deadline for the satisfaction of such conditions set
forth in the award, the Restricted Ordinary Shares which have not vested shall
be forfeited and any purchase price paid by the employee shall be returned to
the employee. At the time Restricted Ordinary Shares vest (and, if the employee
has been issued legended certificates of Restricted Ordinary Shares, upon the
return of such certificates to the Company), a certificate for such vested
shares shall be delivered to the employee (or the Beneficiary designated by the
employee in the event of death), free of all restrictions.
(c) Notwithstanding the vesting conditions set forth in the Restricted
Ordinary Shares award, (i) the Committee may in its discretion accelerate the
vesting of Restricted Ordinary Shares at any time, and (ii) all Restricted
Ordinary Shares shall vest upon a Change of Control of the Company.
3.2 PERFORMANCE AWARDS UNDER SECTION 162(M) OF THE CODE
The Committee shall have the right to designate awards of Restricted
Ordinary Shares as "Performance Awards." Notwithstanding any other provisions
of this Article III, awards so designated shall be granted and administered in a
manner designed to preserve the deductibility of the compensation resulting from
such awards in accordance with Section 162(m) of the Code. The grant or vesting
of a Performance Award shall be subject to the achievement of performance
objectives (the "Performance Objectives") established by the Committee based on
one or more of the following criteria, in each case applied to the Company on a
consolidated basis and/or to a business unit, and either as an absolute measure
or as a measure of comparative performance relative to a peer group of
companies: sales, operating profits, operating profits before interest expense
and taxes, net earnings, earnings per share, return on equity, return on assets,
return on invested capital, total shareholder return, cash flow, debt to equity
ratio, market share, share price, economic value added, and market value added.
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The Performance Objectives for a particular Performance Award relative to a
particular fiscal year shall be established by the Committee in writing no later
than 90 days after the beginning of such year. The Committee shall have the
authority to determine whether the Performance Objectives and other terms and
conditions of the award are satisfied, and the Committee's determination as to
the achievement of Performance Objectives relating to a Performance Award shall
be made in writing. The Committee shall have discretion to modify or waive the
Performance Objectives or conditions to the grant or vesting of a Performance
Award only to the extent that the exercise of such discretion would not cause
the Performance Award to fail to qualify as "performance-based compensation"
within the meaning of Section 162(m) of the Code.
3.3 SUPPLEMENTAL PAYMENT ON VESTING OF RESTRICTED ORDINARY SHARES
The Committee, either at the time of grant or at the time of vesting of
Restricted Ordinary Shares, may provide for a Supplemental Payment by the
Company to the employee in an amount specified by the Committee which shall not
exceed the amount necessary to pay the federal income tax payable with respect
to both the vesting of the Restricted Ordinary Shares and receipt of the
Supplemental Payment, assuming the employee is taxed at the maximum effective
federal income tax rate applicable thereto and has not elected to recognize
income with respect to the Restricted Ordinary Shares before the date such
Restricted Ordinary Shares vest. The Supplemental Payment shall be paid within
30 days of each date that Restricted Ordinary Shares vest. The Committee shall
have the discretion to grant Supplemental Payments that are payable solely in
cash or Supplemental Payments that are payable in cash, Ordinary Shares, or a
combination of both, as determined by the Committee at the time of payment.
IV. SHARE OPTIONS OR FREESTANDING SHARE APPRECIATION RIGHTS
FOR DIRECTORS
4.1 GRANT OF OPTIONS OR FREESTANDING SARS
Each person who becomes an Eligible Director (other than a person who first
becomes an Eligible Director on the date of an annual meeting of the Company's
shareholders) shall be granted, effective as of the date such person becomes an
Eligible Director, (i) an Option to purchase 4,000 Ordinary Shares, if such
person is not then residing in Norway, or (ii) a freestanding SAR with respect
to 4,000 Ordinary Shares, if such person is then residing in Norway. Each
person who is or becomes an Eligible Director on the date of an annual meeting
of the Company's shareholders and whose service on the Board of Directors will
continue after such meeting shall be granted, effective as of the date of such
meeting, (i) an Option to purchase 4,000 Ordinary Shares, if such person is not
then residing in Norway, or (ii) a freestanding SAR with respect to 4,000
Ordinary Shares, if such person is then residing in Norway.
4.2 TERMS AND CONDITIONS OF OPTIONS
Each Option granted under this Article shall have the following terms and
conditions:
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(a) Option Price. The option price per share shall be the closing sales
price of an Ordinary Share on the date the Option is granted (or, if the
Ordinary Shares are not traded on such date, on the immediately preceding date
on which the Ordinary Shares are traded).
(b) Term of Option. Each Option shall expire ten years from the date of
grant, except as provided in Section 4.2(c) with respect to the death of an
optionee. No Option shall be exercised after the expiration of its term.
(c) Exercise of Options. Subject to Section 4.2(g) and the remainder of
this paragraph, each Option shall become exercisable in installments as follows:
(1) a total of 1,333 Ordinary Shares may be purchased through exercise of the
Option on or after the first anniversary of the date of grant; (2) a total of
2,666 Ordinary Shares may be purchased through exercise of the Option on or
after the second anniversary of the date of grant; and (3) a total of 4,000
Ordinary Shares may be purchased through exercise of the Option on or after the
third anniversary of the date of grant. If a Participant ceases to be a Director
of the Company as a result of death, disability, or retirement from the Board of
Directors on his Retirement Date (as defined in Section 4.2(i)), each Option
shall immediately become fully exercisable and shall remain exercisable for the
remainder of its term, except that an Option which is outstanding on the date of
an optionee's death shall remain outstanding and exercisable for a term of the
greater of ten years from the date of grant or one year after the optionee's
death. If a Participant ceases to be a Director of the Company for any reason
not set forth in the preceding sentence, no additional portions of the Option
will become exercisable, and the portion of the Option that is then exercisable
shall expire if not exercised within 60 days after cessation of service as a
Director. An Option may be exercised in accordance with its terms as to any or
all shares purchasable thereunder.
(d) Payment for Shares. Payment for shares as to which an Option is
exercised shall be made in cash, Ordinary Shares or a combination thereof, in
the discretion of the Participant, or in such other manner as the Committee in
its discretion may provide. Ordinary Shares delivered in payment of the Option
price shall be valued at the average of the high and low prices of such Shares
on the date of exercise (or, if the Ordinary Shares are not traded on such date,
at the weighted average of the high and low prices on the nearest trading dates
before and after such date).
(e) Nontransferability of Options. No Option or any interest therein shall
be transferable by the Participant other than by will or by the laws of descent
and distribution. During a Participant's lifetime, all Options shall be
exercisable only by such Participant or by the guardian or legal representative
of the Participant.
(f) Shareholder Rights. The holder of an Option shall, as such, have none
of the rights of a shareholder.
(g) Change of Control. Notwithstanding any other provisions of the Plan,
upon the occurrence of a Change of Control (as defined in Section 6.10) all
Options
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outstanding at the time of such Change of Control shall become immediately
exercisable and shall remain exercisable for the remainder of their term.
(h) Tax Status. The Options granted under this Article shall be "non-
qualified" options, and shall not be incentive stock options as defined in
Section 422 of the Code.
(i) Retirement Date. For purposes of this Article, a Participant's
Retirement Date shall mean the date on which the Participant shall be required
to retire from the Board of Directors under the retirement policies of the Board
of Directors as in effect on the date of the Participant's retirement.
4.3 TERMS AND CONDITIONS OF FREESTANDING SHARE APPRECIATION RIGHTS
Each Freestanding Share Appreciation Right granted under this Article shall
have the following terms and conditions:
(a) Base Price and Appreciation. The base price of the SAR shall be the
closing sales price of an Ordinary Share on the date the SAR is granted (or, if
the Ordinary Shares are not traded on such date, on the immediately preceding
date on which the Ordinary Shares are traded). Upon exercise of an SAR, the
holder shall receive, for each share with respect to which the SAR is exercised,
an amount (the "Appreciation") equal to the amount by which the fair market
value of an Ordinary Share on the date of exercise of the SAR exceeds the base
price of the SAR. For purposes of the preceding sentence, the fair market value
of an Ordinary Share shall be the average of the high and low prices of such
share as reported on the New York Stock Exchange composite tape. The
Appreciation shall be payable in cash and shall be paid within 30 days of the
exercise of the SAR.
(b) Term of SAR. Each SAR shall expire ten years from the date of grant,
except as provided in Section 4.3(c) with respect to the death of a Participant.
No SAR shall be exercised after the expiration of its term.
(c) Exercise of SARs. Subject to Section 4.3(f) and the remainder of this
paragraph, each SAR shall become exercisable in installments as follows: (1) the
SAR shall be exercisable with respect to a total of 1,333 Ordinary Shares on or
after the first anniversary of the date of grant; (2) the SAR shall be
exercisable with respect to a total of 2,666 Ordinary Shares on or after the
second anniversary of the date of grant; and (3) the SAR shall be exercisable
with respect to a total of 4,000 Ordinary Shares on or after the third
anniversary of the date of grant. If a Participant ceases to be a Director of
the Company as a result of death, disability, or retirement from the Board of
Directors on his Retirement Date (as defined in Section 4.2(i)), each SAR shall
immediately become fully exercisable and shall remain exercisable for the
remainder of its term, except that notwithstanding the term of the SAR, an SAR
which is outstanding on the date of a Participant's death shall remain
outstanding and exercisable for a term of the greater of ten years from the date
of grant or one year after the Participant's death. If a Participant ceases to
be a Director of the Company for any reason not set forth in the preceding
sentence, no additional portions of the SAR will become exercisable, and the
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portion of the SAR that is then exercisable shall expire if not exercised within
60 days after cessation of service as a Director. An SAR may be exercised in
accordance with its terms in whole or in part.
(d) Nontransferability of SARs. No SAR or any interest therein shall be
transferable by the Participant other than by will or by the laws of descent and
distribution. During a Participant's lifetime, all SARs shall be exercisable
only by such Participant or by the guardian or legal representative of the
Participant.
(e) Shareholder Rights. The holder of an SAR shall, as such, have none of
the rights of a shareholder.
(f) Change of Control. Notwithstanding any other provisions of the Plan,
upon the occurrence of a Change of Control (as defined in Section 6.10) all SARs
outstanding at the time of such Change of Control shall become immediately
exercisable and shall remain exercisable for the remainder of their term.
(g) Special Provisions. Notwithstanding the foregoing provisions of Section
4.3, the freestanding SARs granted to Eligible Directors residing in Norway who
were first elected to the Board of Directors in 1996 (and who waived the grant
of an Option to which they were then entitled under the terms of the Plan as
then in effect) with respect to their initial election to the Board of Directors
(i) shall have a base price equal to the closing sales price of the Ordinary
Shares on the date of their initial election, and (ii) shall have exercise and
expiration dates determined as if such SARs had been granted on the date of
their initial election.
4.4 SUPPLEMENTAL PAYMENT ON EXERCISE OF PRIOR AWARDS OF OPTIONS OR SARS
(a) Supplemental Payments. Within 30 days of each date that an Option or
SAR granted prior to the date of this Amendment and Restatement is exercised, a
Supplemental Payment shall be paid to the Participant (or to the Participant's
Beneficiary in the event of death), in cash, in an amount equal to the amount
necessary to pay the income tax payable to the national government where the
Director resides with respect to both the exercise of such Option or SAR and
receipt of the Supplemental Payment, assuming the Participant is taxed at the
maximum effective income tax rate applicable thereto; provided, however, that no
such payment shall be made if the Participant has waived his right to the
payment pursuant to Section 4.4(b).
(b) Waiver. The Committee may grant an additional Option or SAR, as
applicable, to any Participant who agrees in writing to waive the right to
receive a supplemental cash payment under Section 4.4(a). Such Option or SAR
shall be immediately exercisable. All other provisions of Section 4.2 or 4.3
will apply as though the date of acceptance of the Option or SAR were the date
of grant. Notwithstanding the foregoing, however, in no event shall (i) the
number of Ordinary Shares subject to this Section 4.4(b) exceed 50,000, or (ii)
the number of SARs subject to this Section 4.4(b) exceed 50,000.
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V. CASH PERFORMANCE AWARDS
5.1 TERMS AND CONDITIONS OF CASH PERFORMANCE AWARDS
A "Cash Award" is a cash bonus paid solely on account of the attainment of
one or more objective performance goals that have been preestablished by the
Committee. Each Cash Award shall be subject to such terms and conditions,
restrictions and contingencies, if any, as the Committee shall determine.
Restrictions and contingencies limiting the right to receive a cash payment
pursuant to a Cash Award shall be based on the achievement of single or multiple
performance goals over a performance period established by the Committee. No
employee shall receive Cash Awards during any calendar year aggregating in
excess of $1 million.
5.2 PERFORMANCE OBJECTIVES UNDER SECTION 162(M) OF THE CODE
The Committee shall have the right to designate Cash Awards as "Cash
Performance Awards." Notwithstanding any other provisions of this Article V,
awards so designated shall be granted and administered in a manner designed to
preserve the deductibility of the compensation resulting from such awards in
accordance with Section 162(m) of the Code. The payment of a Cash Performance
Award shall be subject to the achievement of performance objectives (the
"Performance Objectives") established by the Committee based on one or more of
the following criteria, in each case applied to the Company on a consolidated
basis and/or to a business unit, and either as an absolute measure or as a
measure of comparative performance relative to a peer group of companies: sales,
operating profits, operating profits before interest expense and taxes, net
earnings, earnings per share, return on equity, return on assets, return on
invested capital, total shareholder return, cash flow, debt to equity ratio,
market share, share price, economic value added, and market value added.
The Performance Objectives for a particular Cash Performance Award relative
to a particular fiscal year shall be established by the Committee in writing no
later than 90 days after the beginning of such year. The Committee shall have
the authority to determine whether the Performance Objectives and other terms
and conditions of the award are satisfied, and the Committee's determination as
to the achievement of Performance Objectives relating to a Cash Performance
Award shall be made in writing.
VI. ADDITIONAL PROVISIONS
6.1 GENERAL RESTRICTIONS
Each award under the Plan shall be subject to the requirement that, if at
any time the Committee shall determine that (i) the listing, registration or
qualification of the Ordinary Shares subject or related thereto upon any
securities exchange or under any state or federal law, or (ii) the consent or
approval of any government regulatory body, or (iii) an agreement by the
recipient of an award with respect to the disposition of Ordinary Shares is
necessary or desirable (in connection with any requirement or interpretation of
any federal or state securities law, rule or regulation) as a condition of, or
in connection with, the granting of such award or the issuance, purchase or
delivery
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of Ordinary Shares thereunder, such award may not be consummated in whole or in
part unless such listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free of any conditions not
acceptable to the Committee.
6.2 ADJUSTMENTS FOR CHANGES IN CAPITALIZATION
In the event of a scheme of arrangement, reorganization, recapitalization,
Ordinary Share split, Ordinary Share dividend, combination of shares, rights
offer, liquidation, dissolution, merger, consolidation, spin-off, sale of
assets, payment of an extraordinary cash dividend, or any other change in or
affecting the corporate structure or capitalization of the Company, the
Committee shall make appropriate adjustment in the number and kind of shares
authorized by the Plan (including any limitations on individual awards), in the
number, price or kind of shares covered by the awards and in any outstanding
awards under the Plan; provided, however, that no such adjustment shall increase
the aggregate value of any outstanding award.
6.3 AMENDMENTS
(a) The Board of Directors may amend the Plan from time to time. No such
amendment shall require approval by the shareholders unless shareholder approval
is required to satisfy Rule 16b-3 under the Securities Exchange Act of 1934 or
Section 162(m) of the Code, or by applicable law or Stock exchange requirements.
(b) The Committee shall have the authority to amend any grant to include
any provision which, at the time of such amendment, is authorized under the
terms of the Plan; however, no outstanding award may be revoked or altered in a
manner unfavorable to the holder without the written consent of the holder.
(c) If a Participant has ceased or will cease to be a Director of the
Company for the convenience of the Company (as determined by the Board of
Directors), the Board of Directors may amend all or any portion of such
Participant's Options or SARs so as to make such Options or SARs fully
exercisable and/or specify a schedule upon which they become exercisable, and/or
permit all or any portion of such Options or SARs to remain exercisable for such
period designated by it, but not beyond the expiration of the term established
pursuant to Section 4.2(b) or 4.3(b). A Participant shall not participate in the
deliberations or vote by the Board of Directors under this paragraph with
respect to his Options or SARs. The exercise periods of Options or SARs
established by the Board of Directors pursuant to this paragraph shall override
the provisions of Section 4.2(c) or 4.3(c) to the extent inconsistent therewith.
6.4 CANCELLATION OF AWARDS
Any award granted under Articles II and III of the Plan may be canceled at
any time with the consent of the holder and a new award may be granted to such
holder in lieu thereof, which award may, in the discretion of the Committee, be
on more favorable terms and conditions than the canceled award; provided,
however, that the Committee may not reduce the exercise or base price of
outstanding Options or SARs where the
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existing exercise or base price is higher than the then current market price of
the Ordinary Shares.
6.5 BENEFICIARY
An employee or Participant may file with the Company a written designation
of Beneficiary, on such form as may be prescribed by the Committee, to receive
any Options, SARs, Restricted Shares, Ordinary Shares and Supplemental Payments
that become deliverable to the employee or Participant pursuant to the Plan
after the employee's or Participant's death. An employee or Participant may,
from time to time, amend or revoke a designation of Beneficiary. If no
designated Beneficiary survives the employee or Participant, the executor or
administrator of the employee's or Participant's estate shall be deemed to be
the employee's or Participant's Beneficiary.
6.6 WITHHOLDING
(a) Whenever the Company proposes or is required to issue or transfer
Ordinary Shares under the Plan, the Company shall have the right to require the
award holder to remit to the Company an amount sufficient to satisfy any
applicable withholding tax liability prior to the delivery of any certificate
for such shares. Whenever under the Plan payments are to be made in cash, such
payments shall be net of an amount sufficient to satisfy any withholding tax
liability.
(b) An employee entitled to receive Ordinary Shares under the Plan who has
not received a cash Supplemental Payment may elect to have a minimum statutory
withholding tax liability with respect to such Ordinary Shares satisfied by
having the Company withhold from the shares otherwise deliverable to the
employee Ordinary Shares having a value equal to the amount of the tax liability
to be satisfied with respect to the Ordinary Shares. An election to have all or
a portion of the tax liability satisfied using Ordinary Shares shall comply with
such requirements as may be imposed by the Committee.
6.7 NON-ASSIGNABILITY
Except as expressly provided in the Plan, no award under the Plan shall be
assignable or transferable by the holder thereof except by will or by the laws
of descent and distribution. During the life of the holder, awards under the
Plan shall be exercisable only by such holder or by the guardian or legal
representative of such holder.
6.8 NON-UNIFORM DETERMINATIONS
Determinations by the Committee under the Plan (including, without
limitation, determinations of the persons to receive awards under Articles II
and III; the form, amount and timing of such awards; the terms and provisions of
such awards and the agreements evidencing same; and provisions with respect to
termination of employment) need not be uniform and may be made by it selectively
among persons
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who receive, or are eligible to receive, awards under the Plan, whether or not
such persons are similarly situated.
6.9 NO GUARANTEE OF EMPLOYMENT OR DIRECTORSHIP
The grant of an award under the Plan shall not constitute an assurance of
continued employment for any period or any obligation of the Board of Directors
to nominate any Director for re-election by the Company's shareholders.
6.10 CHANGE OF CONTROL
A "Change of Control" means:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding ordinary shares of the Company (the "Outstanding
Company Ordinary Shares") or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection (a), the following acquisitions
shall not constitute a Change of Control: (i) any acquisition directly from the
Company, (ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation or other entity controlled by the Company or (iv) any
acquisition by any corporation or other entity pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (c) of this Section
6.10; or
(b) Individuals who, as of the date hereof, constitute the Board of the
Company (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board of the Company; provided, however, that for purposes of
this Section 6.10 any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board of the Company; or
(c) Consummation of a scheme of arrangement, reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Ordinary Shares and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the
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then outstanding ordinary shares or shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
or other entity resulting from such Business Combination (including, without
limitation, a corporation or other entity which as a result of such transaction
owns the Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination
of the Outstanding Company Ordinary Shares and Outstanding Company Voting
Securities, as the case may be, (ii) no Person (excluding any corporation or
other entity resulting from such Business Combination or any employee benefit
plan (or related trust) of the Company or such corporation or other entity
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding ordinary shares
or shares of common stock of the corporation or other entity resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation or other entity except to the extent that such
ownership existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the action of the Board of the Company providing for such Business
Combination; or
(d) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
6.11 DURATION AND TERMINATION
(a) The Plan shall be of unlimited duration. Notwithstanding the foregoing,
no incentive Share option (within the meaning of Section 422 of the Code) shall
be granted under the Plan, and no Options or SARs shall be granted under the
Plan to Eligible Directors under Article IV, after May 1, 2003, but awards
granted prior to such dates may extend beyond such dates, and the terms of this
Plan shall continue to apply to all awards granted hereunder.
(b) The Board of Directors may discontinue or terminate the Plan at any
time. Such action shall not impair any of the rights of any holder of any award
outstanding on the date of the Plan's discontinuance or termination without the
holder's written consent.
6.12 EFFECTIVE DATE
The Plan was originally effective May 1, 1993. The Plan was amended and
restated effective March 13, 1997 and March 12, 1998 and amended effective May
14, 1999. This amendment and restatement of the Plan was adopted by the Board
of Directors effective January 1, 2000, and the increase in the number of
Ordinary Shares reserved for issuance under the Plan and the increase in the
aggregate number of Ordinary Shares subject to awards of freestanding SARs to
employees was approved by the holders of a majority of issued and outstanding
Ordinary Shares at the extraordinary general shareholders' meeting held on
December 10, 1999.
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IN WITNESS WHEREOF, this document has been executed effective as of
January 1, 2000.
TRANSOCEAN SEDCO FOREX INC.
By: /s/ Eric B. Brown
-------------------
Eric B. Brown
Corporate Secretary
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EXHIBIT 10.10
TRANSOCEAN SEDCO FOREX INC.
DEFERRED COMPENSATION PLAN
--------------------------
(As Amended and Restated Effective January 1, 2000)
THIS PLAN, made and executed at Houston, Texas by TRANSOCEAN SEDCO FOREX
INC., a Cayman Islands exempted company (the "Company"), effective July 1, 1998,
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees of the Company and its
participating affiliates and for the purpose of providing non-employee members
of the Board of Directors of the Company the ability to defer receipt of all or
part of their compensation from the Company, and as thereafter amended in
November 1999, by the First Amendment thereto, is hereby amended and restated
effective January 1, 2000.
ARTICLE I.
DEFINITIONS
-----------
Section 1.1 Definitions. Unless the context clearly indicates otherwise,
when used in this Plan:
(a) "Account" means a Participant's Deferral Account and/or Employer
Account, as the case may be.
(b) "Adjustment Date" means the last day of each calendar quarter and
such other dates as the Administrative Committee in its discretion may
prescribe.
(c) "Affiliated Company" means any corporation or organization which
together with the Company would be treated as a single employer under
Section 414 of the Code.
(d) "Administrative Committee" means the committee designated pursuant
to Section 2.1 to administer this Plan.
(e) "Change of Control" means:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of either (A) the then outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or (B) the
combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection (i), the following acquisitions shall not
constitute a Change of Control: (A) any acquisition directly from the
Company, (B) any acquisition by the Company, (C) any acquisition by any
employee benefit
<PAGE>
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (D) any acquisition by any
corporation pursuant to a transaction which complies with clauses (A), (B)
and (C) of subsection (iii) of this Section 1.1(e); or
(ii) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board; or
(iii) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of
the Company (a "Business Combination"), in each case, unless, following
such Business Combination, (A) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly
or indirectly, more than 50% of, respectively, the then outstanding shares
of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors,
as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result
of such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business Combination or
the combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the members of the
board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
Notwithstanding the foregoing, the consummation of the transaction
contemplated by the Agreement and Plan of Merger by and between
Schlumberger Limited, Sedco Forex
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Holdings Limited, and the Company dated July 12, 1999, will not be deemed a
Change of Control for purposes of the Plan.
(f) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(g) "Company" means TRANSOCEAN SEDCO FOREX INC., a Cayman Islands
exempted company, and its successors.
(h) "Compensation Committee" means the Compensation Committee of the
Board of Directors of the Company.
(i) "Deferral Account" means the account established and maintained on
the books of an Employer to record a Participant's interest under this Plan
attributable to amounts credited to such Participant pursuant to Sections
3.1, 3.2, 3.3 and/or 3.5.
(j) "Director" means a member of the Board of Directors of the Company
who is not also an Employee; provided, however, that no Director who is not
already a member of the Board of Directors of the Company immediately prior
to a Change of Control shall become eligible to participate in this Plan
upon or after a Change of Control.
(k) "Effective Date" means July 1, 1998.
(l) "Election Period" means
(i) such period immediately prior to the beginning of a Plan Year
(or, with respect to the Short Plan Year, the period immediately prior to
the Effective Date) specified by the Administrative Committee for the
making of deferral elections for such Plan Year pursuant to Sections 3.1,
3.2 and/or 3.5,
(ii) for purposes of Sections 3.1 and 3.5, solely with respect to
individuals who first become Eligible Employees or Directors after the
beginning of a Plan Year (or Short Plan Year), the period of 60 days (or
shorter period as may be prescribed by the Administrative Committee)
beginning on the date such individual becomes an Eligible Employee or
Director, as the case may be,
(iii) with respect to deferral elections pursuant to Section
3.3, such period determined in accordance with Section 3.3, or
(iv) with respect to a Participant whose Account is credited with
an Employer contribution or who has entered into a Deferred Compensation
Award Agreement pursuant to Section 3.4 prior to making any deferral
election pursuant to this Plan, the period immediately prior to the date
such Employer contribution is credited or such Deferred Compensation Award
Agreement is signed by the Participant as may be specified by the
Administrative Committee).
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(m) "Eligible Employee" means any Employee who is one of a select
group of management or highly compensated employees and
(i) whose annual base salary equals or exceeds $125,000, or
(ii) whose annual base salary equals or exceeds $100,000 and
whose position is of significant impact on the operations of his or her
Employer as determined by the Administrative Committee in its absolute
discretion;
provided, however, that no Employee who is not already an Eligible Employee
immediately prior to a Change of Control shall become eligible to
participate in this Plan upon or after a Change of Control.
(n) "Employee" means an individual who is employed by an Employer and
is subject to U.S. income taxation.
(o) "Employer" includes the Company, Transocean Offshore Deepwater
Drilling Inc. ("TODDI") and any subsidiaries of TODDI which are Affiliated
Companies and are incorporated in the United States, and any other
Affiliated Company incorporated in the United States which adopts this Plan
with the consent of the Compensation Committee in accordance with Section
6.5.
(p) "Employer Account" means the account established and maintained
on the books of an Employer to record an Employee Participant's interest
under this Plan attributable to amounts credited to such Participant
pursuant to Section 3.4.
(q) "Net Amount Payable" means the gross amount payable to a
Participant by the Company or other Employer absent a deferral election
under this Plan minus all amounts to be deducted from the gross amount
other than income tax withholding, amounts deferred under a cash or
deferred arrangement subject to Section 401(k) of the Internal Revenue Code
and deferrals under this Plan.
(r) "Ordinary Shares" means ordinary shares, par value U.S. $0.01 per
share, of the Company.
(s) "Participant" means a Director, former Director, Eligible Employee
or former Eligible Employee for whom an Account is being maintained under
this Plan.
(t) "Plan" means this Transocean Sedco Forex Inc. Deferred
Compensation Plan, as in effect from time to time on and after the
Effective Date.
(u) "Plan Year" means each calendar year commencing after the Short
Plan Year.
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(v) "Short Plan Year" means the period commencing on the Effective
Date and ending on December 31, 1998.
(w) "Termination Date" means with respect to an Employee Participant,
the termination of employment with an Employer or Affiliated Company for
any reason other than death or transfer to employment with another Employer
or Affiliated Company, and with respect to a Director Participant, the
termination of service as a Director of the Company.
ARTICLE II.
PLAN ADMINISTRATION
-------------------
Section 2.1 Administrative Committee. This Plan shall be administered by
an Administrative Committee composed of the individuals appointed to serve as
the administrative committee for the Company's Retirement Plan. Each member of
the Administrative Committee so appointed shall serve in such office until his
or her death, resignation or removal by the Company's Board of Directors. The
Administrative Committee shall have discretionary and final authority to
interpret and implement the provisions of the Plan, including without
limitation, authority to determine eligibility for benefits under the Plan. The
Administrative Committee shall act by a majority of its members at the time in
office and such action may be taken either by a vote at a meeting or in writing
without a meeting. The Administrative Committee may adopt such rules and
procedures for the administration of the Plan as are consistent with the terms
hereof and shall keep adequate records of its proceedings and acts. Every
interpretation, choice, determination or other exercise by the Administrative
Committee of any power or discretion given either expressly or by implication to
it shall be conclusive and binding upon all parties having or claiming to have
an interest under the Plan or otherwise directly or indirectly affected by such
action, without restriction, however, on the right of the Administrative
Committee to reconsider and redetermine such action.
Section 2.2 Appointment of Independent Committee.
(a) Upon a Change of Control, an Independent Committee consisting of
at least three members shall be appointed by the Compensation Committee
subject to the written approval of a majority of the Participants in the
Plans on the date of such Change of Control. Each member of the
Independent Committee so appointed shall serve in such office until his or
her death, resignation or removal. The Compensation Committee may remove
any member of the Independent Committee by giving written notice thereof to
all Plan Participants and all members of the Independent Committee;
provided, however, that no member of the Independent Committee may be
removed by the Compensation Committee except with the written consent of a
majority of the Plan Participants. Vacancies on the Independent Committee
shall be filled from time to time by the Compensation Committee subject to
the written approval of a majority of the Participants in the Plans on the
date such vacancy is filled.
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<PAGE>
(b) The Independent Committee shall act by a majority of its members
at the time in office and such action may be taken either by a vote at a
meeting or in writing without a meeting. The Independent Committee may by
such majority action authorize any one or more of its members to execute
any document or documents on behalf of the Independent Committee. Every
interpretation, choice, determination or other exercise by the Independent
Committee of any power or discretion given either expressly or by
implication to it shall be conclusive and binding upon all parties having
or claiming to have an interest under the Plan or otherwise directly or
indirectly affected by such action, without restriction, however, on the
right of the Independent Committee to reconsider and redetermine such
action.
(c) Any provision of this Plan to the contrary notwithstanding, in the
event that (i) the Compensation Committee shall not appoint an Independent
Committee within 30 days following a Change of Control or a majority of the
Participants in the Plans do not approve in writing at least three members
selected by the Compensation Committee to serve on an Independent Committee
within such 30-day period or (ii) the Compensation Committee does not fill
a vacancy on the Independent Committee within 30 days of the date such
office becomes vacant or a majority of the Participants in the Plans do not
approve in writing the Compensation Committee's selection to fill a vacancy
on the Independent Committee within such 30-day period, then the
Participants in the Plans shall elect, by majority vote, up to three
individuals to the extent necessary to ensure that the Independent
Committee consists of three members.
(d) Any provision of this Plan to the contrary notwithstanding, on and
after the date of a Change of Control, the Independent Committee appointed
in accordance with this Section shall be responsible for the administration
of this Plan and shall have all of the powers, duties, responsibilities and
obligations of the Administrative Committee as provided hereunder. In
addition, the Independent Committee shall determine the amount of the
irrevocable contributions to be made by the Company to the Deferred
Compensation Trust established in accordance with Section 6.2 hereof, and
have all authority otherwise allocated to the Administrative Committee
under the terms of said Deferred Compensation Trust to determine the
entitlement of Plan Participants and beneficiaries to benefits under the
terms of the Plan, the amounts payable with respect to each Plan
Participant (and his or her beneficiaries), the form in which such amounts
are to be paid and the time of commencement for payment of such amounts,
and to direct the trustee of the Deferred Compensation Trust to make
payments to Plan Participants and their beneficiaries in accordance with
such determinations.
ARTICLE III.
DEFERRED COMPENSATION PROVISIONS
--------------------------------
Section 3.1 Base Salary Deferral Election. During the Election Period
prior to the beginning of each Plan Year (and the Short Plan Year), or with
respect to a new Eligible Employee the Election Period during a Plan Year (or
the Short Plan Year), an Eligible Employee may elect to
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<PAGE>
have the payment of an amount of up to 90% of the annual base salary otherwise
payable by an Employer to such Eligible Employee for such Plan Year (or the
Short Plan Year), but not in excess of the Net Amount Payable of such base
salary, deferred for payment in the manner and at the time specified in Article
IV; provided, however, that the Administrative Committee may in its discretion
establish a minimum amount that an Eligible Employee may elect to defer for a
Plan Year (or the Short Plan Year) pursuant to this Section 3.1. The amount of
annual base salary a Participant elects to defer pursuant to this Section 3.1
shall be deducted from the Participant's pay in substantially equal amounts over
all pay periods during the Plan Year (or Short Plan Year). All elections made
pursuant to this Section 3.1 shall be made in writing on a form prescribed by
and filed with the Administrative Committee and shall be irrevocable; provided,
however, that effective as of the first day of any calendar quarter during a
Plan Year, an Eligible Employee may revoke his or her deferral election and
thereby suspend further salary deferrals for the remainder of such Plan Year by
providing written notice thereof to the Administrative Committee no later than
15 days prior to the effective date of such suspension. Any Eligible Employee
who so suspends his or her salary deferrals pursuant to this Section shall not
be permitted to elect future salary deferrals pursuant to this Section to be
effective earlier than the first day of the next Plan Year.
Section 3.2 Performance Award Cash Bonus Deferral Election. During the
Election Period prior to the beginning of each Plan Year (but not the Short Plan
Year), an Eligible Employee may elect to have the payment of an amount up to
100% of any future bonus otherwise payable pursuant to the Performance Award
Cash Bonus Plan by an Employer with respect to services to be performed by such
Eligible Employee during such Plan Year, but not in excess of the Net Amount
Payable of such bonus, deferred for payment in the manner and at the time
specified in Article IV; provided, however, that the Administrative Committee
may in its discretion establish a minimum amount that an Eligible Employee may
elect to defer for a Plan Year pursuant to this Section 3.2. All elections made
pursuant to this Section 3.2 shall be made in writing on a form prescribed by
and filed with the Administrative Committee and shall be irrevocable.
Section 3.3 Special Payment Deferral Election. In addition to the above,
during the Election Period prescribed pursuant to this Section, an Eligible
Employee may elect to have the payment of an amount of up to 100% of any bonus
or other special payment as may be designated by the Chief Executive Officer of
the Company (or with respect to amounts otherwise payable to the Chief Executive
Officer of the Company, designated by the Chairman of the Compensation
Committee) otherwise payable by an Employer with respect to such Eligible
Employee, but not in excess of the Net Amount Payable of such bonus or special
payment, deferred for payment in the manner and at the time specified in Article
IV with the deferral election to be made in the manner and during the Election
Period prescribed by the Chief Executive Officer of the Company (or with respect
to amounts otherwise payable to the Chief Executive Officer of the Company, the
Chairman of the Compensation Committee); provided, however, that any such
election must be made in writing by the Eligible Employee prior to the time at
which the Eligible Employee otherwise is entitled to receive payment of the
amount from the Employer and shall be irrevocable.
Section 3.4 Employer Contributions. For each Plan Year (and the Short
Plan Year) each Employer shall credit to the Employer Accounts as an Employer
contribution such amount, if any, to be determined by the Compensation
Committee. Any Employer contribution so determined for a Plan Year shall be
credited to Participants' Employer Accounts at the time and in the manner
described in Section 3.6. In addition, the Chief Executive Officer of the
Company may enter into "Deferred Compensation Award Agreements" with such
Eligible Employees as may from time to time be approved by the Compensation
Committee. Such Agreements shall provide for the grant
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<PAGE>
of a deferred compensation award, either fixed as to amount or determinable
pursuant to a formula, to the Eligible Employee subject to such vesting
requirements, including performance criteria, as shall be approved by the
Compensation Committee.
Section 3.5 Director Fee Deferral Election. During the Election Period
prior to the beginning of each Plan Year (and the Short Plan Year), or with
respect to a new Director the Election Period during a Plan Year (or the Short
Plan Year), a Director may elect to have the payment of an amount of up to 100%
of the cash fees otherwise payable by the Company to such Director for services
rendered to the Company as a member of its Board of Directors, including
services on a committee of the Board of Directors, for such Plan Year (or the
Short Plan Year), but not in excess of the Net Amount Payable of such fees,
deferred for payment in the manner and at the time specified in Article IV;
provided, however, that the Administrative Committee may in its discretion
establish a minimum amount that a Director may elect to defer for a Plan Year
(or the Short Plan Year) pursuant to this Section 3.5. The amount of Director
fees a Participant elects to defer pursuant to this Section 3.5 shall be
deducted from the Participant's fees during the Plan Year (or Short Plan Year).
All elections made pursuant to this Section 3.5 shall be made in writing on a
form prescribed by and filed with the Administrative Committee and shall be
irrevocable; provided, however, that effective as of the first day of any
calendar quarter during a Plan Year, a Director may revoke his or her deferral
election and thereby suspend further fee deferrals for the remainder of such
Plan Year by providing written notice thereof to the Administrative Committee no
later than 15 days prior to the effective date of such suspension. Any Director
who so suspends his or her deferrals pursuant to this Section shall not be
permitted to elect future fee deferrals pursuant to this Section to be effective
earlier than the first day of the next Plan Year.
Section 3.6 Accounts and Allocations.
(a) An Employer shall establish and maintain on its books a Deferral
Account and an Employer Account for each Eligible Employee employed by such
Employer who elects to participate in this Plan. The Company shall
establish and maintain on its books a Deferral Account for each Director
who elects to participate in this Plan. Each such Account shall be
designated by the name of the Participant for whom it is established. The
Administrative Committee may require separate subaccounts to be maintained
within a Participant's Deferral Account and Employer Account.
(b) Amounts deferred for a Participant pursuant to Sections 3.1, 3.2,
3.3 and/or 3.5 shall be credited by the Employer to such Participant's
Deferral Account as of the date such amounts otherwise would have been paid
to such Participant by such Employer.
(c) The amount of any deferred compensation award pursuant to Section
3.4 hereof which vests pursuant to the terms of a Deferred Compensation
Award Agreement entered into with an Eligible Employee shall be credited to
such Participant's Deferral Account as of the date of such vesting, if such
individual is an Eligible Employee as of the date of vesting.
8
<PAGE>
(d) Any Employer contribution declared for a Plan Year pursuant to
Section 3.4 shall be credited to the Employer Accounts of those Employee
Participants specified by the Compensation Committee at the time and in the
manner determined by the Compensation Committee in its absolute discretion.
(e) An Employer shall continue maintaining a Participant's Accounts as
long as a positive balance remains credited to such Accounts.
Section 3.7 Account Adjustments. As of each Adjustment Date, the amount
credited to a Participant's Accounts as of the preceding Adjustment Date, less
any distributions or forfeitures made with respect to such Accounts since such
preceding Adjustment Date, shall be adjusted by reference to the fluctuations in
value, taking into account gain, loss, expenses and other adjustments, of the
investment indices selected by the Participant for the investment adjustment of
his or her Accounts, with such adjustments to be made in the manner prescribed
by the Administrative Committee. Following such adjustment, the amounts
credited to a Participant's Accounts shall be increased to take into account
additional deferrals and contributions credited to such Accounts since the
preceding Adjustment Date. The Administrative Committee shall have sole and
absolute discretion with respect to the number and type of investment indices
made available for selection by Participants pursuant to this Section, the
timing of Participant elections and the method by which adjustments are made;
provided, however, that Ordinary Shares shall be an available investment index
for Director Participants, but shall not be available to Employee Participants.
The designation of investment indices by the Administrative Committee shall be
for the sole purpose of adjusting Accounts pursuant to this Section and this
provision shall not obligate the Employers to invest or set aside any assets for
the payment of benefits hereunder; provided, however, that an Employer may
invest a portion of its general assets in investments, including investments
which are the same as or similar to the investment indices designated by the
Administrative Committee and selected by Participants, but any such investments
shall remain part of the general assets of such Employer and shall not be deemed
or construed to grant a property interest of any kind to any Participant,
designated beneficiary or estate. The Administrative Committee shall notify the
Participants of the investment indices available and the procedures for making
and changing elections.
Section 3.8 Vesting. Subject to Section 4.5, all amounts credited to a
Participant's Deferral Account shall be fully vested and nonforfeitable at all
times. Any amounts attributable to Employer contributions made for a Plan Year
pursuant to Section 3.4 which are credited to Participants' Employer Accounts
shall be subject to such vesting schedule as the Compensation Committee shall
establish for such contributions in its sole and absolute discretion; provided,
however, that all amounts credited to Participants' Employer Accounts shall be
100% vested and nonforfeitable on and after the date of a Change of Control.
9
<PAGE>
ARTICLE IV.
BENEFITS
--------
Section 4.1 Source of Benefit Payments. Benefit payments to be made with
respect to an Employee Participant's Accounts maintained pursuant to the Plan
will be paid in cash. Such benefit payments will be the primary obligation of
the Employer maintaining such Accounts and the Company shall be secondarily
liable for the obligation in the event it becomes payable by an Employer that is
an Affiliated Company on the date payment is due. Benefit payments to be made
with respect to a Director Participant's Accounts maintained pursuant to the
Plan will be the obligation solely of the Company. Payment to Director
Participants will be made by the transfer to the Director of a number of
Ordinary Shares equal to the deemed whole number of Ordinary Shares credited to
the Director's Account at the time of distribution, if applicable, based on the
Director's prior designation of Ordinary Shares as an investment index, and cash
for any fractional Ordinary Shares and for the balance of the Account allocated
to any other investment indices. Ordinary Shares transferred to a Director
shall be previously issued and outstanding Ordinary Shares acquired for this
purpose through a third party.
Section 4.2 Amount of Benefit Payments. The amount payable from a
Participant's Accounts shall be determined based upon the vested amount credited
to such Accounts as of the Adjustment Date last preceding the date of payment
plus any contributions and deferrals credited to and less any distributions or
withdrawals made from such Accounts since such Adjustment Date. The amount of
each payment made with respect to a Participant's Accounts and any forfeiture
amounts applied pursuant to Section 4.5 shall be deducted from the balance
credited to such Accounts at the time of payment or forfeiture.
Section 4.3 Termination. Upon a Participant's Termination Date, the
amount payable from such Participant's Accounts, as determined in accordance
with Section 4.2, shall be paid to such Participant (or, in the event of his or
her subsequent death, to the beneficiary or beneficiaries designated by such
Participant pursuant to Plan Section 4.6) in one of the following forms as
elected by the Participant during the Participant's initial Election Period or
in a subsequent election made in accordance with Section 4.8:
(a) a single lump sum to be paid as soon as practicable following the
Participant's Termination Date or the Participant's attainment of age 65,
as designated by the Participant in his or her election; or
(b) if the amount payable from a Participant's Accounts is $50,000 or
more as of the Termination Date, annual installments over the period
certain designated by the Participant in his or her election which may not
exceed 15 years, commencing in payment as soon as practicable following the
Termination Date or the Participant's attainment of age 65, as designated
by the Participant in his or her election, with each annual installment
equal to the Account balance multiplied by a fraction the numerator of
which is one and the denominator of which is the number of payments
remaining;
10
<PAGE>
provided, however, that if a Participant who is entitled to a delayed lump sum
or installment payments hereunder encounters an unforeseeable emergency (as
determined in accordance with Section 4.7 hereof), the Administrative Committee,
in its absolute discretion, may direct the Employer to accelerate such portion
of the delayed lump sum or installment payments as the Administrative Committee
shall determine to be necessary to alleviate the severe financial hardship of
the Participant caused by such unforeseeable emergency.
Section 4.4 Death. Upon a Participant's Termination Date arising by
reason of death, the amount payable from such Participant's Accounts, as
determined in accordance with Section 4.2, shall be paid by the Employer to the
beneficiary or beneficiaries designated by such Participant pursuant to Section
4.6 in one of the following forms as elected by the Participant during the
Participant's initial Election Period or in a subsequent election made in
accordance with Section 4.8:
(a) a single lump sum to be paid as soon as practicable following the
Participant's death; or
(b) if the amount payable from the Participant's Accounts is $50,000
or more as of the date of the Participant's death, annual installments over
the period certain designated by the Participant in his or her election
which may not exceed 15 years, commencing in payment as soon as practicable
following the Participant's death with each annual installment equal to the
Account balance multiplied by a fraction the numerator of which is one and
the denominator of which is the number of payments remaining;
provided, however, that if a beneficiary of a deceased Participant who is
entitled to installment payments hereunder encounters an unforeseeable emergency
(as determined in accordance with Section 4.7 hereof), the Administrative
Committee, in its absolute discretion, may direct the Employer to accelerate
such portion of the installment payments as the Administrative Committee shall
determine to be necessary to alleviate the severe financial hardship of the
beneficiary caused by such unforeseeable emergency.
Section 4.5 Option to Request Immediate Payout. Each Participant (or
beneficiary in the case of a deceased Participant) shall have the right at any
time, but no more frequently than one time during any calendar year, to elect a
lump sum payment in an amount equal to:
(a) all or any portion (but not less than $5,000 or, if less, the
entire amount credited to the Participant's Accounts) of the amount payable
from the Participant's Accounts, determined in accordance with Section 4.2,
minus
(b) a forfeiture amount equal to 10% of the amount elected for
withdrawal as provided in (a) above.
A Participant's election for an immediate payout pursuant to this Section must
be in the form of a written notice provided to the Administrative Committee.
The Administrative Committee shall notify any Employer maintaining a
Participant's Accounts with respect to such Participant of the election and the
amount so determined, less the amount forfeited as provided above, shall be paid
11
<PAGE>
to the Participant (or, in the case of a deceased Participant, to the
beneficiary or beneficiaries designated by such Participant pursuant to Section
4.6) by the Employers no later than fifteen days following receipt of notice by
the Administrative Committee.
Section 4.6 Designation of Beneficiaries. Any amount payable under this
Plan on account of the death of a married Participant shall be paid when
otherwise due hereunder to the surviving spouse of such Participant unless such
Participant designates otherwise with the written consent of his or her spouse.
Any amount payable under this Plan on account of the death of a Participant who
is not married or who is married but has designated, as provided above, a
beneficiary other than his or her spouse, shall be paid when otherwise due
hereunder to the beneficiary or beneficiaries designated by such Participant.
Such designation of beneficiary or beneficiaries shall be made in writing on a
form prescribed by and filed with the Administrative Committee and shall remain
in effect until changed by such Participant by the filing of a new beneficiary
designation form with the Administrative Committee. If an unmarried Participant
fails to so designate a beneficiary, or in the event all of a Participant's
designated beneficiaries are individuals who either predecease the Participant
or survive the Participant but die prior to receiving the full amount payable
under this Plan, any remaining amount payable under this Plan shall be paid when
otherwise due hereunder to such Participant's spouse if living at the time of
the Participant's death or, if not, to the Participant's estate.
Section 4.7 Hardship Distributions. If a Participant encounters an
unforeseeable emergency, the Administrative Committee in its absolute discretion
may direct the Employer maintaining such Participant's Accounts to pay to such
Participant and deduct from such Accounts such portion of the vested amount then
credited to such Accounts (including, if appropriate, the entire amount
determined in accordance with Section 4.2) as the Administrative Committee shall
determine to be necessary to alleviate the severe financial hardship of such
Participant caused by such unforeseeable emergency. For this purpose, an
"unforeseeable emergency" shall be a severe financial hardship to the
Participant resulting from a sudden and unexpected illness or accident of the
Participant or of a dependent of the Participant, loss of the Participant's
property due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant. The circumstances that will constitute an unforeseeable emergency
will depend upon the facts of each case, but in any case, payment may not be
made to the extent that such hardship is or may be relieved (i) through
reimbursement or compensation by insurance or otherwise, (ii) by liquidation of
the Participant's assets, to the extent liquidation of such assets would not
itself cause severe financial hardship, or (iii) by cessation of deferrals under
the Plan. No distribution shall be made to a Participant pursuant to this
Section 4.7 unless such Participant requests such a distribution in writing and
provides to the Administrative Committee such information and documentation with
respect to his or her unforeseeable emergency as may be requested by the
Administrative Committee.
Section 4.8 Change of Distribution Form. Each Participant may elect at
any time after a Participant's initial Election Period, but no more often than
once during each calendar year, to change the distribution form elected with
respect to all amounts credited to such Participant's Accounts; provided,
however, that such election shall not be effective unless made at least twelve
months preceding the Participant's Termination Date.
12
<PAGE>
Section 4.9 Accelerated Distribution of Reclassified Amounts. In the
event that the Internal Revenue Service formally assesses a deficiency against a
Participant on the grounds that an amount credited to such Participant's
Accounts under this Plan is subject to federal income tax (the "Reclassified
Amount") earlier than the time payment otherwise would be made to the
Participant pursuant to this Plan, then the Administrative Committee shall
direct the Employer maintaining such Participant's Accounts to pay to such
Participant and deduct from such Accounts the Reclassified Amount. No payment
made to a Participant pursuant to this Section 4.9 shall be subject to
forfeiture as provided in Section 4.5 hereof.
ARTICLE V.
AMENDMENT AND TERMINATION
-------------------------
Section 5.1 Amendment and Termination. The Compensation Committee shall
have the right and power at any time and from time to time to amend this Plan,
in whole or in part, on behalf of all Employers, and to terminate this Plan or
any Employer's participation hereunder. Any amendment to or termination of this
Plan shall be made by or pursuant to a resolution duly adopted by the
Compensation Committee and shall be evidenced by such resolution or by a written
instrument executed by such person as the Compensation Committee shall authorize
for such purpose. Any provision of this Plan to the contrary notwithstanding,
no amendment to or termination of this Plan shall reduce the amounts actually
credited to a Participant's Accounts as of the date of such amendment or
termination, or further defer the dates for the payment of such amounts, without
the consent of the affected Participant. Upon termination of this Plan, the
Compensation Committee, in its sole discretion, may require the Administrative
Committee to calculate final Account balances as of such Adjustment Date as it
may prescribe, and direct each Employer to make immediate lump sum payments to
each Participant (or beneficiary in the case of a deceased Participant) with
respect to which such Employer maintains an Account in the amount determined to
be credited to such Participant's Accounts as of such final Adjustment Date.
Section 5.2 Change of Control. The preceding provisions of this Article
to the contrary notwithstanding, no action taken on or after a Change of Control
to amend or terminate this Plan shall be effective unless written consent
thereto is obtained from a majority of the Participants.
ARTICLE VI.
MISCELLANEOUS PROVISIONS
------------------------
Section 6.1 Nature of Plan and Rights. This Plan is unfunded and
maintained by the Employers primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
and directors of the Employers. The Accounts established and maintained under
this Plan by an Employer are for its accounting purposes only and shall not be
deemed or construed to create a trust fund or security interest of any kind for
or to grant a property interest of any kind to any Participant, designated
beneficiary or estate. The amounts credited by an Employer to Accounts
maintained under this Plan are and for all purposes shall
13
<PAGE>
continue to be a part of the general assets and liabilities of such Employer,
and to the extent that a Participant, designated beneficiary or estate acquires
a right to receive a payment from such Employer pursuant to this Plan, such
right shall be no greater than the right of any unsecured general creditor of
such Employer.
Section 6.2 Deferred Compensation Trust. An Employer may, but shall not
be required to, establish a trust (the "Deferred Compensation Trust") which
satisfies the requirements of the model trust prescribed by the Internal Revenue
Service in Revenue Procedure 92-64 (or otherwise constitutes a grantor trust, of
which the Employer is the grantor, within the meaning of subpart E, part I,
subchapter J, chapter 1, subtitle A of the Code) into which the Employer will
contribute funds to be used to fund the benefit payments under this Plan without
accelerating the timing of income recognition for federal income tax purposes
for the Participant or beneficiary; provided, however, that, as soon as
possible, but in no event more than 30 days following the date of a Change of
Control, each Employer shall (i) establish (if such Employer has not already) a
Deferred Compensation Trust governed by such provisions and with a trustee as
may be acceptable to the Independent Committee, (ii) make an irrevocable
contribution to the Deferred Compensation Trust in an amount, as determined by
the Independent Committee which when added to the total value of the assets of
the Deferred Compensation Trust at such time equals the total amount credited to
all Accounts under the Plan as of the date on which the Change of Control
occurred, and (iii) on and after the date of the Change of Control, make monthly
contributions to the Deferred Compensation Trust in amounts sufficient, as
determined by the Independent Committee, to maintain the total value of the
Deferred Compensation Trust assets at an amount equal to the total amount
credited to all Accounts under the Plan. Any provision of this Plan to the
contrary notwithstanding, on and after the date of a Change of Control, the
assets of the Deferred Compensation Trust, including any additional
contributions made by the Employer in accordance with this Section 6.2 for the
period following such Change of Control and any earnings on the assets of the
Deferred Compensation Trust, shall be held exclusively for the benefit of those
individuals (or their beneficiaries) who were Participants in the Plan or
beneficiaries thereof immediately prior to such Change of Control, subject to
the claims of general creditors of the Employer under federal and state law as
set forth in the Deferred Compensation Trust.
Section 6.3 Spendthrift Provision. No Account balance or other right or
interest under this Plan of a Participant, designated beneficiary or estate may
be assigned, transferred or alienated, in whole or in part, either directly or
by operation of law, and no such balance, right or interest shall be liable for
or subject to any debt, obligation or liability of such Participant, designated
beneficiary or estate.
Section 6.4 Employment Noncontractual. The establishment of this Plan
shall not enlarge or otherwise affect the terms of any Participant's employment
with an Employer or service as a Director of the Company, and each Employer may
terminate an Employee Participant's employment and the Company may terminate a
Director Participant's service as a Director as freely and with the same effect
as if this Plan had not been established.
14
<PAGE>
Section 6.5 Adoption by Other Employers. With the consent of the
Compensation Committee, this Plan may be adopted by any Affiliated Company, such
adoption to be effective as of the date specified by such Affiliated Company at
the time of adoption.
Section 6.6 Claims Procedure. If any person (hereinafter called the
"Claimant") feels that he or she is being denied a benefit to which he or she is
entitled under this Plan, such Claimant may file a written claim for said
benefit with the Administrative Committee. Within sixty days following the
receipt of such claim the Administrative Committee shall determine and notify
the Claimant as to whether he or she is entitled to such benefit. Such
notification shall be in writing and, if denying the claim for benefit, shall
set forth the specific reason or reasons for the denial, make specific reference
to the pertinent provisions of this Plan, and advise the Claimant that he or she
may, within sixty days following the receipt of such notice, in writing request
to appear before the Administrative Committee or its designated representative
for a hearing to review such denial. Any such hearing shall be scheduled at the
mutual convenience of the Administrative Committee or its designated
representative and the Claimant, and at any such hearing the Claimant and/or his
or her duly authorized representative may examine any relevant documents and
present evidence and arguments to support the granting of the benefit being
claimed. The final decision of the Administrative Committee with respect to the
claim being reviewed shall be made within sixty days following the hearing
thereon, and Administrative Committee shall in writing notify the Claimant of
said final decision, again specifying the reasons therefor and the pertinent
provisions of this Plan upon which said final decision is based. The final
decision of the Administrative Committee shall be conclusive and binding upon
all parties having or claiming to have an interest in the matter being reviewed.
Section 6.7 Reimbursement of Expenses. In the event that a dispute arises
between a Participant or beneficiary and the Company or other Employer liable
for payments with respect to the payment of benefits hereunder and the
Participant or beneficiary is successful in pursuing a benefit to which he or
she is entitled under the terms of the Plan against the Company or such other
Employer or any other party in the course of litigation or otherwise and incurs
attorneys' fees, expenses and costs in connection therewith, the Company or such
other Employer against whom the Participant or beneficiary has been successful
in pursuing a benefit under this Plan shall reimburse the Participant or
beneficiary for the full amount of any such attorneys' fees, expenses and costs.
Section 6.8 Withholding Tax. There shall be deducted from all amounts
paid under this Plan any taxes required to be withheld by any Federal, state,
local or other government. The Participant and/or his or her beneficiary
(including his or her estate) shall bear all taxes on amounts paid under this
Plan to the extent that no taxes are withheld, irrespective of whether
withholding is required. The Participant will be required to pay to his or her
Employer the amount of any federal, state or local taxes required by law to be
withheld in connection with the Plan in the event that such Participant is not
being paid by an Employer or amounts being paid by an Employer to such
Participant are insufficient to satisfy any such withholding obligation.
Section 6.9 Applicable Law. This Plan shall be governed and construed in
accordance with the internal laws (and not the principles relating to conflicts
of laws) of the State of Texas, except where superseded by federal law.
15
<PAGE>
IN WITNESS WHEREOF, this amendment and restatement of the Plan is
effective as of January 1, 2000.
TRANSOCEAN SEDCO FOREX INC.
By: /s/ Eric R. Brown
---------------------------------
Title: Vice President and Secretary
16
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF TRANSOCEAN SEDCO FOREX INC.
As of December 31, 1999
NAME* JURISDICTION
- ----- ------------
Transocean Offshore Deepwater Drilling Inc. Delaware
Sonat Offshore Petroleum Services LDC Cayman Islands
Sonat Offshore Far East LDC Cayman Islands
Sonat Offshore International LDC Cayman Islands
Transocean Offshore International Ventures Limited Cayman Islands
Transocean Offshore Limited Cayman Islands
Transocean Offshore International Limited Cayman Islands
Transocean Offshore (North Sea) Limited Cayman Islands
Transocean Offshore Services Ltd. Cayman Islands
Transocean Offshore Europe Limited Cayman Islands
Transocean International Drilling Limited Cayman Islands
Transocean Offshore (Cayman) Inc. Cayman Islands
Transocean Alaskan Ventures Inc. Delaware
Transocean-Nabors Drilling Technology LLC (50%) Delaware
Transocean Drilling Services Inc. Delaware
EPN-Sonat, S.A. de C.V. (50%) Mexico
Offshore Turnkey Ventures (partnership) (50%) Texas
Offshore Turnkey Ventures L.L.C. (50%) Delaware
Transocean Enterprise Inc. Delaware
Transocean Offshore Drilling International Inc. Delaware
Transocean Offshore Drilling Services Inc. Delaware
Transocean Offshore D.V. Inc Delaware
DeepVision L.L.C. (50%) Delaware
Transocean Offshore Norway Inc. Delaware
Transocean Offshore USA Inc. Delaware
Transocean Offshore Ventures Inc. Delaware
Transocean Offshore (U.K.) Inc. Delaware
Transocean Offshore Caribbean Sea, L.L.C. Delaware
Sonat Offshore S.A. Panama
Asie Sonat Offshore Sdn. Bhd. Malaysia
Sonat Brasocean Servicos de Perfuracoes Ltda. Brazil
Sonat Offshore do Brasil Perfuracoes Maritimos Ltda. Brazil
Transocean Brasil Ltda. Brazil
Transocean Offshore Nigeria Ltd. Nigeria
Transocean Hull No. 277 S. de R. L. Panama
Transhav AS Norway
Transocean Services AS Norway
Transocean Offshore Holdings ApS Denmark
Transocean AS Norway
Transocean Petroleum Technology AS Norway
Transocean Petroleum Technology Ltd. U.K.
Target Drilling Services Ltd. U.K.
Transocean I AS Norway
Transocean Drilling (U.S.A.) Inc.
(formerly Wilrig (U.S.A.) Inc.) Texas
Transocean Drilling Co. Inc. Panama
Transocean Drilling ApS Denmark
Transocean Drilling Netherlands Ltd. Bahamas
Transocean Drilling (Nigeria) Ltd. Nigeria
Transnor Rig Ltd. U.K.
- --------------
* Subsidiaries (50% or greater ownership) are owned 100% unless otherwise
indicated.
1
<PAGE>
SUBSIDIARIES OF TRANSOCEAN SEDCO FOREX INC.
As of December 31, 1999
Name* Jurisdiction
- ----- -------------
SDS Offshore Ltd. U.K.
Transocean Drilling Ltd. U.K.
Shelf Drilling Ltd. U.K.
Transocean Kan Tan Ltd. U.K.
Transocean Sino Ltd. U.K.
Wilrig Offshore (UK) Ltd. U.K.
Wilrig Holdings (UK) Ltd. U.K.
Wilrig (UK) Ltd. U.K.
Wilrig Drilling (Canada) Inc. Canada
Wilrig Offshore Bahamas Inc. Bahamas
Transocean Drilling GmbH Germany
Sedco Forex Holdings Limited British Virgin Islands
Sedco Forex International, Inc. Panama
Cariba Ships Corporation N.V. Netherlands Antilles
Caspian Sea Ventures International Ltd. (75%) British Virgin Islands
Hellerup Finance International Ltd. Ireland
International Chandlers, Inc. Texas
Overseas Drilling Ltd. (50%) Liberia
Sedco Forex Canada Ltd. Alberta
Sedco Forex Corporation Delaware
Sedco-Forex do Brazil Ltda. Brazil
Sedco Forex International Drilling, Inc. Panama
PT Hitek Nusantara Offshore Drilling (80%) Indonesia
Sedco Forex International Resources, Limited British Virgin Islands
Sedco Forex International Services, Inc. Panama
Sedco Forex of Nigeria Limited (60%) Nigeria
Sedco Forex Offshore International N.V. (Limited) Netherlands Antilles
Sedco Forex Shorebase Support Limited U.K.
Sedco Forex Technical Services, Inc. Panama
Sedco Forex Technology, Inc. Panama
Services Petroliers Sedco Forex France
Triton Holdings Limited British Virgin Islands
Sefora Maritime Ltd. British Virgin Islands
Triton Industries, Inc. Panama
Sedneth Panama S.A. Panama
- -------------
* Subsidiaries (50% or greater ownership) are owned 100% unless otherwise
indicated.
2
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Forms S-3 Nos. 333-24457 and 333-59001) of Transocean Sedco Forex Inc. and in
the related Prospectuses and in the Registrations Statements (Forms S-8 Nos.
33-64776, 33-66036, 333-12475, 333-58211, 333-58203, 333-94543, 333-94569, and
333-94551) pertaining to the Long-term Incentive Plan, Savings Plan, Employee
Stock Purchase Plan and Sedco Forex Employees Option Plan of our report dated
January 31, 2000, with respect to the consolidated balance sheet as of
December 31, 1999, and the related combined statements of operations, equity,
and cash flows and schedule for the year then ended of Transocean Sedco Forex
Inc. included in this Annual Report (Form 10-K) for the year ended December 31,
1999.
/s/ ERNST & YOUNG LLP
---------------------------------
Ernst & Young LLP
Houston, Texas
March 15, 2000
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (Nos. 333-24457; 333-59001) and on Form S-8
(Nos.33-64776; 33-66036; 333-12475; 333-58211; 333-58203; 333-94543; 333-94569;
333-94551) of Transocean Sedco Forex Inc. of our report dated August 6, 1999
relating to the financial statements of Sedco Forex Holdings Limited which
appears in the 1999 Annual Report to Shareholders of Transocean Sedco Forex
Inc., whose report and financial statements are incorporated by reference in
this Annual Report on Form 10-K. We also consent to use of our report on the
financial statement schedule which appears in this Form 10-K.
PricewaterhouseCoopers LLP
New York, New York
March 16, 2000
<PAGE>
EXHIBIT 24
1999 Form 10-K & 462
TRANSOCEAN SEDCO FOREX INC.
Power of Attorney
-----------------
WHEREAS, TRANSOCEAN SEDCO FOREX INC., a Cayman Islands corporation (the
"Company"), intends to file with the U.S. Securities and Exchange Commission
(the "Commission") pursuant to the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder, an
annual report on Form 10-K for the fiscal year ended December 31, 1999, together
with any and all exhibits and other instruments and documents necessary,
advisable or appropriate in connection therewith (the "Form 10-K"); and
WHEREAS, the Company has filed with the Commission pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), a post-effective
amendment to the Company's Registration Statement on Form S-3 (Registration No.
333-59001), as amended, including a related prospectus (the "Registration
Statement"), as prescribed by the Commission pursuant to the Securities Act and
the rules and regulations thereunder, in connection with the registration of
ordinary shares, par value U.S. $0.01 per share, unsecured debt securities,
preference shares or warrants to purchase securities of the Company.
NOW, THEREFORE, the undersigned, in his capacity as Chairman of the Board
of the Company, does hereby appoint Eric B. Brown, Nicolas J. Evanoff, William
E. Turcotte, Ricardo Rosa and Brenda S. Masters, and each of them severally, his
true and lawful attorney or attorneys with power to act with or without the
others, and with full power of substitution and resubstitution, to execute in
his name, place and stead, in his capacity as Chairman of the Board of the
Company:
a. the Form 10-K and any and all amendments thereto, including any and all
exhibits and other instruments and documents said attorney or attorneys
shall deem necessary, appropriate or advisable in connection therewith, and
to file the same with the Commission and to appear before the Commission in
connection with any matter relating thereto; and
b. any and all further post-effective amendments to the Registration
Statement, including the exhibits thereto and the related prospectus or
prospectuses and any supplement(s) thereto, and any registration statement
for the same offering filed pursuant to Rule 462 under the Securities Act
and any and all instruments necessary or incidental in connection
therewith, as said attorney or attorneys shall deem necessary or incidental
in connection therewith, and to file the same with the Commission and to
appear before the Commission in connection with any matter relating
thereto.
Each of said attorneys shall have full power and authority to do and perform in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary
<PAGE>
or desirable to be done in the premises, as fully and to all intents and
purposes as the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts that said attorneys and each of them, or their
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 12th day of March, 2000.
/s/ Victor E. Grijalva
----------------------
Victor E. Grijalva
<PAGE>
1999 Form 10-K & 462
TRANSOCEAN SEDCO FOREX INC.
Power of Attorney
-----------------
WHEREAS, TRANSOCEAN SEDCO FOREX INC., a Cayman Islands corporation (the
"Company"), intends to file with the U.S. Securities and Exchange Commission
(the "Commission") pursuant to the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder, an
annual report on Form 10-K for the fiscal year ended December 31, 1999, together
with any and all exhibits and other instruments and documents necessary,
advisable or appropriate in connection therewith (the "Form 10-K"); and
WHEREAS, the Company has filed with the Commission pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), a post-effective
amendment to the Company's Registration Statement on Form S-3 (Registration No.
333-59001), as amended, including a related prospectus (the "Registration
Statement"), as prescribed by the Commission pursuant to the Securities Act and
the rules and regulations thereunder, in connection with the registration of
ordinary shares, par value U.S. $0.01 per share, unsecured debt securities,
preference shares or warrants to purchase securities of the Company.
NOW, THEREFORE, the undersigned, in his capacity as a director of the
Company, does hereby appoint Eric B. Brown, Nicolas J. Evanoff, William E.
Turcotte, Ricardo Rosa and Brenda S. Masters, and each of them severally, his
true and lawful attorney or attorneys with power to act with or without the
others, and with full power of substitution and resubstitution, to execute in
his name, place and stead, in his capacity as a director of the Company:
a. the Form 10-K and any and all amendments thereto, including any and all
exhibits and other instruments and documents said attorney or attorneys
shall deem necessary, appropriate or advisable in connection therewith, and
to file the same with the Commission and to appear before the Commission in
connection with any matter relating thereto; and
b. any and all further post-effective amendments to the Registration
Statement, including the exhibits thereto and the related prospectus or
prospectuses and any supplement(s) thereto, and any registration statement
for the same offering filed pursuant to Rule 462 under the Securities Act
and any and all instruments necessary or incidental in connection
therewith, as said attorney or attorneys shall deem necessary or incidental
in connection therewith, and to file the same with the Commission and to
appear before the Commission in connection with any matter relating
thereto.
Each of said attorneys shall have full power and authority to do and perform in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary
<PAGE>
or desirable to be done in the premises, as fully and to all intents and
purposes as the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts that said attorneys and each of them, or their
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 9th day of March, 2000.
/s/ Richard D. Kinder
---------------------
Richard D. Kinder
<PAGE>
1999 Form 10-K & 462
TRANSOCEAN SEDCO FOREX INC.
Power of Attorney
-----------------
WHEREAS, TRANSOCEAN SEDCO FOREX INC., a Cayman Islands corporation (the
"Company"), intends to file with the U.S. Securities and Exchange Commission
(the "Commission") pursuant to the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder, an
annual report on Form 10-K for the fiscal year ended December 31, 1999, together
with any and all exhibits and other instruments and documents necessary,
advisable or appropriate in connection therewith (the "Form 10-K"); and
WHEREAS, the Company has filed with the Commission pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), a post-effective
amendment to the Company's Registration Statement on Form S-3 (Registration No.
333-59001), as amended, including a related prospectus (the "Registration
Statement"), as prescribed by the Commission pursuant to the Securities Act and
the rules and regulations thereunder, in connection with the registration of
ordinary shares, par value U.S. $0.01 per share, unsecured debt securities,
preference shares or warrants to purchase securities of the Company.
NOW, THEREFORE, the undersigned, in his capacity as a director of the
Company, does hereby appoint Eric B. Brown, Nicolas J. Evanoff, William E.
Turcotte, Ricardo Rosa and Brenda S. Masters, and each of them severally, his
true and lawful attorney or attorneys with power to act with or without the
others, and with full power of substitution and resubstitution, to execute in
his name, place and stead, in his capacity as a director of the Company:
a. the Form 10-K and any and all amendments thereto, including any and all
exhibits and other instruments and documents said attorney or attorneys
shall deem necessary, appropriate or advisable in connection therewith, and
to file the same with the Commission and to appear before the Commission in
connection with any matter relating thereto; and
b. any and all further post-effective amendments to the Registration
Statement, including the exhibits thereto and the related prospectus or
prospectuses and any supplement(s) thereto, and any registration statement
for the same offering filed pursuant to Rule 462 under the Securities Act
and any and all instruments necessary or incidental in connection
therewith, as said attorney or attorneys shall deem necessary or incidental
in connection therewith, and to file the same with the Commission and to
appear before the Commission in connection with any matter relating
thereto.
Each of said attorneys shall have full power and authority to do and perform in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary
<PAGE>
or desirable to be done in the premises, as fully and to all intents and
purposes as the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts that said attorneys and each of them, or their
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 10th day of March, 2000.
/s/ Ronald L. Kuehn, Jr.
------------------------
Ronald L. Kuehn, Jr.
<PAGE>
1999 Form 10-K & 462
TRANSOCEAN SEDCO FOREX INC.
Power of Attorney
-----------------
WHEREAS, TRANSOCEAN SEDCO FOREX INC., a Cayman Islands corporation (the
"Company"), intends to file with the U.S. Securities and Exchange Commission
(the "Commission") pursuant to the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder, an
annual report on Form 10-K for the fiscal year ended December 31, 1999, together
with any and all exhibits and other instruments and documents necessary,
advisable or appropriate in connection therewith (the "Form 10-K"); and
WHEREAS, the Company has filed with the Commission pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), a post-effective
amendment to the Company's Registration Statement on Form S-3 (Registration No.
333-59001), as amended, including a related prospectus (the "Registration
Statement"), as prescribed by the Commission pursuant to the Securities Act and
the rules and regulations thereunder, in connection with the registration of
ordinary shares, par value U.S. $0.01 per share, unsecured debt securities,
preference shares or warrants to purchase securities of the Company.
NOW, THEREFORE, the undersigned, in his capacity as a director of the
Company, does hereby appoint Eric B. Brown, Nicolas J. Evanoff, William E.
Turcotte, Ricardo Rosa and Brenda S. Masters, and each of them severally, his
true and lawful attorney or attorneys with power to act with or without the
others, and with full power of substitution and resubstitution, to execute in
his name, place and stead, in his capacity as a director of the Company:
a. the Form 10-K and any and all amendments thereto, including any and all
exhibits and other instruments and documents said attorney or attorneys
shall deem necessary, appropriate or advisable in connection therewith, and
to file the same with the Commission and to appear before the Commission in
connection with any matter relating thereto; and
b. any and all further post-effective amendments to the Registration
Statement, including the exhibits thereto and the related prospectus or
prospectuses and any supplement(s) thereto, and any registration statement
for the same offering filed pursuant to Rule 462 under the Securities Act
and any and all instruments necessary or incidental in connection
therewith, as said attorney or attorneys shall deem necessary or incidental
in connection therewith, and to file the same with the Commission and to
appear before the Commission in connection with any matter relating
thereto.
Each of said attorneys shall have full power and authority to do and perform in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary
<PAGE>
or desirable to be done in the premises, as fully and to
all intents and purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts that said attorneys and each
of them, or their or his substitutes or substitute, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 9th day of March, 2000.
/s/ Arthur Lindenauer
---------------------
Arthur Lindenauer
<PAGE>
1999 Form 10-K & 462
TRANSOCEAN SEDCO FOREX INC.
Power of Attorney
-----------------
WHEREAS, TRANSOCEAN SEDCO FOREX INC., a Cayman Islands corporation (the
"Company"), intends to file with the U.S. Securities and Exchange Commission
(the "Commission") pursuant to the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder, an
annual report on Form 10-K for the fiscal year ended December 31, 1999, together
with any and all exhibits and other instruments and documents necessary,
advisable or appropriate in connection therewith (the "Form 10-K"); and
WHEREAS, the Company has filed with the Commission pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), a post-effective
amendment to the Company's Registration Statement on Form S-3 (Registration No.
333-59001), as amended, including a related prospectus (the "Registration
Statement"), as prescribed by the Commission pursuant to the Securities Act and
the rules and regulations thereunder, in connection with the registration of
ordinary shares, par value U.S. $0.01 per share, unsecured debt securities,
preference shares or warrants to purchase securities of the Company.
NOW, THEREFORE, the undersigned, in his capacity as a director of the
Company, does hereby appoint Eric B. Brown, Nicolas J. Evanoff, William E.
Turcotte, Ricardo Rosa and Brenda S. Masters, and each of them severally, his
true and lawful attorney or attorneys with power to act with or without the
others, and with full power of substitution and resubstitution, to execute in
his name, place and stead, in his capacity as a director of the Company:
a. the Form 10-K and any and all amendments thereto, including any and all
exhibits and other instruments and documents said attorney or attorneys
shall deem necessary, appropriate or advisable in connection therewith, and
to file the same with the Commission and to appear before the Commission in
connection with any matter relating thereto; and
b. any and all further post-effective amendments to the Registration
Statement, including the exhibits thereto and the related prospectus or
prospectuses and any supplement(s) thereto, and any registration statement
for the same offering filed pursuant to Rule 462 under the Securities Act
and any and all instruments necessary or incidental in connection
therewith, as said attorney or attorneys shall deem necessary or incidental
in connection therewith, and to file the same with the Commission and to
appear before the Commission in connection with any matter relating
thereto.
Each of said attorneys shall have full power and authority to do and perform in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary
<PAGE>
or desirable to be done in the premises, as fully and to all intents and
purposes as the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts that said attorneys and each of them, or their
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 14th day of March, 2000.
/s/ Martin B. McNamara
----------------------
Martin B. McNamara
<PAGE>
1999 Form 10-K & 462
TRANSOCEAN SEDCO FOREX INC.
Power of Attorney
-----------------
WHEREAS, TRANSOCEAN SEDCO FOREX INC., a Cayman Islands corporation (the
"Company"), intends to file with the U.S. Securities and Exchange Commission
(the "Commission") pursuant to the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder, an
annual report on Form 10-K for the fiscal year ended December 31, 1999, together
with any and all exhibits and other instruments and documents necessary,
advisable or appropriate in connection therewith (the "Form 10-K"); and
WHEREAS, the Company has filed with the Commission pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), a post-effective
amendment to the Company's Registration Statement on Form S-3 (Registration No.
333-59001), as amended, including a related prospectus (the "Registration
Statement"), as prescribed by the Commission pursuant to the Securities Act and
the rules and regulations thereunder, in connection with the registration of
ordinary shares, par value U.S. $0.01 per share, unsecured debt securities,
preference shares or warrants to purchase securities of the Company.
NOW, THEREFORE, the undersigned, in his capacity as a director of the
Company, does hereby appoint Eric B. Brown, Nicolas J. Evanoff, William E.
Turcotte, Ricardo Rosa and Brenda S. Masters, and each of them severally, his
true and lawful attorney or attorneys with power to act with or without the
others, and with full power of substitution and resubstitution, to execute in
his name, place and stead, in his capacity as a director of the Company:
a. the Form 10-K and any and all amendments thereto, including any and all
exhibits and other instruments and documents said attorney or attorneys
shall deem necessary, appropriate or advisable in connection therewith, and
to file the same with the Commission and to appear before the Commission in
connection with any matter relating thereto; and
b. any and all further post-effective amendments to the Registration
Statement, including the exhibits thereto and the related prospectus or
prospectuses and any supplement(s) thereto, and any registration statement
for the same offering filed pursuant to Rule 462 under the Securities Act
and any and all instruments necessary or incidental in connection
therewith, as said attorney or attorneys shall deem necessary or incidental
in connection therewith, and to file the same with the Commission and to
appear before the Commission in connection with any matter relating
thereto.
Each of said attorneys shall have full power and authority to do and perform in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary
<PAGE>
or desirable to be done in the premises, as fully and to all intents and
purposes as the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts that said attorneys and each of them, or their
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 14th day of March, 2000.
/s/ Roberto Monti
-----------------
Roberto Monti
<PAGE>
1999 Form 10-K & 462
TRANSOCEAN SEDCO FOREX INC.
Power of Attorney
-----------------
WHEREAS, TRANSOCEAN SEDCO FOREX INC., a Cayman Islands corporation (the
"Company"), intends to file with the U.S. Securities and Exchange Commission
(the "Commission") pursuant to the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder, an
annual report on Form 10-K for the fiscal year ended December 31, 1999, together
with any and all exhibits and other instruments and documents necessary,
advisable or appropriate in connection therewith (the "Form 10-K"); and
WHEREAS, the Company has filed with the Commission pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), a post-effective
amendment to the Company's Registration Statement on Form S-3 (Registration No.
333-59001), as amended, including a related prospectus (the "Registration
Statement"), as prescribed by the Commission pursuant to the Securities Act and
the rules and regulations thereunder, in connection with the registration of
ordinary shares, par value U.S. $0.01 per share, unsecured debt securities,
preference shares or warrants to purchase securities of the Company.
NOW, THEREFORE, the undersigned, in his capacity as a director of the
Company, does hereby appoint Eric B. Brown, Nicolas J. Evanoff, William E.
Turcotte, Ricardo Rosa and Brenda S. Masters, and each of them severally, his
true and lawful attorney or attorneys with power to act with or without the
others, and with full power of substitution and resubstitution, to execute in
his name, place and stead, in his capacity as a director of the Company:
a. the Form 10-K and any and all amendments thereto, including any and all
exhibits and other instruments and documents said attorney or attorneys
shall deem necessary, appropriate or advisable in connection therewith, and
to file the same with the Commission and to appear before the Commission in
connection with any matter relating thereto; and
b. any and all further post-effective amendments to the Registration
Statement, including the exhibits thereto and the related prospectus or
prospectuses and any supplement(s) thereto, and any registration statement
for the same offering filed pursuant to Rule 462 under the Securities Act
and any and all instruments necessary or incidental in connection
therewith, as said attorney or attorneys shall deem necessary or incidental
in connection therewith, and to file the same with the Commission and to
appear before the Commission in connection with any matter relating
thereto.
Each of said attorneys shall have full power and authority to do and perform in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary
<PAGE>
or desirable to be done in the premises, as fully and to all intents and
purposes as the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts that said attorneys and each of them, or their
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 15th day of March 2000.
/s/ Alain Roger
---------------
Alain Roger
<PAGE>
1999 Form 10-K & 462
TRANSOCEAN SEDCO FOREX INC.
Power of Attorney
-----------------
WHEREAS, TRANSOCEAN SEDCO FOREX INC., a Cayman Islands corporation (the
"Company"), intends to file with the U.S. Securities and Exchange Commission
(the "Commission") pursuant to the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder, an
annual report on Form 10-K for the fiscal year ended December 31, 1999, together
with any and all exhibits and other instruments and documents necessary,
advisable or appropriate in connection therewith (the "Form 10-K"); and
WHEREAS, the Company has filed with the Commission pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), a post-effective
amendment to the Company's Registration Statement on Form S-3 (Registration No.
333-59001), as amended, including a related prospectus (the "Registration
Statement"), as prescribed by the Commission pursuant to the Securities Act and
the rules and regulations thereunder, in connection with the registration of
ordinary shares, par value U.S. $0.01 per share, unsecured debt securities,
preference shares or warrants to purchase securities of the Company.
NOW, THEREFORE, the undersigned, in his capacity as a director of the
Company, does hereby appoint Eric B. Brown, Nicolas J. Evanoff, William E.
Turcotte, Ricardo Rosa and Brenda S. Masters, and each of them severally, his
true and lawful attorney or attorneys with power to act with or without the
others, and with full power of substitution and resubstitution, to execute in
his name, place and stead, in his capacity as a director of the Company:
a. the Form 10-K and any and all amendments thereto, including any and all
exhibits and other instruments and documents said attorney or attorneys
shall deem necessary, appropriate or advisable in connection therewith, and
to file the same with the Commission and to appear before the Commission in
connection with any matter relating thereto; and
b. any and all further post-effective amendments to the Registration
Statement, including the exhibits thereto and the related prospectus or
prospectuses and any supplement(s) thereto, and any registration statement
for the same offering filed pursuant to Rule 462 under the Securities Act
and any and all instruments necessary or incidental in connection
therewith, as said attorney or attorneys shall deem necessary or incidental
in connection therewith, and to file the same with the Commission and to
appear before the Commission in connection with any matter relating
thereto.
Each of said attorneys shall have full power and authority to do and perform in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary
<PAGE>
or desirable to be done in the premises, as fully and to all intents and
purposes as the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts that said attorneys and each of them, or their
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 13th day of March, 2000.
/s/ Kristian Siem
-----------------
Kristian Siem
<PAGE>
1999 Form 10-K & 462
TRANSOCEAN SEDCO FOREX INC.
Power of Attorney
-----------------
WHEREAS, TRANSOCEAN SEDCO FOREX INC., a Cayman Islands corporation (the
"Company"), intends to file with the U.S. Securities and Exchange Commission
(the "Commission") pursuant to the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder, an
annual report on Form 10-K for the fiscal year ended December 31, 1999, together
with any and all exhibits and other instruments and documents necessary,
advisable or appropriate in connection therewith (the "Form 10-K"); and
WHEREAS, the Company has filed with the Commission pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), a post-effective
amendment to the Company's Registration Statement on Form S-3 (Registration No.
333-59001), as amended, including a related prospectus (the "Registration
Statement"), as prescribed by the Commission pursuant to the Securities Act and
the rules and regulations thereunder, in connection with the registration of
ordinary shares, par value U.S. $0.01 per share, unsecured debt securities,
preference shares or warrants to purchase securities of the Company.
NOW, THEREFORE, the undersigned, in his capacity as a director of the
Company, does hereby appoint Eric B. Brown, Nicolas J. Evanoff, William E.
Turcotte, Ricardo Rosa and Brenda S. Masters, and each of them severally, his
true and lawful attorney or attorneys with power to act with or without the
others, and with full power of substitution and resubstitution, to execute in
his name, place and stead, in his capacity as a director of the Company:
a. the Form 10-K and any and all amendments thereto, including any and all
exhibits and other instruments and documents said attorney or attorneys
shall deem necessary, appropriate or advisable in connection therewith, and
to file the same with the Commission and to appear before the Commission in
connection with any matter relating thereto; and
b. any and all further post-effective amendments to the Registration
Statement, including the exhibits thereto and the related prospectus or
prospectuses and any supplement(s) thereto, and any registration statement
for the same offering filed pursuant to Rule 462 under the Securities Act
and any and all instruments necessary or incidental in connection
therewith, as said attorney or attorneys shall deem necessary or incidental
in connection therewith, and to file the same with the Commission and to
appear before the Commission in connection with any matter relating
thereto.
Each of said attorneys shall have full power and authority to do and perform in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary
<PAGE>
or desirable to be done in the premises, as fully and to all intents and
purposes as the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts that said attorneys and each of them, or their
or his substitutes or substitute, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 15th day of March, 2000.
/s/ Ian C. Strachan
-------------------
Ian C. Strachan
<PAGE>
1999 Form 10-K & 462
TRANSOCEAN SEDCO FOREX INC.
Power of Attorney
-----------------
WHEREAS, TRANSOCEAN SEDCO FOREX INC., a Cayman Islands corporation (the
"Company"), intends to file with the U.S. Securities and Exchange Commission
(the "Commission") pursuant to the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission promulgated thereunder, an
annual report on Form 10-K for the fiscal year ended December 31, 1999, together
with any and all exhibits and other instruments and documents necessary,
advisable or appropriate in connection therewith (the "Form 10-K"); and
WHEREAS, the Company has filed with the Commission pursuant to the Securities
Act of 1933, as amended (the "Securities Act"), a post-effective amendment to
the Company's Registration Statement on Form S-3 (Registration No. 333-59001),
as amended, including a related prospectus (the "Registration Statement"), as
prescribed by the Commission pursuant to the Securities Act and the rules and
regulations thereunder, in connection with the registration of ordinary shares,
par value U.S. $0.01 per share, unsecured debt securities, preference shares or
warrants to purchase securities of the Company.
NOW, THEREFORE, the undersigned, in his capacity as President, Chief
Executor Officer and a director of the Company, does hereby appoint Eric B.
Brown, Nicolas J. Evanoff, William E. Turcotte, Ricardo Rosa and Brenda S.
Masters, and each of them severally, his true and lawful attorney or attorneys
with power to act with or without the others, and with full power of
substitution and resubstitution, to execute in his name, place and stead, in his
capacity as President, Chief Executor Officer and a director of the Company:
a. the Form 10-K and any and all amendments thereto, including any and all
exhibits and other instruments and documents said attorney or attorneys
shall deem necessary, appropriate or advisable in connection therewith, and
to file the same with the Commission and to appear before the Commission in
connection with any matter relating thereto; and
b. any and all further post-effective amendments to the Registration
Statement, including the exhibits thereto and the related prospectus or
prospectuses and any supplement(s) thereto, and any registration statement
for the same offering filed pursuant to Rule 462 under the Securities Act
and any and all instruments necessary or incidental in connection
therewith, as said attorney or attorneys shall deem necessary or incidental
in connection therewith, and to file the same with the Commission and to
appear before the Commission in connection with any matter relating
thereto.
Each of said attorneys shall have full power and authority to do and perform in
the name and on behalf of the undersigned, in any and all capacities, every act
whatsoever necessary or desirable to be done in the premises, as fully and to
all intents and
<PAGE>
purposes as the undersigned might or could do in person, the
undersigned hereby ratifying and approving the acts that said attorneys and each
of them, or their or his substitutes or substitute, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as
of the 13th day of March, 2000.
/s/ J. Michael Talbert
----------------------
J. Michael Talbert
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 165,673 174,481
<SECURITIES> 0 0
<RECEIVABLES> 277,352 234,181
<ALLOWANCES> 27,109 829
<INVENTORY> 0 0
<CURRENT-ASSETS> 558,866 514,693
<PP&E> 5,498,116 1,954,961
<DEPRECIATION> 1,153,614 1,039,538
<TOTAL-ASSETS> 6,140,170 1,472,919
<CURRENT-LIABILITIES> 528,521 297,984
<BONDS> 1,187,578 86,100
0 0
0 0
<COMMON> 2,101 0
<OTHER-SE> 3,908,038 564,382
<TOTAL-LIABILITY-AND-EQUITY> 6,140,170 1,472,919
<SALES> 0 0
<TOTAL-REVENUES> 648,236 1,090,523
<CGS> 0 0
<TOTAL-COSTS> 599,392 713,258
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 10,250 12,950
<INCOME-PRETAX> 48,807 374,021
<INCOME-TAX> (9,296) 32,443
<INCOME-CONTINUING> 58,103 341,578
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 58,103 341,578
<EPS-BASIC> 0.53<F2> 3.12<F2>
<EPS-DILUTED> 0.53<F2> 3.12<F2>
<F1>
<FN>
<F1> 1998 has been restated due to the Reverse Acquisition of Transocean
Offshore Inc. by Sedco Forex.
<F2> Basic and Diluted Earnings per share are shown on a Pro Forma basis.
</FN>
</TABLE>
