UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
1998 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, 1998
Commission file number 1-5471
__________
GLOBAL MARINE INC.
(Exact name of registrant as specified in its charter)
Delaware 95-1849298
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
777 N. Eldridge Parkway, Houston, Texas 77079
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (281)596-5100
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $.10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
As of February 28, 1999, the aggregate market value of the Company's common
stock, $.10 par value, held by non-affiliates was $1,346,143,414.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date: Common Stock, $.10 par
value, 173,414,727 shares outstanding as of February 28, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement in connection with the 1999 Annual Meeting of
Stockholders are incorporated into Part III of this Report.
<PAGE>
TABLE OF CONTENTS
Page
Part I
Items 1. and 2. Business and Properties 3
Item 3. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of Security Holders 14
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 14
Item 6. Selected Financial Data 15
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 16
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 28
Item 8. Financial Statements and Supplementary Data 29
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 57
Part III
Item 10. Directors and Executive Officers of the Registrant 57
Item 11. Executive Compensation 57
Item 12. Security Ownership of Certain Beneficial Owners
and Management 57
Item 13. Certain Relationships and Related Transactions 57
Part IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 58
<PAGE>
PART I
ITEMS 1. AND 2. BUSINESS AND PROPERTIES
Global Marine Inc. is a holding company incorporated in Delaware in 1964.
Unless otherwise provided, the term "Company" refers to Global Marine Inc.
and, unless the context otherwise requires, to its consolidated subsidiaries.
The Company's businesses are conducted by subsidiaries of Global Marine Inc.
The Company, which is headquartered in Houston, Texas, provides offshore
drilling services on a dayrate basis and offshore drilling management
services on a turnkey basis. Business segment and geographic information
is set forth in Note 11 of Notes to Consolidated Financial Statements in
Item 8 of this Annual Report on Form 10-K.
Contract Drilling
Substantially all of the Company's domestic offshore contract drilling
operations are conducted by Global Marine Drilling Company ("GMDC"), a
wholly-owned subsidiary, and substantially all international operations are
conducted by Global Marine International Drilling Corporation ("GMIDC"), also
a wholly-owned subsidiary. Contract drilling offices are located in Houston,
Texas; The Hague, Netherlands; Lafayette, Louisiana; Aberdeen, Scotland;
Buenos Aires, Argentina; Cabinda, Angola; Douala, Cameroon; London, England;
Luanda, Angola; New Orleans, Louisiana; Port Gentil, Gabon; Port Harcourt,
Nigeria; Pointe Noire, Republic of Congo; and Trinidad, West Indies.
The Company has a modern, diversified, active fleet of 31 mobile offshore
drilling rigs, plus two ultra deep-water drillships under construction.
The active fleet consists of 23 cantilevered jackups, five third-generation
semisubmersibles, one fourth-generation semisubmersible, one moored drillship,
and one dynamically positioned drillship. In addition, the Company has one
currently inactive concrete island drilling system ("CIDS") designed for arctic
operations. All of the Company's active rigs were placed in service in 1979 or
later, and, as of February 22, 1999, their average age was approximately 15.7
years.
The Company's fleet is deployed in the major offshore oil and gas operating
areas worldwide. The principal areas in which the fleet is currently deployed
are the U.S. Gulf of Mexico, offshore West Africa, and the North Sea.
In February and March 1998 the Company entered into agreements with Harland
and Wolff Shipbuilding and Heavy Industries Ltd. for the construction of two
dynamically-positioned ultra deep-water drillships to fulfill the Company's
obligations under two multi-year drilling contracts. The first of the new
drillships, the Glomar C.R. Luigs, will be capable of drilling in maximum
water depths of 9,000 feet, upgradable to 12,000 feet, and is scheduled to
be delivered in the fourth quarter of 1999. The second of the new drillships,
the Glomar Jack Ryan, will be capable of drilling in maximum water depths of
8,000 feet, upgradable to 12,000 feet, and is scheduled to be delivered in the
first quarter of 2000. The two drillships have commitments from customers for
a minimum period of three years each following delivery. Anticipated revenues
under these contracts total $434 million.
In December 1998 the Company novated the contracts for the construction of
the Glomar C.R. Luigs and the Glomar Jack Ryan to leasing subsidiaries of
Lloyds Bank Plc and Barclays Bank Plc, respectively, and entered into two-fully
defeased, 20-year capital leases with respect to the rigs. The leasehold costs
of the drillships, including all construction, equipment, and financing costs,
are anticipated to be approximately $610
<PAGE>
million and are included in the Company's capital expenditures. (See Note 4
of Notes to Consolidated Financial Statements in Item 8 of this Annual Report
on Form 10-K.)
As part of the Company's goal of enhancing long-term shareholder value, the
Company has from time to time considered and actively pursued business
combinations and the acquisition or construction of suitable additional rigs
and other assets. If the Company decides to undertake a business combination
or an acquisition or construction project, the issuance of additional debt or
additional shares of stock could be required.
Offshore Rig Fleet. The following table lists the rigs in the Company's
drilling fleet as of February 22, 1999, indicating the year each rig was placed
in drilling service, each rig's maximum water and drilling depth capabilities,
current location, customer, and the date each rig is expected to complete
its current drilling commitments.
<PAGE>
<TABLE>
<CAPTION>
OFFSHORE RIG FLEET
Status as of February 22, 1999
YEAR
PLACED MAXIMUM DRILLING
IN WATER DEPTH DEPTH CURRENT CONTRACT
SERVICE CAPABILITY CAPABILITY LOCATION CUSTOMER TERM (1)
------- ----------- ---------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
CANTILEVERED JACKUP
Glomar High Island I 1979 250 ft. 20,000 ft. Gulf of Mexico Nippon expires 5/99
Glomar High Island II 1979 270 ft. 20,000 ft. Gulf of Mexico Unocal expires 5/99
Glomar High Island III 1980 250 ft. 20,000 ft. West Africa - -
Glomar High Island IV 1980 250 ft. 20,000 ft. Gulf of Mexico Chevron expires 8/99
Glomar High Island V 1981 270 ft. 20,000 ft. West Africa Cabinda Gulf expires 9/99
Glomar High Island VII 1982 250 ft. 20,000 ft. West Africa Pecten Cameroon expires 3/99
Glomar High Island VIII 1982 250 ft. 20,000 ft. Gulf of Mexico Vastar Resources expires 2/99
Glomar High Island IX 1983 250 ft. 20,000 ft. West Africa - -
Glomar Adriatic I 1981 300 ft. 25,000 ft. West Africa - -
Glomar Adriatic II 1981 350 ft. 25,000 ft. Gulf of Mexico Chevron expires 3/99
Glomar Adriatic III 1982 328 ft. 25,000 ft. Gulf of Mexico BHP expires 3/99
Glomar Adriatic IV 1983 350 ft. 25,000 ft. North Sea Ranger expires 4/99
Glomar Adriatic V 1979 300 ft. 20,000 ft. West Africa - -
Glomar Adriatic VI 1981 350 ft. 20,000 ft. North Sea British Petroleum expires 8/00
Glomar Adriatic VII 1983 328 ft. 20,000 ft. Trinidad Elf expires 6/99
Glomar Adriatic VIII 1983 300 ft. 25,000 ft. West Africa Mobil expires 11/99
Glomar Adriatic IX 1981 300 ft. 20,000 ft. West Africa - -
Glomar Adriatic X 1982 300 ft. 20,000 ft. West Africa Cabinda Gulf expires 8/99
Glomar Adriatic XI 1983 225 ft. 25,000 ft. North Sea British Gas expires 3/00
Glomar Main Pass I 1982 300 ft. 25,000 ft. Gulf of Mexico Equitable expires 5/99
Glomar Main Pass IV 1982 300 ft. 25,000 ft. Gulf of Mexico Energy Partners expires 3/99
Glomar Labrador I 1983 300 ft. 25,000 ft. Argentina Total expires 8/99
Glomar Baltic I 1983 375 ft. 25,000 ft. Gulf of Mexico Anadarko expires 3/99
SEMISUBMERSIBLE
Glomar Arctic I 1983 3,000 ft. 25,000 ft. Gulf of Mexico British Petroleum expires 5/02
Glomar Arctic III 1984 1,800 ft. 25,000 ft. North Sea Talisman expires 3/99
Glomar Arctic IV 1983 1,800 ft. 25,000 ft. North Sea BritishPetroleum expires 11/99
Maersk Jutlander 1982 1,200 ft. 25,000 ft. North Sea Maersk expires 12/00
Glomar Grand Banks 1984 1,500 ft. 25,000 ft. Canada Mobil expires 3/00
Glomar Celtic Sea 1998 5,000 ft. 25,000 ft. Gulf of Mexico Elf Exploration expires 2/01
DRILLSHIP
Glomar Robert F. Bauer 1983 2,750 ft. 25,000 ft. West Africa Marathon expires 7/99
Glomar Explorer 1998 7,800 ft. 25,000 ft. Gulf of Mexico Texaco/Chevron expires 9/03
CONCRETE ISLAND
DRILLING SYSTEM
Glomar Beaufort Sea I (2) 1984 55 ft. 25,000 ft. Alaska - -
_______________
(1) Expiration dates relate to executed contracts and letters of intent or
other customer commitments for which contracts have not yet been executed
and are estimates only.
(2) The Glomar Beaufort Sea I concrete island drilling system is inactive and
has been excluded from the Company's rig utilization figures.
</TABLE>
Jackup rigs have elevating legs which extend to the sea bottom, providing a
stable platform for drilling, and are generally preferred in water depths of
300 feet or less. All of the Company's jackup rigs have drilling equipment
mounted on cantilevers, which allow the equipment to extend outward from the
rigs' hulls over fixed drilling platforms and enable operators to drill both
exploratory and development wells. The Company has extended the reach of the
cantilevers on ten of its jackups beyond the originally designed reach. This
enables the drilling equipment to operate over larger production platforms.
In addition, two of the Company's jackups have been equipped with "skid-off
packages," which allow the drilling equipment to be transferred to fixed
production platforms. The Company's two largest jackup rigs, the Glomar
Labrador I and Glomar Baltic I, are capable of operating in severe weather
environments such as the North Sea and offshore Eastern Canada.
<PAGE>
Semisubmersible rigs are floating offshore drilling units that have pontoons
and columns that, when flooded with water, cause the unit to partially
submerge to a predetermined depth. Most semisubmersibles are anchored to
the sea bottom with mooring chains, but some use dynamic positioning ("DP"),
which means they are held in position by computer-controlled propellers,
known as thrusters. Semisubmersibles are classified into four generations,
distinguished mainly by their age, environmental rating, variable deck load,
and water depth capability. The Company's Glomar Arctic I, Glomar Arctic III,
Glomar Arctic IV, Glomar Grand Banks, and Maersk Jutlander semisubmersibles
are third-generation, conventionally-moored rigs suitable for drilling in
deep-water, harsh-weather environments. The Company's Glomar Celtic Sea is a
fourth-generation semisubmersible capable of drilling in water depths of up to
5,000 feet, and utilizes a mooring system that is DP-assisted.
Drillships are generally preferred for deep-water drilling in remote locations
with moderate weather environments because of their mobility and large load
carrying capability. The Company's Glomar Explorer is a dynamically positioned
drillship capable of drilling in maximum water depths of 7,800 feet. The
Glomar Robert F. Bauer is a conventionally-moored drillship capable of drilling
in maximum water depths of 2,750 feet.
The Company's "deep-water" rigs consist of its semisubmersibles and drillships.
The Company considers rigs with a maximum water depth capability of 5,000 feet
or more, such as the Glomar Explorer, the Glomar Celtic Sea, and the two
drillships currently under construction, to be "ultra deep-water" rigs.
All of the Company's active rigs are equipped with top-drive drilling systems.
Top-drives permit drilling with extended stands of drill pipe, reducing the
number of connections required, and enable operators to rotate the drill pipe
when exiting the well bore, thereby increasing both the speed and safety of
drilling operations and reducing the risk of the drill pipe becoming stuck
in the well bore.
The Company owns all of the rigs in the fleet with the exception of the Glomar
Explorer, which is subject to a 30-year capital lease, and the two drillships
under construction, which are subject to 20-year capital leases.
Rig Utilization. For the year ended December 31, 1998, the Company's average
utilization rate(1) for its active rigs was 96 percent compared to 99 percent
for 1997. As of February 22, 1999, 26 of the Company's 31 active rigs were
under contract. Twelve of the Company's currently operating rigs are expected
to complete their commitments by June 30, 1999, an additional seven are
expected to complete their commitments by December 31, 1999, and the remaining
seven rigs are expected to complete their commitments in 2000 or later.
As of December 31, 1998, eleven of the Company's twelve rigs in the Gulf of
Mexico were employed. As of that date, the industry utilization rate(2) in
the Gulf of Mexico was 65 percent compared with a rate of 89 percent as of
December 31, 1997. Revenues atrributable to the Gulf of Mexico accounted for
36 percent of the Company's contract drilling revenues in 1998, 40 percent
in 1997, and 36 percent in 1996.
________________
(1) The average rig utilization rate for a period is the ratio of days in the
period during which the rigs were under contract to the total days in the
period during which the rigs were available to work. It excludes the CIDS
and also excludes days while a rig undergoes conversion to drilling
operations.
(2) Industry utilization rates are derived from data published by Offshore
Data Services and other information available to the Company. The Company
has adjusted the numerator (rigs working) and denominator (rigs available)
as reported by Offshore Data Services to include certain rigs which are
under contract for non-drilling uses but which are able to compete with
Company rigs and to exclude other rigs that, because of their location or
other factors, do not compete with Company rigs.
<PAGE>
As of December 31, 1998, seven of the Company's ten rigs offshore West Africa
were employed. As of that date, the industry utilization rate offshore West
Africa was 82 percent compared with a rate of 96 percent as of December 31,
1997. Revenues from this market accounted for 29 percent of the Company's
contract drilling revenues in 1998, 36 percent in 1997, and 35 percent in 1996.
As of December 31, 1998, all six of the Company's rigs in the North Sea were
employed. As of that date, the industry utilization rate in the North Sea
was 91 percent compared with a rate of 94 percent as of December 31, 1997.
Revenues from this market accounted for 23 percent of the Company's contract
drilling revenues in 1998, 13 percent in 1997, and 25 percent in 1996.
In addition to the major drilling markets of the Gulf of Mexico, West Africa,
and the North Sea, the Company had one rig operating offshore Canada, one
offshore Trinidad, and one offshore Argentina at December 31, 1998.
The following table sets forth the size and average utilization rate of the
Company's active rig fleet for each of the past five years.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Rigs in service at year-end 31 28 26 26 24
Average rig utilization 96% 99% 98% 99% 94%
</TABLE>
Backlog. The following tables show, for each of the Company's three principal
types of drilling rigs and each major geographic area, the Company's revenue
backlog and percentage of rig months committed for 1999 and 2000 and revenue
backlog for later years, determined on the basis of executed contracts and
other commitments as of December 31, 1998. The number of rigs of each type is
indicated in parenthesis. Figures in the tables below include two drillships
under construction, one of which is scheduled to enter service in the Gulf of
Mexico in the fourth quarter of 1999 and one of which is scheduled to enter
service offshore West Africa in the first quarter of 2000.
<TABLE>
<CAPTION>
1999 2000
------------------- -------------------
% Rig % Rig
Months Months Later Total
Revenues Committed Revenues Committed Years Revenues
-------- --------- -------- --------- ------- --------
($ in millions)
<S> <C> <C> <C> <C> <C> <C>
Jackups (23) $142 31% $ 26 4% $ - $ 168
Semisubmersibles (6) 235 85% 125 49% 73 433
Drillships (4) 98 84% 191 74% 431 720
---- ---- ---- ------
Total $475 45% $342 20% $504 $1,321
==== ==== ==== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1999 2000
------------------- -------------------
% Rig % Rig
Months Months Later Total
Revenues Committed Revenues Committed Years Revenues
-------- --------- -------- --------- ------- --------
($ in millions)
<S> <C> <C> <C> <C> <C> <C>
Gulf of Mexico (13) $175 35% $231 31% $358 $ 764
West Africa (11) 75 33% 62 8% 146 283
North Sea (6) 134 74% 49 29% - 183
Other (3) 91 67% - - - 91
---- ---- ---- ------
Total $475 45% $342 20% $504 $1,321
==== ==== ==== ======
</TABLE>
The contract drilling backlog at December 31, 1997 was $1.2 billion. The
backlog at December 31, 1998 and 1997 included $68 million and $346 million,
respectively, attributable to letters of intent or other customer commitments
for which contracts had not yet been executed as of December 31.
Drilling Contracts and Major Customers. Contracts to employ the Company's
drilling rigs extend over a specified period of time or the time required
to drill a specified well or number of wells. While the final contract for
employment of a rig is the result of negotiations between the Company and
the customer, most contracts are awarded based upon competitive bidding.
The rates specified in drilling contracts are generally on a daily-rate
("dayrate") basis, payable in U.S. dollars, and vary depending upon the type
of rig employed, equipment and services supplied, geographic location, term
of the contract, competitive conditions, and other variables. Each contract
provides for a basic dayrate during drilling operations, with lower rates or
no payment for periods of equipment breakdown, adverse weather, or other
conditions which may be beyond the Company's control. When a rig mobilizes
to or demobilizes from an operating area, a contract may provide for different
dayrates, specified fixed amounts, or for no payment during the mobilization
or demobilization. A contract may be terminated by the customer if the rig
is destroyed or, in some cases, if drilling operations are suspended for a
specified period of time due to a breakdown of major equipment, in the event
of poor operational, safety, or environmental performance not remedied by the
Company within a specified period, or if other events occur that are beyond
either party's control.
The Company's offshore contract drilling business is subject to the usual
risks associated with having a limited number of customers for its services.
No single customer provided more than 10 percent of consolidated revenues
in 1998, 1997, or 1996.
Drilling Management Services
The Company provides drilling management services priced on a completed-project
("turnkey") basis through two wholly-owned subsidiaries, Applied Drilling
Technology Inc. ("ADTI") and Global Marine Integrated Services - International
Inc. ("GMIS-I"), and through Global Marine Integrated Services - Europe
("GMIS-E"), a division of one of the Company's foreign subsidiaries. ADTI
operates primarily in the U.S. Gulf of Mexico, and GMIS-I and GMIS-E operate
in areas other than the U.S. Gulf of Mexico. Each will assume responsibility
for the design and execution of specific offshore drilling programs and
deliver a logged or loggable hole to an agreed depth for a guaranteed price.
Compensation is contingent upon satisfactory completion of the drilling
program.
As of December 31, 1998, ADTI had completed 487 turnkey wells since commencing
operations in 1980, including 74 in 1998, 101 in 1997, and 79 in 1996. GMIS-I
completed three turnkey wells in 1998, six in 1997, and three in 1996. GMIS-E
did not undertake any turnkey wells in 1998, 1997, or 1996.
<PAGE>
In addition to providing drilling management services on a turnkey basis,
GMIS-I and GMIS-E offer services as general contractors under arrangements
described as "partnering," "full service contracting," and "integrated drilling
services" arrangements, among others. When the Company acts as a general
contractor, it provides planning, engineering and management services beyond
the scope of its traditional contract drilling business, and thereby assumes
greater liability. GMIS-I and GMIS-E provide such planning, engineering and
management services, as well as turnkey drilling services, in areas other than
the U.S. Gulf of Mexico.
As of December 31, 1998, the Company's drilling management services revenue
backlog was approximately $36 million, all of which is expected to be realized
in 1999. As of December 31, 1997, the drilling management services backlog
was approximately $55 million.
Oil and Gas Operations
The Company conducts oil and gas exploration, development, and production
activities through its wholly-owned subsidiary, Challenger Minerals Inc.
("CMI"). Such activities primarily include participation in the development
and operation of properties for oil and gas production. In addition, the
Company incurs through ADTI and other subsidiaries certain limited exploration
and leasehold acquisition costs in connection with its turnkey drilling
operations. Typically the Company acquires a participation interest only
in order to secure a turnkey drilling contract. Substantially all of the
Company's oil and gas activities are conducted in the United States offshore
Louisiana and Texas and onshore in Oklahoma and Texas. Oil and gas operations
accounted for less than one percent of the Company's revenues in 1998.
Competition and Business Environment
Drilling contracts are awarded on a competitive-bid basis. An operator
selecting a rig may consider, among other things, rig availability, quality
of service and equipment, and price. Offshore drilling is a highly competitive
business with numerous industry participants, none of which has a significant
market share, which makes it difficult to raise prices. Recent mergers in the
oil and gas industry have resulted in fewer but bigger customers for the
services provided by the Company and its competitors.
Offshore drilling is a highly cyclical business and may be impacted by oil and
gas price levels and volatility. Worldwide military, political, and economic
events have contributed to oil and gas price volatility and are likely to
continue to do so in the future. Some other factors which have affected and
are likely to continue affecting oil and gas prices and, in turn, the level of
demand for the Company's services, include demand for oil and gas worldwide,
the ability of the Organization of Petroleum Exporting Countries ("OPEC") to
set and maintain production levels, the level of production by non-OPEC
countries, domestic and foreign tax policy, and government laws and regulations
which restrict exploration and development of oil and gas in various offshore
jurisdictions.
Competition for the skilled labor required for deep-water operations has
intensified as the number of deep-water rigs added to worldwide fleets or
under construction has increased in the last few years. Although such
competition has not materially affected the Company to date, the Company has
found it more difficult to find qualified individuals, and the possibility
exists that competition for skilled labor with deep-water expertise could
limit the Company's results of operations.
<PAGE>
ADTI, GMIS-I, and GMIS-E compete with other participants in the offshore
drilling industry, some of which have greater resources. In addition, the
Company's drilling management services business is subject to the usual risks
associated with having a limited number of customers for its services.
Results of operations from the Company's drilling management services may be
limited by certain factors, in particular, the ability of the Company to obtain
and successfully perform turnkey drilling contracts based on competitive bids.
The Company's ability to obtain turnkey drilling contracts is largely dependent
on the number of such contracts available for bid. Accordingly, results of the
Company's drilling management service operations may vary widely from quarter
to quarter and from year to year.
With respect to the Company's oil and gas operations, CMI experiences
competition from other oil and gas companies in all phases of its operations.
Many competing companies have substantially greater financial and other
resources. The Company's oil and gas production operations and economics
are affected by prices of oil and gas, governmental regulation, the use and
allocation of oil and gas, the extent of domestic production, and the levels of
imports and of prices of competitive fuels. They are also affected by excess
supplies of oil and gas in the Company's market areas, as well as seasonal
demand factors, tax and other laws relating to the petroleum industry and
changes in such laws, and by changing administrative regulations.
Operational Risks and Insurance
The Company's operations are subject to the usual hazards incident to the
drilling of oil and gas wells, such as blowouts, explosions, oil spills, and
fires. They are also subject to hazards peculiar to marine operations, such
as collision, grounding, and severe weather. All of these hazards can cause
personal injury and loss of life, severe damage to and destruction of property
and equipment, pollution or environmental damage, and suspension of operations.
The Company maintains insurance coverage against certain general and marine
public liability, including liability for personal injury, in the amount of
$200 million, subject to a self-insured retention of no more than $250,000
per occurrence. In addition, the Company's rigs and related equipment are
separately insured under hull and machinery policies against certain marine
and other perils, subject to a self-insured retention generally of no more
than $300,000 per occurrence. The Company's current practice is to insure
each active rig for its market value. Although each rig is insured for at
least its financial book value, the Company's insurance does not cover all
costs that would be required to replace each rig with a newly constructed
one. In addition to hull and machinery coverage, the Company purchases
business interruption insurance with respect to its operating rigs. Business
interruption coverage applies only to business interruptions as a result of
losses insured under hull and machinery policies, and is not available to the
Company for interruptions arising from damages to "spud cans," which are the
bases of legs of jackup rigs. The deductible for business interruption claims
is 30 days. Although the Company currently purchases business interruption
insurance with respect to all of its operating rigs, the decision to insure a
rig against interruption risks is dependent on a number of factors, including
dayrate and utilization levels, and no assurance can be made that the Company
will continue to insure any or all of its operating rigs against such risks.
All of the Company's rigs which are operated internationally are presently
insured against loss due to war, including terrorism.
Although the Company's general and marine public liability policies cover
liability for pollution under most circumstances, they do not cover liability
for bringing a well under control following a blowout. In the case of turnkey
drilling operations, the Company maintains insurance covering the cost of
controlling the
<PAGE>
well, including any environmental damage resulting therefrom, the cost of
cleanup, and the cost of redrilling ("well-control liabilities") in an amount
not less than $30 million per occurrence, subject to a self-insured retention
of $200,000 per occurrence. Under turnkey drilling contracts, the Company
generally assumes the risk of the cost of well control, but on occasion the
Company receives indemnification from the customer for such risk in excess of
the $30 million insurance coverage. In many instances, however, the Company
is not indemnified by its customers for well-control liabilities. Furthermore,
the Company is not insured against certain drilling risks, such as stuck drill
stem and loss of in-hole equipment not arising from an insured peril, that
could result in delays or nonperformance of a turnkey drilling contract. In
connection with the Company's offshore contract drilling operations, the
Company is generally indemnified for any cost of well control by its customers.
In any event, however, the Company maintains insurance against such liabilities
in the amount of $50 million per occurrence, subject to a self-insured
retention of $200,000 per occurrence.
The occurrence of a significant event, including pollution or environmental
damage, not fully insured or indemnified against or the failure of a customer
to meet its indemnification obligations, could materially and adversely affect
the Company's operations and financial condition. Moreover, no assurance can
be made that the Company will be able to maintain adequate insurance in the
future at rates it considers reasonable. See "-- Governmental Regulations
and Environmental Matters."
Foreign Operations
A significant portion of the Company's revenues is attributable to
operations in foreign countries. Such activities accounted for 47 percent
of the Company's consolidated revenues in 1998, 35 percent in 1997, and 40
percent in 1996. Risks associated with the Company's operations in foreign
areas include risks of war and civil disturbance or other risks that may
limit or disrupt markets, expropriation, nationalization, renegotiation or
nullification of existing contracts, foreign exchange restrictions, foreign
currency fluctuations, foreign taxation, changing political conditions, and
foreign and domestic monetary policies. To date, the Company has experienced
no material loss as a result of any of these factors. Additionally, the
ability of the Company to compete in the international drilling market may be
adversely affected by foreign governmental regulations favoring or requiring
the awarding of drilling contracts to local contractors, or by regulations
requiring foreign contractors to employ citizens of, or purchase supplies from
a particular jurisdiction. Furthermore, foreign governmental regulations,
which may in the future become applicable to the oil and gas industry, could
reduce demand for the Company's services, or such regulations could directly
affect the Company's ability to compete for customers.
Governmental Regulations and Environmental Matters
The Company's business is affected by changes in public policy and by federal,
state, foreign, and local laws and regulations relating to the energy industry.
The adoption of laws and regulations curtailing exploration and development
drilling for oil and gas for economic, environmental, and other policy reasons
adversely affects the Company's operations by limiting available drilling and
other opportunities in the energy service industry.
The Company's operations are subject to numerous federal, state, and local
laws and regulations controlling the discharge of materials into 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 U.S. waters and certain offshore areas, including the Outer
Continental Shelf, is liable for damages and for the cost of removing oil
spills for which it may be held responsible, subject to certain limitations.
The Company's
<PAGE>
operations may involve the use or handling of materials that may be
classified as environmentally hazardous substances. Laws and regulations
protecting the environment have generally become more stringent, and may in
certain circumstances impose "strict liability," rendering a person liable
for environmental damage without regard to negligence or fault. The Company
does not believe that environmental regulations have had any material adverse
effect on its capital expenditures, results of operations, or competitive
position to date, and does not presently anticipate that any material
expenditures will be required to enable it to comply with existing laws
and regulations. It is possible, however, that modification of existing
regulations or the adoption of new regulations in the future, particularly
with respect to environmental and safety standards, could have such a
material adverse effect on the Company's operations.
The U.S. Oil Pollution Act of 1990 ("OPA '90") and similar legislation enacted
in Texas, Louisiana, and other coastal states address oil spill prevention and
control and significantly expanded liability exposure across all spectrums of
the oil and gas industry. The Company is of the opinion that it maintains
sufficient insurance coverage to respond to the added exposures.
OPA '90 mandated increases in the amounts of financial responsibility that
must be certified with respect to mobile offshore drilling units and offshore
facilities (e.g., oil and gas production platforms, among others) located in
U.S. waters. Operators of mobile offshore drilling units, together with
operators of vessels, must provide evidence of financial responsibility based
on a tonnage formula. The Company has complied with the requirement by
providing evidence of adequate U.S.-based net worth. The Company's inability
to comply with the rule in the future, however, could have a material adverse
effect on its operations and financial condition. For 1998, 37 percent of the
Company's contract drilling revenues were attributable to operations in U.S.
waters, and, as of February 22, 1999, 12 of the Company's 31 active rigs were
located in U.S. waters.
OPA '90 also requires lessees, permittees, or holders of a right of use for
offshore facilities (including mobile offshore drilling rigs while attached
to the ocean floor) to certify evidence of financial responsibility. This
financial responsibility requirement varies from $10 million to $150 million
per facility, with the actual requirement determined based on an estimate
of the number of barrels of oil which could be spilled under a worst-case
scenario. The Department of the Interior's Minerals Management Service is
responsible for promulgating regulations implementing the financial
responsibility requirements with respect to offshore facilities. CMI does
not presently operate any offshore production platforms, but it expects to
do so on occasion in the future, and expects to satisfy the financial
responsibility requirements with third-party insurance. ADTI's business
and GMDC's operations in the Gulf of Mexico are largely dependent on oil
and gas companies' drilling activities, which, in turn, ultimately depend
on their ability to meet the OPA '90 financial responsibility requirements.
Employees
The Company had approximately 2,700 employees at December 31, 1998. The
Company requires highly skilled personnel to operate its drilling rigs. In
recognition of this, the Company conducts extensive personnel training and
safety programs.
<PAGE>
Executive Officers of the Registrant
The name, age as of December 31, 1998, and office or offices currently held
by each of the executive officers of the Company are as follows:
Name Age Office or Offices
---- --- -----------------
David A. Herasimchuk 56 Vice President, Market Development
Thomas R. Johnson 50 Vice President and Corporate Controller
C. Russell Luigs 65 Chairman of the Board
Jon A. Marshall 47 Executive Vice President and
Chief Operating Officer
James L. McCulloch 46 Vice President, General Counsel and
Assistant Secretary
W. Matt Ralls 49 Senior Vice President, Chief Financial
Officer and Treasurer
Robert E. Rose 60 President and Chief Executive Officer
Douglas K. Vrooman 48 President of Applied Drilling Technology Inc.
Marion M. Woolie 44 President of Global Marine Drilling Company
Officers serve for a one-year term or until their successors are elected and
qualified to serve. Each executive officer's principal occupation has been as
an executive officer of the Company for more than the past five years, with
the exception of Messrs. Ralls, Rose, Vrooman, and Woolie. Mr. Ralls has been
the Company's Senior Vice President, Chief Financial Officer and Treasurer
since January 1999, prior to which he had been the Company's Vice President
and Treasurer since 1997. Mr. Ralls served as Executive Vice President, Chief
Financial Officer, and a director of Kelley Oil Corporation from 1990 to 1996,
after which he was Vice President of Capital Markets and Corporate Development
for The Meridian Resource Corporation. Mr. Rose has been the Company's
President and Chief Executive Officer since May 1998, prior to which he was
President and Chief Executive Officer of Cardinal Services, Inc., an oil
services company, since April 1998, and President and Chief Executive Officer
of Diamond Offshore Drilling, Inc. and its predecessor, Diamond M Company, for
more than a decade. Mr. Vrooman has been President of Applied Drilling
Technology Inc. ("ADTI") since 1995. He joined ADTI in 1994 as Operations
Manager after 24 years in onshore and offshore drilling operations with Exxon
and Freeport McMoRan. Mr. Woolie has been President of Global Marine Drilling
Company ("GMDC") since May 1998. He was GMDC's Vice President, Sales and
Contracts, from May 1997 to May 1998, prior to which he was responsible for
GMDC's North and South American sales.
ITEM 3. LEGAL PROCEEDINGS
The Company is seeking to resolve a dispute with Sedco Forex Offshore ("Sedco")
with respect to a bareboat charter agreement for the drilling rig, Glomar
Grand Banks. The Company assumed rights to the bareboat charter at the time
it acquired ownership of the rig in July 1997. At issue are the date of
termination of the charter, the condition of the rig upon its return to the
Company, and Sedco's liability to pay additional dayrate. With regard to the
first issue, the Company has contended that the charter expired on January 20,
1998. The parties commenced arbitration proceedings in London in December
1997, and the arbitration panel ruled in favor of the Company on that issue.
With respect to the other issues, the Company contends Sedco is responsible
under the charter for paying the cost of certain repairs to the rig and for
paying a market dayrate for the period following termination of the charter
and while the rig was in the shipyard for repairs prior to its return to work
for another customer. Sedco completed using the rig for drilling on May 5,
1998, at which time the rig entered a shipyard to undergo the repairs at issue.
<PAGE>
The Company completed the repairs on October 30, 1998, and mobilized the rig
to the east coast of Canada, where it is currently operating for another
customer. The arbitration hearing in London with regard to the outstanding
issues has been delayed until no earlier than the third quarter of 1999.
As of December 31, 1998, the amount of dayrate from Sedco which the Company
has recognized as revenue totaled $23.2 million, none of which has been
collected. In addition, the Company has paid $28.7 million as of December 31,
1998, for the cost of certain rig repairs for which the Company contends Sedco
is responsible, and the Company expects to make claims against Sedco for
additional repair costs. The two amounts totaling $51.9 million at December
31, 1998, were classified as noncurrent assets on the accompanying balance
sheet. The Company has not reserved any of these amounts, all of which it
expects to collect. The total amount of dayrate to be claimed by the Company
is projected to be in excess of the $23.2 million recognized through December
31, 1998.
There are no other material pending legal proceedings, other than ordinary
routine litigation incidental to the business of the Company, to which the
Company is a party or of which any of its property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's security holders
during the fourth quarter of 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock, $.10 par value per share, is listed on the New
York Stock Exchange under the symbol "GLM." At February 28, 1999, there
were 8,223 stockholders of record of the Common Stock. The high and low
sales prices of the Common Stock as reported on the New York Stock Exchange
Composite Transactions Tape for each full quarterly period within the past
two years appear under "Consolidated Selected Quarterly Financial Data,"
which follows the notes to the consolidated financial statements.
The Company did not declare any dividends on its common stock in either 1998
or 1997. Subject to the preferential dividend rights of holders of the
Company's preferred stock, if any, the holders of the Common Stock will be
entitled to receive when, as, and if declared by the Board of Directors out
of funds legally available therefor, all other dividends payable in cash,
in property, or in shares of Common Stock. The Company does not intend to
declare or pay dividends on the Common Stock in the foreseeable future, but
reconsiders the declaration and payment of dividends from time to time.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
FIVE-YEAR REVIEW
(In millions, except per share and operational data)
<CAPTION>
------------------------------------------------------
1998 1997 1996 1995 1994
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Financial Performance
Revenues:
Contract drilling $ 742.4 $ 579.4 $ 362.5 $ 248.9 $ 211.4
Drilling management services 416.0 480.5 305.3 209.3 137.8
Oil and gas 3.8 7.2 12.9 9.8 9.8
-------- -------- -------- -------- --------
Total revenues $1,162.2 $1,067.1 $ 680.7 $ 468.0 $ 359.0
======== ======== ======== ======== ========
Operating income:
Contract drilling $ 361.7 $ 274.8 $ 125.4 $ 54.6 $ 25.6
Drilling management services (30.7) 50.0 27.9 17.3 10.8
Oil and gas 0.3 2.1 6.8 3.4 3.7
Corporate expenses (20.8) (21.8) (19.3) (15.0) (14.0)
-------- -------- -------- -------- --------
Total operating income 310.5 305.1 140.8 60.3 26.1
-------- -------- -------- -------- --------
Other income (expense):
Interest expense (46.9) (39.7) (30.9) (30.2) (30.2)
Interest capitalized 17.2 20.9 2.6 5.6 3.7
Interest income 3.3 7.7 6.2 4.7 3.8
Other - - 1.0 14.7 2.0
-------- -------- -------- -------- --------
Total other income (expense) (26.4) (11.1) (21.1) (5.2) (20.7)
-------- -------- -------- -------- --------
Income before income taxes, extraordinary
item, and accounting change 284.1 294.0 119.7 55.1 5.4
Provision for income taxes:
Current tax provision 18.5 33.5 9.6 3.2 0.6
Deferred tax provision (benefit) 42.3 (54.6) (70.0) - -
-------- -------- -------- -------- --------
Total income tax provision (benefit) 60.8 (21.1) (60.4) 3.2 0.6
-------- -------- -------- -------- --------
Income before extraordinary item and
cumulative effect of accounting change 223.3 315.1 180.1 51.9 4.8
Extraordinary loss on extinguishment of debt, net - (4.5) - - -
Cumulative effect of accounting change - - - - (3.5)
-------- -------- -------- -------- --------
Net income $ 223.3 $ 310.6 $ 180.1 $ 51.9 $ 1.3
======== ======== ======== ======== ========
Income per share before extraordinary item and
accounting change:
Basic $ 1.29 $ 1.84 $ 1.07 $ 0.31 $ 0.03
Diluted $ 1.27 $ 1.79 $ 1.03 $ 0.31 $ 0.03
Net income per share:
Basic $ 1.29 $ 1.81 $ 1.07 $ 0.31 $ 0.01
Diluted $ 1.27 $ 1.76 $ 1.03 $ 0.31 $ 0.01
Average common shares - Basic 173.0 171.2 167.9 165.1 163.8
Average common shares - Diluted 175.8 176.2 174.3 169.4 166.7
Dividends declared per common share $ - $ - $ - $ - $ -
Capital expenditures $ 637.7 $ 580.3 $ 118.3 $ 73.5 $ 75.9
Depreciation, depletion, and amortization $ 103.9 $ 55.1 $ 40.9 $ 31.0 $ 37.4
Financial Position (end of year)
Working capital $ 117.0 $ 144.2 $ 158.9 $ 116.2 $ 93.4
Net properties $1,512.1 $ 999.0 $ 477.4 $ 386.6 $ 353.4
Total assets $1,971.6 $1,421.9 $ 807.8 $ 563.0 $ 512.4
Long-term debt, including capital lease obligation $ 768.4 $ 417.3 $ 241.6 $ 225.0 $ 225.0
Shareholders' equity $1,040.4 $ 805.6 $ 459.1 $ 269.0 $ 212.3
Operational Data
Average rig utilization (1) (2) 96% 99% 98% 99% 94%
Fleet average dayrate (3) $ 71,100 $ 55,700 $ 38,000 $ 28,700 $ 25,600
Number of active rigs (end of year) (2) 31 28 26 26 24
Turnkey wells completed 77 107 82 67 52
Number of employees (end of year) 2,700 2,500 2,100 2,100 1,700
__________________
(1) The average rig utilization rate for a period is the ratio of days in the
period during which the rigs were under contract to the total days in the
period during which the rigs were available to work.
(2) Excludes the Glomar Beaufort Sea I concrete island drilling system, a
currently inactive, special-purpose mobile offshore rig designed for
arctic operations.
(3) Contract drilling revenues less non-rig related revenues divided by the
aggregate contract days, adjusted to exclude days under contract at zero
dayrate.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Operating Results
Summary
Operating income increased by $5.4 million to $310.5 million in 1998 from
$305.1 million in 1997. The increase was attributable to higher average
contract drilling dayrates and the addition of five deep-water rigs to the
contract drilling fleet since July 1997, partially offset by a loss for
drilling management services. The drilling management services loss was
primarily attributable to the fixed costs of rigs retained by the Company
under term contracts and the downturn in shallow-water drilling activity.
In 1997 operating income increased by $164.3 million to $305.1 million from
$140.8 million in 1996. The increase was primarily attributable to higher
average contract drilling dayrates and an increase in the number of drilling
management services turnkey contracts completed.
Data relating to the Company's operations by business segment follows:
<TABLE>
<CAPTION>
Increase Increase
1998 (Decrease) 1997 (Decrease) 1996
------ -------- ------ -------- ------
($ in millions)
<S> <C> <C> <C> <C> <C>
Revenues:
Contract drilling $ 753.7 29% $ 584.7 59% $368.2
Drilling management 421.5 (13%) 482.6 58% 306.3
Oil and gas 3.8 (47%) 7.2 (44%) 12.9
Less: Intersegment revenues (16.8) 127% (7.4) 10% (6.7)
-------- -------- ------
$1,162.2 9% $1,067.1 57% $680.7
======== ======== ======
Operating income:
Contract drilling $ 361.7 32% $ 274.8 119% $125.4
Drilling management (30.7) na 50.0 79% 27.9
Oil and gas 0.3 (86%) 2.1 (69%) 6.8
Corporate expenses (20.8) (5%) (21.8) 13% (19.3)
-------- -------- ------
$ 310.5 2% $ 305.1 117% $140.8
======== ======== ======
</TABLE>
The Company reported net income of $223.3 million for 1998 as compared with
net income of $310.6 million for 1997 and $180.1 million for 1996. Net income
for 1997 included a $4.5 million after-tax extraordinary charge in connection
with the redemption of all $224 million of the Company's 12-3/4% Senior Secured
Notes due 1999 (the "12-3/4% Notes") and a $45.0 million net credit to income
taxes. The income tax adjustment consisted of a net credit to deferred taxes
in connection with the recognition of the future tax benefits of net operating
loss carryforwards, partially offset by charges to current and deferred taxes
for the effects of a realignment of the Company's foreign operations. Net
income for 1996 included a $70.0 million net credit to deferred income taxes
due to the recognition of tax benefits of operating loss carryforwards.
Excluding these unusual items, net income was $270.1 million for 1997 and
$110.1 million for 1996.
During 1998 the Company added three deep-water rigs to the fleet -- the
Glomar Celtic Sea in February, the Glomar Arctic IV in March, and the Glomar
Explorer in August. In July 1997 the Company added two deep-water rigs to
the fleet, the Glomar Grand Banks and the Maersk Jutlander semisubmersibles.
<PAGE>
The Company has under construction, subject to two fully-defeased, 20-year
capital leases, two dynamically-positioned, ultra deep-water drillships,
one of which is scheduled for delivery in the fourth quarter of 1999 and
the other in the first quarter of 2000. The Company's deep-water fleet
will total ten rigs with the addition of these two rigs.
The persistent weakness in worldwide oil prices continues to depress offshore
drilling activity. Iraq is adding new supplies of oil to the market, and
OPEC and other major oil producers have been unsuccessful in cutting their
production enough to increase oil prices. If oil prices remain at current
levels, the Company anticipates a decline in its average dayrates and
utilization in 1999, as compared with 1998 levels, and a corresponding decline
in operating results.
In recent weeks, at least two of the Company's competitors have reported
a contract cancellation, ostensibly due to performance issues. To date,
the Company has not experienced any contract cancellations, but it cannot
guarantee that it will not have any cancellations in the future. Cancellation
of one or more of the Company's long-term contracts may significantly impact
the Company's results of operations, cash flow, and financial position.
The Company has adopted a strategy it believes will allow it to weather the
downturn in drilling activity yet be prepared to capitalize on potential
opportunities. Effective January 1, 1999, the Company instituted hiring and
wage freezes and is cutting other costs selectively, including cold-stacking
rigs that cannot find gainful employment. The Company is also limiting
capital expenditures to those essential to maintaining the competitiveness of
the fleet and completing construction of the two ultra deep-water drillships,
both of which have long-term drilling contracts.
Contract Drilling Operations
Data with respect to the Company's contract drilling operations follows:
<TABLE>
<CAPTION>
Increase Increase
1998 (Decrease) 1997 (Decrease) 1996
------ -------- ------ -------- ------
($ in millions, except for fleet average dayrate)
<S> <C> <C> <C> <C> <C>
Contract drilling revenues
by area: (1)
Gulf of Mexico $ 267.5 13% $ 235.8 76% $ 133.7
West Africa 218.8 4% 211.1 62% 130.4
North Sea 174.1 126% 77.0 (14%) 90.0
Other 93.3 53% 60.8 331% 14.1
------- ------- -------
$ 753.7 29% $ 584.7 59% $ 368.2
======= ======= =======
Average rig utilization (2) 96% 99% 98%
Fleet average dayrate $71,100 $55,700 $38,000
________________
(1) Includes revenues earned from affiliates.
(2) Excludes the Glomar Beaufort Sea I concrete island drilling system, a
currently inactive, special-purpose mobile offshore rig designed for
arctic operations.
</TABLE>
Of the $169.0 million increase in contract drilling revenues for 1998
compared to 1997, $120.2 million was attributable to fleet additions during
1997 and 1998 and $97.7 million was attributable to increases in average
dayrates, partially offset by a $23.0 million decrease attributable to lower
average rig utilization and a $25.9 million decrease in non-dayrate revenues.
Of the $216.5 million increase in contract drilling revenues for 1997 compared
to 1996, $183.6 million was attributable to increases in average dayrates,
$20.7 million was attributable to increases in non-dayrate
<PAGE>
revenues, $9.8 million was attributable to the addition of the Maersk Vinlander
(subsequently renamed the Glomar Grand Banks) and Maersk Jutlander in mid-1997,
and $2.4 million was attributable to higher average rig utilization.
The mobilization of rigs between the geographic areas shown in the above table
also affected each area's revenues over the periods indicated. During 1997
the Company mobilized one jackup from the U.S. Gulf of Mexico to Trinidad, one
jackup from West Africa to California, and one jackup from the North Sea to
offshore Argentina. During 1998 the Company mobilized one jackup from the
U.S. Gulf of Mexico to the North Sea, one jackup from California to the North
Sea, and one semisubmersible from the North Sea to the east coast of Canada.
The Company's operating profit margin for contract drilling operations
increased to 48 percent in 1998 from 47 percent in 1997 and 34 percent in
1996. The increase in operating profit margin in 1998 compared to 1997 was
attributable to higher average dayrates, partly offset by lower average rig
utilization. The increase in operating profit margin in 1997 compared to
1996 was primarily attributable to higher average dayrates. Operating
expenses increased to $392.0 million in 1998 from $309.9 million in 1997 and
$242.8 million in 1996. Increases in operating expenses were attributable
to higher depreciation and other operating costs in connection with the
additions to the fleet, and higher labor and repairs and maintenance, among
other factors.
The persistent weakness in worldwide oil prices has caused many oil and gas
operators to reduce their 1998 and 1999 drilling budgets. This decreased
drilling activity has in turn increased competition among drilling contractors
for available work, and has forced down dayrates for some rigs by as much
as two-thirds compared to levels seen early in 1998. Most of the Company's
currently operating jackup rigs were contracted since June of 1998 at rates
which were, on average, approximately 50 percent below the rates received
early in 1998. Among the 18 jackups operating at February 22, 1999, four were
operating under higher-dayrate contracts signed in early 1998. Among these
four rigs, two are estimated to complete their contracts in 1999 and two are
estimated to complete their contracts in 2000. The Company's deep-water rigs,
currently consisting of six semisubmersibles and two drillships, are generally
operating under longer-term contracts and are less affected by the slowdown.
At February 22, 1999, three of these rigs were operating under contracts
expiring in 1999, two were operating under contracts expiring in 2000, and the
remaining three rigs were operating under contracts expiring in each of 2001,
2002, and 2003. In addition to lower dayrates, the Company anticipates lower
rig utilization in 1999, as compared with 1998, in each of the Company's
geographic markets, assuming a continuation of current market conditions.
As of February 22, 1999, twelve of the Company's rigs were located in the U.S.
Gulf of Mexico, ten were offshore West Africa, six were in the North Sea, and
one was offshore each of Argentina, Trinidad, and Canada.
The Company averaged 96 percent utilization for its drilling rigs in the U.S.
Gulf of Mexico for 1998, 99 percent for 1997, and 100 percent for 1996. As of
February 22, 1999, all twelve of the Company's rigs in the U.S. Gulf of Mexico
were under contract or otherwise committed to a customer.
The Company's average utilization rate for its rigs located offshore West
Africa was 94 percent for 1998 and 100 percent for 1997 and 1996. As of
February 22, 1999, five of the Company's rigs located offshore West Africa
were under contract or otherwise committed to a customer, and five were idle.
<PAGE>
The Company averaged 97 percent utilization for its rigs in the North Sea for
1998, 100 percent for 1997, and 97 percent for 1996. As of February 22, 1999,
all six of the Company's rigs in the North Sea were under contract or otherwise
committed to a customer.
Effective January 1, 1999, the Company increased the estimated useful lives of
its jackups and semisubmersibles to 30 years. Prior to the change, jackups
were depreciated over 25-year lives, and semisubmersibles were depreciated over
10 to 20-year lives. The effect of the change will be to decrease 1999
depreciation expense by approximately $29 million.
Drilling Management Services
Drilling management services revenues decreased by $61.1 million to $421.5
million in 1998 from $482.6 million in 1997, and operating income decreased
by $80.7 million to a loss of $30.7 million in 1998 from income of $50.0
million in 1997. The decrease in revenues consisted of a $117.2 million
decrease attributable to a reduction in the number of turnkey wells completed,
from 107 in 1997 to 77 in 1998, partly offset by a $37.8 million increase
attributable to higher average turnkey revenues per well and an $18.3 million
increase attributable to daywork and other revenues.
Revenues from drilling management services increased by $176.3 million to
$482.6 million in 1997 from $306.3 million in 1996, and operating income
increased by $22.1 million to $50.0 million in 1997 from $27.9 million in 1996.
The increase in revenues consisted of an $88.9 million increase attributable to
an increase in the number of turnkey wells completed, from 82 in 1996 to 107
in 1997, a $53.2 million increase attributable to daywork and other revenues,
and a $34.2 million increase attributable to higher average turnkey revenues
per well.
The drilling management services operating loss in 1998 was primarily due to
the fixed cost of rigs retained by the Company under term contracts at above
current-market rates. During 1998 the Company had as many as 16 third-party
rigs under contracts with initial terms ranging from six months to one year.
The Company has from time to time subcontracted some of these rigs to third
parties when they were not needed for drilling operations. Due to the slowdown
in shallow-water drilling activity in the U.S. Gulf of Mexico, these rigs were
neither subcontracted out to third parties nor utilized internally for
approximately 17 percent of the time, on average, resulting in idle-time costs
of $39.0 million for 1998. In addition, the Company incurred losses of $3.7
million in 1998 related to rigs subcontracted at rates below the Company's
cost. Twelve of the 16 rig contracts had expired on or prior to December 31,
1998. Contracts on three of the remaining four rigs expired in February 1999,
and the remaining contract expires in June 1999. In exchange for the lessor
lowering the dayrate, effective January 1, 1999, on the last of the 16 rigs
previously under term contracts, the Company has agreed to lease one or more
of the lessor's other rigs for an additional 360 rig-days prior to December 31,
1999. In 1998 the Company recorded its known losses for idle rig time and rigs
subcontracted at below cost; however, the Company believes there could be an
additional impact of as much as $9 million in 1999, most of which would be
incurred in the first quarter. Going forward, the Company plans to contract
rigs for its drilling management services operations primarily on an as-needed,
well-by-well basis.
The number of rigs under contract at above current-market rates significantly
affected the number of turnkey wells resulting in losses for 1998. The Company
incurred losses of $18.7 million on 21 of the 77 turnkey wells completed in
1998, as compared with losses of $5.9 million on 9 of the 107 turnkey wells
completed in 1997 and $12.1 million on 11 of the 82 turnkey wells completed
in 1996.
<PAGE>
In June 1998 the Company suspended drilling a turnkey well after experiencing
an underground blowout which made it impossible to continue drilling. The
Company has been unable to successfully complete the well. As a result, in
the fourth quarter of 1998, the Company charged to income costs in the amount
of $5.3 million (net of estimated insurance recoveries of $7.3 million) that
had been previously deferred pending resolution of the matter.
Drilling management services operating results were also impaired by increases
to the allowance for uncollectible accounts totaling $11.3 million in 1998
(including $6.1 million in the fourth quarter), as compared with $0.8 million
in 1997 and none in 1996. Operating results for 1998 were favorably affected
by downward revisions to estimates of the costs of wells completed in prior
periods in the amount of $8.3 million.
Operating income from drilling management services as a percentage of drilling
management revenues increased to 10 percent for 1997 from 9 percent for 1996.
The increase in profit margin was attributable primarily to the higher average
turnkey revenues per well.
Results of operations from the Company's drilling management services may be
limited by certain factors, in particular, the ability of the Company to obtain
and successfully perform turnkey drilling contracts based on competitive bids.
The Company's ability to obtain turnkey drilling contracts is largely dependent
on the number of such contracts available for bid, which in turn is influenced
by market prices for oil and gas, among other factors. Accordingly, results
of the Company's drilling management service operations may vary widely from
quarter to quarter and from year to year.
Other Income and Expense
General and administrative expenses were $19.1 million in 1998, $20.5 million
in 1997, and $18.3 million in 1996. The decline in general and administrative
expenses from 1997 to 1998 was due to lower costs in connection with a
stock-based compensation plan, which costs were based on Company performance
and the market price of the Company's common stock, partially offset by higher
compensation and severance, among other costs. The increase in general and
administrative expenses from 1996 to 1997 was due to higher costs in connection
with the stock-based compensation plan and increases in general price levels.
Interest expense was $46.9 million for 1998, $39.7 million for 1997, and
$30.9 million for 1996. The increases in interest expense were primarily
attributable to higher debt incurred to finance the upgrade, acquisition,
conversion, and construction of rigs and for working capital requirements,
partially offset in 1998 by lower effective interest rates due to the
redemption of the 12-3/4% Notes in December 1997.
The Company capitalized interest expense of $17.2 million in 1998, $20.9
million in 1997, and $2.6 million in 1996 in connection with the conversions
of the Glomar Celtic Sea and Glomar Explorer and, with respect to 1998,
progress payments associated with the construction of the Glomar C.R. Luigs
and the Glomar Jack Ryan.
Interest income decreased to $3.3 million in 1998 from $7.7 million in 1997
and $6.2 million in 1996. The changes in interest income were primarily due
to the levels of cash and short-term investments.
The Company's effective income tax rate for financial reporting purposes for
1998 was approximately 21 percent which was lower than the U.S. federal
statutory rate of 35 percent. This lower effective rate was primarily the
result of the Company's December 1997 realignment, which placed the ownership
of its
<PAGE>
foreign operating assets in foreign subsidiaries of the Company, and the fact
that such foreign subsidiaries' earnings permanently reinvested abroad were
taxed at foreign rates, which were generally lower than the U.S. federal income
tax rate. The Company intends to permanently reinvest outside the United
States its foreign subsidiaries' earnings that are not otherwise subject to
U.S. taxation, and, as a result, the Company will neither incur nor provide
for any deferred federal income taxes on such foreign earnings. Most of the
tax expense for 1998 was noncash because the Company used a portion of its net
operating loss ("NOL") carryforward to significantly reduce its current federal
income tax liability for the year.
In 1997 and 1996 the Company reduced a valuation allowance pertaining to the
value of future tax benefits of NOL carryforwards and other deferred tax
assets recorded on its balance sheet. The Company reduced the valuation
allowance based on its expectation that it will be able to realize the tax
benefits of certain NOL carryforwards prior to their expiration. The effect
of reducing the valuation allowance was to significantly reduce income tax
expense in both 1997 and 1996.
Liquidity and Capital Resources
Financing and Investing Activities
During the three-year period ended December 31, 1998, the Company lowered
the average interest rate on its long-term debt from 12-3/4 percent to just
over 7 percent by redeeming the $223.9 million principal amount outstanding
of the 12-3/4% Notes and issuing an aggregate of $600 million principal
amount of long-term debt securities; increased the maximum amount available
for borrowings under its bank revolving credit facilities from $100 million
to $390 million; purchased three deep-water rigs for an aggregate purchase
price of $400 million; completed the conversion of two additional deep-water
rigs which entered service under long-term drilling contracts in February and
August 1998; and began construction of two new ultra deep-water drillships
for delivery in late 1999 and early 2000. These events are discussed in more
detail in the paragraphs which follow.
In July 1997 the Company amended and restated its revolving credit facility
agreement with a group of major banks, increasing its credit limit to $250
million from $100 million, and used $200 million drawn under the facility,
together with $50 million of cash on hand, to purchase two deep-water
semisubmersibles, the Maersk Vinlander and Maersk Jutlander, for a combined
purchase price of $250 million.
In September 1997 the Company issued $300 million of 7-1/8% Notes due 2007
(the "7-1/8% Notes") and received cash proceeds of $299.3 million, of which
$200 million was used to pay all amounts outstanding under the revolving
credit facility.
In December 1997 the Company amended and restated its $250 million revolving
credit facility agreement. Under the amended and restated facility, which
terminates in December 2002, the Company may borrow up to $240 million on
more favorable terms. As of December 31, 1998, borrowings under the $240
million credit facility totaled $155.0 million.
In December 1997 the Company redeemed the entire $223.9 million of its 12-3/4%
Notes then outstanding at a price of 102 percent of principal, plus accrued
interest. The total required payment was $242.6 million, which was funded
with cash on hand, including the balance of the proceeds from the 7-1/8% Note
issuance, together with $100 million drawn under the $240 million credit
facility. The Company recorded
<PAGE>
an extraordinary charge on debt extinguishment in the amount of $4.5 million,
net of a $2.4 million income tax benefit.
In January 1998 the Company entered into a one-year unsecured $150 million
revolving credit facility under which the Company may borrow up to $150
million at interest rates determinable at the time of the borrowings. The
$150 million credit facility was amended November 1998 to extend the
revolving period to November 1999. Any amounts outstanding at the end of
the revolving period may, at the option of the Company, be converted into a
two-year term loan. One-fourteenth of the converted balance would be due
each quarter for seven quarters, and the remainder would be due at the end
of the two-year period. As of December 31, 1998, there were no borrowings
under the $150 million credit facility.
In February 1998 the Company completed its conversion of the Glomar Celtic
Sea semisubmersible, and the rig entered service in the U.S. Gulf of Mexico
under a three-year, $164 million contract. In August 1998 the Company
completed its conversion of the Glomar Explorer drillship, and the rig
entered service in the U.S. Gulf of Mexico under a five-year, $268 million
contract. Total cost of the two rigs, including all construction, equipment,
and financing costs, totaled $520 million, of which $139 million was incurred
in 1998.
In February and March 1998 the Company entered into agreements with Harland
and Wolff Shipbuilding and Heavy Industries Ltd. for the construction of
two dynamically-positioned, ultra deep-water drillships to fulfill the
Company's obligations under two multi-year drilling contracts. Delivery of
the drillships is scheduled for the fourth quarter of 1999 and the first
quarter of 2000. Pursuant to two fully-defeased long-term lease agreements,
in December 1998 the Company novated the contracts for the construction of
the Glomar C.R. Luigs and the Glomar Jack Ryan to leasing subsidiaries of
Lloyds Bank Plc and Barclays Bank Plc, respectively. The effect of the
transactions will be an estimated cash savings to the Company of approximately
$54 million. (See Note 4 of Notes to Consolidated Financial Statements.)
Capital expenditures in 1998 in connection with construction of the drillships
totaled $234.3 million, including $6.8 million of capitalized interest. The
Company expects to spend an additional $374 million, including $31 million of
capitalized interest, in connection with construction of the drillships during
1999 and 2000. The Company is financing progress payments associated with
construction of the drillships with internally generated funds and funds
available under existing bank revolving credit facilities.
The first of the new drillships, the Glomar C.R. Luigs, is under contract
to a customer for thirty of the thirty-six months following delivery. The
Company has a letter of intent from another customer for use of the rig for
the other six months. The first customer also has two one-year options
following the thirty-six month period. Total revenues to be generated over
the thirty-six month period after delivery are approximately $226 million.
The second of the two drillships, the Glomar Jack Ryan, is under contract
to a customer for a period of three years and is expected to generate
revenues of approximately $208 million.
In March 1998 the Company purchased a deep-water semisubmersible drilling rig,
the Stena Forth, for $150 million. The Company financed the rig's purchase
through borrowings under its bank revolving credit facilities. The Stena
Forth, which was subsequently renamed the Glomar Arctic IV, is currently
operating in the U.K. sector of the North Sea under a contract that extends
through November 1999.
In March 1998 the Company entered into an agreement to purchase from
Transocean ASA, a Norwegian drilling contractor ("Transocean"), the
remaining 43.4 percent interest in the partnership operating the Glomar
Adriatic V, Glomar Adriatic VI, and Glomar Adriatic VII for $20.3 million
in cash. The Company
<PAGE>
and Transocean previously shared in the net revenues of the aforementioned
rigs and a Transocean rig, the Nordic, as part of a 1993 rig purchase and
sale agreement. The agreement also gives each party a right of first refusal
for three years in the event the other party decides to transfer its interest
in any of the rigs that were subject to the revenue sharing arrangement, and
it also provides for the parties to share in any gain above values set forth
in the agreement that results from such transfer.
In May 1998 the Company issued $300 million of 7% Notes due 2028 (the "7%
Notes") and received cash proceeds of $296.0 million after deduction for
discount and underwriting fees. The Company used $150.0 million of the
proceeds to repay all amounts drawn under the $150 million credit facility
and used the remainder to repay a portion of the amount drawn under the $240
million credit facility. The outstanding debt repaid from the net proceeds
of the 7% Notes was incurred to finance the upgrade, acquisition, and
construction of rigs and for working capital requirements.
Cash Flows
In 1998 cash flow provided by operating activities amounted to $258.0 million.
An additional $292.9 million was provided from issuance of the 7% Notes (after
deduction for discount, underwriting fees, and issue costs), $55.0 million was
provided from borrowings under the Company's bank revolving credit facilities
(net of payments), $4.4 million was provided from exercises of employee stock
options, $3.7 million was provided from sales of properties and equipment, and
$1.7 million was provided from maturities of marketable securities (net of
purchases). From the $615.7 million sum of cash inflows, plus available cash,
$637.7 million was used for capital expenditures.
In 1997 cash flow provided by operating activities amounted to $359.3 million.
An additional $297.1 million was provided from issuance of the 7-1/8% Notes
(after deduction for discount, underwriting fees, and issue costs), $100.0
million was provided from borrowings under the revolving credit facilities
(net of payments), $25.8 million was provided from maturities of marketable
securities (net of purchases), $10.0 million was provided from exercises of
employee stock options, and $3.6 million was provided from sales of properties
and equipment. From the $795.8 million sum of cash inflows, plus available
cash, $580.3 million was used for capital expenditures and $229.5 million was
used to redeem the 12-3/4% Notes.
In 1996 cash flow provided by operating activities amounted to $139.2 million.
An additional $25.9 million was provided from maturities of marketable
securities (net of purchases), $9.2 million was provided from exercises of
employee stock options, and $3.7 million was provided from sales of properties
and equipment. From the $178.0 million sum of cash inflows, $118.3 million
was used for capital expenditures.
Future Cash Requirements
As of December 31, 1998, the Company had long-term debt of $768.4 million
and shareholders' equity of $1,040.4 million. Long-term debt at December 31
consisted of $299.5 million (net of discount) of 7-1/8% Notes due 2007, $296.2
million (net of discount) of 7% Notes due 2028, $155.0 million of borrowings
under the Company's $240 million revolving credit facility, and a $17.7 million
capital lease obligation.
The annual interest on the 7-1/8% Notes is $21.4 million, payable semiannually
each March and September. The annual interest on the 7% Notes is $21.0
million, payable semiannually each June and December. No principal payments
are due under either issue until the maturity date.
<PAGE>
The Company may redeem the 7-1/8% Notes and the 7% Notes in whole at any
time, or in part from time to time, at a price equal to 100 percent of the
principal amount thereof plus accrued interest, if any, to the date of
redemption, plus a premium, if any, relating to the then prevailing Treasury
Yield and the remaining life of the notes. The indentures relating to the
7-1/8% Notes and the 7% Notes contain limitations on the Company's ability to
incur indebtedness for borrowed money secured by certain liens and to engage
in certain sale/leaseback transactions. The revolving credit facilities
contain similar limitations, require the Company to maintain minimum levels
of net worth and interest coverage, and limit the Company's maximum debt as
a percentage of capitalization.
Capital expenditures for 1999 are estimated to be $392 million, including
$318 million in connection with construction of the two new drillships, $42
million for improvements to the remainder of the drilling fleet, $28 million
for capitalized interest, and $4 million for other capital expenditures.
Sources of Liquidity
As of December 31, 1998, the Company had $56.9 million of cash and cash
equivalents and $235.0 million available for borrowings under the Company's
bank revolving credit facilities. As of December 31, 1997, the Company had
$80.6 million in cash, cash equivalents, and marketable securities.
In April 1998 the Company filed with the U.S. Securities and Exchange
Commission a registration statement on Form S-3 under which, together with
a previous registration statement on Form S-3, the Company may offer to
sell from time to time (i) unsecured debt securities consisting of notes,
debentures, or other evidences of indebtedness, (ii) shares of preferred
stock, $.01 par value per share, and/or (iii) shares of common stock, $.10
par value per share, for an aggregate initial public offering price not to
exceed $500 million. The amount of securities available for issuance was
reduced from $500 million to $200 million as a result of the issuance of
the $300 million of 7% Notes in May 1998.
The Company believes it will be able to meet all of its current obligations,
including capital expenditures and debt service, from its existing bank credit
facilities, its cash flow from operations, and its cash and cash equivalents.
Year 2000 Readiness Disclosure
The "Year 2000" problem refers to the inability of certain computer systems
and other equipment with embedded chips or processors (collectively "Business
Systems") to correctly interpret the century from a date in which the year is
represented by only two digits. Business Systems which are not Year 2000
ready may not be able to correctly process certain data, or in extreme
situations, may cause a system to be disabled or fail to function reliably.
The Company's goal is to have substantially all of its critical Business
Systems functioning properly with respect to the Year 2000 problem by June 30,
1999 and to develop by June 30, 1999 contingency plans for use in the event of
disruptions caused by the Year 2000 problem. In order to meet these goals, the
Company has established a task force of key employees and outside professional
consultants to identify, repair, and replace, if necessary, significant
Business Systems with Year 2000 problems. These overall goals and objectives
are referred to as the "Year 2000 Project Plan."
The Year 2000 Project Plan has been divided into various subprojects and
phases. The six subprojects include: Information Technology, Rigs,
Supplier/Customer/Shareholder Relations, Telecommunications,
<PAGE>
Facilities and Employee Benefit Plans. Currently, each subproject is in
various stages of completion. The Company has identified the Information
Technology and Rigs subprojects as the most critical, based on the
possibility of business disruptions as a result of any Year 2000 failures
in these areas. The Company has made significant progress with its Year
2000 project and estimates that it is more than one-half complete. The
Company estimates that it will be substantially complete with the Year 2000
Project Plan by June 30, 1999.
Information Technology. In 1995 the Company purchased and developed new
accounting, payroll, personnel, and purchasing software as part of the
migration of its computer systems from a mainframe platform to a PC-based
client/server platform. The Company has tested and is retesting the software
to confirm that they are, as the Company believes them to be, Year 2000 ready.
The Company, as part of its normal business operations, has upgraded certain
software as part of its software maintenance agreements and is in the process
of upgrading and modifying other software, to ensure that they are Year 2000
ready. As part of normal business operations, the Company replaces its
computer hardware on an as-needed basis as new technology is developed. The
Company believes its computer hardware to be substantially Year 2000 ready;
however, as part of its Information Technology subproject, it is currently
testing the hardware for such readiness.
Rigs. The Company is in the process of inventorying each drilling rig's
critical Business Systems. This inventory is in the process of being fully
developed and evaluated, and a compilation of written documentation regarding
Year 2000 readiness is underway. On-sight surveys are being conducted on each
rig type by an independent consultant and are scheduled to be completed by
early May 1999. This subproject is more than one-half complete, and no
remediation has been required on the rigs surveyed. The Glomar C.R. Luigs
and Glomar Jack Ryan, the Company's new-build, deep-water drillships, will
be assessed and tested during the commissioning of the vessels. Contingency
planning is being conducted in conjunction with assessment. Both contingency
planning and assessment are scheduled to be completed by June 30, 1999.
Supplier/Customer/Shareholder Relations. The Company has initiated
communications with its significant customers, suppliers, and business
partners (collectively "Key Business Partners") to seek Year 2000 readiness
assurances and determine the extent to which their failure to correct their
own Year 2000 problems could affect the Company. The Company's Key Business
Partners include suppliers whose critical function is to provide drilling
rig capital equipment essential to the operation of a rig. As part of normal
business operations, the Company generally does not maintain an inventory of
drilling rig capital equipment replacement parts. Although the Company will
have a contingency plan in place, in the event replacement parts are required
for a rig and the Company is unsuccessful in purchasing the equipment from its
suppliers, the rig could experience idle time resulting in loss of revenue.
Other Key Business Partners include customers who provide the Company's source
of revenue and cash flow. Any disruption in this revenue stream could impact
the Company's cash flow, results of operations, and financial position. In
large measure, the Company must rely on such Key Business Partners to make
accurate and complete disclosures about their Year 2000 efforts in order for
its assessment of their readiness to be effective. Accordingly, the Company
cannot guarantee that Year 2000 problems, if any, in Key Business Partners'
systems on which it relies will be timely resolved, nor, in most cases, can
it reasonably inspect their Year 2000 efforts or independently verify their
representations to the Company. In addition, the Company cannot foretell
the effect on its business operations from the failure of systems owned by
others, from the delivery of inaccurate information from other companies, or
from the inability of Key Business Partners' systems to interface with the
Company's systems. Where appropriate, the Company plans to explore the
possibility of conducting tests of critical system interfaces with relevant
Key Business Partners. The
<PAGE>
Company cannot guarantee that other companies' failure to resolve their Year
2000 problems would not have a material adverse effect on the Company; however,
the Company will continue to assess these risks and prepare accordingly.
Telecommunications. The Company has compiled a list of its inventory of
telecommunications hardware and software and has contacted vendors and
service providers to determine the Year 2000 readiness of their products. No
significant remediation has been required. The subproject is scheduled to be
completed by June 30, 1999.
Facilities. The Company is conducting evaluations of computer-controlled
components within the Company's main offices in the United States and Europe.
In addition, the Company is evaluating the Year 2000 readiness information of
its landlords for its main offices. The assessment phase is scheduled to be
completed by March 31, 1999.
Employee Benefit Plans. The Company has confirmed the Year 2000 readiness of
its internal systems that interface with its Employee Benefit Plans, as well as
the readiness of its third-party service providers. Testing of the Company's
system interfaces with its service providers is complete.
The Company expects its projected costs for outside consultants for the Year
2000 Project Plan to be approximately $0.8 million, of which $141,000 has
been incurred as of February 22, 1999. Such costs are exclusive of certain
software corrections or upgrades that are generally made in the normal course
of business and are exclusive of the information system upgrade in 1995, which
was unrelated to the Year 2000 issue. Although the Company presently expects
future costs related to the Year 2000 issue to be immaterial with respect to
the Company's results of operations, cash flow, and financial position, total
costs will be influenced by the Company's ability to successfully identify,
repair, and/or replace the Business Systems that are critical to its business
operations. The Company will be unable to estimate its future costs until it
has significantly completed the assessment, remediation, and testing phases of
the Year 2000 Project Plan, which are expected to be substantially completed
by June 30, 1999. The Company does not separately track the internal costs of
its Year 2000 Project Plan. Such costs are primarily related to payroll costs
of the Company's information technology group. Costs related to the Year 2000
issue are funded from the Company's operating cash flows.
As a company that provides offshore drilling rigs, the Company routinely
faces the possibility of a catastrophic event affecting its rigs. A Year
2000 failure could produce such an event, which is the reason the Company
has developed a specific subproject that focuses exclusively on analyzing,
remediating, testing, and contingency planning for possible Year 2000
disruptions aboard its rigs. The Company's present analysis of its most
reasonably likely worst-case scenario for Year 2000 disruptions involves
potential downtime on its semisubmersibles and deep-water drillships under
long-term contract, consisting of its recent conversions, the Glomar
Explorer and Glomar Celtic Sea, the two new-build, deep-water drillships,
the Glomar C.R. Luigs and Glomar Jack Ryan, and the Glomar Grand Banks
and Glomar Arctic I. A Year 2000 failure of critical hardware or software
needed for proper functioning of these vessels could lead to downtime,
which if lengthy, could materially impact the Company's financial condition.
The Arctic class of rigs has been assessed, and no remediation has been
required. The third-party survey of the Glomar Grand Banks is scheduled to
be completed in March 1999, and the surveys of the Glomar Explorer and Glomar
Celtic Sea are scheduled to be completed in April 1999. Certain critical
hardware and software aboard the Glomar Explorer and Glomar Celtic Sea were
tested for Year 2000 readiness during the commissioning of the vessels. The
Glomar C.R. Luigs and Glomar Jack Ryan will be assessed and tested for Year
2000 readiness during the commissioning of the vessels. In addition, many
<PAGE>
of the critical systems on board these vessels are redundant, so that a
failure on one system due to Year 2000 disruptions will not prevent a vessel
from operating. The Company's contingency plan will consider any significant
failure related to the most reasonably likely worst-case scenario and will
factor in severity and duration of the impact of such a scenario. From this
analysis, a Year 2000 contingency plan will be developed to mitigate those
risks.
Contingency planning for each subproject has been incorported into the
Company's Year 2000 Project Plan and is expected to be substantially
completed by June 30, 1999. The Company has engaged external consultants
to develop contingency plans for Business Systems and certain processes that
are highly critical to its business operations. The contingency plans will
encompass alternative courses of action, with limited reliance on computer
software and hardware, in the event that Business Systems or processes are
not Year 2000 ready. The contingency plans are expected to be substantially
completed by June 30, 1999 with continual updating expected through December
31, 1999.
The Company's expectations regarding the Year 2000 problem are subject to
uncertainties which could affect the Company's results of operations or
financial condition. For example, the Company could be adversely affected
by the inability of its Key Business Partners to remedy their own Year 2000
problems, or the Company could be unsuccessful in identifying or repairing
all of its Year 2000 problems related to its critical business operations,
and as such, the Company's results of operations or financial condition
could be materially impacted. Accordingly, success depends on many factors,
some of which are outside the Company's control. Despite reasonable efforts,
the Company cannot assure that it will not experience any disruptions or
otherwise be adversely affected by Year 2000 problems. While the Company
does not expect any catastrophic failures of any of its Business Systems,
such belief is based upon future events which cannot be reasonably predicted.
As part of assessing its Year 2000 risks, the Company has initiated
communication with its insurance carrier to determine the extent to which
Year 2000 problems are covered.
To the extent that any reader of the above Year 2000 Readiness Disclosure is
other than an investor or potential investor in the Company's equity or debt
securities, this disclosure is made for the sole purpose of communicating or
disclosing information aimed at correcting, helping to correct, and/or avoid
Year 2000 failures. This statement is made with the intention to comply
fully with the Year 2000 Information and Readiness Disclosure Act as signed
into law October 19, 1998. All statements made herein shall be construed
within the confines of that Act.
Forward-Looking Statements
Under the Private Securities Litigation Reform Act of 1995, companies are
provided a "safe harbor" for discussing their expectations regarding future
performance. We believe it is in the best interests of our stockholders
and the investment community to use these provisions and provide such
forward-looking information. We do so in this report and other communications.
Our forward-looking statements include things such as our expectations for
future Company performance and earnings; our projections regarding costs of
rigs that are under construction, the financing of those costs, the dates the
rigs will enter service, and the revenues expected to be generated by the rigs;
our expectations regarding reimbursements under the Company's insurance
coverages; the estimated impact of idle and subcontracted third-party rigs
that are under contract to the Company and our plans to contract rigs in the
future; our expectations regarding disputed amounts of dayrate revenue that
can be claimed and collected by the Company; statements regarding oil and gas
prices and demand and the effect the resulting slowdown in offshore drilling
activity will have on results of operations; our expectations regarding future
income tax rates and liabilities and future capital expenditures; our estimated
completion dates for the various phases of our Year 2000 Project
<PAGE>
Plan, as well as the project's estimated costs and projected effectiveness;
our belief in the Company's ability to meet its current obligations; and
other statements that are not historical facts.
Our forward-looking statements speak only as of the date of this report and
are based on currently available industry, financial, and economic data and
our operating plans. They are also inherently uncertain, and investors must
recognize that events could turn out to be materially different from our
expectations.
Factors that could cause or contribute to such differences include, but are
not limited to, changes in capital markets that affect our ability to obtain
financing to fund our growth; changes in the markets for oil and gas and for
offshore drilling services, including decreases in demand for the Company's
services which may result from curtailments of oil and gas operators' drilling
programs due to low oil or gas prices; the uncertainties inherent in resolving
disputed matters through negotiation, arbitration, litigation, or by other
means; changing tax laws and regulations, as well as changing interpretations
of such laws and regulations; the risks of operating in international markets,
including changes in political, economic, trade, and regulatory climates;
unanticipated costs or delays in the Company's construction projects due to
things such as price inflation, design and engineering problems, regulatory
requirements, and labor difficulties; competitive and technological changes
that affect our ability to market our services competitively and cost
effectively; personal events that affect key employees' employment
relationships with the Company; the operational risks and uncertainties
inherent in offshore oil and gas drilling, particularly on a turnkey basis;
the risks discussed above in our Year 2000 Information and Readiness Statement
and Disclosure; and such other risk factors as may be discussed in the
Company's reports filed with the U.S. Securities and Exchange Commission.
The Company disclaims any obligation or undertaking to disseminate any updates
or revisions to its statements, forward-looking or otherwise, to reflect
changes in the Company's expectations or any change in events, conditions, or
circumstances on which any such statements are based.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not material.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Global Marine Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, shareholders' equity and cash flows present
fairly, in all material respects, the financial position of Global Marine Inc.
and subsidiaries (the "Company") at December 31, 1998 and 1997, and the results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements
in accordance with generally accepted auditing standards 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.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
February 22, 1999
<PAGE>
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<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share data)
<CAPTION>
Year Ended December 31,
------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Contract drilling $ 742.4 $ 579.4 $ 362.5
Drilling management 416.0 480.5 305.3
Oil and gas 3.8 7.2 12.9
-------- -------- --------
Total revenues 1,162.2 1,067.1 680.7
Expenses:
Contract drilling 280.4 252.9 200.8
Drilling management 446.4 430.2 277.3
Oil and gas 1.9 3.3 2.6
Depreciation, depletion, and amortization 103.9 55.1 40.9
General and administrative 19.1 20.5 18.3
-------- -------- --------
851.7 762.0 539.9
-------- -------- --------
Operating income 310.5 305.1 140.8
Other income (expense):
Interest expense (46.9) (39.7) (30.9)
Interest capitalized 17.2 20.9 2.6
Interest income 3.3 7.7 6.2
Other - - 1.0
-------- -------- --------
Total other income (expense) (26.4) (11.1) (21.1)
-------- -------- --------
Income before income taxes and
extraordinary item 284.1 294.0 119.7
Provision (benefit) for income taxes:
Current income tax provision 18.5 33.5 9.6
Deferred income tax provision (benefit) 42.3 (54.6) (70.0)
-------- -------- --------
Total provision (benefit) for income taxes 60.8 (21.1) (60.4)
-------- -------- --------
Income before extraordinary item 223.3 315.1 180.1
Extraordinary loss on extinguishment of
debt, net of income tax benefit of $2.4 - (4.5) -
-------- -------- --------
Net income $ 223.3 $ 310.6 $ 180.1
======== ======== ========
Basic earnings per common share:
Before extraordinary item $ 1.29 $ 1.84 $ 1.07
Extraordinary loss on extinguishment of
debt, net - (0.03) -
-------- -------- --------
Basic earnings per common share $ 1.29 $ 1.81 $ 1.07
======== ======== ========
Diluted earnings per common share:
Before extraordinary item $ 1.27 $ 1.79 $ 1.03
Extraordinary loss on extinguishment of
debt, net - (0.03) -
-------- -------- --------
Diluted earnings per common share $ 1.27 $ 1.76 $ 1.03
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
($ in millions)
ASSETS
<CAPTION>
December 31,
------------------
1998 1997
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 56.9 $ 78.9
Accounts receivable, less allowance for doubtful
accounts of $4.2 in 1998 and $2.8 in 1997 163.0 152.2
Future income tax benefits 20.0 70.0
Prepaid expenses 15.6 3.1
Costs incurred on turnkey drilling contracts in progress 6.6 11.7
Other current assets 7.3 11.8
-------- --------
Total current assets 269.4 327.7
Properties and equipment:
Rigs and drilling equipment, less accumulated
depreciation of $371.9 in 1998 and $275.4 in 1997 1,262.6 609.2
Construction in progress 236.8 383.4
Oil and gas properties, full cost method,less
accumulated depreciation, depletion, and amortization
of $24.3 in 1998 and $29.7 in 1997 12.7 6.4
-------- --------
Net properties and equipment 1,512.1 999.0
Future income tax benefits 89.8 79.4
Other assets 100.3 15.8
-------- --------
Total assets $1,971.6 $1,421.9
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
($ in millions)
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
December 31,
------------------
1998 1997
-------- --------
<S> <C> <C>
Current liabilities:
Accounts payable $ 99.0 $ 115.5
Accrued compensation and related employee costs 22.5 30.5
Accrued income taxes 12.2 19.5
Accrued interest 9.3 6.6
Other accrued liabilities 9.4 11.4
-------- --------
Total current liabilities 152.4 183.5
Long-term debt 750.7 399.4
Capital lease obligation 17.7 17.9
Other long-term liabilities 10.4 15.5
Shareholders' equity:
Preferred stock, $0.01 par value, 10 million shares
authorized, no shares issued or outstanding - -
Common stock, $0.10 par value, 300 million shares
authorized, 173,368,384 shares and 172,202,785
shares issued and outstanding at December 31, 1998
and 1997, respectively 17.3 17.2
Additional paid-in capital 321.5 310.1
Retained earnings 701.6 478.3
-------- --------
Total shareholders' equity 1,040.4 805.6
-------- --------
Total liabilities and shareholders' equity $1,971.6 $1,421.9
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
<CAPTION>
Year Ended December 31,
------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 223.3 $ 310.6 $ 180.1
Adjustments to reconcile net income to net
cash flow provided by operating activities:
Depreciation, depletion, and amortization 103.9 55.1 40.9
Deferred income taxes 42.3 (54.6) (70.0)
Decrease (increase) in costs incurred on
turnkey drilling contracts in progress 5.1 (.9) (2.4)
Increase in accrued interest 2.7 5.4 -
Increase in other current assets (9.7) (2.3) (7.8)
Increase in accounts receivable (13.3) (49.6) (34.2)
(Decrease) increase in other accrued liabilities (14.2) 31.2 19.0
(Decrease) increase in accounts payable (16.5) 62.0 19.6
Increase in noncurrent receivables (67.7) - (2.6)
Extraordinary loss on debt extinguishment - 4.5 -
Gains on sales of properties and equipment - - (1.1)
Other, net 2.1 (2.1) (2.3)
------- ------- -------
Net cash flow provided by operating activities 258.0 359.3 139.2
Cash flows from investing activities:
Capital expenditures (637.7) (580.3) (118.3)
Proceeds from sales of properties and equipment 3.7 3.6 3.7
Proceeds from maturities of held-to-maturity
securities 2.8 46.6 101.2
Purchases of held-to-maturity securities (1.1) (20.8) (75.3)
------- ------- -------
Net cash flow used in investing activities (632.3) (550.9) (88.7)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 621.0 599.3 -
Reductions of long-term debt (270.0) (429.5) -
Proceeds from exercises of employee stock options 4.4 10.0 9.2
Other (3.1) (2.2) -
------- ------- -------
Net cash flow provided by financing activities 352.3 177.6 9.2
------- ------- -------
(Decrease) increase in cash and cash equivalents (22.0) (14.0) 59.7
Cash and cash equivalents at beginning of year 78.9 92.9 33.2
------- ------- -------
Cash and cash equivalents at end of year $ 56.9 $ 78.9 $ 92.9
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
($ in millions)
<CAPTION>
Retained
Common Stock Additional Earnings
----------------------- Paid-In (Accumulated
Shares Par Value Capital Deficit) Total
----------- --------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 166,458,083 $16.6 $264.8 $(12.4) $ 269.0
Net income - - - 180.1 180.1
Exercise of employee stock options 2,963,567 .3 8.9 - 9.2
Stock issued under other employee
benefit plans 18,919 - .2 - .2
Income tax benefit from stock
option exercises - - .6 - .6
----------- ----- ------ ------ ---------
Balance at December 31, 1996 169,440,569 16.9 274.5 167.7 459.1
Net income - - - 310.6 310.6
Exercise of employee stock options 2,636,527 .3 10.3 - 10.6
Stock issued under other employee
benefit plans 149,588 - 3.1 - 3.1
Stock canceled (23,899) - (.5) - (.5)
Income tax benefit from stock
option exercises - - 22.7 - 22.7
----------- ----- ------ ------ ---------
Balance at December 31, 1997 172,202,785 17.2 310.1 478.3 805.6
Net income - - - 223.3 223.3
Exercise of employee stock options 991,018 .1 4.4 - 4.5
Stock issued under other employee
benefit plans 178,162 - 4.4 - 4.4
Stock canceled (3,581) - (.1) - (.1)
Income tax benefit from stock
option exercises - - 2.7 - 2.7
----------- ----- ------ ------ ---------
Balance at December 31, 1998 173,368,384 $17.3 $321.5 $701.6 $ 1,040.4
=========== ===== ====== ====== =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
GLOBAL MARILE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Global Marine
Inc. and its majority-owned subsidiaries. Unless the context otherwise
requires, the term "Company" refers to Global Marine Inc. and its consolidated
subsidiaries. Intercompany accounts and transactions have been eliminated.
Cash Equivalents
Cash equivalents consist of all highly liquid debt instruments with remaining
maturities of three months or less at the time of purchase.
Properties and Depreciation
Rigs and Drilling Equipment. Capitalized costs of rigs and drilling equipment
include all costs incurred in the acquisition of capital assets including
allocations of interest costs incurred during periods that rigs are under
construction or refurbishment. Expenditures for maintenance and repairs are
charged to expense as incurred. Costs of property sold or retired and the
related accumulated depreciation are removed from the accounts; resulting gains
or losses are included in income.
Jackup drilling rigs were depreciated over lives of 25 years, with salvage
values of $0.5 million per rig. Semisubmersible drilling rigs and drillships,
other than the Glomar Explorer, were depreciated over lives ranging from 10 to
20 years, with salvage values of $1.0 million per rig. The Glomar Explorer is
being depreciated over the remainder of its 30-year lease (from the date the
rig entered service), or approximately 28 years, with no salvage value.
Effective January 1, 1999, the Company increased the estimated useful lives of
its jackups and semisubmersibles to 30 years. The effect of the change will be
to decrease 1999 depreciation expense by approximately $29 million.
Rigs and drilling equipment included $241.1 million of assets recorded under
capital lease at December 31, 1998 (inclusive of $225.1 million of leasehold
improvements and capitalized interest), and $148.9 million at December 31,
1997 (inclusive of $132.9 million of leasehold improvements and capitalized
interest). Construction in progress at December 31, 1998 included $234.3
million of assets subject to capital leases. Accumulated amortization of
assets under capital leases totaled $3.3 million at December 31, 1998 and zero
at December 31, 1997.
Oil and Gas Properties. The Company uses the full-cost method of accounting
for oil and gas exploration and development costs. Under this method of
accounting, the Company capitalizes all costs incurred in the acquisition,
exploration, and development of oil and gas properties and amortizes such
costs, together with estimated future development and dismantlement costs,
using the units-of-production method.
<PAGE>
Revenue Recognition
Contract drilling services are performed generally on a dayrate basis under
individual contracts to employ the Company's rigs. Such contracts extend
over a specified period of time or the time required to drill a specified
well or number of wells. Revenues from contract drilling services and the
related expenses are recognized on a per-day basis as the work progresses.
Revenues from turnkey drilling contracts, which are classified under drilling
management revenues, are derived from the design and execution of specific
offshore drilling programs, each at a fixed price to the oil and gas operator.
Revenues from each turnkey drilling contract and the related expenses are
recognized upon completion of the contract.
Foreign Currency Translation
The United States dollar is the functional currency for all of the Company's
operations. Realized and unrealized foreign currency transaction gains and
losses are recorded in income.
The Company may be exposed to the risk of foreign currency exchange losses
in connection with its foreign operations. Such losses are the result of
holding net monetary assets (cash and receivables in excess of payables)
denominated in foreign currencies during periods of a strengthening U.S.
dollar. The Company attempts to lessen the impact of exchange rate changes
by requiring customer payments to be primarily in U.S. dollars, by keeping
foreign cash balances at minimal levels, and by not speculating in foreign
currencies. The Company incurred aggregate foreign currency transaction
losses of $0.6 million in 1998 and 1997 and an aggregate transaction gain of
$1.3 million in 1996.
Income Taxes
The Company intends to permanently reinvest in its business outside the
United States the unremitted earnings of foreign subsidiaries not otherwise
subject to U.S. taxation. As a result, the Company has not provided for
deferred federal income taxes on such unremitted foreign earnings.
Stock-Based Compensation Plans
The Company accounts for its stock option and stock-based compensation plans
using the intrinsic-value method prescribed by Accounting Principles Board
("APB") Opinion No. 25. Accordingly, the Company computes compensation cost
for each employee stock option granted as the amount by which the quoted
market price of the Company's common stock on the date of grant exceeds the
amount the employee must pay to acquire the stock. The amount of compensation
cost, if any, is charged to income over the vesting period. With respect to
performance-based stock awards, under which the number of shares issued is
dependent on the attainment of certain long-term performance goals,
compensation expense is charged to income over the performance (vesting)
period but is adjusted for changes in the market price of the stock during
the period. (See Note 6.)
<PAGE>
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2 - Investments
At December 31, 1998 and 1997, the Company had investments in cash equivalents
and marketable securities consisting of debt securities which were classified
as held-to-maturity and carried at amortized cost. Marketable securities at
December 31, 1997 in the table below were classified as other current assets
on the accompanying balance sheet. A summary of the estimated fair values of
these investments as of December 31 follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
(In millions)
<S> <C> <C>
Cash equivalents:
Money market funds $ 38.0 $ -
Commercial paper 2.0 78.8
Repurchase agreements .2 -
Eurodollar time deposits - 7.0
------ ------
$ 40.2 $ 85.8
====== ======
Marketable securities:
Eurodollar time deposits $ 1.5
Certificates of deposit .2
------
$ 1.7
======
</TABLE>
The estimated fair values of investments approximated their carrying values;
therefore, there were no unrealized holding gains or losses as of December 31,
1998 or 1997. The estimated fair values of investments as of December 31
grouped by contractual maturities were as follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
(In millions)
<S> <C> <C>
Within three months or less $ 40.2 $ 85.8
After three months through one year - 1.7
------ ------
$ 40.2 $ 87.5
====== ======
</TABLE>
The following are investments in connection with certain of the Company's
nonqualified pension plans as of December 31, 1998 and 1997. These investments
were categorized as available-for-sale and were included in other assets at
December 31. Unrealized holding gains and losses for each year were not
material.
<PAGE>
<TABLE>
<CAPTION>
1998 1997
---------------- ----------------
Cost Fair Value Cost Fair Value
---- ---------- ---- ----------
(In millions)
<S> <C> <C> <C> <C>
Money market mutual fund $4.8 $4.8 $4.0 $4.0
Bond mutual fund 1.0 1.0 1.0 1.0
Stock and bond mutual fund 0.9 1.1 0.8 0.9
---- ---- ---- ----
$6.7 $6.9 $5.8 $5.9
==== ==== ==== ====
</TABLE>
Note 3 - Long-term Debt
Long-term debt as of December 31 consisted of the following:
<TABLE>
<CAPTION>
1998 1997
------ ------
(In millions)
<S> <C> <C>
7-1/8% Notes due 2007, net of unamortized discount
of $0.5 million at December 31, 1998 and $0.6
million at December 31, 1997 $299.5 $299.4
7% Notes due 2028, net of unamortized discount of
$3.8 million 296.2 -
Borrowings under $240 million bank revolving
credit facility 155.0 100.0
------ ------
Total long-term debt including current maturities 750.7 399.4
Less current maturities - -
------ ------
Long-term debt $750.7 $399.4
====== ======
</TABLE>
On May 26, 1998, the Company issued $300 million of 7% Notes due 2028 (the
"7% Notes") and received cash proceeds of $296.0 million after deduction for
discount and underwriting fees. The Company used the proceeds to reduce
amounts outstanding under its bank credit facilities. The outstanding debt
that was repaid from the proceeds of the 7% Notes was incurred to finance
the upgrade, acquisition, and construction of rigs and for working capital
requirements. Interest on the 7% Notes is payable on June 1 and December 1
of each year.
No principal payments are required with respect to either the 7-1/8% Notes
or the 7% Notes prior to their final maturity date. The Company may redeem
the 7-1/8% Notes and the 7% Notes in whole at any time, or in part from time
to time, at a price equal to 100 percent of the principal amount thereof plus
accrued interest, if any, to the date of redemption, plus a premium, if any,
relating to the then prevailing Treasury Yield and the remaining life of the
notes.
The Company's $240 million bank revolving credit facility is a five-year,
unsecured revolving credit facility with a group of banks under which the
Company may borrow up to $240 million at interest rates determinable at the
time of the borrowings. As of December 31, 1998, the weighted average annual
rate of interest on borrowings under the $240 million credit facility was
5.876 percent, as compared to 6.325 percent as of December 31, 1997. The
$240 million credit facility terminates in December 2002. The unused portion
of the facility is subject to an annual commitment fee of one-tenth of one
percent.
<PAGE>
In addition to the $240 million credit facility, the Company has a $150
million unsecured revolving credit facility terminating November 1999.
Any amounts outstanding at the end of the period may, at the option of the
Company, be converted into a two-year term loan. One-fourteenth of the
converted balance would be due each quarter for seven quarters, and the
remainder would be due at the end of the two-year period. The $150 million
credit facility is subject to an annual facility fee of one-eighth of one
percent. As of December 31, 1998, there were no borrowings under the $150
million credit facility.
All of the Company's debt is unsecured and unsubordinated and ranked equally
in right of payment with all other unsubordinated and unsecured indebtedness
of the Company.
The indentures relating to the 7-1/8% Notes and the 7% Notes contain
limitations on the Company's ability to incur indebtedness for borrowed
money secured by certain liens and to engage in certain sale/leaseback
transactions, among other things. The revolving credit facilities contain
similar limitations, require the Company to maintain minimum levels of net
worth and interest coverage, and limit the Company's maximum debt as a
percentage of capitalization.
Note 4 - Commitments and Contingencies
At December 31, 1998, the Company had under operating leases office space and
equipment with remaining terms ranging from approximately one to nine years.
Some of the leases may be renewed at the Company's option, and some are subject
to rent revisions based on the Consumer Price Index or increases in building
operating costs. In addition, at December 31, 1998, the Company had under
capital lease the Glomar Explorer drillship through 2026. Rent expense was
$213.6 million for 1998, $149.2 million for 1997, and $85.8 million for 1996.
Included in rent expense was the rental of offshore drilling rigs used in the
Company's turnkey operations totaling $207.1 million for 1998, $144.6 million
for 1997, and $81.7 million for 1996.
<PAGE>
Future minimum rental payments with respect to the Company's lease obligations
as of December 31, 1998 were as follows:
<TABLE>
<CAPTION>
Capital Operating
Lease Leases
------- ---------
(In millions)
<S> <C> <C>
Year ended December 31:
1999 $ 1.8 $17.6
2000 1.8 3.8
2001 1.8 3.7
2002 1.8 3.0
2003 1.8 2.8
Later years 40.5 5.2
----- -----
Total future minimum rental payments 49.5 $36.1
Less amount representing imputed interest 30.0 =====
-----
Present value of future minimum rental
payments under capital lease 19.5
Less current portion included in accrued
liabilities 1.8
-----
Long-term capital lease obligation $17.7
=====
</TABLE>
In 1998 the Company entered into agreements with Harland and Wolff Shipbuilding
and Heavy Industries, Ltd. for the construction of two dynamically-positioned
deep-water drillships, the Glomar C.R. Luigs and the Glomar Jack Ryan. In
December 1998 the Company novated the contracts for the construction of the
Glomar C.R. Luigs and the Glomar Jack Ryan to leasing subsidiaries of Lloyds
Bank Plc and Barclays Bank Plc, respectively (the "Lessors"), placing ownership
of the drillships with the Lessors, and entered into 20-year capital leases
with respect to the rigs. By the time construction of the ships is completed,
the Company will have deposited with three large foreign banks (the "Payment
Banks") amounts equal to the progress payments that the Lessors are required
to make under the construction contracts, less approximately $54 million. In
exchange for the deposits, the Payment Banks will assume liability for making
rental payments required under the leases, and the Company will be legally
released from making such rental payments. Accordingly, the Company has
recorded no capital lease obligation on its balance sheet. Future payment
commitments in place at December 31, 1998 in connection with construction of
the rigs totaled $335 million. Under the terms of the leases, the Company
retains full control over both the operations and ultimate disposition of the
vessels in all but remote circumstances. The ultimate amount of the benefit
to be received by the Company is dependent on interest and tax rates in the
United Kingdom over the 20-year terms of the leases and may be more or less
than the $54 million initial benefit. Changes in interest or tax rates from
levels assumed in the leases will result in the Company paying or receiving
additional amounts over the 20-year term.
The Company is seeking to resolve a dispute with Sedco Forex Offshore
("Sedco") with respect to a bareboat charter agreement for the drilling rig,
Glomar Grand Banks. The Company assumed rights to the bareboat charter at
the time it acquired ownership of the rig in July 1997. At issue are the
date of termination of the charter, the condition of the rig upon its return
to the Company, and Sedco's liability to pay additional dayrate. With regard
to the first issue, the Company has contended that the charter
<PAGE>
expired on January 20, 1998. The parties commenced arbitration proceedings
in London in December 1997, and the arbitration panel ruled in favor of the
Company on that issue. With respect to the other issues, the Company contends
Sedco is responsible under the charter for paying the cost of certain repairs
to the rig and for paying a market dayrate for the period following termination
of the charter and while the rig was in the shipyard for repairs prior to its
return to work for another customer. Sedco completed using the rig for
drilling on May 5, 1998, at which time the rig entered a shipyard to undergo
the repairs at issue. The Company completed the repairs on October 30, 1998,
and mobilized the rig to the east coast of Canada, where it is currently
operating for another customer. The arbitration hearing in London with regard
to the outstanding issues has been delayed until no earlier than the third
quarter of 1999. As of December 31, 1998, the amount of dayrate from Sedco
which the Company has recognized as revenue totaled $23.2 million, none of
which has been collected. In addition, the Company has paid $28.7 million as
of December 31, 1998, for the cost of certain rig repairs for which the Company
contends Sedco is responsible, and the Company expects to make claims against
Sedco for additional repair costs. The two amounts totaling $51.9 million at
December 31, 1998, were classified as noncurrent assets on the accompanying
balance sheet. The Company has not reserved any of these amounts. The total
amount of dayrate to be claimed by the Company is projected to be in excess
of the $23.2 million recognized through December 31, 1998.
The Company is involved in various lawsuits resulting from personal injury and
property damage. In the opinion of management, resolution of these matters
will not have a material adverse effect on the Company's results of operations,
financial position, or cash flows.
Note 5 - Financial Instruments
Concentrations of Credit Risk
The market for the Company's services and products is the offshore oil and
gas industry, and the Company's customers consist primarily of major integrated
international oil companies and independent oil and gas producers. The Company
performs ongoing credit evaluations of its customers and generally does not
require material collateral. The Company maintains reserves for potential
credit losses, and such losses have been within management's expectations.
The Company had cash deposits concentrated primarily in five major banks at
December 31, 1998 and 1997. In addition, the Company had money-market funds,
commercial paper, and Eurodollar time deposits with a variety of financial
institutions with strong credit ratings. As a result of the foregoing, the
Company believes that credit risk in such instruments is minimal.
Fair Values of Financial Instruments
The estimated fair value of the Company's $750.7 million carrying value of
long-term debt approximated $738.0 million at December 31, 1998. At
December 31, 1997, the estimated fair value of the Company's $399.4 million
carrying value of long-term debt was $410.6 million. Fair values were based
on quoted market prices. The fair values of the Company's cash equivalents,
marketable securities, trade receivables,
<PAGE>
and trade payables approximated their carrying values due to the short-term
nature of these instruments (see Note 2).
Note 6 - Stock-Based Compensation Plans
At December 31, 1998, the Company had four stock-based compensation plans,
the Global Marine Inc. 1989 Stock Option and Incentive Plan and the Global
Marine 1998 Stock Option and Incentive Plan (together, the "Employee Plans"),
the Global Marine Inc. 1994 Non-Employee Stock Option and Incentive Plan
(the "Non-Employee Plan"), and the Global Marine Inc. 1990 Non-Employee
Director Stock Option Plan (the "Director Plan"). Under the Employee Plans,
incentive and nonqualified options to purchase a fixed number of shares of
the Company's common stock ("stock options") may be granted to key employees;
under the Non-Employee Plan, nonqualified stock options may be granted to
certain non-employees; and under both plans, shares of common stock may be
sold at prices below the market price at the time of the sale. Under the
Director Plan, nonqualified stock options are automatically granted each
year to outside directors of the Company. One half of each stock option
grant under the Director Plan becomes exercisable one year after the grant
date with the remainder exercisable after two years. Under the Employee
Plans and Non-Employee Plan, stock options become exercisable in increments
of 25 percent each year beginning one year after the grant date. Stock
options under all plans expire ten years after the grant date and become
exercisable in full if more than 50 percent of the Company's outstanding
common stock is acquired by a person or a single group of persons. At
December 31, 1998, there were 6,257,158 shares available for future grants
under all plans.
Under the Employee Plans, the Company has offered to certain key employees
at nominal or no cost to the employee a variable number of shares of common
stock, the exact number being dependent on the Company's attainment of
certain long-term performance goals ("performance-based stock awards").
Estimates of fair values of stock options and performance-based stock awards
on the grant dates in the disclosures which follow were computed using the
Black-Scholes option-pricing model based on the following assumptions:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Expected price volatility range 49% to 53% 48% 41% to 43%
Risk-free interest rate range 4.4% to 5.7% 5.8% to 6.6% 5.5% to 6.8%
Expected dividends none none none
Expected life of stock options 5 years 5 years 5 years
Expected life of performance-based
stock awards 3 years 3 years 3 years
</TABLE>
<PAGE>
STOCK OPTIONS
A summary of the status of stock options granted under all plans is presented
below:
<TABLE>
<CAPTION>
Number
Of Shares Weighted Average
Under Option Exercise Price
------------ ----------------
<S> <C> <C>
Shares under option at December 31, 1995 9,835,401 $3.50
Granted 1,317,500 $11.33
Exercised (2,963,567) $3.13
Canceled (96,500) $6.01
---------
Shares under option at December 31, 1996 8,092,834 $4.88
Granted 1,011,400 $22.91
Exercised (2,636,527) $4.02
Canceled (37,900) $15.51
---------
Shares under option at December 31, 1997 6,429,807 $8.01
Granted 2,083,400 $23.27
Exercised (991,018) $4.56
Canceled (139,100) $19.96
---------
Shares under option at December 31, 1998 7,383,089 $12.55
=========
Options exercisable at December 31,
1996 5,887,559 $3.59
1997 4,457,868 $3.92
1998 3,972,889 $5.28
</TABLE>
In 1996 the Company granted 42,000 stock options with a weighted average
exercise price of $6.81 per share, which was less than the market price of
the stock on the date of grant, and a weighted average fair value of $11.01
per share. All other stock options granted in 1996 and all stock options
granted in 1997 and 1998 had exercise prices equal to the market price of
the Company's common stock on the date of grant. The weighted average
per-share fair value of these options as of the grant date was $5.21 in 1996,
$11.37 in 1997, and $11.54 in 1998.
<PAGE>
The following table summarizes information with respect to stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------- ---------------------------
Weighted
Range of Number Average Weighted Number Weighted
Exercise Outstanding Remaining Average Exercisable Average
Prices at 12/31/98 Contractual Life Exercise Price at 12/31/98 Exercise Price
- --------- ----------- ---------------- -------------- ----------- --------------
<C> <C> <C> <C> <C> <C>
$0.56 to $3.81 1,755,890 3.8 years $2.46 1,755,890 $2.46
$4.13 to $5.63 1,622,393 3.8 years $4.63 1,622,393 $4.63
$6.69 to $10.25 788,842 7.1 years $9.18 301,342 $8.95
$12.44 to $20.75 1,247,564 8.5 years $18.39 237,289 $19.95
$24.94 to $34.19 1,968,400 9.1 years $25.74 55,975 $30.70
--------- ---------
7,383,089 6.4 years $12.55 3,972,889 $5.28
========= =========
</TABLE>
Performance-Based Stock Awards
Under the Employee Plans, the Company has offered shares of Company stock
to certain key employees at nominal or no cost to the employee. The exact
number of shares that each employee will be allowed to receive is dependent
on Company performance over three-year periods as measured against performance
goals with respect to cash flow, earnings per share, and stock price. The
performance period applicable to each offer ends on December 31 of the second
full year following the year of the grant. A summary of the status of
performance-based stock awards is presented below:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Number of contingent shares at beginning of year 428,668 593,750 462,500
Granted 315,000 68,600 131,250
Issued (178,162) (141,098) -
Forfeited/canceled (119,150) (92,584) -
------- ------- -------
Number of contingent shares at end of year 446,356 428,668 593,750
======= ======= =======
Shares vested at December 31 97,479 252,777 200,000
Fair value at grant date $24.94 $20.67 $9.23
</TABLE>
PRO FORMA DISCLOSURES
As discussed in Note 1 under "Stock-Based Compensation Plans," the Company
accounts for its stock-based compensation plans under APB Opinion No. 25.
Accordingly, no compensation cost has been recognized for those stock options
with exercise prices equal to the market price of the stock on the date of
grant. The amount of compensation cost included in income for the Company's
performance-based stock awards was a credit of $1.2 million in 1998 and
charges of $6.3 million in 1997 and $5.9 million in 1996. Had compensation
cost for the Company's stock-based compensation plans been determined based
on fair values as of the dates of grant, the Company's net income and
earnings per share would have been reported as follows:
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
(In millions, except per share amounts)
<S> <S> <C> <C> <C>
Net income: As reported $223.3 $310.6 $180.1
Pro forma $210.5 $311.5 $178.4
Basic earnings per share: As reported $1.29 $1.81 $1.07
Pro forma $1.22 $1.82 $1.06
Diluted earnings per share: As reported $1.27 $1.76 $1.03
Pro forma $1.20 $1.77 $1.02
</TABLE>
The pro forma figures above may not be representative of pro forma amounts in
future years.
Note 7 - Retirement Plans
Pensions
The Company has adopted Statement of Financial Accounting Standards ("SFAS")
No. 132, "Employers' Disclosures About Pensions and Other Postretirement
Benefits," which changes the way the Company is required to report information
about its pensions and other postretirement benefits. Information for prior
years has been restated to conform to the 1998 presentation.
The Company has defined benefit pension plans covering substantially all
of its employees. For the most part, benefits are based on the employee's
length of service and average earnings for the five highest consecutive
calendar years of compensation during the last fifteen years of service.
Substantially all benefits are paid from funds previously provided to
trustees. The Company is the sole contributor to the plans, and its funding
objective is to fund participants' benefits under the plans as they accrue,
taking into consideration future salary increases. The components of net
periodic benefit cost by plan type (for federal income tax reporting purposes)
were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------ ------------------------ ------------------------
Qualified Nonqualified Qualified Nonqualified Qualified Nonqualified
--------- ------------ --------- ------------ --------- ------------
(In millions)
<S> <C> <C> <C> <C> <C> <C>
Service cost - benefits earned
during the period $ 3.8 $ .6 $ 2.6 $ .1 $ 2.5 $ .1
Interest cost on projected
benefit obligation 5.5 1.0 4.7 .9 4.3 .7
Expected return on plan assets (6.2) (.5) (5.1) (.4) (4.3) (.3)
Recognized actuarial loss 1.2 .3 .6 .2 1.1 .3
Amortization of prior service costs - - - - (.1) .1
----- ----- ----- ----- ----- -----
Net periodic benefit cost $ 4.3 $ 1.4 $ 2.8 $ .8 $ 3.5 $ .9
===== ===== ===== ===== ===== =====
</TABLE>
<PAGE>
The following table sets forth the funded status of the plans and the amounts
recognized in the Company's consolidated balance sheet as of December 31:
<TABLE>
<CAPTION>
1998 1997
------------------------ ------------------------
Qualified Nonqualified Qualified Nonqualified
--------- ------------ --------- ------------
(In millions)
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 75.2 $ 12.2 $ 62.2 $ 10.7
Service cost 3.8 .6 2.6 .1
Interest cost 5.5 1.0 4.7 .9
Actuarial loss 8.8 2.5 7.5 .9
Benefits paid (2.1) (.5) (1.8) (.4)
------ ------ ------ ------
Projected benefit obligation at end of year 91.2 15.8 75.2 12.2
------ ------ ------ ------
Change in plan assets:
Fair value of plan assets at beginning of year 66.5 5.7 54.9 3.4
Actual return on plan assets 3.9 1.2 7.9 1.8
Employer contributions 6.0 .3 5.5 .9
Benefits paid (2.1) (.5) (1.8) (.4)
------ ------ ------ ------
Fair value of plan assets at end of year 74.3 6.7 66.5 5.7
------ ------ ------ ------
Projected benefit obligation in excess of plan assets 16.9 9.1 8.7 6.5
Unrecognized net loss (21.1) (3.6) (11.2) (2.1)
------ ------ ------ ------
(Prepaid) accrued benefit cost $ (4.2) $ 5.5 $ (2.5) $ 4.4
====== ====== ====== ======
</TABLE>
Plan assets consist primarily of listed stocks and bonds.
The Company has established grantor trusts to provide funding for the benefits
payable under certain of the nonqualified plans. The trusts are irrevocable,
and grantor trust assets, which are excluded from plan assets in the table
above, can be used only to pay such benefits, with certain exceptions. Fair
value of the grantor trust assets totaled $6.9 million and $5.9 million at
December 31, 1998 and 1997, respectively, and consisted of a money market
mutual fund, a bond mutual fund, and a stock and bond mutual fund. Grantor
trust assets are included in other assets on the consolidated balance sheet.
The expected long-term rate of return on plan assets used to compute pension
cost was 9.0 percent for 1998, 1997, and 1996. The assumed rate of increase
in future compensation levels ranged from 5.5 percent to 6.5 percent for each
of 1998, 1997, and 1996. The discount rate used to compute the actuarial
present value of the projected benefit obligation was 6.75 percent for 1998,
7.0 percent for 1997, and 7.5 percent for 1996.
The Company has a defined contribution savings plan in which substantially
all of the Company's domestic employees are eligible to participate. Company
contributions to the savings plan are based on the amount of employee
contributions. Effective July 1, 1998, the Company increased its matching
contribution to 100 percent of each participant's first six percent of
compensation contributed to the Plan. Charges to expense with respect to this
plan totaled $2.2 million for 1998, $0.9 million for 1997, and $0.8 million for
1996.
<PAGE>
Other Postretirement Benefits
The Company provides term life insurance to retirees and, for a period
generally ending two years following retirement, health care benefits
to retirees and their covered dependents. Generally, employees who have
reached the age of 55 and have rendered a minimum of five years of service
are eligible for such retirement benefits. For the most part, health care
benefits are contributory while life insurance benefits are non-contributory.
Liabilities for postretirement health care and life insurance benefits are
not material to the Company's results of operations or financial position.
Note 8 - Income Taxes
In 1998 income before income taxes consisted of foreign earnings of $222.2
million and domestic earnings of $61.9 million. In 1997 foreign earnings
were $162.3 million, and domestic earnings were $131.7 million. In 1996
foreign earnings were $89.4 million, and domestic earnings were $30.3
million.
The provision (benefit) for income taxes consisted of the following:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
(In millions)
<S> <C> <C> <C>
Current - Foreign $ 15.8 $ 19.0 $ 7.0
- U.S. federal 2.2 14.3 2.4
- State .5 .2 .2
------ ------ ------
18.5 33.5 9.6
Deferred - U.S. federal 42.3 (54.6) (70.0)
------ ------ ------
Provision (benefit) for income taxes $ 60.8 $(21.1) $(60.4)
====== ====== ======
</TABLE>
A reconciliation of the differences between taxes on income before
extraordinary item computed at the U.S. federal statutory rate of 35
percent and the Company's reported provision (benefit) for income taxes
follows:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
($ in millions)
<S> <C> <C> <C>
Income tax provision at statutory rate $ 99.4 $ 102.9 $ 41.9
Foreign earnings taxed at less than the U.S. rate (58.1) - -
Increase (decrease) in the valuation allowance 15.8 (246.4) (103.3)
Net decrease (increase) in credit carryforwards
and net operating loss carryforwards 2.7 (13.2) (2.9)
Other, net 1.0 13.4 3.9
Effect of foreign operations realignment - 99.6 -
Decrease in valuation allowance recorded to
paid-in capital - 22.6 -
------- ------- -------
Provision (benefit) for income taxes $ 60.8 $ (21.1) $ (60.4)
======= ======= =======
Effective tax rate 21% (7%) (50%)
======= ======= =======
</TABLE>
<PAGE>
The Company intends to permanently reinvest in its business outside the
United States the unremitted earnings of foreign subsidiaries not otherwise
subject to U.S. taxation. As a result, the Company has not provided for
deferred federal income taxes on $152.0 million of cumulative unremitted
foreign earnings at December 31, 1998. It is not practicable to estimate
the amount of deferred income taxes associated with these unremitted earnings;
however, the Company has available foreign tax credits associated with these
earnings that could be used to reduce federal income taxes that may be due in
the event those earnings were remitted to the United States.
Deferred tax assets and liabilities are recorded in recognition of the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. The significant components
of the Company's deferred tax assets and liabilities as of December 31 were
as follows:
<TABLE>
<CAPTION>
1998 1997
------ ------
(In millions)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $208.8 $250.5
Tax credit carryforwards 30.3 29.3
Accrued expenses not currently deductible 7.9 9.5
Other 12.4 8.8
------ ------
259.4 298.1
Less: Valuation allowance (48.7) (32.9)
------ ------
Deferred tax assets, net of valuation allowance 210.7 265.2
Deferred tax liabilities:
Depreciation and depletion for tax in excess of
book expense 78.7 102.0
Income recognized for book in excess of tax 12.3 2.3
Tax benefit transfers 9.7 10.9
Other .2 .6
------ ------
Total deferred tax liabilities 100.9 115.8
------ ------
Net future income tax benefit recognized in
consolidated balance sheet $109.8 $149.4
====== ======
</TABLE>
The Company has established a valuation allowance primarily due to the
uncertainty of realizing certain net operating loss ("NOL") and other
carryforwards. The Company increased the valuation allowance in 1998
primarily due to revisions in the amounts of deferred tax liabilities.
At December 31, 1998, the Company had $497.7 million of U.S. NOL
carryforwards, $15.2 million of non-expiring alternative minimum tax credit
carryforwards, $12.6 million of foreign tax credit carryforwards expiring in
2003, and $2.6 million of investment tax credit ("ITC") carryforwards which
can be used to reduce the Company's U.S. federal income taxes payable in
future years. The NOL and ITC carryforwards expire as follows:
<PAGE>
<TABLE>
<CAPTION>
NOL ITC
----- -----
(In millions)
<S> <C> <C>
Year ended December 31:
1999 $2.3
2000 .3
2005 $342.4 -
2006 82.8 -
2007 19.6 -
2008 34.1 -
2009 18.8 -
------ ----
$497.7 $2.6
====== ====
</TABLE>
In addition, at December 31, 1998, the Company had $111.6 million of
non-expiring NOL carryforwards in the United Kingdom.
The Company's U.S. NOL and ITC carryforwards are subject to review and
potential disallowance by the Internal Revenue Service ("IRS") upon audit
of the Company's federal income tax returns. Section 382 and 383 of the
Internal Revenue Code of 1986, as amended, may impair the future availability
of the NOL and ITC carryforwards if there is a change in ownership of more
than 50 percent of the Company's common stock. This limitation, if it
applied, would limit the utilization of the NOL in each taxable year to an
amount equal to the product of the federal long-term tax-exempt bond rate
prescribed monthly by the IRS and the fair market value of all the Company's
stock at the time of the ownership change. The Company believes that it has
not undergone a greater-than-50-percent ownership change and that its
carryforwards are currently available for utilization without limitation.
Note 9 - Earnings Per Share
A reconciliation of the numerators and denominators of the basic and diluted
per-share computations for income before extraordinary item follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
($ in millions, except per share amounts)
<S> <C> <C> <C>
Income (numerator):
Income before extraordinary item $223.3 $315.1 $180.1
Shares (denominator):
Shares - Basic 173,040,584 171,159,212 167,915,661
Effect of employee stock options 2,744,611 5,002,765 6,373,951
----------- ----------- -----------
Shares - Diluted 175,785,195 176,161,977 174,289,612
=========== =========== ===========
Earnings per share before
extraordinary item:
Basic $1.29 $1.84 $1.07
Diluted $1.27 $1.79 $1.03
</TABLE>
<PAGE>
Note 10 - Supplemental Cash Flow Information
Cash interest payments totaled $41.1 million in 1998, $29.7 million in 1997,
and $28.7 million in 1996. Cash payments for income taxes totaled $26.6
million in 1998, $18.1 million in 1997, and $7.0 million in 1996.
In 1996 the Company financed the acquisition of the hull for the Glomar
Explorer drillship by assuming a $16.0 million capital lease obligation.
Note 11 - Segment and Geographic Information
The Company has adopted the provisions of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which changes the way
the Company is required to report information about its operating segments.
SFAS No. 131 did not materially change the manner in which the Company's
segments are reported; however, information for prior years has been restated
to conform to the 1998 presentation.
The Company has three lines of business, each organized along the basis of
products and services and each with separate management teams. The Company's
three lines of business are each reported as a separate operating segment and
consist of contract drilling, drilling management services, and oil and gas.
The Company's contract drilling business leases fully-manned, mobile offshore
drilling rigs to oil and gas operators on a daily-rate basis and is also
referred to as dayrate drilling. The drilling management services business,
also referred to as turnkey drilling, designs, develops, and executes specific
offshore drilling programs and delivers a logged or loggable hole to an agreed
depth for a guaranteed price. In addition, it serves as a general contractor
for oil and gas operators, providing planning, engineering, and management
services needed to drill offshore. The Company's oil and gas business
participates in development and production activities for its own account.
The Company evaluates and measures segment performance on the basis of
operating income. Segment operating income is inclusive of intersegment
revenues. Such revenues, which have been eliminated from the consolidated
totals, are recorded at transfer prices which are intended to approximate
the prices charged to external customers. Segment operating income consists
of revenues less the related operating costs and expenses and is exclusive
of interest expense, interest income, and unallocated corporate expenses.
Segment assets consist of all current and long-lived assets, exclusive of
affiliate receivables and investments.
Information by operating segment, together with reconciliations to the
consolidated totals, is presented in the following table:
<PAGE>
<TABLE>
<CAPTION>
Drilling
Contract Management Adjustments and
Drilling Services Oil and Gas Corporate Eliminations Consolidated
-------- ---------- ----------- --------- --------------- ------------
(In millions)
<S> <C> <C> <C> <C> <C> <C>
Revenues from
external customers
1998 $ 742.4 $416.0 $ 3.8 $1,162.2
1997 579.4 480.5 7.2 1,067.1
1996 362.5 305.3 12.9 680.7
Intersegment revenues
1998 11.3 5.5 - $(16.8) -
1997 5.3 2.1 - (7.4) -
1996 5.7 1.0 - (6.7) -
Total revenues
1998 753.7 421.5 3.8 (16.8) 1,162.2
1997 584.7 482.6 7.2 (7.4) 1,067.1
1996 368.2 306.3 12.9 (6.7) 680.7
Operating income
1998 361.7 (30.7) 0.3 $(20.8) - 310.5
1997 274.8 50.0 2.1 (21.8) - 305.1
1996 125.4 27.9 6.8 (19.3) - 140.8
Depreciation, depletion
and amortization
1998 100.3 0.3 1.6 1.7 - 103.9
1997 51.7 0.3 1.8 1.3 - 55.1
1996 36.3 0.1 3.5 1.0 - 40.9
Capital expenditures
1998 627.9 0.1 7.8 1.9 - 637.7
1997 575.0 0.4 2.7 2.2 - 580.3
1996 115.4 (1) 0.4 1.5 1.0 - 118.3
Segment assets
1998 - Foreign 1,038.9 7.4 - - - 1,046.3
1998 - Domestic 674.6 53.4 15.7 181.6 - 925.3
1998 - Total 1,713.5 60.8 15.7 181.6 - 1,971.6
1997 - Foreign 753.8 7.5 - 0.3 - 761.6
1997 - Domestic 318.4 65.2 8.4 268.3 - 660.3
1997 - Total 1,072.2 72.7 8.4 268.6 - 1,421.9
______________
(1) Excludes the acquisition of an asset for $16.0 million through
assumption of a capital lease.
</TABLE>
No single customer provided more than ten percent of revenues for 1998, 1997,
or 1996.
<PAGE>
A reconciliation of segment operating income to consolidated income before
income taxes and extraordinary item follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(In millions)
<S> <C> <C> <C>
Total segment operating income $ 331.3 $ 326.9 $ 160.1
Corporate general and administrative
expenses (19.1) (20.5) (18.3)
Corporate depreciation, depletion
and amortization (1.7) (1.3) (1.0)
-------- -------- --------
Consolidated operating income 310.5 305.1 140.8
Interest expense (46.9) (39.7) (30.9)
Interest capitalized 17.2 20.9 2.6
Interest income 3.3 7.7 6.2
Other - - 1.0
-------- -------- --------
Income before income taxes and
extraordinary item $ 284.1 $ 294.0 $ 119.7
======== ======== ========
</TABLE>
Revenues and assets by geographic area in the tables below were attributed to
countries based on the physical location of the assets. The mobilization of
rigs between geographic areas may have affected area revenues and long-lived
assets over the periods presented.
Revenues from external customers by geographic areas were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(In millions)
<S> <C> <C> <C>
United Kingdom $ 182.7 $ 84.2 $ 101.5
Other foreign countries 360.7 286.1 170.1
-------- -------- --------
Total foreign revenues 543.4 370.3 271.6
United States 618.8 696.8 409.1
-------- -------- --------
Total revenues $1,162.2 $1,067.1 $ 680.7
======== ======== ========
</TABLE>
Long-lived assets by geographic areas, based on their location at December 31,
were as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
(In millions)
<S> <C> <C>
United Kingdom $ 222.7 $ 302.8
Canada 171.4 -
Other foreign countries 236.0 162.1
-------- --------
Total foreign long-lived assets 630.1 464.9
United States 645.2 150.7
-------- --------
Total productive assets 1,275.3 615.6
Construction in progress - United Kingdom 236.8 383.4
-------- --------
Total long-lived assets $1,512.1 $ 999.0
======== ========
</TABLE>
<PAGE>
CONSOLIDATED SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
(In millions, except per share data)
<TABLE>
<CAPTION>
1998 1997
---------------------------------------- ----------------------------------------
Fourth Third Second First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $258.9 $272.2 $356.0 $275.1 $319.3 $304.4 $233.1 $210.3
Operating income 51.9 66.6 101.3 90.7 93.1 87.7 66.9 57.4
Income before extraordinary item 34.5 47.2 73.4 68.2 58.8 93.4 84.1 78.8
Net income 34.5 47.2 73.4 68.2 54.3 93.4 84.1 78.8
Basic earnings per share before
extraordinary item 0.20 0.27 0.42 0.40 0.34 0.54 0.49 0.46
Diluted earnings per share before
extraordinary item 0.20 0.27 0.42 0.39 0.34 0.53 0.48 0.45
Net income includes the following
special items:
(Provision) benefit for income
taxes (1) - - - - (25.0) 15.0 25.0 30.0
Extraordinary loss on debt
extinguishment - - - - (4.5) - - -
Price ranges of common stock:
High 13-5/16 18-3/4 25-5/8 26-1/8 36-13/16 35 25 25-1/4
Low 8-5/8 9-5/16 18-1/8 19-5/16 21-5/8 23-1/2 17-7/8 17-1/4
________________
(1) Adjustments to income taxes in the fourth quarter of 1997 are for
the tax effects of a realignment of the Company's foreign operations,
partially offset by the net recognition of the income tax benefits of
prior years' net operating loss carryforwards. Adjustments to income
taxes in all other quarters indicated are for the net recognition of
income tax benefits of prior years' net operating loss carryforwards.
</TABLE>
The Company did not declare any dividends on its common stock in either 1998
or 1997.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Global Marine Inc.
Our report on the consolidated financial statements of Global Marine Inc.
and subsidiaries is included on page 29 of this Form 10-K. In connection
with our audits of such financial statements, we have also audited the related
financial statement schedule listed in the index on page 58 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
February 22, 1999
<PAGE>
<TABLE>
GLOBAL MARINE INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In millions)
<CAPTION>
Additions
-----------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Year Expenses Accounts Deductions of Year
- ------------------------ ---------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1998:
Allowance for doubtful
accounts receivable (1) $ 2.8 $12.2 $ - $ 1.3 $ 13.7
Deferred tax asset valuation
allowance 32.9 15.8 - - 48.7
Year ended December 31, 1997:
Allowance for doubtful
accounts receivable $ 1.3 $ 1.7 $ - $ .2 $ 2.8
Deferred tax asset valuation
allowance 279.3 - - 246.4 32.9
Year ended December 31, 1996:
Allowance for doubtful
accounts receivable $ 1.1 $ .5 $ - $ .3 $ 1.3
Deferred tax asset valuation
allowance 382.6 - - 103.3 279.3
______________
(1) Of the total allowance for doubtful accounts receivable at December 31,
1998, $4.2 million was classified as current and $9.5 million was
classified as long-term.
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As permitted by General Instruction G, the information called for by this
item with respect to the Company's directors, and the information required by
this item and Item 405 of Regulation S-K with respect to filings under Section
16 of the 1934 Securities Exchange Act, is incorporated by reference from the
Company's definitive proxy statement to be filed pursuant to Regulation 14A
within 120 days after the end of the last fiscal year. Information with
respect to the Company's executive officers required by Item 401 of Regulation
S-K is set forth in Part I of this Annual Report on Form 10-K under the caption
"Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
As permitted by General Instruction G, the information called for by this item
is incorporated by reference from the Company's definitive proxy statement to
be filed pursuant to Regulation 14A within 120 days after the end of the last
fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As permitted by General Instruction G, the information called for by this item
is incorporated by reference from the Company's definitive proxy statement to
be filed pursuant to Regulation 14A within 120 days after the end of the last
fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As permitted by General Instruction G, the information called for by this item
is incorporated by reference from the Company's definitive proxy statement to
be filed pursuant to Regulation 14A within 120 days after the end of the last
fiscal year.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Page
(a) Financial Statements, Schedules and Exhibits
(1) Financial Statements
Report of Independent Accountants 29
Consolidated Statement of Income 31
Consolidated Balance Sheet 32
Consolidated Statement of Cash Flows 34
Consolidated Statement of Shareholders' Equity 35
Notes to Consolidated Financial Statements 36
(2) Financial Statement Schedule
Report of Independent Accountants 55
Schedule II - Valuation and Qualifying Accounts 56
Schedules other than those listed above are omitted for the reason
that they are not applicable.
(3) Exhibits
The following are included as exhibits to this Annual Report
on Form 10-K and are filed herewith unless otherwise indicated.
Exhibits incorporated by reference are so indicated by
parenthetical information.
3(i).1 Restated Certificate of Incorporation of the Company as filed
with the Secretary of State of Delaware on March 15, 1989,
effective March 16, 1989. (Incorporated herein by this reference
to Exhibit 3(i).1 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993.)
3(i).2 Certificate of Amendment of the Restated Certificate of
Incorporation of the Company as filed with the Secretary of
State of Delaware on May 11, 1990. (Incorporated herein by this
reference to Exhibit 3(i).2 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993.)
3(i).3 Certificate of Correction of the Restated Certificate of
Incorporation of the Company as filed with the Secretary of State
of Delaware on September 25, 1990. (Incorporated herein by this
reference to Exhibit 3(i).3 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993.)
3(i).4 Certificate of Amendment of the Restated Certificate of
Incorporation of the Company as filed with the Secretary of
State of Delaware on May 11, 1992. (Incorporated herein by this
reference to Exhibit 3(i).4 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993.)
3(i).5 Certificate of Amendment of the Restated Certificate of
Incorporation of the Company as
<PAGE>
filed with the Secretary of State of Delaware on May 12, 1994.
(Incorporated herein by this reference to Exhibit 4.5 of the
Registrant's Registration Statement on Form S-3 (No. 33-53691)
filed with the Commission on May 18, 1994.)
3(ii).1 Amendment to the By-laws of the Company, effective February 23,
1999.
3(ii).2 By-laws of the Company as amended through February 23, 1999.
4.1 Section II-7 of the By-laws of the Company as amended February 23,
1999.
4.2 Indenture dated as of September 1, 1997, between Global Marine
Inc. and Wilmington Trust Company, as Trustee, relating to Debt
Securities of the Registrant. (Incorporated herein by this
reference to Exhibit 4.1 of the Registrant's Registration
Statement on Form S-4 (No. 333-39033) filed with the Commission
on October 30, 1997.)
4.3 Form of 7-1/8% Exchange Note Due 2007. (Incorporated herein
by this reference to Exhibit 4.4 of Amendment No. 1 to the
Registrant's Registration Statement on Form S-4 (No. 333-39033)
filed with the Commission on February 3, 1998.)
4.4 Terms of 7-1/8% Notes Due 2007. (Incorporated herein by this
reference to Exhibit 4.5 of the Registrant's Registration
Statement on Form S-4 (No. 333-39033) filed with the Commission
on October 30, 1997.)
4.5 Form of 7% Note Due 2028. (Incorporated herein by this reference
to Exhibit 4.2 of the Registrant's Current Report on Form 8-K
dated May 20, 1998.)
4.6 Terms of 7% Note Due 2028. (Incorporated herein by this reference
to Exhibit 4.1 of the Registrant's Current Report on Form 8-K
dated May 20, 1998.)
10.1 Second Amended and Restated Credit Agreement among Global Marine
Inc., Various Lending Institutions, and Bankers Trust Company,
as Administrative Agent, Societe Generale, Southwest Agency, as
Documentation Agent, and Skandinaviska Enskilda Banken AB (publ)
and Den Norske Bank ASA, New York Branch, as Co-Agents, dated as
of December 9, 1997. (Incorporated herein by reference to
Exhibit 99.3 of Amendment No.1 to the Registrant's Registration
Statement on Form S-4 (No. 333-39033) filed with the Commission
on February 3, 1998.)
10.2 First Amendment to Credit Agreement and Loan Documents, dated as
of November 23, 1998, among Global Marine Inc., Various Lending
Institutions, Bankers Trust Company, as administrative agent,
Skandinaviska Enskilda Banken AB (publ) and Den Norske Bank ASA,
New York Branch, as co-agents, and Societe Generale, Southwest
Agency, as documentation agent.
10.3 Credit Agreement among Global Marine Inc., Various Lending
Institutions, and Bankers Trust Company, as Administrative Agent,
ABN AMRO Bank, Houston Agency, as Syndication Agent, and Societe
Generale, Southwest Agency, as Documentation Agent, dated as of
January 29, 1998. (Incorporated herein by reference to Exhibit
99.4 of Amendment No. 1 to the Registrant's Registration Statement
on Form S-4 (No. 333-39033)
<PAGE>
filed with the Commission on February 3, 1998.)
10.4 First Amendment to Credit Agreement and Loan Documents, dated as
of November 23, 1998, among Global Marine Inc., Various Lending
Institutions, Bankers Trust Company, as administrative agent, ABN
Amro Bank, N.V., Houston Agency, as syndication agent, and Societe
Generale, Southwest Agency, as documentation agent.
10.5 Letter Agreement, dated March 10, 1998, between Global Marine Inc.
and Transocean ASA.
10.6 Bareboat Charter Agreement, dated July 2, 1996, between the
United States of America and Global Marine Capital Investments
Inc. (Incorporated herein by this reference to Exhibit 10.1 of
the Registrant's Current Report on Form 8-K dated August 1, 1996.)
10.7 Shipbuilding Contract dated 27 February 1998 relating to Hull
No. 1739 between Harland and Wolff Shipbuilding and Heavy
Industries Limited and Global Marine International Services
Corporation. (Incorporated herein by this reference to Exhibit
10.4 of the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998.)
10.8 Novation Agreement dated 9th December 1998 by and among Harland
and Wolff Shipbuilding and Heavy Industries Limited, Global
Marine International Drilling Corporation, Global Marine Leasing
Corporation and Global Marine Inc. relating to Shipbuilding
Contract dated 27 February 1998 for construction of deepwater
drillship Hull No. 1739.
10.9 Novation Agreement dated 9th December 1998 by and among Harland
and Wolff Shipbuilding and Heavy Industries Limited, Nelstar
Leasing Company Limited, Global Marine International Drilling
Corporation and Global Marine Leasing Corporation relating to
Shipbuilding Contract dated 27 February 1998 for the construction
of deepwater drillship Hull No. 1739.
10.10 Head Lease Agreement dated 8th December 1998 by and between
Nelstar Leasing Company Limited, as lessor, and Global Marine
Leasing Corporation, as lessee, relating to a Glomar Hull 456
class deepwater drillship to be constructed by Harland and Wolff
Shipbuilding and Heavy Industries Ltd. with hull number 1739
(t.b.n. "Glomar C.R. Luigs").
10.11 Guarantee and Indemnity dated 8th December 1998 by and between
Global Marine Inc., as guarantor, and Nelstar Leasing Company
Limited, as lessor.
10.12 Shipbuilding Contract dated 28 March 1998 relating to Hull
No. 1740 between Harland and Wolff Shipbuilding and Heavy
Industries Limited and Global Marine International Services
Corporation. (Incorporated herein by this reference to
Exhibit 10.5 of the Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998.)
10.13 Novation Agreement dated 9th December 1998 by and among Harland
and Wolff Shipbuilding and Heavy Industries Limited, BMBF (No. 12)
Limited and Global Marine International Drilling Corporation
relating to Shipbuilding Contract dated 28 March 1998 for the
construction of deepwater drillship Hull No. 1740.
<PAGE>
10.14 Head Lease Agreement dated 8th December 1998 by and between BMBF
(No. 12) Limited, as lessor, and Global Marine International
Drilling Corporation, as lessee, relating to one double hulled,
dynamically positioned ultra-deepwater Glomar class 456 drillship
to be constructed by Harland and Wolff Shipbuilding and Heavy
Industries Ltd. with hull number 1740.
10.15 Deed of Guarantee and Indemnity dated 8th December 1998 by and
between Global Marine Inc., as Guarantor, and BMBF (No. 12)
Limited, as Lessor.
* 10.16 Letter Employment Agreement dated May 5, 1998, between the
Company, Global Marine Corporate Services Inc., and Robert E.
Rose. (Incorporated herein by this reference to Exhibit 10.3
of the Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998.)
* 10.17 Employment Agreement dated as of March 1, 1999, between the
Company, Global Marine Corporate Services Inc., and John G. Ryan.
* 10.18 Consulting Agreement dated February 14, 1986, between Challenger
Minerals Inc. and Donald B. Brown. (Incorporated herein by this
reference to Exhibit 10.2 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1987.)
* 10.19 Letter Severance Agreement dated May 7, 1992, between the Company
and one executive officer. (Incorporated herein by this reference
to Exhibit 10.5 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1992.)
* 10.20 Form of Letter Severance Agreement dated August 5, 1998, between
the Company and seven executive officers, respectively.
(Incorporated herein by this reference to Exhibit 10.1 of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998.)
* 10.21 Global Marine Inc. 1989 Stock Option and Incentive Plan.
(Incorporated herein by this reference to Exhibit 10.6 of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1988.)
* 10.22 First Amendment to Global Marine Inc. 1989 Stock Option and
Incentive Plan. (Incorporated herein by this reference to
Exhibit 10.6 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1990.)
* 10.23 Second Amendment to Global Marine Inc. 1989 Stock Option and
Incentive Plan. (Incorporated herein by this reference to
Exhibit 10.7 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1991.)
* 10.24 Third Amendment to Global Marine Inc. 1989 Stock Option and
Incentive Plan. (Incorporated herein by this reference to
Exhibit 10.19 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993.)
* 10.25 Fourth Amendment to Global Marine Inc. 1989 Stock Option and
Incentive Plan. (Incorporated herein by this reference to
Exhibit 10.16 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994.)
<PAGE>
* 10.26 Fifth Amendment to Global Marine Inc. 1989 Stock Option and
Incentive Plan. (Incorporated herein by this reference to
Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996.)
* 10.27 Sixth Amendment to Global Marine Inc. 1989 Stock Option and
Incentive Plan. (Incorporated herein by this reference to
Exhibit 10.18 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996.)
* 10.28 Global Marine 1998 Stock Option and Incentive Plan. (Incorporated
herein by this reference to Exhibit 10.1 of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1998.)
* 10.29 Form of Performance Stock Memorandum dated February 14, 1995,
regarding conditional opportunity to acquire Company stock
granted to six executive officers, respectively. (Incorporated
herein by this reference to Exhibit 10.20 of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1994.)
* 10.30 Form of Performance Stock Memorandum dated February 20, 1996,
regarding conditional opportunity to acquire Company stock
granted to six executive officers, respectively. (Incorporated
herein by this reference to Exhibit 10.21 of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1995.)
* 10.31 Form of Performance Stock Memorandum dated February 11, 1997,
regarding conditional opportunity to acquire Company stock
granted to six executive officers, respectively. (Incorporated
herein by this reference to Exhibit 10.24 of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1996.)
* 10.32 Form of Performance Stock Memorandum dated February 10, 1998
regarding conditional opportunity to acquire Company stock
granted to eight executive officers, respectively, and dated
May 5, 1998 regarding conditional opportunity to acquire Company
stock granted to one executive officer. (Incorporated herein by
this reference to Exhibit 10.2 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1998.)
* 10.33 Form of Notice of Grant of Stock Options (Non-Qualified Stock
Options).
* 10.34 Form of Notice of Grant of Stock Options (Incentive Stock
Options).
* 10.35 Executive Life Insurance Plan. (Incorporated herein by this
reference to Exhibit 10.5 of the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1988.)
* 10.36 Global Marine Inc. Executive Supplemental Retirement Plan of
1990 (Incorporated herein by this reference to Exhibit 10.8 of
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1990), as amended by First Amendment thereto
(Incorporated herein by this reference to Exhibit 10.1 of the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997).
* 10.37 Second Amendment to Global Marine Executive Supplemental
Retirement Plan of 1990.
<PAGE>
* 10.38 Global Marine Executive Deferred Compensation Trust as
established effective January 1, 1995 (Incorporated herein
by this reference to Exhibit 10.24 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995), as
amended by First Amendment thereto (Incorporated herein by this
reference to Exhibit 10.2 of the Registrant's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1997).
* 10.39 Global Marine Benefit Equalization Retirement Plan effective
January 1, 1990. (Incorporated herein by this reference to
Exhibit 10.8 of the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1989.)
* 10.40 Global Marine Benefit Equalization Retirement Trust as
established effective January 1, 1990. (Incorporated herein
by this reference to Exhibit 10.9 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1989.)
* 10.41 Form of Indemnification Agreement entered into between the
Company and each of its directors and officers. (Incorporated
herein by this reference to Exhibit 10.12 of the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1986.)
* 10.42 Resolution dated August 5, 1997, regarding Directors'
Compensation. (Incorporated herein by this reference to
Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997.)
* 10.43 Amended and Restated Retirement Plan for Outside Directors.
(Incorporated herein by this reference to Exhibit 10.12 of
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1990.)
* 10.44 Global Marine Outside Director Deferred Compensation Trust as
established effective January 1, 1996. (Incorporated herein
by this reference to Exhibit 10.34 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1996.)
* 10.45 Global Marine Inc. 1990 Non-Employee Director Stock Option Plan.
(Incorporated herein by this reference to Exhibit 10.18 of the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991.)
* 10.46 First Amendment to Global Marine Inc. 1990 Non-Employee Director
Stock Option Plan. (Incorporated herein by this reference to
Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995.)
* 10.47 Second Amendment to Global Marine Inc. 1990 Non-Employee Director
Stock Option Plan. (Incorporated herein by this reference to
Exhibit 10.37 of the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996.)
* 10.48 Global Marine Inc. 1999 Management Incentive Award Plan.
21.1 List of Subsidiaries.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
<PAGE>
27.1 Financial Data Schedule. (Exhibit 27.1 is being submitted as
an exhibit only in the electronic format of this Annual Report
on Form 10-K being submitted to the Securities and Exchange
Commission. Exhibit 27.1 shall not be deemed filed for purposes
of Section 11 of the Securities Act of 1933, Section 18 of the
Securities Exchange Act of 1934 or Section 323 of the Trust
Indenture Act, or otherwise be subject to the liabilities of
such sections, nor shall it be deemed a part of any registration
statement to which it relates.)
____________
* Management contract or compensatory plan or arrangement.
The Company hereby undertakes, pursuant to Regulation S-K, Item 601(b),
paragraph (4) (iii), to furnish to the Securities and Exchange
Commission on request agreements defining the rights of holders of
long-term debt of the Company and its consolidated subsidiaries not
filed herewith in accordance with said Item.
(b) Reports on Form 8-K
The Company did not file any Current Reports on Form 8-K during the last
quarter of 1998.
<PAGE>
SIGNATURES REQUIRED FOR FORM 10-K
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.
GLOBAL MARINE INC.
(REGISTRANT)
Date: March 12, 1999 By: W. MATT RALLS
----------------------------
(W. Matt Ralls)
Senior Vice President
and Chief Financial Officer
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 and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
C.R. LUIGS Chairman of the Board March 12, 1999
- -----------------------
(C.R. Luigs)
ROBERT E. ROSE President, Chief Executive March 12, 1999
- ----------------------- Officer and Director
(Robert E. Rose)
W. MATT RALLS Senior Vice President and March 12, 1999
- ----------------------- Chief Financial Officer
(W. Matt Ralls) (Principal Financial Officer)
THOMAS R. JOHNSON Vice President and March 12, 1999
- ----------------------- Corporate Controller
(Thomas Johnson) (Principal Accounting Officer)
EDWARD A. BLAIR Director March 12, 1999
- -----------------------
(Edward A. Blair)
DONALD B. BROWN Director March 12, 1999
- -----------------------
(Donald B. Brown)
E.J. CAMPBELL Director March 12, 1999
- -----------------------
(E.J. Campbell)
THOMAS CASON Director March 12, 1999
- -----------------------
(Thomas Cason)
JOHN M. GALVIN Director March 12, 1999
- -----------------------
(John M. Galvin)
J.C. MARTIN Director March 12, 1999
- -----------------------
(J.C. Martin)
E.R. MULLER Director March 12, 1999
- -----------------------
(E.R. Muller)
PAUL J. POWERS Director March 12, 1999
- -----------------------
(Paul J. Powers)
Director
- -----------------------
(John G. Ryan)
BEN G. STREETMAN Director March 12, 1999
- -----------------------
(Ben G. Streetman)
JOHN WHITMIRE Director March 12, 1999
- -----------------------
(John Whitmire)
EXHIBIT INDEX
A. Copies of exhibits listed below are submitted with this Annual Report on
Form 10-K, immediately following this index.
3(ii).1 Amendment to the By-laws of the Company, effective February
23, 1999.
3(ii).2 By-laws of the Company as amended through February 23, 1999.
4.1 Section II-7 of the By-laws of the Company as amended
February 23, 1999.
10.2 First Amendment to Credit Agreement and Loan Documents, dated
as of November 23, 1998, among Global Marine Inc., Various
Lending Institutions, Bankers Trust Company, as administrative
agent, Skandinaviska Enskilda Banken AB (publ) and Den Norske
Bank ASA, New York Branch, as co-agents, and Societe Generale,
Southwest Agency, as documentation agent.
10.4 First Amendment to Credit Agreement and Loan Documents, dated
as of November 23, 1998, among Global Marine Inc., Various
Lending Institutions, Bankers Trust Company, as administrative
agent, ABN Amro Bank, N.V., Houston Agency, as syndication
agent, and Societe Generale, Southwest Agency, as documentation
agent.
10.5 Letter Agreement, dated March 10, 1998, between Global Marine
Inc. and Transocean ASA.
10.8 Novation Agreement dated 9th December 1998 by and among
Harland and Wolff Shipbuilding and Heavy Industries Limited,
Global Marine International Drilling Corporation, Global Marine
Leasing Corporation and Global Marine Inc. relating to
Shipbuilding Contract dated 27 February 1998 for construction
of deepwater drillship Hull No. 1739.
10.9 Novation Agreement dated 9th December 1998 by and among Harland
and Wolff Shipbuilding and Heavy Industries Limited, Nelstar
Leasing Company Limited, Global Marine International Drilling
Corporation and Global Marine Leasing Corporation relating to
Shipbuilding Contract dated 27 February 1998 for the
construction of deepwater drillship Hull No. 1739.
10.10 Head Lease Agreement dated 8th December 1998 by and between
Nelstar Leasing Company Limited, as lessor, and Global Marine
Leasing Corporation, as lessee, relating to a Glomar Hull 456
class deepwater drillship to be constructed by Harland and
Wolff Shipbuilding and Heavy Industries Ltd. with hull number
1739 (t.b.n. "Glomar C.R. Luigs").
10.11 Guarantee and Indemnity dated 8th December 1998 by and between
Global Marine Inc., as guarantor, and Nelstar Leasing Company
Limited, as lessor.
II-I
<PAGE>
10.13 Novation Agreement dated 9th December 1998 by and among Harland
and Wolff Shipbuilding and Heavy Industries Limited, BMBF
(No. 12) Limited and Global Marine International Drilling
Corporation relating to Shipbuilding Contract dated 28 March
1998 for the construction of deepwater drillship Hull No. 1740.
10.14 Head Lease Agreement dated 8th December 1998 by and between
BMBF (No. 12) Limited, as lessor, and Global Marine
International Drilling Corporation, as lessee, relating to one
double hulled, dynamically positioned ultra-deepwater Glomar
class 456 drillship to be constructed by Harland and Wolff
Shipbuilding and Heavy Industries Ltd. with hull number 1740.
10.15 Deed of Guarantee and Indemnity dated 8th December 1998 by and
between Global Marine Inc., as Guarantor, and BMBF (No. 12)
Limited, as Lessor.
10.17 Employment Agreement dated as of March 1, 1999, between the
Company, Global Marine Corporate Services Inc., and John G.
Ryan.
10.33 Form of Notice of Grant of Stock Options (Non-Qualified Stock
Options).
10.34 Form of Notice of Grant of Stock Options (Incentive Stock
Options).
10.37 Second Amendment to Global Marine Executive Supplemental
Retirement Plan of 1990.
10.48 Global Marine Inc. 1999 Management Incentive Award Plan.
21.1 List of Subsidiaries.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
27.1 Financial Data Schedule. (Exhibit 27.1 is being submitted as
an exhibit only in the electronic format of this Annual Report
on Form 10-K being submitted to the Securities and Exchange
Commission. Exhibit 27.1 shall not be deemed filed for
purposes of Section 11 of the Securities Act of 1933, Section
18 of the Securities Exchange Act of 1934 or Section 323 of
the Trust Indenture Act, or otherwise be subject to the
liabilities of such sections, nor shall it be deemed a part
of any registration statement to which it relates.)
B. All other exhibits listed in Item 14(a)(3) are incorporated by
reference in this Annual Report on Form 10-K, as stated in Item 14(a)(3).
Descriptions of these exhibits are incorporated herein by this reference
to Item 14(a)(3) of this Report.
II-II
EXHIBIT 3(ii).1
GLOBAL MARINE INC.
BY-LAW AMENDMENTS EFFECTIVE FEBRUARY 23, 1999
Sections II-2, II-3, II-5, II-6, II-7, III-3, III-5, V-1, V-2,
V-4, V-5b, V-6, V-7, V-9, V-11, V-12, VI-1, VI-2, VII-4, and VII-7
of the By-laws of Global Marine Inc. are amended in their entirety
effective February 23, 1999, to change said sections from the old
version to the new version, in each case, as indicated below.
OLD VERSION:
SECTION II-2 DATE, TIME, AND PURPOSE OF ANNUAL MEETING: The annual
meeting of stockholders shall be held at such date and time as may
be determined by the Board of Directors. In the event that the
Board does not set a date and time, such meeting shall be held at
11:00 a.m. on the fourth Wednesday in May of each year if not a
legal holiday, and if a legal holiday, then at the same time on the
next business day following. At such annual meeting the
stockholders shall elect directors and shall transact such other
business as may properly be brought before the meeting.
NEW VERSION:
SECTION II-2 DATE, TIME, AND PURPOSE OF ANNUAL MEETING: The annual
meeting of stockholders shall be held at such date and time as may
be determined by the Board of Directors. At such annual meeting
the stockholders shall elect directors and shall transact such
other business as may properly be brought before the meeting.
OLD VERSION:
SECTION II-3 WRITTEN NOTICE: Written notice of the annual meeting
shall be given to each stockholder entitled to vote thereat at
least ten days before the date of the meeting.
NEW VERSION:
Section II-3 [Deleted].
OLD VERSION:
SECTION II-5 SEPCIAL MEETING: Special meetings of the stockholders
may only be called at any time by a majority of the directors then
in office or the President, or by the holders of at least 25% of
the issued and outstanding common stock of the corporation as
provided in the Certificate of Incorporation.
NEW VERSION:
SECTION II-5 SPECIAL MEETING: Special meetings of the stockholders
may only be called at any time by a majority of the directors then
in office or the Chief Executive Officer, or by the holders of at
least 25% of the issued and outstanding common stock of the
corporation as provided in the Certificate of Incorporation;
provided that, in the event that such holders of common stock elect
to call a special meeting pursuant to this Section II-5 or the
Certificate of Incorporation, the Board of Directors shall
determine a place, date and time for such meeting, which time shall
not be less than 90 nor more than 100 days after the receipt and
determination of the validity of such election, and a record date
for the determination of stockholders entitled to vote at such
meeting in the manner set forth in Section VI-5 hereof. Following
such receipt and determination, it shall be the duty of the
Secretary to cause notice to be given to the stockholders entitled
to vote at such meeting, in the manner set forth in Section II-6
hereof, that a special meeting will be held at the place, date and
time so determined.
OLD VERSION:
SECTION II-6 NOTICE OF SPECIAL MEETING: Written notice of a
special meeting of stockholders, stating the time, place and object
thereof, shall be given to each stockholder entitled to vote
thereat, at least five days before the date fixed for the meeting.
NEW VERSION:
SECTION II-6 WRITTEN NOTICE: Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the
meeting shall be given which shall state the place, date and hour
of the meeting, and, in the case of a special meeting, the purpose
or purposes for which the meeting is called. Unless otherwise
required by law, the written notice of any meeting shall be given
not less than 10 nor more than 60 days before the date of the
meeting to each stockholder entitled to vote at such meeting.
OLD VERSION:
SECTION II-7 BUSINESS TO BE CONDUCTED AND NOMINATIONS: (a) At any
special meeting of stockholders, only such business shall be
conducted, and only such proposals shall be acted upon, as shall
have been set forth in the notice relating to the meeting.
(b) At any annual meeting of stockholders, only such business
shall be conducted, and only such proposals shall be acted upon, as
shall have been brought before the annual meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of
the corporation who is a stockholder of record at the time of the
giving of such stockholder's notice provided for in this paragraph
(b), who shall be entitled to vote at such meeting, and who
complies with the requirements of this paragraph (b) and as shall
otherwise be proper subjects for stockholder action and shall be
properly introduced at the meeting. For a proposal to be properly
brought before an annual meeting by a stockholder, in addition to
any other applicable requirements, the stockholder must have given
timely advance notice thereof in writing to the Secretary of the
corporation. To be timely, a stockholder's notice must be
delivered to, or mailed and received at, the principal executive
offices of the corporation not later than the close of business on
the 90th day prior to the first anniversary of the beginning of the
preceding year's annual meeting; provided, however, that in the
event that the date of the annual meeting is more than 30 days
before or more than 60 days after such anniversary date, notice by
the stockholder to be timely must be so delivered not later than
the close of business on the later of the 90th day prior to the
scheduled day of such annual meeting or the 10th day following the
day on which public announcement of the date of such meeting is
first made by the corporation, including, without limitation, by
press release, by filing with the Securities and Exchange
Commission, and/or by any written material sent to stockholders.
Any such stockholder's notice to the Secretary of the corporation
shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (i) a description of the proposal desired
to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and
address, as they appear on the corporation's books, of the
stockholder proposing such business and any other stockholders
known by such stockholder to be supporting such proposal, (iii) the
class and number of shares of the corporation's stock that are
beneficially owned by the stockholder on the date of such notice,
(iv) any financial interest of the stockholder in such proposal,
and (v) a representation that the stockholder intends to appear in
person or by proxy at the meeting to bring the proposed business
before the annual meeting. The presiding officer of the annual
meeting shall determine whether the requirements of this paragraph
(b) have been met with respect to any stockholder proposal. If the
presiding officer determines that a stockholder proposal was not
made in accordance with the terms of this paragraph (b), he shall
so declare at the meeting and such proposal shall not be acted upon
at the meeting.
(c) Subject to such rights of the holders of any class or
series of preferred stock as may be prescribed in the Certificate
of Incorporation or in the resolutions of the Board of Directors
providing for the issuance of any such class or series, only
persons who are nominated in accordance with the procedures set
forth in this paragraph (c) shall be eligible for election as, and
to serve as, directors. Nominations of persons for election to the
Board of Directors may be made at a meeting of the stockholders at
which directors are to be elected (i) by or at the direction of the
Board of Directors or (ii) by any stockholder of the corporation
who is a stockholder of record at the time of the giving of such
stockholder's notice provided for in this paragraph (c), who shall
be entitled to vote at such meeting in the election of directors,
and who complies with the requirements of this paragraph (c). Such
nominations, other than those made by or at the direction of the
Board of Directors, shall be preceded by timely advance notice
thereof in writing to the Secretary of the corporation. To be
timely, a stockholder's notice must be delivered to, or mailed and
received at, the principal executive offices of the corporation not
later than the close of business on the 90th day prior to the first
anniversary of the beginning of the preceding year's annual
meeting; provided, however, that in the event that the date of the
annual meeting is more than 30 days before or more than 60 days
after such anniversary date, notice by the stockholder to be timely
must be so delivered not later than the close of business on the
later of the 90th day prior to the scheduled day of such annual
meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made by the
corporation, including, without limitation, by press release, by
filing with the Securities and Exchange Commission, and/or by any
written material sent to stockholders. Any such stockholder's
notice to the Secretary of the corporation shall set forth (x) as
to each person whom the stockholder proposes to nominate for
election or re-election as a director, (i) the name, age, business
address and residence address of such person, (ii) the principal
occupation or employment of such person, (iii) the number of shares
of each class of capital stock of the corporation beneficially
owned by such person and (iv) the written consent of such person to
having such person's name placed in nomination at the meeting and
to serve as a director if elected, and (y) as to the stockholder
giving the notice, (i) the name and address, as they appear on the
corporation's books, of such stockholder, (ii) the class and number
of shares of the corporation's stock that are beneficially owned by
the stockholder on the date of such notice, (iii) any arrangement
between the nominee or nominees and the stockholder, (iv) any other
facts about the nominee or nominees that would be required in a
proxy statement and (v) a representation that the stockholder
intends to appear in person or by proxy at the meeting to make the
nomination or nominations. The presiding officer of the meeting of
stockholders shall determine whether the requirements of this
paragraph (c) have been met with respect to any nomination or
intended nomination. If the presiding officer determines that any
nomination was not made in accordance with the terms of this
paragraph (c), he shall so declare at the meeting and such
nomination shall be disregarded.
(d) Notwithstanding the foregoing provisions of this Section
II-7, a stockholder shall also comply with all applicable
requirements of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder with respect to the
matters set forth in this Section II-7.
NEW VERSION:
SECTION II-7 BUSINESS TO BE CONDUCTED AND NOMINATIONS: (a) At any
special meeting of stockholders, only such business shall be
conducted, and only such proposals shall be acted upon, as shall
have been set forth in the notice relating to the meeting.
(b) At any annual meeting of stockholders, only such business
shall be conducted, and only such proposals shall be acted upon, as
shall have been brought before the annual meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of
the corporation who is a stockholder of record at the time of the
giving of such stockholder's notice provided for in this paragraph
(b), who shall be entitled to vote at such meeting, and who
complies with the requirements of this paragraph (b) and as shall
otherwise be proper subjects for stockholder action and shall be
properly introduced at the meeting. For a proposal to be properly
brought before an annual meeting by a stockholder, in addition to
any other applicable requirements, the stockholder must have given
timely advance notice thereof in writing to the Secretary of the
corporation. To be timely, a stockholder's notice must be
delivered to, or mailed and received at, the principal executive
offices of the corporation no earlier than the 120th day nor later
than the close of business on the 90th day prior to the first
anniversary of the beginning of the preceding year's annual
meeting; provided, however, that in the event that the date of the
annual meeting is more than 30 days before or more than 60 days
after such anniversary date, notice by the stockholder to be timely
must be so delivered not later than the close of business on the
later of the 90th day prior to the scheduled day of such annual
meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made by the
corporation, including, without limitation, by press release, by
filing with the Securities and Exchange Commission, and/or by any
written material sent to stockholders. Any such stockholder's
notice to the Secretary of the corporation shall set forth as to
each matter the stockholder proposes to bring before the annual
meeting (i) a description of the proposal desired to be brought
before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and address, as they
appear on the corporation's books, of the stockholder proposing
such business and any other stockholders known by such stockholder
to be supporting such proposal, (iii) the class and number of
shares of the corporation's stock that are beneficially owned by
the stockholder on the date of such notice, (iv) any financial
interest of the stockholder in such proposal, and (v) a
representation that the stockholder intends to appear in person or
by proxy at the meeting to bring the proposed business before the
annual meeting. The presiding officer of the annual meeting shall
determine whether the requirements of this paragraph (b) have been
met with respect to any stockholder proposal. If the presiding
officer determines that a stockholder proposal was not made in
accordance with the terms of this paragraph (b), he shall so
declare at the meeting and such proposal shall not be acted upon at
the meeting.
(c) Subject to such rights of the holders of any class or
series of preferred stock as may be prescribed in the Certificate
of Incorporation or in the resolutions of the Board of Directors
providing for the issuance of any such class or series, only
persons who are nominated in accordance with the procedures set
forth in this paragraph (c) shall be eligible for election as, and
to serve as, directors. Nominations of persons for election to the
Board of Directors may be made at a meeting of the stockholders at
which directors are to be elected (i) by or at the direction of the
Board of Directors or (ii) by any stockholder of the corporation
who is a stockholder of record at the time of the giving of such
stockholder's notice provided for in this paragraph (c), who shall
be entitled to vote at such meeting in the election of directors,
and who complies with the requirements of this paragraph (c). Such
nominations, other than those made by or at the direction of the
Board of Directors, shall be preceded by timely advance notice
thereof in writing to the Secretary of the corporation. To be
timely, a stockholder's notice must be delivered to, or mailed and
received at, the principal executive offices of the corporation no
earlier than the 120th day nor later than the close of business on
the 90th day prior to the first anniversary of the beginning of the
preceding year's annual meeting; provided, however, that in the
event that the date of the annual meeting is more than 30 days
before or more than 60 days after such anniversary date, notice by
the stockholder to be timely must be so delivered not later than
the close of business on the later of the 90th day prior to the
scheduled day of such annual meeting or the 10th day following the
day on which public announcement of the date of such meeting is
first made by the corporation, including, without limitation, by
press release, by filing with the Securities and Exchange
Commission, and/or by any written material sent to stockholders.
Any such stockholder's notice to the Secretary of the corporation
shall set forth (x) as to each person whom the stockholder proposes
to nominate for election or re-election as a director, (i) the
name, age, business address and residence address of such person,
(ii) the principal occupation or employment of such person,
(iii) the number of shares of each class of capital stock of the
corporation beneficially owned by such person and (iv) the written
consent of such person to having such person's name placed in
nomination at the meeting and to serve as a director if elected,
and (y) as to the stockholder giving the notice, (i) the name and
address, as they appear on the corporation's books, of such
stockholder, (ii) the class and number of shares of the
corporation's stock that are beneficially owned by the stockholder
on the date of such notice, (iii) any arrangement between the
nominee or nominees and the stockholder, (iv) any other facts about
the nominee or nominees that would be required in a proxy statement
and (v) a representation that the stockholder intends to appear in
person or by proxy at the meeting to make the nomination or
nominations. The presiding officer of the meeting of stockholders
shall determine whether the requirements of this paragraph (c) have
been met with respect to any nomination or intended nomination. If
the presiding officer determines that any nomination was not made
in accordance with the terms of this paragraph (c), he shall so
declare at the meeting and such nomination shall be disregarded.
(d) Notwithstanding the foregoing provisions of this Section
II-7, a stockholder shall also comply with all applicable
requirements of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder with respect to the
matters set forth in this Section II-7.
OLD VERSION:
SECTION III-3 FIRST MEETING OF THE NEWLY ELECTED BOARD: The first
meeting of each newly elected Board of Directors shall be held at
such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting
shall be necessary to the newly elected directors in order to
legally constitute the meeting, provided a quorum shall be present.
In the event of the failure of the stockholders to fix the time or
place of such first meeting of the newly elected Board of
Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such
time and place as shall have been determined for the next regular
meeting by the previous Board of Directors or as shall be
determined by the President, which time and place shall be
specified in a notice given as hereinafter provided for meetings of
the Board of Directors, or as shall be specified in a written
waiver signed by all of the directors.
NEW VERSION:
SECTION III-3 FIRST MEETING OF THE NEWLY ELECTED BOARD: The first
meeting of each newly elected Board of Directors shall be held at
such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting
shall be necessary to the newly elected directors in order to
legally constitute the meeting, provided a quorum shall be present.
In the event of the failure of the stockholders to fix the time or
place of such first meeting of the newly elected Board of
Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such
time and place as shall have been determined for the next regular
meeting by the previous Board of Directors or as shall be
determined by the Chief Executive Officer, which time and place
shall be specified in a notice given as hereinafter provided for
meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
OLD VERSION:
SECTION III-5 SPECIAL MEETINGS; TELEPHONIC MEETINGS PERMITTED:
Special meetings of the Board of Directors may be called by the
President on reasonable notice to each director, which notice may
be written, oral, or by any other mode of notice; special meetings
shall be called by the President or Secretary in like manner and on
like notice on the written request of two directors. Unless
otherwise restricted by the Certificate of Incorporation or these
By-laws, members of the Board of Directors, or any committee
designated by the Board, may participate in a meeting of the Board
or of such committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this provision shall
constitute presence in person at such meeting.
NEW VERSION:
SECTION III-5 SPECIAL MEETINGS; TELEPHONIC MEETINGS PERMITTED:
Special meetings of the Board of Directors may be called by the
Chief Executive Officer on reasonable notice to each director,
which notice may be written, oral, or by any other mode of notice;
special meetings shall be called by the Chief Executive Officer or
Secretary in like manner and on like notice on the written request
of two directors. Unless otherwise restricted by the Certificate
of Incorporation or these By-laws, members of the Board of
Directors, or any committee designated by the Board, may
participate in a meeting of the Board or of such committee, as the
case may be, by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and participation
in a meeting pursuant to this provision shall constitute presence
in person at such meeting.
OLD VERSION:
SECTION V-1 ELECTION OF OFFICERS: The officers of the corporation
shall be chosen by the Board of Directors, and shall be a Chairman
of the Board, a President, a Vice President, a Secretary and a
Treasurer. The Board of Directors may also choose additional vice
presidents, and one or more assistant secretaries and/or assistant
treasurers, and one or more such other officers, with such other
titles, as the Board may deem necessary or desirable. Two or more
offices may be held by the same person, except that where the
offices of president and secretary are held by the same person,
such person shall not hold any other office. The Board of
Directors shall designate either the Chairman of the Board or the
President to be the Chief Executive Officer of the corporation.
NEW VERSION:
SECTION V-1 ELECTION OF OFFICERS: The officers of the corporation
shall be chosen by the Board of Directors, and shall be a Chairman
of the Board, a Chief Executive Officer, a President, a Vice
President, a Secretary, and a Treasurer. The Board of Directors
may also choose additional vice presidents, and one or more
assistant secretaries and/or assistant treasurers, and one or more
such other officers, with such other titles, as the Board may deem
necessary or desirable. Two or more offices may be held by the
same person.
OLD VERSION:
SECTION V-2 TIME OF ELECTION OF PRINCIPAL OFFICERS: The Board of
Directors at its first meeting after each annual meeting of
stockholders shall choose a Chairman of the Board, a President, one
or more Vice Presidents, a Secretary and a Treasurer; the Chairman
of the Board shall be a member of the Board; none of the other
officers need be a member of the Board.
NEW VERSION:
SECTION V-2 TIME OF ELECTION OF PRINCIPAL OFFICERS: The Board of
Directors at its first meeting after each annual meeting of
stockholders shall choose a Chairman of the Board, a Chief
Executive Officer, a President, one or more Vice Presidents, a
Secretary, and a Treasurer; the Chairman of the Board shall be a
member of the Board; none of the other officers need be a member of
the Board.
OLD VERSION:
SECTION V-4 SALARIES: The salaries of the Chairman of the Board
and the President shall be fixed by the Board of Directors. The
salaries of other officers shall be fixed by the Chief Executive
Officer subject to review by the Board of Directors.
NEW VERSION:
SECTION V-4 SALARIES: The salaries of the Chairman of the Board,
the Chief Executive Officer, and the President shall be fixed by
the Board of Directors. The salaries of other officers shall be
fixed by the Chief Executive Officer subject to review by the Board
of Directors.
OLD VERSION:
SECTION V-5b CHIEF EXECUTIVE OFFICER: The Board shall designate
either the Chairman of the Board or the President to be the Chief
Executive Officer of this corporation; the Chief Executive Officer
shall see that all orders and resolutions of the Board of Directors
are carried into effect, and shall exercise or perform such other
powers and duties as may be from time to time assigned to him by
the Board of Directors or prescribed by the By-laws.
NEW VERSION:
SECTION V-6 THE CHIEF EXECUTIVE OFFICER: The Board shall designate
a Chief Executive Officer of this corporation. The Chief Executive
Officer shall see that all orders and resolutions of the Board of
Directors are carried into effect; shall assume the duties and
responsibilities of the Chairman of the Board in the absence of the
Chairman of the Board, or if there shall be no person occupying
that office; shall execute bonds, mortgages, and the contracts
requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed
and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer
or agent of the corporation; and shall exercise or perform such
other powers and duties as may be from time to time assigned to him
by the Board of Directors or prescribed by the By-laws.
OLD VERSION:
SECTION V-6 THE PRESIDENT - DUTIES: The President shall have
general and active management of the business of the corporation
subject to the direction and control of the Board of Directors, and
if the President is not the Chief Executive Officer, subject also
to the direction and control of the Chief Executive Officer. The
President shall assume the duties and responsibilities of the
Chairman of the Board in the absence of the Chairman of the Board,
or if there shall be no person occupying that office.
NEW VERSION:
SECTION V-7 THE PRESIDENT: The President shall have general and
active management of the business of the corporation subject to the
direction and control of the Board of Directors, and if the
President is not the Chief Executive Officer, subject also to the
direction and control of the Chief Executive Officer. The
President shall assume the duties and responsibilities of the Chief
Executive Officer in the absence of the Chief Executive Officer, or
if there shall be no person occupying that office.
OLD VERSION:
SECTION V-7 THE PRESIDENT - EXECUTION OF DOCUMENTS REQUIRING A
SEAL: He shall execute bonds, mortgages, and the contracts
requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed
and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer
or agent of the corporation.
NEW VERSION:
[Deleted]
OLD VERSION:
SECTION V-9 THE SECRETARY: The Secretary shall attend all meetings
of the Board of Directors and all meetings of the stockholders and
record all the proceedings of the meetings of the corporation and
of the Board of Directors in a book to be kept for that purpose and
shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of
Directors, and shall perform other such duties as may be prescribed
by the Board of Directors or President, under whose supervision he
shall be. He shall keep in safe custody the seal of the
corporation, and when authorized by the Board of Directors, affix
the same to any instrument requiring it.
NEW VERSION:
SECTION V-9 THE SECRETARY: The Secretary shall attend all meetings
of the Board of Directors and all meetings of the stockholders and
record all the proceedings of the meetings of the corporation and
of the Board of Directors in a book to be kept for that purpose and
shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of
Directors, and shall perform other such duties as may be prescribed
by the Board of Directors or Chief Executive Officer, under whose
supervision he shall be. He shall keep in safe custody the seal of
the corporation, and when authorized by the Board of Directors,
affix the same to any instrument requiring it.
OLD VERSION:
SECTION V-11 THE TREASURER - RESPONSIBILITY FOR FUNDS: The
Treasurer shall have custody of and be responsible for all the
monies and funds of the company. He shall deposit or cause to be
deposited all company monies, funds and other valuables in the name
and to the credit of the company in such banks or other financial
institutions as in his judgment is proper or as shall be directed
by the Board, Chairman of the Board or the President, and shall
disburse the funds of the company which have been duly approved for
disbursement. He shall enter regularly in the books of the company
to be kept by him for the purpose of full and accurate accounts of
all monies received and paid out by him on account of the company.
NEW VERSION:
SECTION V-11 THE TREASURER - RESPONSIBILITY FOR FUNDS: The
Treasurer shall have custody of and be responsible for all the
monies and funds of the company. He shall deposit or cause to be
deposited all company monies, funds and other valuables in the name
and to the credit of the company in such banks or other financial
institutions as in his judgment is proper or as shall be directed
by the Board, Chairman of the Board or the Chief Executive Officer,
and shall disburse the funds of the company which have been duly
approved for disbursement. He shall enter regularly in the books
of the company to be kept by him for the purpose of full and
accurate accounts of all monies received and paid out by him on
account of the company.
OLD VERSION:
SECTION V-12 THE TREASURER - OTHER DUTIES: The Treasurer shall
have such other powers and perform such other duties as may from
time to time be prescribed by the Board, the Chairman of the Board,
the President or the By-laws, and he shall in general, subject to
control of the Board, the Chairman of the Board and the President,
perform all the duties usually incident to the office of treasurer
of a corporation.
NEW VERSION:
SECTION V-12 THE TREASURER - OTHER DUTIES: The Treasurer shall
have such other powers and perform such other duties as may from
time to time be prescribed by the Board, the Chairman of the Board,
the Chief Executive Officer or the By-laws, and he shall in
general, subject to control of the Board, the Chairman of the Board
and the Chief Executive Officer, perform all the duties usually
incident to the office of treasurer of a corporation.
OLD VERSION:
SECTION VI-1 RIGHT OF STOCKHOLDER TO CERTIFICATE: Every holder of
stock in the corporation shall be entitled to have a certificate,
signed by, or in the name of the corporation by, the President or
a Vice President and the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary of the corporation,
certifying the number of shares owned by him in the corporation.
NEW VERSION:
SECTION VI-1 RIGHT OF STOCKHOLDER TO CERTIFICATE: Every holder of
stock in the corporation shall be entitled to have a certificate,
signed by, or in the name of the corporation by, the Chairman of
the Board, the President or a Vice President, and by the Treasurer
or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the corporation, certifying the number of shares owned
by him in the corporation.
OLD VERSION:
SECTION VI-2 FACSIMILE SIGNATURE: Where a certificate is signed
(1) by a transfer agent other than the corporation or its employee
or (2) by a registrar other than the corporation or its employee,
the signature of any such President, Vice President, Treasurer,
Assistant Treasurer, Secretary or Assistant Secretary may be by
facsimile. In case any officer or officers who have signed, or
whose facsimile signature or signatures have been used on any such
certificate or certificates shall cease to be such officer or
officers of the corporation, whether because of death, resignation
or otherwise, before such certificate or certificates have been
delivered by the corporation, such certificate or certificates may
nevertheless be adopted by the corporation and be issued and
delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or
signatures have been used thereon had not ceased to be such officer
or officers of the corporation.
NEW VERSION:
SECTION VI-2 FACSIMILE SIGNATURE: Where a certificate is signed
(1) by a transfer agent other than the corporation or its employee
or (2) by a registrar other than the corporation or its employee,
the signature of the corporation's Chairman of the Board,
President, Vice President, Treasurer, Assistant Treasurer,
Secretary or Assistant Secretary may be by facsimile. In case any
officer or officers who have signed, or whose facsimile signature
or signatures have been used on any such certificate or
certificates shall cease to be such officer or officers of the
corporation, whether because of death, resignation or otherwise,
before such certificate or certificates have been delivered by the
corporation, such certificate or certificates may nevertheless be
adopted by the corporation and be issued and delivered as though
the person or persons who signed such certificate or certificates
or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the corporation.
OLD VERSION:
SECTION VII-4 EXECUTION OF DOCUMENTS: Unless otherwise authorized
or prescribed by the Board of Directors, all contracts, leases,
deeds, deeds of trust, mortgages, bonds, indentures, endorsements,
assignments, powers of attorney to transfer stock or for other
purposes, and other documents and instruments of whatever kind
shall be executed for and on behalf of the corporation by the
President, a Vice President, or the Treasurer, or by any such
officer and the Secretary or an Assistant Secretary, who shall have
authority to affix the corporate seal to the same.
The Board of Directors also may authorize any other officer or
officers, or agent or agents, to execute any contract, document or
instrument of whatever kind for and on behalf of the corporation
and such authority may be general or be confined to specific
instances.
NEW VERSION:
SECTION VII-4 EXECUTION OF DOCUMENTS: Unless otherwise authorized
or prescribed by the Board of Directors, all contracts, leases,
deeds, deeds of trust, mortgages, bonds, indentures, endorsements,
assignments, powers of attorney to transfer stock or for other
purposes, and other documents and instruments of whatever kind
shall be executed for and on behalf of the corporation by the Chief
Executive Officer, the President, a Vice President, or the
Treasurer, or by any such officer and the Secretary or an Assistant
Secretary, who shall have authority to affix the corporate seal to
the same.
The Board of Directors also may authorize any other officer or
officers, or agent or agents, to execute any contract, document or
instrument of whatever kind for and on behalf of the corporation
and such authority may be general or be confined to specific
instances.
OLD VERSION:
SECTION VII-7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS:
Shares standing in the name of the corporation may be voted or
represented and all rights incident thereto may be exercised on
behalf of the corporation by the President, a Vice President, the
Secretary or the Treasurer, or by such other officers as to whom
the Board of Directors may from time to time confer like powers.
NEW VERSION:
SECTION VII-7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS:
Shares standing in the name of the corporation may be voted or
represented and all rights incident thereto may be exercised on
behalf of the corporation by the Chief Executive Officer, the
President, a Vice President, the Secretary or the Treasurer, or by
such other officers as to whom the Board of Directors may from time
to time confer like powers.
EXHIBIT 3(ii).2
Global Marine Inc.
BY-LAWS
AS AMENDED THROUGH FEBRUARY 23, 1999
INDEX
ARTICLE I OFFICES PAGE
Section I-1 Principal Office 1
Section I-2 Other Offices 1
ARTICLE II MEETINGS OF STOCKHOLDERS
Section II-1 Place 1
Section II-2 Date, Time, and Purpose of
Annual Meeting 1
Section II-3 [Deleted]
Section II-4 Stockholder List 1
Section II-5 Special Meeting 2
Section II-6 Written Notice 2
Section II-7 Business to be Conducted
and Nominations 2
Section II-8 Quorum 4
Section II-9 Required Vote 4
Section II-10 The Stockholder Vote 4
ARTICLE III DIRECTORS
Section III-1 Number, Qualification, Election,
and Term of Office 4
Section III-2 Location of Board Meeting 5
Section III-3 First Meeting of the Newly
Elected Board 5
Section III-4 Regular Meetings 5
Section III-5 Special Meetings; Telephonic
Meetings Permitted 5
Section III-6 Quorum and Majority Vote 5
Section III-7 Unanimous Written Consent 6
Section III-8 Committees - Formation and
Powers 6
Section III-9 Committee Minutes 6
Section III-10 Compensation 6
Section III-11 Indemnification of Directors,
Officers, Employees and Agents 6
Section III-12 Directors Emeritus 10
ARTICLE IV NOTICES AND WAIVERS THEREOF
Section IV-1 Notices 10
Section IV-2 Waiver of Notice 10
ARTICLE V OFFICERS
Section V-1 Election of Officers 11
Section V-2 Time of Election of Principal
Officers 11
Section V-3 Time of Election of Other
Officers 11
Section V-4 Salaries 11
Section V-5 Term of Office, Removal and
Filling of Vacancies 11
Section V-5a The Chairman of the Board 11
Section V-6 The Chief Executive Officer 11
Section V-7 The President 12
Section V-8 The Vice President 12
Section V-9 The Secretary 12
Section V-10 The Assistant Secretary 12
Section V-11 The Treasurer - Responsibility
for Funds 12
Section V-12 The Treasurer - Other Duties 12
Section V-13 The Assistant Treasurer 12
ARTICLE VI CERTIFICATE OF STOCK
Section VI-1 Right of Stockholder to
Certificate 13
Section VI-2 Facsimile Signature 13
Section VI-3 Lost Certificates 13
Section VI-4 Transfer of Stock 13
Section VI-5 Record Date 13
Section VI-6 Registered Stockholders 14
ARTICLE VII GENERAL PROVISIONS
Section VII-1 Dividends - Declaration and
Payment 14
Section VII-2 Reserve Out of Funds Available
for Dividends 14
Section VII-3 Annual Report 15
Section VII-4 Execution of Documents 15
Section VII-5 Undertakings and Commitments 15
Section VII-6 Checks 15
Section VII-7 Representation of Shares of
Other Corporations 15
Section VII-8 Fiscal Year 15
Section VII-9 Corporate Seal 15
ARTICLE VIII AMENDMENT OF BY-LAWS
Section VIII-1 Amendment 16
GLOBAL MARINE INC.
BY-LAWS
ARTICLE I
OFFICES
SECTION I-1 PRINCIPAL OFFICE: The principal office shall be in the
City of Wilmington, County of New Castle, state of Delaware.
SECTION I-2 OTHER OFFICES: The corporation may also have offices
at such other places both within and without the state of Delaware
as the Board of Directors may from time to time determine or the
business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION II-1 PLACE: All meetings of the stockholders for the
election of directors shall be held at such place, within or
without the state of Delaware, as may be fixed from time to time by
the Board of Directors. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the
state of Delaware, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
SECTION II-2 DATE, TIME, AND PURPOSE OF ANNUAL MEETING: The annual
meeting of stockholders shall be held at such date and time as may
be determined by the Board of Directors. At such annual meeting
the stockholders shall elect directors and shall transact such
other business as may properly be brought before the meeting.
SECTION II-3 [DELETED].
SECTION II-4 STOCKHOLDER LIST: The officer who has charge of the
stock ledger of the corporation shall prepare and make, at least
ten days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in
alphabetical order, and showing the address of and the number of
shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall
be specified in the notice of the meeting, or, if not so specified,
at the place where the meeting is to be held, and the list shall be
produced and kept at the time and place of the meeting during the
whole time thereof, and subject to the inspection of any
stockholder who is present.
SECTION II-5 SPECIAL MEETING: Special meetings of the stockholders
may only be called at any time by a majority of the directors then
in office or the Chief Executive Officer, or by the holders of at
least 25% of the issued and outstanding common stock of the
corporation as provided in the Certificate of Incorporation;
provided that, in the event that such holders of common stock elect
to call a special meeting pursuant to this Section II-5 or the
Certificate of Incorporation, the Board of Directors shall
determine a place, date and time for such meeting, which time shall
not be less than 90 nor more than 100 days after the receipt and
determination of the validity of such election, and a record date
for the determination of stockholders entitled to vote at such
meeting in the manner set forth in Section VI-5 hereof. Following
such receipt and determination, it shall be the duty of the
Secretary to cause notice to be given to the stockholders entitled
to vote at such meeting, in the manner set forth in Section II-6
hereof, that a special meeting will be held at the place, date and
time so determined.
Section II-6 Written Notice: Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the
meeting shall be given which shall state the place, date and hour
of the meeting, and, in the case of a special meeting, the purpose
or purposes for which the meeting is called. Unless otherwise
required by law, the written notice of any meeting shall be given
not less than 10 nor more than 60 days before the date of the
meeting to each stockholder entitled to vote at such meeting.
SECTION II-7 BUSINESS TO BE CONDUCTED AND NOMINATIONS: (a) At any
special meeting of stockholders, only such business shall be
conducted, and only such proposals shall be acted upon, as shall
have been set forth in the notice relating to the meeting.
(b) At any annual meeting of stockholders, only such business
shall be conducted, and only such proposals shall be acted upon, as
shall have been brought before the annual meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of
the corporation who is a stockholder of record at the time of the
giving of such stockholder's notice provided for in this paragraph
(b), who shall be entitled to vote at such meeting, and who
complies with the requirements of this paragraph (b) and as shall
otherwise be proper subjects for stockholder action and shall be
properly introduced at the meeting. For a proposal to be properly
brought before an annual meeting by a stockholder, in addition to
any other applicable requirements, the stockholder must have given
timely advance notice thereof in writing to the Secretary of the
corporation. To be timely, a stockholder's notice must be
delivered to, or mailed and received at, the principal executive
offices of the corporation no earlier than the 120th day nor later
than the close of business on the 90th day prior to the first
anniversary of the beginning of the preceding year's annual
meeting; provided, however, that in the event that the date of the
annual meeting is more than 30 days before or more than 60 days
after such anniversary date, notice by the stockholder to be timely
must be so delivered not later than the close of business on the
later of the 90th day prior to the scheduled day of such annual
meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made by the
corporation, including, without limitation, by press release, by
filing with the Securities and Exchange Commission, and/or by any
written material sent to stockholders. Any such stockholder's
notice to the Secretary of the corporation shall set forth as to
each matter the stockholder proposes to bring before the annual
meeting (i) a description of the proposal desired to be brought
before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and address, as they
appear on the corporation's books, of the stockholder proposing
such business and any other stockholders known by such stockholder
to be supporting such proposal, (iii) the class and number of
shares of the corporation's stock that are beneficially owned by
the stockholder on the date of such notice, (iv) any financial
interest of the stockholder in such proposal, and (v) a
representation that the stockholder intends to appear in person or
by proxy at the meeting to bring the proposed business before the
annual meeting. The presiding officer of the annual meeting shall
determine whether the requirements of this paragraph (b) have been
met with respect to any stockholder proposal. If the presiding
officer determines that a stockholder proposal was not made in
accordance with the terms of this paragraph (b), he shall so
declare at the meeting and such proposal shall not be acted upon at
the meeting.
(c) Subject to such rights of the holders of any class or
series of preferred stock as may be prescribed in the Certificate
of Incorporation or in the resolutions of the Board of Directors
providing for the issuance of any such class or series, only
persons who are nominated in accordance with the procedures set
forth in this paragraph (c) shall be eligible for election as, and
to serve as, directors. Nominations of persons for election to the
Board of Directors may be made at a meeting of the stockholders at
which directors are to be elected (i) by or at the direction of the
Board of Directors or (ii) by any stockholder of the corporation
who is a stockholder of record at the time of the giving of such
stockholder's notice provided for in this paragraph (c), who shall
be entitled to vote at such meeting in the election of directors,
and who complies with the requirements of this paragraph (c). Such
nominations, other than those made by or at the direction of the
Board of Directors, shall be preceded by timely advance notice
thereof in writing to the Secretary of the corporation. To be
timely, a stockholder's notice must be delivered to, or mailed and
received at, the principal executive offices of the corporation no
earlier than the 120th day nor later than the close of business on
the 90th day prior to the first anniversary of the beginning of the
preceding year's annual meeting; provided, however, that in the
event that the date of the annual meeting is more than 30 days
before or more than 60 days after such anniversary date, notice by
the stockholder to be timely must be so delivered not later than
the close of business on the later of the 90th day prior to the
scheduled day of such annual meeting or the 10th day following the
day on which public announcement of the date of such meeting is
first made by the corporation, including, without limitation, by
press release, by filing with the Securities and Exchange
Commission, and/or by any written material sent to stockholders.
Any such stockholder's notice to the Secretary of the corporation
shall set forth (x) as to each person whom the stockholder proposes
to nominate for election or re-election as a director, (i) the
name, age, business address and residence address of such person,
(ii) the principal occupation or employment of such person,
(iii) the number of shares of each class of capital stock of the
corporation beneficially owned by such person and (iv) the written
consent of such person to having such person's name placed in
nomination at the meeting and to serve as a director if elected,
and (y) as to the stockholder giving the notice, (i) the name and
address, as they appear on the corporation's books, of such
stockholder, (ii) the class and number of shares of the
corporation's stock that are beneficially owned by the stockholder
on the date of such notice, (iii) any arrangement between the
nominee or nominees and the stockholder, (iv) any other facts about
the nominee or nominees that would be required in a proxy statement
and (v) a representation that the stockholder intends to appear in
person or by proxy at the meeting to make the nomination or
nominations. The presiding officer of the meeting of stockholders
shall determine whether the requirements of this paragraph (c) have
been met with respect to any nomination or intended nomination. If
the presiding officer determines that any nomination was not made
in accordance with the terms of this paragraph (c), he shall so
declare at the meeting and such nomination shall be disregarded.
(d) Notwithstanding the foregoing provisions of this Section
II-7, a stockholder shall also comply with all applicable
requirements of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder with respect to the
matters set forth in this Section II-7.
SECTION II-8 QUORUM: The holders of a majority of the stock issued
and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of
the stockholders for the transaction of business except as
otherwise provided by statute or by the Certificate of
Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting
at which a quorum shall be present or represented any business may
be transacted which might have been transacted at the meeting as
originally notified.
SECTION II-9 REQUIRED VOTE: When a quorum is present at any
meeting, in all matters other than the election of directors, the
affirmative vote of the majority of shares present in person or
represented by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the stockholders, unless the
matter is one upon which by express provision of the statutes or of
the Certificate of Incorporation a different vote is required, in
which case such express provision shall govern and control the
decision of such matter. In any election of directors at a meeting
when a quorum is present, the individual or individuals elected
shall be the nominee or nominees, equal in number to the position
or positions to be filled, who receives or receive a plurality of
the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of directors.
SECTION II-10 THE STOCKHOLDER VOTE: Each stockholder shall at
every meeting of the stockholders be entitled to one vote in person
or by proxy for each share of the capital stock having voting power
held by such stockholder, but no proxy shall be voted on after
three years from its date, unless the proxy provides for a longer
period. At all elections of directors of the corporation each
stockholder having voting power shall be entitled to exercise the
right of cumulative voting as provided in the Certificate of
Incorporation.
ARTICLE III
DIRECTORS
SECTION III-1 NUMBER, QUALIFICATION, ELECTION, AND TERM OF OFFICE:
The exact number of directors, within the limits stated in the
Certificate of Incorporation, shall be determined by resolution or
resolutions passed by a majority of the whole Board of Directors.
If it is proposed to reduce the authorized number of directors
below five (5), the vote of stockholders holding more than eighty
percent (80%) of the voting power shall be necessary for such
reduction. No person shall serve as a director of this corporation
who at the time of his or her election has reached his or her 70th
birthday unless such person was elected as a director at the annual
meeting of holders of common stock of this corporation held on May
18, 1979, in which case such person shall be entitled to serve as
a director without regard to any limitation of age. Each director
shall serve for a term of office within the limits stated in the
Certificate of Incorporation. Directors need not be stockholders.
SECTION III-2 LOCATION OF BOARD MEETING: The Board of Directors of
the corporation may hold meetings, both regular and special, either
within or without the state of Delaware.
SECTION III-3 FIRST MEETING OF THE NEWLY ELECTED BOARD: The first
meeting of each newly elected Board of Directors shall be held at
such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting
shall be necessary to the newly elected directors in order to
legally constitute the meeting, provided a quorum shall be present.
In the event of the failure of the stockholders to fix the time or
place of such first meeting of the newly elected Board of
Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such
time and place as shall have been determined for the next regular
meeting by the previous Board of Directors or as shall be
determined by the Chief Executive Officer, which time and place
shall be specified in a notice given as hereinafter provided for
meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
SECTION III-4 REGULAR MEETINGS: Regular meetings of the Board of
Directors may be held without notice at such time and at such place
as shall from time to time be determined by the Board.
SECTION III-5 SPECIAL MEETINGS; TELEPHONIC MEETINGS PERMITTED:
Special meetings of the Board of Directors may be called by the
Chief Executive Officer on reasonable notice to each director,
which notice may be written, oral, or by any other mode of notice;
special meetings shall be called by the Chief Executive Officer or
Secretary in like manner and on like notice on the written request
of two directors. Unless otherwise restricted by the Certificate
of Incorporation or these By-laws, members of the Board of
Directors, or any committee designated by the Board, may
participate in a meeting of the Board or of such committee, as the
case may be, by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and participation
in a meeting pursuant to this provision shall constitute presence
in person at such meeting.
SECTION III-6 QUORUM AND MAJORITY VOTE: At any meeting of the
Board or of any committee of the Board, one-third of the directors
holding office or one-third of the members constituting such
committee, as the case may be, shall constitute a quorum for the
transaction of business, provided however that a quorum for the
transaction of business at any meeting of a committee of the Board
shall not be less than two members. The act of a majority of the
directors or members present at any meeting at which there is a
quorum shall be the act of the Board of Directors or such
committee, as the case may be, except as may be otherwise
specifically provided by statute or by the Certificate of
Incorporation. If a quorum shall not be present at any meeting of
the Board of Directors or of any committee of the Board, the
directors or members present thereat may adjourn the meeting from
time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
SECTION III-7 UNANIMOUS WRITTEN CONSENT: Unless otherwise
restricted by the Certificate of Incorporation or these By-laws,
any action required or permitted to be taken at a meeting of the
Board of Directors or of any committee thereof may be taken without
a meeting, if a written consent thereto is signed by all members of
the Board or of such committee as the case may be, and such written
consent or consents are filed with the minutes of proceedings of
the Board or committee.
SECTION III-8 COMMITTEES - FORMATION AND POWERS: The Board of
Directors may designate one or more committees, each committee to
consist of two or more of the directors of the corporation, which,
to the extent provided by the Board, shall have and may exercise
the powers of the Board of Directors in the management of the
business and affairs of the corporation and may authorize the seal
of the corporation to be affixed to all papers which may require
it. Such committee or committees shall have such name or names as
may be determined from time to time by the Board of Directors. The
Board of Directors may designate one or more directors as alternate
members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the
absence or disqualification of a member of a committee, and in the
absence of a designation by the Board of Directors of an alternate
member to replace the absent or disqualified member, the member or
members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act
at the meeting in place of any absent or disqualified member.
SECTION III-9 COMMITTEE MINUTES: Each committee shall keep regular
minutes of its meeting and report the same to the Board of
Directors when required.
SECTION III-10 COMPENSATION: The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors and a retainer for their service
as directors. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees
may be allowed like compensation for attending committee meetings.
SECTION III-11 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND AGENTS: (a)(i) The corporation, to the full extent permitted,
and in the manner required by the laws of the state of Delaware, as
in effect at the time of the adoption of this revised Section III-
11 or as such laws may be amended from time to time, shall
indemnify any person who was or is made a party to or is threatened
to be made a party to any threatened, pending or completed action,
suit or proceeding (including any appeal thereof), whether civil,
criminal, administrative or investigative (other than an action by
or in the right of the corporation), by reason of the fact that
such person is or was a director or officer of the corporation, or,
if at a time when he was a director or officer of the corporation,
is or was serving at the request of the corporation as a director,
officer, partner, trustee, fiduciary, employee or agent (a
"Subsidiary Officer") of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise (an
"Affiliated Entity"), against expenses (including attorneys' fees),
costs, judgments, fines, penalties and amounts paid in settlement
actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith
and in a manner such person reasonably believed to be in or not
opposed to the best interest of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful; provided, however, that
the corporation shall not be obligated to indemnify against any
amount paid in settlement unless the corporation has consented to
such settlement, which consent shall not be unreasonably withheld.
The termination of any action, suit or proceeding by judgment,
order, settlement, conviction or upon a plea of NOLO CONTENDERE or
its equivalent shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or
proceeding, that such person had reasonable cause to believe that
his conduct was unlawful. Notwithstanding anything to the contrary
in the foregoing provisions of this subparagraph (i) and except for
any action, suit or proceeding brought on behalf of a person to
enforce the right to indemnification hereunder or otherwise, a
person shall not be entitled, as a matter of right, to
indemnification pursuant to this subparagraph (i) against costs or
expenses incurred in connection with any action, suit or proceeding
commenced by such person against any person who is or was a
director, officer, fiduciary, employee or agent of the corporation
or a Subsidiary Officer of an Affiliated Entity, but such
indemnification may be provided by the corporation in any specific
case as permitted by paragraph (f) of this Section III-11.
(ii) The corporation may indemnify any employee or agent of
the corporation in the manner and to the extent that it shall
indemnify any director or officer under this paragraph (a),
including indemnity in respect of service at the request of the
corporation as a Subsidiary Officer of an Affiliated Entity.
(b)(i) The corporation, to the full extent permitted, and in
the manner required by the laws of the state of Delaware, as in
effect at the time of the adoption of this Section III-11 or as
such laws may be amended from time to time, shall indemnify any
person who was or is made a party to or is threatened to be made a
party to any threatened, pending or completed action or suit
(including any appeal thereof) brought in the right of the
corporation to procure a judgment in its favor by reason of the
fact that such person is or was a director or officer of the
corporation, or, if at a time when he was a director or officer of
the corporation, is or was serving at the request of the
corporation as a Subsidiary Officer of an Affiliated Entity,
against expenses (including attorneys' fees) and costs actually and
reasonably incurred by such person in connection with such action
or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall
be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation
unless, and except to the extent that, the Court of Chancery of the
state of Delaware or the court in which such judgment was rendered
shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such
expenses and costs as the Court of Chancery of the state of
Delaware or such other court shall deem proper. Notwithstanding
anything to the contrary in the foregoing provisions of this
subparagraph (b)(i), a person shall not be entitled, as a matter of
right, to indemnification pursuant to this subparagraph (b)(i)
against costs and expenses incurred in connection with any action
or suit in the right of the corporation commenced by such person,
but such indemnification may be provided by the corporation in any
specific case as permitted by paragraph (f) of this Section III-11.
(ii) The corporation may indemnify any employee or agent of
the corporation in the manner and to the extent that it shall
indemnify any director or officer under this paragraph (b),
including indemnity in respect of service at the request of the
corporation as a Subsidiary Officer of an Affiliated Entity.
(c) Any indemnification under paragraph (a) or (b) of this
Section III-11 (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer,
employee or agent is proper under the circumstances because such
person has met the applicable standard of conduct set forth in
paragraph (a) or (b) of this Section III-11. Such determination
shall be made (i) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to the
action, suit or proceeding in respect of which indemnification is
sought or by majority vote of the members of a committee of the
Board of Directors composed of at least three members each of whom
is not a party to such action, suit or proceeding, or (ii) if such
a quorum is not obtainable and/or such a committee is not
established or obtainable, or, even if obtainable, if a quorum of
disinterested directors so directs, by independent legal counsel in
a written opinion, or (iii) by the stockholders. In the event a
request for indemnification is made by any person referred to in
subparagraph (i) of paragraph (a) or subparagraph (i) of paragraph
(b), the corporation shall cause such determination to be made not
later than 60 days after such request is made.
(d)(i) Notwithstanding the other provisions of this Section
III-11, to the extent that a director, officer, employee or agent
of the corporation has been successful on the merits or otherwise
in defense of any action, suit or proceeding referred to in
paragraph (a) or (b) of this Section III-11, or in defense of any
claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees) and costs actually and
reasonably incurred by such person in connection therewith.
(ii) To the extent any person who is or was a director or
officer of the corporation has served or prepared to serve as a
witness in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, or in any investigation by the
corporation or the Board of Directors thereof or a committee
thereof or by any securities exchange on which securities of the
corporation are or were listed or any national securities
association, by reason of his services as a director or officer of
the corporation or, if at a time when he was a director or officer
of the corporation, is or was serving at the request of the
corporation as a Subsidiary Officer of an Affiliated Entity, the
corporation shall indemnify such person against expenses (including
attorneys' fees) and costs actually and reasonably incurred by such
person in connection therewith within 30 days after the receipt by
the corporation from such person of a statement requesting such
indemnification, averring such service and reasonably evidencing
such expenses and costs. The corporation may indemnify any
employee or agent of the corporation to the same extent it is
required to indemnify any director or officer of the corporation
pursuant to the foregoing sentence of this paragraph.
(e)(i) Expenses and costs incurred by any person referred to
in subparagraph (i) of paragraph (a) or subparagraph (i) of
paragraph (b) of this Section III-11 in defending a civil,
criminal, administrative or investigative action, suit or
proceeding shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such person to repay such amount if
it shall ultimately be determined that such person is not entitled
to be indemnified by the corporation as authorized by this Section
III-11.
(ii) Expenses and costs incurred by any person referred to in
subparagraph (ii) of paragraph (a) or subparagraph (ii) of
paragraph (b) of this Section III-11 in defending a civil,
criminal, administrative or investigative action, suit or
proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the
Board of Directors, a committee thereof or an officer of the
corporation or a committee thereof authorized to so act by the
Board of Directors upon receipt of an undertaking by or on behalf
of such person to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by
the corporation as authorized by this Section III-11.
(f) The provision of indemnification to or the advancement of
expenses and costs to any person under this Section III-11, or the
entitlement of any person to indemnification or advancement of
expenses and costs under this Section III-11, shall not limit or
restrict in any way the power of the corporation to indemnify or
advance expenses and costs to such person in any other way
permitted by law or be deemed exclusive of any right to which any
person seeking indemnification or advancement of expenses and costs
may be entitled under any law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such
person's capacity as an officer, director, employee or agent of the
corporation and as to action in any other capacity while holding
any such position.
(g) The indemnification provided or permitted under this
Section III-11 shall apply in respect of any expense, costs,
judgment, fine, penalty or amount paid in settlement, whether or
not the claim or cause of action in respect thereof accrued or
arose before or after the effective date of this revised Section
III-11. The right of any person who is or was a director, officer,
employee or agent of the corporation to indemnification and advance
payment of expenses and costs under this Section III-11 shall
continue after he shall have ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs,
distributees, executors, administrators and other legal
representatives of such person.
(h) This Section III-11 shall be deemed to create a binding
obligation on the part of the corporation to its current and former
officers and directors and their heirs, distributees, executors,
administrators and other legal representatives, and each director
or officer in acting in such capacity shall be entitled to rely on
the provisions of this Section III-11, without giving notice
thereof to the corporation.
(i) The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of
the corporation as a Subsidiary Officer of any Affiliated Entity,
against any liability asserted against such person and incurred by
such person in any such capacity, or arising out of such person's
status as such, whether or not the corporation would have the power
to indemnify such person against such liability under the
provisions of this Section III-11 or applicable law.
(j)(i) For purposes of this Section III-11, references to "the
corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger which, if
its corporate existence had continued, would have been permitted
under applicable law to indemnify its directors, officers,
employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is
or was serving at the request of such constituent corporation as a
Subsidiary Officer of any Affiliated Entity, shall stand in the
same position under the provisions of this Section III-11 with
respect to the resulting or surviving corporation as such person
would have with respect to such constituent corporation if its
separate existence had continued.
(ii) For purposes of this Section III-11, references to
"fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; references to "serving at the
request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the
interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed
to the best interest of the corporation" as referred to in this
Section III-11.
SECTION III-12 DIRECTORS EMERITUS: The Board of Directors may,
from time to time, elect one or more Directors Emeritus, each of
whom shall serve until the first meeting of the Board next
following the annual meeting of stockholders or until his earlier
resignation or removal by the Board. Directors Emeritus shall
serve as advisors and consultants to the Board of Directors, shall
be invited to attend all meetings of the Board and may participate
in all discussions occurring during such meetings. Directors
Emeritus shall not be privileged to vote on matters brought before
the Board and shall not be counted for the purpose of determining
whether a quorum of the Board is present.
ARTICLE IV
NOTICES AND WAIVERS THEREOF
SECTION IV-1 NOTICES: Whenever under the provisions of these By-
laws notice is required to be given to any stockholder, director or
officer, such notice may be written, oral or by any other mode of
notice unless otherwise provided by law, the Certificate of
Incorporation or these By-laws. If given by United States mail,
notice is given when deposited in the United States mail, postage
prepaid, directed to such stockholder, director, or officer at his
address as it appears on the records of the corporation, or in
default of other address, to such stockholder, director, or officer
at the general post office in the City of Wilmington, County of New
Castle, Delaware.
SECTION IV-2 WAIVER OF NOTICE: Whenever any notice whatever is
required to be given by law, or under the provisions of the
Certificate of Incorporation, or of these By-laws, a waiver thereof
in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be
deemed equivalent to receipt of such required notice.
ARTICLE V
OFFICERS
SECTION V-1 ELECTION OF OFFICERS: The officers of the corporation
shall be chosen by the Board of Directors, and shall be a Chairman
of the Board, a Chief Executive Officer, a President, a Vice
President, a Secretary, and a Treasurer. The Board of Directors
may also choose additional vice presidents, and one or more
assistant secretaries and/or assistant treasurers, and one or more
such other officers, with such other titles, as the Board may deem
necessary or desirable. Two or more offices may be held by the
same person.
SECTION V-2 TIME OF ELECTION OF PRINCIPAL OFFICERS: The Board of
Directors at its first meeting after each annual meeting of
stockholders shall choose a Chairman of the Board, a Chief
Executive Officer, a President, one or more Vice Presidents, a
Secretary, and a Treasurer; the Chairman of the Board shall be a
member of the Board; none of the other officers need be a member of
the Board.
SECTION V-3 TIME OF ELECTION OF OTHER OFFICERS: The Board of
Directors may appoint such other officers and agents as it shall
deem necessary who shall hold their offices for such terms and
shall exercise such powers and perform such duties as shall be
determined from time to time by the Board.
SECTION V-4 SALARIES: The salaries of the Chairman of the Board,
the Chief Executive Officer, and the President shall be fixed by
the Board of Directors. The salaries of other officers shall be
fixed by the Chief Executive Officer subject to review by the Board
of Directors.
SECTION V-5 TERM OF OFFICE, REMOVAL AND FILLING OF VACANCIES: The
officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or
appointed by the Board of Directors may be removed at any time by
the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the corporation shall be filled
by the Board of Directors.
SECTION V-5a THE CHAIRMAN OF THE BOARD: The Chairman of the Board
shall preside at all meetings of the Board of Directors, and shall
exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Directors or
prescribed by the By-laws.
SECTION V-6 THE CHIEF EXECUTIVE OFFICER: The Board shall designate
a Chief Executive Officer of this corporation. The Chief Executive
Officer shall see that all orders and resolutions of the Board of
Directors are carried into effect; shall assume the duties and
responsibilities of the Chairman of the Board in the absence of the
Chairman of the Board, or if there shall be no person occupying
that office; shall execute bonds, mortgages, and the contracts
requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed
and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer
or agent of the corporation; and shall exercise or perform such
other powers and duties as may be from time to time assigned to him
by the Board of Directors or prescribed by the By-laws.
SECTION V-7 THE PRESIDENT: The President shall have general and
active management of the business of the corporation subject to the
direction and control of the Board of Directors, and if the
President is not the Chief Executive Officer, subject also to the
direction and control of the Chief Executive Officer. The
President shall assume the duties and responsibilities of the Chief
Executive Officer in the absence of the Chief Executive Officer, or
if there shall be no person occupying that office.
SECTION V-8 THE VICE PRESIDENT: The Vice President, or if there
shall be more than one, the Vice Presidents in the order determined
by the Board of Directors, shall in the absence or disability of
the President, perform the duties and exercise the powers of the
President and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
SECTION V-9 THE SECRETARY: The Secretary shall attend all meetings
of the Board of Directors and all meetings of the stockholders and
record all the proceedings of the meetings of the corporation and
of the Board of Directors in a book to be kept for that purpose and
shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of
Directors, and shall perform other such duties as may be prescribed
by the Board of Directors or Chief Executive Officer, under whose
supervision he shall be. He shall keep in safe custody the seal of
the corporation, and when authorized by the Board of Directors,
affix the same to any instrument requiring it.
SECTION V-10 THE ASSISTANT SECRETARY: The Assistant Secretary, or
if there be more than one, the Assistant Secretaries in the order
determined by the Board of Directors, shall, in the absence or
disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and
have such other powers as the Board of Directors may from time to
time prescribe.
SECTION V-11 THE TREASURER - RESPONSIBILITY FOR FUNDS: The
Treasurer shall have custody of and be responsible for all the
monies and funds of the company. He shall deposit or cause to be
deposited all company monies, funds and other valuables in the name
and to the credit of the company in such banks or other financial
institutions as in his judgment is proper or as shall be directed
by the Board, Chairman of the Board or the Chief Executive Officer,
and shall disburse the funds of the company which have been duly
approved for disbursement. He shall enter regularly in the books
of the company to be kept by him for the purpose of full and
accurate accounts of all monies received and paid out by him on
account of the company.
SECTION V-12 THE TREASURER - OTHER DUTIES: The Treasurer shall
have such other powers and perform such other duties as may from
time to time be prescribed by the Board, the Chairman of the Board,
the Chief Executive Officer or the By-laws, and he shall in
general, subject to control of the Board, the Chairman of the Board
and the Chief Executive Officer, perform all the duties usually
incident to the office of treasurer of a corporation.
SECTION V-13 THE ASSISTANT TREASURER: Each Assistant Treasurer
shall assist the Treasurer and, in the absence or disability of the
Treasurer, any Assistant Treasurer may perform the duties of the
Treasurer unless and until the contrary is expressed by the Board,
and shall perform such other duties as may be prescribed by the
Board or the Treasurer.
ARTICLE VI
CERTIFICATE OF STOCK
SECTION VI-1 RIGHT OF STOCKHOLDER TO CERTIFICATE: Every holder of
stock in the corporation shall be entitled to have a certificate,
signed by, or in the name of the corporation by, the Chairman of
the Board, the President or a Vice President, and by the Treasurer
or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the corporation, certifying the number of shares owned
by him in the corporation.
SECTION VI-2 FACSIMILE SIGNATURE: Where a certificate is signed
(1) by a transfer agent other than the corporation or its employee
or (2) by a registrar other than the corporation or its employee,
the signature of the corporation's Chairman of the Board,
President, Vice President, Treasurer, Assistant Treasurer,
Secretary or Assistant Secretary may be by facsimile. In case any
officer or officers who have signed, or whose facsimile signature
or signatures have been used on any such certificate or
certificates shall cease to be such officer or officers of the
corporation, whether because of death, resignation or otherwise,
before such certificate or certificates have been delivered by the
corporation, such certificate or certificates may nevertheless be
adopted by the corporation and be issued and delivered as though
the person or persons who signed such certificate or certificates
or whose facsimile signature or signatures have been used thereon
had not ceased to be such officer or officers of the corporation.
SECTION VI-3 LOST CERTIFICATES: The Board of Directors may direct
a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the corporation
alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate of
stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof,
require the owner of such lost or destroyed certificate or
certificates, or his legal representative, to advertise the same in
such manner as it shall require and/or to give the corporation a
bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the
certificate alleged to have been lost or destroyed.
SECTION VI-4 TRANSFER OF STOCK: Upon surrender to the corporation
or the transfer agent of the corporation of a certificate for
shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the
transaction upon its books.
SECTION VI-5 RECORD DATE: (a) In order that the corporation may
determine the stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, the Board of
Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall
not be more than sixty nor less than ten days before the date of
such meeting. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice
is given, or, if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of
the meeting; provided, however, that the Board of Directors may fix
a new record date for the adjourned meeting.
(b) In order that the corporation may determine the
stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or the stockholders
entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date shall be
not more than sixty days prior to such action. If no record date
is fixed, the record date for determining stockholders for any such
purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
(c) In each case when a record date has been duly fixed, such
stockholders and only such stockholders as shall be stockholders of
record on the date so fixed shall be entitled to notice of and to
vote at the meeting of stockholders and any adjournment thereof, or
to receive payment of the dividend or other distribution, or to
receive the allotment of rights, or to exercise the rights or
participate in the other action, as the case may be,
notwithstanding any transfer of any stock on the books of the
corporation after such record date is fixed.
SECTION VI-6 REGISTERED STOCKHOLDERS: The corporation shall be
entitled to recognize the exclusive right of a person registered on
its books as the owner of shares to receive dividends, and to vote
as such owner, and shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
SECTION VII-1 DIVIDENDS - DECLARATION AND PAYMENT: Dividends upon
the capital stock of the corporation, subject to the provisions of
the Certificate of Incorporation, if any, may be declared by the
Board of Directors at any regular or special meeting pursuant to
law. Dividends may be paid in cash, in property, or in shares of
the capital stock of the corporation, subject to the provisions of
the Certificate of Incorporation.
SECTION VII-2 RESERVE OUT OF FUNDS AVAILABLE FOR DIVIDENDS: Before
payment of any dividend, there may be set aside out of any funds of
the corporation available for dividends such sum or sums as the
directors from time to time in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing and maintaining any property
of the corporation, or for such other purpose as the directors
think conducive to the interest of the corporation, and the
directors may modify or abolish any such reserve in the manner in
which it was created.
SECTION VII-3 ANNUAL REPORT: The Board of Directors shall cause an
annual report to be sent to the stockholders, not later than three
months after the close of the fiscal year, but at least fifteen
days in advance of the annual meeting of stockholders, such report
to include a balance sheet as of such closing date and a statement
of income and profit and loss for the year ended on such closing
date.
SECTION VII-4 EXECUTION OF DOCUMENTS: Unless otherwise authorized
or prescribed by the Board of Directors, all contracts, leases,
deeds, deeds of trust, mortgages, bonds, indentures, endorsements,
assignments, powers of attorney to transfer stock or for other
purposes, and other documents and instruments of whatever kind
shall be executed for and on behalf of the corporation by the Chief
Executive Officer, the President, a Vice President, or the
Treasurer, or by any such officer and the Secretary or an Assistant
Secretary, who shall have authority to affix the corporate seal to
the same.
The Board of Directors also may authorize any other officer or
officers, or agent or agents, to execute any contract, document or
instrument of whatever kind for and on behalf of the corporation
and such authority may be general or be confined to specific
instances.
SECTION VII-5 UNDERTAKINGS AND COMMITMENTS: No undertaking,
commitment, contract, instrument or document shall be binding upon
the corporation unless previously authorized or subsequently
ratified by the Board of Directors or executed by an officer or
officers or an agent or agents of the corporation acting under
powers conferred by the Board of Directors or by these By-laws.
SECTION VII-6 CHECKS: All checks, notes and other obligations for
collection, deposit or transfer, and all checks and drafts for
disbursement from company funds, and all bills of exchange and
promissory notes, and all acceptances, obligations and other
instruments for the payment of money, shall be endorsed or signed
by such officer or officers, agent or agents, as shall be thereunto
authorized from time to time by the Board of Directors.
SECTION VII-7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS:
Shares standing in the name of the corporation may be voted or
represented and all rights incident thereto may be exercised on
behalf of the corporation by the Chief Executive Officer, the
President, a Vice President, the Secretary or the Treasurer, or by
such other officers as to whom the Board of Directors may from time
to time confer like powers.
SECTION VII-8 FISCAL YEAR: The fiscal year of the corporation
shall end the thirty-first day of December in each year.
SECTION VII-9 CORPORATE SEAL: The corporate seal shall have
inscribed thereon the name of the corporation, the year of its
organization and the words "Corporate Seal, Delaware." The seal
may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
ARTICLE VIII
AMENDMENT OF BY-LAWS
SECTION VIII-1 AMENDMENT: These By-laws may be altered or repealed
at any meeting of the stockholders or of the Board of Directors.
EXHIBIT 4.1
GLOBAL MARINE INC.
SECTION II-7 OF THE BY-LAWS
SECTION II-7 BUSINESS TO BE CONDUCTED AND NOMINATIONS: (a) At any
special meeting of stockholders, only such business shall be
conducted, and only such proposals shall be acted upon, as shall
have been set forth in the notice relating to the meeting.
(b) At any annual meeting of stockholders, only such business
shall be conducted, and only such proposals shall be acted upon, as
shall have been brought before the annual meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of
the corporation who is a stockholder of record at the time of the
giving of such stockholder's notice provided for in this paragraph
(b), who shall be entitled to vote at such meeting, and who
complies with the requirements of this paragraph (b) and as shall
otherwise be proper subjects for stockholder action and shall be
properly introduced at the meeting. For a proposal to be properly
brought before an annual meeting by a stockholder, in addition to
any other applicable requirements, the stockholder must have given
timely advance notice thereof in writing to the Secretary of the
corporation. To be timely, a stockholder's notice must be
delivered to, or mailed and received at, the principal executive
offices of the corporation no earlier than the 120th day nor later
than the close of business on the 90th day prior to the first
anniversary of the beginning of the preceding year's annual
meeting; provided, however, that in the event that the date of the
annual meeting is more than 30 days before or more than 60 days
after such anniversary date, notice by the stockholder to be timely
must be so delivered not later than the close of business on the
later of the 90th day prior to the scheduled day of such annual
meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made by the
corporation, including, without limitation, by press release, by
filing with the Securities and Exchange Commission, and/or by any
written material sent to stockholders. Any such stockholder's
notice to the Secretary of the corporation shall set forth as to
each matter the stockholder proposes to bring before the annual
meeting (i) a description of the proposal desired to be brought
before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and address, as they
appear on the corporation's books, of the stockholder proposing
such business and any other stockholders known by such stockholder
to be supporting such proposal, (iii) the class and number of
shares of the corporation's stock that are beneficially owned by
the stockholder on the date of such notice, (iv) any financial
interest of the stockholder in such proposal, and (v) a
representation that the stockholder intends to appear in person or
by proxy at the meeting to bring the proposed business before the
annual meeting. The presiding officer of the annual meeting shall
determine whether the requirements of this paragraph (b) have been
met with respect to any stockholder proposal. If the presiding
officer determines that a stockholder proposal was not made in
accordance with the terms of this paragraph (b), he shall so
declare at the meeting and such proposal shall not be acted upon at
the meeting.
(c) Subject to such rights of the holders of any class or
series of preferred stock as may be prescribed in the Certificate
of Incorporation or in the resolutions of the Board of Directors
providing for the issuance of any such class or series, only
persons who are nominated in accordance with the procedures set
forth in this paragraph (c) shall be eligible for election as, and
to serve as, directors. Nominations of persons for election to the
Board of Directors may be made at a meeting of the stockholders at
which directors are to be elected (i) by or at the direction of the
Board of Directors or (ii) by any stockholder of the corporation
who is a stockholder of record at the time of the giving of such
stockholder's notice provided for in this paragraph (c), who shall
be entitled to vote at such meeting in the election of directors,
and who complies with the requirements of this paragraph (c). Such
nominations, other than those made by or at the direction of the
Board of Directors, shall be preceded by timely advance notice
thereof in writing to the Secretary of the corporation. To be
timely, a stockholder's notice must be delivered to, or mailed and
received at, the principal executive offices of the corporation no
earlier than the 120th day nor later than the close of business on
the 90th day prior to the first anniversary of the beginning of the
preceding year's annual meeting; provided, however, that in the
event that the date of the annual meeting is more than 30 days
before or more than 60 days after such anniversary date, notice by
the stockholder to be timely must be so delivered not later than
the close of business on the later of the 90th day prior to the
scheduled day of such annual meeting or the 10th day following the
day on which public announcement of the date of such meeting is
first made by the corporation, including, without limitation, by
press release, by filing with the Securities and Exchange
Commission, and/or by any written material sent to stockholders.
Any such stockholder's notice to the Secretary of the corporation
shall set forth (x) as to each person whom the stockholder proposes
to nominate for election or re-election as a director, (i) the
name, age, business address and residence address of such person,
(ii) the principal occupation or employment of such person,
(iii) the number of shares of each class of capital stock of the
corporation beneficially owned by such person and (iv) the written
consent of such person to having such person's name placed in
nomination at the meeting and to serve as a director if elected,
and (y) as to the stockholder giving the notice, (i) the name and
address, as they appear on the corporation's books, of such
stockholder, (ii) the class and number of shares of the
corporation's stock that are beneficially owned by the stockholder
on the date of such notice, (iii) any arrangement between the
nominee or nominees and the stockholder, (iv) any other facts about
the nominee or nominees that would be required in a proxy statement
and (v) a representation that the stockholder intends to appear in
person or by proxy at the meeting to make the nomination or
nominations. The presiding officer of the meeting of stockholders
shall determine whether the requirements of this paragraph (c) have
been met with respect to any nomination or intended nomination. If
the presiding officer determines that any nomination was not made
in accordance with the terms of this paragraph (c), he shall so
declare at the meeting and such nomination shall be disregarded.
(d) Notwithstanding the foregoing provisions of this Section
II-7, a stockholder shall also comply with all applicable
requirements of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder with respect to the
matters set forth in this Section II-7.
FIRST AMENDMENT TO
CREDIT AGREEMENT AND LOAN DOCUMENTS
This First Amendment to Credit Agreement and Loan
Documents (this "AMENDMENT") dated as of November 23, 1998 is among
GLOBAL MARINE INC., a Delaware corporation (the "BORROWER"), the
banks named on the signature pages hereto (together with their
respective successors and assigns in such capacity, the "BANKS"),
BANKERS TRUST COMPANY, as administrative agent for the Banks
(together with its successors and assigns in such capacity, the
"ADMINISTRATIVE AGENT"), SKANDINAVISKA ENSKILDA BANKEN AB (PUBL)
and DEN NORSKE BANK ASA, NEW YORK BRANCH, as co-agents for the
Banks, SOCIETE GENERALE, SOUTHWEST AGENCY, as documentation agent
for the Banks (all of the agents, collectively, together with their
successors and assigns in such capacity, the "AGENTS").
PRELIMINARY STATEMENT
The Borrower, the Banks and the Agents have entered into
that certain Second Amended and Restated Credit Agreement dated as
of December 9, 1997 (as amended or restated from time to time the
"CREDIT AGREEMENT").
The Borrower, the Banks and the Agents wish to amend the
Credit Agreement and execute this Amendment to reflect same.
NOW THEREFORE, in consideration of the foregoing and the
mutual agreements set forth herein, the parties agree as follows:
Section 1. DEFINITIONS. Unless otherwise defined in this
Amendment, each capitalized term used in this Amendment has the
meaning assigned to such term in the Credit Agreement.
Section 2. AMENDMENTS. Section 8.08 of the Credit
Agreement is hereby amended in its entirety to read as follows:
"Section 8.08 DEBT TO CAPITALIZATION
RATIO. Borrower shall not permit the ratio of
its Consolidated Indebtedness to its
Consolidated Total Capitalization measured at
the end of each fiscal quarter, to be greater
at any time than the following ratio for the
periods indicated:
Through End of
CALENDAR YEAR 1998 ALL OTHER PERIODS
.50 to 1.0 .45 to 1.0 "
<PAGE>
Section 3. RATIFICATION. The Borrower hereby ratifies and
confirms all of the Obligations under the Credit Agreement (as
amended hereby) and the Notes. All references to the "Credit
Agreement" shall mean the Credit Agreement as amended hereby and as
the same may be amended, supplemented, restated or otherwise
modified and in effect from time to time in the future.
Section 4. EFFECTIVENESS. The effectiveness of this
Amendment is subject to the condition precedent that the
Administrative Agent shall have received in form and substance
reasonably satisfactory to the Banks and in such number of
counterparts as may be reasonably requested by the Administrative
Agent, this Amendment executed by the Borrower and each of the
Banks constituting the Required Banks and has paid all of the
Administrative Agent's reasonable costs and expenses (other than
legal fees and expenses, which shall be payable promptly after
Borrower receives an invoice from counsel to Administrative Agent)
incurred in connection herewith.
Section 5. REPRESENTATIONS AND WARRANTIES. The Borrower
hereby represents and warrants to the Banks that (a) the execution,
delivery and performance of this Amendment has been duly
authorized by all requisite corporate action on the part of the
Borrower, (b) the Credit Agreement (as amended hereby) constitutes
a valid and legally binding agreement enforceable against the
Borrower in accordance with its terms except, as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar
laws relating to or affecting the enforcement of creditors' rights
generally and by general principles of equity, (c) the
representations and warranties by the Borrower contained in the
Credit Agreement as amended hereby are true and correct on and as
of the date hereof in all material respects as though made as of
the date hereof unless such representation and warranty expressly
indicates that it is being made as of any specific date, in which
case such representations and warranties shall be true and correct
in all material respects as of such date, and except to the extent
that such representations and warranties are no longer true and
correct due to any action or inaction permitted or required to be
taken under the Credit Documents by Borrower or any Subsidiary, and
(d) no Default or Event of Default exists under the Credit
Agreement (as amended hereby).
Section 6. CHOICE OF LAW. THIS AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
Section 7. FINAL AGREEMENT. THE CREDIT AGREEMENT (AS
AMENDED HEREBY) 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 ORAL
AGREEMENTS BETWEEN THE PARTIES.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by its officers thereunto duly authorized
as of the date first above written.
ADDRESS: GLOBAL MARINE INC.
777 N. Eldridge Road
Houston, Texas 77079-4416 By: /S/W. MATT RALLS
Telecopy: (281) 596-5826 W. Matt Ralls
Telephone: (281) 596-5810 Vice President and Treasurer
Attention: W. Matt Ralls
<PAGE>
BANKERS TRUST COMPANY, Individually
and as Administrative Agent
By: /S/MARCUS M. TARKINGTON
Name: Marcus M. Tarkington
Title: Principal
<PAGE>
ABN AMRO BANK, N.V., HOUSTON
AGENCY
By: /S/STUART MURRAY
Name: Stuart Murray
Title: Vice President
By: /S/W. BRYAN CHAPMAN
Name: W. Bryan Chapman
Title: Group Vice President
<PAGE>
ARGENTARIA-BANCO EXTERIOR DE ESPANA
NEW YORK BRANCH
By: /S/AUGUSTO GODOY
Name: Augusto Godoy
Title: General Manager
<PAGE>
THE BANK OF NOVA SCOTIA
By: /S/F.C.H. ASHBY
Name: F.C.H. Ashby
Title: Senior Manager
Loan Operations
<PAGE>
THE BANK OF TOKYO -
MITSUBISHI, LTD.
By: /S/JOHN W. MCGHEE
Name: John W. McGhee
Title: Vice President & Manager
<PAGE>
CHRISTIANIA BANK og KREDITKASSE ASA
NEW YORK BRANCH
By: /S/MARTIN LUNDER
Name: Martin Lunder
Title: Senior Vice President
By: /S/HANS CHR. KJELSRUD
Name: Hans Chr. Kjelsrud
Title: Senior Vice President
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
By: /S/PHILIPPE SOUSTRA
Name: Philippe Soustra
Title: Senior Vice President
<PAGE>
DEN NORSKE BANK ASA, NEW YORK
BRANCH, Individually and as Co-
Agent
By: /S/GEORGE P. MALANGA
Name: George P. Malanga
Title: Senior Vice President
By: /S/BARBARA GRONQUIST
Name: Barbara Gronquist
Title: First Vice President
<PAGE>
SOCIETE GENERALE, SOUTHWEST
AGENCY, Individually and as
Documentation Agent
By: /S/RICHARD A. GOULD
Name: Richard A. Gould
Title: Director
<PAGE>
TORONTO DOMINION (TEXAS), INC.
By: /S/CAROL BRANDT
Name: Carol Brandt
Title: Vice President
<PAGE>
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By: /S/FELICIA LA FORGIA
Name: Felicia La Forgia
Title: Vice President
By: /S/THOMAS LEE
Name: Thomas Lee
Title: Associate
FIRST AMENDMENT TO
CREDIT AGREEMENT AND LOAN DOCUMENTS
This First Amendment to Credit Agreement and Loan
Documents (this "AMENDMENT") dated as of November 23, 1998 is
among GLOBAL MARINE INC., a Delaware corporation (the
"BORROWER"), the banks named on the signature pages hereto
(together with their respective successors and assigns in such
capacity, the "BANKS"), BANKERS TRUST COMPANY, as administrative
agent for the Banks (together with its successors and assigns in
such capacity, the "ADMINISTRATIVE AGENT"), ABN AMRO BANK, N.V.,
HOUSTON AGENCY, as syndication agent for the Banks, SOCIETE
GENERALE, SOUTHWEST AGENCY, as documentation agent for the Banks
(all of the agents, collectively, together with their successors
and assigns in such capacity, the "AGENTS").
PRELIMINARY STATEMENT
The Borrower, the Banks and the Agents have entered
into that certain Credit Agreement dated as of January 29, 1998
(as amended or restated from time to time, the "CREDIT
AGREEMENT").
The Borrower, the Banks and the Agents wish to amend
the Credit Agreement and execute this Amendment to reflect same.
NOW THEREFORE, in consideration of the foregoing and
the mutual agreements set forth herein, the parties agree as
follows:
Section 1. DEFINITIONS. Unless otherwise defined in
this Amendment, each capitalized term used in this Amendment has
the meaning assigned to such term in the Credit Agreement.
Section 2. AMENDMENTS. The Credit Agreement is hereby
amended as follows:
a. Section 1.01 of the Credit Agreement is hereby
amended by: (i) replacing the phrase "Maturity Date" with
the phrase "Revolving Loan Maturity Date" in subsection (i)
of paragraph (a) thereof and (ii) adding a new paragraph
(c)thereto to read as follows:
"(c) If Borrower elects to extend the
Loans from the Revolving Loan Maturity Date to
the Term Loan Maturity Date as contemplated in
SECTION 4.02(A)(b), all obligations of the
Banks to make further Revolving Credit Loans
shall nonetheless cease as of the Revolving
Loan Maturity Date and, thereafter, all
amounts outstanding shall consist of term
loans and shall be repaid in accordance with
the provisions of SECTION 4.02 on or before
the Term Loan Maturity Date."
<PAGE>
b. Section 1.05 of the Credit Agreement is
hereby amended by rewriting sub-section (v) of paragraph (b)
thereof to read as follows:
"mature on the Revolving Loan Maturity Date,
provided, if Borrower has elected to extend the Loan as
provided in SECTION 4.02(A)(b), said Notes shall
automatically be extended and shall thereafter mature on the
Term Loan Maturity Date . . ."
c. Section 1.09 of the Credit Agreement is hereby
amended by rewriting subsection (iv) of paragraph (a)
thereof to read as follows:
"no Interest Period shall extend beyond
the Revolving Loan Maturity Date unless
Borrower has elected to extend the Loan
pursuant to SECTION 4.02(A)(b), in which case
no Interest Period shall extend beyond the
Term Loan Maturity Date"
d. Section 2.01 of the Credit Agreement is
hereby amended by changing all references contained therein to
"Maturity Date" to "Revolving Loan Maturity Date."
e. Section 3.01(a) of the Credit Agreement is
hereby amended in its entirety to read as follows:
"Section 3.01 FEES. (a) Borrower
agrees to pay to the Administrative Agent a facility
fee ("FACILITY FEE") based on Borrower's Rating, at the
rates set forth below, pro rata for the account of each
Non-Defaulting Bank, with respect to its Commitment in effect
from the Closing Date until payment in full of the Notes,
which Facility Fee, prior to the Revolving Loan Maturity
Date, shall be based upon the total amount of such Bank's
Commitment, regardless of what amount may actually be advanced
and outstanding and, subsequent thereto and until payment in full
of the Notes, shall be based upon the average daily balance of
the actual principal amounts outstanding during the quarterly
period then ending. Such Facility Fee shall be due and
payable in arrears on the first Business Day of each March,
June, September and December and on the date the Notes are
paid in full.
Rating A-/A3 BBB+/Baa1 BBB/Baa2 BBB-/Baa3 BB+/Ba1
Facility Fee .1% .125% .15% .2% .3%"
<PAGE>
f. Section 3.03 of the Credit Agreement is hereby amended in its
entirety to read as follows:
"3.03 TERMINATION OF COMMITMENTS. The Total Commitment shall
terminate on the Revolving Loan Maturity Date subject to the terms
of SECTION 4.02(A)(b)."
g. Section 4.02(A)(b) of the Credit Agreement is hereby
amended in its entirety to read as follows:
"All outstanding principal and any accrued unpaid
interest shall be due and owing on the Revolving Loan
Maturity Date, provided, if no Default or Event of
Default shall be in existence Borrower may, at its option,
by giving written notice to the Administrative Agent no
later than five Business Days before the Revolving Loan
Maturity Date, extend the final maturity of the Loans
from the Revolving Loan Maturity Date to the Term Loan
Maturity Date. If Borrower makes such election,
Borrower shall make mandatory payments of principal on
the last Business Day of each February, May, August and
November following January 1, 2000 (i) equal to one-fourteenth
(1/14th) of the total outstanding principal balance of all
of the Revolving Loan Notes on the Revolving Loan Maturity
Date, and (ii) a final balance of all of the remaining
outstanding principal on the Term Loan Maturity Date.
Borrower's election to so extend shall constitute an
automatic extension of each of the Notes to the Term Loan
Maturity Date. All outstanding principal and all
accrued, unpaid interest on all Loans shall be repaid in
full on the Term Loan Maturity Date."
h. Section 8.08 of the Credit Agreement is hereby
amended in its entirety to read as follows:
"Section 8.08 DEBT TO CAPITALIZATION
Ratio. Borrower shall not permit the ratio of
its Consolidated Indebtedness to its
Consolidated Total Capitalization measured at
the end of each fiscal quarter, to be greater
at any time than the following ratio for the
periods indicated:
Through End of
Calendar Year 1998 All Other Periods
.50 to 1.0 .45 to 1.0"
<PAGE>
i. The following defined terms are hereby amended in
Section 10 of the Credit Agreement in their appropriate
alphabetical order to read as follows:
(i) "'AMENDMENT CLOSING DATE' shall mean the date
that the First Amendment to Credit Agreement and Loan Documents
dated as of November 23, 1998, among Borrower, the Administrative
Agent and the Banks shall have become effective pursuant to
Section 4 thereof."
(ii) "'APPLICABLE EURODOLLAR MARGIN' shall mean the
following: prior to the Revolving Loan Maturity Date the
Applicable Eurodollar Margin shall be equal to the percentage
per annum set forth below opposite Borrower's applicable
Rating, effective as of the date such Rating is published or
announced:
RATING APPLICABLE
EURODOLLAR
MARGIN
A-/A3 .40%
BBB+/Baa1 .50%
BBB/Baa2 .60%
BBB-/Baa3 .80%
BB+/Ba1 .95%
Subsequent to the Revolving Loan Maturity Date and until
payment in full of the Obligations, the Applicable Eurodollar
Margin shall be equal to the percentage per annum set forth
below opposite Borrower's applicable Rating, effective as of
the date such Rating is published or announced:
APPLICABLE
EURODOLLAR
RATING MARGIN
A-/A3 .65%
BBB+/Baa1 .75%
BBB/Baa2 .85%
BBB-/Baa3 1.05%
BB+/Ba1 1.2%"
(iii) The definition of "Commitment Commission" is
hereby deleted. References in Section 9 to the Commitment
Commission shall henceforth refer to the Facility Fee.
(iv) The phrase "Maturity Date" in the definition of
"Disqualified Capital Stock" is deleted and replaced with the
phrase "Term Loan Maturity Date."
(v) "'FACILITY FEE' shall have the meaning set forth
in SECTION 3.01(a)."
<PAGE>
(vi) The definition of "Maturity Date" is hereby deleted.
(vii) "'REVOLVING LOAN MATURITY DATE' shall mean 364
days after the Amendment Closing Date, unless accelerated
pursuant to SECTION 9."
(viii)"'TERM LOAN MATURITY DATE' shall mean the second
anniversary of the Revolving Loan Maturity Date, unless
accelerated pursuant to SECTION 9."
j. Section 12.12 of the Credit Agreement is hereby
amended by deleting the phrase "Maturity Date" contained in
subsection (i) thereof and replacing it with the phrase
"Revolving Loan Maturity Date or the Term Loan Maturity Date
. . ."
k. Annex I of the Credit is hereby deleted and
replaced with the Annex I attached hereto.
Section 3. RATIFICATION. The Borrower hereby ratifies
and confirms all of the Obligations under the Credit Agreement (as
amended hereby) and the Notes. All references to the "Credit
Agreement" shall mean the Credit Agreement as amended hereby and
as the same may be amended, supplemented, restated or otherwise
modified and in effect from time to time in the future.
Section 4. EFFECTIVENESS. The effectiveness of this
Amendment is subject to the condition precedent that the Administrative
Agent shall have received in form and substance reasonably satisfactory
to the Banks and in such number of counterparts as may be reasonably
requested by the Administrative Agent, this Amendment executed by the
Borrower and each of the Banks and the Borrower shall have paid all of
the Administrative Agent's reasonable costs and expenses (other than legal
fees and expenses, which shall be payable promptly after Borrower receives
an invoice from counsel to the Administrative Agent) incurred in
connection herewith.
Section 5. REPRESENTATIONS AND WARRANTIES. The Borrower
hereby represents and warrants to the Banks that (a) the execution,
delivery and performance of this Amendment has been duly
authorized by all requisite corporate action on the part of the
Borrower, (b) the Credit Agreement (as amended hereby)
constitutes a valid and legally binding agreement enforceable against the
Borrower in accordance with its terms except, as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws relating to or affecting the enforcement of
creditors' rights generally and by general principles of equity, (c) the
representations and warranties by the Borrower contained in the Credit
Agreement as amended hereby are true and correct on and as of the date
hereof in all material respects as though made as of the date hereof
unless such representation and warranty expressly indicates that it is
being made as of any specific date, in which case such representations
and warranties shall be true and correct in all material respects as of
such date, and except to the extent that such representations and
warranties are no longer true and correct due to any action or inaction
permitted or required to be taken under the Credit Documents by Borrower
or any Subsidiary, and (d) no Default or Event of Default exists under
the Credit Agreement (as amended hereby).
<PAGE>
Section 6. CHOICE OF LAW. THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 7. FINAL AGREEMENT. THE CREDIT AGREEMENT (AS AMENDED
HEREBY) 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 ORAL AGREEMENTS BETWEEN THE PARTIES.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by its officers thereunto duly authorized as of the date first
above written.
ADDRESS: GLOBAL MARINE INC.
777 N. Eldridge Road
Houston, Texas 77079-4416
Telecopy: (281) 596-5826
Telephone:(281) 596-5810 By: /S/W. MATT RALLS
Attention: W. Matt Ralls W. Matt Ralls
Vice President and Treasurer
<PAGE>
BANKERS TRUST COMPANY, Individually
and as Administrative Agent
By: /S/MARCUS M. TARKINGTON
Name: Marcus M. Tarkington
Title:Principal
<PAGE>
ABN AMRO BANK, N.V., HOUSTON
AGENCY, Individually and as
Syndication Agent
By: /S/STUART MURRAY
Name: Stuart Murray
Title: Vice President
By: /S/W. BRYAN CHAPMAN
Name: W. Bryan Chapman
Title: Group Vice President
<PAGE>
ARGENTARIA-BANCO EXTERIOR DE ESPANA
NEW YORK BRANCH
By: /S/AUGUSTO GODOY
Name: Augusto Godoy
Title: General Manager
<PAGE>
THE BANK OF NOVA SCOTIA
By: /S/F.C.H. ASHBY
Name: F.C.H. Ashby
Title: Senior Manager
Loan Operations
<PAGE>
BANK OF TOKYO - MITSUBISHI, LTD.
By: /s/John W. McGhee
Name: John W. McGhee
Title: Vice President & Manager
<PAGE>
CREDIT LYONNAIS, NEW YORK BRANCH
By: /S/PHILIPPE SOUSTRA
Name: Philippe Soustra
Title: Senior Vice President
<PAGE>
DEN NORSKE BANK ASA, NEW YORK
BRANCH
By: /S/GEORGE P. MALANGA
Name: George P. Malanga
Title: Senior Vice President
By: /S/BARBARA GRONQUIST
Name: Barbara Gronquist
Title: First Vice President
<PAGE>
SOCIETE GENERALE, SOUTHWEST AGENCY,
Individually and as Documentation
Agent
By: /S/RICHARD A. GOULD
Name: Richard A. Gould
Title: Director
<PAGE>
TORONTO DOMINION (TEXAS), INC.
By: /S/CAROL BRANDT
Name: Carol Brandt
Title: Vice President
<PAGE>
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By: /S/FELICIA LA FORGIA
Name: Felicia La Forgia
Title: Vice President
By: /S/THOMAS LEE
Name: Thomas Lee
Title: Associate
<PAGE>
ANNEX I
COMMITMENTS
BANK COMMITMENT
Bankers Trust Company $ 5,000,000
ABN AMRO Bank, N.V., Houston Agency $30,000,000
Argentaria-Banco Exterior de Espana New York Branch $ 5,000,000
The Bank of Nova Scotia $10,000,000
Bank of Tokyo-Mitsubishi, Ltd. $10,000,000
Credit Lyonnais, New York Branch $20,000,000
Den norske Bank ASA, New York Branch $15,000,000
Societe Generale, Southwest Agency $30,000,000
Toronto Dominion (Texas), Inc. $15,000,000
WestDeutsche Landesbank Girozentrale,
New York Branch $10,000,000
March 10, 1998
Mr. Gary Kott
Sr. V.P., CFO
Global Marine Inc.
Houston, Texas
By Courier
Re: Resolution of Arbitration Proceedings between Transocean ASA
and Global Marine Inc.
Dear Mr. Kott:
This will confirm the agreement reached between Global Marine
Inc. ("Global") and Transocean ASA ("Transocean") (together with
their Associated Companies referred to hereinafter as "party" or
"parties") with respect to the resolution of the pending
arbitration proceedings between Global and Transocean.
The proceedings involve certain disputes under the Purchase and
Sale Agreement dated August 24, 1993, the Owner's Operating
Principles dated August 24, 1993 and other agreements including
but not limited to the Tax Partnership Agreements between the
parties (all such agreements being defined hereinafter as the
"Agreements") relating to the ownership, management and operation
of four drilling rigs (collectively the "Rigs" or individually
the "Rig"), one of which was sold by Global to Transocean
("Transocean Nordic") and three of which were sold by Transocean
to Global ("Glomar Adriatic V, Glomar Adriatic VI and Glomar
Adriatic VII) pursuant to such Agreements.
The parties wish to resolve all pending disputes and terminate
the Agreements on the following terms.
In consideration of the mutual promises contained herein and
other good and valuable consideration, Transocean and Global
agree as follows:
1. Within six (6) business days after execution of this
agreement, Global shall pay Transocean by wire transfer
to an account to be designated by Transocean:
1.1. The sum of U.S. $18,000,000 (Eighteen million U.S.
dollars).
<PAGE>
1.2. The further sum of U.S. $9,796,981 (Nine million seven
hundred ninety six thousand nine hundred eighty one
U.S. dollars) which represents the balance of the
undisputed Equalisation payments due Transocean under
the Agreements for operations up to February 1, 1998.
1.3. The yet further sum of U.S. $1,984,613 (One million
nine hundred eighty four thousand six hundred thirteen
U.S. dollars) which represents the resolution of the
"disputed amounts" as to the periodic survey and
upgrade for the Transocean Nordic.
2. Following receipt by Transocean of the sums payable under
Clause 1 hereof:
2.1. The Agreements shall be terminated with effect from
February 1, 1998 and thereafter neither party shall
have any further obligations or responsibilities to the
other under the Agreements save for the purpose of
giving effect to and enforcing this agreement.
2.2. The London arbitration proceedings presently pending
between Transocean and Global shall be discontinued
forthwith with no order as to costs and each party
agrees:
2.2.1 that all claims and counterclaims made in the
London arbitration proceedings are thereby
settled, and the parties shall be under no
further liability whatsoever to each other
in respect of the Agreements and/or the
ownership, management or operation of the
Rigs, except as provided for herein.
2.2.2. To notify the arbitration tribunal of the
fact of this agreement and to pay the costs
of the arbitrator selected by that party and
one half of the costs of the third arbitrator;
2.2.3. To pay their own legal costs and disbursements
incurred in connection with the said arbitration
proceedings; and
2.2.4. To provide wriften joint instructions to the
NatWest Bank, 135 Bishopsgate to pay to
Global the principal amount of the funds
deposited by Global and currently held in the
Joint Account established pursuant to the
Agreement between the parties dated 12 December 1997
and to pay to Transocean the interest accrued on such
deposited funds.
<PAGE>
3. For a period of three years from February 1, 1998, if either
Transocean or Global should decide to sell or transfer its
ownership in any of the Rigs to any entity that is not an
Associated Company, the other party shall have the right of
first refusal. Such right of first refusal shall be valid
for forty-five (45) days after receipt by the non-selling
party of written notice of the selling party's intent to
sell which notice shall set forth all material terms of the
bona fide offer to purchase the Rig(s) which the selling
party is willing to accept. If the Rig(s) is/are sold or
transferred to the non-selling party or a third party, then
any gain above the values set forth in Clause 4 shall be
divided between Transocean and Global with 56.59% of such
amount belonging to Global and 43.41% belonging to Transocean.
4. For the purposes of Clause 3 above the values above which
the gain is to be divided between Transocean and Global as
set forth above are as follows:
Transocean Nordic - $56,000,000
Glomar Adriatic V - $21,000,000
Glomar Adriatic VI - $25,500,000
Glomar Adriatic VII - $26,500,000
provided, however, that in the event that either Transocean
or Global makes aggregate capital expenditures in a Rig
which total over U.S. $5,000,000, then the value listed
above shall. be increased by the amount of such capital
expenditures for that Rig. In addition, the "gain" shall
be that amount determined after deducting reasonable
selling expenses (i.e. Commission, etc.).
5. For the avoidance of doubt, the right of refusal set out in
Clause 3 above shall not arise by reason of (a) a merger of
Transocean or Global with another entity (b) any change in
the ownership of any of the shares of Transocean or Global
or of any Holding Company thereof from time to time in
issue; or (c) any sale or transfer of the ownership of any
of the Rigs to an Associated Company provided that the right
of first refusal set out in Clause 3 above shall arise if
such Associated Company ceases to be an Associated Company
and prior to such cessation the relevant Rigs(s) has not
been transferred to Transocean or Global (as the case may
be) or to another Associated Company thereof.
6. In this agreement, "Holding Company" and "subsidiary" have
the meanings given in S.736 Companies Act 1985; and "Associated
<PAGE>
Company" means any subsidiary or holding company of Transocean or
Global (as the case may be) and any subsidiary of such holding company.
7. This agreement shall be governed by and construed in accordance with
English law and any disputes arising out of or in connection with this
agreement shall be referred to the exclusive jurisdiction of the English
courts in London, England.
If this correctly sets forth our agreement, please execute and
return one original to us for our files.
Very truly yours,
/s/ Michael Talbert
Michael Talbert
Transocean ASA
Agreed and accepted this 18 day of March 1998
Global Marine Inc.
By: /s/ Gary L. Kott
Name: Gary L. Kott
Title: Senior Vice President/
Chief Financial Officer
CONFORMED COPY
Date 8 December, 1998
HARLAND AND WOLFF SHIPBUILDING
AND HEAVY INDUSTRIES LIMITED
- and -
GLOBAL MARINE INTERNATIONAL
DRILLING CORPORATION
- and -
GLOBAL MARINE LEASING CORPORATION
- and -
GLOBAL MARINE INC.
GM NOVATION AGREEMENT
relating to Shipbuilding Contract
dated 27 February, 1998 for the
construction of deepwater
drillship Hull No.1739
INDEX
Clause Page
1 DEFINITIONS AND INTERPRETATION 1
2 NOVATION 2
3 MISCELLANEOUS 3
4 LAW 4
EXECUTION
THIS GM NOVATION AGREEMENT is made on 8 December, 1998
BETWEEN:
(1) HARLAND AND WOLFF SHIPBUILDING AND HEAVY INDUSTRIES LIMITED,
a company incorporated under the laws of Northern Ireland having its
registered office at Queens Island, Belfast, Northern Ireland, BT3 9DU
(the "Builder");
(2) GLOBAL MARINE INTERNATIONAL DRILLING COMPANY (formerly named Global
Marine International Services Corporation), a corporation incorporated under
the laws of The Bahamas having its registered office at c/o McKinney,
Bancroft & Hughes, Manera House, 4 George Street, PO Box No. 3937, Nassau,
Bahamas ("GMIDC");
(3) GLOBAL MARINE LEASING CORPORATION, a corporation incorporated under
the laws of The Bahamas having its registered office at c/o McKinney, Bancroft
& Hughes, Mareva House, 4 George Street, PO Box No. 3937, Nassau, Bahamas
("GMLC"); and
(4) GLOBAL MARINE INC., a corporation incorporated under the laws of
Delaware, having an office at 777 N. Eldridge Parkway, Houston, Texas 77078,
USA ("GMI").
WHEREAS:
(A) GMIDC and the Builder have entered into the Old Contract (as defined
below) for the construction, completion and delivery by the Builder and
delivery to GMIDC of a deepwater drillship, identified by the Builder
as Hull No. 1739.
(B) GMIDC and GMLC have agreed that GMLC will assume all the rights and
obligations of GMIDC under the Old Contract and the Builder is willing
to and agree to the substitution of GMLC in place of GMIDC in relation
to such rights and obligations, to the release of GMIDC in respect
thereof so as to bring into existence the New Contract (as defined
below) between the Builder and GMLC, all subject to and upon the terms
and conditions of this Agreement; and
(C) GMI, GMIDC and GMLC have agreed that, in consideration of the
arrangements referred to above, GMLC will assume certain obligations of
GMIDC to GMI, and GMIDC will be released from such obligations.
IT IS AGREED as follows:
1 DEFINITIONS AND INTERPRETATION
1.1 In this Agreement, unless the context otherwise requires, words and
expressions defined in the Old Contract or the New Contract shall have
the meanings given to them therein when used herein, and the following
words and expressions shall have the following meaning:
"Dollars" and "$" means the lawful currency of the United States of
America;
"Existing Work" means that Work, if any, in respect of which, in
accordance with the New Contract, title has passed to GMIDC on or
before time at which this Agreement takes effect in accordance with
Clause 2.1;
"New Contract" means the Old Contract as it is to be novated to GMLC
by, and subject to and in accordance with the terms and conditions of,
this Agreement;
"Novated Obligations" means all the obligations and liabilities of
"Owner" expressed to be imposed under, or otherwise arising under, out
of or in connection with, the Old Contract, as such obligations and
liabilities are to be novated subject to and in accordance with the
terms and conditions of this Agreement (which obligations and
liabilities shall, for the avoidance of doubt, include obligations and
liabilities arising under the Old Contract on or before the date hereof
which have not been performed or discharged on the date hereof including
obligations and liabilities in respect of amounts invoiced by the
Builder but not paid);
"Novated Rights" means all the rights and claims of "Owner" expressed
to be granted under, or otherwise arising under, out of or in connection
with, the Old Contract, as such rights and claims are to be novated
subject to and in accordance with the terms and conditions of this
Agreement (which rights and claims shall, for the avoidance of doubt,
include rights and claims in respect of obligations and liabilities of
the Builder arising under the Old Contract before the date hereof);
"Old Contract" means the contract dated 27 February, 1998 between
GMIDC and the Builder first referred to in Recital (A) above, including
all schedules thereto, as amended, varied and supplemented prior to
the date hereof.
1.2 References in this Agreement to Clauses or Appendices are, unless
otherwise specified, references to clauses of, and appendices to, this
Agreement.
1.3 References to "person" or "persons" or to words importing persons
include, without limitation, individuals, firms, corporations,
government agencies, committees, departments, authorities and other
bodies, incorporated or unincorporated, whether having distinct legal
personality or not.
1.4 Clause headings are for ease of reference only.
2 NOVATION
2.1 Immediately prior to the Effective Time (as defined in a novation
agreement of even date herewith and made between the Builder, GMLC,
GMIDC and Nelstar Leasing Company Limited) it is agreed that the
following shall, and hereby does, take place:
(a) GMIDC releases and discharges the Builder from all obligations,
liabilities, claims and demands under the Old Contract;
(b) the Builder releases and discharges GMIDC from all obligations,
liabilities, claims and demands under the Old Contract;
(c) GMLC has the benefit of the Novated Rights to the exclusion of GMIDC
and the Builder assumes towards GMLC all obligations and liabilities
corresponding to the Novated Rights;
(d) GMLC assumes the Novated Obligations and the Builder has the benefit
of all rights and claims corresponding to the Novated Obligations;
(e) GMIDC passes to GMLC such title to the Existing Work and the Vessel as
it is constructed as it has obtained from the Builder, and GMLC accepts
such title in accordance with Clause 9.1(e) of the New Contract,
such that the Old Contract shall cease to have effect as between the
Builder and GMIDC and shall be novated so as to bring the New Contract
into effect between the Builder and GMLC.
2.2 The Builder acknowledges that all obligations and liabilities of GMIDC
under the Old Contract which have been performed or discharged by GMIDC
shall, to that extent, be treated by the Builder for the purposes of
the New Contract as having been performed or discharged by GMLC.
2.3 Except as otherwise expressly provided in this Agreement, nothing in
this Agreement or the New Contract shall subject the Builder to any
liability to which it would not otherwise be subject under the Old
Contract or diminish in any way any rights or remedies to which the
Builder would otherwise be entitled under the Old Contract or modify
in any respect the Builders contractual rights and obligations
thereunder.
2.4 The Builder hereby acknowledges and agrees with GMLC that, if the
Builder is in breach of its obligations under the Old Contract, GMIDCs
entitlement to damages shall be preserved and vest in GMLC. If the
Builder is in breach of its obligations under the Old Contract or New
Contract the measure of damages shall be that which would have been
payable to GMIDC under the Old Contract if this Agreement had not been
entered into; provided that the Builder shall not be liable to pay an
aggregate amount under Clauses 17 or 25 of the New Contract in excess
of the amount which the Builder would have been liable to pay under
Clauses 17 and 25 of the Old Contract as if this Agreement had not
been entered into.
2.5 Immediately following the novation referred to at clause 2.1 above, all
references in the New Contract to Owner shall be construed as
references to GMLC rather than GMIDC, provided that:
(a) in Clause 1.1.28 the first reference to Owner shall mean the
Old Owner and the second reference to Owner shall mean the Old
Owner before the time at which the novation contained in Clause 2
of this Agreement takes effect, and the New Owner thereafter;
(b) in Clause 3.2 the reference to Owner in the second line of
sub-clause (a) shall mean the Old Owner; and
(c) in Clause 3.5, the reference to Owner shall mean the Old Owner
(so that, for the avoidance of doubt, the applicable Builders
Working Drawings and other applicable rights referred to in that
Clause shall be and remain the property of the Old Owner and not
the New Owner).
2.6 For the avoidance of doubt, all rights and obligations of GMIDC in
respect of OFE shall remain with GMIDC, and no title to any OFE shall
pass to GMLC under this Agreement.
2.7 In consideration of the novation contained in Clause 2.1 above, GMLC
shall, and hereby does, assume, with effect immediately following such
novation, the obligation of GMIDC to repay to GMI outstanding
indebtedness under certain intra-group arrangements in the amount of
US$123,687,203.74 and GMIDC shall be, and hereby is, released
by GMI from such obligations.
3 MISCELLANEOUS
3.1 This Agreement may be executed in several counterparts and any single
counterpart or set of counterparts signed, in either case, by all of
the parties thereto shall be deemed to be an original, and all
counterparts when taken together shall constitute one and the same
instrument.
3.2 This Agreement may be amended only by an instrument in writing signed
by all of the parties hereto.
3.3 Any waiver of any right, power or privilege by any party hereto shall
be in writing signed by such party. No failure or delay by any party
hereto to exercise any right, power or privilege under this Agreement
shall operate as a waiver thereof nor shall any single or partial
exercise of such right, power or privilege preclude any further exercise
thereof or of any other right, power or privilege.
4 LAW
4.1 This Agreement and the rights and obligations of the parties hereunder
shall be governed by and construed in accordance with the laws of
England and Wales.
4.2 Each of the parties hereto submits to the jurisdiction of the courts of
England with respect to this Agreement.
SIGNED by the representatives of the parties.
___________________________________________
J.P. WARD, Attorney-in-Fact
Duly authorised for and on behalf of for H&W
HARLAND AND WOLFF SHIPBUILDING
AND HEAVY INDUSTRIES LIMITED
___________________________________________
W.A. BAKER
Duly authorised for and on behalf of
GLOBAL MARINE INTERNATIONAL
DRILLING CORPORATION
_________________________________________
W.A. BAKER
Duly authorised for and on behalf of
GLOBAL MARINE LEASING CORPORATION
_________________________________________
W. RALLS
Duly authorised for and on behalf of
GLOBAL MARINE INC.
CONFORMED COPY
Date 8 December, 1998
HARLAND AND WOLFF SHIPBUILDING
AND HEAVY INDUSTRIES LIMITED
- and -
NELSTAR LEASING COMPANY LIMITED
- and -
GLOBAL MARINE INTERNATIONAL DRILLING CORPORATION
- and -
GLOBAL MARINE LEASING CORPORATION
NOVATION AGREEMENT
relating to Shipbuilding Contract
dated 27 February, 1998 for the
construction of deepwater
drillship Hull No. 1739
<PAGE>
INDEX
Clause Page
1 DEFINITIONS AND INTERPRETATION 1
2 REPRESENTATIONS AND WARRANTIES 4
3 CONDITIONS PRECEDENT 7
4 NOVATION 9
5 OTHER TRANSACTIONS 9
6 OFE CONTRACTS 10
7 MEASURE OF DAMAGES 11
8 BUILDER'S RIGHTS AGAINST NEW OWNER 11
9 CERTAIN OBLIGATIONS 12
10 VAT 12
11 STAMP DUTY 13
12 MISCELLANEOUS 14
13 NOTICES 15
14 BUILDER'S COSTS AND EXPENSES 16
15 LAW 17
EXECUTION
APPENDIX A CONTRACT AMENDMENTS
APPENDIX B FORM OF CERTIFICATE (Clause 3.2(a))
APPENDIX C FORM OF CERTIFICATE (Clause 3.2(g))
APPENDIX D FORM OF EFFECTIVE TIME CERTIFICATE
APPENDIX E FORM OF REPLACEMENT BUILDER PARENT COMPANY
GUARANTEE
APPENDIX F FORM OF REPLACEMENT LETTER OF CREDIT
APPENDIX G FORM OF OFE ASSIGNMENT
<PAGE>
THIS NOVATION AGREEMENT is made on 8 December, 1998
BETWEEN:
HARLAND AND WOLFF SHIPBUILDING AND HEAVY INDUSTRIES LIMITED, a company
incorporated under the laws of Northern Ireland having its registered office
at Queen's Island, Belfast, Northern Ireland, BT3 9DU (the "Builder");
NELSTAR LEASING COMPANY LIMITED, a company incorporated under the laws of
England and Wales having its registered office at 71 Lombard Street,
London EC3P 3BS (the "New Owner").
GLOBAL MARINE LEASING CORPORATION, a company incorporated under the laws of
The Bahamas having its registered office at c/o McKinney, Bancroft & Hughes,
Mareva House, 4 George Street, PO Box No.3937, Nassau, Bahamas (the "Old
Owner").
GLOBAL MARINE INTERNATIONAL DRILLING CORPORATION (formerly named
Global Marine International Services Corporation), a company incorporated
under the laws of The Bahamas having its registered office at c/o McKinney,
Bancroft & Hughes, Mareva House 4 George Street, PO Box No.3937, Nassau,
Bahamas ("GMIDC").
WHEREAS:
(A) The Old Owner and the Builder are party to the Old Contract (as defined
below) for the construction, completion and delivery by the Builder to the Old
Owner of a deepwater drillship, identified by the Builder as Hull No. 1739
(such contract originally having been entered into between GMIDC and the Builder
and having been novated from GMIDC to the Old Owner by the GM Novation Agreement
(as defined below)).
(B) At the request of the Old Owner, the New Owner has agreed to assume all
the rights and obligations of the Old Owner under the Old Contract and the
Builder is willing to agree to the substitution of the New Owner in place of
the Old Owner in relation to such rights and obligations, to the release of
the Old Owner in respect thereof and to the amendment of the Old Contract so
as to bring into existence the New Contract (as defined below) between the
Builder and the New Owner, all subject to and upon the terms and conditions of
this Agreement.
IT IS AGREED as follows:
1 DEFINITIONS AND INTERPRETATION
1.1 In this Agreement, unless the context otherwise requires, words and
expressions defined in the Old Contract or the New Contract shall have the
meanings given to them therein when used herein and the following words and
expressions shall have the following meaning:
"Building Agreements" means the Old Contract, the GM Novation Agreement,
this Agreement, the New Contract, the Put Option Agreement, the OFE
Assignments and the OFE Supervision Agreement;
"Builder's OFE Agent" means GMIDC in its capacity as agent and supervisor
for the Builder appointed under the OFE Supervision Agreement;
"Contract Amendments" mean the amendments to the Old Contract set out in
Appendix A;
"Cut-Off Date" means 31st December, 1998, or if that date is not a Working
Day, the preceding Working Day;
"Dollars" and "$" means the lawful currency of the United States of
America;
"Effective Time" means the time (on a Working Day) agreed as such in the
certificate to be executed by the parties pursuant to Clause 3.4;
<PAGE>
"Excluded OFE Contracts" means OFE Contracts under which title to all
(but not part only) of the applicable OFE the subject thereof has passed
from the applicable OFE Supplier to GMIDC on or prior to the Effective
Time;
"Existing OFE Contracts" means OFE Contracts which are in existence as
at the Effective Time, other than Excluded OFE Contracts;
"Existing Work" means that Work in respect of which, in accordance with
the Old Contract, title has passed or shall have passed to the Old Owner
on or before the Effective Time;
"Future Instalments" means (i) all amounts (whether instalments of
Contract Price, bonuses or otherwise) payable but not yet paid by the Old
Owner (or by GMIDC as the Old Owner's predecessor in interest) to the
Builder on or before the Effective Time and (ii) all amounts (whether
instalments of Contract Price, bonuses or otherwise) becoming payable
by the New Owner to the Builder under the New Contract after the Effective
Time;
"Future OFE Contracts" means OFE Contracts which are entered into
(pursuant to the OFE Supervision Agreement) after the Effective Time;
"GM Novation Agreement" means a novation agreement dated 8 December, 1998
entered into between the Builder, GMIDC and the Old Owner providing for
the novation of the Old Contract (as therein defined) from GMIDC, but
with obligations in relation to OFE remaining with GMIDC;
"Initial Payment" means the amount payable in Sterling by the New Owner
to the Builder under Clause 5.1(a);
"Lease" means the lease agreement of even date herewith entered into
between the New Owner and the Old Owner in respect of the leasing of the
Vessel by the New Owner to the Old Owner;
"Lien" means any right, title or interest in favour of any person other
than the New Owner, including (without prejudice to the generality of the
foregoing) any right of ownership, retained title, security, mortgage,
pledge, charge, encumbrance, lease, lien, statutory right in rem,
hypothecation, title retention, attachment, levy, claim or security
interest of whatever kind;
"New Contract" means the Old Contract as it is to be amended and restated,
and as it is to be novated to the New Owner by, and subject to and in
accordance with the terms and conditions of, this Agreement;
"New Owner's Agent" means GMIDC in its capacity as agent and supervisor
for the New Owner appointed under the Supervision Agreement;
"Novated Obligations" means all the obligations and liabilities of "Owner"
expressed to be imposed under, or otherwise arising under, out of or in
connection with, the Old Contract, as such obligations and liabilities are
to be novated and amended subject to and in accordance with the terms and
conditions of this Agreement (which obligations and liabilities shall,
for the avoidance of doubt, include obligations and liabilities arising
under the Old Contract on or before the Effective Time which have not been
performed or discharged on the Effective Time including obligations and
liabilities in respect of amounts invoiced by the Builder but not paid);
"Novated Rights" means all the rights and claims of "Owner" expressed to
be granted under, or otherwise arising under, out of or in connection
with, the Old Contract, as such rights and claims are to be novated and
amended subject to and in accordance with the terms and conditions of
this Agreement (which rights and claims shall, for the avoidance of
doubt, include rights and claims in respect of obligations and liabilities
of the Builder arising under the Old Contract before the Effective Time);
<PAGE>
"OFE Assigned Rights" means all right, title and interest of GMIDC in
and to the Existing OFE Contracts (including, without limitation, the
right to take delivery of and title to the applicable OFE);
"OFE Consideration" means an amount equal to the OFE Cost, payable by
the Builder to GMIDC subject to and in accordance with Clause 6.3;
"OFE Assignments" means assignments in respect of the GMIDC's rights,
title and interest in and to (but not obligations under) the Existing
OFE Contracts to be entered into between GMIDC and the Builder
substantially in the form of Appendix G;
"OFE Contracts" means contracts or purchase orders in respect of OFE
with OFE Suppliers (i) entered into or from time to time to be entered
into before the Effective Time by GMIDC or (ii) from time to time to be
entered into on or after the Effective Time by the Builder's OFE Agent on
behalf of the Builder;
"OFE Cost Instalment" means that part of each instalment of Total Vessel
Cost payable pursuant to Clause 8.3 of the New Contract which is
apportionable to OFE Cost;
"OFE Suppliers" means suppliers of OFE;
"OFE Supervision Agreement" means a supervision agreement entered into
between the Builder and the Builder's OFE Agent of even date herewith
whereby, amongst other things, the Builder's OFE Agent is appointed
agent and supervisor of the Builder in respect of the OFE Contracts;
"Old Contract" means the contract dated 27 February, 1998 first made
between GMIDC and the Builder, as novated from GMIDC to the Old Owner by
the GM Novation Agreement and as otherwise amended, varied and
supplemented prior to the date hereof including all schedules thereto;
"Pounds" and "Pounds-Sterling" means the lawful currency of the United
Kingdom;
"Put Option Agreement" means the agreement of even date herewith entered
into between the Builder, the New Owner and Global Marine C.R. Luigs
Limited providing for the New Contract to be further novated from the New
Owner to Global Marine C. R. Luigs Limited at the option of the New Owner
in the manner and in the circumstances therein described;
"Replacement Letter of Credit" means the letter of credit to be issued
by Ulster Bank in favour of the New Owner (but capable of being drawn at
the instance of the New Owner's Agent) in the form of Appendix F;
"Sterling Equivalent" means the equivalent in Pounds of an amount in
Dollars (or any other relevant currency) determined by reference to the
spot rate quoted by Lloyds Bank Plc for the purchase of Dollars (or any
other relevant currency) with Pounds at 11:00 a.m. two (2) Working Days
prior to any applicable date of payment under this Agreement;
"Supervision Agreement" means a supervision agreement entered into or to
be entered into between the New Owner and the New Owner's Agent of even
date herewith whereby, amongst other things, the New Owner's Agent is
appointed agent and supervisor of the New Owner in respect of certain
matters relating to the New Contract;
<PAGE>
"Working Day" means any day (other than a Saturday or Sunday) on which
banks are open for business in London.
1.2 References in this Agreement to Clauses or Appendices are, unless
otherwise specified, references to clauses of, and appendices to, this
Agreement.
1.3 References to "person" or "persons" or to words importing persons
include, without limitation, individuals, firms, corporations, government
agencies, committees, departments, authorities and other bodies,
incorporated or unincorporated, whether having distinct legal personality
or not.
1.4 Clause headings are for ease of reference only.
2 REPRESENTATIONS AND WARRANTIES
2.1 The Builder represents and warrants to each of the other parties to this
Agreement that the following statements are, at the date hereof, true and
accurate:
(a) the Builder is duly incorporated with limited liability under the
laws of Northern Ireland and has full power, authority and right to
enter into and perform its obligations under the Building Agreements
and to consummate the transactions contemplated thereby;
(b) the execution, delivery and performance of the Building Agreements
and the consummation of the transactions contemplated thereby have
been duly authorised by all necessary corporate action on the part
of the Builder, do not require shareholder approval and do not
contravene any applicable law, regulation or order binding on the
Builder or any of its assets or its Memorandum and Articles of
Association;
(c) neither the execution, delivery nor performance by the Builder of
the Building Agreements, nor the consummation of any of the
transactions by the Builder contemplated thereby, require the consent
or approval of, the giving of notice to, the registration with, or
the taking of any other action in respect of, any governmental
authority or agency, except such as have been obtained and are in
full force and effect;
(d) the Building Agreements and any document required to be entered
into by the Builder thereunder constitute, or when entered into will
constitute, legal, valid and binding obligations of the Builder
subject to the following matters:
(i) the other parties to the Building Agreements having the capacity,
power and authority to enter into and perform their respective
obligations thereunder;
(ii) the due execution and delivery of the Building Agreements by all
the other parties thereto; and
(iii) applicable laws relating to bankruptcy, insolvency or
liquidation or any other laws or legal procedures affecting
generally the enforcement of creditors' rights, and
applicable general principles of equity;
<PAGE>
(e) title to the Existing Work and the Vessel as it is constructed has
passed or, as the case may be, will have passed, in accordance with
clause 9.1 of the Old Contract, on or prior to the Effective Time
from the Builder to the Old Owner in accordance with the Old Contract
and, as at the Effective Time, there shall be no other Work, title to
which has not passed from the Builder to the Old Owner; and
(f) at the Effective Time the Existing Work and the Vessel as it is
constructed will be located in Northern Ireland, save for Existing
Work and parts of the Vessel (including, without limitation, OFE)
which may be located elsewhere in the course of manufacture or
transportation.
2.2 The New Owner represents and warrants to each of the other parties to
this Agreement that the following statements are, at the date hereof, true
and accurate:
(a) the New Owner is duly incorporated with limited liability under the
laws of England and Wales, is a wholly-owned indirect subsidiary of
Lloyds Bank Plc and has full power, authority and right to enter into
and perform its obligations under the Building Agreements to which it
is a party and to consummate the transactions contemplated thereby;
(b) the execution, delivery and performance of the Building Agreements
to which it is a party and the consummation of the transactions
contemplated hereby have been duly authorised by all necessary
corporate action on the part of the New Owner, do not require
shareholder approval and do not contravene any applicable law, order
or regulation binding on the New Owner or any of its assets, or its
Memorandum and Articles of Association; and
(c) the Building Agreements to which the New Owner is a party and any
document required to be entered into by the New Owner thereunder
constitute, or when entered into will constitute, legal, valid and
binding obligations of the New Owner subject to the following matters:
(i) the other parties to the Building Agreements having the
capacity, power and authority to enter into and perform their
respective obligations thereunder;
(ii) the due execution and delivery of the Building Agreements by
all the other parties thereto; and
(iii) applicable laws relating to bankruptcy, insolvency or
liquidation or any other laws or legal procedures affecting
generally the enforcement of creditors' rights, and applicable
general principles of equity;
2.3 Each of the Old Owner and GMIDC represents and warrants to each of the
other parties to this Agreement that the following statements are, at the
date hereof, true and accurate:
(a) it is duly incorporated under the laws of the Bahamas and is validly
existing with limited liability, has full power and authority to
enter into and perform its obligations under the Building Agreements
to which it is a party and to consummate the transactions contemplated
hereby and thereby;
(b) the execution, delivery and performance of the Building Agreements to
which it is a party and the consummation of the transactions
contemplated thereby have been duly authorised by all necessary
corporate action on it's part, do not require shareholder approval
and do not contravene any law, regulation or order binding on it or
any of its assets or its constitutional documents;
<PAGE>
(c) neither the execution, delivery nor performance by the Building
Agreements to which it is a party, nor the consummation of any of the
transactions by it contemplated thereby, require the consent or
approval of, the giving of notice to, the registration with, or the
taking of any other action in respect of, any governmental authority
or agency, except such as have been obtained and are in full force
and effect; and
(d) the Building Agreements to which it is a party and any document
required to be entered into by it thereunder constitute, or when
entered into will constitute, it's legal, valid and binding
obligations subject to the following matters:
(i) the other parties to the Building Agreements having the
capacity, power and authority to enter into and perform their
respective obligations thereunder;
(ii) the due execution and delivery of the Building Agreements by
all the other parties thereto; and
(iii) applicable laws relating to bankruptcy, insolvency or
liquidation or any other laws or legal procedures affecting,
generally the enforcement of creditors' rights and applicable
general principles of equity;
2.4 The Old Owner represents and warrants to the New Owner that the following
statements are, at the date hereof, true and accurate:
(a) the Old Owner has supplied the New Owner with true, complete and
up-to-date copies of the Old Contract including the GM Novation
Agreement, all addenda, supplements, amendments and collateral
agreements related thereto and all variation orders issued and agreed
on or prior to the date hereof;
(b) all information to be supplied by the Old Owner to the New Owner
pursuant to Clause 3.2 will be true, complete and up-to-date when
supplied;
(c) the Old Contract has not, except by, or as described in, this
Agreement, been amended, waived, varied, modified, nor has it been
novated, cancelled or terminated;
(d) the Old Owner has not sold, assigned, transferred or created any Lien
in or over the Old Contract or its title to the Existing Work or the
Vessel as it is constructed; and
(e) from the execution of this Agreement until the Effective Time the
Old Owner will:
(i) promptly supply the New Owner with copies of all documents of
the type referred to in Clause 2.4(a) which are entered into
during such period;
(ii) not do any of the things referred to in Clause 2.4(c), except
as permitted by or pursuant to the terms of the Supervision
Agreement; and
<PAGE>
(iii) not do any of the things referred to in Clause 2.4(d).
2.5 The representations and warranties given in this Clause 2 shall survive
the execution of this Agreement.
3 CONDITIONS PRECEDENT
3.1 The occurrence of the Effective Time and the matters listed below in
this Clause 3.1 are subject to the conditions precedent set out in Clause 3.2
having, by no later than the Cut-Off Date, been fulfilled or waived by the
party or parties for whose benefit such conditions are given as expressed in
parentheses. Those matters are:
(a) the coming into effect of the Contract Amendments;
(b) the novation of the Old Contract in accordance with Clause 4;
(c) the obligation of the New Owner to pay the Builder the Initial Payment
in accordance with Clause 5.1(a) and the obligation of the Builder to
pay the Old Owner the amount referred to in Clause 5.1(b);
(d) the obligation of the Old Owner to pass title to the Existing Work
and the Vessel as it is constructed to the Builder, the obligation of
the Builder to take title to the Existing Work and the Vessel as it
is constructed from the Old Owner and the passing of title from the
Builder to the New Owner, all in accordance with Clause 5.3; and
(e) the assignment of the Existing OFE Contracts in accordance with
Clause 6 and the other matters relating to OFE set out in Clause 6.
3.2 The conditions precedent referred to in Clause 3.1 are as follows:
(a) a certificate (in the form of Appendix B) from the New Owner
confirming that the conditions precedent referred to in Schedule 5,
Parts 1 and 2 of the Lease have been fulfilled to the satisfaction of,
or waived by, the New Owner (New Owner);
(b) the execution and delivery to the New Owner of a parent company
guarantee from the Builder's parent company in the form of Appendix E
(New Owner);
(c) the delivery to the New Owner of a letter of credit in the form of
Appendix F issued by Ulster Bank (New Owner);
(d) the delivery by the Old Owner and GMIDC to the New Owner of schedules
describing, respectively, the Existing Work and the Existing OFE
Contracts (New Owner);
(e) the written confirmation by the Old Owner to the New Owner and the
Builder of details of the amount referred to in Clause 5.1(a) and
any amounts referred to in (i) of the definition of Future
Instalments (New Owner and Builder);
(f) the execution and delivery by the Builder, New Owner and Global
Marine C. R. Luigs Limited of the Put Option Agreement (Builder,
New Owner and Old Owner);
(g) a certificate (in the form of Appendix C) from the Old Owner
confirming that the conditions precedent referred to in Clause 3.5
of the Lease have been fulfilled to the satisfaction of, or waived
by, the Lessee (Old Owner);
<PAGE>
(h) the New Owner shall have received an invoice from the Builder for
the Initial Payment complying with the laws relating to Value Added
Tax (New Owner);
(i) the Old Owner shall have received a credit note from the Builder
for an amount equal to the aggregate of all payments previously made
by the Old Owner (or by GMIDC as the Old Owner's predecessor in
interest) to the Builder under the Old Contract (Old Owner);
(j) GMIDC and the Builder shall have entered into OFE Assignments in
respect of the Existing OFE Contracts (GMIDC, New Owner and Builder);
and
(k) the New Owner shall have confirmed to the Builder and the Old Owner
in writing that the Owner Project Manager and the Authorised
Representatives of the Owner Project Manager remain unchanged and
continue to act (by virtue of their appointment by the New Owner's
Agent) on behalf of the New Owner (Builder and Old Owner);
(l) the New Owner being satisfied that payment of the Initial Payment
would not cause the Payment Limit (as defined in the Put Option
Agreement) to be exceeded (New Owner);
(m) evidence reasonably satisfactory to the Old Owner and the New Owner
of the due authorisation and execution (i) by the Builder of this
Agreement and the other Building Agreements (other than the Old
Contract) to which it is a party and (ii) by the Builder's parent
company of the guarantee in the form of Appendix E (Old Owner and
New Owner);
(n) evidence reasonably satisfactory to the Builder and the New Owner of
the due authorisation and execution by the Old Owner of this
Agreement and the other Building Agreements to which it is a party
(Builder and New Owner);
(o) evidence reasonably satisfactory to the Builder and the Old Owner of
the due authorisation and execution by the New Owner of this
Agreement and the other Building Agreements to which it is a party
(Builder and Old Owner);
(p) a legal opinion, in form and substance satisfactory to the Builder,
from Global Marine Inc.'s in-house counsel on the assignability of
the Existing OFE Contracts (Builder); and
(q) the New Owner, the New Owner's Agent and the Builder shall have
confirmed in writing their satisfaction as to the terms on which the
insurance arrangements pursuant to Clause 10 of the New Contract
are put in place and/or amended as at the Effective Time (Builder
and Old Owner and New Owner).
3.3 If a party agrees to waive or defer any of the conditions precedent
specified in Clause 3.2 which are expressed to be for its benefit, such party
may attach to such waiver or deferral such requirements and further conditions
as such party may reasonably determine (in the case of Clauses 3.2(a) and (g),
in accordance with the applicable provisions of the Lease), provided that
any such conditions shall not affect the occurrence of the Effective Time.
3.4 At the Effective Time, the parties shall execute a certificate in the
form of Appendix D confirming that the Effective Time has occurred.
3.5 If the Effective Time does not occur on or before the Cut-Off Date, the
Old Contract shall continue in full force and effect as if this Agreement had
never been executed and each of the Old Owner, the Builder and the New Owner
<PAGE>
agrees that it shall not have any rights and claims against the others under
this Agreement other than the rights and claims of the Builder against the Old
Owner under Clause 14, and without prejudice to the provisions of the Lease.
3.6 Promptly following the Effective Time the New Owner, the New Owner's
Agent and the Builder shall initial, by way of agreement to its terms, copies
of the New Contract (as amended and restated).
4 NOVATION
4.1 On and with effect from (but subject to the occurrence of) the Effective
Time and immediately prior to the effectiveness of the Contract Amendments it
is agreed that the following shall, and hereby does, take place:
(a) the Old Owner releases and discharges the Builder from all
obligations, liabilities, claims and demands under the Old Contract;
(b) the Builder releases and discharges the Old Owner from all
obligations, liabilities, claims and demands under the Old Contract;
(c) the New Owner has the benefit of the Novated Rights to the exclusion
of the Old Owner and the Builder assumes towards the New Owner all
obligations and liabilities corresponding to the Novated Rights;
(d) the New Owner assumes the Novated Obligations (including, without
limitation, the obligation to pay all Future Instalments in
accordance with the New Contract) and the Builder has the benefit of
all rights and claims corresponding to the Novated Obligations,
such that with effect from the Effective Time the Old Contract shall
cease to have effect as between the Builder and the Old Owner and
shall be novated so as to bring the New Contract into effect between
the Builder and the New Owner.
4.2 The Builder acknowledges that all obligations and liabilities of the Old
Owner under the Old Contract which have been performed or discharged by the
Old Owner shall, to that extent, be treated by the Builder for the purposes of
the New Contract as having been performed or discharged by the New Owner.
4.3 Except as otherwise expressly provided in this Agreement, nothing in this
Agreement or the New Contract shall subject the Builder to any liability to
which it would not otherwise be subject under the Old Contract or diminish in
any way any rights or remedies to which the Builder would otherwise be entitled
under the Old Contract or modify in any respect the Builder's contractual
rights and obligations thereunder.
4.4 The Contract Amendments shall become effective on the Effective Time
immediately after the novation pursuant to Clause 4.1.
5 OTHER TRANSACTIONS
5.1 At the Effective Time (subject to Clause 5.2), the following payments
shall be made:
(a) the New Owner shall pay to the Builder an amount equal to the
aggregate of:
<PAGE>
(i) the Sterling Equivalent of all payments previously made by the
Old Owner (or by GMIDC as the Old Owner's predecessor in
interest) to the Builder under the Old Contract; and
(ii) the Sterling Equivalent of all payments previously made by
GMIDC to OFE Suppliers under the Existing OFE Contracts; and
(b) the Builder shall subject to, but forthwith upon, receipt of the
payment from the New Owner pursuant to sub-clause (a) above (being
the Initial Payment), pay to the Old Owner an amount equal to the
Initial Payment, such payment to be made to an account of the Old
Owner in London to be separately notified to the Builder and, for
the purposes of the following provision of this Clause, the New Owner.
The Builder hereby directs the New Owner to pay, on the Builder's behalf,
to the Old Owner at the Effective Time an amount equal to the Initial Payment.
The Builder acknowledges that such payment by the New Owner to the Old Owner
shall constitute pro tanto satisfaction of the New Owner's obligation to make
the Initial Payment to the Builder in accordance with Clause 5.1(a). The
Old Owner acknowledges that such payment by the New Owner to the Old Owner
shall constitute pro tanto satisfaction of the Builder's obligation to make
payment to the Old Owner in accordance with Clause 5.1(b).
5.2 If the Effective Time occurs after 2:00 p.m (London time) the payments
referred to in Clause 5.1 shall be made on the next Working Day after the day
on which the Effective Time occurs.
5.3 At the Effective Time the Old Owner shall and hereby does pass title to
the Existing Work and the Vessel as it is constructed to the Builder, and the
Builder shall accept such title. Thereupon, title to the Existing Work and
the Vessel as it is constructed shall, and does hereby, pass automatically to
the New Owner in accordance with Clause 9.1 of the New Contract.
5.4 At the Effective Time each of the Parent Guarantee and the Letter of
Credit shall, for the avoidance of doubt, be returned cancelled and shall be
replaced by the guarantee and letter of credit referred to in Clauses 3.2(b)
and (c) respectively.
6 OFE CONTRACTS
6.1 At the Effective Time, GMIDC and the Builder shall enter into OFE
Assignments in respect of the Existing OFE Contracts.
6.2 On or from time to time after the Effective Time the Builder's OFE Agent
shall enter into the Future OFE Contracts pursuant to the OFE Supervision
Agreement.
6.3 The consideration payable by the Builder for GMIDC's (i) entering into
the OFE Assignments and (ii) assuming liability (as the Builder's OFE Agent)
to make payment to OFE Suppliers under the Future OFE Contracts shall be the
OFE Consideration. It is hereby agreed that the Builder's obligation to pay
GMIDC the OFE Consideration shall, without prejudice to the assignment
contained in Clause 6.4, be a limited recourse obligation, only to pay such
amount at the same time as the Builder receives from the New Owner:
(a) the payment referred to in Clause 5.1(a)(ii); or
(b) an OFE Cost Instalment pursuant to Clause 8.3 of the New Contract.
<PAGE>
6.4 As security for the Builder's obligation to pay the OFE Consideration
to GMIDC in the manner set out in Clause 6.3, the Builder hereby assigns and
agrees to assign absolutely to GMIDC all the Builder's right, title and
interest in and to each OFE Cost Instalment. The New Owner, by its execution
of this Agreement, hereby acknowledges such assignment.
6.5 Pursuant to the assignment contained in Clause 6.4 each OFE Cost
Instalment shall be paid direct by the New Owner to the account of the Old
Owner to be notified pursuant to Clause 5.1(b) (which payment, as GMIDC
acknowledges, shall constitute pro tanto discharge of the Builder's obligation
to pay the OFE Consideration).
6.6 Title to the OFE shall pass from the Builder to the New Owner in
accordance with Clause 9.1 of the New Contract. At the time of, and with
effect from, such passing of title the Builder hereby assigns and agrees to
assign absolutely to and in favour of the New Owner all the Builder's right,
title and interest in and to the OFE Contracts relating to such OFE. The
Builder shall on request of the New Owner's Agent from time to time give
notice to the applicable OFE Suppliers in such form as the New Owner's Agent
shall reasonably require.
7 MEASURE OF DAMAGES
7.1 The Builder hereby acknowledges and agrees with the New Owner and the
Old Owner that, if the Builder is in default of its liabilities or breach of
its obligations under the Old Contract, the Old Owner's entitlement to damages
shall be preserved and vest in the New Owner. If the Builder is in breach of
its liabilities or obligations under the Old Contract or New Contract the
measure of damages shall be that which would have been payable to the Old
Owner under the Old Contract if this Agreement had not been entered into.
7.2 For the avoidance of doubt, without prejudice to the generality of
Clause 21 of the New Contract, the New Owner shall be entitled to assign all
rights and claims in respect of the liabilities and obligations referred to in
Clause 7.1 and all the New Owner's rights under the New Contract, without
limitation.
7.3 The Builder shall not be liable to pay an aggregate amount under
Clauses 17 or 25 of the New Contract in excess of the amount which the Builder
would have been liable to pay under Clauses 17 and 25 of the Old Contract if
this Agreement had not been entered into.
8 BUILDER'S RIGHTS AGAINST NEW OWNER
8.1 The Builder agrees that, in relation to all amounts payable to it under
the New Contract, it will first submit Builder's Quarterly Invoices or other
invoices (in each case addressed to the New Owner) to the New Owner's Agent
and not the New Owner.
8.2 The Builder will not re-submit any Builder's Quarterly Invoice or other
invoices directly to the New Owner, or otherwise look to or make demand on the
New Owner (except as permitted by Clause 8.1), for a period (the "Agreed
Period") which shall be:
(a) seven (7) days, in the case of (i) instalments which are the subject
of invoices submitted pursuant to Clause 8.5(ii) of the New Contract
or (ii) any other amounts payable to the Builder under the New
Contract (other than amounts the subject of Builder's Quarterly
Invoices); and
(b) thirty (30) days, in the case of Builder's Quarterly Invoices.
8.3 On the first Working Day after the expiry of the Agreed Period (the
"Agreed Date") the Builder may make demand directly on the New Owner for
payment of any amount referred to in Clause 8.1 and which then remains unpaid
and the New Owner shall, subject to the terms of the New Contract, thereupon
be obliged to pay such amount on the date falling two (2) Working Days after
<PAGE>
the Agreed Date together with, for the avoidance of doubt, (but in the case of
Builder's Quarterly Invoices only if they are undisputed as referred to in
Clause 8.10 of the New Contract) interest from the last day of the Agreed
Period until payment at the rate of two per cent (2%) over one month LIBOR
from time to time in the particular currency.
8.4 For the avoidance of doubt:
(a) references in this Clause 8 to amounts "payable" to the Builder
shall be without prejudice to the New Owner's right to contest
whether such amounts are payable in accordance with the terms of
the New Contract and, for this purpose, the expression "payable"
shall be deemed to include amounts allegedly payable;
(b) payment of any amount to the Builder by the New Owner's Agent
shall constitute pro tanto discharge of the New Owner's obligation
in respect of that amount; and
(c) the New Owner shall not be in default of its payment obligations
under the New Contract unless and until it shall fail to make a
payment in accordance with Clause 8.3.
9 CERTAIN OBLIGATIONS
9.1 GMIDC (in its own capacity, not as agent of the New Owner and without
liability of the New Owner) agrees to be bound by, and liable under, the
provisions of the New Contract where it is stated in Appendix A that any
obligations are obligations of GMIDC (the provisions of the New Contract
to which this Clause 9.1 applies being Clauses 7.1, 10, 12.6, 17.2, 25.3
and 26.2). The Builder acknowledges that the New Owner shall have no
liability under those provisions.
9.2 The Builder agrees to be bound by, and liable under, the provisions of
the New Contract which are expressed to be for the benefit of the New
Owner's Agent (the provisions of the New Contract to which this Clause
9.2 applies being Clauses 3.4, 3.5, 17.1, 25.2 and (by reason of the
amendment to the definition of "Owner Group") 26.1.
10 VAT
10.1 If Value Added Tax is chargeable on any supplies under this Agreement or
under the GM Novation Agreement with the result that the Builder is
required to account for Value Added Tax in respect of any supply made
by it under, or as contemplated in, this Agreement, the GM
Novation Agreement, the New Contract, the OFE Assignments, the Put
Option Agreement or the OFE Supervision Agreement, the Old Owner and/or
GMIDC and/or the New Owner (depending on to whom the supply is made)
shall pay to the Builder on demand such Value Added Tax against receipt
by the Old Owner, GMIDC or the New Owner (as applicable) of a valid VAT
invoice in respect of the relevant supply.
10.2 If the Builder shall make any payments under, or as contemplated in this
Agreement or the other Building Agreements which shall bear or include
Value Added Tax which the Builder shall not be able to recover (by way of
repayment or credit) from the Value Added Tax authority which Value
Added Tax it would not have incurred or would have been able to recover
had it not entered into this Agreement then GMIDC shall indemnify the
Builder against such non-recoverability by paying to the Builder an
amount equal to the Value Added Tax not recovered by the Builder
provided that the Builder shall specify the basis of calculation and the
circumstances in which the claim under this Clause 10.2 has arisen.
10.3 The Old Owner, GMIDC, the Builder and the New Owner agree to co-operate
with a view to minimising any Value Added Tax payable by any of them
<PAGE>
under this Agreement, the GM Novation Agreement, the New Contract, the
OFE Assignments, the Put Option Agreement or the OFE Supervision
Agreement. The Builder agrees to use all reasonable endeavours to
ensure that any Value Added Tax in respect of which indemnity may be
available under Clause 10.2 is recovered as aforesaid. If it
subsequently transpires that any Value Added Tax in respect of which
the Builder has been indemnified under Clause 10.2 is recovered by the
Builder, the Builder shall promptly refund the amount so received to
GMIDC.
10.4 The consideration for the supplies under, or as contemplated by, this
Agreement or the other Building Agreements shall be exclusive of Value
Added Tax.
11 STAMP DUTY
11.1 GMIDC is of the understanding that none of the following documents, that
is to say:
(a) the GM Novation Agreement; the New Contract; this Agreement; the
OFE Contracts; the OFE Assignments; the Put Option Agreement; the
Put Notice; the certificate to be entered into pursuant to
Clause 3.4 in the form of Appendix D (together "the Transaction
Documents"); and
(b) any other written instrument of any kind entered into in connection
with or pursuant to the Transaction Documents of which the main
effect or purpose is (or of which one of the main purposes is) to
transfer title to any part of the Work from one of the parties to
this Agreement to another of them (together "the Documents" and
severally "the Document"), is chargeable to United Kingdom stamp
duty. In case any of the Documents is chargeable to stamp duty
GMIDC, subject to Clauses 11.2 and 11.3, shall indemnify the
Builder against any stamp duty imposed on or in connection with
any of the Documents (including any penalties and interest accrued
up to 3 Working Days after any payment to the Builder under this
Clause).
11.2 GMIDC shall not be liable under Clause 11.1 in respect of stamp duty on
any document executed before the execution of the Building Agreements.
11.3 The Builder will use its reasonable endeavours to avoid unnecessarily
rendering GMIDC liable under Clause 11.1, provided always that the Builder
shall be entitled to present an executed original or counterpart document to
the relevant authority for stamping in any case where:
(a) such document is intended to be used by the Builder as evidence in
legal proceedings and would be inadmissible in evidence if left
unstamped; or
(b) an official or authority empowered to require production of the
same has made a written request for the Builder to produce a
stamped executed original or counterpart document (whether in
connection with taxation or otherwise); or
(c) it is obligatory to file a stamped executed original or counterpart
document with any official or authority; or
(d) the New Owner has requested the Builder in writing to present an
executed original or counterpart documents for stamping.
<PAGE>
11.4 Before communicating with the Inland Revenue in relation to the question
of whether any Document is chargeable to stamp duty, the Builder shall notify
GMIDC in writing and GMIDC shall have the right at its own cost promptly to
conduct any such communications with the Inland Revenue and, if the Inland
Revenue determine that such Document is chargeable to stamp duty, GMIDC shall
be entitled at its own cost to take on the conduct of any appeal on behalf of
the Builder, keeping the Builder and the New Owner promptly informed of all
matters relating to such communications or appeal and on the basis that GMIDC
shall first promptly submit all material communications which are to be
transmitted to the Inland Revenue to the Builder and the New Owner and shall
take account of their reasonable comments. GMIDC shall indemnify the Builder
on demand against its reasonable costs incurred in connection with any actions
taken by it under this Clause.
12 MISCELLANEOUS
12.1 This Agreement may be executed in several counterparts and any single
counterpart or set of counterparts signed, in either case, by all of the
parties thereto shall be deemed to be an original, and all counterparts when
taken together shall constitute one and the same instrument.
12.2 This Agreement may be amended only by an instrument in writing signed by
all of the parties hereto.
12.3 Any waiver of any right, power or privilege by any party hereto shall be
in writing signed by such party. No failure or delay by any party hereto to
exercise any right, power or privilege under this Agreement shall operate as
a waiver thereof nor shall any single or partial exercise of such right,
power or privilege preclude any further exercise thereof or of any other right,
power or privilege.
12.4 Each party agrees, at the request of any other party to enter into such
further documents and do all such further acts as the requesting party may
reasonably require to give full effect to the purpose and intent of this
Agreement. The requesting party (or the Old Owner if the requesting party is
the New Owner) shall reimburse the other parties for all out of pocket costs
and expenses (including legal fees and expenses) reasonably incurred by each
other party in furtherance of action taken pursuant to this Clause 12.4.
12.5 The service by the New Owner of a Put Notice (as defined in the Put
Option Agreement) pursuant to and in accordance with the Put Option Agreement
shall release the parties from their obligations under this Agreement except
that the provisions of Clauses 6, 7, 10, 11, 12.4, this 12.5, 13, 14 and 15
shall survive and continue after the service of a Put Notice.
12.6 No party shall be entitled to assign or otherwise transfer its rights or
obligations under this Agreement or the other Building Agreements without the
prior written consent of the other parties, provided that:
(a) the New Owner shall be entitled to assign, transfer, novate or
otherwise dispose of all (but not part only) of its rights and
obligations under this Agreement and the other Building Agreements
to which it is a party to any person who is a member of the New
Owner's group of companies (that is Lloyds Bank Plc and all its
Subsidiaries (as defined in the Lease) from time to time and its
Holding Company (as defined in the Lease) from time to time) but
no other party to this Agreement shall be under any greater
obligation or liability under this Agreement or any of the other
Building Agreements than it would have been under but for such
assignment, transfer, novation or other disposal; and
(b) the New Owner shall be freely entitled to assign its rights obtained
by assignment pursuant to Clause 6.6.
This Clause 12.6 is without prejudice to Clause 7.2 or the operation of
the Put Option Agreement.
12.7 The Replacement Letter of Credit will be capable of being drawn in
respect of amounts due from the Builder to BMBF (No.12) Limited ("BMBF")
<PAGE>
under the shipbuilding contract (as novated) in respect of Builder's Hull
No. 1740. Accordingly, the New Owner agrees:
(a) that any amount drawn under the Replacement Letter of Credit which
is in respect of such obligations (as certified by the New Owner's
Agent to the New Owner) will promptly upon receipt by the New Owner
be paid to BMBF; and
(b) that any amount received by the New Owner from BMBF pursuant to
Clause 12.7(a) of the novation agreement in respect of Hull No. 1740
shall promptly be paid by the New Owner to the Old Owner (in its
capacity as lessee under the Lease and pursuant to Clause 13
thereof).
13 NOTICES
13.1 Every notice, consent, request, demand or other communication (a
"Notice") under this Agreement or the New Contract shall:
(a) be in the English language and in writing delivered personally or
by prepaid first class airmail letter or delivered by hand or sent
by fax;
(b) be sent:
(i) to the Builder to:
The Project Manager
Ship No: 1739
Harland and Wolff Shipbuilding and Heavy Industries Limited
Queen's Island
Belfast
BT3 9DU
Northern Ireland
Fax: (00 44) 1232-458515
(ii) to the New Owner to:
Nelstar Leasing Company
Great Surrey House
203 Blackfriars Road
London SE1 8NH
England
Fax: (00 44) 171 922 1874
Attention: Managing Director
(iii) to the Old Owner to:
<PAGE>
Global Marine Leasing Corporation
c/o McKinney, Bancroft & Hughes
Mareva House, 4 George Street
P.O. Box N.3937
Nassau, Bahamas
Fax: (001) 242 348 2520
Attention: Richard Lightbourn, Director
With copies to:
Global Marine Leasing Corporation
c/o Global Marine International Drilling Corporation
Parkstraat 83
2514 JG Den Haag
Netherlands
Fax: (0031) 70 302 933
Attention: Mr Bruce Watson
and
Global Marine Inc.
777 N. Eldridge Parkway
Houston, Texas 77079
Fax: (001) 281 596 5196
Attention: General Counsel
and
Global Marine Drilling Company
777 N. Eldridge Parkway
Houston, Texas 77079
Fax: (001) 281 596 5179
Attn: John A. Thorson (Manager Construction and Marine
Projects)
(iv) to GMIDC to:
Global Marine International Drilling Corporation
Parkstraat 83
2514 JG Den Haag
Netherlands
Fax: (0031) 70 302 833
Attention: Mr Bruce Watson
or in each case to such other person or address as one party may,
by not less than three (3) Working Days' notice, notify in writing
to other parties hereto; and
(c) any Notice shall be deemed to have been given or received to or
by the party to whom it is addressed then (10) days following
posting, if posted by first class prepaid airmail post, and on
receipt, if delivered by hand. Any notice sent by fax shall be
treated as received only when the sender has received a fax by
return from the recipient acknowledging receipt;
(d) a Notice to the Old Owner shall be copied as referred to in
sub-clause (b) above but no failure to serve a copy or copies
will invalidate a notice served on the Old Owner.
14 BUILDER'S COSTS AND EXPENSES
14.1 The Old Owner shall reimburse the Builder on demand, on a full indemnity
basis, for all costs and expenses (including legal fees and disbursements plus
any Value Added Tax payable thereon) incurred by the Builder in connection
<PAGE>
with or arising out of the negotiation, execution, operation and implementation
of the Building Agreements (other than the Old Contract) and any other
documents required in connection therewith (including, for the avoidance of
doubt, arising out of any assignment by the New Owner pursuant to Clause
12.6(a) or Clause 9.6 of the Put Option Agreement).
15 LAW
15.1 This Agreement and the rights and obligations of the parties hereunder
shall be governed by and construed in accordance with the laws of England and
Wales.
15.2 Each of the parties hereto submits to the jurisdiction of the courts of
England with respect to this Agreement (any such legal action or proceedings
before such courts being "Relevant Proceedings"). By its execution and
delivery of this Agreement each of the parties hereto:
(a) hereby accepts for itself and in respect of its property,
generally and unconditionally, the exclusive jurisdiction of the
aforesaid courts with respect to any Relevant Proceedings;
(b) waives any objections on the grounds of venue or forum
non conveniens or any similar grounds with respect to any Relevant
Proceedings;
(c) agrees that final judgment against it in any Relevant Proceedings
shall be conclusive and may be enforced in any other jurisdiction
by suit on the judgment; and each of the Old Owner and GMIDC
hereby designates, appoints and empowers WFW Legal Services
Limited at its registered office for the time being (currently at
15 Appold Street, London EC2A 2HB) to receive, for and on behalf of
it, service of process in such jurisdiction in any Relevant
Proceedings. Each of the Old Owner and GMIDC agrees that it will
at all times continuously maintain an agent to receive service of
process in England on its behalf and on behalf of their property
with respect to any Relevant Proceedings and in the event that,
for any reason, such agent named above or its successor shall no
longer serve as agent of the Old Owner or GMIDC (as applicable )
to receive service of process in England with respect to any
Relevant Proceedings it shall promptly appoint a successor and
advise the other parties thereof. It is understood that a copy
of any such process served on any such agent will be promptly
forwarded by first class prepaid mail to the Old Owner or GMIDC
(as applicable) at its address specified in Clause 13 but the
failure of the Old Owner or GMIDC (as applicable) to receive such
copy shall not affect in any way the service of such process on
the said company as the agent of such party.
15.3 The provisions of this Clause 15 are without prejudice to the provisions
of Clause 20 of the Old Contract and the New Contract, which shall continue
to apply in relation to the Old Contract and the New Contract, respectively.
<PAGE>
SIGNED by the representatives of the parties.
_____________________________
J.P. WARD, Attorney-in-Fact for H&W
Duly authorised for and on behalf of
HARLAND AND WOLFF SHIPBUILDING
AND HEAVY INDUSTRIES LIMITED
_____________________________
OWEN HARRINGTON, Attorney-in-Fact
Duly authorised for and on behalf of
for Nelstar
NELSTAR LEASING COMPANY LIMITED
_____________________________
W.A. BAKER
Duly authorised for and on behalf of
GLOBAL MARINE LEASING CORPORATION
_____________________________
W.A. BAKER
Duly authorised for and on behalf of
GLOBAL MARINE INTERNATIONAL
DRILLING CORPORATION
<PAGE>
APPENDIX A
CONTRACT AMENDMENTS
Capitalised words and expressions defined in the Old Contract, or in the
Novation Agreement of which this Appendix A forms part, shall have the same
meanings when used herein. With effect from the Effective Time the New
Contract shall be and it is hereby supplemented and amended as set out below.
1 GENERAL
All references to "Owner" shall be construed as references to the New
Owner rather than the Old Owner save as provided below in this
paragraph 1 or elsewhere in this Appendix A.
(a) in Clause 1.1.20 the references to "Owner" shall mean the Old Owner
before the Effective Time and the New Owner as from the Effective
Time, and the words "(or the Supervisor on behalf of the Owner)"
shall be inserted immediately after "Owner", where it appears twice;
(b) in Clause 1.1.28 the first reference to "Owner" shall mean the Old
Owner and the second reference to "Owner" shall mean the Old Owner
before the Effective Time and the New Owner as from the Effective
Time, and the words "(or by the Supervisor on behalf of the Owner)"
shall be inserted immediately after the second reference to "Owner";
(c) in Clause 2.1 the reference to "Owner's design" in the second line
shall mean the Old Owner's design;
(d) in Clause 3.2, the reference to "Owner" in the second line of the
sub-clause (a) shall mean the Old Owner and the words "(or by the
Supervisor)" shall be inserted immediately after "Owner" where it
appears elsewhere in Clause 3.2;
(e) in Clause 3.4 the reference to "Owner" in the fourth line shall
mean the Old Owner (so that, for the avoidance of doubt, the Owner
I.P.R. shall be and remain the sole and exclusive property of the
Old Owner and not the New Owner);
(f) in Clause 3.5 the references to "Owner" shall mean the Old Owner
(so that, for the avoidance of doubt, the applicable Builder's
Working Drawings and other applicable rights referred to in that
Clause shall be and remain the property of the Old Owner and not
the New Owner);
(g) in Clause 12.2 (final paragraph) the references to "Owner" where
they occur in the second and fifth lines shall mean the Old Owner
before the Effective Time and the New Owner or the New Owner's
Agent as from the Effective Time, and the words "(or by the
Supervisor") shall be inserted immediately after "Owner" where
it so appears;
(h) in Clause 16.3 the references to "Owner" where they occur twice
shall mean the Old Owner before the Effective Time and the New
Owner as from the Effective Time, and the words "(or the
Supervisor)" shall be inserted immediately after "Owner" where is
so appears;
<PAGE>
2 Clause 1.1.16, Clause 8.2 and Schedule Three.
Letter of Credit
The Letter of Credit shall be replaced by, and "Letter of Credit" shall
mean, the letter of credit in the form of Appendix F to the Novation
Agreement and, where the context requires, shall include the letter of
credit issued or to be issued pursuant to the novation agreement in
respect of Hull No. 1740.
3 Clause 1.1.19, "Owner Furnished Equipment"
The continued use of the expressions "Owner Furnished Equipment" and "OFE"
in the New Contract shall be for convenience only and shall not affect the
provisions of the New Contract in relation to the rights and obligations
of the parties in relation to such equipment.
4 Clause 1.1.22, Clause 8.2 and Schedule Four.
Parent Company Guarantee
The Parent Company Guarantee shall be replaced by, and "Parent Company
Guarantee" shall mean, the guarantee in the form of Appendix E of the
Novation Agreement.
5 Clause 1.1.21. "Owner Project Manager"
The following shall be inserted after "by Owner" in the first line:
"(or by the Supervisor on behalf of the Owner)".
6 Clause 1 - Interpretation
New defined terms shall be inserted as follows:
(a) ""Builder's OFE Agent" means Global Marine International Drilling
Corporation in its capacity as agent and supervisor for the Builder
appointed under the OFE Supervision Agreement;";
(b) ""Novation Agreement" means an agreement relating to this Contract
entered into or to be entered into among the Builder, Nelstar
Leasing Company Limited, Global Marine International Drilling
Corporation and the Owner;";
(c) ""OFE Contract" means any contract for the supply of an item or
items of OFE entered or to be entered into between Global Marine
International Drilling Corporation (whether on its own behalf or
as the Builder's OFE Agent) and an Owner Supplier or Owner
Subcontractor;";
(d) ""OFE Cost" means the cost of OFE specified in Clause 8.1.B;";
(e) ""OFE Supervision Agreement" means a supervision agreement entered
into or to be entered into between the Builder and the Builder's
OFE Agent whereby, amongst other things, the Builder's OFE Agent is
appointed agent and supervisor of the Builder in respect of the OFE
Contracts;";
(f) ""Supervision Agreement" means the supervision agreement relating
to this Contract entered into or to be entered into between Nelstar
Leasing Company Limited and Global Marine International Drilling
Corporation;";
(g) ""Supervisor" means Global Marine International Drilling
Corporation, having been appointed by the Owner to act as Owner's
exclusive supervisor and agent for the purposes of this Contract
upon the terms and conditions set out in the Supervision Agreement;";
<PAGE>
(h) ""Total Vessel Cost" means the aggregate of the Contract Price and
the OFE Cost;".
7 Clause 5.16
Clause 5.16 shall be amended by inserting "(including the Supervisor and
Supervisor's Operations Personnel)" after "operations personnel" in the
first line.
8 Clause 7 - Owner Furnished Equipment
Clause 7 shall be amended as follows:
(a) Clause 7.1 shall be deleted and replaced with the following:
"7.1 All items of Owner Furnished Equipment shall be delivered to
the Builder's Yard by the Builder's OFE Agent in accordance with
the delivery date for such item specified in the initial Primavera
critical path project schedule (as amended from time to time by
Permissible Delay), (the "OFE Scheduled Delivery Date") provided
that the Builder shall be under no liability for any failure or
delay in such delivery.";
(b) in Clause 7.6, the word "Owner" in the first line shall be replaced
by "Builder's OFE Agent".
9 Clause 8 - Price and Terms of Payment
Clause 8 shall be amended as follows:
(a) Clause 8.1B shall be deleted and replaced with the following:
"B An estimated sum of United States Dollars One hundred and five
million and five hundred thousand (US$105,500,000) for OFE, subject
to upward or downward adjustment as notified by the Supervisor to
the Builder from time to time, having regard to the OFE necessary
to complete this Contract but in no circumstances greater than
United States Dollars One hundred and twenty million
(US$120,000,000);
(b) Clause 8.2 shall be deleted and replaced with the following:
"8.2 Builder shall provide the Parent Company Guarantee (in the form
of Appendix E to the Novation Agreement) and the Letter of Credit
(in the form of Appendix F to the Novation Agreement) at the time
required by, and otherwise in accordance with, the Novation
Agreement.";
<PAGE>
(c) Clause 8.3 shall be deleted and replaced with the following:
"8.3 With effect from the Effective Time (as defined in the Novation
Agreement) payment of the Total Vessel Cost shall be made or has
been made (as the case may be) by instalments from or on behalf of
the Owner to the Builder as follows:
8.3.1 Twenty percent (20%) of the Contract Price on signature of
this Contract within seven (7) days of Owner's receipt of
Builder's invoice (receipt of which the Builder hereby
acknowledges);
8.3.2 Twenty percent (20%) of the Contract Price at the start of
the continuous cutting of steel but not before March 2,
1998 (receipt of which the Builder hereby acknowledges);
8.3.3 Twenty percent (20%) of the Contract Price Cost on keel
laying of a minimum of five hundred (500) tons of steel,
but not before September 1, 1998 (receipt of which the
Builder hereby acknowledges);
8.3.4 Twenty percent (20%) of the Contract Price at floatation
of the Vessel in a condition where it can be floated without
requiring new docking, but not before April 15, 1999,
together with such amount of the OFE Cost as equals the
aggregate amount paid by Global Marine International
Drilling Corporation (as the party liable under each OFE
Contract, including, where applicable, as the Builder's OFE
Agent) to the applicable suppliers of OFE after the
Effective Time (as defined in the Novation Agreement) and
up to and including the due date for payment pursuant to
this clause 8.3.4; and
8.3.5 Twenty percent (20%) of the Contract Price plus or minus any
increases or decreases occasioned in accordance with the
provisions of this Contract or any Amendment hereof which
have not previously been accounted for by adjustment of
this or any earlier instalments, at Delivery of the Vessel,
estimated to be October 10, 1999, together with such amount
of the OFE Cost as equals the aggregate amount paid by
Global Marine International Drilling Corporation (as the
party liable under each OFE Contract, including, where
applicable, as the Builder's OFE Agent) to the applicable
suppliers of OFE after the date of payment pursuant to
Clause 8.3.4 and up to and including the due date for
payment pursuant to this Clause 8.3.5.";
(d) in Clause 8.7, the details of the Builder's Account No. are as
follows:
The Bank of New York
New York, NY
Swift No. 1RVTUS3N
Account No. 890-00337-877
Beneficiary Bank: Ulster Bank Limited, Belfast
P O Box 235
40 Linenhall Street
Belfast BT2 8AZ
Sort Code: 98-00-05
Swift No. ULFBGB2B
Account No. 114546102
Account Name: Harland and Wolff Shipbuilding and Heavy
Industries Limited
For the purposes of calculation of default interest no account shall be
taken of the OFE Cost element of any instalment (and any partial payment
of an instalment shall be appropriated first towards due payment of the
Contract Price).
10 Clause 9 - Property and Jurisdiction
(a) Clause 9.1 shall be deleted and replaced with the following:
"9.1 Upon payment of the sum due under Clause 8.3.1 the Vessel, as
it is constructed, and all machinery, equipment and materials
whether wholly or partially finished or unfinished from time to
time appropriated or intended for it in the Builder's Yard or
elsewhere (including, without limitation, Owner Furnished Equipment)
shall become and remain the absolute property of the Owner (but at
the risk of the Builder) notwithstanding that any such machinery,
equipment and materials shall subsequently be worked upon by the
Builder or its Subcontractors or otherwise processed or
incorporated into the Vessel and shall not be within the ownership
or dispostion of the Builder, but the Builder shall at all times
have a lien thereon (excluding Owner Furnished Equipment) for
any part of the Contract Price which is unpaid and for any sums due
from time to time in accordance with this Contract provided that
such lien shall not continue or be enforceable by or on behalf of
the Builder in any of the circumstances described in Clauses 15.1
or 15.2.";
(b) Clause 9.3 shall be deleted and replaced with the following:
"9.3 Any items, other than Owner Furnished Equipment, not used in
the construction of the Vessel shall after Delivery revert to and
become the property of the Builder.".
11 Clause 10 - Insurance
The obligations of "Owner" shall not be obligations of the New Owner but
shall be obligations of the Old Owner (in its own capacity, not as agent
of the New Owner and without liability of the New Owner) to comply with
Clause 10 on such amended basis as shall be agreed as referred to in the
Novation Agreement.
12 Clause 12 - Delivery
(a) A new Clause 12.5 shall be inserted as follows (and the existing
Clause 12.5 shall be re-designated 12.6):
"12.5 Any amounts payable to or by the Builder shall be
ascertained two (2) Business Days before Delivery.";
(b) The obligations of "Owner" under the last sentence only of
Clause 12.6 (as re-designated above) shall not be obligations of
the New Owner but shall be obligations of the Old Owner (in its
own capacity, not as agent of the New Owner and without liability
of the New Owner).
13 Clause 13 - Force Majeure
In Clause 13.1, the following shall be inserted after "party affected"
in the second line:
"(which, in relation to an event affecting the Owner, shall include
the Supervisor)".
14 Clause 14 - Default of the Owner
(a) Clause 14.1 shall be amended by adding at the beginning "Subject
to Clause 8 of the Novation Agreement.";
(b) Clause 14.1.1 shall be amended by deleting "Contract Price" and
replacing it with "Total Vessel Cost";
15 Clause 15 - Default of the Builder
(a) In paragraph (i) of Clause 15.2 there shall be deleted the words
"(c) any and all amounts reasonably and properly paid by Owner for
<PAGE>
Owner Furnished Equipment which has been incorporated in the
Vessel" (it being acknowledged, for the avoidance of doubt, that
the words in paragraph (a) "the aggregate amount of all sums paid
pursuant to Clause 8" include the Total Vessel Cost).
(b) In paragraph (ii) of Clause 15.3 after the words "the Letter of
Credit" there shall be inserted "including procuring a demand
under the letter of credit issued pursuant to the shipbuilding
contract (as novated) for hull no. 1740)".
(c) In Clause 15.5 there shall be inserted after "Supplier contracts"
in the third line the words "and the OFE Contracts" and after
"Subcontracts" in the fifth line the words "Supplier contracts and
the OFE Contracts".
16 Clause 17 - Indemnities for Information Supplied
(a) In Clause 17.1 there shall be inserted after "Owner" in the first
line the words "and the Supervisor", after "Owner" in the second
line the words "or the Supervisor", after "Owner" in the third
line the words "Supervisor," and after "Owner" in the fifth line
the words "as Supervisor".
(b) In Clause 17.2 there shall be inserted in the third line after
"Owner" the words ", the Supervisor".
(c) In Clause 17.2 the obligations of "Owner" shall not be obligations
of the New Owner but shall be obligations of the Old Owner.
17 Clause 24 - Entire Contract
In the first line after "Contract" there shall be inserted "(together
with the Novation Agreement and the matters referred to therein)".
18 Clause 25 - Liability and Indemnification
(a) In Clause 25.1 (a), a new paragraph (iii) shall be inserted as
follows:
"Supervisor, its Parent, subsidiary, affiliated, associated
Companies;", former paragraph (iii) shall be renumbered (iv)
accordingly, and the words "and clause 25.1(a)(iii)" shall be
inserted at the end of such paragraph (iv).
(b) In Clause 25.3 the obligations of "Owner" shall not be obligations
of the New Owner but shall be obligations of the Old Owner.
19 Clause 22 - Notice and communications
Clause 13 of the Novation Agreement (to the extent it relates to the New
Owner and the Builder) shall apply to notices and correspondence between
the New Owner and the Builder, provided that all notices from the Builder
to the New Owner shall be copied to the Supervisor at the address and
other details for the Old Owner set out in the Novation Agreement.
<PAGE>
APPENDIX B
FORM OF CERTIFICATE (CLAUSE 3.2(a))
NOVATION AGREEMENT DATED [ ] 1998 AMONG (i) HARLAND AND WOLFF SHIPBUILDING
AND HEAVY INDUSTRIES LIMITED (ii) BMBF (NO. 12) LIMITED AND (iii) GLOBAL MARINE
INTERNATIONAL DRILLING CORPORATION (THE "NOVATION AGREEMENT").
[Date]
Reference is made to the Novation Agreement and it is hereby confirmed,
pursuant to Clause 3.2(a) of the Novation Agreement, that the conditions
precedent referred to in Schedule 4, Parts 1 and 2 of the Lease have been
fulfilled to our satisfaction or have been temporarily waived to our
satisfaction pursuant to Clause 3.4 of the Lease.
Words and expressions defined in the Novation Agreement shall have the same
meanings when used herein.
_________________________________________
For and on behalf of
NELSTAR LEASING COMPANY LIMITED
<PAGE>
APPENDIX C
FORM OF CERTIFICATE (CLAUSE 3.2(g))
NOVATION AGREEMENT DATED [ ] 1998 AMONT (i) HARLAND AND WOLFF
SHIPBUILDING AND HEAVY INDUSTRIES (ii) BMBF (NO. 12) LIMITED AND (iii)
GLOBAL MARINE INTERNATIONAL DRILLING CORPORATION (THE "NOVATION AGREEMENT").
[Date]
Reference is made to the Novation Agreement and it is hereby confirmed,
pursuant to Clause 3.2(g) of the Novation Agreement that the conditions
precedent referred to in Clause [ ] of the Lease have been fulfilled to
the satisfaction of the Lessee or have been temporarily waived to the
satisfaction of the Lessee pursuant to Clause [ ] of the Lease.
Words and expressions defined in the Novation Agreement shall have the same
meanings when used herein.
_________________________________________
For and on behalf of
GLOBAL MARINE LEASING CORPORATION
<PAGE>
APPENDIX D
FORM OF EFFECTIVE TIME CERTIFICATE
NOVATION AGREEMENT DATED [ ] 1998 AMONG (i) HARLAND AND WOLFF
SHIPBUILDING AND HEAVY INDUSTRIES LIMITED, (ii) BMBF (NO. 12) LIMITED AND
(iii) GLOBAL MARINE INTERNATIONAL DRILLING CORPORATION (THE "NOVATION
AGREEMENT").
[Date]
Reference is made to the Novation Agreement and it is hereby confirmed,
pursuant to Clause 3.4 of the Novation Agreement, that the Effective Time
(as therein defined) is [ ] [am][pm] (London time) on
[ ] 1998.
_________________________________________
For and on behalf of
HARLAND AND WOLFF SHIPBUILDING AND
HEAVY INDUSTRIES LIMITED
_________________________________________
For and on behalf of
NELSTAR LEASING COMPANY LIMITED
_________________________________________
For and on behalf of
GLOBAL MARINE INTERNATIONAL DRILLING CORPORATION
_________________________________________
For and on behalf of
GLOBAL MARINE LEASING CORPORATION
<PAGE>
APPENDIX E
FORM OF REPLACEMENT BUILDER PARENT COMPANY GUARANTEE
THIS PARENT COMPANY GUARANTEE (hereinafter called "GUARANTEE") is made this
day of 1998 by HARLAND AND WOLFF HOLDINGS PLC having its
registered office at Queen's Island, Belfast BT3 9DU (hereinafter called
"GUARANTOR") in favour of NELSTAR LEASING COMPANY LIMITED having its registered
office at 71 Lombard Street, London EC3P 3BS (hereinafter called "OWNER").
WHEREAS, GUARANTOR has agreed that it will to the extent hereinafter set forth
guarantee the due performance by Harland and Wolff Shipbuilding and Heavy
Industries Limited ("H&W") of its obligations under the Shipbuilding Contract
relating to H&W hull no. 1739 originally made between H&W and Global Marine
International Drilling Corporation (formerly Global Marine International
Services Corporation)] (as previously novated to Global Marine Leasing
Corporation, and as subsequently amended, supplemented and novated in favour
of the OWNER, the "CONTRACT").
NOW THEREFORE in consideration of the OWNER's agreeing to enter into the
novation of the CONTRACT referred to above and payment of Pound-Sterling 1
by the OWNER to the GUARANTOR (the receipt and sufficiency of which is hereby
acknowledged by the GUARANTOR), it is hereby agreed as follows:
1 GUARANTOR guarantees the punctual true and faithful performance and
observance by H&W of all its obligations under or in accordance with
the CONTRACT and in the event of any breach of the obligations of H&W
under the CONTRACT then:
(a) upon being required to do so by OWNER by notice in writing the
GUARANTOR shall of its own expense perform or take whatever steps
may be necessary to procure performance of the obligations of H&W
under the CONTRACT and shall from the date of such notice assume
jointly and severally with H&W all the rights and obligations of
the CONTRACT in every way as if GUARANTOR were party thereto; and
(b) GUARANTOR shall indemnify OWNER against all direct losses, damage
costs and expenses which OWNER may suffer or incur by reason of
or in connection with a breach by H&W of any of its obligations
under the CONTRACT provided that GUARANTOR shall in no event have
any greater liability under this Guarantee in respect of such
breach than that of H&W under the CONTRACT in relation thereto.
2 Without any prejudice to Clause 1, GUARANTOR guarantees to OWNER the
payment by H&W of any and all amounts from time to time or at any time
payable by H&W to OWNER under or in connection with the CONTRACT and
undertakes to pay to OWNER forthwith upon demand by OWNER any and all
amounts which H&W shall have failed, now or in the future, to pay to
OWNER under or in connection with the CONTRACT.
3 GUARANTOR shall not be discharged or released from this GUARANTEE by any
arrangement made between H&W and OWNER under the CONTRACT or by any
forbearance whether as to payment, time, performance or otherwise even
though such arrangement, alteration or forbearance may be without the
assent of GUARANTOR, or by the liquidation, bankruptcy or insolvency of
H&W.
<PAGE>
4 This GUARANTEE may be freely assigned by OWNER to any of its permitted
assignees under the CONTRACT.
5 This GUARANTEE shall be construed and governed in accordance with
English Law and GUARANTOR agrees to submit to the jurisdiction of the
English courts.
6 This Guarantee shall expire on the expiry of the Guarantee Period as
defined in the CONTRACT.
IN WITNESS WHEREOF, this GUARANTEE has been executed by duly authorised
representatives of the GUARANTOR and the OWNER in duplicate effective as of
the date and year first above written.
By: ................. By: .................
<PAGE>
APPENDIX F
FORM OF REPLACEMENT STANDBY LETTER OF CREDIT
[name and address of Issuing Bank]
Date [ ]
To: Nelstar Leasing Company Limited
Great Surrey House
203 Blackfriars Road
London SE1 8NH
We refer to the contract originally made on 27 February, 1998 between
Global Marine International Drilling Corporation (formerly Global Marine
International Services Corporation) and Harland and Wolff Shipbuilding and
Heavy Industries Limited (the "Builder", which expression shall include its
successors, assigns or transferees) (as previously novated in favour of
Global Marine Leasing Corporation, and as subsequently amended, supplemented
and novated in favour of Nelstar Leasing Company Limited having its registered
office at 71 Lombard Street, London EC3P 3BS (the "Buyer" which expression
shall include its successors, assigns, or transferees), (the "Contract"):
In connection with the Contract we hereby issue at the request of the
Builder our irrevocable Standby Letter of Credit No. [ ] in your
favour for the aggregate maximum amount of Twenty Million United States Dollars
(US$20,000,000) expiring on 10th August 2000 (the "Expiry Date").
The amount which may be drawn by you under this Letter of Credit shall be
automatically reduced by the amount of any drawing hereunder. Partial
drawings are permitted. We hereby undertake that if, before 5pm London time
on the Expiry Date, Global Marine International Drilling Corporation (the
"Agent") presents to us at our counters or the office set out above its sight
draft drawn on us, together with a Certificate of Drawing in strict conformity
with the Schedule below, such certificate of drawing, bearing the following
certification by the Secretary, any Assistant Secretary, the Treasurer or any
Assistant Treasurer of the Agent as agent of the Buyer, "I hereby certify that
the person signing this Certificate of Drawing is an officer or director of
Global Marine International Drilling Corporation with the authority to sign
this Certificate of Drawing", we shall honour the same by payment to you with
value on the next following banking day. For the purposes of this Letter of
Credit, a banking day is a day on which banks are open for business (including
dealings in foreign exchange and currency deposits) in both London and New
York.
All payments under this Letter of Credit shall be made without any
deduction of any kind, except any which we are required by law to make.
In that case, but subject to the limit set out below, we shall pay such an
increased sum as will ensure that, after the deduction you receive a net amount
equal to that which you would have received had there been no deduction.
<PAGE>
The aggregate amount payable by us under or in connection with this
Letter of Credit shall not, in any circumstances whatsoever, exceed the said
amount of Twenty Million United States Dollars (US$20,000,000).
You may assign or transfer your rights under this letter of credit with
prior notice to, and prior written consent of the Builder, who shall not
unreasonably withhold such consent. Such prior written notice and consent is
not required where the assignee or transferee is an associated company of the
Buyer or the Agent, which means and includes any holding company whether
direct or indirect or any subsidiary whether direct or indirect of the Buyer
or, as the case may be, the Agent, or of such holding company. The terms
"holding company" and "subsidiary" having the meanings assigned to these terms
by Section 736 of the Companies Act 1985.
This Letter of Credit is subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500.
This Letter of Credit is governed by English law and the courts of
England shall have jurisdiction to settle any disputes which may arise in
connection herewith.
Form of Certificate of Drawing
To: [Name and address of Issuing Bank]
Re: Standby Letter of Credit No: [ ]
Issued by [ ]
Date [ ]
We hereby certify that Harland and Wolff Shipbuilding and Heavy Industries
Limited (the "Builder") [are in default under Clause [ ] of the contract
originally made on 27 February, 1998 between Global Marine International
Drilling Corporation (formerly Global Marine International Services
Corporation) (1) and the Builder (2) (as subsequently novated to Global
Marine Leasing Corporation and as further amended, supplemented and novated
in favour of Nelstar Leasing Company Limited), as the same has been or may
further be novated to Global Marine C.R. Luigs Limited, that by reason of
such default an amount of US$[ ] has become due and payable
by the Builder to Nelstar Leasing Company Limited or Global Marine
C.R. Luigs Limited, as the case may be under the said Contract and that, as at
the date of this Certificate, that amount remains unpaid]*[are in default
under Clause [ ] of the contract originally made on 28 March, 1998 between
Global Marine International Drilling Corporation (formerly Global Marine
International Services Limited) (1) and the Builder (2) (as subsequently
amended, supplemented and novated in favour of BMBF (No.12) Limited ("BMBF"),
as the same has been or may further be novated to Global Marine U.K. Limited,
that by reason of such default an amount of US$[ ] has become due
and payable by the Builder to BMBF or, as the case may be, Global Marine U.K.
Limited under the said Contract and that, as at the date of this Certificate,
that amount remains unpaid].*
<PAGE>
We therefore request payment under the above-mentioned Letter of Credit by
US$[ ] and enclose our sight draft drawn on you for that
amount.
Dated: this [ ] day of [ ]
Signed:
duly authorised
for and on behalf of
Global Marine International Drilling Corporation
[Authorised Signatory
<PAGE>
APPENDIX G
FORM OF OFE ASSIGNMENT
THIS ASSIGNMENT is made , 1998
BY:
GLOBAL MARINE INTERNATIONAL DRILLING CORPORATION (formerly named
Global Marine International Services Corporation), a company incorporated
under the laws of The Bahamas having its registered office at c/o McKinney,
Bancroft & Hughes, Mareva House, George Street, P O Box 3937, Nassau,
Bahamas (the "Assignor")
IN FAVOUR OF:
HARLAND AND WOLFF SHIPBUILDING AND HEAVY INDUSTRIES LIMITED, a
company incorporated under the laws of Northern Ireland having its
registered office at Queen's Island, Belfast, Northern Ireland, BT3 9DU
(the "Builder")
WHEREAS
(A) The Builder and Global Marine Leasing Corporation (the "Old Owner") are
party to a contract dated 27th February, 1998, as amended, varied,
supplemented prior to the date hereof, for the construction, completion
and delivery by the Builder to the Assignor of a deepwater drillship,
identified by the Builder as Hull No. 1739 (such contract originally
having been entered into between the Assignor and the Builder and having
been novated from the Assignor to the Old Owner by a novation agreement
dated [ ], 1998).
(B) The Builder, Nelstar Leasing Company Limited (the "New Owner") and the
Assignor have entered into a Novation Agreement dated ,1998
(the "Novation Agreement") in respect of the contract referred to in
Recital (A) above pursuant to which the New Owner agrees to assume all
the rights and obligations of the Assignor thereunder, the Builder agrees
to the substitution of the New Owner in place of the Assignor in relation
to such rights and obligations, to the release of the Old Owner in respect
thereof and to the amendment of the said contract, all subject to and
upon the terms and conditions of the Novation Agreement.
IT IS AGREED as follows:
1 DEFINITIONS AND INTERPRETATION
1.1 In this Assignment, unless the context otherwise requires, words and
expressions defined in the Novation Agreement (either expressly or by
cross-reference to other documents) shall have the meanings given to them
therein when used herein and the following expression shall have the
following meaning:
"Applicable OFE Contracts" means those OFE Contracts which are listed in
Appendix 1.
1.2 References in this Assignment to Clauses or Appendices are, unless
otherwise specified, references to clauses of, and appendices to, this
Assignment.
1.3 References to "person" or "persons" or to words importing persons
include, without limitation, individuals, firms, incorporations, government
agencies, committees, departments, authorities and other bodies, incorporated
or unincorporated, whether having distinct legal personality or not.
1.4 Clause headings are for ease of reference only.
<PAGE>
2 ASSIGNMENT
2.1 For good and valuable consideration provided by the Builder (the
sufficiency of which is hereby acknowledged by the Assignor), the Assignor
hereby assigns absolutely and agrees to assign absolutely to and in favour of
the Builder all the Assignor's right, title and interest in and to the
Applicable OFE Contracts (including, without limitation, the right to take
delivery of and title to the OFE which is the subject matter of the Applicable
OFE Contracts).
2.2 The Assignor shall remain liable for all obligations under the Applicable
OFE Contracts.
2.3 The Assignor shall promptly give notice to the OFE Suppliers which are
arty to the Applicable OFE Contracts in the form of Appendix 2. The Assignor
shall forward to the Builder copies of all acknowledgements of that notice
received by the Assignor from the OFE Suppliers.
3 MISCELLANEOUS
3.1 Clauses 12.1 to 12.4 of the Novation Agreement shall apply to this
Assignment as if it were, with any necessary consequential changes, set out
in full herein.
4 NOTICES
4.1 Clause 13 of the Novation Agreement, insofar as it relates to notices to
and from the Assignor and the Builder, shall apply to this Assignment as if it
were, with any necessary consequential changes, set out in full herein.
5 LAW
5.1 Clause 15 of the Novation Agreement shall apply to this Assignment as if
it were, with any necessary consequential changes, set out in full herein.
SIGNED by the representatives of the parties
__________________________________________________________
Duly authorised for and on behalf of
GLOBAL MARINE INTERNATIONAL DRILLING
CORPORATION
__________________________________________________________
Duly authorised for and on behalf of
HARLAND AND WOLFF SHIPBUILDING AND HEAVY
INDUSTRIES LIMITED
C.R. WIGS
(at 2/12/98)
<PAGE>
<TABLE>
APPENDIX 1
Applicable OE Contracts
<CAPTION>
Vendor P.O. # Description Amount
<S> <C> <C> <C>
Victoria Machine HOU456000004 350 Ton BOP Cart $ 121,011.38
Works (VMW) HOU456000005 100 Ton Subsea Tree Cart $ 165,061.40
National-Oilwell HOU456000011 Drawworks $ 2,030,017.10
HOU456000012 Rotary $ 264,608.35
HOU456000013 Travelling Block $ 268,197.50
Varco International HOU456000015 Tubular Conveyor $ 630,875.00
HOU456000016 RBS-IV Raised Backup System $ 168,925.00
HOU456000017 AR3200 Iron Roughneck $ 408,798.50
HOU456000018 Mousehole Spider Assy. $ 59,692.50
HOU456000027 Casing Roughneck $ 518,080.00
HOU456000040 Top Drive $ 1,202,183.90
HOU456000046 E-Z Torque $ 32,470.00
HOU456000057 PS-21 Hydraulic Power Slip $ 443,229.70
HOU456000057A MPCH Master Bushing $ 175,205.10
HOU456000099 Hyd. Power Dist. Manifold $ 64,740.00
Seatrax HOU456000019 Cranes $ 3,698,810.90
Cameron HOU456000020 BOP Stack $ 6,643,712.00
HOU456000020A Control System $ 6,084,118.00
Stewart & Stevenson HOU456000021 Riser & Bouyancy Modules $27,727,709.00
Services HOU456000039 Diverter $ 693,310.95
HOU456000053 Choke & Kill Manifold $ 564,000.00
HOU456000091 Riser Tensioner Ring $ 926,250.00
Shaffer HOU456000023 CMC $ 3,272,446.00
(Varco) HOU456000024 250K Riser Tensioner $ 7,781,765.00
HOU456000025 Riser Recoil $ 803,244.00
HOU456000026 Spherical BOP $ 476,330.00
Hal Oilfield Pump HOU456000090 Salt Water Circulating Pumps $ 24,772.20
and Equipment Co.
Dreco Inc. HOU456000031 Derrick $ 3,570,516.00
(National-0ilwell)
Drilling & HOU456000054 Mud Manifolds $ 381,212.35
Production HOU456000055 Cement Manifolds $ 85,837.35
Resources, Inc.
Tool Co., Inc. HOU456000092 Velan 300# RTJ $ 3,688.00
HOU456000095 Velan Gate Values $ 24,326.00
Offshore Inland HOU456000041 Drill Floor Hydraulic Power $ 191,586.00
Service, Inc. Unit
Rigtech (Varco) HOU456000044 Shale Shakers $ 565,541.00
Drillpro HOU456000062 Drill Line Spooler $ 58,980.00
Oil States Ind. HOU456000056 Flexjoints $ 997,000.00
Siemens HOU456000058 SCR's $ 1,617,512.00
Martin-Decker HOU456000060 Electronic modules $ 1,537,399.00
HOU456000083 Operating Unit $ 19,724.50
Certex HOU456000061A 2" Drill Line $ 83,719.00
Dryvent, Ltd. HOU456000064 Compressed Air Drying Plants $ 62,862.52
C.E. Marine HOU456000068 Horizontal Pipe Racker $ 3,511,363.00
Products HOU456000100 350 Ton BOP Transporter $ 1,800,000.00
HOU456000102 50 Ton Riser Skate & Cart $ 335,200.00
Mustang Industrial HOU456000069 Caterpillar 36V Forklift $ 28,347.00
Equipment
AGI Industries HOU456000073 High Pressure BOP Test Unit $ 60,439.00
Piper Oilfield HOU456000074 Diverter Valve Assy. $ 121,490.75
Products
Adrian Industrial HOU456000076 Test Stump Support and Lift $ 23,840.00
Constructors Structure
HOU456000088 Telescoping Joint $ 35,322.00
Verhoef Aluminium HOU456000079 Accommodation Ladder $ 74,900.00
Scheepsbouw Inds.
Airdyne Inc. HOU456000080 Wireline Spoolers fl/Riser
Tensioner $ 57,800.00
Forthwright HOU456000082 Trip Tank $ 109,842.71
Offshore Service
Dolphin Compactors HOU456000089 Trash Compactor $ 19,300.00
International HOU456000093 Junction Boxes $ 1,500.00
Electric Co., Inc.
Cranemann, Inc. HOU456000104 50 Ton Riser Gantry Crane $ 903,730.00
HOU456000105 100 Ton BOP Gantry Crane $ 869,655.00
HOU456000106 Bridge Drive Unit and Trolley $ 137,510.00
E2 Engineering HOU456000107 Camera Equipment $ 92,538.00
</TABLE>
<PAGE>
APPENDIX 2
Form of Notice to OFE Supplier(s)
To: [OFE Supplier]
[Address]
[Date]
[Applicable OFE Contract(s)] (the "Contract(s)")]
Gentlemen
We refer to the Contract(s) and hereby notify you that, by an Assignment
dated [ ], 1998 entered into by us in favor of Harland and Wolff Shipbuilding
and Heavy Industries Limited (the "Builder"), we have assigned absolutely and
agreed to assign absolutely to and in favor of the Builder all our right, title
and interest in and to the Contract(s) (including, without limitation, the
right to take delivery of and title to the equipment which is the subject
matter of the Contract(s)).
We remain liable for all obligations of the Buyer under, and as defined in the
Contract(s).
We further notify you that by a Supervision Agreement dated
[ ], 1998 the Builder has irrevocably appointed
us its agent and supervisor in relation to the Contract(s) to exercise all
rights of the Builder under the Contract(s) as so assigned. You shall, and are
requested to, continue to deal exclusively with ourselves in all matters
relating to the Contract(s).
You are hereby requested to acknowledge receipt of this notice by executing
and returning to us the form of acknowledgement attached to this letter in the
envelope provided. If you have any questions, please contact Walter A. Baker,
Assistant General Counsel at 281 596 5131.
Yours faithfully
________________________
Duly authorised
For and on behalf of
GLOBAL MARINE INTERNATIONAL
DRILLING CORPORATION
cc. M A Crispi, Construction Purchasing
M S Jadick, Material Control
<PAGE>
Acknowledgement
To: Global Marine International Drilling Corporation (the "Assignor")
c/o Global Marine U.K. Limited
Standbrook House
2/5 Old Bond Street
London W1X 4QH
Re: [Applicable OFE Contracts] (the "Contracts")
We hereby acknowledge receipt of the above notice of assignment from the
Assignor and we hereby consent and agree with the Assignor and the Builder as
follows:
1 To the extent (if any) required by the Contract(s), we hereby consent to
the said assignment.
2 We confirm that we have received no notice of the assignment of the
Contract(s) in favor of any third party.
3 If we are in breach of our obligations under the Contract(s) prior to
assignment in favor of the Builder, the Assignor's entitlement to damages
shall be preserved and vest in the Builder. If we are in breach of our
obligations under the Contract(s) at any time after assignment in favour
of the Builder, the measure of damages payable to the Builder shall be
that which would have been payable to the Assignor had the Contract not
been assigned in favour of the Builder.
Acknowledged this day of , 1998
By:____________________________________
Name: _________________________________
Title: __________________________________
Company: ______________________________
* Note: These are alternatives; delete as applicable. More than one
Certificate of Drawing can be presented on the same day.
CONFORMED COPY
DATED 8th DECEMBER 1998
NELSTAR LEASING COMPANY LIMITED
as lessor
- and -
GLOBAL MARINE LEASING CORPORATION
as lessee
____________________________________________________
HEAD LEASE AGREEMENT
relating to
a Glomar Hull 456 class
Deepwater Drillship to be
constructed by Harland and Wolff with
hull number 1739
(t.b.n. "GLOMAR C.R. LUIGS")
____________________________________________________
TABLE OF CONTENTS
Clause Heading Page
1. DEFINITIONS AND INTERPRETATIONS 1
2. REPRESENTATIONS AND WARRANTIES 28
3. CONDITIONS PRECEDENT 29
4. LEASING AND DELIVERY AND ACCEPTANCE OF THE VESSEL 30
5. DISCLAIMERS AND EXCLUSIONS, LESSOR'S COVENANTS 31
6. LEASE PERIOD 35
7. RENT 36
8. PAYMENTS 37
9. COVENANTS CONCERNING INSURANCES 39
10. TOTAL LOSS AND DAMAGE 45
11. GENERAL COVENANTS AND UNDERTAKINGS OF THE LESSEE 48
12. OPERATIONAL COVENANTS IN RELATION TO THE VESSEL 50
13. BENEFIT OF THIRD PARTY WARRANTIES 57
14. INSPECTION 59
15. RISK 59
16. REQUISITION FOR HIRE 60
17. SALVAGE 61
18. TITLE AND LIENS 61
19. RE-DELIVERY AND SALE OF THE VESSEL 62
20. PROCEEDS OF SALE 65
21. TERMINATION PROVISIONS 66
22. SECURITY AND SECURITY REVIEW 72
23. EXCLUDED OBLIGATIONS 75
24. CHANGE OF CIRCUMSTANCES ETC. 77
25. GENERAL INDEMNITY 79
26. GENERAL TAX INDEMNITY AND OTHER TAX PROVISIONS 84
27. PRESERVATION OF INDEMNITIES 90
28. ASSIGNMENT 90
29. LESSOR'S RIGHT OF SET-OFF 92
30. SUB-LEASING 92
31. MISCELLANEOUS 93
32. CONFIDENTIALITY 97
SCHEDULE 1 Financial Schedule 99
SCHEDULE 2 100
SCHEDULE 3 INTENTIONALLY OMITTED 101
SCHEDULE 4 Part 1 - Representations and Warranties
by the Lessee 102
Part 2 - Representations and warranties
by the Lessor 105
SCHEDULE 5 Part 1 - Conditions precedent to the
obligations of the Lessor generally 106
Part 2 - Conditions precedent to Lessor's
payment obligations under the
Shipbuilding Contract 108
Part 3 - Conditions Precedent to Delivery 111
Part 4 - Conditions Precedent to the
obligations of the Lessee generally 113
SCHEDULE 6 Form of Acceptance Certificate 114
SCHEDULE 7 Part I - Form of Hull and Machinery
(Marine and War Risks) Loss Payable Clause 115
SCHEDULE 7 Part II -Form of Protection and Indemnity
Risks Loss Payable Clause 116
THIS AGREEMENT dated 8th December, 1998 is made
BETWEEN:
(1) NELSTAR LEASING COMPANY LIMITED, a company incorporated
under the laws of England and Wales with company
registration number 1581384 whose registered office is at
71 Lombard Street, London EC3P 3BS, England; and
(2) GLOBAL MARINE LEASING CORPORATION, a company incorporated
under the laws of the Commonwealth of the Bahamas whose
registered office is at Mareva House, 4 George Street,
Nassau, the Commonwealth of the Bahamas.
WHEREAS:
The Lessor carries on the trade of leasing and pursuant to the
Shipbuilding Contract and the Construction Supervision Agreement
has agreed to incur capital expenditure on the provision of the
Vessel for leasing to the Lessee on and subject to the terms and
conditions contained in this Agreement.
NOW IT IS AGREED:
1. DEFINITIONS AND INTERPRETATIONS
1.1 DEFINITIONS
In this Agreement the following words and expressions
shall each have the meaning respectively attributed to
them below:
"ACCELERATION NOTICE" means a written notice from the
Lessor to the Lessee given under Clause 6.3;
"ACCELERATION OPTION" means the option on the part of the
Lessor the terms of which are set out in Clause 6.3;
"ACCELERATION RENT" shall have the meaning attributed to
that term in Clause 6.3;
"ACCEPTANCE CERTIFICATE" means the certificate given by
the Lessee to the Lessor pursuant to Clause 4.2, in or
substantially in the form of Schedule 6;
"ACCOUNTING PERIOD" means an accounting period as defined
in section 12 of ICTA 1988;
"Accounts" means, together, the First Account and the
Second Account;
"ADDITIONAL PAYMENT" shall have the meaning attributed to
that term in Clause 26.5;
"ADDITIONAL SECURITY" means additional security for the
obligations of the Lessee under this Agreement in form and
content acceptable to the Lessor, provided in accordance
with Clause 22.3;
"ADDITIONAL SECURITY DOCUMENTS" means all documents under
which Additional Security is constituted or by which such
security is evidenced or pursuant to which the Lessee
obtains or secures the provision of any Additional
Security;
"ADDITIONAL SECURITY PROVIDER" means any person providing
Additional Security;
"ADJUSTMENT DATE" shall have the meaning attributed to
that term in the Financial Schedule;
"APPROVED BROKERS" means McGriff, Seibels & Williams of
Texas, Inc. or such other firm or firms of insurance
brokers as may from time to time be approved in writing by
the Lessor for the purposes of this Agreement (such
consent not to be unreasonably withheld);
"ASSUMPTIONS" shall have the meaning attributed to that
term in the Financial Schedule;
"BALANCE" shall have the meaning attributed to that term
in the Financial Schedule;
"BANK" means Lloyds Bank Plc, registered in England with
company registration number 2065 and shall include its
successors but shall not include its assignees or
transferees under clause 11.3 of each of the Deposit
Deeds;
"BANK GUARANTEE" means the guarantee granted or, as the
context may require, to be granted on or about the date of
this Agreement to the Lessee by the Bank in relation to
the obligations of the Lessor under this Agreement;
"BASE RATE" means the base rate from time to time quoted
by the Bank in London as its "BASE RATE" or, if no rate of
interest is quoted as such, the rate of interest from time
to time certified by the Bank in London as being the rate
which the Bank uses as the base for determining rates of
interest charged to corporate customers;
"BROKEN FUNDING COSTS" shall have the meaning attributed
to that term in the Financial Schedule;
"BROKEN FUNDING GAINS" shall have the meaning attributed
to that term in the Financial Schedule;
"BUILDER" means Harland and Wolff Shipbuilding and Heavy
Industries Ltd., a company incorporated under the laws of
Northern Ireland, whose principal office is at Queen's
Island, Belfast, Northern Ireland BT3 9DU;
"BUSINESS DAY" means a day on which dealings in Sterling
deposits are carried on in the London Inter-Bank Market
and (other than a Saturday or Sunday, or holiday scheduled
by law) on which banks are open for business (a) in the
City of London and (b) if on that date any payment falls
to be made under any of the Relevant Lease Documents other
than in Sterling, in the principal financial centre in the
country of the currency concerned and (c) if on that date
no payment falls to be made under any of the Relevant
Lease Documents, in Houston, Texas;
"CAA 1990" means the Capital Allowances Act 1990;
"CALCULATION PERIOD" means
(a) in relation to the Instalment Date for the First
Instalment and the Second Instalment, the period
commencing on that Instalment Date and ending on
the next date set out in the column headed "Date"
in Part A of Schedule 2 and thereafter the period
commencing on a date set out in that column and
ending on the next date set out in that column up
to and including the date set out in that column
which is the same date as the Instalment Date for
the Delivery Instalment; or
(b) at any time on or after the Instalment Date for the
Delivery Instalment, each period commencing on a
date set out in the column headed "Date" in Part A
of Schedule 2 and ending on the next date shown in
that column;
"CHANGE OF LAW" means, in each case after the date on
which this Agreement is originally executed:
(a) the implementation, introduction, abolition,
withdrawal or variation of, any applicable law,
regulation, practice or concession or official
directive, ruling, request, notice, guideline,
statement of policy or practice statement by the
Bank of England, the European Union or any central
bank or tax, fiscal, revenue, monetary,
governmental, local, international, national or
other competent authority or agency (whether or not
having the force of law but in respect of which
compliance by banks or other financial institutions
or institutions of a similar nature to the Lessor
in the relevant jurisdiction is generally
customary); or
(b) any change in any interpretation, or the
introduction or making of any new or further
interpretation, or any new or different
interpretation of any applicable law, regulation,
practice or concession or official directive,
ruling, request, notice, guideline, statement of
policy or practice statement by any court,
tribunal, governmental, local, international,
national or other competent authority or agency or
the Bank of England, the European Union or any
central bank or tax, fiscal, revenue or monetary
authority or agency (whether or not having the
force of law but in respect of which compliance by
banks or other financial institutions or
institutions of a similar nature to the Lessor in
the relevant jurisdiction is generally customary);
or
(c) compliance with any new or different request or
direction from the Bank of England, the European
Union or any central bank, tax, fiscal, monetary,
revenue, governmental, local, international,
national or other competent authority or agency
(whether or not having the force of law but in
respect of which compliance by banks or other
financial institutions or institutions of a similar
nature to the Lessor in the relevant jurisdiction
is generally customary);
"CHAPS" means the Clearing Houses Automated Payments
System;
"CIBC" means Canadian Imperial Bank of Commerce acting
through its London branch at Cottons Centre, Cottons Lane,
London SE1 2QL, England;
"CIBC PAYMENT AGREEMENT" means the payment agreement
entered into or, as the context may require, to be entered
into on or about the date of this Agreement between CIBC,
the Lessor and the Lessee relating to the undertaking by
CIBC to perform certain payment obligations;
"CLASSIFICATION" means A1-E Mobile Offshore Drilling Unit-
DPS-3 AMS ACCU, R2S (or, as the case may be, its equivalent)
with the Classification Society or such other classification
as the Lessor shall, at the request of the Lessee, have
agreed in writing shall be treated as the Classification for
the purposes of this Agreement;
"CLASSIFICATION SOCIETY" means American Bureau of Shipping
or any other classification society which is a member of
the International Association of Classification Societies
(or equivalent body for the time being);
"COMMENCEMENT DATE" shall have the meaning attributed to
that term in the Financial Schedule;
"COMMERZBANK" means Commerzbank A.G. acting through its
London branch at 23 Austin Friars, London EC2N 2EN,
England;
"COMMERZBANK PAYMENT AGREEMENT" means the payment
agreement entered into or, as the context may require, to
be entered into on or about the date of this Agreement
between Commerzbank, the Lessor and the Lessee relating to
the undertaking by Commerzbank to perform certain payment
obligations;
"COMPULSORY ACQUISITION" means requisition for title or
other compulsory acquisition, requisition, appropriation,
expropriation, deprivation, forfeiture or confiscation for
any reason of the Vessel by any Government Entity or other
competent authority, whether de jure or de facto, but
shall exclude requisition for use or hire not involving
requisition of title;
"CONSTITUTIVE DOCUMENTS" in relation to any English
company means that company's certificate of incorporation
and memorandum and articles of association and, in
relation to any overseas person (whether incorporated,
established or otherwise formed, but excluding natural
persons), means the documents having equivalent status and
effect in the relevant jurisdiction;
"CONSTRUCTION SUPERVISION AGREEMENT" means the agreement
entered or to be entered into between the Lessor and GMIDC
with respect to the supervision by GMIDC of the
construction of the Vessel;
"CONTRIBUTION DEED" means the deed entered into or, as the
context may require, to be entered into between the
Lessor, the Lessor's Agent and the Sub-Lessee providing
for the making by the Sub-Lessee of a capital contribution
to the Lessor's cost of the acquisition of the Vessel from
time to time;
"CORPORATION TAX" means corporation tax chargeable in the
context of the scheme of Taxation applied to United
Kingdom resident companies generally at the rate
applicable to such companies (disregarding the provisions
of section 13 of ICTA 1988 concerning the small companies'
rate) or any Tax of a similar nature enacted in addition
to or substitution for corporation tax;
"COST OF MANAGEMENT TIME" means the cost of the management
time of the Lessor (or any other member of the Lessor's
Group acting on behalf of the Lessor) incurred by any
director or employee of the Lessor or such member of the
Lessor's Group charged at the rate of two hundred Pounds-
Sterling(200) (as such figure shall be increased on an annual
basis by the percentage increase in the RPI since 1st
January 1998) per hour;
"DATE OF TOTAL LOSS" shall have the meaning attributed to
that term in Clause 10.3;
"DEFAULT RATE" in respect of Sterling amounts means the
percentage rate per annum which is two per cent (2%) over
Base Rate and, in respect of other amounts means 2% over
the cost to the Lessor of funding the relevant amount, in
the relevant currency;
"DELIVERY" means delivery of the Vessel by the Lessor to
the Lessee in accordance with Clause 4.2;
"DELIVERY DATE" means the date on which the Vessel is
delivered by the Lessor to the Lessee in accordance with
Clause 4.2;
"DELIVERY INSTALMENT" means the amount paid or, as the
context may require, payable by the Lessor (i) to the
Lessor's Agent on the Delivery Date pursuant to clause 5.1
of the Construction Supervision Agreement and (ii) to the
Builder pursuant to the Shipbuilding Contract;
"DEPOSIT BANK" means Lloyds Bank Plc, acting through its
branch at 71 Lombard Street, London EC3P 3BS as holder of
the Accounts and shall include, where the context
requires, any successors or assignees and/or transferees
pursuant to clause 11.3 of the relevant Deposit Deed of
the then current Deposit Bank;
"DEPOSIT DEEDS" means, together, the First Deposit Deed
and the Second Deposit Deed;
"DETERMINATION" shall have the meaning attributed to that
term in Clause 1.4(a);
"DOCUMENT OF COMPLIANCE" shall have the meaning
attributable to that term in the ISM Code;
"DOLLARS" and "$" each means the lawful currency for the
time being of the United States of America and in respect
of all payments to be made to the Lessor under this
Agreement and any of the other Relevant Lease Documents in
Dollars, each means immediately available, freely
transferable cleared funds in Dollars;
"EARLY TERMINATION FEE" means an amount calculated in
accordance with paragraph 4.4 of the Financial Schedule;
"ENVIRONMENT" means:
(i) any land including, without limitation, surface
land and sub-surface strata, sea bed or river bed
under any water (as defined below) and any natural
or man-made structures;
(ii) water including, without limitation, coastal and
inland waters, surface waters, ground waters and
water in drains and sewers; and
(iii) air, including air within buildings and other
natural and man-made structures above and below
ground;
"ENVIRONMENTAL CLAIM" means any written or oral notice
from any Government Entity or, subject to the proviso
below, any third party, alleging any breach, contravention
or violation of any Environmental Law or the existence of
any liability or potential liability arising from any such
breach, contravention or violation including, without
limitation, in respect of liability to conduct, pay for or
for damages in respect of any investigation or audit,
clean-up, redemption, administrative cost or charge or
expense, damage to the Environment or any natural
resource, property loss or damage, personal injury or any
penalty attaching or relating to the presence, emission,
release or leak of any Hazardous Material in or to the
Environment PROVIDED THAT there shall be excluded from
this defined term any such allegation from a third party
(not being a Government Entity) which the Lessee, acting
reasonably, believes to be spurious or not made in good
faith;
"ENVIRONMENTAL LAW" means any or all applicable law
(whether civil, criminal or administrative), common law,
statute, statutory instrument, treaty, convention,
regulation, directive, by-law, demand, decree, injunction,
resolution, order or judgment (in each case having the
force of law) and codes of practice or conduct (in respect
of which compliance by persons carrying on the same
business as the Lessee is customary), circulars and
guidance notes having legal or judicial import or effect,
in each case of any Government Entity (whether now
existing or hereafter promulgated) in any applicable
jurisdiction relating to or concerning:
(a) pollution or contamination of the Environment;
(b) harm, whether actual or potential, to mankind and
human senses, other living organisms and ecological
systems;
(c) the generation, manufacture, processing,
distribution, use (including abuse), treatment,
storage, disposal, transport or handling of
Hazardous Materials; and
(d) the emission, leak, release, spill or discharge
into the Environment of noise, vibration, dust,
fumes, gas, odours, smoke, steam, effluvia, heat,
light, radiation (of any kind), infection,
electricity or any Hazardous Material and any
matter or thing capable of constituting a nuisance
or an actionable tort or breach of statutory duty
of any kind in respect of such matters,
including, without limitation, the following laws of the
United States of America: the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as
amended, the Hazardous Materials Transportation Act, as
amended, the Oil Pollution Act of 1990, as amended, the
Federal Water Pollution Control Act, as amended, the
Resource Conservation and Recovery Act, as amended and the
Toxic Substance Control Act, as amended, in each case with
the regulations promulgated and the guidance issued
pursuant thereto;
"ENVIRONMENTAL PERMITS" means, in relation to any person,
all or any permits, licences, consents, approvals,
certificates, registrations, and other authorisations and
the filing of all notifications, reports and assessments
required under any Environmental Law in connection with
the conduct of such person's business and the ownership,
use, exploitation or occupation of all of its property and
assets;
"EXCESS RISKS" means the proportion of claims for general
average, salvage and salvage charges not recoverable under
the hull and machinery policies in respect of the Vessel
in consequence of her insured value being less than the
value at which the Vessel is assessed for the purposes of
such claims;
"EXCLUDED OBLIGATIONS" shall have the meaning attributed
to that term in Clause 23.1;
"EXCLUDED PROPERTY" means, in respect of the Vessel, any
items of equipment installed on or attached to the Vessel
but which do not become or are not required to become, by
virtue of any provision of this Agreement, part of the
Vessel;
"FINAL DATE" shall have the meaning attributed to that
term in the Financial Schedule;
"FINANCIAL SCHEDULE" means Schedule 1;
"FINANCE LEASE" shall have the meaning attributed to that
term in the United Kingdom Statement of Standard
Accounting Practice 21;
"FINANCIAL INDEBTEDNESS" in relation to any person means,
without duplication, all indebtedness of such person for
borrowed money (whether or not the recourse of the lender
is to the whole of the assets of such person or only to a
portion thereof);
"FINANCIAL STATEMENTS" means the unaudited accounts of the
Lessee, prepared in accordance with US GAAP;
"FIRST ACCOUNT" means the account number 1012083 entitled
"Global Marine Leasing Corporation: Glomar C.R. Luigs
Number One Account" opened by the Lessee with the Deposit
Bank to which, inter alia, moneys payable by the Payment
Banks under the Payment Agreements are to be credited;
"FIRST ACCOUNT INTEREST ACCRUAL" means, for the Relevant
Date in any Calculation Period, the amount shown for that
Calculation Period in the column headed "First Account
Interest Accrual" in Part [ ] of Schedule 2;
"FIRST ACCOUNT PRINCIPAL BALANCE" means for the Relevant
Date in any Calculation Period, the amount shown for that
Calculation Period in the column headed "First Account" in
Part A of Schedule 2 calculated in accordance with the
provisions of clause 3 of the First Deposit Deed;
"FIRST DEPOSIT DEED" means the deed so entitled entered
into or, as the context may require, to be entered into on
or about the date of this Agreement between the Lessee,
the Lessor and the Deposit Bank in relation to the First
Account;
"FIRST INSTALMENT" means the amount paid or, as the
context may require, payable by the Lessor pursuant to
clause 5.1(a) of the Novation Agreement;
"FLAG STATE" means the Republic of Panama or any other
state or country in which the Vessel is from time to time
registered in accordance with the provisions of Clause
12.20;
"GOVERNMENT ENTITY" means and includes (whether having a
distinct legal personality or not) (i) any national
government, political sub-division thereof or local
jurisdiction therein, (ii) any board, commission,
department, division, organ, instrumentality, court or
agency of any entity referred to in (i) above, however
constituted, and (iii) any association, organisation or
institution (international or otherwise) of which any
entity mentioned in (i) or (ii) above is a member or to
whose jurisdiction any of the foregoing is subject or in
whose activities any of the foregoing is a participant;
"GMIDC" means Global Marine International Drilling
Corporation, a company incorporated under the laws of the
Commonwealth of the Bahamas whose registered office is at
c/o McKinney, Bancroft & Hughes, Mareva House, 4 George
Street, P.O. Box 3937, Nassau, Bahamas;
"GUARANTEE" means the deed of guarantee and indemnity given
or, as the context may require, to be given by the Guarantor
in favour of the Lessor;
"GUARANTOR" means Global Marine Inc., a company
incorporated under the laws of the State of Delaware in
the United States of America whose principal place of
business is at 777 North Eldridge Parkway, Houston, Texas
77079, United States of America;
"GUARANTOR CREDIT CURE EVENT" means an event which shall
occur if, following the occurrence of a Guarantor Credit
Event, the Guarantor's unsecured, unguaranteed and
unsubordinated long term debt is rated BBB- by Standard &
Poor's Ratings Group ("S&P"), a division of McGraw Hill
Corporation and Baa3 by Moody's Investors Service Inc.
("MOODY'S") or higher (or any successor to S&P's or, as
the case may be, Moody's ratings business or, if there is
no such successor, such other internationally recognised
credit rating organisation as the Lessor may reasonably
specify (in which case references in this Agreement to S&P
or Moody's credit rating scales and rating terminology
shall be construed as references to the equivalent scales
and terminology of such successor or, as the case may be,
such organisation so specified)) ;
"GUARANTOR CREDIT EVENT" means an event which shall occur
if the Guarantor's unsecured, unguaranteed and
unsubordinated long term debt is rated below BBB- by
Standard & Poor's Ratings Group ("S&P"), a division of
McGraw Hill Corporation or Baa3 by Moody's Investors
Service Inc. ("MOODY'S") (or any successor to S&P's or, as
the case may be, Moodys' ratings business or, if there is
no such successor, such other internationally recognised
credit rating organisation as the Lessor may reasonably
specify (in which case references in this Agreement to S&P
or Moody's credit rating scales and rating terminology
shall be construed as references to the equivalent scales
and terminology of such successor or, as the case may be,
such organisation so specified)) or the unsecured,
unguaranteed and unsubordinated long term debt of the
Guarantor shall cease to be rated at all by both such
agencies;
"GUARANTOR CREDIT EVENT CURE DATE" shall have the meaning
attributed to that term in Clause 22.6(B);
"GUARANTOR CREDIT EVENT OCCURRENCE DATE" shall have the
meaning attributed to that term in Clause 22.2(a);
"GUARANTOR'S GROUP" means the Guarantor and its Holding
Company (US) and its Subsidiaries (US) from time to time;
"HAZARDOUS MATERIAL" means any element or substance,
whether natural or artificial, and whether consisting of
gas, liquid, solid or vapour, whether on its own or in any
combination with any other element or substance, which is
listed, identified, defined or determined by any
applicable law to be, to have been, or to be capable of
being or becoming harmful to mankind or any living
organism or damaging to the Environment including without
limitation oil (as defined in the United States Oil
Pollution Act of 1990, as amended) and all hazardous
substances (as defined in the United States Comprehensive
Environmental Response, Compensation and Liability Act of
1980, as amended);
"HOLDING COMPANY" means any holding company within the
meaning of section 736 of the Companies Act 1985;
"HOLDING COMPANY (US)" means a corporation which owns,
directly or indirectly, more than 50% of the voting stock
(as defined in the definition of "SUBSIDIARY (US)") of
another corporation;
"HULL INSURANCES" means the insurances described in Clause
9.1(a)(i);
"ICTA 1988" means the Income and Corporation Taxes Act
1988;
"INCREASED COST" shall have the meaning attributed to that
term in Clause 24.4.
"INDEMNIFIED PERSONS" shall have the meaning attributed to
that term in Clause 25.1 (a);
"INITIAL SERVICE CONTRACTOR" means BHP Petroleum
(Americas) Inc., a company incorporated under the laws of
the State of Delaware in the United States of America;
"INSOLVENCY EVENT" means, in relation to any person any of
the following:
(a) that person is unable to pay its debts as they fall
due within the meaning of section 123(1) of the
Insolvency Act 1986 or has a voluntary arrangement
proposed under section 1 of the Insolvency Act 1986
or admits in writing its inability to pay its debts
as they mature or declares a moratorium on the
payment of all or a substantial part of its
indebtedness or makes a general assignment for the
benefit of creditors or is subject to or applies
for winding-up or liquidation proceedings or is
successfully put into forced or voluntary
liquidation (except for the purpose of (i)
voluntary reorganisation of that person previously
agreed in writing by the Lessor not involving the
insolvency of that person and (ii) voluntary
reorganisation of any other person not involving
the insolvency of that person); or
(b) that person or any creditor or shareholder of that
person petitions or applies to any court, tribunal
or authority for the appointment of, or that person
has or suffers to be appointed, any examiner,
administrator, administrative receiver, receiver,
liquidator, trustee or similar officer of it, its
undertaking or any substantial part of its assets
(unless in the case of a petition or application by
a creditor, it is established to the reasonable
satisfaction of the Lessor that such petition or
application is of a frivolous or vexatious nature
or such petition or application is dismissed within
thirty (30) days); or
(c) that person shall suffer a distress, execution,
sequestration, attachment or other process or the
same is being levied or enforced upon or sued out
against, in each case against the whole or a
substantial part of the assets, rights or revenues
of that person or a creditor takes possession of
the whole or a substantial part of the assets,
rights and revenues of that person, and such
distress, execution, attachment, sequestration or
other process is not dismissed or released or that
person does not regain possession in each case
within ten (10) Business Days provided that an
arrest or other detention of the Vessel shall not
of itself be an Insolvency Event if the provisions
of Clause 12.17 are being complied with by the
Lessee; or
(d) that person otherwise enters into any settlement or
takes any corporate action or that person or any
creditor or shareholder of that person takes any
steps in relation to that person under any law,
regulation or decree of any applicable jurisdiction
whether now or hereafter in effect relating to or
which has an equivalent effect to any of (a), (b)
or (c) above;
"INSTALMENT" means each of the First Instalment, the
Second Instalment and the Delivery Instalment;
"INSTALMENT DATE" means:
(a) in respect of the First Instalment, the date during
which the Effective Time (as such term is defined
in the Novation Agreement) falls;
(b) in respect of the Second Instalment, the date
described in the clause 8.3.4 of the Shipbuilding
Contract; and
(d) in respect of the Delivery Instalment, the date
described in clause 8.3.5 of the Shipbuilding
Contract;
or, in each case, such other date or dates as the Lessee
may notify to the Lessor upon giving not less than five
(5) Business Days' notice (a "5 B.D. NOTICE") and, in the
case of the Delivery Instalment, subject to the Lessee
having given the Lessor at least one 5 B.D. Notice, such
other date or dates as the Lessee may notify to the Lessor
upon giving not less than one (1) Business Day's notice;
"INSURANCE ADVISER'S FEE" means the fees, charges and
expenses paid or payable by the Lessor to the Lessor's
insurance adviser in respect of the transactions
contemplated by the Lease Documents, incurred up to and
including the Delivery Date (excluding any VAT thereon);
"INSURANCES" means all policies and contracts of insurance
(which expression includes all entries of the Vessel in a
protection and indemnity or war risks association) which
are from time to time prior to or during the Lease Period
in place or taken out or entered into (a) pursuant to
Clause 9 in respect of any part of the Vessel or (b)
otherwise howsoever in connection with the Vessel and, in
each case, all benefits thereof (including claims of
whatsoever nature and return of premiums);
"IRRECOVERABLE VAT" means any amounts paid or payable by
or on behalf of the Lessor in respect of Value Added Tax
under or as contemplated by any of the Relevant Lease
Documents to the extent the Lessor shall determine that
the Lessor or, if the Lessor is a member of a group for
Value Added Tax purposes, the representative member has
not or will not receive a credit (whether by way of credit
or repayment) for that amount as "INPUT TAX" (as that
expression is defined in sub-section (1) of section 24 of
VATA) under sections 25 and 26 of VATA (nor receive a
credit for it under any similar or equivalent legislation)
PROVIDED THAT in calculating the amount of Irrecoverable
VAT (if any) it shall be assumed that neither the Lessor
nor any representative member has entered into any
transactions other than as contemplated by the Relevant
Lease Documents and that accurate and timely VAT returns
have been made by the Lessor or the representative member;
"ISM CODE" means:
(a) The International Safety Management Code for the
Safe Operation of Ships and for Pollution
Prevention currently known or referred to as the
"ISM Code", adopted by the Assembly of the
International Maritime Organisation by Resolution
A.741(18) on 4th November 1993 and incorporated on
19th May 1994 into chapter IX of the International
Convention for the Safety of Life at Sea 1974
(SOLAS 1974); and
(b) all further resolutions, circulars, codes,
guidelines, regulations and recommendations which
are now or may in the future be issued by or on
behalf of the International Maritime Organisation
or any other entity with responsibility for
implementing the ISM code, including, without
limitation, the "Guidelines on implementation or
administering of the International Safety
Management (ISM) Code by Administrations" produced
by the International Maritime Organisation pursuant
to Resolution A.788(19) adopted on 25th November
1995;
as the same may be amended, supplemented or replaced from
time to time;
"JOINT VENTURE" means (a) with respect to properties
located in the United States of America, any partnership,
corporation or other entity, in which up to and including
50% of the partnership interests, outstanding voting stock
or other equity interests is owned, directly or
indirectly, by the Guarantor and/or one or more
subsidiaries, and (b) with respect to properties located
outside the United States of America, any partnership,
corporation or other entity, in which up to and including
60% of the partnership interests, outstanding voting stock
or other equity interests is owned, directly or
indirectly, by the Guarantor and/or one or more
Subsidiaries (US);
"LEASE DOCUMENTS" means the Relevant Lease Documents, the
Original Shipbuilding Contract, the Sub-Lease, the OFE
Supervision Agreement, any Service Contract and any other
document, notice, letter or instrument designated as a
Lease Document by the Lessor and the Lessee;
"LEASE PERIOD" means the period during which the Lessee
shall be entitled to possession and use of the Vessel in
accordance with this Agreement being the period, if any,
commencing on (and including) the Delivery Date and
terminating on (and including) the Termination Date;
"LEASE PERIOD END DATE" means the later of the Primary
Period End Date and the last day of the final Secondary
Lease Period;
"LESSEE" means Global Marine Leasing Corporation;
"LESSOR" means Nelstar Leasing Company Limited;
"LESSOR ACTION" means any action on the part of the Lessor
required or permitted pursuant to this Agreement,
including, but not limited to, the giving, refusing,
revocation or withdrawal of any consent or approval;
"LESSOR'S AGENT" means GMIDC;
"LESSOR'S ARRANGEMENT FEE" means the amount of the fee
(excluding VAT thereon) paid or payable by the Lessor to
Atlas Oceanic Limited for services rendered to the Lessor
in relation to the arrangement of the transactions
contemplated by this Agreement and the other Lease
Documents;
"LESSOR'S COST" as at any time means the sum equal to the
aggregate of the amounts paid by the Lessor by way of
reimbursement to the Lessor's Agent pursuant to the
Construction Supervision Agreement or paid to the Builder
pursuant to the Shipbuilding Contract, being the aggregate
of the Instalments (to the extent paid up to and including
that time) calculated in each case by reference to the
date on which the Lessor makes payment of the relevant
Instalment under the Construction Supervision Agreement in
reimbursement of expenditure incurred by the Lessor's
Agent on behalf of the Lessor or (as the case may be)
makes payment to the Builder pursuant to the Shipbuilding
Contract;
"LESSOR'S EXPENSES" means the Lessor's Arrangement Fee,
the Lessor's Legal Expenses and the Insurance Adviser's
Fee (if any) together with any "desk-top" valuation fee
incurred by the Lessor in connection with the Vessel prior
to the payment of the Delivery Instalment;
"LESSOR'S GROUP" means the Lessor and its ultimate Holding
Company (if any) from time to time and any company which
is from time to time a Subsidiary of that Holding Company;
"LESSOR'S LEGAL EXPENSES" means the amount of fees,
disbursements and incidentals (excluding VAT thereon) paid
or payable by the Lessor to Wilde Sapte and any relevant
overseas legal advisers for services rendered to the
Lessor in relation to, inter alia, the preparation,
negotiation and completion of the transactions
contemplated by this Agreement and the other Lease
Documents Provided that the amount of Wilde Sapte's fees
(excluding disbursements, incidentals and any VAT thereon)
which shall constitute part of the Lessor's Legal Expenses
shall not exceed a maximum amount separately agreed;
"LESSOR'S LIEN" means a Lien of the type referred to in
Clause 5.2(b) but excluding (other than for the purposes
of any title warranty in respect of the Vessel which the
Lessor has agreed in the Relevant Lease Documents to give
on sale of the Vessel) Liens referred to in the proviso to
that Clause;
"LIABILITY" shall have the meaning attributed to that term
in Clause 25.1(a);
"LIABILITY INSURANCES" means the insurances described in
Clause 9.1(a)(ii);
"LIBID" in relation to a particular amount for a
particular period, means LIBOR for the amount and period
LESS zero point one two five per cent (0.125%);
"LIBOR" means, in relation to a particular period:
(i) the offered rate for deposits of Sterling
for a period equal to such period at or about 11.00 a.m.
(London time) on the first day of such period as displayed
on Telerate page 3750 (British Bankers' Association
Interest Settlement Rates) or such other page as may
replace page 3750 on such system or on any other system of
the information vendor for the time being designated by
the British Bankers' Association to calculate British
Bankers' Association's Interest Settlement Rate (as
defined in the British Bankers' Association's Recommended
Terms and Conditions dated 5th August, 1985); or
(ii) if on such date no such rate as is mentioned in
paragraph (i) above is displayed, LIBOR for such
period shall be the arithmetic mean (rounded
upwards if necessary to five decimal places) of the
rates respectively quoted to the Bank by each of
the Reference Banks at the request of the Bank (or,
if not all the Reference Banks provide a quotation
when requested, the arithmetic mean of the rates
which are quoted) as such Reference Banks' offered
rates for deposits of Sterling in an amount
approximately equal to the amount in relation to
which LIBOR is to be determined for a period
equivalent to such period to prime banks in the
London Inter-bank Market at or about 11.00 a.m.
(London time) on the first day of such period; or
(iii) if on such date no such rate can be ascertained
pursuant to either paragraph (i) or paragraph (ii)
of this definition, LIBOR for such period shall be
the rate, determined by the Lessor at which the
Bank would be able to obtain deposits of Sterling
in an amount approximately equal to the amount in
respect of which LIBOR is to be determined, from
whatever source it may reasonably select for a
period equivalent to such period at or about 11.00
a.m. (London time) on the first day of such period;
"LIEN" means any right of ownership, security, retention
of title, right of possession or detention, mortgage,
charge, lien, pledge, encumbrance, lease or other
bailment, assignment, statutory right in rem,
hypothecation, attachment, levy, claim, detention,
proceeding or set-off (other than any right of set-off
arising in favour of a banker by operation of law which
has not been exercised) or any agreement or arrangement
having the effect of creating a security interest or any
other encumbrance or security interest whatsoever,
howsoever and wheresoever created or arising;
"LONDON BUSINESS DAY" means a day on which dealings in
Sterling deposits are carried on in the London Inter-Bank
Market and (other than a Saturday or Sunday, or holiday
scheduled by law) on which banks are open for business in
the City of London;
"LOSSES" shall have the meaning attributed to that term in
Clause 25.1(a) and "LOSS" shall be construed accordingly;
"LOSS PAYABLE CLAUSE" means the provisions regulating the
recipient of payment of sums recoverable under the Hull
Insurances in respect of the Vessel which are to be
incorporated in the relevant insurance documents, such
Loss Payable Clause to be in the form of Schedule 7 or in
such other forms as may from time to time be required in
writing by the Lessor;
"MATERIAL SUBSIDIARY (US)" means any Subsidiary (US) whose
gross assets or net assets represent 10% or more of the
consolidated gross assets or consolidated net assets
respectively of the Guarantor's Group;
"MONTH" or "MONTH" means a period beginning in one
calendar month and ending in the next succeeding (or
stipulated following) calendar month on the day
numerically corresponding to the day of the calendar month
on which it started, provided that (i) if the period
started on the last Business Day in a calendar month or if
there is no numerically corresponding day, it shall end on
the last Business Day in such next calendar month and (ii)
if such numerically corresponding day is not a Business
Day, the period shall end on the preceding Business Day
and "MONTHS" and "MONTHLY" shall be construed accordingly;
"MORATORIUM" shall have the meaning attributed to that
term in Clause 23.3;
"NEW SCHEDULE 2, PART A" means each new Part A of Schedule
2 substituted for the then existing Part A of Schedule 2
in accordance with Clause 22.5 (Security Provision);
"NON-DEPOSIT BANK CASH ADDITIONAL SECURITY" means any
Additional Security other than the Additional Security
described in Clause 22.3(b);
"NOTICE" shall have the meaning attributed to that term in
Clause 31.6;
"NOVATION AGREEMENT" means the agreement entered or to be
entered into between the Builder, the Lessee and the
Lessor pursuant to which the Original Shipbuilding
Contract is further amended and novated by the Lessee in
favour of the Lessor;
"OFE" shall have the meaning attributed to that term in
the Shipbuilding Contract;
"OFE SUPERVISION AGREEMENT" means the agreement entered or
to be entered into between the Builder and GMIDC with
respect to the supervision by GMIDC of the provision of
the OFE.
"OFE SUPPLIERS" shall have the meaning attributed to that
term in the Novation Agreement;
"ORIGINAL CURRENCY" shall have the meaning attributed to
that term in Clause 31.12;
"ORIGINAL SHIPBUILDING CONTRACT" means the agreement for
the construction of the Vessel dated 27th February 1998
between the Builder and GMIDC as amended and novated
pursuant to a novation agreement of even date to this
Agreement made between the Builder, GMIDC and the Lessee
and including, without limitation, all plans, technical
drawings and specifications relating thereto;
"OTHER CURRENCY" shall have the meaning attributed to that
term in Clause 31.12;
"PAYMENT AGREEMENTS" means, together, the CIBC Payment
Agreement and the Commerzbank Payment Agreement and
"PAYMENT AGREEMENT" means either of them;
"PAYMENT BANK EVENT OF DEFAULT" means, in relation to a
Payment Bank, any of the following:
(i) the failure by such Payment Bank to pay any amount
due under the Payment Agreement to which such
Payment Bank is a party; or
(ii) an Insolvency Event occurs in relation to such
Payment Bank; or
(iii) an event occurs which, with the giving of notice,
the lapse of time, the making of any determination
or any combination of any number of these three
would, in the opinion of the Lessor, constitute an
Insolvency Event in relation to such Payment Bank;
"PAYMENT BANKS" means, together, Commerzbank and CIBC and
"PAYMENT BANK" means either of them or, where the context
requires, shall mean a Replacement Payment Bank (as such
term is defined in either Payment Agreement);
"PAYMENT BANKS INTEREST ACCRUAL" means, for the Relevant
Date in any Calculation Period, the amount shown for that
Calculation Period in the column headed "Payment Banks
Interest Accrual" in Part A of Schedule 2 calculated in
accordance with the provisions of clause 3 of each Payment
Agreement;
"PAYMENT BANKS LIMIT" means, for any Calculation Period,
the highest amount shown in Part A of Schedule 2 against
any date set out in that schedule which falls within that
Calculation Period, Provided that for this purpose the
date on which that Calculation Period ends shall be deemed
not to fall within that Calculation Period;
"PAYMENT BANKS PRINCIPAL BALANCE" means, for the Relevant
Date in any Calculation Period, the amount shown for that
Calculation Period in the column headed "Payment Banks
Principal Balance" in Part A of Schedule 2;
"PERMITTED LIEN" means:
(i) any Lien created by the Lessee in favour of the
Lessor as security for the Lessee's obligations
under this Agreement;
(ii) any Lessor's Lien;
(iii) any Lien for Taxes either not yet assessed or,
if assessed, not yet due and payable or being
contested in good faith by appropriate proceedings
(and for the payment of which adequate reserves
have been provided) so long as any such proceedings
or the continued existence of such Lien do not
involve any reasonable likelihood of the sale,
forfeiture or loss of, or of any interest in, the
Vessel (or any part thereof);
(iv) Liens arising out of claims, judgments or awards
against the Lessee which are being contested in
good faith or which are subject to a pending appeal
and for which there shall have been granted a stay
of execution pending such appeal and for the
payment of which adequate reserves have been
provided so long as any such proceedings do not
involve any reasonable likelihood of the sale,
forfeiture or loss of, or of any interest in, the
Vessel (or any part thereof);
(v) any Lien for salvage and any ship repairer's or
outfitter's possessory lien in each case for a sum
not exceeding an amount equal to ten per cent.
(10%) of the Lessor's Cost or the equivalent in any
other currency or any lien for general average or
for officers' or crew's wages not more than ten
(10) Business Days outstanding in the ordinary
course of trading which in each case is not yet due
and payable or is being contested in good faith by
appropriate proceedings (and for the payment of
which adequate reserves have been provided) so long
as any such proceedings or the continued existence
of such Lien do not involve any reasonable
likelihood of the sale, forfeiture or the loss of,
or of any interest in, the Vessel (or any part
thereof);
(vi) any Lien created by the Lessor or any other
person under and as permitted by any Relevant Lease
Document;
(vii) any other Lien, the creation of which has been
expressly permitted in writing by the Lessor;
(viii) any Lien arising by operation of law or by
any contractual right of set-off, in each case in
the ordinary course of the business of the Lessee
in respect of amounts which are not overdue; and
(ix) any Lien in respect of claims which the Lessee
demonstrates to the Lessor's satisfaction are then
covered by the Insurances, provided that there is
no reasonable likelihood of the sale or forfeiture
or loss of, or of any interest in, the Vessel (or
any part thereof);
"PLA COSTS" means the percentage rate determined in
accordance with Annex A to the Financial Schedule;
"PRE-LEASE PERIOD" means the period from the date of this
Agreement up to the Delivery Date;
"PRIMARY PERIOD" means the period commencing on the
Delivery Date to and including the Primary Period End
Date, or such shorter period as may be determined in
accordance with the provisions of this Agreement;
"PRIMARY PERIOD END DATE" means the twentieth (20th)
anniversary of the Delivery Date;
"PRIMARY PERIOD RENT" means each instalment of Rent in the
amount determined pursuant to paragraph 1.1 of the
Financial Schedule, as adjusted from time to time pursuant
to the provisions of the Financial Schedule;
"PROCEEDS OF SALE" shall have the meaning attributed to
that term in Clause 20.1;
"PROVIDER OF SECURITY" means each of the Payment Banks,
the Deposit Bank or any Additional Security Provider who
the Lessor agrees in writing shall be a "PROVIDER OF
SECURITY" for the purposes of this Agreement and the other
Relevant Lease Documents;
"PUT OPTION DEED" means the put option deed entered into
or, as the context may require, to be entered into in or
about the date of this Agreement between the Lessor, the
Sub-Lessee and the Builder;
"RATE OF EXCHANGE" shall have the meaning attributed to
that term in Clause 31.12;
"REBATE" shall have the meaning attributed to that term in
Clause 26.5(b);
"REDELIVERY LOCATION" means a port acceptable to the
Lessor and, otherwise than on a redelivery following
service of a Termination Notice, agreed by the Lessee;
"REFERENCE BANKS" means the principal London offices of
each of National Westminster Bank Plc, Lloyds Bank Plc,
Barclays Bank PLC and Midland Bank PLC;
"RELEVANT DATE" means any date within a Calculation Period
designated by the Lessor as a "RELEVANT DATE" and set out
in the column headed "RELEVANT DATE" in Part A of
Schedule 2;
"RELEVANT DISPOSAL" shall have the meaning attributed to
that term in Clause 28.1;
"Relevant Event" means any Termination Event or any event
which, after the giving of notice or lapse of time or
both, or the satisfaction of any other condition (or any
combination thereof), would constitute a Termination
Event;
"RELEVANT LEASE DOCUMENTS" means this Agreement, the
Novation Agreement, the Construction Supervision
Agreement, the Put Option Deed, the Contribution Deed, the
Payment Agreements, the Side Letters, the Guarantee, the
First Deposit Deed, the Second Deposit Deed and any
documents creating or constituting any Additional Security
and any other document, notice, letter or instrument
entered into, issued or given pursuant to the terms of any
of the foregoing and any other document, notice, letter or
instrument designated as a Relevant Lease Document by the
Lessor and the Lessee;
"RELEVANT MEMBER" means any member of the Lessor's Group
other than the Lessor;
"REMAINING OBLIGATIONS" means the obligations of the
Lessee or the Guarantor under each Relevant Lease Document
other than Excluded Obligations;
"RENT" means any or all (as the context requires) of the
Primary Period Rent, the Secondary Period Rent and any
other sum (including any Termination Rent or Termination
Payment) payable by the Lessee pursuant to this Agreement
which is expressed to be by way of Rent or additional
Rent;
"RENT DATE" means each Rent Payment Date and, prior to the
Delivery Date, each date which is assumed for the purposes
of the latest Revised Cash Flow Report to be a Rent
Payment Date and each date on which any additional Rent is
payable;
"RENT LIMIT" shall have the meaning attributed to that
term in Clause 23.1(a);
"RENT PAYMENT DATE" shall have the meaning attributed to
that term in the Financial Schedule;
"REPLACEMENT DEPOSIT BANK" means any Deposit Bank other
than the Bank;
"REQUISITION COMPENSATION" means all sums of money or
other compensation from time to time payable in respect of
the Compulsory Acquisition of the Vessel;
"RESTRICTED ACCESS" in relation to any moneys at any time
standing to the credit of an Account, means either:
(a) the security constituted by the relevant Deposit
Deed is found or held to be invalid, illegal or
unenforceable for (subject as provided below) any
reason whatsoever, including by reason of the
occurrence of an Insolvency Event in relation to
the Lessee or any other person; or
(b) immediate access to such moneys is denied for
(subject as provided below) any reason whatsoever
including by reason of the occurrence of an
Insolvency Event in relation to the Lessee or any
other person,
Provided that there shall be deemed to be excluded:
(i) from paragraph (a), any invalidity, illegality or
unenforceability which would not have arisen but
for, and only but for, the occurrence of an
Insolvency Event in relation to the Deposit Bank or
the relevant Payment Bank; and
(ii) from paragraph (a), any invalidity, illegality or
unenforceability which would not have arisen but
for, and only but for, the Deposit Bank being a
Replacement Deposit Bank and such invalidity,
illegality or unenforceability would not have been
caused or would not have arisen had the Deposit
Bank been the Bank; and
(iii) from paragraph (b), any limit on access to such
moneys which would not have arisen but for, and
only but for, (1) the occurrence of an Insolvency
Event in relation to the Deposit Bank or the
relevant Payment Bank, (2) a claim against the
Deposit Bank or the relevant Payment Bank unless
that claim (aa) is made against the Deposit Bank in
its capacity as holder of the First Account or the
Second Account, (bb) relates to any of the Relevant
Lease Documents or the financing arrangements
contemplated thereby or (cc) is brought by the
Lessee or any person associated (within the meaning
of section 839 ICTA 1988) with the Lessee or (3) a
default in payment by the Deposit Bank in
accordance with the terms of the relevant Deposit
Deed where such default would not have arisen but
for, and only but for, the breach by the Deposit
Bank of its express obligations under such relevant
Deposit Deed other than any such breach which is
caused by or arises as a result of (aa) the
circumstances described in paragraph (a) or (b)
(subject to the provisos in paragraphs (i), (ii)
and (iii), or (bb) a breach by any Security Party
of any of its obligations under the Relevant Lease
Documents;
"REVISED CASH FLOW REPORT" shall have the meaning
attributed to that term in the Financial Schedule;
"REVISED STRIP LIMIT" means, with respect to each of the
Guarantor Credit Event Cure Dates referred to in Clause
22.2(c), the Strip Limit which would have applied on such
Guarantor Credit Event Cure Date but for, and only but
for, the occurrence of a Guarantor Credit Event;
"RISK ASSET WEIGHTING" shall have the meaning attributed
to that term in the Financial Schedule;
"RPI" shall have the meaning attributed to that term in
the Financial Schedule;
"SAFETY MANAGEMENT CERTIFICATE" shall have the meaning
attributable to that term in the ISM Code;
"SAFETY MANAGEMENT SYSTEM" shall have the meaning
attributable to that term in the ISM Code;
"SECOND ACCOUNT" means the account number 1012334 entitled
"Global Marine Leasing Corporation: Glomar C.R. Luigs
Number Two Account" opened by the Lessee with the Deposit
Bank to which the Lessee may from time to time be obliged
to credit moneys pursuant to the provisions of this
Agreement and the Second Deposit Deed;
"SECOND ACCOUNT INTEREST ACCRUAL" means, for the Relevant
Date in any Calculation Period, the amount shown for that
Calculation Period in the column headed "Second Account
Interest Accrual" in Part A of Schedule 2 calculated in
accordance with the provisions of clause 3 of the Second
Deposit Deed;
"SECOND DEPOSIT DEED" means the deed so entitled, entered
into or, as the context may require, to be entered into on
or about the date of this Agreement between the Lessee,
the Lessor and the Deposit Bank in relation to the Second
Account;
"SECOND INSTALMENT" means the aggregate amount paid or, as
the context may require, payable by the Lessor (i) to the
Lessor's Agent pursuant to clause 5.1 of the Construction
Supervision Agreement and (ii) to the Builder pursuant to
the Shipbuilding Contract on the date upon which the
instalment of the Total Vessel Cost becomes due under
clause 8.3.4 of the Shipbuilding Contract;
"SECONDARY PERIOD" means each period for which the leasing
of the Vessel under this Agreement is extended in
accordance with Clause 6.2;
"SECONDARY PERIOD RENT" means each instalment of Rent in
the amount determined pursuant to paragraph 1.2 of the
Financial Schedule;
"SECURITY PARTY" means each party to a Lease Document
(other than the Lessor, the Deposit Bank, the Payment
Banks and any Additional Security Provider who is NOT a
member of the Guarantor's Group and who the Lessor agrees
in writing shall be a "SECURITY PARTY" for the purposes of
this Agreement and the other Relevant Lease Documents);
"SERVICE CONTRACT" means the agreement to be entered into
between the Sub-Lessee and the Initial Service Contractor
and any further service contract or contracts for the
Vessel entered into by the Lessee and a Service Contractor
and under which the Service Contractor may direct the
operations of the Vessel;
"SERVICE CONTRACTOR" means the Initial Service Contractor
or any other person who is entitled to direct the
operations of the Vessel under the terms of a Service
Contract;
"SETTLEMENT DATE" means the earlier of:
(i) the first Business Day which falls after the date
which falls one hundred and eighty (180) days after
the Date of Total Loss; and
(ii) the date on which the Total Loss Proceeds in
respect of the Total Loss are received by the
Lessor;
"SHIPBUILDING CONTRACT" means the Original Shipbuilding
Contract as amended and novated by the Novation Agreement;
"SIDE LETTERS" means each of the letters issued or, as the
context may require, to be issued on or about the date of
this Agreement by the Lessor which (i) is entitled rate of
writing down allowances (from the Lessor to the Lessee),
(ii) is entitled indexation letter (from the Lessor to the
Lessee), (iii) is entitled tax consultation (from the
Lessor to the Lessee), (iv) is entitled deemed schedules
(from the Lessor to the Lessee), (v) is entitled insurance
side letters from the Lessor's Agent to the Lessor,
(vi) relates to certain standby purchaser arrangements
(between the Lessor, the Guarantor and the Lessee) and
(vii) is entitled arrangement fee (from the Lessor to
Atlas Oceanic Limited);
"SLV" means, for any Calculation Period, the Termination
Payment calculated for the Relevant Date falling within
that Calculation Period by the Lessor in accordance with
the provisions of paragraph 4 of the Financial Schedule
and which is shown in the column headed "SLV" in Part A of
Schedule 2;
"STERLING" and "POUNDS-STERLING" and "POUNDS" mean the
lawful currency for the time being of the United Kingdom
and in respect of all payments to be made under this
Agreement in Sterling means immediately available, freely
transferable cleared funds in Sterling;
"STERLING EQUIVALENT" of any amount denominated in a
currency other than Sterling on any date means the
equivalent in Sterling of such amount calculated by
converting such amount into Sterling at the rate certified
by the Lessor as being the spot rate of exchange for
purchasing Sterling with such currency quoted by the Bank
at or about 11.00 a.m. (London time) two (2) London
Business Days prior to such date for delivery on such
date;
"STRIP AMOUNT" means, in respect of any date, the SLV for
the Calculation Period in which that date falls less the
aggregate of the Value of all Termination Security
calculated for that date and set out in the column headed
"STRIP AMOUNT" in Part A of Schedule 2;
"STRIP LIMIT" means, for any Calculation Period, the
amount set out in the column headed "STRIP LIMIT" in Part
A of Schedule 2 opposite such Calculation Period;
"SUB-LEASE" means any lease or charter agreement entered
or, as the context may require, to be entered into between
the Lessee and the Sub-Lessee providing for, inter alia,
the leasing or chartering of the Vessel by the Lessee to
the Sub-Lessee and more particularly described in Clause
30(A);
"SUB-LESSEE" means Global Marine C.R. Luigs Limited, a
company incorporated under the laws of England whose
registered office is at 15 Appold Street, London EC2A 2HB,
England or any other member of the Guarantor's Group or
any other person permitted to sub-lease or sub-charter the
Vessel in accordance with the provisions of Clause 30(A);
"SUBSIDIARY" means any subsidiary within the meaning of
section 736 of the Companies Act 1985;
"SUBSIDIARY (US)" means a corporation more than 50% of the
outstanding voting stock of which is owned, directly or
indirectly, by the Guarantor or by one or more other
Subsidiaries (US), or by the Guarantor and one or more
other Subsidiaries (US). For the purposes of this
definition, "voting stock" means stock that ordinarily has
voting power for the election of directors, whether at all
times or only so long as no senior class of stock has such
voting power by reason of any contingency. A Joint
Venture shall not be a Subsidiary (US);
"SURVIVING PARTS" in the event of a Total Loss of the
Vessel means those spares and other parts comprising part
of the Vessel which survive that Total Loss, whether
through being stored ashore or otherwise;
"TAX" means all present and future taxes, charges,
imposts, duties, levies of any kind whatsoever (whether
levied by deduction, withholding or otherwise), or any
amount payable on account of or as security for any of the
foregoing, payable at the instance of or imposed by any
statutory, governmental, international, state, federal,
provincial, local or municipal authority, agency, body or
department whatsoever or any central bank, monetary agency
or European Union institution, in each case whether in the
United Kingdom or elsewhere, together with any penalties,
additions, fines, surcharges or interest relating thereto
and "TAXES", "TAXATION" and cognate expressions shall be
construed accordingly;
"TAX LIABILITY" means in respect of any person:
(i) any liability or any increase in the liability of
that person to make any payment or payments of or
in respect of Tax;
(ii) the loss or setting off against income, profits or
gains or against any liability to make a payment or
payments of or in respect of Tax of any relief,
allowance, deduction or credit ("RELIEF") which
would otherwise have been available to that person;
and
(iii) the loss or setting off against any liability to
make a payment or payments of or in respect of Tax
of a right to repayment of Tax which would
otherwise have been available to that person;
and in any case falling within (ii) or (iii) above the
amount that is to be treated as a Tax Liability shall be
determined as follows:
(a) in a case which falls within (ii) above and where
the Relief that was the subject of the loss or
setting off was or would have been a deduction from
or offset against Tax, the Tax Liability shall be
the amount of that Relief;
(b) in a case which falls within (ii) above and which
involves the loss of a Relief which would otherwise
have been available as a deduction from or offset
against gross income, profits or gains the Tax
Liability shall be the amount of Tax which would
(on the basis of the Tax rates current at the date
of the loss and assuming that the person has
sufficient gross income, profits or gains to
utilise the Relief) have been saved but for the
loss of the Relief;
(c) in a case which falls within (ii) above and which
involves the setting off of a Relief which would
otherwise have been available as a deduction from
or offset against gross income, profits or gains,
the Tax Liability shall be the amount of Tax which
has been or will be saved in consequence of the
setting off;
(d) in a case which falls within (iii) above, the Tax
Liability shall be the amount of the repayment that
would have been obtained but for the loss or
setting off.
For the purposes of this definition any question of
whether or not any relief, allowance, deduction, credit or
right to repayment of tax has been lost or set off, and if
so, the date on which that loss or set-off took place,
shall be conclusively determined by the Lessor;
"TAX WRITTEN DOWN VALUE" shall have the meaning attributed
to that term in the Financial Schedule;
"TECHNICAL RECORDS" means all technical data, manuals, log
books, records and other materials and documents (kept or
to be kept for the Vessel in compliance with any
applicable law or regulation of the Flag State or of any
regulatory authority, government entity or international
body or treaty organisation from time to time) and all
additions, renewals, revisions and replacements from time
to time made in accordance with this Agreement;
"TERMINATION DATE" means:
(a) the Lease Period End Date; or
(b) where the leasing of the Vessel to the Lessee or,
if Delivery has not occurred, the obligation of the
Lessor to lease the Vessel to the Lessee, pursuant
to this Agreement terminates by virtue of a Total
Loss under Clause 10 of this Agreement, the Date of
Total Loss; or
(c) where the leasing of the Vessel to the Lessee or,
if Delivery has not occurred, the obligation of the
Lessor to lease the Vessel to the Lessee, pursuant
to this Agreement terminates by reason, in either
case, of the delivery by the Lessor of a
Termination Notice pursuant to Clause 21.3
following the occurrence of any Termination Event,
the date of the Termination Notice; or
(d) where the leasing of the Vessel or, if Delivery has
not occurred, the obligation of the Lessor to lease
the Vessel to the Lessee pursuant to this Agreement
terminates by reason of the voluntary termination
of the leasing of the Vessel under this Agreement
pursuant to Clause 6.4 or 21.4 of this Agreement,
the date upon which the notice given by the Lessee
in accordance with Clause 6.4 or, as the case may
be, 21.4 expires;
"TERMINATION EVENT" means any of the events listed in
Clause 21.1;
"TERMINATION LIMIT" shall have the meaning attributed to
that term in Clause 23.1(b);
"TERMINATION NOTICE" has the meaning attributed to that
term in Clause 21.3;
"TERMINATION PAYMENT" shall have the meaning attributed to
that term in paragraph 4.2 of part 4 of the Financial
Schedule;
"TERMINATION PAYMENT DATE" means, (i) in the case of a
termination pursuant to Clause 10, the Settlement Date
and, (ii) in any other case, the relevant Termination
Date;
"TERMINATION RENT" means an amount calculated in
accordance with paragraph 4.3 of the Financial Schedule;
"TERMINATION SECURITY" at any time, means the aggregate
of:
(a) the Payment Banks Principal Balance;
(b) the Payment Banks Interest Accrual;
(c) the First Account Principal Balance;
(d) the First Account Interest Accrual; and
(e) all Additional Security held by the Lessor at that
time;
"TERMINATION SHORTFALL" means, for any date falling within
a Calculation Period, the amount (if any) by which the
Strip Amount for that date exceeds the Strip Limit for
that date;
"TOTAL LOSS" means:
(a) the actual or constructive or agreed or compromised
or arranged total loss of the Vessel; or
(b) the Compulsory Acquisition of the Vessel; or
(c) the hijacking, theft, condemnation, capture,
seizure, arrest, detention, forfeiture or
confiscation of the Vessel (other than where the
same amounts to Compulsory Acquisition of the
Vessel), unless the Vessel be released and restored
to the Lessee from such hijacking, theft,
condemnation, capture, seizure, arrest, detention
or confiscation within one hundred and eighty (180)
days after the occurrence thereof,
"TOTAL LOSS PROCEEDS" in relation to the Vessel means any
compensation or insurance proceeds received by the Lessor
in respect of a Total Loss of the Vessel which the Lessor
is, as against the payer thereof, unconditionally entitled
to retain;
"TOTAL VESSEL COST" shall have the meaning attributed to
that term in the Shipbuilding Contract;
"US GAAP" means generally accepted accounting principles
in the United States of America set forth in the opinions
and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the
accounting profession of the United States of America, as
in effect from time to time;
"VALUE" means, as calculated at any time in relation to a
particular date, the aggregate value of any security then
held by the Lessor being:
(a) in respect of the security constituted by the
undertakings of the Payment Banks under the Payment
Agreement for the purposes of Termination Security,
the amount which would (following a demand under
Clause 5.4 of each of the Payment Agreements) be
payable by the Payment Banks on that date under
Clause 5.7 of each of the Payment Agreements
(ignoring for these purposes the provisions of
clauses 4.1, 4.6 and 5.7 of each of the Payment
Agreements entitling the relevant Payment Bank to
make any deduction or withholding from such amount
which would be payable) being an amount equal to
the aggregate of the Payment Banks Principal
Balance and the Payment Banks Interest Accrual (at
the time of calculation), less, in each such case,
the aggregate of (A) the amount, if any, of any
withholding or deduction which the Payment Banks
are or will be entitled to make from any payment
under the Payment Agreements and (B) any amount
which, by virtue of invalidity, illegality or
unenforceability, either Payment Bank is relieved
from its obligation to make any payment under the
relevant Payment Agreement (other than by virtue of
invalidity, illegality or unenforceability which
would not have arisen but for, and only but for,
the occurrence of an Insolvency Event in relation
to a Payment Bank), Provided that if the value
allocated pursuant to this paragraph (a) would, but
for this proviso, exceed the Payment Bank Limit for
the Calculation Period in which the relevant date
occurs, such value shall instead be deemed to be
the Payment Bank Limit for the Calculation Period
in which that date occurs;
(b) in respect of cash deposited in either Account,
the principal amount originally deposited in that
Account together with all further amounts deposited
in that Account prior to the time of calculation
plus (i) interest at LIBID credited or which (but
for a default on the part of the Deposit Bank in
performance of its obligations under the Second
Deposit Deed) ought to have been so credited for
any period for which LIBID is known being an amount
equal to the aggregate of the First Account
Interest Accrual and the Second Account Interest
Accrual (at the time of calculation) and (ii) for
any future period up to that date for which LIBID
cannot (at the date of valuation) be ascertained,
interest credited or to be credited to the Second
Account in accordance with the Second Deposit Deed
at a reasonable annual market rate less (aa) the
amount of any transfer (prior to that date) from
that Account made in accordance with the provisions
of the relevant Deposit Deed and less (bb) the
amount of any withholding or deduction which the
Deposit Bank is or will be entitled to make from
any payment under the terms of the relevant Deposit
Deed and less (cc) any amounts in respect of which
there is (at the time of calculation) Restricted
Access, provided that (1) all interest calculations
made for the purpose of this definition shall be
made in accordance with the provisions of the
relevant Deposit Deed on the basis of the actual or
assumed future daily balances taking into account
any additional amounts credited to the relevant
Account and any withdrawals from that Account in
accordance with the relevant Deposit Deed, (2) all
payments to be made by the Payment Banks to either
Account shall be deemed to be made when due and (3)
the amount calculated under this paragraph (b)
shall, if negative, be deemed to be zero;
(c) the Strip Limit for that particular date; and
(d) in respect of any Additional Security not falling
within paragraphs (a), (b) and (c) above, such
value as the Lessor shall allocate acting
reasonably given the type of such Additional
Security, the Lessor's access to it and the
provisions of any applicable law (including,
without limitation, in relation to withholdings and
deductions);
"VALUE ADDED TAX" or "VAT" means value added tax as
provided for in VATA and legislation (whether delegated or
otherwise) supplemental thereto or in any primary or
subordinate legislation promulgated by the European Union
or any body or agency thereof and any tax similar or
equivalent to value added tax imposed by any country other
than the United Kingdom and any similar or turnover Tax
replacing or introduced in addition to any of the same;
"VATA" means the Value Added Tax Act 1994; and
"VESSEL" means:
(a) for the period up to the Primary Period Start
Date, the ultra-deepwater drillship with the Builder's
hull number 1739 currently being constructed by the
Builder and more particularly described in the
specification to the Shipbuilding Contract; and
(b) on and after the Primary Period Start Date, the
motor driven ultra-deepwater drillship of 53,000
operating displacement tonnage having hull number
1739 and to be registered under the Panamanian flag
with the name "GLOMAR C.R. LUIGS" and includes any
share or interest therein and all engines,
machinery, boats, tackle, outfit, equipment, spare
gear, belongings and appurtenances relating to that
Vessel which are at the relevant time the property
of the Lessor whether on board or ashore (but
excluding, where the context so requires, all
Excluded Property) together with all substitutions,
replacements and renewals thereof and additions
thereto from time to time made in or to the Vessel
and where the context so permits "Vessel" includes
any part thereof and all Technical Records relating
to the Vessel.
1.2 INTERPRETATION
(a) The expression "THIS AGREEMENT" includes the
recital hereto and each schedule as the same may
from time to time be amended, supplemented or
substituted by agreement of the parties hereto.
(b) In this Agreement references to:
(i) clauses, paragraphs, sub-paragraphs and
schedules are, unless otherwise specified,
references to clauses, paragraphs, sub-
paragraphs of, and schedules to, this
Agreement, or the relevant part thereof, as
from time to time amended, supplemented or
substituted in accordance with the
provisions of this Agreement;
(ii) without prejudice to Clause 1.2(c)(i),
any statute or other legislative provision
shall, unless otherwise specified, be read
to include any statutory or legislative
modification or re-enactment thereof, or
substitution therefor;
(iii) any agreement or instrument shall
include such agreement or instrument as it may from
time to time be extended, amended,
supplemented, novated or substituted with
the agreement of the parties thereto and,
where this Agreement and such agreement
expressly so provides, the parties hereto;
(iv) "PERSON" shall include any individual,
company, corporation, firm, partnership,
joint venture, association, trust,
unincorporated organisation or government or
state (including any agency, department or
political sub-division thereof) whether
having distinct legal personality or not;
(v) "ASSIGNEE" or "ASSIGNEES" of a person
shall include any person who has assumed all or
some of the rights and/or obligations of the
relevant person, whether by assignment,
novation or otherwise;
(vi) reference to any person shall include
its successors and, other than in the case of
the Bank, its permitted assignees and
permitted transferees in accordance with
their respective interests;
(vii) the "ASSETS" of any person shall be
construed as a reference to the whole or any
part of its business, undertaking, property,
assets and revenue (including any right to
receive revenues);
(viii) "INDEBTEDNESS" shall be construed
so as to include any obligation (whether
incurred as principal or as surety) for the
payment or repayment of money, whether
present or future, actual or contingent;
(ix) the "WINDING-UP", "DISSOLUTION" or
"ADMINISTRATION" of a company or corporation
shall be construed so as to include any
equivalent or analogous proceedings under
the law of the jurisdiction in which such
company or corporation is incorporated or
any jurisdiction in which such company or
corporation carries on business including
the seeking of liquidation, winding-up,
reorganisation, dissolution, administration,
arrangement, adjustment, protection or
relief of debtors;
(x) words importing the plural include the
singular and vice versa;
(xi) a "LAW" (1) includes any common law,
statute, decree, constitution, regulation,
order, judgment or directive of any
governmental entity; (2) includes any
treaty, pact, compact or other agreement to
which any government entity is a signatory
or party; (3) includes any judicial or
administrative interpretation or application
thereof and (4) is a reference to that
provision as amended, substituted or
re-enacted; and
(xii) a document being in the "AGREED FORM"
shall be read and construed as referring to such
document in the form thereof which has been
initialled for identification purposes by
the parties hereto or their respective legal
counsel on their behalf.
(c) In the Financial Schedule, references to parts,
paragraph and annexes are, unless otherwise stated,
references to parts and paragraphs of, and annexes
to, the Financial Schedule as from time to time
amended, supplemented or substituted, and:
(i) references to statutory provisions are
to statutory provisions as at the date of this
Agreement and, to that extent, Clause
1.2(b)(ii) shall not apply to the Financial
Schedule; and
(ii) any references to the occurrence of an
event shall include a reference to the failure of
an assumed event to occur.
(d) Clause and other headings are for ease of reference
only and shall not affect the interpretation of
this Agreement.
1.3 CONFLICTS
In the event of any conflict between this Agreement and
any of the other Lease Documents, the provisions of this
Agreement shall prevail.
1.4 DETERMINATIONS
(a) Any reference to the timing or amount of any
payment to be made or received, or assumed to be
made or received, by the Lessor or to the making of
any determination, calculation or quantification
under this Agreement (each a "DETERMINATION" and
"DETERMINE" shall be construed accordingly) shall
be construed as a reference to such Determination
as determined by the Lessor in accordance with this
Agreement.
(b) If requested in writing by the Lessee, the Lessor
shall provide the Lessee with written details
(including any relevant calculations) of any
Determination made in connection with this
Agreement (for the avoidance of doubt Clause 32
(Confidentiality) of this Agreement shall apply to
all information disclosed in accordance with this
paragraph).
(c) Subject to paragraph 3.15 of the Financial
Schedule, the Lessor shall be entitled (but not
obliged) to make a Determination that any
Assumption (including for this purpose any
Termination Assumption) is incorrect if in good
faith it has reasonable grounds for believing that
a change in that Assumption will occur, but shall
be obliged to make a Determination that a change in
that Assumption has occurred as soon as is
reasonably practicable after that change has
actually occurred.
(d) The Lessor shall have reasonable grounds for having
a belief that a legislative change will or is
likely to occur if an official announcement is made
by or on behalf of any body mentioned in the
definition of Tax (including, for the avoidance of
doubt, a statement by the Chancellor of the
Exchequer) or other competent authority to that
effect, and shall have reasonable grounds for
having a belief that any other change will occur if
it has obtained information from any body mentioned
in the definition of Tax (including any challenge
or dispute by the Inland Revenue of anything
assumed in or contemplated by the Financial
Schedule) or other competent authority or
professional advice relating to that information or
any published announcement, any practice,
concession or judicial decision (which shall, in
each case, be appropriate to the change in point)
from which it appears that a change will occur.
(e) If the Lessee considers that:
(i) any Determination of the Lessor is or may
not be accurate or correct, the Lessee may,
within twenty (20) Business Days of being
notified of that Determination, so inform
the Lessor by notice in writing, giving its
reasons for considering it not to be
accurate or correct; or
(ii) the Lessor ought to have made a
Determination but has failed to do so, the
Lessee may so inform the Lessor by notice in
writing within twenty (20) Business Days of
the date the Lessee becomes aware of the
alleged omission, giving its written reasons
why it considers that a Determination ought
to have been made.
(f) As soon as practicable after a notification under
Clause 1.4(e) by the Lessee, if requested in
writing by the Lessee, the Lessor and the Lessee
shall discuss with each other the Determination in
question. If the Lessor and the Lessee cannot
agree to the correctness or otherwise of such
Determination within a further period of twenty
(20) Business Days of the Lessee's notice referred
to in Clause 1.4(e) above, then both the Lessee and
the Lessor shall be at liberty to pursue any legal
action or proceedings;
(g) If the Lessor agrees that the Determination in
question was materially inaccurate or incorrect,
then:
(i) in relation to a Determination in
connection with a Cashflow Report, a revised Cashflow
Report shall be prepared in accordance with
the Financial Schedule, taking account of
the corrected Determination; or
(ii) in any other case, and subject to any
express provision in this Agreement, such
necessary adjustments by way of payment
between the Lessor and the Lessee shall be
made as are required in order to leave the
Lessor in the same after-Tax position as
that in which it would have been if it had
originally made the Determination as
corrected.
(h) The foregoing provisions of this Clause 1.4 shall
be without prejudice to the obligations of the
Lessee to make payment of Rent or any other payment
pursuant to this Agreement on the due date for
payment in the amount demanded by the Lessor in
accordance with the Lessor's original
Determination.
(i) The Lessor shall be entitled to charge for (and the
Lessee shall so pay) for the Cost of Management
Time in respect of any matter undertaken or
anything done at the request of the Lessee under
this Clause 1.4 save and to the extent the Lessor
would have undertaken that matter in any event or
where the Lessor's Determination is subsequently
established to be incorrect to the detriment of the
Lessee by more than five thousand pounds-sterling
(5,000) of the (corrected) Determination referred to in
Clause 1.4(g) above.
2. REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES BY THE LESSEE
The Lessee acknowledges that the Lessor has entered or, as
the case may be, shall enter into the Relevant Lease
Documents to which it is, or is to be, a party in full
reliance on representations by the Lessee in the terms set
out in Part 1 of Schedule 4 and the Lessee warrants to the
Lessor that the statements made in Part 1 of Schedule 4
are, as at the date of this Agreement, true and accurate.
2.2 REPRESENTATIONS AND WARRANTIES BY THE LESSOR
The Lessor acknowledges that the Lessee has entered or, as
the case may be, shall enter into the Lease Documents to
which it is, or is to be, a party in full reliance on
representations by the Lessor to the Lessee in the terms
set out in Part 2 of Schedule 4 and the Lessor warrants to
the Lessee that the statements made in Part 2 of Schedule
4 are, as at the date of this Agreement, true and
accurate.
2.3 REPETITION OF REPRESENTATIONS AND WARRANTIES
The representations and warranties referred to in Clauses
2.1 and 2.2 shall be deemed to be repeated on, and by
reference to facts and circumstances at, each Instalment
Date and the Delivery Date.
2.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties referred to in Clauses
2.1 and 2.2 and the rights of the respective parties in
respect thereof shall survive the execution and delivery
of this Agreement and Delivery.
2.5 NOT PREJUDICED BY THE LESSOR'S INVESTIGATION
The rights and remedies of the Lessor in relation to any
misrepresentation or breach of warranty on the part of the
Lessee or the Guarantor shall not be prejudiced by any
investigation by or on behalf of the Lessor into the
affairs of any person (other than the Lessor), by the
Lessor being a party to the Relevant Lease Documents, by
the performance of any of the Lease Documents or by any
other act or thing which may be done or omitted to be done
by the Lessor under any of the Relevant Lease Documents
which would or might, but for this Clause 2.5, prejudice
such rights and remedies, other than an express written
waiver of such rights and remedies by the Lessor.
3. CONDITIONS PRECEDENT
3.1 LESSOR'S CONDITIONS PRECEDENT
The obligations of the Lessor under this Agreement and the
other Relevant Lease Documents to which it is a party
shall be subject to the prior satisfaction in full, or
waiver or deferral in writing by the Lessor to the extent
not so satisfied, of the conditions precedent set out in
Part 1 of Schedule 5.
3.2 CONDITIONS PRECEDENT TO LESSOR'S PAYMENT OBLIGATIONS
The obligation of the Lessor to make payment of any
Instalment and to take delivery of the Vessel pursuant to
the terms of the Shipbuilding Contract shall be subject to
the prior satisfaction in full, or waiver in writing by
the Lessor to the extent not so satisfied, of the
conditions precedent set out in Part 2 of Schedule 5.
3.3 CONDITIONS PRECEDENT TO DELIVERY
The obligation of the Lessor to take delivery of the
Vessel pursuant to the terms of the Shipbuilding Contract
and to deliver the Vessel to the Lessee under Clause 4.2
shall be subject to the prior satisfaction in full, or
waiver in writing by the Lessor to the extent not so
satisfied, of the conditions precedent set out in Part 3
of Schedule 5.
3.4 WAIVER OR DEFERRAL OF CONDITIONS PRECEDENT
(a) If any of the conditions precedent referred to in
Clause 3.1, Clause 3.2 or Clause 3.3 are waived or
deferred by the Lessor, the Lessor may attach to
such waiver or deferral such requirements and
further or other conditions as it thinks fit, and
the Lessee shall fulfil, or procure fulfilment of,
all such requirements or further or other
conditions as may be notified by the Lessor to the
Lessee, in accordance with the terms of such
notification.
(b) If the Lessor agrees to make the payment of an
Instalment or, as the case may be, deliver the
Vessel to the Lessee on terms (express or
otherwise) that any condition may be fulfilled
after the relevant Instalment Date or, as the case
may be, the Delivery Date, the Lessee shall (unless
the Lessor shall have expressly otherwise agreed in
writing) procure that such condition is fulfilled
within such period after the relevant Instalment
Date or, as the case may be, the Delivery Date as
the Lessor may stipulate, and the Lessor shall be
entitled to treat any failure by the Lessee so to
procure as an immediate Termination Event.
3.5 LESSEE'S CONDITIONS PRECEDENT
The obligations of the Lessee under this Agreement and the
other Relevant Lease Documents to which it is a party
shall be subject to the prior satisfaction in full, or
waiver or deferral in writing by the Lessee to the extent
not so satisfied, of the conditions precedent set out in
Part 4 of Schedule 5.
4. LEASING AND DELIVERY AND ACCEPTANCE OF THE VESSEL
4.1 LEASING
(a) Subject to the provisions of this Agreement, the
Lessor agrees to lease to the Lessee, and the Lessee agrees
to lease from the Lessor, the Vessel on and subject to the
terms and conditions herein contained.
(b) Upon the commencement of the leasing hereunder, the
Vessel will be sub-leased immediately by the Lessee to
the Sub-Lessee upon and subject to the terms and
conditions contained in the Sub-Lease.
4.2 DELIVERY AND ACCEPTANCE OF THE VESSEL
The Lessor and the Lessee hereby agree that, as between the
Lessor and the Lessee, upon delivery of the Vessel to the
Lessor pursuant to the terms of the Shipbuilding Contract, the
Lessee shall become unconditionally bound to accept delivery
thereof under this Agreement. Simultaneously with the
delivery of the Vessel to the Lessor, the Lessee shall deliver
to the Lessor an Acceptance Certificate duly executed by the
Lessee and dated the date of such delivery. Such Acceptance
Certificate shall, without further act, constitute irrevocable
evidence of delivery of the Vessel to the Lessee hereunder and
acceptance thereof for all purposes of this Agreement.
5. DISCLAIMERS AND EXCLUSIONS, LESSOR'S COVENANTS
5.1 DISCLAIMERS AND EXCLUSIONS
(a) The Lessee acknowledges and agrees that:
(i) the Vessel has been designed, manufactured,
assembled and constructed without reference to
or involvement of the Lessor or any member of
the Lessor's Group and that the Lessee alone
has selected the Vessel for purchase by the
Lessor pursuant to the Shipbuilding Contract
and leasing by the Lessor to the Lessee
hereunder and for sub-leasing by the Lessee to
the Sub-Lessee under the Sub-Lease and for the
purposes described in any Service Contract;
(ii) the Lessor has not made or given nor shall
be deemed to have made or given any term,
condition, representation, warranty or
covenant, express or implied (whether statutory
or otherwise), as to the seaworthiness,
suitability, capacity, age, state, value,
quality, durability, condition, appearance,
safety, design, construction, operation,
performance, description, merchantability,
satisfactory quality, fitness for use or
purpose or any particular use or purpose or
suitability of the Vessel or any part thereof,
as to the absence of latent or other defects,
whether or not discoverable, as to the absence
of any infringement of any patent, trademark or
copyright, as to the ability of the Vessel to
satisfy the requirements of any law, rule,
specification or contract pertaining thereto,
or as to title to the Vessel or any other
representation or warranty whatsoever, express
or implied, with respect to the Vessel, all of
which are hereby excluded; and
(iii) the Lessee is taking the Vessel on lease
and is sub-leasing the Vessel to the Sub-Lessee on an
"as is, where is, and with all faults" basis,
and that the Lessee's acceptance of Delivery
from the Lessor in accordance with Clause 4.2
(Delivery and acceptance of Vessel) shall be
conclusive evidence (except as against the
Builder or the manufacturer of any part of the
Vessel) that the Vessel is complete, in good
order and condition, of satisfactory quality,
fit for any purpose for which it may be
intended or required, seaworthy in all
respects, without defect or inherent vice
whether or not discoverable by the Lessee,
suitable in all respects and in every way
satisfactory and without prejudice to the
foregoing, complies in all respects with the
Shipbuilding Contract.
(b) Save as otherwise expressly and specifically provided
by this Agreement or any other Relevant Lease Document,
the Lessee hereby waives as between itself and the
Lessor and agrees not to seek to enforce, all its
rights, express or implied (whether statutory or
otherwise), whether against the Lessor in respect of
the Vessel (or any part thereof) or against the Vessel
or any part thereof (except rights arising out of any
act or omission of the Lessor which is a breach by the
Lessor of its express and specific obligations to the
Lessee under this Agreement or any other Relevant Lease
Document).
(c) The Lessor shall be under no obligation to provide
to the Lessee or to any other person any replacement for
the Vessel (or any part thereof) during any period when
the Vessel (or any part thereof) is unavailable for use
for any reason whatever nor, except where the
unavailability for use arises solely as a result of the
breach by the Lessor of its express and specific
obligations to the Lessee under Clause 5.2 (Lessor's
covenants) of this Agreement, otherwise to compensate
the Lessee in respect of such unavailability for use.
(d) Save as expressly provided in this Agreement or the
other Relevant Lease Documents, and without prejudice
to the generality of Clauses 5.1 (a) and 5.1(b)
(Disclaimers and exclusions), the Lessor shall be under
no liability to the Lessee or any other person
whatsoever and howsoever arising, and from whatever
cause, and whether in contract, tort or otherwise, in
respect of the satisfactory condition or fitness for
purpose of the Vessel or any loss (consequential or
otherwise), liability or damage of, or to, or in
connection with, the Vessel or any part thereof
(including delay in delivery thereof to the Lessee
under this Agreement, or by the Lessee to any Sub-
Lessee under any Sub-Lease or by the Sub-Lessee to any
Service Contractor under any Service Contract, or
thereafter or delay of any nature whatsoever) or any
person or property whatsoever irrespective of whether
such loss, liability or damage shall arise from any
action or omission of the Lessor and whether or not the
same shall arise from the Lessor's negligence, actual
or imputed (other than any action or omission of the
Lessor which is a breach by the Lessor of its express
and specific obligations to the Lessee under the
Relevant Lease Documents to which the Lessor is party).
5.2 LESSOR'S COVENANTS ETC.
(a) The Lessor covenants to the Lessee that throughout
the Lease Period the Lessor (other than through the acts or
omissions of any Security Party, or any Security
Party's agents or representatives, acting as agent or
representative of the Lessor) will not, otherwise than
pursuant to its rights under any of the Relevant Lease
Documents or which may exist under any applicable law
as a result of the occurrence of any Termination Event
which is continuing and except as may be required by
law or any ruling or recommendation of any Government
Entity compliance of which is customary for the Lessor,
interfere with the quiet use, possession and quiet
enjoyment of the Vessel by the Lessee. The Lessee
acknowledges that the covenant by the Lessor contained
in this Clause 5.2(a) is, as between the Lessor and the
Lessee, the sole covenant by the Lessor in respect of
quiet enjoyment and is in substitution for, and to the
exclusion of, any other covenant for quiet enjoyment
which may have otherwise been given or implied at law
or otherwise, all of which are hereby expressly
excluded and waived by the Lessee. The provisions of
this Clause 5.2(a) are, however, without prejudice to
the Lessor's obligations under Clause 5.2(b).
(b) The Lessor covenants with the Lessee that, subject
to the proviso in this Clause 5.2(b), throughout the Lease
Period the Lessor shall not create or permit to arise
or suffer to exist any Lien on the Vessel which arises
solely from, or solely as a result of:
(i) any claim against or affecting the Lessor
(including any claim in relation to any other
vessel of which the Lessor is the beneficial
owner) and chartered by it otherwise than to
the Lessee or any other member of the
Guarantor's Group that is not related to, or
does not arise directly or indirectly as a
result of, the transactions contemplated by
this Agreement or any of the other Lease
Documents; or
(ii) any act or omission of the Lessor that is
not related to, or does not arise directly or
indirectly as a result of, the transactions
contemplated by this Agreement or any of the
other Lease Documents; or
(iii) any Taxes imposed upon the Lessor, other
than those in respect of which the Lessor is
required to be indemnified against by the
Lessee or by any other person under this
Agreement or under any of the other Lease
Documents; or
(iv) any act or omission of the Lessor (but not
of any Security Party or any Security Party's
agents or representatives acting as agent or
representatives of the Lessor) constituting a
breach by the Lessor of its express and
specific obligations under this Agreement or
the other Relevant Lease Documents; or
(v) any act or omission of the Lessor which
constitutes the wilful misconduct of or
recklessness by the Lessor,
PROVIDED THAT if any of (i),(ii),(iii),(iv)
or (v) above applies to any Lien, the Lessor shall not be
liable to pay or discharge the same, or the amount of
the same or remove the same, if adequate reserves for
the payment of such amount have been provided and such
Lien is being disputed by the Lessor or any other
person on its behalf in good faith and in a manner
effectively staying such Lien and the continued
existence of such Lien does not involve any reasonable
likelihood of the arrest of the Vessel or the sale,
forfeiture or loss of, or any interest in, the Vessel
(or any part thereof) and without prejudice to the
foregoing, if the Vessel is at any time during the
Lease Period:
(i) arrested, seized, taken into custody or
otherwise detained by any court or other
tribunal or by any Government Entity; or
(ii) subjected to distress by reason of any
process, claim, the exercise of any rights conferred by
a Lien or by any other action whatsoever
in either event arising out of the use or
operation of any other vessel for the time being operated by
the Lessor or owned or chartered in by the Lessor which
vessel is not chartered to the Lessee or any other
member of the Guarantor's Group (and if the Lessor
fails in accordance with its aforementioned obligations
to secure the release of the Vessel or fails to
discharge the liability in respect of which the Vessel
has been arrested, seized, taken into custody, detained
or subjected to distress as aforesaid), the Lessee
shall be entitled:
(a) to act as agent for the Lessor for the
purpose of securing the release of the Vessel;
(b) to discharge such liability; and
(c) to be indemnified by the Lessor and held
harmless against all direct losses (including
loss of hire) and expenses so incurred by it.
(c) The Lessor acknowledges that it shall not be entitled
to, and covenants with the Lessee that it shall not,
serve a notice upon a Payment Bank in accordance with
clause 5.4 of the Payment Agreement to which such
Payment Bank is a party (the "RELEVANT PAYMENT
AGREEMENT") unless any of the following shall have
occurred:
(i) a Termination Event; or
(ii) an Acceleration Notice has been given; or
(iii) a Total Loss of the Vessel; or
(iv) the Lessee shall have given a notice to the
Lessor under Clause 6.4, 21.4(A), 21.4(B),
21.4(C) 21.4(D) or 21.4(E); or
(v) the circumstances described in clause 5.5 of
the Relevant Payment Agreement; or
(vi) a Payment Bank Event of Default with
respect to such Payment Bank (which event and any notice
served by the Lessor on a Payment Bank as a
consequence thereof shall, for the avoidance of
doubt, not have any effect on the rights and
obligations of the Lessor or the Lessee under
this Agreement and the other Lessor Documents).
(d) The Lessor covenants with the Lessee that if the
circumstances described in clause 5.1, 5.2 or 5.3 of
either Payment Agreement occur and:
(i) the relevant Payment Bank does not exercise
its rights pursuant to such clause 5.1, 5.2 or, as
the case may be 5.3 to make the payment
described in clause 5.7 of the relevant Payment
Agreement to the Lessor or at the Lessor's
direction; and
(ii) the Lessor does not exercise its rights
pursuant to clause 5.6 of the relevant Payment
Agreement to require the relevant Payment Bank
to make the payment described in such clause
5.7 to the Lessor or at its direction, or to a
Replacement Payment Bank (as such term is
defined in clause 5.4 of the relevant Payment
Agreement), then upon receiving a written
request from the Lessee, the Lessor will
exercise its rights pursuant to such clause 5.6
to require the relevant Payment Bank to make
the payment described in such clause 5.7 either
to the Lessor or at its direction (it being
acknowledged that the Lessor shall be entitled
to decide as to where the payment is to be made
in this regard) or to an entity proposed by the
Lessee to be the "REPLACEMENT PAYMENT BANK".
5.3 UNFAIR CONTRACT TERMS ACT 1977
Without prejudice to the indemnities of the Lessor by the
Lessee contained in any of the Relevant Lease Documents,
nothing in this Clause 5 shall afford to the Lessor any wider
exclusion of any liability of the Lessor to any person for
death or personal injury than the Lessor may effectively
exclude having regard to the provisions of the Unfair Contract
Terms Act 1977.
5.4 QUIET ENJOYMENT WITH RESPECT TO THE SUB-LESSEE AND SERVICE
CONTRACTORS
The Lessee will cause the provisions of Clause 5.1 to be made
known to the Sub-Lessee and will procure that the Sub-Lessee
confirms to the Lessor, prior to the commencement of the sub-
leasing, that it accepts and agrees to be bound by the
provisions of Clause 5.1. The Lessor will, upon being
requested to do so by the Lessee, provide a letter to the
Service Contractor in form and content mutually acceptable to
the Lessor and the Lessee (each acting reasonably).
6. LEASE PERIOD
6.1 PRIMARY PERIOD
The leasing of the Vessel hereunder shall commence on the
Delivery Date and shall, subject to this Clause 6, continue
until the Primary Period End Date unless earlier terminated in
accordance with this Agreement.
6.2 SECONDARY PERIOD
6.2.1 The Lessee may, by written notice to the Lessor to be received
by the Lessor no later than one month prior to the date upon
which the leasing of the Vessel under this Agreement would
otherwise expire by effluxion of time request that the leasing
of the Vessel be extended for a Secondary Period (or, as the
case may be, a further Secondary Period). Any notice once
given by the Lessor pursuant to this Clause 6.2 may only be
withdrawn with the written consent of the Lessor.
6.2.2 The continuation of the leasing under Clause 6.2.1 shall be
subject to:
(i) no Termination Event having occurred and being
continuing; and
(ii) evidence in form and substance satisfactory to the
Lessor of the Vessel not having reached and not being
likely to reach during the relevant Secondary Period,
the end of its useful economic life and remaining,
during such Secondary Period, safe and capable of
performing the function which it is carrying out at the
time of the commencement of the proposed Secondary
Period.
6.3 ACCELERATION
6.3.1 The Lessor shall be entitled, by giving to the Lessee not
less than thirty (30) days' written notice to expire on the first
day of the Lessor's Accounting Period immediately following
the twelfth (12th) anniversary of the Delivery Date, to
require the Lessee to terminate the leasing of the Vessel
under this Agreement and pay to the Lessor a Rental (the
"ACCELERATION RENT") with respect to the Vessel. The
Acceleration Rent shall be of an amount equal to the
Termination Rent (as calculated in accordance with Part 4 of
the Financial Schedule) which would have been payable on the
day the Acceleration Rent is payable, if that date had in fact
been the Termination Payment Date (such that, in particular,
the Termination Assumption set out in paragraph 4.5.2(e) of
the Financial Schedule is applied in calculating such
Termination Rent). The Acceleration Rent shall be subject to
adjustment in accordance with Part 4 of the Financial Schedule
as if it were a Termination Rent.
6.3.2 The Lessee shall be entitled, upon giving notice in writing to
the Lessor seven (7) months prior to the first day of the
Lessor's Accounting Period immediately following the twelfth
(12th) anniversary of the Delivery Date, to request the Lessor
to submit to the Lessor's normal credit approval process
either of the following proposals:
(i) that the Lessor waive its entitlement described in
Clause 6.3.1 or extend the date upon which the Lessor
is entitled to exercise its option described in Clause
6.3.1; or
(ii) to approve one or more banks or financial institutions
to assume the obligations then existing of the Payment
Banks;
and the Lessor agrees that it will make such a submission
PROVIDED THAT the Lessee acknowledges and agrees that the
Lessor shall be entitled to accept or reject either proposal
(including approving or disapproving the identity of any such
bank or financial institution) in its absolute discretion
without giving any reasons for such acceptance or rejection
and that if the Lessor accepts either proposal, such
acceptance shall be conditional upon any requirements (whether
in regard to documentation or otherwise) which the Lessor may,
in its absolute discretion, specify. Furthermore, the Lessee
agrees that the Lessor shall not be obliged to reveal any
details of its internal credit or other procedures or the
reasons for any decision made in any particular case.
6.4 VOLUNTARY TERMINATION
If the Lessee has, pursuant to its rights in Clause 19.2
(Sale of the Vessel), arranged a sale of the Vessel in accordance
with the provisions of Clause 19.2, the Lessee shall have the
right exercisable upon at least fifteen (15) days' written
notice to the Lessor (which notice, once given, shall be
irrevocable) to terminate the leasing of the Vessel hereunder
or, if Delivery has not then occurred, the right of the Lessee
to take the Vessel on lease, on the date specified in such
notice (which shall be the date upon which such sale is to be
completed) PROVIDED THAT the Lessee shall only be entitled to
exercise the right of voluntary termination under this Clause
6.4 if no Termination Notice has been served upon it.
7. RENT
7.1 PRE-LEASE PERIOD RENTAL
During the Pre-Lease Period no rental shall be payable by the
Lessee to the Lessor in respect of the hiring of the Vessel.
7.2 PRIMARY PERIOD RENT
The Lessee shall pay to the Lessor, in respect of the Primary
Period, a Primary Period Rent on each Rent Payment Date
throughout the Primary Period, each such Primary Period Rent
to be calculated in accordance with the provisions of the
Financial Schedule. Each such amount of Primary Period Rent
shall be subject to adjustment and supplement in accordance
with the provisions of the Financial Schedule.
7.3 SECONDARY PERIOD RENT
The Lessee shall pay to the Lessor on the first day of each
Secondary Period a Secondary Period Rent calculated in
accordance with paragraph 1.2 of the Financial Schedule.
7.4 ADDITIONAL RENT
The Lessee shall, on the dates ascertained in accordance with
the Financial Schedule (or, if no such date is specified, upon
written demand by the Lessor), pay all amounts calculated and
due to the Lessor under the Financial Schedule and expressed
to be payable by way of additional Rent.
8. PAYMENTS
8.1 LESSOR'S ACCOUNT
Each payment to be made by the Lessee to the Lessor in
Sterling pursuant to this Agreement shall be made from a bank
account in the United Kingdom in Sterling in cleared funds for
value on the due date by means of CHAPS to the account of the
Lessor with the Bank at its branch at 71 Lombard Street,
London EC3P 3BS, England, account number 0439687, sort code
30-00-02, or to such other bank account in the United Kingdom
as the Lessor may from time to time designate by not less than
ten (10) Business Days' notice to the Lessee. Any payment
which is to be made to the Lessor in a currency other than
Sterling pursuant to this Agreement shall be made to such
account as the Lessor shall notify the Lessee in writing.
8.2 PAYMENTS UNCONDITIONAL
The Lessee's obligation to pay Rent and make other payments,
and perform any obligations, owed to the Lessor pursuant to or
in connection with this Agreement or any of the other Relevant
Lease Documents to which it is a party shall, subject to
Clause 23.1, be absolute and unconditional and shall not be
affected by and shall be irrespective of any contingency
whatsoever including (but not limited to):
(a) any right of set-off, counterclaim, recoupment,
defence, deduction, withholding or other right;
(b) any unavailability of the Vessel for any reason,
including, but not limited to, requisition thereof, or
any prohibition or interruption of or other restriction
against the Lessor's, the Lessee's, the Sub-Lessee's,
any Service Contractor's or any other person's use,
operation or possession of the Vessel, any interference
with such use, operation or possession or failure to
deliver any part of the Vessel or any lack or
invalidity of title or any other defect in the title,
suitability, seaworthiness, satisfactory quality,
merchantability, fitness for any purpose, condition,
appearance, safety, design, or operation of any kind
or nature of the Vessel, or the ineligibility of the
Vessel for any particular use or trade, or for want of
registration or the absence or withdrawal of any
permit, licence, authorisation or other documentation
required under the applicable law of any relevant
jurisdiction for the ownership, leasing, use, operation
or location of the Vessel, or (subject to Clause
10.1(a) (Total Loss)) the Total Loss of, or any damage
to, the Vessel or any part thereof;
(c) any insolvency, bankruptcy, winding-up,
administration, reorganisation, reconstruction, arrangement,
readjustment or rescheduling of debt, dissolution,
liquidation or similar proceedings by or against the
Lessor, the Bank, the Lessee or any other person
(whether a party to any Lease Document or not);
(d) any invalidity or unenforceability or lack of due
authorisation of, or other defect in, this Agreement or
any of the other Lease Documents or any particular
provision hereof or thereof;
(e) any failure or delay on the part of any party, whether
with or without fault on its part, duly to perform or
comply with its obligations under this Agreement or any
of the other Lease Documents; and
(f) any other case which but for this provision would or
might have the effect of terminating or in any way
affecting any obligation of the Lessee hereunder,
(but without prejudice to the rights of the Lessee to damages
or specific performance or any other injunctive relief in
respect of this Agreement or any of the other Relevant Lease
Documents) it being the declared intention of the parties that
the provisions of this Clause 8 and the obligations of the
Lessee to pay Rent and make other payments in accordance with
this Agreement and the other Relevant Lease Documents shall
survive any frustration and that save as expressly and
specifically provided in this Agreement no moneys payable or
paid hereunder by the Lessee to the Lessor shall in any event
or circumstances be repayable to the Lessee.
8.3 INTEREST ON OVERDUE AMOUNTS
(a) If, subject to Clause 23.1, any amount payable by
the Lessee to the Lessor under this Agreement or any of the
other Relevant Lease Documents is not paid in full on
the date such amount becomes due and payable hereunder
or thereunder, the Lessor shall (without prejudice to
the rights of the Lessor under Clause 21 (Termination
provisions)) be entitled, in addition, to demand
interest on the unpaid sum at the Default Rate from and
including such date to and including the date of actual
payment (after as well as before judgment). Such
interest at the Default Rate shall accrue on a day to
day basis and be compounded quarterly.
(b) If any amount payable by the Lessor to the Lessee
under this Agreement or any of the other Relevant Lease
Documents is not paid in full on the date such amount
becomes due and payable hereunder or thereunder, the
Lessee shall be entitled, in addition, to demand
interest on the unpaid sum at LIBOR from and including
such date to and including the date of actual payment
(after as well as before judgment). Such interest
shall accrue on a day to day basis and be compounded
quarterly.
(c) All interest under this Clause 8.3 shall be calculated
on the basis of the actual number of days elapsed and
(i) a three hundred and sixty-five (365) day year in
relation to Sterling amounts (or, where market practice
in the London Inter-Bank Market differs, in accordance
with market practice in the London Inter-Bank Market)
and amounts in other currencies where that is the
normal bank basis for interest calculations under the
relevant currency, or (ii) a three hundred and sixty
(360) day year for amounts in other currencies.
8.4 TIME OF THE ESSENCE
Punctual payment of amounts payable by the Lessee to the
Lessor and performance by the Lessee of each of its
obligations under this Agreement shall, subject to any express
periods of grace set out in Clause 21.1 (Termination
provisions) and as otherwise agreed in writing by the Lessor,
be of the essence and shall be conditions of this Agreement.
8.5 BUSINESS DAYS
If any payment under this Agreement or any other Relevant
Lease Document is due on a day which is not a Business Day, it
shall, unless expressly provided to the contrary in this
Agreement or the relevant other Relevant Lease Document, be
paid on the immediately succeeding Business Day, together with
interest from the due date, on a daily basis at LIBOR for the
relevant period, unless that day falls in the calendar month
succeeding that in which the date on which the payment is due
falls, in which case it shall be due on the immediately
preceding Business Day, but the amount of such payment shall
not be adjusted in consequence thereof.
8.6 APPLICATION OF PAYMENTS
If the Lessee shall pay to the Lessor, or the Lessor shall
otherwise recover, any amount expressed to be payable under
this Agreement or any of the other Relevant Lease Documents in
an amount less than the total amount then due, or due and
outstanding, the sum so paid may be applied by the Lessor
(irrespective of any contrary appropriation by the Lessee) in
or towards satisfaction of such amounts which are due for
payment under this Agreement and the other Relevant Lease
Documents in such manner or order and at such time as the
Lessor may think fit.
9. COVENANTS CONCERNING INSURANCES
9.1 INSURANCES IN RESPECT OF THE VESSEL
The Lessee hereby covenants with the Lessor and undertakes
that, throughout the Lease Period and thereafter until sale of
the Vessel, it will:
(a) insure and keep the Vessel insured free of cost and
expense to the Lessor and in the joint names of the
Lessee and the Lessor, without liability on the part of
the Lessor for premia or calls (each as their interests
may appear) in respect of claims arising in connection
with the ownership or operation of the Vessel:
(i) against fire and usual marine risks (including
Excess Risks to the extent not covered under
the Liability Insurances) and war risks, on an
agreed value basis in accordance with the
practice from time to time of prudent owners of
similar types of vessel as the Vessel, provided
that the amount of such insurances shall be
equal to or greater than the highest Tax
Written Down Value for the Vessel for the
period of such insurances; and
(ii) against protection and indemnity risks
(including oil pollution liability) on terms
and conditions which are the same or
substantially the same as the insurance taken
out with respect to the same risks by other
owners of comparable size and standing
operating similar types of vessel as the Vessel
in the jurisdictions where the Vessel is being
operated at the relevant time and which is
reasonably available to the Lessee (taking into
account the provisions of this Agreement and
the fact that although the Lessor is the owner
of the Vessel it has no operational interest in
the Vessel) and shall be in an amount of two
hundred million Dollars ($200,000,000) any one
occurrence or such greater amount as is either
(x) the general practice from time to time of
owners of equivalent tonnage to and similar
types of vessel as the Vessel to obtain in the
jurisdiction(s) in which the Vessel is being
operated at the time when such general practice
is being determined (provided such greater
amount is reasonably obtainable by the Lessee)
or (y) required by any rules, regulations,
laws, treaties or conventions of the Flag State
from time to time or of the jurisdiction in
which the Vessel is being operated at any
particular time or (z) following a Change of
Law with respect to an Environmental Law in a
jurisdiction in which the Vessel is being
operated at any particular time, and the Lessor
reasonably determining that such a Change of
Law has resulted in the actual or potential
liability of the Lessor with respect to an
Environmental Claim increasing above the
Lessor's liability as at the date of this
Agreement under the Oil Pollution Act of 1990,
as amended, of the United States of America
(the "MEASURED LIABILITY"), the amount of such
increase in liability over the Measured
Liability or, where the Vessel is employed in
the storage of hydrocarbons, for the amount
which is the general practice from time to time
of owners of comparable size and standing
operating similar types of vessels as the
Vessel employed in such use in jurisdictions in
which the Vessel is being operated at any
particular time;
and in each case the Lessor may rely upon the advice of
its legal, insurance and other advisers and the Lessee
further agrees that the Lessor shall be deemed to have
acted reasonably in connection with any Lessor Action
under or in connection with this Clause 9 if the Lessor
has relied upon any such advice of its legal, insurance
or other advisers;
(b) if the Lessor requires an increase in the amount
insured in respect of oil pollution liability risks in
accordance with the provisions of Clause 9.1(a)(ii),
the Lessee shall effect such increase within ten (10)
Business Days of being notified by the Lessor to effect
such increase or, if later, the date upon which such
increase is required pursuant to the rules,
regulations, laws, treaties or conventions referred to
in Clause 9.1(a)(ii)(y) or, as the case may be, the
date upon which the Change of Law referred to in Clause
9.1(a)(ii)(z) comes into effect;
(c) effect the Insurances, including the Liability
Insurances aforesaid in Dollars (where appropriate in
an equivalent amount at the time of each renewal of the
Insurances to the amount required expressed in
Sterling) or such other freely transferable and
convertible currency acceptable to the Lessor and
through the Approved Brokers or such other insurance
companies and/or underwriters or by entry of the Vessel
with a mutual insurance association or club;
(d) punctually pay all premiums, calls, contributions
or other sums payable in respect of all such Insurances
and to produce all relevant receipts or other evidence
of payment when so required by the Lessor and, in the
event that any premium or call is charged to be levied
upon the Lessor, the Lessee shall forthwith reimburse
the Lessor with any amount so paid;
(e) at least ten (10) Business Days (or such shorter
period as the Lessor may from time to time agree) before the
relevant policies, contracts or entries expire, notify
the Lessor of the names of the marine and war risks
brokers and/or the war risks or protection and
indemnity risks associations and/or underwriters
proposed to be employed by the Lessee for the purposes
of the renewal of such Insurances and of the amounts in
which such Insurances are proposed to be renewed and
the risks to be covered and, subject to compliance with
the provisions of this Clause 9.1, procure that
appropriate instructions for the renewal of such
Insurances are given to the Approved Brokers and/or to
the approved war risks and protection and indemnity
risks associations at least ten (10) days (or such
shorter period as the Lessor may from time to time
agree) before the relevant policies, contracts or
entries expire, and that the Approved Brokers and/or
the approved war risks and protection and indemnity
risks associations and/or approved underwriters will at
least seven (7) days before such expiry (or within such
shorter period as the Lessor may from time to time
agree) confirm in writing to the Lessor as and when
such renewals have been effected in accordance with the
instructions so given;
(f) if any of the Insurances referred to in Clause
9.1(a)(i) form part of a fleet cover for the Lessee or
the Guarantor and any Subsidiaries (US), and such
Approved Brokers are or would be entitled to exercise
rights of set-off or cancellation in relation to claims
under such Insurances relating to the Vessel for non-
payment of premiums in respect of other vessels covered
by the same Insurances, the Lessee shall use all
reasonable endeavours (having regard to the then
current market practice including the practice
prescribed by the Lloyd's Insurance Brokers' Committee
and/or any other professional association of which the
Approved Brokers are members) to procure that the
Approved Brokers shall undertake to the Lessor:
(i) not to exercise against the policy or against
any claims in respect of the Vessel any Lien or
right of set-off for unpaid premiums in respect
of vessels other than the Vessel covered under
such fleet cover or for unpaid premiums in
respect of any other such policies of
insurance; and
(ii) not to cancel the Insurances for the Vessel
by reason of the non-payment of premiums for
vessels covered by such fleet cover,
or, in lieu of the undertakings referred to in
paragraphs (i) and (ii), shall instruct the Approved
Brokers to issue a separate policy of insurance in
respect of the Vessel as and when the Lessor may so
require;
(g) promptly arrange for the execution and delivery of
such guarantees or indemnities as may from time to time be
required by any protection and indemnity or war risks
association in accordance with its rules or the terms
of entry of the Vessel;
(h) procure:
(i) that all original slips, cover notes, policies,
certificates of entry and other instruments of
insurance issued from time to time shall
forthwith be deposited with the Approved
Brokers in respect of those of the Insurances
in respect of the Vessel which are effected
through Approved Brokers; and
(ii) that the interest of the Lessor shall be
endorsed on the Insurances referred to in
Clause 9.1(a)(i) and (ii) by noting the
interests of the Lessor on the policies and by
the endorsement of the Loss Payable Clause on
the policies in respect of the Hull Insurances;
(i) procure that the Approved Brokers or the insurers
and any protection and indemnity or war risks association
or the war risks insurers in which the Vessel may from
time to time be entered or with whom cover may be
placed shall deliver to the Lessor a letter or letters
of undertaking in such form as the Lessor may
reasonably require having regard to the then current
market practice and the practices prescribed by the
"International Group" of protection and indemnity
associations or successor association or body and/or
the Lloyd's Insurance Brokers' Committees and/or any
other professional association of which the Approved
Brokers are members;
(j) comply with the terms and conditions of the
Insurances, not do, consent to or permit any act or omission
which might invalidate or render unenforceable the whole or
any part of the Insurances and not (without first
obtaining the consent of the insurers to such
employment and complying with such requirements as to
extra premium or otherwise as the insurers may
prescribe) employ the Vessel or suffer the Vessel to be
employed otherwise than in conformity with the terms of
the Insurances (including any warranties express or
implied therein) and within the geographical limits
thereof; and
(k) supply to the Lessor all necessary information,
documentation and assistance which may be required by
the Lessor from time to time in respect of the
Insurances and in connection with making any claim
under the Insurances,
PROVIDED HOWEVER THAT if, in the event of requisition of the
Vessel for hire, it is proved to the satisfaction of the
Lessor that such requisition is upon terms whereby the
requisitioning authority has assumed the responsibility of the
Lessee to the Lessor to indemnify or recompense it in respect
of or otherwise to make good all losses which would ordinarily
be covered by the insurance required to be effected by the
Lessee under this Agreement, the Lessee shall be relieved from
its insurance obligations under this Agreement in respect of
such period of requisition or in the event that the
requisitioning authority shall have assumed only a partial
responsibility as aforesaid, the insurance obligations of the
Lessee under this Agreement shall be modified in such manner
and to such extent as the Lessor may approve in its absolute
discretion having regard to the insurance provisions contained
in this Agreement.
9.2 If, at the time of any renewal of the Insurances, there is, in
the opinion of the Lessor acting reasonably:
(a) any material adverse change in the credit standing or
claims payment record of the relevant insurer or war
risks or protection and indemnity association; or
(b) any material adverse change in the terms on which the
relevant Insurances are placed; or
(c) any change affecting the insurance market which may
have, or may be likely to have, a material adverse
effect on the Insurances in respect of the Vessel,
then the Lessor may, having consulted with its insurance
advisers, stipulate reasonable requirements for the Insurances
in the light of such changes. If the Lessor has stipulated
such requirements to the Lessee, the Lessor and the Lessee
shall (at the cost of the Lessee) respectively cause their
insurance advisers to meet to consider the Lessor's
requirements and, if such advisers do not agree promptly with
respect to such requirements, the matter shall be referred to
an appropriate independent insurance adviser agreed by the
Lessor and the Lessee. In the absence of agreement as to an
appropriate independent insurance adviser, either the Lessor
or the Lessee may request the President for the time being of
the Law Society to appoint an appropriate independent
insurance adviser who shall act as an expert and not as an
arbitrator and whose assessment with respect to such
requirements shall be final and binding on the Lessor and the
Lessee.
If the insurance advisers of the Lessor and the Lessee agree
with respect to such requirements and on the changes required
to be effected to the then current insurance requirements or
if the independent insurance adviser, appointed by the
President of the Law Society, stipulates changes required to
be effected to the then current insurance requirements then
(a) the Lessee shall, at its own cost, promptly, and in any
event within sixty (60) days of such agreement, or as the case
may be stipulation, effect or procure that there is effected
such requirements and (b) the Lessor shall be entitled, at the
Lessee's cost, to effect contingent third party liability
insurances for the Lessor and members of the Lessor's Group to
cover such requirements.
9.3 COLLECTION OF CLAIMS
The Lessee shall do all things necessary and provide all
documents, evidence and information to enable the Lessor to
collect or recover all moneys which shall at any time become
due to the Lessor in respect of the Insurances.
9.4 APPLICATION OF RECOVERIES
The Lessee shall apply all sums receivable under the
Insurances which are paid to it in accordance with the Loss
Payable Clauses.
9.5 OTHER INSURANCES AND ASSUREDS
The Lessee shall not, without the prior written consent of the
Lessor, during the Lease Period take out additional insurances
for the Lessee's sole benefit, or permit the Lessee or the
Lessor to be named insured in insurances with respect to the
Vessel, other than as required under this Agreement, where
such additional insurances will or may prejudice the
Insurances or recovery thereunder or will exceed the amount
permitted by the warranties or other conditions of the
Insurances (unless the insurers under the Insurances have
consented thereto) and will, upon the Lessor's request,
immediately furnish the Lessor with particulars of any such
additional insurances (including copies of any cover notes or
policies) and of the written consent of the insurers under the
Insurances in any case where such consent is necessary. The
Lessor acknowledges that the provisions of this Clause 9.5 are
without prejudice to the Lessee's right to take out loss of
hire insurances in respect of the Vessel in accordance with
usual market practice.
9.6 ENCUMBRANCES
The Lessee shall not create or permit to exist any Lien over
the Lessee's interest in the Insurances or any Requisition
Compensation save as contemplated by this Agreement.
9.7 BROKER'S REPORT
On the date of this Agreement and on each date when the
Insurances are renewed, the Lessee shall, at its own expense,
furnish or cause to be furnished to the Lessor evidence that
the Insurances have been placed in accordance with this Clause
9 and are in full force and effect together with an opinion
signed by a firm of insurance brokers other than the Approved
Brokers stating that the Insurances then in effect are
consistent with the requirements for the Insurances under this
Agreement and in compliance with the terms of this Clause 9.
9.8 OMISSION TO COMPLY WITH INSURANCE PROVISIONS
If at any time the Lessee shall fail to comply with:
(a) any of the provisions of this Clause 9 in relation to
or in connection with all or any part of the Liability
Insurances and the Vessel; or
(b) any of the material provisions of this Clause 9 in
relation to or in connection with all or any part of
the Hull Insurances and the Vessel,
then the Lessor shall be entitled (at the Lessee's cost and
expense), either (i) to procure such insurance or entries in a
war risks association and/or protection and indemnity
association or associations in accordance with the aforesaid
provisions, or (ii) at any time whilst such failure is
continuing to require the Vessel to remain in port or, as the
case may be, to proceed to and remain in a port designated by
the Lessor until such provisions are fully complied with, or
both, but without prejudice to the right of the Lessor in any
such case to treat such failure as being within Clause 21
(Termination provisions). Rent shall continue to accrue during
such time and any expense incurred by the Lessor in relation
to or in connection with any of the arrangements described
above shall be recoverable from the Lessee on demand.
9.9 LESSOR'S INSURANCE
Any insurance effected by the Lessor which the Lessee is not
obliged to effect under this Clause 9 shall not be brought
into account in relation to any claim under any indemnity in
favour of any Indemnified Person under any of the Lease
Documents.
10. TOTAL LOSS AND DAMAGE
10.1 TOTAL LOSS
In the event of:
(a) a Total Loss occurring prior to Delivery, the
obligation of the Lessor to lease the Vessel to the
Lessee shall terminate on the Date of Total Loss; or
(b) a Total Loss occurring during the Lease Period, the
Lease Period shall end on the Date of Total Loss and
the obligation of the Lessee to pay Rent (other than
any Termination Payment) under Clause 7 (Rent) becoming
due on any Rent Payment Date which falls on or after
the Date of Total Loss shall cease; and
the Lessee shall (without prejudice to the obligations of the
Lessee pursuant to any provision of this Agreement or the
Relevant Lease Documents to pay to the Lessor all sums which
may become due to the Lessor or be ascertained after the Date
of Total Loss) pay to the Lessor, as compensation for the
Lessor's full financial loss consequent upon such termination,
the amounts set out below and on the dates prescribed below
for those amounts (but subject always to its application both
before and after the date on which such payment is made, to
the provisions of the Financial Schedule):
(i) if (during the Lease Period) on or after the Date
of Total Loss but before the Settlement Date there falls a
day which, if the leasing of the Vessel had not
terminated, would have been a Rent Payment Date, the
Lessee shall on that Rent Payment Date pay to the
Lessor an amount equal to the Rent which would have
become payable had the Total Loss not occurred; and
(ii) on the Settlement Date, the Lessee shall pay to the
Lessor an amount equal to the aggregate of:
(A) the Termination Payment calculated for the
Settlement Date;
(B) all instalments of Rent (if any) which have
become due prior to the Date of Total Loss and
remain unpaid; and
(C) all other amounts due and payable from the
Lessee to the Lessor pursuant to any Relevant
Lease Document, including, without limitation,
any Broken Funding Costs (less any Broken
Funding Gains).
10.2 APPLICATION OF TOTAL LOSS PROCEEDS
All moneys received by the Lessor from insurers in respect of
a Total Loss and all Requisition Compensation received by the
Lessor shall be applied by the Lessor as follows:
(a) first, in retention by the Lessor of an amount equal
to one per cent. (1.0%) of the amount by which the Total
Loss Proceeds exceed the applicable Termination Rent;
(b) secondly, any balance remaining shall be paid to the
Lessee by way of rebate of Rent.
10.3 DATE OF TOTAL LOSS
For the purposes of this Agreement, a Total Loss in respect of
the Vessel shall be deemed to have occurred:
(a) in the case of an actual total loss of the Vessel at
noon (London time) on the actual date the Vessel was
lost or, if such date is not known, on the date on
which the Vessel was last reported;
(b) in the case of constructive total loss of the Vessel,
on the date and at the time notice of abandonment of
the Vessel is given to the insurers of the Vessel for
the time being (provided a claim for such constructive
total loss is admitted by the insurers) or, if the
insurers do not admit such a claim, on the date and
time at which a constructive total loss is subsequently
adjudged by a competent court of law to have occurred;
(c) in the case of a compromised or arranged total loss,
on the date upon which a binding agreement as to such
compromised or arranged total loss has been entered
into by the insurers of the Vessel;
(d) in the case of Compulsory Acquisition, on the date
on which the relevant requisition of title or other
compulsory acquisition occurs; and
(e) in the case of hijacking, theft, condemnation,
confiscation, capture, detention or seizure of the
Vessel (other than where the same amounts to Compulsory
Acquisition of the Vessel) which deprives the Lessee
or, as the case may be, any Sub-Lessee of the use of
the Vessel for more than one hundred and eighty (180)
days, upon the expiry of the period of one hundred and
eighty (180) days after the date upon which the
relevant hijacking, theft, condemnation, confiscation,
capture, detention or seizure occurred.
The date on which a Total Loss shall be deemed pursuant to
this Clause 10.3 to have occurred is referred to as the "DATE
OF TOTAL LOSS".
10.4 DAMAGE CLAIMS
In the event of repairable damage occurring to the Vessel any
insurance moneys receivable in respect thereof shall be paid
to the Lessee.
10.5 THIRD PARTY CLAIMS
Any insurance moneys paid under the Liability Insurances shall
be paid to the person to whom the liability (or alleged
liability) covered by such insurances or entry was incurred,
or to the person otherwise entitled to it.
10.6 INSUFFICIENT INSURANCE RECOVERY
In the event of repairable damage to the Vessel or a liability
or alleged liability covered by the Insurances taken out or
entries made referred to in Clause 9.1(a) (Insurance
undertakings) being incurred or alleged, and if the insurance
moneys paid in respect thereof are insufficient to pay the
cost or estimated cost of making good or repairing such damage
or discharging the liability or alleged liability, the Lessee
will pay the deficiency.
10.7 NOTICE OF ABANDONMENT
The Lessee shall, subject to the prior written consent of the
Lessor, be entitled to determine whether or not a case has
arisen for the giving of notice of abandonment to abandon the
Vessel to the insurers and/or claim a constructive total loss
and the Lessee is hereby authorised by the Lessor, following
the Lessor's consent as specified above, to give such notice
of abandonment if the Lessee so determines. Such consent by
the Lessor shall not be unreasonably withheld if the Lessor is
indemnified to its satisfaction against any Loss or exposure
by virtue of the failure of any Assumption which has occurred,
or which the Lessor reasonably considers may occur, in
connection with the giving of such notice of abandonment or
the Total Loss of the Vessel. Furthermore any consent given
by the Lessor shall be deemed to be subject to the condition
that if, after the delivery of a notice of abandonment prior
to a Total Loss of the Vessel, any Assumption fails or, in the
Lessor's reasonable opinion becomes likely to fail in
connection therewith, the Lessee shall indemnify the Lessor to
the Lessor's satisfaction to cover any increased exposure
arising or which may arise by virtue of that failure which
might arise from the giving of such notice of abandonment or
the Total Loss of the Vessel.
10.8 FURTHER ACTION ON PART OF LESSOR
(a) If the Lessee is, pursuant to Clause 10.7 above,
entitled to give a notice of abandonment, the Lessor
shall upon the request and at the cost of the Lessee
promptly execute such documents as may be required to
enable the Lessee to abandon the Vessel to the insurers
and/or claim a constructive total loss of the Vessel
and the Lessor shall, provided that the Lessor is
indemnified to its reasonable satisfaction against its
cost of so doing, give the Lessee all reasonable
assistance in pursuing the said claim, provided that
the Lessor may (taking into account paragraph (b)
below) in its absolute discretion, refuse to permit the
Lessee or any person claiming through the Lessee to
pursue any such claim in the name of the Lessor or any
other member of the Lessor's Group.
(b) The Lessor shall, at the request of the Lessee
consult with the Lessee for a period not exceeding thirty (30)
days in good faith if the Lessee or any person claiming
through the Lessee requests permission to pursue any
claim in the name of the Lessor or any other member of
the Lessor's Group provided that the Lessor shall be
under no obligation and have no liability other than to
the extent of its agreement to hold discussions with
the Lessee as set out above.
10.9 SALE OF VESSEL FOLLOWING TOTAL LOSS
If the insurers of the Vessel have satisfied or admitted in
full their obligations under the Insurances and have expressly
waived any rights they may have, or would or might require, in
the Vessel the Lessee shall pursuant to Clause 19.2 (Sale of
the Vessel) as soon as practicable after the date of Total
Loss of the Vessel endeavour to arrange a sale of the Vessel.
Any such sale shall comply with Clause 19 (Re-delivery and
sale of the Vessel).
11. GENERAL COVENANTS AND UNDERTAKINGS OF THE LESSEE
11.1 NOTIFICATION OF RELEVANT EVENT
The Lessee undertakes with the Lessor that, from the date of
this Agreement and so long as any moneys are owing under this
Agreement or any of the other Relevant Lease Documents to
promptly notify the Lessor of the occurrence of any Relevant
Event promptly upon becoming aware thereof.
11.2 NOTIFICATION OF TERMINATION OF SUB-LEASE
The Lessee undertakes with the Lessor that, from the date of
this Agreement and so long as any moneys are owing under this
Agreement or any of the other Relevant Lease Documents to
promptly notify the Lessor of the termination of the
sub-leasing of the Vessel or the obligation of the Lessee to
sub-lease the Vessel pursuant to the Sub-Lease at any time
during the requisite period (as defined in section 40 CAA
1990).
11.3 SUPPLY OF ACCOUNTS AND FINANCIAL INFORMATION
The Lessee shall provide to the Lessor (or, as the case may
be, shall procure that there is provided to the Lessor) such
reasonably available financial information relating to the
Lessee as the Lessor may reasonably require. In particular
the Lessee shall, from the date of this Agreement and so long
as any moneys are owing under this Agreement or any of the
Relevant Lease Documents, properly prepare or cause to be
properly prepared financial statements for the Lessee in
respect of each financial year and will deliver or cause to be
delivered a copy of the same to the Lessor as soon as
practicable but in any event not later than one hundred and
twenty (120) days after the end of the financial year to which
they relate.
11.4 INFORMATION CONCERNING THE VESSEL
The Lessee undertakes with the Lessor that, from the date of
this Agreement and so long as any moneys are owing under this
Agreement, or any of the other Relevant Lease Documents it
will promptly furnish the Lessor with all such information as
the Lessor may from time to time reasonably request in writing
regarding the Vessel, its insurance, condition, maintenance,
employment, position and engagements, particulars of all
towages and salvages and copies of all charters, leases and
other contracts for the employment of the Vessel, or otherwise
concerning the Vessel.
11.5 NOTIFICATION REQUIREMENTS IN RELATION TO THE VESSEL
The Lessee shall notify the Lessor in writing promptly at the
Lessee's cost and expense of:
(a) any accident to the Vessel involving repairs the cost
whereof will or is, in the reasonable opinion of the
Lessee, likely to exceed an amount equal to ten per
cent. (10%) of the Lessor's Cost (or the equivalent in
any other currency);
(b) any occurrence in consequence whereof the Vessel has
become or is, in the reasonable opinion of the Lessee,
likely to become a Total Loss;
(c) any requirement made by any insurer or any material
requirement made by the Classification Society or by
any competent authority in relation to the Vessel which
is not complied with in accordance with its terms;
(d) any material assistance which has been given to the
Vessel which has resulted or may result in a lien for
salvage being acquired over the Vessel;
(e) any material failure to pay promptly and regularly the
wages and allotments or the insurance and pension
contributions (if any) of the officers and crew of the
Vessel;
(f) the requisition for hire at any time of the Vessel;
(g) any serious or potentially serious injury to an
individual or group of individuals in an amount
exceeding five million Dollars ($5,000,000) in
aggregate (or the equivalent in any other currency)
caused by, or in connection with, the Vessel;
(h) any damage in an amount exceeding five million Dollars
($5,000,000) (or the equivalent in any other currency)
to property caused by, or in connection with, the
Vessel; and
(i) any other event which occurs in connection with the
Vessel which in the reasonable opinion of the Lessee
affects or might affect the rights of the Lessor or
involves or might involve any material loss or
liability to or of the Lessor.
11.6 TAXES
(a) The Lessee shall not and shall procure that each other
party to the Lease Documents shall not (other than the
Lessor and the Deposit Bank) claim any capital
allowances in respect of any expenditure relating to
the Vessel incurred or to be incurred by the Lessor or
otherwise in respect of the Vessel which would
adversely affect the Lessor's claim to capital
allowances.
(b) The Lessee shall pay and discharge from time to time
all outgoings whatsoever lawfully imposed on the Vessel
or any income therefrom (other than Taxes) attributable
to:
(i) any Rent or Termination Payment actually
receivable hereunder; or
(ii) any other amounts payable to and
unconditionally received by the Lessor under
this Agreement or pursuant to or in connection
with any of the other Relevant Lease Documents;
or
(iii) any sales or other proceeds (including,
without limitation, insurance moneys) actually received
and retained by the Lessor in respect of the
Vessel as a result of the use, possession,
control and command of the Vessel.
(c) The Lessee will not use any part of the Vessel or
permit any part of the Vessel to be used and shall
procure that no part of the Vessel is used during the
requisite period (as defined in section 40 CAA 1990) so
as to result in the application of any of sections 42,
43, 44, and 46 CAA 1990 and shall immediately notify
the Lessor if at any time within such requisite period
the Vessel is used for leasing to a non-resident other
than permitted leasing, "non-resident" and "permitted
leasing" bearing for this purpose the meaning set out
in section 50 CAA 1990 and also notify the Lessor of
any event or matter which under section 48 CAA 1990
ought to be notified by the Lessor to the Board of the
Inland Revenue or any Inspector of Taxes in connection
with the Vessel or the leasing thereof and shall
promptly furnish when the Lessor may require such
information as may properly be required to be so
furnished by the Lessor to the Board of the Inland
Revenue and Inspector of Taxes regarding the leasing of
the Vessel or the use to which it is being put or has
been put (including any and all correspondence and
documents which passed between Watson, Farley &
Williams and the Oil Taxation Office), in order to
enable the Lessor to comply with the provisions of
section 48 CAA 1990 or to respond to such a request.
11.7 ENVIRONMENTAL LAWS
The Lessee shall comply, or procure compliance with, all
requirements of Environmental Law which are applicable to the
Vessel, (including, without limitation, obtaining and
maintaining in full force and effect all Environmental Permits
required from time to time and all requirements relating to
manning, submission of oil spill response plans, designation
of qualified individuals and establishing financial
responsibility) and promptly notify the Lessor of (i) any
Environmental Claim which has been made or threatened against
the Lessor, the Lessee, the Sub-Lessee or which is in relation
to or is caused by or is in connection with the Vessel and
which the Lessee is obliged (a) in accordance with the terms
of the Insurances to report to the relevant insurers and/or
(b) under any applicable law to report to any Government
Entity (and for the purposes of (a) and (b) above the proviso
to the definition of Environmental Claim shall not apply) and
(ii) any revocation, suspension, amendment, variation,
withdrawal or refusal to grant any Environmental Permit or any
requirement relating to the manning, submission of oil
response plans, designation of qualified individuals and
establishing financial responsibility.
11.8 OFE
The Lessee will provide to the Lessor from time to time on
request copies of all supporting invoices in respect of any
OFE.
12. OPERATIONAL COVENANTS IN RELATION TO THE VESSEL
12.1 USE OF VESSEL
The Lessee shall, subject to the provisions of this Agreement,
as between itself and the Lessor and to the exclusion of the
Lessor, have full and exclusive use, possession, control and
command of the Vessel during the Lease Period.
12.2 DESIGN REQUIREMENTS
The Lessee shall ensure that the Vessel is operated in a
proper, and safe manner at all times in accordance with its
design requirements and subject to any limitations placed on
such operation by that design or any recommendations of the
Builder or any repairer of the Vessel and in the manner
prescribed by any legislation in force in any applicable
jurisdiction.
12.3 COMPLIANCE WITH LAWS AND REGULATIONS
The Lessee shall not cause nor permit the Vessel to be
operated in any manner which is contrary to international law
or any other law, regulation or contractual requirement that
is applicable to the Vessel or any party to the Lease
Documents relating to the Vessel or to the exploitation or
development of any accumulation of hydrocarbons and the Lessee
shall ensure that the Vessel shall only be utilised in
accordance with the terms of all applicable permits and
consents including, but not limited to, any such permit or
consent from time to time issued by the Classification Society
or any other body.
12.4 OPERATION IN ACCORDANCE WITH INSURANCE ARRANGEMENTS
The Lessee will not use the Vessel nor cause nor permit the
Vessel to be used or operated in any manner or for any purpose
excepted from any insurance policy or policies or certificate
or certificates of entry comprising the whole or part of any
Insurances, or for the purpose of the storage of any goods of
any description excepted from any such insurance policy or
policies or certificate or certificates of entry and shall not
do or permit to be done anything which could be expected to
invalidate any insurance policy or certificate of entry or the
Insurances evidenced thereby.
12.5 ALTERATIONS
The Lessee may at any time alter any items of equipment or fit
any additional equipment required for the purpose of the
operation of the Vessel and may make any alteration to the
type or performance characteristics of the Vessel that it
considers is necessary or desirable without impairing the
safety of operation of the Vessel, provided that:
(a) if any such alteration or fitting when taken on its
own or as a series of changes constitutes a substantial
change to the Vessel (measured by value or by physical
extent), the Lessee shall promptly notify the Lessor
thereof in writing;
(b) such alterations or additional equipment shall not,
without the prior written consent of the Lessor,
materially reduce the value of the Vessel;
(c) the Lessee may remove (or permit the removal of)
additional equipment fitted pursuant to this Clause
12.5 or any other Excluded Property at any time before
the expiration of the Lease Period (subject to
paragraph (b) above) or earlier termination of the
leasing of the Vessel under this Agreement;
(d) subject to the provisions of Clause 19.2, any such
additional equipment and any other Excluded Property
which belongs to any member of the Guarantor's Group
which is not removed pursuant to paragraph (c) above
prior to the expiration of the Lease Period may be sold
or otherwise disposed of by the Lessor without the need
for any further act by the Lessee or any other person.
Where that additional equipment or such other Excluded
Property is in addition to (and not in replacement of)
the equipment forming part of the Vessel as at the
Delivery Date, a sum equal to the proceeds of sale or
other disposal of such additional equipment or such
other Excluded Property which has been sold or disposed
of by the Lessor shall be paid to the Lessee as soon as
practicable after the completion of such sale or other
disposal; and
(e) any equipment (other than the Excluded Property and
additional equipment altered or replaced in accordance
with this Clause 12.5) that is removed during the Lease
Period shall, unless otherwise agreed by the Lessor in
writing, be replaced at the cost and expense of the
Lessee prior to the expiration of the Lease Period in
at least as good a condition as at the time of removal
(fair wear and tear excepted) and shall be in place and
in such condition at the expiration of the Lease
Period.
The cost of fitting or removing any such additional equipment
or such other Excluded Property together with the cost of
making good any damage caused by such fitting or removal shall
be payable by the Lessee. The Lessee shall notify the Lessor
in writing of any material alterations to the Vessel and shall
provide details of all that is fitted to or removed from the
Vessel by the Lessee which, in the Lessee's reasonable
opinion, may have a material adverse impact on the market
value of the Vessel, within a reasonable period of such
alterations being carried out, or the fitting or removal of
such additional equipment or such other Excluded Property.
12.6 MANNING
The Lessee shall be responsible for providing or procuring
that there be provided the officers and crew (together the
"CREW") on board the Vessel who shall remain the employees of
the Lessee or the Sub-Lessee, or such other person as the
Lessee or the Sub-Lessee shall engage to provide crewing
services for the Vessel. The Crew shall be responsible for
the manning and operation of the Vessel on behalf of the
Lessee and, as between the Lessor and the Lessee, at the risk
of the Lessee.
12.7 EXPENSES INCIDENTAL TO USE AND OPERATION
The Lessee shall, subject to the provisions of this Agreement,
be responsible for all expenses, charges and penalties of
every kind whatsoever incidental to the use and operation of
the Vessel during the Lease Period and shall ensure that the
Vessel is kept and maintained in accordance with any law,
regulation, consent or other requirement from time to time
applicable to the Vessel.
12.8 MAINTENANCE AND REPAIR
The Lessee shall, or shall procure that any Sub-Lessee shall,
throughout the Lease Period and thereafter until sale of the
Vessel:
(a) at no expense to the Lessor, maintain the Vessel
(and each part thereof) in a good state of repair (fair wear
and tear excepted), in efficient and safe operating
condition, and in accordance with the Lessee's
maintenance schedule and practice from time to time and
shall ensure that the Vessel complies at all times with
all applicable requirements of the Classification
Society, the insurers and any applicable law,
regulations and requirements applicable to equipment of
a type similar to the Vessel in force at all times and
shall forward to the Lessor on request subject to
availability, copies of all certificates as may be
required for the proper use and operation of the Vessel
for the time being;
(b) procure all repairs to or replacement of any badly
worn, damaged, broken or lost parts or equipment to be
effected promptly and in such manner (with regard to
both workmanship and quality of materials) as not to
reduce materially the value of the Vessel without the
prior written consent of the Lessor and the Lessee
shall be responsible for all costs and expenses so
incurred; and
(c) procure that (to the extent reasonably practicable)
title to all replacement parts or equipment attached to
or installed on the Vessel under Clause 12.8(b) shall
vest (by such delivery) in the Lessor (and the Lessee
shall, at its cost and expense procure that any
necessary action is taken to ensure that such vesting
is effective).
12.9 OBSTRUCTION
The Lessee shall pay all charges and expenses of every kind
and nature whatsoever incidental to the use and operation of
the Vessel under this Agreement and, if the Vessel or any part
thereof becomes a wreck or an obstruction to navigation, any
costs and expenses arising which may be incurred by or made or
asserted against the Lessor in connection with or as a
consequence of the removal or destruction of the wreck or
obstruction, provided that the Lessee shall have the right to
contest in good faith any such charge or expense (and no
person employed to control or operate the Vessel shall be
deemed to be a servant of the Lessor for any purpose
whatsoever) and to this end the Lessor shall upon receipt of
the written request from the Lessee not unreasonably refuse to
lend to the Lessee, at the Lessee's expense, all necessary
assistance in connection with any litigation, arbitration or
other administrative proceedings to which the Lessee may be a
party or in which the Lessee may be otherwise involved in
connection with the contest of the validity or amount of such
charge or expense provided however that the Lessor may, in its
absolute discretion, refuse to permit its name or the name of
the Bank to be used in any manner in any such litigation,
arbitration or other administrative proceedings.
12.10 INTENTIONALLY OMITTED
12.11 STORAGE AND TRANSPORT OF HYDROCARBONS
The Lessee shall procure that the Vessel shall not transport
hydrocarbons or similar substances and, unless the Lessee has
given the Lessor prior written notice and complied with any
change in the Insurances required under Clause 9 shall not
store hydrocarbons or similar substances.
12.12 SAFETY AND OPERATION
The Lessee shall, or shall procure that the Sub-Lessee shall,
take such steps as are reasonably practicable to ensure that
the Vessel and all constituent parts thereof will be safe and
without risk to health when in use and that the Vessel is not
operated beyond its specified or recommended limits or
capacity. To this end and without prejudice to the generality
of the foregoing, the Lessee shall ensure that any defects in
the Vessel which could be or cause a danger to safety and a
risk to health are repaired and made good so far as is
reasonably practicable in accordance with the Lessee's normal
practices. For this purpose the Lessee shall cause the Vessel
to be inspected regularly and its various systems tested
provided that such inspection and testing will only be carried
out in accordance with and at the interval specified in the
Lessee's maintenance schedule for the Vessel and otherwise at
times and in such manner as a prudent operator of vessels of a
similar type to the Vessel and engaged in a similar trade
would normally expect to carry out such inspection and
testing. The Lessee shall also take all reasonable steps to
ensure that appropriate safety measures are adopted and all
provisions of all applicable laws, codes and regulations
relating to the Vessel are complied with and the Lessee shall
ensure or procure where required by any applicable law that at
all times the Vessel is subject to a Safety Management System
which complies in all respects with the ISM Code and has a
valid Safety Management Certificate and that there is a valid
Document of Compliance which is applicable to the Vessel.
12.13 OPERATIONAL CONTROL
The Lessor acknowledges that, as between itself and the
Lessee, the Lessee shall have the full operational control of
the Vessel, but without prejudice to the right of the Lessor
following the delivery by it of a Termination Notice to
repossess the Vessel in accordance with Clause 21.7.
12.14 CONSENTS
The Lessee shall procure that at all times during the Pre-
Lease Period and the Lease Period there are maintained in full
force and effect all relevant authorisations (governmental and
otherwise) and will promptly obtain any further authorisation
in each case which are or may become necessary for the
operational use of the Vessel or the performance of any of the
transactions contemplated by this Agreement and the other
Lease Documents (other than the performance of the Payment
Agreements by Payment Banks).
12.15 GOOD PRACTICE
The Lessee shall ensure that in all respects the Vessel will
be operated and maintained to comply in all material respects
with all applicable laws in accordance with good oil field and
marine practice.
12.16 SERVICE CONTRACTS AND SERVICE CONTRACTOR'S OIL POLLUTION
INDEMNITY
(A) The Lessee shall provide to the Lessor on or shortly prior to
or, if that is impractical, as soon as practical after, the
Sub-Lessee entering into a Service Contract a certificate
executed by a duly authorised officer of the Lessee certifying
that:
(i) the Sub-Lessee or, if applicable and subject to the
terms of this Agreement, the Lessee is about to enter
into or, as the case may be, has entered into a Service
Contract;
(ii) the Lessee has complied with its obligations under
Clause 12.16(B); and
(iii) either (a) that the relevant extracts of the Service
Contract or other agreement, document or instrument
attached to such certificate are true and complete
extracts of the relevant provisions of the Service
Contact or, as the case may be, such other agreement,
document or instrument containing an indemnity or
indemnities with respect to oil pollution for the
benefit of the Indemnified Persons (either expressly or
by an indemnity or indemnities in favour of a class of
persons within which the Indemnified Persons fall) by
operation of the third party beneficiary doctrine under
the law governing the Service Contract or other
document or instrument or (b) that the Service
Contractor refused to give any such indemnity or
indemnities.
(B) The Lessee shall use all reasonable efforts and endeavours to
procure that each Service Contractor grants an indemnity or
indemnities in compliance with clause 12.16(A)(iii)(a).
12.17 ARREST AND DETENTION
If the Vessel is at any time during the Lease Period:
(a) arrested, seized, taken into custody or otherwise
detained by any court or other tribunal or by any
Government Entity (other than by a Compulsory
Acquisition or any requisition for hire or by reason of
a Lessor's Lien); or
(b) subjected to distress or other legal proceedings by
reason of any process, claim, the exercise of any
rights conferred by a Lien or by any other action
whatsoever (other than by reason of a Lessor's Lien),
the Lessee shall procure the release of the Vessel from such
arrest, seizure or detention within twenty-one (21) days of
receiving notice thereof by providing bail or otherwise as the
circumstances may require. The Lessor acknowledges and
accepts that the Lessee shall, unless and until a Relevant
Event shall have occurred which is continuing, have the sole
right to contest any litigation, arbitration or administrative
proceedings in respect of the foregoing and the Lessor shall,
upon receipt of the written request from the Lessee and being
secured to the Lessor's satisfaction against its costs and
expenses of so doing, not unreasonably refuse to render all
necessary assistance as the Lessee may reasonably require in
connection therewith, provided however that the Lessor may, in
its absolute discretion, refuse to permit its name or the name
of the Bank to be used in any manner in any such litigation,
arbitration or other proceedings.
12.18 REGISTRATION
(a) The Lessee shall not do and shall procure that each
other party to the Lease Documents (other than the
Lessor and the Deposit Bank) shall not do anything or
permit anything to be done whereby the registration of
the Vessel under the laws of the Flag State may be
forfeited or imperilled.
(b) The Lessee shall comply with and procure the
compliance with the provisions of all applicable laws and
regulations necessary to maintain the registration of
the Vessel under the laws of the Flag State.
12.19 NOTICE OF LEASE
(a) The Lessee shall place and keep or procure that there
is placed and kept prominently displayed in the control
room of the Vessel throughout the Lease Period a framed
printed notice in plain type in English of such size
that the paragraph of reading matter shall cover a
space of not less than six (6) inches wide by nine (9)
inches high, reading substantially as follows:
"NOTICE OF LEASE"
"This Vessel is the property of [Lessor] (the "LESSOR")
and is subject to a head lease granted by the Lessor in
favour of [Lessee] (the "LESSEE"). This Vessel is
subject to a sub-lease granted by the Lessee in favour
of [UK lessee] (the "SUB-LESSEE").
Neither the Lessee, the Sub-Lessee and any Service
Contractor, nor any manager, nor any servant or agent
of any thereof has any authority whatsoever to contract
on behalf of the Lessor or to pledge the credit of the
Lessor or the involvement of the Lessor in any
liability whatsoever and none of the Lessee, the Sub-
Lessee, any Service Contractor, any manager of this
vessel and any other person has any right, power or
authority to create, incur or permit to be imposed upon
this vessel any Lien whatsoever except for general
average, crew's wages or salvage."
The Lessee undertakes that it shall not place or permit
to be placed in or on the Vessel any other notice
dealing with the rights of any person without the prior
written consent of the Lessor.
(b) The Lessee undertakes not to remove or cover up the
notice specified in Clause 12.19(a).
(c) The Lessee shall carry a true and complete copy of
this Agreement with the Vessel's papers and on demand
exhibit the same to any person having business with the
Vessel which might reasonably be considered to give
rise to any Lien other than any Permitted Lien.
12.20 TRANSFER OF FLAG OR REGISTRY OF VESSEL
The Lessee may at any time and from time to time during the
Lease Period request the Lessor to transfer the register of
the Vessel to any port and/or to re-document the Vessel under
the laws of any jurisdiction other than the port and/or
jurisdiction at which the Vessel is for the time being
registered and/or under whose laws the Vessel is for the time
being documented. If the Lessor approves of such transfer of
register and/or re-documentation of the Vessel (such approval
not to be unreasonably withheld or delayed, provided always
that it shall be reasonable for the Lessor to withhold its
consent if the Lessor demonstrates to the Lessee (by producing
a legal opinion from legal counsel of the Lessor's choice
qualified and practising in the relevant jurisdiction to which
the registration of the Vessel is to be transferred) that the
Lessor's ownership and/or liability position will be adversely
affected by such transfer of register and/or re-documentation
of the Vessel), the Lessor shall, at the request of the
Lessee, co-operate with and permit the Lessee to take all
necessary steps to comply with such request and thereafter
shall during the Lease Period co-operate with the Lessee to
take such action as the Lessee may reasonably require (but
only in such manner and upon such conditions as the Lessor may
approve (such approval not to be unreasonably withheld or
delayed) and, if such approval is given, subject to such
conditions as the Lessor may reasonably impose and provided
always that it shall be reasonable for the Lessor to withhold
its approval or impose conditions if it demonstrates to the
Lessee (by producing a legal opinion from legal counsel of the
Lessor's choice qualified and practising in the relevant
jurisdiction to which the registration of the Vessel is to be
transferred) that the Lessor's ownership and/or liability
position will be adversely affected if the Lessor gives such
approval and/or does not impose such conditions) to maintain
the documentation of the Vessel at the port to which the
register of the Vessel is so transferred and/or under the laws
of the jurisdiction under whose laws the Vessel is so re-
documented.
If the Lessor demonstrates to the Lessee (by producing a legal
opinion from legal counsel of the Lessor's choice qualified
and practising in the relevant jurisdiction) that it has
become impossible or unlawful for the Lessor to maintain the
documentation of the Vessel under the laws of any jurisdiction
under whose laws the Vessel is for the time being documented
or the Lessor demonstrates to the Lessee (by producing a legal
opinion from legal counsel of the Lessor's choice qualified
and practising in the relevant jurisdiction in which the
registration of the Vessel is currently located) that its
ownership is or is likely to be imperilled or otherwise
adversely affected under such law or that the liabilities to
which it is or is likely to become exposed have increased to
what is, in the opinion of the Lessor, an unacceptably high
level, the Lessor shall give notice thereof to the Lessee and
the Lessee shall forthwith enter into negotiations in good
faith with a view to agreeing upon the Vessel remaining
documented under the laws of the jurisdiction under which it
is documented at that time or an alternative jurisdiction for
the documentation of the Vessel, but if no such agreement
shall be reached within thirty (30) days after the Lessor
shall have given such notice to the Lessee, the Lessor shall
be at liberty to take and/or require the Lessee to take such
action to re-document the Vessel and/or to transfer the
registry of the ship to a port of registry in such registry as
the Lessor, acting reasonably, considers appropriate having
regard to the Lessor's ownership of the Vessel and/or the
Lessor's liability position and the operational requirements
for the Vessel by the Lessee, the Sub-Lessee and the Service
Contractor and in either case the Lessee shall do all that may
be necessary on its part to give effect to such re-
documentation and/or transfer of register.
The Lessee shall indemnify and hold harmless the Lessor
against all losses, costs, expenses and liabilities of
whatsoever nature which the Lessor may suffer or incur and
which arise directly or indirectly out of the documentation of
the Vessel at a different port and/or under the laws of any
jurisdiction following a request by the Lessee or the Lessor
in accordance with the foregoing provisions of this Clause
12.20, including the costs incurred by the Lessor in obtaining
a legal opinion under this Clause (whether the transfer of the
register of the Vessel is requested by the Lessor or the
Lessee and irrespective of whether the registration of the
Vessel is changed).
13. BENEFIT OF THIRD PARTY WARRANTIES
13.1 The Lessor agrees to assign absolutely to the Lessee upon the
request of the Lessee from time to time or at any time after
Delivery:
(a) all or any of the rights and interests in and to all
warranties and indemnities given by the Builder, each
OFE Supplier and each other manufacturer, repairer or
supplier of any part of the Vessel to the extent that
the same are vested in the Lessor and are capable of
assignment; and
(b) all or any of the rights and interests in and to all
claims and rights of action whatsoever of the Lessor
against the Builder under the Shipbuilding Contract and
any OFE Supplier (other than those referred to in sub-
clause (a) above) and all guarantees, letters of credit
or other security for the Builder's, each Supplier's
and each other manufacturer's, repairer's or Supplier's
OFE obligations to the extent that the same have been
vested in the Lessor by or pursuant to the Shipbuilding
Contract and are capable of assignment.
13.2 The Lessee shall be entitled, as assignee of the Lessor by
virtue of Clause 13.1, to take action in its own name against
the Builder, each OFE Supplier, each other manufacturer,
repairer or supplier and such other applicable party referred
to in Clause 13.1.
13.3 The Lessor shall, upon the Lessee's request, promptly give
notice to the Builder, any OFE Supplier or other applicable
party referred to in Clause 13.1 of the assignment contained
in Clause 13.1, each such notice to be in form and substance
mutually agreed by the Lessor and the Lessee.
13.4 Without prejudice to the assignments contained in Clause 13.1,
to the extent that such assignments may not be effective to
vest in the Lessee the full benefit of all rights and claims
purportedly assigned (including the right to be compensated in
the same amount as that to which the Lessor would have been
entitled had the assignment not taken place), the Lessee shall
be entitled, subject to the Lessee first ensuring that the
Lessor is indemnified or secured from time to time and at all
times to its satisfaction by the Lessee against all potential
costs and expenses to be incurred, to take action in the name
of the Lessor in respect of all or any of the matters referred
to in Clause 13.1 to commence or conduct private arbitration
proceedings (that is to say the proceedings themselves are
conducted in private and the arbitrator's award is given and
known only to the parties to the arbitration) against the
Builder, any OFE Supplier and any other manufacturer, repairer
or supplier of any part of the Vessel and any other applicable
party referred to above, provided that:
(a) the Lessee shall in all circumstances keep the Lessor
fully informed and have due regard to the wishes of the
Lessor in relation to the use of the Lessor's name,
acknowledging the Lessor's interest in preserving, in
the UK financial community, the Lessor's and its
immediate or ultimate parent company's reputations as
financial institutions and their respective business
interests and customer relationships to the extent that
such interests and relationships are reasonably likely
to be affected in a materially adverse way as a result
of the commencement and/or conduct of such arbitration
proceedings;
(b) if private arbitration proceedings are commenced the
Lessor shall permit the Lessee to have the conduct of
such proceedings but (i) the Lessor shall be entitled
to join in the conduct of such proceedings at any time
and (ii) the Lessee shall give timely notice to the
Lessor of any meetings with Counsel or attendance at
the arbitration, and the Lessor shall be entitled to
attend any such meetings or attendances PROVIDED THAT
following the service of a Termination Notice the
Lessee shall cease to have, and the Lessor shall have,
sole conduct of such proceedings in the Lessor's name;
(c) the Lessor shall be entitled to charge for, and the
Lessee shall pay for, the Cost of Management Time
incurred in respect of or in connection with any such
private arbitration proceedings; and
(d) if the Lessee notifies the Lessor that it does not
intend to appeal any award made against the Lessor by
the arbitrator or the Lessee does not satisfy the award
within the time allowed by applicable law for an
appeal, the Lessor shall be entitled to satisfy the
award.
13.5 The provisions of Clause 13.5 shall apply mutatis mutandis
with respect to any court proceedings which the Lessee wishes
to commence in the name of the Lessor in respect of all or any
of the matters referred to in Clause 13.1 (whether prior to
the arbitration proceedings referred to in Clause 13.4 or by
way of an appeal from the award of the arbitrator in such
proceedings) on the basis that references in Clause 13.4(a) to
"private arbitration proceedings", "arbitration proceedings",
"arbitration" and "proceedings" shall be construed as
references to court proceedings and (b) to the "arbitrator's
award" or the "award" shall be construed as a reference to an
order of any competent court and the second set of words in
parentheses in the first paragraph of Clause 13.4 shall be
disregarded. In addition, following receipt by the Lessee of
a certificate signed by an officer of the Bank of at least the
level of Managing Director, Corporate and Institutional
Financial Services (or the equivalent of such officer from
time to time) certifying that the Bank is of the opinion that
the continued taking by the Lessee of any action in the name
of the Lessor and/or, as the case may be, the continued use by
the Lessee of the Lessor's name in any court proceedings is
affecting or will affect in any adverse way whatsoever the
Lessor's or its immediate or ultimate parent company's
reputations as financial institutions in the UK financial
community and/or their respective business interests and/or
customer relationships, then, if the Lessor is the plaintiff
in any such proceedings, the Lessee shall no longer be
entitled to, and shall not, take any action or, as the case
may be, any further action in the name of the Lessor or use
the Lessor's name in any such proceedings and if the Lessor is
the defendant in any such proceedings, the Lessee shall cease
to have, and the Lessor shall have, sole conduct of such
proceedings in its own name.
13.6 The Lessor shall, subject to the provisions of Clause 13.4 in
the applicable circumstances and subject to being indemnified
or secured by the Lessee against all potential costs and
expenses to be incurred, take all such further actions as the
Lessee may reasonably require in order to confer on the Lessee
the full benefit of the rights and claims referred to in
Clause 13.1
14. INSPECTION
14.1 Without imposing or implying any obligation on the Lessor, the
Lessor may inspect, and may instruct an agent on its behalf,
at any reasonable time upon reasonable notice, to inspect the
Vessel.
14.2 The costs of such inspection shall be borne by:
(a) the Lessor if, at the time of the inspection, no
Termination Event has occurred which is continuing and
such inspection reveals that all provisions of this
Agreement with regard to the operation and maintenance
of the Vessel are being substantially complied with;
and
(b) the Lessee in each other case.
14.3 Provided no Termination Event has occurred which is
continuing, the Lessor agrees that no such inspection shall
(a) take place more than once a year or (b) interfere with the
operation, maintenance or repair of the Vessel.
14.4 The Lessor also agrees that it or its agent shall comply with
all safety, fire and operational regulations and instructions
which may be given on the occasion of any inspection.
15. RISK
Throughout the Pre-Lease Period and the Lease Period and until
redelivery of the Vessel in accordance with Clause 19.1
(Re-delivery of the Vessel), the Vessel shall, as between the
Lessor and the Lessee, be in every respect at the risk of the
Lessee. The Lessee shall bear all risks howsoever arising
whether of navigation of the Vessel or the operation or
maintenance of the Vessel (or any part thereof) or otherwise.
The Lessee agrees that the Lessor shall not be liable for any
liability, claim, loss, damage or expense of any kind or
nature caused directly or indirectly by the Vessel or any part
thereof or any inadequacy thereof for any purpose or any
deficiency or defect therein or the use or performance thereof
or any repairs or servicing thereto or any delay in providing
or failure to provide any thereof or any interruption or loss
of service or use thereof or any loss of business or other
consequential damage or any damage whatsoever and howsoever
caused or any other matter which but for this provision might
operate to frustrate this Agreement, save for direct losses
and expenses suffered or incurred by the Lessee (including any
losses and expense against which the Lessee is obliged to
indemnify any third party irrespective of any limit on the
right of recourse by that third party to the Lessee or its
assets) which result solely from a breach by the Lessor of its
express and specific obligations under the Relevant Lease
Documents to which it is party.
16. REQUISITION FOR HIRE
16.1 If the Vessel is requisitioned for hire by any Government
Entity during the Lease Period, the leasing of the Vessel
shall continue in full force and effect for the remainder of
the Lease Period and the Lessee shall remain fully responsible
for the due compliance with all its obligations under this
Agreement other than in respect of provisions which the Lessee
is precluded from performing as a result of such requisition.
16.2 The Lessee shall be entitled to all requisition hire paid to
the Lessor or to the Lessee by such Government Entity or other
competent authority on account of such requisition in respect
of the Vessel and shall be entitled to all requisition hire
paid in respect of the Vessel, whether during or following the
expiration or earlier termination of the Lease Period.
16.3 The Lessee shall be under no liability to the Lessor in
respect of any change in the structure, state and condition of
the Vessel in so far as such change is due to the manner in
which the Vessel has been used or treated or to the events
that have occurred during the period of requisition.
Nonetheless the Lessee shall ensure that any compensation
payable by the requisitioning authority in respect of such
change shall, unless the Lessor otherwise agrees in writing:
(a) if received after the occurrence of a Total Loss
which is continuing, be paid to the Lessor and until payment
be held on trust for the Lessor; and
(b) otherwise be retained by the Lessee,
and, in each such case, applied in accordance with
Clause 16.4 or 16.5.
16.4 Any such compensation as is referred to in Clause 16.3 which
is received prior to the end of the Lease Period shall, unless
the Lessor otherwise agrees in writing be applied:
(a) first if received and permitted to be retained by the
Lessee pursuant to Clause 16.3, by the Lessee in or
towards restoring the Vessel (so far as is possible) to
the condition which it is in at the time the
requisition took place;
(b) secondly if received by the Lessor, by the Lessor in
reimbursement of the Lessee of any amounts expended by
the Lessee in or towards restoring the Vessel (so far
as is possible) to the condition which it was in at the
time the requisition took place or, as the case may be,
in making direct payment to any relevant shipyard or
other repairer or supplier; and
(c) thirdly, provided that the Vessel has at such time (so
far as is possible) been restored to the condition
which it was in at the time the requisition took place,
in payment by the Lessor to the Lessee or (as the case
may be) retention by the Lessee for its own account of
any surplus as if it were requisition for hire.
16.5 Any such compensation as is referred to in Clause 16.3 which
relates to any period after the end of the Lease Period shall
be paid by the Lessor to or, as the case may be, retained by
the Lessee.
16.6 In the event that the Vessel shall at the end of the Lease
Period for any reason whatsoever be under requisition for hire
the provisions of this Agreement in respect of re-delivery and
sale of the Vessel shall unless the Lessor otherwise agrees in
writing apply at the end of the period of requisition for hire
regardless that the Lease Period shall have expired before the
end of the requisition period.
17. SALVAGE
All salvage and towage and all proceeds from derelicts shall
be for the Lessee's benefit and the cost of repairing damage
occasioned thereby shall be borne by the Lessee.
18. TITLE AND LIENS
18.1 TITLE
During the Pre-Lease Period, title to the Vessel as it is
constructed shall pass to the Lessor in accordance with the
provisions of the Shipbuilding Contract and during the Lease
Period the Vessel shall at all times be the property of and
belong to the Lessor. Nothing in the Lease Documents shall
have the effect of or be deemed to have the effect of passing
title or beneficial ownership of the Vessel or any part
thereof to the Lessee or any Sub-Lessee or any Service
Contractor. For the avoidance of doubt, it is expressly
agreed that none of the Lessee or any Sub-Lessee or any
Service Contractor shall, as against the Lessor, have an
option or right to acquire title to or any proprietary right
or interest in or to all or any of the Vessel.
18.2 LIENS
(a) The Lessee shall not and shall procure that each
Security Party shall not (save as provided in Clause
19.2(d) (Sale of the Vessel) or pursuant to the
Relevant Lease Documents) sell nor purport to sell the
Vessel or any part thereof.
(b) Subject to Clause 12.17, the Lessee shall not and shall
procure that each Security Party shall not create,
incur or permit to arise or be imposed on the Vessel
any Lien, other than Permitted Liens, and the Lessee
shall pay and discharge (or provide bail in respect of)
all debts, damages and liabilities whatsoever which may
have given or may give rise to any Lien or claim
enforceable against the Vessel (other than those which
may have given or may give rise to Lessor's Liens).
19. RE-DELIVERY AND SALE OF THE VESSEL
19.1 RE-DELIVERY OF THE VESSEL
(a) Except in the event of a Total Loss (other than as
provided in Clause 10.7 (Notice of abandonment), in
which event Clause 19.1(c) shall apply) and except
where a sale of the Vessel has been arranged in
accordance with Clause 19.2 and title to the Vessel is
transferred to the purchaser thereof at the end of the
Lease Period and subject to the provisions of Clauses
16.6 and 21.7, the Lessee shall at the end of the Lease
Period re-deliver the Vessel together with all
certificates relating to the Vessel to the Lessor free
of all Liens (other than Liens falling within
paragraphs (i), (ii), or (vi) of the definition of
Permitted Liens), and the Lessor shall accept such re-
delivery, at the Redelivery Location. Subject to the
provisions of Clause 16.6, the Lessee shall at its
expense before such re-delivery make all such repairs
and do all such work as may be necessary so that the
Vessel at the date of re-delivery shall be:
(i) unless otherwise agreed by the Lessor in
writing, such state of repair and operating
condition as it is required to be maintained in
accordance with the provisions of this
Agreement, fair wear and tear and changes and
alterations properly made by the Lessee as
permitted under this Agreement excepted;
(ii) with all required certificates in full force
and effect; and
(iii) with all equipment, fittings, spare and
replacement parts installed in or on, or which
are attached to, or which are part of the
Vessel in accordance with this Agreement other
than Excluded Property which was entitled to be
(and was) removed prior to re-delivery in
accordance with Clause 12.5 (Alterations).
The cost of satisfying the requirements specified
in paragraphs (i) to (iii) above and remedying any defects
or deficiencies shall be borne by the Lessee or the
Lessee shall pay to the Lessor the cost of effecting
the same.
(b) At or about the time of re-delivery following a
termination of the leasing of the Vessel pursuant to
Clause 21.3 (Termination by Lessor) or following the
end of a period of requisition for hire which ends
after the expiration of the Lease Period and unless a
sale of the Vessel has been arranged in accordance with
Clause 19.2 and title to the Vessel is transferred to
the purchaser thereof on the Termination Date and
subject to Clause 21.7, a survey shall, if the Lessor
so requires, be made to determine the state and
condition of the Vessel. In that event, the Lessee and
the Lessor shall each appoint surveyors to be present
at such survey and the surveyors present shall
determine the condition of the Vessel and shall state
the repairs or work necessary to place the Vessel at
the date of re-delivery in the structure, state and
condition required to demonstrate compliance by the
Lessee with the repair and maintenance covenants
contained in this Agreement. If the said surveyors
disagree they shall refer the matter to a senior
surveyor of the Classification Society whose decision
shall be final and binding on the parties hereto. All
reasonable costs occasioned by any such survey
including the costs of the said surveyors appointed by
the Lessee and the Lessor and, if appointed, the costs
of the senior surveyor of the Classification Society
shall be payable by the Lessee, but if the Vessel is
found by such senior surveyor to be in the condition
provided for in this Agreement, fair wear and tear
alone and changes and alterations properly made by the
Lessee as permitted under this Agreement excepted, such
reasonable costs shall be payable by the Lessor. If
the Lessee fails to appoint a surveyor as specified,
the survey shall be conducted by the Lessor's appointee
alone and references to the "senior surveyor" in this
Clause shall be ignored.
(c) In the event of a Total Loss to which Clause 10.9
applies, the Lessee shall, at the Lessee's cost and
expense, re-deliver the Vessel and all Surviving Parts
to the Lessor at such location and upon such other
terms and conditions as the Lessor and the Lessee may
agree at such time.
19.2 SALE OF THE VESSEL
(a) Upon any termination of the leasing of the Vessel
(or, as the case may be, the right of the Lessee to take the
Vessel on Lease (but subject always to the rights of
the Lessor under clause 3 of the Put Option Deed))
under this Agreement through effluxion of time or
otherwise (but in the case of a Total Loss, only to the
extent that the Lessor is free to dispose of the same)
the Vessel shall be sold in accordance with the
remaining provisions of this Clause 19.2.
(b) To the extent of its entitlement to act as the
Lessor's sales agent in accordance with paragraph (d) below,
the Lessee shall have the right to decide the means, timing
and terms of disposal of the Vessel subject always to
compliance with paragraphs (c) and (d) below.
(c) Any sale pursuant to this Clause 19 shall comply with
the following conditions:
(i) the sale shall be at a cash price payable by
the purchaser in full on completion in Dollars
or such other currency as the Lessor may agree
(such agreement not to be unreasonably
withheld) direct to the Lessor for credit to
the account designated by the Lessor;
(ii) the sale shall be at a price which (excluding
VAT or other similar taxes wheresoever and
howsoever arising) shall be not less than the
higher of the open market value of the Vessel
and the Tax Written Down Value;
(iii) the sale may be to any person other than:
(A) the Lessee; or
(B) the Sub-Lessee; or
(C) any person who is purchasing on behalf
of or in trust for the Lessee or the
Sub-Lessee; or
(D) any person who is purchasing as part of
an arrangement under which title will or
may pass to any of the persons mentioned
in (A) and (B) above;
(iv) the sale shall be made upon terms which do not
expose the Lessor or any member of the Lessor's
Group to any liability, including but not
limited to any Tax Liability (excluding
Corporation Tax chargeable on capital gains and
any Tax Liability arising out of a disposal for
Capital Allowances) which it would not have had
but for execution of the relevant sale
documents (save for liability for breach of the
warranty set out in this Clause 19.2(c)) unless
the Lessor or the relevant member of the
Lessor's Group shall first have been
indemnified and/or secured to its satisfaction
against any such liability, and otherwise
without any representation, recourse or
warranty whatsoever to or on the part of the
Lessor or any member of the Lessor's Group
other than a warranty that the Lessor shall
pass such title to the Vessel as the Lessor has
acquired pursuant to the Shipbuilding Contract
subject to Liens, save for Lessor's Liens
Provided that the Lessee shall be entitled to
make any representation or warranty with
respect to the Vessel strictly on its own
behalf without recourse whatsoever to or on the
part of the Lessor or any member of the
Lessor's Group;
(v) a sale shall be on an "as is, where is and with
all faults" basis and governed by the laws of
England;
(vi) a sale shall exclude, so far as permitted by
the laws of England and any other laws
governing or applicable to the sale of the
Vessel, all liability of the Lessor or any
member of the Lessor's Group, in contract or
tort, in relation to the Vessel to the same
extent as such liabilities are excluded by
Clause 5 (disclaimers and exclusions) but save
for the warranty given by the Lessor under
Clause 19.2(c)(iv); and
(vii) if the Vessel is at the date of entry into
any contract for the sale of the Vessel subject to
any requisition for hire, the sale shall be
subject to such requisition.
The Lessee shall, whether or not the Vessel is
sold through the Lessee as sales agent pursuant to Clause
19.2(d) and whether or not the Vessel is in the
possession of the Lessee, the Sub-Lessee or the Lessor,
indemnify the Lessor on demand and keep the Lessor
indemnified on a full indemnity basis (subject to
Clause 25.2 (exclusions from general indemnity) against
all Losses from time to time suffered or incurred by or
made against the Lessor which are connected with the
repossession, re-delivery, storage, maintenance,
protection, sale or attempted sale of the Vessel.
(d) The Lessee is hereby irrevocably appointed by the
Lessor as its sole and exclusive marketing agent for
the Vessel (but shall not be entitled to any fee or
commission for acting as the Lessor's sales agent) any
sale of the Vessel to be completed only at the time of
or following the expiration or earlier termination of
the leasing of the Vessel pursuant to this Agreement,
PROVIDED THAT:
(i) such agency shall cease to be on a sole and
exclusive basis and shall be instead on a joint
(together with the Lessor) and a non-exclusive
basis if no sale has been completed within one
year of the expiration or earlier termination
of the Lease Period (or such longer period as
the Lessor may agree in writing); and
(ii) the authority of the Lessee is limited to the
extent that the Lessee shall not be authorised
to sell the Vessel or any part thereof or to
approve or execute on behalf of the Lessor any
document (including, but not limited to, any
term sheet or heads of terms) relating to the
sale of the Vessel, but the Lessor agrees that
it shall, at the Lessee's cost and expense upon
reasonable notice, execute such agreement as
may be requested for the sale of the Vessel
provided that the same complies with the
provisions of Clause 19.2(c).
(e) The Lessor shall indemnify and hold the Lessee and
each other member of the Guarantor's Group harmless on a
full indemnity basis from any Losses suffered or
incurred by the Lessee or any other member of the
Guarantor's Group which would not have arisen but for,
and only but for, the following:
(i) the failure of the Lessor to sell the Vessel
following receipt by the Lessor of a request by
the Lessee to sell in compliance with the
provisions of this Clause 19.2; and/or
(ii) any actual or purported revocation of the
marketing agency contained in Clause 19.2(d) by
operation of law,
except, in either case, where the circumstances
referred to in (i) or (ii) above arise by operation of,
or as a result of compliance by the Lessor with,
applicable law (other than where the operation of, or
compliance with, applicable law would not have arisen
but for, and only but for, an Insolvency Event in
relation to the Lessor). The Lessee shall hold the
benefit of the indemnity contained in this
Clause 19.2(e) on trust for the other members of the
Guarantor's Group.
20. PROCEEDS OF SALE
20.1 PROCEEDS OF SALE
The "PROCEEDS OF SALE" of the Vessel shall be (i) the total
proceeds of sale thereof (excluding Value Added Tax and other
similar taxes wheresoever and howsoever arising but including
any non-refundable deposit paid by a person proposing to
acquire the Vessel under a contract or offer to purchase which
has been withdrawn, terminated, cancelled or has lapsed)
unconditionally received by the Lessor; or (ii) any capital
sums unconditionally received by the Lessor, before Delivery,
by way of purchase price for (or compensation for the loss of)
the Lessor's rights under the Shipbuilding Contract. If the
Vessel is sold in a currency other than Sterling the "PROCEEDS
OF SALE" thereof shall be the amount of Sterling which the
Lessor is able to purchase with the foreign currency by
reference to the spot rate of exchange of the Bank for
purchasing Sterling with such currency which it receives for
such sale on the day of receipt of such foreign currency or as
soon thereafter as foreign exchange transactions are able to
be made in the City of London.
20.2 APPLICATION OF PROCEEDS OF SALE
Following the termination or expiration of the leasing of the
Vessel and if the completion of a sale or other disposition of
the Vessel or the rights and obligations of the Lessor under
the Shipbuilding Contract takes place, the Proceeds of Sale
(or any part thereof) shall be applied by the Lessor
immediately (or, if it is not possible for the Lessor to apply
the same immediately, then on the next Business Day) as
follows:
(i) firstly, in retention by the Lessor of an amount equal
to one per cent. (1.0%) of the amount by which such
Proceeds of Sale exceed the applicable Termination
Payment; and
(ii) secondly, the Lessor shall pay an amount equal to the
balance, if any, of such money to the Lessee by way of
rebate of Rent.
21. TERMINATION PROVISIONS
21.1 TERMINATION EVENTS
The Lessor and the Lessee agree that it is a fundamental term
and condition of this Agreement that none of the following
events shall occur at any time after the date of this
Agreement, and that the occurrence of any of the following
events shall constitute a repudiation of this Agreement by the
Lessee:
(a) the Lessee, the Guarantor or any Additional Security
Provider who is a member of the Guarantor's Group fails
to pay any amount due to the Lessor under this
Agreement or any other Relevant Lease Document which
constitutes a Remaining Obligation on the due date and
such default is not remedied within three (3) Business
Days after the Lessee or the Guarantor or such
Additional Security Provider is notified by the Lessor
of such non-payment; or
(b) the Lessee fails to obtain and/or maintain or procure
that there are obtained and maintained the Insurances
or if any insurer in respect of any of such Insurances
cancels any of such Insurances or disclaims liability
by reason, in either case, of mis-statement in any
proposal for any of such Insurances or for any other
failure or default on the part of any person (other
than the Lessor) PROVIDED THAT it shall not be a
Termination Event under this Clause 21.1(b) if such
Insurances are Hull Insurances and the Lessor arranges
for such Hull Insurances to be reinstated within ten
(10) Business Days of the date of such failure or, as
the case may be, the date of such cancellation or
disclaiming of liability; or
(c) the Lessee, the Guarantor or any Additional Security
Provider who is a member of the Guarantor's Group fails
to observe or perform any of its obligations under any
Relevant Lease Document to which it is party (other
than an obligation referred to in paragraph 21.1(a) or
21.1(b) above or Clause 21.1(l) or 21.1(m) or 21.1(n)
or 21.1(o) below or any obligation which is an Excluded
Obligation) and does not remedy the failure within
thirty (30) days of receipt by the Lessee or, as the
case may be, the Guarantor of a notice from the Lessor
notifying the Lessee or, as the case may be, the
Guarantor of the relevant failure and requiring the
failure to be remedied; or
(d) an Insolvency Event occurs in relation to the Lessee
or the Guarantor or any Additional Security Provider which
is a member of the Guarantor's Group; or
(e) the Lessee or the Guarantor suspends or ceases or
makes a public announcement or otherwise threatens in writing
to suspend or cease to carry on its business; or
(f) any Financial Indebtedness of the Guarantor or any
Material Subsidiary (US) of the Guarantor in an amount
of at least twenty-five million Dollars ($25,000,000)
(or its equivalent in another currency) is declared due
and payable before its stated maturity; or
(g) any representation or warranty made by the Lessee or
the Guarantor in any Relevant Lease Document or, in
each case, in any certificate, opinion or statement
delivered or made by the Lessee or the Guarantor (or
any officer of such person in each case) pursuant
thereto proves to have been incorrect or inaccurate in
a material respect when made or when deemed to be
repeated pursuant to the terms of the relevant Relevant
Lease Document and such action as is necessary such
that if the relevant representation or warranty was
made or given thereafter it would then be correct and
accurate has not been taken within thirty (30) days of
receipt by the Lessee or, as the case may be, the
Guarantor of a notice from the Lessor notifying the
Lessee or, as the case may be, the Guarantor of such
incorrection or inaccuracy; or
(h) any obligation of any member of the Guarantor's Group
under a Relevant Lease Document ceases to be a legal,
valid and binding obligation in accordance with its
terms and, where such illegality, invalidity or
unenforceability is capable of cure, the same has not
been cured within fourteen (14) days of receipt by the
Lessee of a notice from the Lessor notifying the Lessee
of such illegality, invalidity or unenforceability and
requiring the same to be cured; or
(i) any licence, authorisation, permit, consent or
approval of, or registration with or declaration to,
governmental or public bodies or authorities or courts
required in connection with the use and operation of
the Vessel or to authorise any member of the
Guarantor's Group to enter into any of the Relevant
Lease Documents or the Sub-Lease or required in
connection with the validity, enforceability or
admissibility in evidence of any of the Relevant Lease
Documents or the Sub-Lease is modified, not granted,
revoked, suspended, terminated or expires or is not
renewed or otherwise ceases to be in full force and
effect in each case the effect of which would be to
have a material adverse effect on the ability of any of
the parties to the Relevant Lease Documents to perform,
or to continue to perform, any of their respective
obligations under the Relevant Lease Documents; or
(j) intentionally omitted; or
(k) the Lessee (other than as the Lessor's sales agent
within the scope of its authority under Clause 19.2),
the Sub-Lessee or a Service Contractor shall sell,
mortgage or execute a bill of sale affecting the Vessel
or any interest therein or any part thereof or agree or
endeavour to create any Lien (other than a Permitted
Lien) over the Vessel or any interest therein; or
(l) the Lessee shall fail to comply with its obligations
under Clause 22.3 to provide the Additional Security or
voluntarily to terminate the leasing or, as the case
may be, the obligation to lease the Vessel pursuant to
Clause 21.4; or
(m) the Lessee shall fail to comply with its obligations
under Clause 22.6(C) within the time stated in that
Clause; or
(n) the Vessel is operating in a jurisdiction in respect of
which the circumstances described in Clause
9.1(a)(ii)(z) apply and the Lessee has failed to
increase the amount of oil pollution liability
insurance with respect to the Vessel in the amount
required under Clause 9.1(a)(ii)(z) within the time
required under Clause 9.1(b); or
(o) at any time during the requisite period (as defined
in section 40 CAA 1990) circumstances occur with respect
to the Vessel which result in the application of any of
sections 42, 43, 44 and 46 CAA 1990 (including for the
avoidance of doubt, where the leasing of or, as the
case may be, the obligation to lease the Vessel under
any Sub-Lease shall terminate for any reason whatsoever
(other than after the end of the requisite period (as
defined in section 40 CAA 1990)) in circumstances where
such Sub-Lease is not replaced, prior to such
termination, with a replacement Sub-Lease to a
Sub-Lessee that will not result in the application of
any of sections 42, 43, 44 and 46 CAA 1990).
21.2 INTENTIONALLY OMITTED
21.3 TERMINATION BY LESSOR
The Lessee acknowledges and agrees that the occurrence of a
Termination Event shall go to the root of this Agreement and
accordingly shall be a breach of a condition which the Lessor
shall be entitled to treat as a repudiation by the Lessee of
this Agreement and the Lessor shall be entitled to give a
notice ("TERMINATION NOTICE") to the Lessee to terminate the
leasing of the Vessel and, subject to Clause 21.7, the
Lessor's consent to the Lessee's possession of the Vessel or,
if Delivery has not occurred, to terminate the obligation of
the Lessor to take delivery of and lease the Vessel to the
Lessee.
21.4 MANDATORY VOLUNTARY TERMINATION
(A) If any of the circumstances referred to in clause 3.2
of the Put Option Deed have occurred and notice is
given under clause 3 of the Put Option Deed prior to
Delivery then (a) the Lessor shall promptly notify the
Lessee thereof in writing, (b) the Lessee, upon
receiving such notification, shall serve a notice in
writing upon the Lessor (which notice, subject to item
(c) below, shall be irrevocable once given) to
terminate the Lessor's obligation to deliver and lease
the Vessel to the Lessee hereunder, such notice to
expire ten (10) days after it is given (or if such
tenth day is not a Business Day, on the next succeeding
Business Day) and (c) provided no Termination Notice
shall have been given prior to the expiry of the
Lessee's notice described in item (b) above (in which
event such notice given by the Lessee shall be deemed
to have been withdrawn and cancelled and the provisions
of Clause 21.7 shall apply), on the date of the expiry
of such notice given by the Lessee the obligation of
the Lessor to deliver and to lease the Vessel to the
Lessee shall terminate.
(B) If:
(i) no entity proposed by the Lessor pursuant to
clause 5.5 of either Payment Agreement as the
"Replacement Payment Bank" is acceptable to the
Lessee or the relevant Payment Bank; or
(ii) no entity proposed by the Lessee in exercise of
its rights under Clause 5.2(d) as the
"Replacement Payment Bank" under the relevant
Payment Agreement is acceptable to the Lessor,
and
(x) neither the relevant Payment Bank nor
the Lessor has exercised its rights
pursuant to clause 5.1, 5.2, 5.3, 5.5 or
5.6 of the relevant Payment Agreement to
make the payment described in clause 5.7
of the relevant Payment Agreement to the
Lessor or at its direction; and
(y) the Lessee has not exercised its
rights under Clause 5.2(d) to require the
Lessor to exercise its rights pursuant
to clause 5.6 of the relevant Payment
Agreement to make the payment described
in clause 5.7 of the relevant Payment
Agreement to the Lessor or at its
direction or has not revoked its request
to the Lessor under Clause 5.2(d)(ii)
requiring the Lessor to exercise its
rights pursuant to clause 5.6 of the
relevant Payment Agreement to make the
payment described in clause 5.7 of the
relevant Payment Agreement to a
Replacement Payment Bank.
then (a) the Lessor shall promptly notify the
Lessee thereof in writing, (b) the Lessee, upon receiving such
notification, shall serve a notice in writing upon the
Lessor (which notice, subject to item (c) below, shall
be irrevocable once given) to terminate the Lessor's
obligation to deliver and lease the Vessel to the
Lessee hereunder or, if Delivery has occurred, the
leasing of the Vessel to the Lessee hereunder, such
notice to expire three (3) Business Days after it is
given and (c) provided no Termination Notice shall have
been given prior to the expiry of the Lessee's notice
described in item (b) above (in which event such notice
given by the Lessee shall be deemed to have been
withdrawn and cancelled and the provisions of Clause
21.7 shall apply), on the date of the expiry of such
notice given by the Lessee the obligation of the Lessor
to deliver and lease the Vessel to the Lessee hereunder
or, if Delivery has occurred, to lease the Vessel to
the Lessee, shall terminate.
(C) If the Lessor has served an Acceleration Notice on the
Lessee, then (a) the Lessee, upon receiving the
Acceleration Notice, shall serve a notice in writing
upon the Lessor (which notice, subject to item (b)
below, shall be irrevocable once given) to terminate
the leasing of the Vessel to the Lessee hereunder, such
notice to expire fifteen (15) days after it is given
and (b) provided no Termination Notice shall have been
given prior to the expiry of the Lessee's notice
described in item (a) above (in which event such notice
given by the Lessee shall be deemed to have been
withdrawn and cancelled and the provisions of Clause
21.7 shall apply), on the date of the expiry of such
notice given by the Lessee the obligation of the Lessor
to lease the Vessel to the Lessee shall terminate.
(D) If any obligation of any party to a Relevant Lease
Document ceases to be a legal, valid and binding
obligation in accordance with its terms (except where
the party in question is (a) a member of the
Guarantor's Group, (b) the Deposit Bank or a Payment
Bank or the Lessor and the same would not have arisen
but for, and only but for, the occurrence of an
Insolvency Event in relation to the Deposit Bank or
that Payment Bank or the Lessor or (c) is a Replacement
Deposit Bank and the same would not have arisen but
for, and only but for, the Deposit Bank being a
Replacement Deposit Bank and such illegality,
invalidity or unenforceability would not have been
caused or would not have arisen had the Deposit Bank
been the Bank) and, where such illegality, invalidity
or unenforceability is capable of cure, the same has
not been cured within fourteen (14) days of receipt by
the Lessee of a notice from the Lessor notifying the
Lessee of such illegality, invalidity or
unenforceability and requiring the same to be cured
then (i) the Lessor shall promptly notify the Lessee
thereof in writing, (ii) the Lessee, upon receiving
such notification, shall immediately serve a notice in
writing upon the Lessor (which notice, subject to item
(iii) below, shall be irrevocable once given) to
terminate the Lessor's obligation to deliver and lease
the Vessel to the Lessee hereunder, such notice on the
day it is given and (iii) provided no Termination
Notice shall have been given prior to the expiry of the
Lessee's notice described in item (ii) above (in which
event such notice given by the Lessee shall be deemed
to have been withdrawn and cancelled and the provisions
of Clause 21.7 shall apply), on the date of the expiry
of such notice given by the Lessee the obligation of
the Lessor to deliver and to lease the Vessel to the
Lessee shall terminate.
(E) Any licence, authorisation, permit, consent or
approval of, or registration with or declaration to,
governmental or public bodies or authorities or courts
required in connection with the use and operation of
the Vessel or to authorise any of the parties to the
Relevant Lease Documents (other than the Lessor, the
Deposit Bank and any member of the Guarantor's Group)
or the Sub-Lessee to enter into any of the Relevant
Lease Documents or the Sub-Lease or required in
connection with the validity, enforceability or
admissibility in evidence of any of the Relevant Lease
Documents or the Sub-Lease is modified, not granted,
revoked, suspended, terminated or expires or is not
renewed or otherwise ceases to be in full force and
effect in each case the effect of which would be to
have a material adverse effect on the ability of any of
the parties to the Relevant Lease Documents to perform,
or to continue to perform, any of their respective
obligations under the Relevant Lease Documents, then
(a) the Lessor shall promptly notify the Lessee thereof
in writing, (b) the Lessee, upon receiving such
notification shall immediately serve a notice in
writing upon the Lessor (which notice, subject to item
(c) below, shall be irrevocable once given) to
terminate the Lessor's obligation to deliver and lease
the Vessel to the Lessee hereunder, such notice to
expire on the day it is given and (c) provided no
Termination Notice shall have been given prior to the
expiry of the Lessee's notice described in item (b)
above (in which event such notice given by the Lessee
shall be deemed to have been withdrawn and cancelled
and the provisions of Clause 21.7 shall apply), on the
date of the expiry of such notice given by the Lessee
the obligation of the Lessor to deliver and to lease
the Vessel to the Lessee shall terminate.
(F) Upon any termination of the leasing of the Vessel
pursuant to Clause 6.3, 21.4(B), 21.4(C), 21.4(D) or
21.4(E) the Lessee shall redeliver the Vessel to the
Lessor at the Redelivery Location within ninety (90)
days of the date of such termination (unless or until
the circumstances described in Clause 21.7(a)(ii) (x)
and/or (y) occur, in which case the Lessee shall
redeliver the Vessel to the Lessor forthwith at the
Redelivery Location) and otherwise in accordance with
Clause 19.1 and shall arrange a sale of the Vessel
pursuant to its rights in Clause 19.2 (Sale of the
Vessel) in accordance with the provisions of Clause
19.2 as soon as possible after such termination.
21.5 PAYMENTS ON TERMINATION
(a) On the Termination Payment Date the Lessee shall pay
to the Lessor an amount equal to the Termination Payment,
calculated as at the Termination Payment Date, except
as otherwise specifically provided in the Financial
Schedule.
(b) For the avoidance of doubt, the Lessee shall, except
as expressly otherwise stated in the Relevant Lease
Documents with respect to any Primary Period Rent or
any Secondary Period Rent which falls due on or after
the Termination Payment Date, continue to be liable to
the Lessor to pay all other sums due or to become due
under the Relevant Lease Documents (including, without
limitation, Broken Funding Costs) as and when the same
become due and payable in accordance with the Relevant
Lease Documents.
(c) The payment required from the Lessee pursuant to
Clause 21.5(a) shall, in the case of a notice given by the
Lessor pursuant to Clause 21.3, be by way of agreed
compensation for loss of bargain and, in all other
cases, shall be by way of a liquidated sum or debt.
Such payment shall be the exclusive monetary
compensation payable by the Lessee to the Lessor for
the termination of the leasing of the Vessel but shall
be without prejudice to:
(i) the Lessor's right to recover damages from
the Lessee in an amount up to (but not exceeding)
the Termination Payment in circumstances where
the Termination Payment itself is unenforceable
(in whole or in part) for any reason; and
(ii) the Lessor's right to recover payments from
the Lessee pursuant to other provisions of this
Agreement and the Financial Schedule which
expressly provide for the Lessee to make
payments to the Lessor, whether before or after
the Termination Date.
This Clause 21.5 is, for the avoidance of doubt,
expressly subject to the provisions of Clause 23.
21.6 OTHER OBLIGATIONS AND LIABILITIES
If the leasing of the Vessel or, as the case may be, the right
of the Lessee to take the Vessel on lease, is terminated
(otherwise than following a Total Loss, in which case Clause
10.1 (Total Loss) shall apply), the obligation of the Lessee
to pay Primary Period Rent or Secondary Period Rent which
would otherwise have fallen due on any Rent Payment Dates
which fall on or after the Termination Payment Date shall
cease but without prejudice to the obligations of the Lessee
to make payment of any other moneys then due and unpaid, or
which may become due or be ascertained thereafter (including
under the Financial Schedule and whether by way of additional
Rent or otherwise), or to perform any of its other
obligations, under any other provisions of this Agreement or
the other Relevant Lease Documents.
21.7 RIGHTS OF THE LESSOR
(a) The Lessor shall on and at any time following the
service of a Termination Notice be entitled to:
(i) proceed by appropriate court action or actions
to enforce performance of this Agreement or to
recover damages for the breach of this
Agreement PROVIDED THAT the Lessor shall not be
entitled to recover damages for loss of bargain
if the Termination Payment has been paid in
full to the extent the Termination Payment and
any interest on it constitutes a Remaining
Obligation; and/or
(ii) either:
(A) take possession of the Vessel, for which
purpose the Lessor may enter any
premises belonging to or in the
occupation of or under the control of
the Lessee or the Sub-Lessee or the
Service Contractor where the Vessel may
be located, or cause the Vessel to be
redelivered to the Lessor at the
Redelivery Location; or
(B) by serving notice require the Lessee to
redeliver the Vessel to the Lessor at
the Redelivery Location,
PROVIDED THAT the Lessor shall not be entitled
to exercise its rights under this Clause
21.7(ii) for a period of ninety (90) days
following its service of a Termination Notice
unless or until either:
(x) the Termination Event described
in Clause 21.1(b) has occurred
and is continuing with respect to
the Liability Insurances; and/or
(y) the Termination Event described
in Clause 21.1(d) has occurred
and is continuing with respect to
the Lessee.
For the avoidance of doubt, the Lessor shall not be
obliged to take possession of the Vessel under Clause
21.7(ii)(A) following a termination of the leasing of
the Vessel under this Agreement.
(b) Without prejudice to the obligations of the Lessee to
pay to the Lessor the Termination Payment in accordance
with Clause 21.5, following the service of a
Termination Notice the Lessee shall endeavour to sell
the Vessel as soon as possible in accordance with the
terms of Clause 19.2 (Sale of the Vessel).
22. SECURITY AND SECURITY REVIEW
22.1 THE GUARANTEE
The Lessor shall at all times during the Pre-Lease Period and
the Lease Period and for so long thereafter as the Lessee may
have any actual or contingent obligations or liabilities
hereunder or under any of the other Relevant Lease Documents
have the benefit of the Guarantee from the Guarantor.
22.2 GUARANTOR CREDIT EVENT OCCURRENCE
If a Guarantor Credit Event shall occur:
(a) the Lessee shall promptly notify the Lessor of such
occurrence. Within twenty-one (21) days of the date
(the "GUARANTOR CREDIT EVENT OCCURRENCE DATE"), upon
which a Guarantor Credit Event occurs the Lessee shall
provide Additional Security to the Lessor in accordance
with the provisions of Clause 22.3;
(b) the Strip Limits applying for all Calculation Periods
from and including the Guarantor Credit Event
Occurrence Date up to the subsequent Guarantor Credit
Event Cure Date will be zero PROVIDED THAT following
the occurrence of the third Guarantor Credit Event
Occurrence Date which occurs during the Lease Period,
the Strip Limits applying for all Calculation Periods
from and including such third Guarantor Credit Event
Occurrence Date will be, and will remain, zero; and
(c) on each of the first and second Guarantor Credit Event
Cure Date which occur during the Lease Period the Strip
Limit shall be the Revised Strip Limit and thereafter
the Strip Limits shall be calculated in accordance with
the provisions of this Agreement.
22.3 TERMINATION SHORTFALLS
The Lessee covenants with the Lessor that, prior to the
termination of the leasing of (or the right or obligation to
lease) the Vessel under this Agreement, within twenty-one (21)
days of the delivery by the Lessor to the Lessee of a New
Schedule 2 which shows a Termination Shortfall for any date
(including any Relevant Date), the Lessee shall:
(a) procure the provision to the Lessor of additional
security of a type from a person and upon terms
acceptable to the Lessor in its absolute discretion
such that the value of such additional security for
that date (being the value realised by the Lessor for
payment into the Second Account) will equal that
Termination Shortfall; or
(b) pay or cause to be paid into the Second Account an
amount in Sterling which is, at the date of payment,
the present value of that Termination Shortfall
calculated using a discount rate of LIBID for any
period for which, as at the date of calculation, LIBID
can be ascertained or a discount rate reflecting a
reasonable annual market rate for periods for which no
rate for LIBID can then be ascertained, with rests on
each Adjustment Date.
22.4 CASH SECURITY
If the Lessee has provided cash security under Clause 22.3(b),
the Lessee and the Lessor agree that they shall, without
obligation, discuss in good faith for a period not exceeding
thirty (30) days the possibility of substituting an
alternative form of Additional Security for such cash
security.
22.5 SUBSTITUTION OF NEW SCHEDULE 2 PARTS A, B AND C
The Lessor and the Lessee hereby agree that, subject to Clause
23.3, within twenty-eight (28) days (or such lesser period as
the Lessor shall determine) after any of:
(a) the first day of a Deposit Period (as defined in the
First Deposit Deed); or
(b) the determination by the Lessor that any of the
Assumptions or, as the case may be, the Termination
Assumptions shall not be correct, such that the
schedule 1 which then applies is incorrect; or
(c) a payment by either or both of the Payment Banks to the
Lessor pursuant to any of clause 5.1, 5.2, 5.3, 5.4,
5.5 or 5.6 of either or both of the Payment Agreements;
or
(d) the service by the Lessor of any written notice on
either Payment Bank pursuant to clause 5.5 or 5.6 of
the relevant Payment Agreement, whether or not the
relevant Payment Bank makes the payment required
pursuant to that notice; or
(e) the occurrence of any event which entitles any Provider
of Security to make any withholding or deduction on
account of Taxes or any illegality which relieves that
Provider of Security from making any payment under the
document or documents constituting or evidencing the
relevant security or Additional Security; or
(f) the provision of any Additional Security; or
(g) the occurrence of a Guarantor Credit Event or the
occurrence of the first and second Guarantor Credit
Cure Event to occur during the Lease Period; or
(h) the service by the Lessor of a Lessor Payment Notice
or an Interest Period Notice (as each such term is defined
in each Payment Agreement); or
(i) any other change which would, in the Lessor's opinion,
affect the calculations inherent in Schedule 2,
the Lessor shall produce a New Schedule 2 to this Agreement
which shall (save in the case of manifest error) be
substituted by the Lessor for the Schedule 2 which applied
immediately prior to such substitution. Each New Schedule 2
shall, until itself substituted, constitute Schedule 2 to this
Agreement and references to Schedule 2 in this Agreement shall
be construed accordingly.
22.6 RELEASE AND REPLACEMENT OF ADDITIONAL SECURITY
(A) The Lessor agrees that, prior to the termination of the
leasing of (or the right or obligation to lease) the Vessel
under this Agreement, within five (5) Business Days of the
delivery by the Lessor to the Lessee of a New Schedule 2 which
shows the Strip Limit for the Calculation Period in which the
date upon which such New Schedule 2 was produced by the Lessor
falls exceeding the Strip Amount for such Calculation Period,
then the Lessor shall, provided no Relevant Event has occurred
and is continuing, release and/or discharge all or any part of
the Additional Security selected by the Lessor with a value
(being the Value for such Additional Security if it were paid
into the Second Account) equal to the amount of such excess
and thereafter shall produce a New Schedule 2 to this
Agreement in respect of which the final paragraph of Clause
22.5 shall apply.
(B) If, following the occurrence of a Guarantor Credit Event, a
Guarantor Credit Cure Event occurs (the date upon which such
Guarantor Credit Cure Event occurs being the "GUARANTOR CREDIT
EVENT CURE DATE"), the Lessee shall promptly notify the Lessor
of such occurrence and within five (5) Business Days of such
notification the Lessor shall, provided no Relevant Event has
occurred and is continuing, release and/or discharge the
Additional Security provided by the Lessee under Clause
22.2(a) following the occurrence of such Guarantor Credit
Event PROVIDED THAT:
(i) the Lessor shall only be obliged to release and/or
discharge any Additional Security referred to above
following the occurrence of the first and second
Guarantor Credit Cure Events to occur during the Lease
Period and shall not be so obliged following the
occurrence of the third or any other Guarantor Credit
Cure Event which occurs during the Lease Period; and
(ii) the provisions of this Clause 22.6(B) are
without prejudice to the Lessor's subsequent and continuing
rights under Clause 22.2 to require the Lessee to provide
Additional Security on the dates specified in that Clause.
(C) If any of the following shall occur in relation to any
Additional Security Provider who is not a member of the
Guarantor's Group:
(i) any obligation of such Additional Security Provider
in any of the Additional Security Documents executed by
such Additional Security Provider ceases for any reason
(other than by reason of the occurrence of an
Insolvency Event in relation to such Additional
Security Provider) to constitute the legal, valid,
binding and enforceable obligation of such Additional
Security Provider; or
(ii) if such Additional Security Provider fails to pay
any amount due under any of the Additional Security
Documents executed by it and such failure is not
remedied within three (3) Business Days after such
Additional Security Provider is notified by the Lessor
of such non-payment; or
(iii) if such Additional Security Provider fails to
observe or perform any of its obligations (other than those
referred to in paragraph (ii) above) under any
Additional Security Documents executed by it and does
not remedy the failure within thirty (30) days of
receipt of a notice by the Lessor requiring such
failure to be remedied; or
(iv) if such Additional Security Provider ceases to be a
member of the group of which it was a member at the
time when it executed any Additional Security
Documents; or
(v) an Insolvency Event occurs in relation to any
Additional Security Provider who is not a member of the
Guarantor's Group,
then the Lessee shall, within twenty-one (21) days of being
notified by the Lessor of the occurrence of any of the above
events, provide the Lessor with further additional security to
replace the Additional Security provided by such Additional
Security Provider (the "REPLACED ADDITIONAL SECURITY") in form
and content acceptable to the Lessor and of a value
(calculated on the same basis under this Agreement as the
Value of the Replaced Additional Security) equal to the
Replaced Additional Security.
23. EXCLUDED OBLIGATIONS
23.1 EXCLUDED OBLIGATIONS
The parties hereto agree that the Lessee shall have no
obligation to make payment to the Lessor and accordingly the
Lessor shall have no right of recourse against the Lessee or
its assets (other than to either of the First Account or the
Second Account and any moneys to be released in accordance
with the Deposit Deeds standing to the credit of either of
such accounts) and the Lessee shall have no personal
liability:
(a) in respect of each instalment of Primary Period Rent,
to the extent of an amount (calculated for the due date
for payment of the relevant instalment) equal to the
aggregate of:
(i) the amount payable by each Payment Bank on the
date for payment of the relevant instalment
under clause 4.1 of each of the Payment
Agreements (ignoring for these purposes the
provisions of clauses 4.1, 4.6 and 5.7 of each
of the Payment Agreements entitling the
relevant Payment Bank to make any withholding
or deduction from such instalment) less the
aggregate of (A) the amount, if any, of any
withholding or deduction which the Payment
Banks are or will be entitled to make from such
amount payable under the Payment Agreements and
(B) any amount which, by virtue of invalidity,
illegality or unenforceability, either Payment
Bank is relieved from its obligation to make
payment on such date under the relevant Payment
Agreement (other than by virtue of any
invalidity, illegality or unenforceability
which would not have arisen but for, and only
but for, the occurrence of an Insolvency Event
in relation to the relevant Payment Bank); and
(ii) the amount deposited in the First Account
together with the amount of interest which has
accrued thereon in accordance with the First
Deposit Deed up to the date for payment of the
relevant instalment less the aggregate of (A)
the amount of any withholding or deduction
which the Deposit Bank is or will be entitled
to make from any payment from the First Account
under the terms of the First Deposit Deed and
(B) any amounts in the First Account in respect
of which there is at the date for payment of
the relevant instalment Restricted Access
(the "RENT LIMIT"); and
(b) in respect of the Termination Rent, to the extent
of an amount equal to the Value (calculated for the relevant
Termination Payment Date) of the Termination Security
then held by the Lessor (the "TERMINATION LIMIT"),
the obligations of the Lessee described in (a) and (b) above
being the ("EXCLUDED OBLIGATIONS"), provided that for the
purposes of Clause 23.1(b), (i) the Value of any Non-Deposit
Bank Cash Additional Security delivered to the Lessor shall be
disregarded unless, at the time the relevant Non-Deposit Bank
Cash Additional Security is provided to the Lessor, the Lessor
agrees that the Lessor shall have no right of recourse against
the Lessee or its assets, and the Lessor shall have no
personal liability, to the extent of the Value of that Non-
Deposit Bank Cash Additional Security and (ii) for the
avoidance of doubt, where it is illegal for any Provider of
Security to make payment to the Lessor of amounts which would
otherwise constitute Termination Security or the obligations
of that Provider of Security become unenforceable by the
Lessor by reason of illegality (other than by reason of any
illegality which would not have arisen but for, and only but
for, the occurrence of an Insolvency Event in relation to that
Provider of Security), the Value to be attributed to the
relevant security shall only be the amount of money actually
received and retained by the Lessor.
23.2 REMAINING OBLIGATIONS
Save insofar as the Lessor has agreed to relinquish its rights
against the Lessee or its assets under, or as referred to in,
Clause 23.1, the Lessor shall have full recourse against the
Lessee and its assets for all of the obligations of the Lessee
under the Relevant Lease Documents (but without prejudice to
Clause 29(B)). Accordingly and without limiting the
generality of the foregoing, to the extent that the amount of
any instalment of Primary Period Rent exceeds the Rent Limit
or the amount of any Termination Rent exceeds the Termination
Limit the Lessee shall be obliged to make payment of the
relevant excess in full and the Lessor shall have full
recourse to the Lessee and to its assets to the extent that
such payment is not made.
23.3 NOTICE OF RESTRICTED ACCESS
The Lessor shall, upon becoming aware of the same, give
written notice to the Lessee that there is Restricted Access
to the moneys standing to the credit of either of the First
Account or the Second Account and the Lessor shall take no
action (other than the delivery of any relevant notices or
demands) against the Lessee or its assets (other than the
moneys standing to the credit of the First Account or the
Second Account) for a period (the "MORATORIUM") of ten (10)
Business Days thereafter to recover any amounts which are
subject to such Restricted Access and shall not produce a New
Schedule 2 to this Agreement during the Moratorium. If during
the Moratorium the Lessee (at its own cost and expense)
obtains and delivers to the Lessor a written opinion from
English legal counsel (such counsel being reasonably
acceptable to the Lessor) that there is a reasonable prospect
of successfully obtaining an order of the High Court in London
to effect a release of the moneys which are subject to such
Restricted Access, the Moratorium shall be extended for a
further period of ten (10) Business Days, but, subject to the
further provisions of this Clause 23.3, will then end. If
during the Moratorium there ceases to be Restricted Access to
the relevant moneys, sub-paragraph (cc) of paragraph (b) of
the definition of "VALUE" and sub-paragraph (B) of Clause
23.1(a)(ii) shall cease to apply thereto.
23.4 APPLICATION TO HIGH COURT
If counsel's opinion as specified in Clause 23.3 is obtained
and delivered to the Lessor within the time specified, the
Lessor shall, upon its being indemnified to its satisfaction
against any costs, expenses, losses and liabilities which may
be suffered or incurred by the Lessor so doing, give to the
Lessee such assistance as may be reasonably requested for the
purpose of making an application to the High Court in London
or an order as contemplated in Clause 23.3, including (if the
Lessor so agrees in its absolute discretion) the use of the
Lessor's name in making such application.
24. CHANGE OF CIRCUMSTANCES ETC.
24.1 CHANGE OF CIRCUMSTANCES
This Clause 24.1 applies, otherwise than where a payment is
made in respect of the effect of a Change of Law in accordance
with the provisions of the Financial Schedule, if at any time
the Lessor shall be of the opinion that the effect of a Change
of Law (excluding any introduction or change that relates to
the Taxation of the Lessor or any member of the Lessor's
Group, but including, without limitation, any such change that
relates to the application or modification of any reserve,
deposit, cash ratio, liquidity or similar requirement or to
capital adequacy or that affects the manner in which or the
extent to which the Lessor or any Relevant Member allocates
capital resources to its obligations or to any other form of
banking or monetary controls) is that:
(a) the Lessor or a Relevant Member incurs a cost or an
additional cost as a result of the Lessor having
entered into or assuming, performing, maintaining or
funding its obligations under or pursuant to any of
this Agreement or the other Relevant Lease Documents;
or
(b) the Lessor or a Relevant Member incurs a cost or an
additional cost in making payment of, funding or
maintaining all or any amounts of Balance, or all or
any commitments or obligations under or pursuant to any
of this Agreement or the other Relevant Lease
Documents; or
(c) any amount payable to the Lessor or a Relevant Member
or the effective return to the Lessor or a Relevant
Member under or pursuant to any of this Agreement or
the other Relevant Lease Documents or on all or any of
its capital is reduced; or
(d) the Lessor or a Relevant Member makes any payment or
foregoes any interest or other return on or calculated
by reference to any amount received or receivable by it
under or pursuant to any of this Agreement or the other
Relevant Lease Documents.
24.2 DEMANDS BY LESSOR
If Clause 24.1 applies, then the Lessor may serve one or more
demands on the Lessee, notifying the Lessee of the relevant
event as and when the same shall occur and reasonable details
of the basis of the calculation of the amount referred to in
Clause 24.3 provided that the Lessor shall not be entitled to
serve any demand in respect of a Change of Law which arises as
a consequence of (or of any law or regulation implementing)
(a) the proposals for international convergence of capital
measurement and capital standards published by the Basle
Committee on Banking Regulations and Supervisory Practices in
July 1988 and/or (b) any applicable directive of the European
Union (in each case) unless it results from any change in such
proposals or any such applicable directive (or any law or
regulation implementing the same) occurring or change in the
official interpretation or application thereof after the date
hereof. For the purposes of this Clause 24.2 the term
"APPLICABLE DIRECTIVE" means (exclusively) each of the Own
Funds Directive (89/299/EEC of 17th April 1989) and the
Solvency Ratio Directive (89/647/EEC of 18th December, 1989).
24.3 PAYMENT BY THE LESSEE
Promptly following the service of any demand, the Lessee shall
pay to the Lessor such amount as the Lessor determines and
certifies in the demand will compensate it or a Relevant
Member for the applicable increased cost and in relation to
the period expressed to be covered by such demand.
24.4 MEANING OF "INCREASED COST"
In this Clause 24 "INCREASED COST" means the aggregate of:
(a) the cost or additional cost incurred referred to in
Clause 24.1 (a); and/or
(b) the cost or additional cost incurred referred to in
Clause 24.1 (b) that is attributable to the Lessor or
the Relevant Member in making payment of, funding or
maintaining all or any amounts of Balance, or all or
any commitments or obligations under or pursuant to any
of this Agreement or the other Relevant Lease
Documents; and/or
(c) the reduction in the amount payable or in the return
referred to in Clause 24.1 (c); and/or
(d) the payment or foregone interest or return referred
to in Clause 24.1(d) as appropriate;
PROVIDED THAT an increased cost does not include:
(i) any increased cost compensated for by the
payment of PLA Costs;
(ii) any Tax Liability; and
(iii) any Risk Asset Weighting.
24.5 METHOD OF CALCULATION
When calculating an increased cost, the Lessor may allocate or
spread costs, liabilities and losses to or across the
liabilities or assets of itself or members of the Lessor's
Group, or any class of such liabilities or assets, and on such
basis, as it considers appropriate. A certificate under hand
of an officer of the Lessor specifying the amount of such
compensation shall in the absence of manifest error be
conclusive. Nothing contained in this Clause shall oblige the
Lessor to disclose any information relating to the way in
which it and members of the Lessor's Group employ their
capital or arrange their internal financial affairs.
25. GENERAL INDEMNITY
25.1 GENERAL INDEMNITY
(a) The Lessee hereby agrees at all times to pay promptly or, as
the case may be, indemnify and hold the Lessor and each member
of the Lessor's Group and their respective officers,
directors, secondees, agents and employees (together the
"INDEMNIFIED PERSONS") harmless on a full indemnity basis from
and against each and every liability, loss, charge, claim,
demand, action, proceeding, damage, judgment, order or other
sanction, enforcement, penalty, fine, fee, commission,
interest, Lien, salvage, general average cost and expense of
whatsoever nature suffered or incurred by or imposed on any
Indemnified Person (together "LOSSES"):
(i) arising directly or indirectly out of or in any way
connected with the purchase, manufacture, ownership,
possession, performance, transportation, management,
sale, import to or export from any jurisdiction,
control, use or operation, registration, navigation,
certification, classification, management, manning,
provisioning, the provision of bunkers and lubricating
oils, testing, design, condition, delivery to or by the
Lessor, acceptance, leasing, sub-leasing, insurance,
maintenance, repair, service, modification,
refurbishment, drydocking, survey (save for survey
costs expressly stated in this Agreement to be payable
by the Lessor), conversion, overhaul, replacement,
removal, repossession, return, redelivery, sale or
disposal by the Lessee or any other person of the
Vessel, whether or not such Liability may be
attributable to any defect in the Vessel or to the
design, construction or use thereof or from any
maintenance, service, repair, drydocking, overhaul,
inspection or to any other reason whatsoever (whether
similar to any of the foregoing or not), and regardless
of when the same shall arise (whether prior to, during
or after termination of the leasing of the Vessel under
this Agreement) and whether or not the Vessel (or any
part thereof) is in the possession or control of the
Lessee or the Sub-Lessee or a Service Contractor or any
other person and whether or not the same is in the
United Kingdom waters or abroad;
(ii) as a consequence of any claim that any design,
article or material in the Vessel or any part thereof or
relating thereto or the operation or use thereof
constitutes an infringement of patent, copyright,
design or other proprietary right;
(iii) in preventing or attempting to prevent the arrest,
seizure, taking in execution, requisition, impounding,
forfeiture or detention of the Vessel or in securing or
attempting to secure the release of the Vessel in each
case following the breach by the Lessee of its
obligations under Clause 12.17 (unless the Lessor was
required to take such action either under any
applicable law or in order to avoid paying any penalty
or fine);
(iv) as a consequence (direct or indirect) of the breach
by any person (other than the Lessor) of any of their
respective obligations under any of the Lease Documents
or of any of the warranties and representations on the
part of any person (other than the Lessor) made in this
Agreement or in any of the other Lease Documents being
untrue or inaccurate in any respect whatsoever (even if
not a Termination Event or a Relevant Event) when made;
(v) any costs and expenses reasonably incurred by the
Lessor or, following the occurrence of a Termination
Event, any costs and expenses incurred by the Lessor,
in each case in connection with the sale or Total Loss
of the Vessel (including, without limitation, broker's
commissions, redelivery costs (if any), marketing
expenses, legal costs, storage, insurance, registration
fees and any other expenses of the Lessor incurred
pending the sale or disposal of the Vessel or otherwise
in connection with the sale or disposal of the Vessel);
(vi) any costs, expenses, damages, liabilities, penalties,
fees and other outgoing expended, incurred or suffered
by the relevant Indemnified Person in connection with:
(A) the arrest, seizure, taking into custody or
other detention by any court or other tribunal
or by any Government Entity (other than by
reason of a Lessor's Lien); or
(B) the subjection to distress by reason of any
process, claim, the exercise of any rights
conferred by a Lien (other than Lessor's Liens)
or by any other action whatsoever,
of any vessel owned or hired or leased by any
member of the Lessor's Group or which any member of the Lessor's
Group has agreed to purchase pursuant to a conditional
sale agreement, which are expended, suffered or
incurred as a result of or in connection with any claim
or alleged claim against, or liability or alleged
liability of, any member of the Guarantor's Group
together with any costs and expenses or other outgoings
which may be paid or incurred by any member of the
Lessor's Group in releasing such vessel from any such
arrest, seizure, custody, detention or distress, which
shall be deemed to include, in the event that such
release is secured by the provision by any member of
the Lessor's Group of any guarantee or bond or other
security (including a cash deposit):
(1) any fee paid to any third party for the issue
of any such guarantee or bond; or
(2) if such guarantee or bond is issued by a member
of the Lessor's Group, an amount equal to the
fee which the Lessor certifies would have been
charged by such member of the Lessor's Group to
the Lessee had the Lessee requested the issue
in favour of a third party of a guarantee or
bond in an equivalent maximum principal amount
of the same currency; or
(3) in the case of a cash deposit, interest on the
amount of such deposit (less any interest
actually received by the Lessor thereon, but
after adding back the amount of any Tax
Liability in respect of such interest) for the
period from (and including the date on which
such deposit is provided to (but excluding) the
earlier of (a) the date upon which the Lessee
either pays to the Lessor or, as the Lessor may
require, ensures that there is credited to an
account with the Deposit Bank and charged in
favour of the Lessor upon terms acceptable to
the Lessor an amount equal to such deposit in
substitution or security therefor and (b) the
date of the release of such deposit at the rate
per annum which is the aggregate of the cost to
the Lessor or the applicable Relevant Member of
funding such deposit in the relevant currency
plus two per cent (2%); or
(4) in the case of any other security, the cost to
the Lessor or the applicable Relevant Member in
providing such security;
(vii) if the Vessel becomes a wreck or obstruction to
navigation, against all losses, costs, damages and
expenses which such Indemnified Person may in
consequence thereof incur, including in respect of the
removal or destruction of the wreck or obstruction
under statutory or other powers,
other than a Tax Liability or any amount in respect of which
the Indemnified Person is entitled to be indemnified pursuant
to Clause 26.1 (General Tax indemnity) or would, but for an
exception contained in Clause 26.2 (Restriction on General Tax
indemnity), be so indemnified (each of the above other than a
Tax Liability being referred to as a "LIABILITY").
(b) Without prejudice to the generality of the provisions of
Clause 25.1(a), Clause 25.1 (a) shall extend to claims of
persons (including governments or other bodies whether
corporate or otherwise) who have incurred expenditure in
taking preventative measures against loss or damage or have
suffered or allege that they have suffered loss, damage or
injury in connection with anything done or omitted to be done
by any person in relation to, in respect of, or in connection
with, the Vessel, including in connection with any oil or
other substance emanating or threatening to emanate from the
Vessel and shall extend to levies, impositions, calls or
contributions on, or required to be made by, the Lessor during
or in respect of the period commencing on the Delivery Date
and terminating on a sale of the Vessel following the
termination or expiration of the leasing of the Vessel
hereunder.
(c) The indemnities contained in Clause 25.1(a) shall extend to
include:
(i) the Sterling cost (including fees and commissions) to
the Indemnified Person in acquiring any currency (other
than Sterling) with Sterling in order to satisfy or
discharge in a currency other than Sterling any
Liability;
(ii) all costs of interest, fees and other amounts
whatsoever suffered or incurred by any Indemnified
Person in order to fund the satisfaction or discharge
of any Liability; and
(iii) each Loss suffered or incurred by the Lessor in
satisfying or discharging, or indemnifying any
Indemnified Person (other than itself) against, any
Liability, or any matter referred to in (i) or (ii)
above, whether or not such Liability is suffered or
incurred by the Lessor under any formal or informal
arrangement, and whether or not any such formal or
informal arrangement existed at the time the Liability
was suffered or incurred by such Indemnified Person.
25.2 EXCLUSIONS FROM GENERAL INDEMNITY
The indemnities contained in Clauses 25.1(a) and 25.1(b) shall
not extend to any Liability:
(a) to the extent that such Liability is caused by any act
of an Indemnified Person which constitutes the wilful
misconduct of or recklessness by such Indemnified
Person;
(b) to the extent that such Liability is caused by any
failure on the part of the Lessor to comply with any of
its express and specific obligations under any of the
Relevant Lease Documents to which the Lessor is party;
(c) to the extent that such Liability constitutes the
Lessor's Cost or any part thereof;
(d) to the extent that such Liability constitutes a cost
which is expressly to be borne by the Lessor under any
other provision of this Agreement, the Shipbuilding
Contract or the Construction Supervision Agreement and
which the Lessee establishes was not intended to be
within the scope of the indemnities granted in favour
of the Lessor or any other member of the Lessor's Group
in any Relevant Lease Document;
(e) in respect of which the Lessor is expressly and
specifically indemnified under any other provision of
this Agreement; and
(f) any Liability which is caused solely by a failure of
any Provider of Security (other than any Additional
Security Provider who is a member of the Guarantor's
Group) to comply with any obligation on its part under
any Relevant Lease Document to which it is party.
25.3 NOTIFICATION OF INDEMNITY CLAIMS
Without prejudice to the provisions of this Clause 25 and
without limiting in any way whatsoever, or being a condition
precedent or subsequent to, the indemnities in favour of any
Indemnified Person hereunder or prompt payment thereunder, the
Lessor shall:
(a) notify the Lessee in writing as soon as practicable
after receipt by the Lessor of notice of a Liability
(provided such notice is in writing). Such
notification to the Lessee from the Lessor shall give
such details as the Lessor then has and which are in
all the circumstances reasonable having regard to the
contents of the notice of a Liability received by the
Lessor; and
(b) where reasonably practicable notify the Lessee of
the Lessor's intention to pay or procure the payment of any
moneys in respect of any such Liability before any such
payment is made, provided that interest on any moneys
payable to the Lessor or any Indemnified Person under
Clause 25.1 in respect of such Liability shall only
accrue at LIBOR (or, in relation to any currency other
than Sterling, the Lessor's funding cost in that other
currency) from the date on which the Lessor or that
Indemnified Person incurs that Liability, until such
time as the Lessor notifies the Lessee of that
Liability, whereafter interest will accrue at the
Default Rate until reimbursed in full under Clause
25.1.
25.4 DEFENCE OF CLAIMS
Without prejudice to the provisions of this Clause 25, the
Lessee shall (subject to having first obtained the consent of
the relevant insurers, if any, and complying in all respects
with its obligations under this Agreement) be entitled to take
(at its own cost) such actions as the Lessee reasonably deems
fit to defend or avoid any liability arising in respect of a
Liability or to take such action against any third party in
respect of a Liability and shall be entitled if so agreed by
the Lessor (which agreement the Lessor shall be at full
liberty to withhold) in writing to take such action in the
name of the Lessor, but subject always to the Lessor first
being indemnified to its satisfaction by the Lessee against
all potential losses, costs, damages and expenses.
25.5 RECOVERIES FROM THIRD PARTIES
If any Indemnified Person shall recover from or be paid by,
any person (other than the Lessee, the Sub-Lessee, a Service
Contractor or out of any security constituted by any of the
Relevant Lease Documents) any amount (other than under Clause
26) in respect of any payments paid or discharged by the
Lessee in accordance with this Clause 25, then provided that
the Lessor has received payment of such amount and is
satisfied that such amount is unconditionally available for
retention by the Lessor, the Lessor shall pay to the Lessee a
sum equal to the value of such recovered or paid amount
together with any interest actually earned on such recovered
or paid amount (less the amount of any Tax Liability thereon),
such payment by the Lessor to be subject always to the
provisions of Clause 26.
25.6 OTHER INDEMNITIES
Each of the indemnities contained in this Clause 25 or
otherwise contained in this Agreement or in any other of the
Lease Documents is in addition to, and not in substitution
for, and shall not be affected or prejudiced by, any other
security, guarantee or indemnity (including the other
indemnities aforesaid) now or hereafter held by the Lessor.
25.7 PASS THROUGH OF INDEMNITY BENEFITS
Where in this Clause 25 or in Clause 26 below an indemnity is
expressed to be for the benefit of any person who is not a
party to this Agreement the Lessor shall be entitled to
indemnify such person on the same terms (and subject in
particular to Clause 25.4) mutatis mutandis as the indemnities
expressed to be for the benefit of such person in this Clause
25 and the Lessee shall indemnify the Lessor and hold the
Lessor harmless on a full indemnity basis from and against
each amount paid or payable by the Lessor to such person under
any such indemnity.
25.8 WAIVER OF RIGHTS
The Lessee further agrees and does hereby agree, without
prejudice to the express provisions of this Agreement, to
waive any rights as against the Lessor that the Lessee may
have under the 1976 Convention on the Limitation of Liability
for Maritime Claims (as most recently enacted in the United
Kingdom pursuant to the Merchant Shipping Act 1995) to limit
or reduce any amount that the Lessee is or may be obliged to
pay.
25.9 MITIGATION
If circumstances arise in respect of the Lessor which would,
or would upon the giving of notice, result in the Lessee being
obliged to pay to the Lessor additional amounts pursuant to
Clause 26.3(b) (Payments and Taxes), then, without in any way
limiting, reducing or otherwise qualifying the obligations of
the Lessee under Clause 26.3(b), the Lessor agrees that it
will, for a period not exceeding thirty (30) days consult with
the Lessee in good faith with the intention of determining
whether it is possible to mitigate the effects of such
circumstances, provided that any costs incurred by the Lessor
in connection with such consultation or mitigation shall be
reimbursed on demand by the Lessee and further that the Lessor
shall be under no obligation to take any action and in
particular, without limiting the generality of the foregoing
words, the Lessor shall be under no obligation to take any
action which might have an adverse effect upon its business,
operations or financial condition or the management of its Tax
affairs.
26. GENERAL TAX INDEMNITY AND OTHER TAX PROVISIONS
26.1 GENERAL TAX INDEMNITY AND PAYMENT OF CERTAIN OUTGOINGS
the Lessee shall pay and discharge or cause to be paid and
discharged, as soon as the same arise or become payable (and
shall, if requested by the Lessor, produce to the Lessor
evidence of the payment and discharge thereof) and indemnify
the Lessor and other members of the Lessor's Group and keep
the Lessor and other members of the Lessor's Group fully
indemnified against:
(a) any Tax Liabilities; and
(b) any licence duties, registration, recording, titling
or filing fees, charges or levies and any interest or
penalties payable in connection with any of the same;
which arise or become payable at any time in respect of, in
consequence of or by reference to:
(i) the Vessel (or any part thereof) or any interest
therein; or
(ii) any document, payment, matter, circumstance or
transaction entered into, made or occurring pursuant
to, contemplated by or in accordance with this
Agreement or by any of the other Lease Documents
including (without limitation) the agreement to
purchase, ownership, delivery to or by the Lessor,
leasing, use, possession, operation, import, export,
return, storage, maintenance, protection, sale,
attempted sale or other disposition of the Vessel (or
any part thereof) or any interest therein;
or which arise or become payable as a result (whether alone or
in connection with any other matter or circumstance) of
anything done in response to any request by the Lessee or any
other member of the Guarantor's Group.
26.2 RESTRICTION ON GENERAL TAX INDEMNITY
The Lessee shall not be obliged to indemnify the Lessor or as
the case may be the applicable Relevant Member pursuant to
Clause 26.1:
(a) against Corporation Tax attributable to any Rent or
Termination Payment or interest actually receivable
hereunder by the Lessor or to any other amounts payable
to and unconditionally received by the Lessor under
this Agreement or pursuant to or in connection with any
of the other Relevant Lease Documents or to any sales
or other proceeds (including, without limitation,
insurance moneys) actually received and retained by the
Lessor in respect of the Vessel;
(b) against any Tax Liability or liability in respect of
any of the matters referred to in Clause 26.1(b) to the
extent it would not have arisen but for the reasonably
avoidable delay or failure by the Lessor or, as the
case may be, the applicable Relevant Member in the
filing of Tax returns or the payment of Taxes or any
duties, fees, charges or levies referred to in Clause
26.1(b) assessed on or payable by the Lessor or, as the
case may be, the applicable Relevant Member which delay
or failure has not been consented to, or requested by
the Lessee or any other member of the Lessee's Group or
unless such failure or delay by the Lessor or, as the
case may be, the applicable Relevant Member arises from
a failure by the Lessee or any other member of the
Lessee's Group promptly to provide the Lessor or, as
the case may be, the applicable Relevant Member with
correct, suitable and adequate information to enable
the Lessor or, as the case may be, the applicable
Relevant Member to file the relevant Tax return or pay
such Taxes or other amounts;
(c) against any Tax Liability to the extent that it is
taken into account in accordance with the provisions of
the Financial Schedule in computing the amount of any
Rent or Termination Payment or any adjustment thereto
or would be so taken into account but for the operation
of paragraph 3.3 of Part 3 of the Financial Schedule;
(d) against any Tax Liability which is imposed by way of
deduction or withholding from any payment due from the
Lessee under this Agreement to the Lessor, whether or
not the Lessee is required to make any payment or
increased payment in respect thereof under Clause 26.3;
(e) against any Tax Liability which is suffered by the
Lessor by reason of the non-deductibility for the
purposes of Taxation of any payment made by the Lessor
to the Lessee, whether or not the Lessor is entitled to
make any withholding in respect thereof under Clause
26.7;
(f) to the extent that such Tax Liability is caused by
any act of the Lessor which constitutes wilful misconduct
of or recklessness by the Lessor or a breach by the
Lessor of its obligations under the Relevant Lease
Documents;
(g) against any Tax Liability in respect of VAT or
Irrecoverable VAT, whether or not the Lessee is
required to make any payment or increased payment in
respect thereof under Clause 26.4.
26.3 PAYMENTS AND TAXES
(a) All the sums payable to the Lessor and/or any member of the
Lessor's Group pursuant to or in connection with this
Agreement or any of the other Relevant Lease Documents shall
be paid in full without any set-off or counterclaim whatsoever
and free and clear of all deductions or withholdings
whatsoever save only as may be required by law.
(b) If any deduction or withholding is required by law in respect
of any payment due to the Lessor and/or any member of the
Lessor's Group pursuant to or in connection with this
Agreement or any of the other Relevant Lease Documents or any
document contemplated by or entered into pursuant hereto or
thereto (including any Service Contract), the Lessee shall:
(i) ensure or procure that the deduction or withholding
is made and that it does not exceed the minimum legal
requirement therefor;
(ii) pay, or procure the payment of, the full amount
deducted or withheld to the relevant Taxation or other
authority in accordance with the applicable law;
(iii) (A) if the payment is to be made by the Lessee,
increase the payment in respect of which the deduction or
withholding is required so that the net amount received by
the Lessor or, as the case may be, the applicable Relevant
Member as aforesaid after the deduction or withholding
(and after taking account of any further deduction or
withholding which is required to be made which arises as a
consequence of the increase) shall be equal to the amount
which the Lessor or, as the case may be, that Member
would have been entitled to receive in the absence of any
requirement to make a deduction or withholding; or (as the
case may be)
(B) if the payment is to be made by any person
other than the Lessee, pay directly to the
Lessor or, as the case may be, that Member such
sum (a "COMPENSATING SUM") as will, after
taking into account any deduction or
withholding which is required to be made in
respect of the compensating sum, enable the
Lessor or, as the case may be, that Member to
receive, on the due date for payment, a net sum
equal to the sum which the Lessor or, as the
case may be, that Member would have received in
the absence of any obligation to make a
deduction or withholding; and
(iv) promptly deliver or procure the delivery to the
Lessor or, as the case may be, that Member of appropriate
receipts evidencing the deduction or withholding which
has been made.
(c) If the Lessor or, as the case may be, the applicable Relevant
Member determines in its absolute discretion that it has
received, realised, utilised and retained a Tax benefit by
reason of any deduction or withholding in respect of which the
Lessee has made an increased payment or paid a compensating
sum under this Clause 26.3 the Lessor or, as the case may be,
that Member shall, provided the Lessor or, as the case may be,
that Member has received all amounts which are then due and
payable under any of the provisions of this Agreement and the
other Relevant Lease Documents, pay to the Lessee (to the
extent that the Lessor or, as the case may be, that Member can
do so without prejudicing, the amount of that benefit and the
right of the Lessor or, as the case may be, that Member to
obtain any other benefit relief or allowance which may be
available to it) as soon as reasonably practicable such
amount, if any, as the Lessor shall determine in its absolute
discretion will leave the Lessor or, as the case may be, that
Member in no better and no worse position than the Lessor or,
as the case may be, that Member would have been in if the
deduction or withholding had not been required,
PROVIDED THAT:
(i) the Lessor or, as the case may be, that Member shall
have an absolute discretion as to the time at which and
the order and manner in which it realises or utilises
any Tax benefit;
(ii) the Lessor or, as the case may be, that Member shall
not be obliged to disclose any information regarding
its business, Tax affairs or Tax computations;
(iii) if the Lessor or, as the case may be, that Member
has made a payment to the Lessee pursuant to Clause 26.3(c)
on account of any Tax benefit and it subsequently
transpires that the Lessor or, as the case may be, that
Member did not receive that Tax benefit, or received a
lesser Tax benefit, the Lessee shall pay on demand to
the Lessor such sum as the Lessor may determine as
being necessary to restore the after-Tax position of
the Lessor or, as the case may be, that Member to that
which it would have been had no adjustment under this
proviso (iii) been necessary. Any sums payable by the
Lessee to the Lessor under this proviso (iii) shall be
subject to the provisions of Clause 26.5;
(iv) the Lessor or, as the case may be, that Member shall
not be obliged to make any payment under this Clause
26.3 if, by doing so, it would contravene the terms of
any applicable law or any notice, direction or
requirement of any governmental or regulatory authority
(whether or not having the force of law but compliance
with which is customary); and
(c) PROVIDED FURTHER THAT if the Lessee requests the Lessor, in
writing, to make an application pursuant to the provisions of
a double tax treaty for relief (whether in whole or in part)
in respect of any deduction or withholding required by law,
the Lessor shall (at the cost of the Lessee) take such action
as the Lessee shall reasonably request to make such
application to an applicable Tax authority. If the Lessor
subsequently obtains a repayment (whether in whole or in part)
of such deduction or withholding from that Tax authority in
circumstances where the Lessee has made an increased payment
or paid a compensating sum under this Clause 26.3 the Lessor
shall, provided that the Lessor has received all amounts which
are then due and payable by the Lessee under any of the
provision of this Agreement and the other Relevant Lease
Documents, pay to the Lessee as great an amount of the
repayment as possible as will leave the Lessor in no worse
position than the Lessor would have been in if the deduction
or withholding had not been required.
26.4 VALUE ADDED TAX
(a) If the Lessor makes any supply for Value Added Tax purposes
pursuant to or in connection with this Agreement or any of the
other Relevant Lease Documents or any transaction or document
contemplated herein or therein, the Lessee shall (save to the
extent that the Lessor is entitled to be indemnified in
respect of that Value Added Tax by an increased payment under
Clause 26.4(b) below) at such time as the Lessor certifies to
the Lessee that any amount of VAT payable in respect of that
supply has not been paid to the Lessor and having duly
accounted for such VAT to Customs and Excise at the correct
time and having duly claimed bad debt relief in respect of
that VAT the Lessor either has or has not received such
relief, pay on demand to the Lessor an amount equal to the
aggregate of any Value Added Tax which is payable in respect
of that supply and has not been the subject of bad debt relief
and interest on an amount equal to any Value Added Tax payable
in respect of the supply at LIBOR ascertained in respect of
the date on which such VAT was accounted for to Customs and
Excise for the period from that date until the date of the
Lessor's certificate or the date upon which bad debt relief is
received.
(b) Save where expressly provided to the contrary, all payments
made under this Agreement and the other Relevant Lease
Documents are calculated without regard to Value Added Tax.
If any such payment constitutes the whole or any part of the
consideration for a taxable or deemed taxable supply (whether
that supply is taxable pursuant to the exercise of an option
or otherwise), the amount of that payment shall be increased
by an amount equal to the amount of Value Added Tax which is
chargeable in respect of the taxable supply in question
PROVIDED THAT the Lessor shall not be liable to pay an amount
in respect of Value Added Tax until such time as, and to the
extent that it receives a credit for such VAT as "INPUT TAX",
as defined in sub-section (1) of section 24 of VATA, under
sections 25 and 26 of VATA, in which case such payment shall
be made as soon as practicable after the credit is received.
(c) If any amount or Value Added Tax paid by the Lessor pursuant
to this Agreement or any of the Relevant Lease Documents shall
be Irrecoverable VAT, the Lessee shall forthwith on demand by
the Lessor indemnify the Lessor and keep the Lessor fully
indemnified at all times against such Irrevocable VAT PROVIDED
THAT if the Lessor determines that such Irrecoverable VAT
subsequently proves to be recoverable, the Lessor shall pay to
the Lessee such amount, if any, as the Lessor in its absolute
discretion shall determine will leave the Lessor in no better
and no worse a position than the Lessor would have been in if
no payment had been made by the Lessee to the Lessor under
this Clause 26.4(c).
26.5 GROSSING-UP OF INDEMNITY PAYMENT
If the Lessor makes a payment or suffers a loss in respect of
which it is entitled to be indemnified or reimbursed or
otherwise kept harmless pursuant to any provision of this
Agreement or any of the other Lease Documents and the Lessor
determines in its absolute discretion that:
(a) (i) the loss or payment is not or will
not be wholly deductible in computing the profits of
the Lessor for the purposes of Tax whilst the
payment to be made by way of indemnity or
reimbursement (for the purpose of this Clause
26.5, the "PAYMENT") will or is likely to give
rise to a Tax Liability for the Lessor; or
(ii) the Payment is likely to give rise to
a Tax Liability for the Lessor in any Accounting
Period of the Lessor earlier than the
Accounting Period in which the loss or payment
is deductible;
then, at the time of the Payment the Lessee shall
pay such an amount (the "ADDITIONAL PAYMENT") as will,
after taking into account any Tax Liability likely to
be suffered or incurred by the Lessor in respect of the
Payment or the Additional Payment, leave the Lessor in
the same after-Tax position as it would have been in
had the Payment not given rise to any Tax Liability and
the loss or payment had not been deductible PROVIDED
THAT if at the time of the Payment the Lessor considers
that no Additional Payment is necessary but
subsequently determines that an Additional Payment is
necessary so to indemnify the Lessor, the Additional
Payment shall be paid by the Lessee to the Lessor
following a demand by the Lessor;
(b) the loss or payment has proved to be
wholly deductible in computing the profits of the Lessor for
the purposes of Tax whilst the Payment by the Lessee has
provided not to give rise to any Tax Liability for the Lessor,
then the Lessor shall pay to the Lessee a rebate of
Rent (for the purposes of this Clause 26.5 the
"REBATE") of such amount as will leave the Lessor in no
better and no worse position than it would have been in
if the Payment had not given rise to a Tax Liability
for the Lessor and the loss or payment had not been
deductible,
PROVIDED THAT if the Lessor subsequently determines that any
payment by the Lessee to the Lessor under this Clause 26.5 by
way of an Additional Payment or, as the case may be, any
Rebate was calculated on an incorrect basis, such adjustment
shall be made between the Lessor and Lessee as the Lessor
determines necessary to restore the after-Tax position of the
Lessor to that which it would have been if no adjustment had
been necessary.
26.6 DOCUMENTARY AND OTHER SIMILAR TAXES
All stamp, documentary, registration or other like duties or
Taxes, including any penalties, additions, fines, surcharges
or interest relating thereto, which are imposed on or
chargeable on or in connection with this Agreement or any of
the other Relevant Lease Documents or the Sub-Lease or any
Service Contract shall be paid by the Lessee PROVIDED THAT the
Lessor shall be entitled but not obliged to pay any such
duties or Taxes, whether or not they are its primary
responsibility, whereupon the Lessee shall on demand indemnify
the Lessor against those duties or Taxes. The Lessor agrees
that if it decides to pay any such duties or Taxes, it shall
give the Lessee not less than five (5) Business Days' notice
before making such payment.
26.7 DEDUCTIBILITY
Notwithstanding anything contained in this Agreement or any
of the other Relevant Lease Documents (other than in relation to
any rebate of Rent under Clause 10.2(b) or 20.2(ii)), if the
Lessor determines that any payment which it is required to
make to the Lessee under this Agreement or under any of the
other Relevant Lease Documents, by way of rebate of Rent or
otherwise, will not or may not be fully deductible in
computing the Lessor's liability to Corporation Tax for the
Accounting Period of the Lessor in which the payment is made,
the Lessor shall, except to the extent that such
non-deductibility has been taken into account in accordance
with the Financial Schedule as a result of Assumption 2.3.13
(d) (iii) proving not to be correct, be entitled to withhold
and retain from that payment such amount as the Lessor
determines to be necessary to enable it to occupy the same
after-Tax position as it would occupy if the payment were
fully deductible as aforesaid;
PROVIDED THAT if:
(a) any such payment is made without withholding and the
Lessor subsequently determines that the payment will
not or may not be fully deductible as aforesaid; or
(b) any such payment is made subject to withholding and
the Lessor subsequently determines that no such withholding
ought to have been made or the basis on which the
withholding was calculated was incorrect;
such adjustment shall be made between the Lessor and the
Lessee as the Lessor determines to be necessary, taking into
account the time value of money, to enable the Lessor to
occupy the same after-Tax position as it would occupy if no
such adjustment were necessary. Any sum payable by the Lessee
to the Lessor under this proviso shall be subject to the
provisions of Clause 26.5.
27. PRESERVATION OF INDEMNITIES
Without prejudice to damages or other claim which either party
may, at any time, have against the other hereunder or under
any of the Relevant Lease Documents it is hereby agreed and
declared that the indemnities given by the Lessee in favour of
the Lessor or any member of the Lessor's Group contained in
this Agreement shall continue in full force and effect
notwithstanding any sale or other disposition of the Vessel, a
Total Loss having occurred or any breach of the terms hereof
or thereof by the Lessor (including fundamental breach), the
repudiation by the Lessor or the Lessee of this Agreement or
any of the Relevant Lease Documents or the expiration of the
Pre-Lease Period or the Lease Period through effluxion of time
or otherwise or the termination of the leasing or sale of the
Vessel hereunder or any other circumstance whatsoever.
28. ASSIGNMENT
28.1 ASSIGNMENT BY LESSOR
The Lessee acknowledges and agrees that the Lessor shall be
entitled at any time and from time to time to assign,
transfer, novate or otherwise dispose of all (but not part
only) of its interest in the Vessel and the Relevant Lease
Documents:
(a) to any person (the "TRANSFEREE") who is not a member
of the Lessor's Group with the prior written consent of
the Lessee (such consent not to be unreasonably
withheld) provided always that without prejudice to the
foregoing:
(i) the assignment, transfer, novation or other
disposal shall be on terms that the Lessee
shall be under no greater obligation or
liability under this Agreement and the other
Relevant Lease Documents to which it is a party
than it would have been under but for such
assignment, transfer, novation or other
disposal;
(ii) the Transferee (or its ultimate parent
company) is a bank or financial institution having a
credit rating equal to or better than that of
the Bank as at the date of the assignment,
transfer, novation or other disposal;
(iii) the rights of the Lessee under the Relevant
Lease Documents shall not be adversely affected
and shall be on equivalent terms to the
Relevant Lease Documents in force prior to the
assignment, transfer, novation or other
disposal (and, without prejudice to the
generality of the foregoing, if the Transferee
itself is not a bank or financial institution
satisfying the requirements of paragraph (ii)
above, the Lessee shall receive a parent
company guarantee from the ultimate holding
company of the Transferee on terms no less
favourable than that granted by the Bank); and
(iv) it shall, without limitation, be reasonable
for the Lessee to withhold its consent if it
certifies that the proposed Transferee (or its
ultimate parent company or a subsidiary of its
ultimate parent company) is a company with
which the Lessee or any other company or the
Guarantor's Group has valid business reasons
for not entering into a relationship; and
(b) to any person who is a member of the Lessor's Group
without the need for the Lessee's consent provided that
the Lessee shall not be required to suffer or incur any
greater cost in the performance of its obligations
under this Agreement or the other Relevant Lease
Documents to which it is a party, or any loss of
benefit, than would have been the case but for such
assignment, transfer, novation or other disposal,
and in each case, and the Lessee hereby agrees and undertakes
that it will upon the request of the Lessor execute such
further documents and give such notices as the Lessor may
reasonably require in order to effect such assignment,
transfer, novation or other disposal, provided that any costs
incurred by the Lessee (including any legal fees and
Irrecoverable VAT thereon) in connection therewith or with any
consequential amendments to the Lease Documents shall be
reimbursed by the Lessor upon presentation of a copy of the
relevant invoice.
28.2 ASSIGNMENT BY THE LESSEE
(A) Except as expressly permitted by Clauses 28.2(B)
and 28.2(D), the Lessee may not assign, transfer or part
with any of its rights or obligations under, or the
benefit or burden of, this Agreement or the other Lease
Documents to which the Lessee is a party without the
prior written consent of the Lessor.
(B) The Lessee shall be entitled at any time and from
time to time to assign and transfer the entire burden and
benefit of this Agreement and the other Lease Documents
to which it is a party to any person who is a member of
the Guarantor's Group without the need for the Lessor's
consent provided that:
(i) the transferee and any other necessary person
shall enter into such documentation as may be
necessary to give effect to such assignment and
transfer (including any amendment that may be
necessary to the terms of the Guarantee to
ensure that the Guarantee extends to the
obligations of the assignee hereunder);
(ii) the Lessor shall not suffer or incur any
greater cost, or any loss of benefit, or any
increased obligation, liability or risk than
would have been the case but for such
assignment and transfer; and
(iii) any costs and expenses (including stamp
duty) in respect of such assignment and transfer
shall be for the Lessee's account.
(C) The Lessor agrees from time to time, and at the
Lessee's expense, to co-operate with the Lessee and do
and perform such acts and execute and deliver such
instruments as the Lessee may reasonably request to
effect such assignment and transfer referred to in
Clause 28.2(B).
(D) The Lessee shall be entitled to and will, on request
of the Lessor or any financier who advances funds to the
Sub-Lessee to enable it to pay the put option price
under Clause 3 of the Put Option Deed, assign its
rights to receive rebate of Rent under Clause 20.2(ii)
to any such financier on such terms as such financier
may reasonably require and do such further acts and
enter into such further documents in order to enable
such funding to take place.
29. LESSOR'S RIGHT OF SET-OFF
(A) The Lessor shall be entitled to set off or withhold
from any sum or sums expressed in this Agreement or any
of the Relevant Lease Documents to be payable by the
Lessor to the Lessee (other than any sum or sums
referred to in Clause 29(B)) any amounts due or
expressed to be due (or would, if demanded, be due)
from the Lessee, to the Lessor under this Agreement or
any of the Relevant Lease Documents, other than amounts
payable in relation to Excluded Obligations. Save as
aforesaid, the Lessee authorises the Lessor to apply
any credit balance to which the Lessee is entitled on
any account of the Lessee with the Lessor in
satisfaction of any sum due and payable from the Lessor
hereunder or under any of the other Relevant Lease
Documents but unpaid; for this purpose, the Lessor is
authorised to purchase with the moneys standing to the
credit of any such account such other currencies as may
be necessary to effect such application. The Lessor
shall not be obliged to exercise any right given to it
by this Clause 29.
(B) Rebates of Rent expressed to be payable by the
Lessor to the Lessee under Clause 10.2(b) or 20.2(ii) shall be
paid by the Lessor without set-off or counterclaim and
are hereby expressly excluded from the Lessor's rights
under Clause 29(A).
30. SUB-LEASING
(A) The Lessee shall not, without the prior written
consent of the Lessor, sub-lease the Vessel (and shall procure
that there is no further sub-leasing of the Vessel by
any Sub-Lessee) other than to the Sub-Lessee under a
charter by way of demise, time charter, voyage charter
or other chartering arrangement upon terms to be agreed
by the Lessee and the Sub-Lessee PROVIDED THAT any such
charter or other chartering arrangement shall always
contain a term that neither the Vessel nor any part
thereof shall be used during the requisite period (as
defined in Section 40 CAA 1990) so as to result in the
application of any of Sections 42, 43, 44 and 46 CAA
1990.
(B) In the event that the Sub-Lessee performs any act
to be performed by the Lessee hereunder which, if it had been
performed by the Lessee, it would fully satisfy an
obligation of the Lessee to the Lessor hereunder, such
obligation of the Lessee shall be deemed satisfied as
between the Lessor and the Lessee to the extent so
performed by the Sub-Lessee.
(C) The Lessee shall procure that the Sub-Lease is in all
respects subordinate to the rights of the Lessor under
this Agreement and shall automatically terminate upon
the service of a Termination Notice hereunder. The
Lessee shall further procure that the Sub-Lease
provides that, following the service of a Termination
Notice but subject to Clause 21.7, the Sub-Lessee shall
surrender possession and control of the Vessel to the
Lessor and shall not exercise or purport to exercise
any Lien which they, either together or individually,
might have over or in respect of the Vessel in respect
of the termination of their right to possession of the
same.
31. MISCELLANEOUS
31.1 GENERAL FEES AND EXPENSES
The Lessee shall on demand:
(a) pay or reimburse to the Lessor all costs and
expenses (including, without limitation, the Lessor's Expenses
and survey costs) of the Lessor properly incurred in
connection with the negotiation, preparation or
execution of the Lease Documents and any amendment,
variation or waiver from time to time hereto or thereto
or any consent from time to time hereunder or
thereunder and in connection with the payment by the
Lessor of each of the Instalments, the delivery to or
by the Lessor, redelivery or sale of the Vessel or any
part thereof, save to the extent that such costs and
expenses have been taken into account in the Financial
Schedule;
(b) pay or reimburse to the Lessor all costs and expenses
(including, without limitation, legal fees and survey
costs and expenses) properly incurred by the Lessor in
connection with or incidental to the breach by any
party (other than the Lessor and any Provider of
Security other than any Additional Security Provider
who is a member of the Guarantor's Group) of any of its
respective obligations under the Lease Documents, the
protection, preservation or enforcement of any right or
remedy conferred upon the Lessor under any of the Lease
Documents or by law, or to any action or act to recover
possession of the Vessel or any part thereof, whether
or not any such action progresses to judgment;
(c) pay or reimburse to the Lessor all costs and
expenses (including, without limitation, fees of legal and
other advisers) incurred in connection with any action or act
brought by the Lessor to recover any Rent or other
payments due from any party (other than the Lessor, the
Bank and any Provider of Security other than any
Additional Security Provider who is a member of the
Guarantor's Group) under this Agreement or any of the
other Lease Documents; and
(d) pay or reimburse to the Lessor all costs and
expenses (including without limitation, legal, insurance and
other advisers) properly incurred by the Lessor in
connection with a Total Loss of the Vessel.
31.2 INTENTIONALLY OMITTED
31.3 DELAY IN ENFORCEMENT, WAIVERS ETC.
All waivers of any right, power or privilege by any of the
Lessor or the Lessee shall be in writing signed by the Lessor
or, as the case may be, the Lessee. No failure or delay on
the part of the Lessor or the Lessee in exercising any power
or right hereunder shall operate as a waiver thereof nor shall
any single or partial exercise of any such right or power
preclude any other or further exercise of any such right or
power. The rights and remedies herein provided are cumulative
and not exclusive of any rights or remedies provided by law or
in equity.
31.4 VARIATION
This Agreement shall only be varied by an instrument in
writing executed by the parties hereto.
31.5 INVALIDITY
If any term or provision of this Agreement or the application
thereof to any person or circumstance shall to any extent be
invalid or unenforceable the remainder of this Agreement or
application of such term or provision to persons or
circumstances other than those as to which it is already
invalid or unenforceable shall not be affected thereby and
each term and provision of this Agreement shall be valid and
shall be enforceable to the fullest extent permitted by law.
31.6 NOTICES
(a) Any demand, consent, record, election or notice (a "NOTICE")
required or permitted to be given by either party to the other
under this Agreement shall be in writing and sent by first
class prepaid airmail post or by facsimile transmission or
delivered by hand addressed as follows:
(i) if to the Lessor to:
Nelstar Leasing Company Limited
Great Surrey House
203 Blackfriars Road
London SE1 8NH
England
Fax: +(44) 171 922 1874
Attention: Managing Director
(ii) if to the Lessee to:
c/o McKinney, Bancroft & Hughes
Mareva House
4 George Street
P.O. Box 3937
Nassau
The Bahamas
Fax: +(1) 242 328 2520
Attention: Richard Lightbourn
with a copy sent to:
Global Marine Inc.
777 N. Eldridge Parkway
Houston
Texas 77079
USA
Fax: +(1) 281 596 5196
Attention: General Counsel
or in each case to such other person or address or facsimile
number as one party may, by not less that three (3) Business
Days' notice, notify in writing to the other party hereto.
(b) Any Notice shall be deemed to have been given or received to
or by the party to whom it is addressed ten (10) days
following posting, if posted by first class prepaid airmail
post and on receipt, if delivered by hand and in the case of
facsimile transmission, upon receipt by the sender of a
transmission report showing the Notice has been sent in its
entirety. The sender of a Notice by facsimile shall despatch
an original of such Notice in the first class airmail post
with postage prepaid in an envelope addressed to the recipient
of the facsimile at its address stated in Clause 31.6(a), but
the facsimile Notice shall be the definitive Notice for the
purposes of this Agreement.
31.7 APPLICABLE LAW
This Agreement shall be governed by and construed, and
performance thereof shall be determined, in accordance with
the laws of England.
31.8 COUNTERPARTS
This Agreement may be executed in several counterparts and any
single counterpart or set of counterparts, signed in either
case by all of the parties, shall be deemed to be an original,
and all taken together shall constitute one and the same
instrument.
31.9 FURTHER ASSURANCES
The Lessee agrees from time to time, and at the Lessee's
expense, to do and perform such other and further acts and
execute and deliver any and all such other instruments as may
be required by law or reasonably requested by the Lessee to
establish, maintain and protect the rights and remedies of the
Lessor and to carry out and effect the intent and purpose of
this Agreement and the other Relevant Lease Documents.
31.10 ENTIRE AGREEMENT
This Agreement, in conjunction with the other Relevant Lease
Documents and any other letter agreements of even date
herewith or subsequent hereto between the Lessor and any other
party to the Relevant Lease Documents, constitute the entire
agreement between the parties hereto in relation to the
leasing of the Vessel by the Lessor to the Lessee, and
supersede all previous proposals, agreements and other written
and oral communications in relation thereto.
31.11 SUBMISSION TO JURISDICTION
(a) The Lessee (which shall include its successors and permitted
assigns from time to time) hereby submits to the non-exclusive
jurisdiction of the courts of England with regard to this
Agreement and the other Relevant Lease Documents. Any legal
action or proceedings with respect to this Agreement and the
other Relevant Lease Documents may be brought in the courts of
England or such other jurisdiction, as the Lessor may elect.
By its execution and delivery of this Agreement, the Lessee:
(i) hereby accepts for itself and in respect of its
property, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts with
respect to this Agreement and the other Relevant Lease
Documents;
(ii) waives any objections on the grounds of venue or
forum non conveniens or any similar grounds and agrees that
legal proceedings in any one or more jurisdictions
shall not preclude legal proceedings in any other
jurisdiction with respect to this Agreement and the
other Relevant Lease Documents;
(iii) agrees that final judgment against it in any action
or proceedings shall be conclusive and may be enforced in
any other jurisdiction with respect to this Agreement
and the other Relevant Lease Documents within or
outside England by suit on the judgment, a certified
copy of which shall be conclusive evidence of the fact
and of the amount of its indebtedness; and
(iv) hereby consents generally in respect of any legal
action or proceeding arising out of or in connection
with this Agreement and the other Relevant Lease
Documents to the giving of any relief or the issue of
any process in connection with such action or
proceeding including, without limitation, the making,
enforcement or execution against any property
whatsoever (irrespective of its use or intended use) of
any order or judgment which may be made or given in
such action or proceeding.
(b) The Lessee in the case of the courts of England, hereby
designates, appoints and empowers WFW Legal Services Limited
(ref: CALP/DNO 2628.16002), at the address of its registered
office for the time being (presently 15 Appold Street, London
EC2A 2HB) to receive, for it and on behalf of it, service of
process in any legal action or proceedings with respect to
this Agreement or the other Relevant Lease Documents. The
Lessee agrees that it will at all times continuously maintain
an agent to receive service of process in England on its
behalf and on behalf of its property with respect to this
Agreement and the other Relevant Lease Documents and if, for
any reason, such agent named above or its successor shall no
longer serve as agent of the Lessee to receive service of
process in England, the Lessee shall promptly appoint a
successor in England and advise the Lessor thereof. It is
understood that a copy of any process served as above will be
promptly forwarded (if necessary) by first class prepaid air
mail post to the Lessee but the failure of the Lessee to
receive such copy shall not affect in any way the service of
such process on the said person as the agent of the Lessee.
31.12 JUDGMENT CURRENCY
If, under any applicable law, whether as a result of a
judgment against any of the parties hereto or the liquidation
of any of the parties hereto for any other reason, any payment
under or in connection with this Agreement or any of the other
Relevant Lease Documents or a Service Contract is made or is
recovered in a currency (the "OTHER CURRENCY") other than that
in which it is required to be paid hereunder or thereunder
(the "ORIGINAL CURRENCY") then, to the extent payment (when
converted at the rate of exchange and after deducting
commission on the date of payment or, in the case of a
liquidation, the latest date for the determination of
liabilities permitted by the applicable law) falls short of
the amount which is required to be paid under or in connection
with this Agreement or any of the other Relevant Lease
Documents or a Service Contract as aforesaid, the payer (or,
in the case of a payment to the Lessor under a Service
Contract, the Lessee) shall as a separate and independent
obligation fully indemnify the payee on demand against the
amount of the shortfall; and for the purposes of this Clause
31.13 "RATE OF EXCHANGE" means the rate at which the payee is
able as at 11.00 a.m. (London time) on the relevant date to
purchase the Original Currency from the Bank in London with
the Other Currency.
32. CONFIDENTIALITY
At all times during the Pre-Lease Period and the Lease Period,
each of the parties hereto shall keep confidential and shall
not, without the prior written consent, in the case of the
Lessee, of the Lessor and, in the case of the Lessor, of the
Lessee issue any press release in relation to the transactions
evidenced by this Agreement and the other Lease Documents, or
disclose to any other person the financial details of this
Agreement or any other Lease Document and the transactions
contemplated hereby or thereby or any other agreement entered
into after the date hereof by the Lessor and the Lessee in
connection with this Agreement or any other Lease Document, or
release copies or drafts of any such document which disclose
or reveal the identity of the parties (or any of them)
provided that (i) the Lessor will not unreasonably withhold or
delay its consent to any proposed press release and (ii) the
parties hereto shall be entitled, without any such consent, to
disclose the same:
(a) in connection with any proceedings arising out of
or in connection with this Agreement or any of the other
Lease Documents; or
(b) if required to do so by an order of a court of
competent jurisdiction whether in pursuance of any
procedure for discovery of documents or otherwise; or
(c) pursuant to any law or regulation having the force
of law; or
(d) to any fiscal, monetary, tax, governmental or other
competent authority; or
(e) to the auditors, legal or other professional advisers,
insurance brokers or underwriters of any member of
either the Guarantor's Group or the Lessor's Group; or
(f) if any of the same is or shall become publicly known
otherwise than as a result of a breach by such party of
this Clause 32; or
(g) in any manner contemplated by any of the Lease
Documents; or
(h) to any other party to the Lease Documents or any
Additional Security Provider to the extent that such
Additional Security Provider has executed a
confidentiality undertaking in favour of the Lessor in
form and content reasonably acceptable to the Lessor.
AS WITNESS this Agreement is executed by each of the parties hereto
as their respective deeds and is intended to be and is hereby
delivered the day and year above written.
SCHEDULE 1
Financial Schedule
SCHEDULE 2
SCHEDULE 3
INTENTIONALLY OMITTED
SCHEDULE 4
Part 1
REPRESENTATIONS AND WARRANTIES BY THE LESSEE
(A) The Lessee is a company duly incorporated and validly existing
under the laws of the Commonwealth of the Bahamas and has the
corporate power and authority to own its assets and carry on
its business as it is being presently conducted and to enter
into and perform its obligations under the Lease Documents to
which it is or is to be a party and to consummate the
transactions contemplated hereby;
(B) the execution, delivery and performance by the Lessee of the
Lease Documents to which it is or is to be a party and the
consummation of the transactions contemplated hereby have been
duly authorised by all necessary or appropriate corporate
action on the part of the Lessee, do not require any
shareholder approval, or approval or consent of any trustee
or holders of any indebtedness or obligations of the Lessee
except such as have been duly obtained and are in full force
and effect, and do not contravene or constitute a default
under (aa) any law, governmental rule, regulation or decree,
directive, convention, treaty, judgment, injunction or any
official or judicial order binding on the Lessee or any of its
assets, (bb) its Constitutive Documents or (cc) any agreement
consent or instruments to which it is a party or is binding
upon it or any of its assets nor result in the creation or
imposition of any Lien on any of its assets pursuant to the
provisions of any such agreement, consent or instrument;
(C) this Agreement and the other Lease Documents to which the
Lessee is or is to be a party constitutes, or when executed
and delivered will constitute, the legal, valid and binding
obligations of the Lessee enforceable in accordance with its
terms subject to general principles of equity and the law
affecting creditors' rights generally;
(D) no authorisation, approval, consent, licence, exemption,
registration, recording, filing or notarisation and no payment
of any duty or tax and no other action whatsoever which has
not been duly and unconditionally obtained, made or taken is
necessary or desirable to ensure the validity, enforceability
or priority of the liabilities and obligations of the Lessee
or the rights of the Lessor under this Agreement and the other
Lease Documents to which the Lessee is or is to be a party;
(E) no event has occurred which constitutes a default under, any
agreement by which the Lessee, its business or any of its
assets is bound or affected, being a contravention or default
which would be likely to either have a material adverse effect
on the business, assets or financial or trading condition of
the Lessee or materially and adversely affect its ability to
observe or perform its obligations under this Agreement and
the other Relevant Lease Documents to which the Lessee is or
is to be a party;
(F) no litigation, arbitration or administrative proceedings or
claim which would be likely to, by itself or together with any
other such proceedings or claims, either have a material
adverse effect on its business, assets or financial or trading
condition or materially and adversely affect its ability to
observe or perform its obligations under this Agreement and
the other Lease Documents to which the Lessee is or is to be a
party is presently in progress or, to the best of the
knowledge, information and belief of the Lessee, pending or
threatened against the Lessee, its business or any of its
assets;
(G) no Termination Event has occurred and is continuing and no
Relevant Event has occurred and is continuing;
(H) the Lessee has not taken any corporate action nor, to the best
of its knowledge and belief, have any other steps been taken
or legal proceedings been started against it for its winding
up, dissolution, administration or re-organisation or for the
appointment of a receiver, administrator, administrative
receiver, trustee or similar officer of it or of any or all of
its assets or revenues;
(I) under applicable laws of the Commonwealth of the Bahamas in
force at the date hereof the Lessee is not required to deduct
any Taxes from any payments that it may be required to make
under this Agreement or any of the other Lease Documents to
which the Lessee is or is to be a party;
(J) the Lessee is conducting its business in all material respects
in compliance with all applicable laws, regulations and
government directives and the Lessee has obtained all material
licences, permissions, authorisations and consents necessary
for the conduct of its business and to the best of its
knowledge and belief after due and proper enquiry all such
licences, permissions, authorisations and consents are in full
force and effect;
(K) intentionally omitted;
(L) all information furnished by the Lessee to the Lessor relating
to the transactions contemplated by the Lease Documents is
true and accurate in all material respects and there are no
omissions of material facts or misleading information
contained in such information;
(M) neither the Lessee nor any of its property or assets is
entitled to immunity on the grounds of sovereignty or
otherwise from any legal action, suit or proceeding,
attachment or other legal process in any jurisdiction;
(N) the Lessee has complied with all Taxation laws in all
jurisdictions in which it is subject to Taxation and has paid
all Taxes due and payable by it and no material claims are
being asserted against it with respect to Taxes which would be
likely either to have a material adverse effect on the
business, assets, operations, prospects or condition
(financial or otherwise) of the Lessee or materially and
adversely affect its ability to observe and perform its
obligations under this Agreement and the other Relevant Lease
Documents to which the Lessee is or is to be a party;
(O) no stamp or registration duty or similar taxes or charges are
payable in the Commonwealth of the Bahamas in respect of this
Agreement or any of the other Lease Documents;
(P) subject to any qualifications contained in the legal opinions
addressed to the Lessor described in paragraph 5 of Part 1 of
Schedule 5, the choice of English law to govern this Agreement
and the other Relevant Lease Documents to which the Lessee is
or is to be a party is a valid choice of law and English law
will accordingly be applied by the courts in the Commonwealth
of the Bahamas if this Agreement or such other Relevant Lease
Documents or any claim hereunder or thereunder comes under
their jurisdiction upon proof of the relevant provisions of
English law. The submission hereunder by the Lessee to the
jurisdiction of the courts of England and the appointment by
the Lessee of process agents in England to accept service of
process in respect of the jurisdiction of such courts is valid
and binding upon the Lessee;
(Q) the Vessel on the Delivery Date will:
(i) be eligible in all respects for registration in the
Flag State;
(ii) maintain the Classification free of all
recommendations, reservations, notations and
requirements of the Classification Society excepting
those which do not have to be complied with prior to
the Delivery Date and will be tight, staunch, strong
and seaworthy and will have placed on board full
classification and other certificates required under
all applicable laws and the rules, regulations and
requirements of the Classification Society including
those to which the Vessel, her Master, officers and
crew are subject at the Delivery Date; and
(iii) be free from Liens (other than Permitted Liens);
(R) the Lessee is in compliance with and has at all times complied
with all applicable Environmental Laws and Environmental
Permits required in connection with the Vessel;
(S) the Lessee will at Delivery comply with all applicable
requirements for operators of vessels of a similar type as the
Vessel of the United States Oil Pollution Act of 1990, as
amended, the regulations promulgated and guidance having the
force of law issued pursuant thereto; and
(T) the Guarantor is a person "connected" (construed in accordance
with section 839 ICTA 1988) with the Lessee.
SCHEDULE 4
Part 2
REPRESENTATIONS AND WARRANTIES BY THE LESSOR
(A) The Lessor is duly incorporated and validly existing under the
laws of England as a limited liability company and has the
corporate power to own its assets and to carry on its business
as it is being presently conducted.
(B) The Lessor has the power to execute, deliver and perform its
obligations under the Relevant Lease Documents to which it is
a party and all necessary corporate, shareholder and other
action has been duly obtained or taken to authorise the
execution, delivery and performance of the same.
(C) To the actual knowledge of the Lessor's directors, there is no
pending or threatened litigation, nor any arbitration or
administrative actions or proceedings against the Lessor or
any of its property or assets before any court, arbitrator or
administrative agency or authority which in the opinion of the
directors of the Lessor would have a material adverse effect
on the ability of the Lessor to perform at all times its
obligations under the Relevant Lease Documents to which it is
a party.
(D) The execution, delivery and performance by the Lessor of its
obligations under the Relevant Lease Documents to which it is
a party does not contravene or constitute a default under (aa)
any United Kingdom law, regulation, decree, convention,
treaty, judgment or any official or judicial order valid and
legally binding on the Lessor or any of its assets, or (bb)
its Constitutive Documents.
(E) This Agreement and the other Relevant Lease Documents to which
the Lessor is or is to be a party constitutes, or when
executed and delivered will constitute, the legal, valid and
binding obligations of the Lessor enforceable in accordance
with its terms subject to general principles of equity and the
law affecting creditors' rights generally.
SCHEDULE 5
Part 1
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE LESSOR GENERALLY
(A) The Lessor shall have received each of the following in form
and substance satisfactory to the Lessor:
1. In respect of each of the Lessee, the Sub-Lessee and the
Guarantor:
(a) a copy certified by a duly authorised officer of the
relevant person to be a true, complete and up-to-date
copy of the Constitutive Documents of that person;
(b) a copy, certified by a duly authorised officer of the
relevant person to be a true copy, and as being in full
force and effect and not amended or rescinded, of
resolutions of the board of directors or governors (or
of a committee of the board of directors or governors)
of that person:
(i) authorising the entering into by that person
of such of this Agreement and the other Lease
Documents to which such person is party; and
(ii) authorising an individual or individuals to
sign and deliver on behalf of that person such
of this Agreement and the other Lease Documents
to which such person is party,
or, in each case such other evidence as the Lessor
may require that all necessary corporate action has been
taken for the authorisations referred to in paragraphs
(i) and (ii) above;
(c) a copy certified by a duly authorised officer of
that person to be a true copy, and as being in full force
and effect and not revoked or withdrawn, of any power
of attorney issued by that person pursuant to the said
resolutions; and
(d) a certificate of incumbency in relation to each of
the Lessee, the Guarantor and the Sub-Lessee together with
a list of authorised signatories with specimen
signatures and, in relation to the Lessee, a
certificate of goodstanding in relation to the Lessee.
2. Evidence that the Novation Agreement and the Put Option Deed
has been approved by the board of directors of the Builder,
and that the signatory for the Builder is authorised to
execute the Novation Agreement, the Put Option Deed and the
other Lease Documents to which the Builder is a party.
3. A power of attorney or a certified true copy extract of the
up-to-date signature book of each Payment Bank, evidencing the
extent of the signing authority of all relevant signatories
and specimen signatures of those signatories or other evidence
reasonably acceptable to the Lessor of the authority of the
relevant signatories to execute each of the Relevant Lease
Documents to which each Payment Bank is party.
4. Evidence that all governmental and other licences, approvals,
consents, registrations and filings necessary for any matter
or thing contemplated by the Lease Documents and for the
legality, validity, enforceability, admissibility and evidence
and effectiveness thereof have been obtained or effected on an
unconditional basis and remain in full force and effect (or,
in the case of effecting any registrations and filings, that
arrangements are satisfactory to the Lessor have been made for
the effecting of the same within any applicable time limit).
5. Legal opinions in form and substance satisfactory to the
Lessor relating to all aspects of the laws of Texas, Delaware
and the Bahamas which the Lessor deems relevant with respect
to the transactions contemplated by this Agreement and the
other Lease Documents.
6. Evidence that any licences, approvals and consents which may
be required for the due execution and performance by any party
to any Relevant Lease Document (other than the Lessor and the
Deposit Bank) to which it is party have been obtained and are
in full force and effect.
7. Evidence from I.H.C. Gusto Engineering B.V. that the Primary
Period does not exceed the useful economic life of the Vessel.
8. Evidence of the acceptance of appointment by each service of
process agent appointed or required to be appointed under the
Relevant Lease Documents.
9. An original counterpart of each Relevant Lease Document to
which the Lessor is a party in each case duly executed and
delivered by party thereto (other than the Lessor) and a
certified true copy of other Lease Documents in each case duly
executed and delivered by the parties thereto.
10. Intentionally omitted.
11. Evidence that the conditions precedent to the Relevant Lease
Documents and the Sub-Lease (other than the conditions
precedent contained in this Agreement to be given in favour of
the Lessor) have been fulfilled or waived in accordance with
the respective terms of the Relevant Lease Documents and the
Sub-Lease.
12. A copy of the signed and audited report and consolidated
accounts for the Guarantor's Group for the financial year
ending 31st December 1997.
13. Evidence that each of the First Account and the Second Account
have been opened and that all necessary bank mandates and
signature forms in form and content acceptable to the Lessor
have been delivered to the Deposit Bank and that Pounds-Sterling 1
has been credited to each such account.
14. An opinion from the insurance advisors to the Lessor as to the
adequacy of the insurances to be taken out under the
Shipbuilding Contract.
(B) No Termination Event or Relevant Event has occurred and is
continuing or would result from the Relevant Lease Documents
or the Sub-Lease coming into full force and effect.
SCHEDULE 5
PART 2
CONDITIONS PRECEDENT TO LESSOR'S PAYMENT OBLIGATIONS UNDER THE
CONSTRUCTION SUPERVISION AGREEMENT
The Lessor shall have received each of the following in form and
substance satisfactory to the Lessor in relation to each Instalment:
1 CORPORATE POWER AND AUTHORITY
1.1 Confirmation from a duly authorised officer of each of the
Lessee, the Sub-Lessee and the Guarantor that there has been
no change in the Constitutive Documents of the relevant person
since the date on which a certified copy thereof was provided
to the Lessor, or, as the case may be a copy certified by a
duly authorised officer of the relevant person of any
amendments thereto and confirmation that the board resolutions
or other corporate authorisation referred to in paragraph 1(b)
of part 1 of this Schedule 5 remain unamended and in force.
1.2 In relation to each Payment Bank, either (i) confirmation that
any document to be executed by such Payment Bank will be
executed by the individuals in respect of which valid and
existing powers of attorney appointing such individuals as
attorneys in fact for the relevant party has already been
received or in respect of which a certified true copy extract
of an up to date signature book has been received and that the
respective powers of attorney or signature books of such
Payment Bank, remain valid, in full force and unamended or
(ii) a further certified copy of the relevant power of
attorney appointing such individual as an attorney in fact
with power to sign such documents on behalf of such Payment
Bank, or signature book of such Payment Bank, as the case may
be.
2 INSURANCES
2.1 Evidence that the Vessel is insured in accordance with the
terms of the Shipbuilding Contract.
3 PAYMENTS, LETTER OF CREDIT, ACCOUNTS AND INVOICES
3.1 Evidence that:
(a) the conditions precedent to the obligations of each
Payment Bank under clause 2 of the relevant Payment
Agreement have been satisfied in full or irrevocably
waived in writing to the extent not so satisfied by the
relevant Payment Bank;
(b) the Lessee has delivered a Lessee Payment Notice (as
such term is defined in each Payment Agreement) to each
Payment Bank in accordance with clause 3.1 of the
relevant Payment Agreement in relation to the
Instalment to be made by the Lessor hereunder; and
(c) each of the Payment Banks has unconditionally and
irrevocably received in full the amount described in
the Lessee Payment Notice (as so defined).
3.2 Evidence that the condition precedent set out in paragraph 13
of Schedule 5, Part 1, has been satisfied.
3.3 Evidence that there has been credited to each of the First
Account and the Second Account the amount required to be
deposited therein pursuant to the First Deposit Deed or (as
the case may be) the Second Deposit Deed as at the relevant
date.
3.4 An invoice or invoices issued in favour of the Lessor duly
executed by the Lessor's Agent or, as the case may be, the
Builder specifying in aggregate the relevant Instalment
payable by the Lessor and complying with the laws and
regulations as to Value Added Tax and in the case of an
invoice from the Lessor's Agent, attaching a copy of the
relevant invoice received by the Lessor's Agent from the
Builder.
3.5 Any costs and expenses required by the terms of this Agreement
to be paid by the Lessee and which are not taken into account
in the Financial Schedule.
3.6 Any amount which the Sub-Lessee is required under the terms of
the Contribution Deed to pay to the Lessor with respect to the
relevant Instalment and the Lessor is satisfied that it is
entitled to retain the same.
4 THE VESSEL AND OFE
4.1 Evidence that amounts, the Sterling Equivalent of which (as at
the respective payment dates under the Shipbuilding Contract
and the Construction Supervision Agreement) equals or exceeds
the amount of the applicable Instalment, have fallen due under
the Shipbuilding Contract and have been paid by the Lessor's
Agent for the Lessor in accordance with the Shipbuilding
Contract and the Construction Supervision Agreement or, as the
case may be, are due and payable to the Builder. Such
evidence shall include (but not be limited to) evidence, for
each payment made by GMIDC as the Lessor's agent, of the date,
amount, currency, spot rate of exchange on that date (in each
case) for purchase of that currency with Sterling and the
resulting Sterling equivalent for each such payment.
4.2 An invoice issued in favour of the Lessor duly executed by the
Lessor's Agent and complying with the laws and regulations as
to Value Added Tax in the amount of the OFE Cost (as such term
is defined in the Novation Agreement) and listing brief
details of the OFE to which it relates.
4.3 Evidence that the expenditure to be incurred by the Lessor in
respect of the Vessel qualifies for capital allowances at the
rate of twenty-five per cent. (25%) per annum on a reducing
balance basis.
4.4 Evidence that the expenditure to be incurred by the Lessor in
respect of the OFE which is to be purchased with the relevant
Instalment qualifies for capital allowances at a rate of
twenty-five per cent. (25%) per annum on a reducing balance
basis.
5 REPRESENTATIONS AND WARRANTIES
Confirmation that each of the representations and warranties
on the part of each Security Party under any Relevant Lease
Document are true and accurate on the date for payment of the
relevant Instalment as if given on that date by reference to
the facts and circumstances then existing.
6 NO RELEVANT EVENT
Confirmation that no Relevant Event has occurred or would
result from the payment of that Instalment.
7. DELIVERY INSTALMENT
In addition to the foregoing, the following shall be further
conditions precedent to the obligations of the Lessor to make
payment of the Delivery Instalment.
The Lessor shall have received each of the following in form
and substance satisfactory to the Lessor:
(a) a certificate from the Lessor's Agent stating that all
the works required pursuant to the Shipbuilding
Contract have been completed in full and advising of
any material changes in the nature or extent of the
works effected in respect of the Vessel and in relation
to any material changes to the specification for the
Vessel;
(b) a valuation report for the Vessel, which shall be
required if the certificate referred to in paragraph
(a) above states that the works effected in respect of
the Vessel differ in any respect considered by the
Lessor to be material from the works required (as at
the date of this Agreement) to be performed pursuant to
the Shipbuilding Contract;
(c) evidence of delivery of the Vessel from the Builder,
a Certificate of Delivery (as such term is defined in the
Shipbuilding Contract) executed by or on behalf of the
Builder and the Lessor and all other documents to be
handed over at delivery of the Vessel by the Builder
pursuant to clause 12 of the Shipbuilding Contract; and
(d) a certificate of the insurance broker of the Lessee
and letter of undertaking from such broker in respect of
the Insurances addressed to the Lessor in each case in
form and substance acceptable to the Lessor and such
other evidence satisfactory to the Lessor that the
Lessee has taken the required steps or, as the case may
be, has procured that the required steps have been
taken, to ensure due compliance with the provisions of
this Agreement as to Insurances with effect on or after
the Delivery Date (including receipts (or other
evidence of payment) for the initial and other premiums
and calls in respect of the Insurances) together with
an opinion from the insurance advisers to the Lessor as
to the adequacy of the Insurances.
SCHEDULE 5
PART 3
CONDITIONS PRECEDENT TO DELIVERY
In addition to the conditions set out in Parts 1 and 2 of this
Schedule 5, the Lessor shall have received each of the following in
form and substance satisfactory to the Lessor:
1. a certificate from the Lessor's Agent stating that all the
works required pursuant to the Shipbuilding Contract have been
completed in full and advising of any material changes in the
nature or extent of the works effected in respect of the
Vessel and in relation to any material changes to the
specification for the Vessel;
2. a valuation report for the Vessel, which shall be required if
the report referred to in paragraph 1 above states that the
works effected in respect of the Vessel differ in any respect
considered by the Lessor to be material from the works
required (as at the date of this Agreement) to be performed
pursuant to the Shipbuilding Contract;
3. evidence of delivery of the Vessel from the Builder, a
Certificate of Delivery (as such term is defined in the
Shipbuilding Contract) executed by or on behalf of the Builder
and the Lessor and all other documents to be handed over at
delivery of the Vessel by the Builder pursuant to clause 12 of
the Shipbuilding Contract;
4. the Acceptance Certificate duly executed by the Lessee;
5. a certificate duly executed by the Sub-Lessee evidencing the
Sub-Lessee's acceptance of the Vessel in accordance with the
terms of the Sub-Lease;
6. a certificate of the insurance broker of the Lessee and letter
of undertaking from such broker in respect of the Insurances
addressed to the Lessor in each case in form and substance
acceptable to the Lessor and such other evidence satisfactory
to the Lessor that the Lessee has taken the required steps or,
as the case may be, has procured that the required steps have
been taken, to ensure due compliance with the provisions of
this Agreement as to Insurances with effect on or after the
Delivery Date (including receipts (or other evidence of
payment) for the initial and other premiums and calls in
respect of the Insurances) together with an opinion from the
insurance advisers to the Lessor as to the adequacy of the
Insurances;
7. a confirmation of the Classification issued by the
Classification Society dated not more than three (3) Business
Days prior to Delivery showing the Classification of the
Vessel free from recommendations and notations affecting class
which are overdue at such date;
8. evidence of the registration of the Vessel in the Flag State
in the name and ownership of the Lessor free from registered
Liens;
9. copies, certified as true copies by an authorised signatory of
the Lessee of the trading certificates for the Vessel and the
Vessel Response Plan and Certificate of Financial
Responsibility, if required, for the operator of the Vessel in
a form approved by the U.S. Coast Guard or other relevant U.S.
governmental authorities and agencies and, if required by any
other countries, a copy of such other certificates, plans or
policies as is required for the Vessel to meet the oil
pollution or other environmental legislation of such other
countries;
10. evidence that on the Delivery Date all of the conditions
precedent required to each party's respective obligations
under the Relevant Lease Documents and the Sub-Lease have been
satisfied or waived including a certificate to that effect
from the Lessee;
11. copies of all consents, authorisations and approvals of any
governmental agency or authority and of any trustee or holder
of any indebtedness or obligations of the Lessee, the
Sub-Lessee or the Guarantor which are required in connection
with the Delivery of the Vessel and the leasing of the Vessel
under this Agreement and the Sub-Lease, duly certified by a
representative or, as the case may be, an officer of the
Lessee, the Sub-Lessee or the Guarantor, as the case may be,
or confirmation in writing by a representative or, as the case
may be, an officer of the Lessee, the Sub-Lessee or the
Guarantor, as the case may be, that no such consents,
authorisations or approvals are required;
12. evidence that on the Delivery Date all filings, registrations,
recordings and other actions required to be taken prior to the
Delivery Date which are necessary or advisable to ensure the
validity and effectiveness of the Relevant Lease Documents and
the Sub-Lease and to protect the property rights of the Lessor
in the Vessel, have been or will be taken;
13. confirmation from each of the providers of the legal opinions
referred to in paragraph 5 of Part 1 of Schedule 5 that the
terms and provisions of such legal opinions provided pursuant
to paragraph 5 of part 1 of Schedule 5 need not be altered or
modified in any way.
14 confirmation that each of the representations and warranties
on the part of each Security Party under each Relevant Lease
Document to which they are respectively party are true and
accurate on the Delivery Date as if given on that date by
reference to the facts and circumstances then existing;
15 evidence that no Termination Event or Relevant Event has
occurred or would result from the Delivery of the Vessel on
the Delivery Date or the leasing of the Vessel to the Lessee
pursuant to this Agreement or the sub-leasing of the Vessel to
the Sub-Lessee pursuant to the Sub-Lease.
SCHEDULE 5
PART 4
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE LESSEE GENERALLY
The Lessee shall have received each of the following in form and
substance satisfactory to the Lessee:
1. In respect of each of the Lessor:
(a) a copy certified by a duly authorised officer of the
Lessor to be a true, complete and up-to-date copy of
the Constitutive Documents of the Lessor;
(b) a copy certified by a duly authorised officer of the
Lessor to be a true copy, and as being in full force
and effect and not amended or rescinded, of resolutions
of the board of directors or governors (or of a
committee of the board of directors or governors) of
the Lessor:
(i) authorising the entering into by that person
of such of this Agreement and the other Relevant
Lease Documents to which the Lessor is party;
and
(ii) authorising an individual or individuals to
sign and deliver on behalf of the Lessor such
of this Agreement and the other Relevant Lease
Documents to which the Lessor is party;
(c) a copy certified by a duly authorised officer of the
Lessor to be a true copy of any power of attorney
issued by the Lessor pursuant to the said resolutions.
2. A guarantee and a support letter from the Bank.
3. In respect of the Bank, a copy certified by a duly authorised
officer of the Bank, to be a true, complete and up-to-date
copy of the relevant extracts of the Bank's signature book.
4. Legal opinions from Canadian, German and English counsel.
SCHEDULE 6
FORM OF ACCEPTANCE CERTIFICATE
Acceptance Certificate dated [ ] pursuant to a Lease
Agreement dated [ ], 1998 (the "HEAD LEASE") between Nelstar
Leasing Company Limited (the "LESSOR") as lessor and Global Marine
Leasing Corporation (the "LESSEE") as lessee.
Terms used herein shall have the meaning given thereto in the Head
Lease.
1. The Lessee confirms that, as between the Lessor and the Lessee
and without prejudice to the rights either party has or may
have against the Builder, the Vessel has been delivered by the
Lessor to the Lessee and accepted by the Lessee from the
Lessor on [ ] in a condition and otherwise all in
accordance with the Head Lease free of all Liens other than
the Permitted Liens.
2. The Lessee confirms that on the aforesaid date of delivery the
Vessel became subject to and governed by the provisions of the
Head Lease.
3. The Lessee confirms that as at the date hereof:
(i) no Relevant Event has occurred and is continuing; and
(ii) the representations set out in Part 1 of Schedule 4
of the Head Lease are true and accurate.
SIGNED )
by )
a [duly authorised attorney-in-fact] )
for and on behalf of )
GLOBAL MARINE LEASING CORPORATION )
SCHEDULE 7
FORM OF HULL AND MACHINERY (MARINE AND WAR RISKS) LOSS PAYABLE CLAUSE
All recoveries under this policy shall be applied as follows:
(a) at any time during the Lease Period, all claims hereunder in
respect of actual or constructive or compromised or arranged
total loss shall be paid in full to such account of the Lessor
as the Lessor may notify to the insurers; and
(b) all other claims hereunder shall be paid in full to the Lessee
or to its order.
EXECUTED as a DEED and DELIVERED )
for and on behalf of )
NELSTAR LEASING COMPANY LIMITED )
by PETER BERNARD MILES )
its )
in the presence of: LISA J. BIGGS )
EXECUTED as a DEED, SEALED and )
DELIVERED for and on behalf of )
GLOBAL MARINE LEASING CORPORATION )
by WALTER A. BAKER its )
in the presence of: LISA J. BIGGS )
CONFORMED COPY
PRIVATE & CONFIDENTIAL
DATED 8th DECEMBER 1998
GLOBAL MARINE INC.
as guarantor
- and -
NELSTAR LEASING COMPANY LIMITED
as lessor
GUARANTEE AND INDEMNITY
relating to
Global Marine Leasing Corporation
and a Glomar Hull 456 class Deepwater Drillship with
Harland and Wolff hull number 1739
(t.b.n. "GLOMAR C.R. LUIGS")
<PAGE>
LIST OF CONTENTS
Clause Title Page Number
1. DEFINITIONS AND INTERPRETATION 1
1.1 DEFINITIONS 1
1.2 INTERPRETATION 3
2. GUARANTEE AND INDEMNITY 4
3 DEMANDS AND CERTIFICATES 5
4 TIME AND INDULGENCE 5
5 CONTINUING SECURITY 6
6. NO COMPETITION 7
7. GUARANTOR'S OBLIGATIONS 7
8. REPRESENTATIONS AND WARRANTIES 8
9. COVENANTS 11
9.1 General Covenants 11
10. PAYMENTS AND TAXES 12
10.1 PAYMENTS 12
10.2 Value Added Tax 14
11. ADDITIONAL SECURITY 15
12. ACKNOWLEDGEMENT AND DECLARATION 15
13. ASSIGNMENT 16
13.1 Assignment by Lessor 16
13.2 Assignment by Guarantor 16
14. COSTS AND EXPENSES 16
15. MISCELLANEOUS 17
15.1 Delay in Enforcement, Waivers etc. 17
15.2 Variation 17
15.3 Invalidity 17
15.4 Notices 17
15.5 Applicable Law 18
15.6 Counterparts 18
15.7 Further Assurances 18
15.8 Entire Agreement 18
16. SUBMISSION TO JURISDICTION 19
17. JUDGMENT CURRENCY 19
18. CONFIDENTIALITY 20
19. NATURE OF DOCUMENT 20
THIS GUARANTEE AND INDEMNITY dated 8th December 1998 is made
BETWEEN:
(1) GLOBAL MARINE INC., a company incorporated under the laws
of the State of Delaware in the United States of America
and having its principal place of business at 777 North
Eldridge Parkway, Houston, Texas 77079, United States of
America (the "GUARANTOR"); and
(2) NELSTAR LEASING COMPANY LIMITED, a company incorporated
under the laws of England and Wales with company
registration number 1581384 whose registered office is at
71 Lombard Street, London EC3P 3BS, England
(the "LESSOR").
WHEREAS:
(A) Pursuant to the Shipbuilding Contract and the Head Lease,
the Lessor has agreed, inter alia, to purchase the Vessel
from the Builder and lease the same to the Lessee subject
to the terms and conditions therein contained.
(B) Pursuant to the Construction Supervision Agreement, the
Lessor's Agent has agreed to supervise the construction of
the Vessel for the Lessor upon the terms and conditions
therein contained.
(C) Pursuant to the Put Option Deed, GMCRL has agreed, inter
alia, to purchase the Lessor's rights and obligations
under the Shipbuilding Contract upon the occurrence of
certain events.
(D) Each of the Lessee, the Lessor's Agent and GMCRL is a
wholly owned Subsidiary (US) of the Guarantor.
(E) The Guarantor desires the Lessor to purchase the Vessel
from the Builder, to lease the same to the Lessee for the
purposes of the Lessee sub-leasing the same to the Sub-
Lessee and the Sub-Lessee entering into the Service
Contract with the Initial Service Contractor, and to enter
into the Relevant Lease Documents to which the Lessor is
or is to be a party.
(F) It is a condition precedent to the obligations of the
Lessor under the Head Lease that the Guarantor executes
and delivers this Guarantee and Indemnity to the Lessor.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
Save as otherwise expressly provided herein, words and
expressions used in this Guarantee and Indemnity shall
have the meanings, if any, respectively attributed thereto
in the Head Lease. In this Guarantee and Indemnity
(including the Recitals) the following words and
expressions shall have the meanings respectively
attributed to them below:
"GMCRL" means Global Marine C.R. Luigs Limited, a company
incorporated under the laws of England and having its
registered office at 15 Appold Street, London EC2A 2HB,
England;
"GROUP" means the Guarantor and its Holding Company (US)
and its subsidiaries (US) from time to time;
"GUARANTEED AGREEMENTS" means each of the Relevant Lease
Documents to which any of the lessee, the Lessor's Agent
and GMCRL is a party;
"GUARANTEED OBLIGATIONS" means any and all monies,
liabilities and obligations (whether actual or contingent,
whether now existing or hereafter arising, whether arising
in respect of or attributable to the period prior to the
date of this Guarantee and Indemnity or to any time
hereafter whether or not for the payment of money, and
including, without limitation, any obligation or liability
to pay damages and including any interest which, but for
the application of bankruptcy or insolvency laws, would
have accrued on the amounts in question) which are now or
which may at any time and from time to time hereafter be
due, owing, payable or incurred or be expressed to be due,
owing, payable or incurred from or by each of the Lessee,
the Lessor's Agent and GMCRL to the Lessor under or in
connection with the Guaranteed Agreements EXCEPT any
Excluded Obligations and references to "GUARANTEED
OBLIGATIONS" include references to any part thereof;
"HEAD LEASE" means the lease in respect of the Vessel
entered or to be entered into between the Lessor and the
Lessee;
"LESSEE" means Global Marine Leasing Corporation, a
company incorporated under the laws of the Commonwealth of
the Bahamas and having its registered office at c/o
McKinney, Bancroft & Hughes, Mareva House, 4 George
Street, P.O. Box 3937, Nassau, Bahamas;
"LESSOR'S AGENT" means Global Marine International
Drilling Corporation, a company incorporated under the
laws of the Commonwealth of the Bahamas and having its
registered office at c/o McKinney, Bancroft & Hughes,
Mareva House, 4 George Street, P.O. Box 3937, Nassau,
Bahamas;
"LIABILITY" means a liability, loss, charge, claim,
proceeding, damage, judgment, enforcement, penalty, fine,
fee, cost and expense of whatsoever nature and;
"LIABILITIES" shall be constructed accordingly;
"US GAAP" means generally accepted accounting principles
in the United States of America set forth in the opinions
and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the
accounting profession of the United States of America, as
in effect from time to time;
"VESSEL" means the ultra-deepwater drillship with the
Builder's hull number 1739 currently being construed by
the Builder and more particularly described in the Lease;
and
"YEAR 2000 ISSUE" means the failure of computer software,
hardware and firmware systems and equipment containing
embedded computer chips to properly receive, transmit,
process, manipulate, store, retrieve, re-transmit or in
any other way utilise data and information due to the
occurrence of the year 2000 or the inclusion of dates on
or after 1 January, 2000.
1.2 INTERPRETATION
(A) In this Guarantee and Indemnity references to:
(i) clauses, paragraphs, sub-paragraphs, or the
schedule are, unless otherwise specified,
references to clauses, paragraphs, sub-
paragraphs of, and the schedule to, this
Guarantee and Indemnity as from time to time
amended in accordance with the provisions of
this Guarantee and Indemnity;
(ii) any statute or other legislative provisions
shall, unless otherwise specified, be read
to include any statutory or legislative
modification or re-enactment thereof, or
substitution therefor;
(iii) this Guarantee and Indemnity or any other
agreement or instrument shall include this
Guarantee and Indemnity or such other
agreement or instrument as it may from time
to time be amended, novated, supplemented or
substituted with the agreement of the
parties thereto and, where such agreement
expressly so provides, the parties hereto;
(iv) "PERSON" shall include any individual,
company, corporation, firm, partnership,
joint venture, association, trust,
unincorporated organisation, government
(including any agency, department or
political sub-divisions thereof) state,
international organisation, European Union
institution, committee, department or
authority, whether having distinct legal
personality or not or any association or
partnership of two or more of the foregoing;
(v) "ASSIGNEE" or "ASSIGNS" of a person shall
include any person who has assumed all or
some of the rights and/or obligations of the
relevant person, whether by assignment,
novation or otherwise;
(vi) reference to any person shall include its
successors (whether of the same name or
another name) and permitted assignees;
(vii) the "ASSETS" of any person shall be
construed as a reference to the whole or any
part of its business, undertaking, property,
assets and revenue (including any right to
receive revenues);
(viii) words denoting the singular number shall
include the plural and vice versa;
(ix) the words "OTHER" and "OTHERWISE" shall not
be construed ejusdem generis with any
foregoing words where a wider construction
is possible;
(x) the "WINDING-UP" of a person also includes
the amalgamation, reconstruction,
reorganisation, administration, dissolution,
liquidation, merger or consolidation of that
person, and any equivalent or analogous
procedure under the law of any jurisdiction
in which that person is incorporated,
domiciled or resident or carries on business
or has assets; and
(xi) the words "INCLUDING" and "IN PARTICULAR"
shall be construed as being by way of
illustration or emphasis only and shall not
be construed as, nor shall they take effect
as, limiting the generality of the foregoing
words.
(B) Clause and other headings are for ease of reference
only and shall not affect the interpretation of
this Guarantee and Indemnity.
2. GUARANTEE AND INDEMNITY
2.1 In consideration of the Lessor, inter alia, entering, and
agreeing to enter, into the Head Lease and the other
Relevant Lease Documents to which it is or is to be a
party, the Guarantor:
2.1.1 as primary obligor and not as surety only, hereby
unconditionally and irrevocably guarantees to the
Lessor the due and punctual observance and
performance by each of the Lessee, the Lessor's
Agent and GMCRL of each and every one of the
Guaranteed Obligations;
2.1.2 hereby unconditionally and irrevocably covenants
with and undertakes with the Lessor that in the
event of a default by the Lessee, the Lessor's
Agent or GMCRL in the observance or performance for
whatever reason of any of the Guaranteed
Obligations, as and when the same shall be
expressed to be due to be observed or performed,
the Guarantor shall forthwith on demand by the
Lessor perform such Guaranteed Obligation or cause
such Guaranteed Obligation to be performed,
punctually as if such Guaranteed Obligation were
performed by the Lessee, the Lessor's Agent or
GMCRL, as the case may be; and
2.1.3 hereby irrevocably and unconditionally undertakes,
covenants and agrees with the Lessor as a primary
obligation to indemnify the Lessor and keep the
Lessor indemnified on demand and on a full
indemnity basis for and against any and all
Liabilities incurred or sustained by the Lessor in
relation to and arising out of the failure of the
Lessee, the Lessor's Agent or GMCRL duly and
punctually to perform the Guaranteed Obligations or
as a result of the whole or any part of the
Guaranteed Obligations being or becoming void,
voidable, unenforceable or ineffective as against
the Lessee, the Lessor's Agent or GMCRL, as the
case may be, for any reason whatsoever,
irrespective of whether such reason or any related
fact or circumstance was known or ought to have
been known to the Lessor or any of its officers,
employees, agents or advisers.
2.2 In addition to its liabilities under Clause 2.1 the
Guarantor shall pay or cause to be paid to the Lessor on
demand interest at the Default Rate (both before and after
judgment) accruing on a day to day basis, and on the basis
of a 365 day year (or a 360 day year or any other basis
when the amount in respect of which Default Rate interest
is payable under this Clause 2.2 is denominated in a
currency where it is customary for banks or financial
institutions to calculate interest on such a basis), on
each amount (or any part thereof) for the time being due
to the Lessor under this Guarantee and Indemnity and
unpaid from the date of demand on the Guarantor for
payment until payment is made (but excluding the day on
which value for any payment made is received by the
Lessor) PROVIDED THAT interest shall not be payable by the
Guarantor under this Clause 2.2 if and to the extent that
interest on the same monies continues to accrue at the
Default Rate under any of the Guaranteed Agreements and is
guaranteed hereunder.
2.3 The Guarantor hereby agrees that for the purposes of this
Guarantee and Indemnity, service by the Lessor on the
Lessee of a Termination Notice shall constitute a valid
and effective service of such notice and the Lessee shall
be conclusively deemed to have become liable to make the
payments expressed in Clause 21.5 of the Head Lease to be
payable by the Lessee to the Lessor upon service of such
notice notwithstanding that, as between the Lessee and the
Lessor, the Lessor is, by virtue of any laws of England
and Wales or any other applicable jurisdiction relating to
bankruptcy, insolvency or administration or any similar
laws, prohibited from serving such notice, repossessing
the Vessel or commencing or continuing any proceedings or
other legal process in England and Wales or such other
jurisdiction against the Lessee.
3. DEMANDS AND CERTIFICATES
3.1 In order to make any demand under this Guarantee and
Indemnity the Lessor shall serve upon the Guarantor a
notice in writing.
3.2 Any certificate from any director, officer or authorised
person of the Lessor or any agent of the Lessor contained
in any demand, notice or other communication given or made
by the Lessor under this Guarantee and Indemnity in
relation to the amount of the Guarantor's liability in
relation to the Guaranteed Obligations or any other amount
payable by the Guarantor under this Guarantee and
Indemnity shall be prima facie evidence that the facts
stated in such certificate are true and correct.
3.3 The Guarantor acknowledges and agrees with the Lessor
that, whenever the Lessor cannot reasonably ascertain with
certainty the amount of any liability of the Lessee, the
Lessor's Agent or GMCRL to the Lessor under any of the
Guaranteed Agreements, the Lessor may make demand on the
Lessee, the Lessor's Agent or, as the case may be, GMCRL
on the basis of a provisional estimate thereof by the
Lessor, and if any such demand is not satisfied in full
the Lessor may make demand on the Guarantor under this
Guarantee and Indemnity in accordance with and subject to
Clause 2 for the sum so demanded from the Lessee, the
Lessor's Agent or, as the case may be, GMCRL. Without
prejudice to Clauses 2 and 3.2, the Guarantor agrees that
no such demand on the Guarantor shall be vitiated or
invalidated if it subsequently transpires that the amount
demanded from the Lessee, the Lessor's Agent or, as the
case may be, GMCRL or the Guarantor was less than or
greater than the amount which was properly due. If it
subsequently transpires that an amount (including
interest) paid by the Guarantor was greater than the
amount which was properly due from the Guarantor, the
Lessor shall refund the excess to the Guarantor together
with interest thereon at LIBOR from and including the date
upon which such refund should have been made under this
Clause 3.3 to and including the date of actual payment
(after as well as before judgment). Such interest shall
accrue on a day to day basis and be compounded quarterly.
3.4 Without prejudice to Clauses 3.1, 3.2 and 3.3, the Lessor
may at any time and from time to time issue further or
corrected demands on the Guarantor in respect of any
Guaranteed Obligation.
4. TIME AND INDULGENCE
4.1 The Lessor shall be at liberty at all times and from time
to time, whether before or after any demand for payment
under this Guarantee and Indemnity and without discharging
or in any way affecting the Guarantor's liability
hereunder, to do all or any of the following:
4.1.1 terminate, amend or novate or agree to the
termination, amendment or novation (in accordance
with the terms of the Guaranteed Agreements) any of
the Guaranteed Agreements in any manner whatsoever;
4.1.2 grant to the Lessee, the Lessor's Agent or GMCRL or
to any other person any time or indulgence;
4.1.3 terminate or cancel the Shipbuilding Contract
and/or the purchase of the Vessel thereunder in
accordance with its terms;
4.1.4 deal with, exchange, renew, vary, release, modify
or abstain from perfecting or enforcing any
securities, guarantees or rights which the Lessor
may now or hereafter have from or against the
Lessee, the Lessor's Agent or GMCRL or any other
person in respect of the respective obligations of
the Lessee, the Lessor's Agent or GMCRL or such
other person under or in respect of the Guaranteed
Agreements or the transactions contemplated
thereby;
4.1.5 compound with, discharge or vary the liability of
the Lessee, the Lessor's Agent or GMCRL or any
other person or guarantor to the Lessee, the
Lessor's Agent or GMCRL or concur in, accept or
vary any compromise, arrangement or settlement with
the Lessee, the Lessor's Agent or GMCRL or any
other person or guarantor or concur in or vary any
deed of arrangement or deed of assignment for the
benefit of creditors of any such person;
4.1.6 omit to prove or fail to maintain any right of
proof for or to claim or enforce payment of any
dividend or composition; and
4.1.7 take or omit to take any security from the Lessee,
the Lessor's Agent or GMCRL or any other person or
guarantor in respect of the obligations of the
Lessee, the Lessor's Agent or GMCRL under or in
respect of the Guaranteed Agreements or the
transactions contemplated thereby, whether
contemporaneously with this Guarantee and Indemnity
or otherwise.
5. CONTINUING SECURITY
5.1 This Guarantee and Indemnity shall be a continuing
security and accordingly:
5.1.1 shall be binding on the Guarantor and its
successors and assigns;
5.1.2 shall not be discharged by any partial payment by
the Lessee, the Lessor's Agent or GMCRL or any
other person under or in respect of any of the
Guaranteed Agreements;
5.1.3 shall extend to cover the balance due at any time
from the Lessee, the Lessor's Agent or GMCRL to the
Lessor under or in respect of the Guaranteed
Agreements or the transactions contemplated
thereby;
5.1.4 shall be in addition to and not in substitution for
or derogation of any other security which the
Lessor may at any time hold in respect of the
obligations of the Lessee, the Lessor's Agent or
GMCRL under or in respect of the Guaranteed
Agreements or the transactions contemplated
thereby;
5.1.5 except to the extent that the Lessor expressly
waives the Guarantor's obligations under this
Guarantee and Indemnity, shall not be discharged or
in any way affected by any action taken or not
taken by the Lessor; and
5.1.6 shall not be discharged or in any way affected by
any merger with any other person or persons or
restructuring of any nature whatsoever of, or any
change of name by, the Lessee, the Lessor's Agent
or GMCRL (whether or not the same is consented to,
or otherwise approved by, the Lessor).
6. NO COMPETITION
6.1 From the date or dates upon which any demand is properly
made against the Guarantor under this Guarantee and
Indemnity until such time as the Lessor has received, and
is entitled to retain, payment of the Guaranteed
Obligations in full, the Guarantor shall not:
6.1.1 claim any set-off or counterclaim against the
Lessee, the Lessor's Agent or GMCRL in respect of
any payment by the Guarantor hereunder or in
respect of any outstanding actual or contingent
liability between the Guarantor and the Lessee, the
Lessor's Agent or, as the case may be, GMCRL; or
6.1.2 make or enforce any claim or right (including a
right of subrogation or contribution) against the
Lessee, the Lessor's Agent or GMCRL or prove in
competition with the Lessor in the event of the
liquidation or bankruptcy of the Lessee, the
Lessor's Agent or GMCRL in respect of any payment
by the Guarantor hereunder or in respect of any
outstanding actual or contingent liability between
the Guarantor and the Lessee, the Lessor's Agent or
GMCRL; or
6.1.3 in competition with the Lessor claim the benefit of
any security or guarantee now or hereafter held by
the Lessor for any money or liabilities due or
incurred by the Lessee, the Lessor's Agent or GMCRL
to the Lessor or any share therein.
7. GUARANTOR'S OBLIGATIONS
7.1 The Guarantor's obligations under this Guarantee and
Indemnity are those of primary obligor and exist
irrespective of any total or partial invalidity,
illegality or unenforceability of any of the Guaranteed
Agreements. The Guarantor agrees as a separate and
independent stipulation that if any sum arising under any
liability under the guarantees or the indemnities
contained herein is not or would not be recoverable on the
footing of a guarantee or an indemnity, whether by reason
of any legal limitation, disability or incapacity on or of
the Lessee, the Lessor's Agent or GMCRL or any other act
or circumstance whether known to the Lessor or not
(including without limiting the generality of the
foregoing the bankruptcy, insolvency, winding up,
administration, liquidation or reorganisation of the
Lessee, the Lessor's Agent or GMCRL, the loss for any
reason whatsoever by the Lessee, the Lessor's Agent or
GMCRL of its corporate status or existence, or any other
fact or circumstance which would or might otherwise
constitute a legal or equitable discharge of or defence to
the Guarantor), such sum shall nevertheless be recoverable
from the Guarantor as a sole and principal debtor and
shall be paid or caused to be paid by the Guarantor upon
demand by the Lessor.
7.2 The Lessor shall not be obliged before making demand under
or taking steps to enforce this Guarantee and Indemnity:
7.2.1 to take action or obtain judgment against the
Lessee, the Lessor's Agent or GMCRL or any other
person in any court or tribunal; or
7.2.2 to make or file any claim in a bankruptcy or
liquidation of the Lessee, the Lessor's Agent or
GMCRL or any other person; or
7.2.3 to exercise diligence against the Lessee, the
Lessor's Agent or GMCRL or any other person under
any of the Guaranteed Agreements or the
transactions contemplated thereby.
7.3 The Guarantor waives and agrees not to enforce or claim
the benefit of any and all rights it has or may from time
to time have as surety under any applicable law which is
or may be inconsistent with any of the provisions of this
Guarantee and Indemnity.
8. REPRESENTATIONS AND WARRANTIES
8.1 The Guarantor acknowledges that the Lessor has entered
into the Relevant Lease Documents in full reliance on
representations and warranties by the Guarantor in the
terms set out in this Clause 8 and the Guarantor now
represents and warrants to the Lessor that the following
statements are at the date hereof true and accurate,
namely that:
8.1.1 the Guarantor is a company duly incorporated and
validly existing under the laws of the State of
Delaware in the United States of America and has
the corporate power and authority to own its assets
and carry on its business as it is being presently
conducted and to enter into and perform its
obligations under this Guarantee and Indemnity and
the other Relevant Lease Documents to which it is
or is to be a party and to consummate the
transactions contemplated hereby;
8.1.2 the execution, delivery and performance by the
Guarantor of this Guarantee and Indemnity and the
other Relevant Lease Documents to which it is or is
to be a party and the consummation of the
transactions contemplated hereby have been duly
authorised by all necessary or appropriate
corporate action on the part of the Guarantor, do
not require any shareholder approval, or approval
or consent of any trustee or holders of any
indebtedness or obligations of the Guarantor except
such as have been duly obtained and are in full
force and effect, and do not contravene or
constitute a default under (aa) any law,
governmental rule, regulation or decree, directive,
convention, treaty, judgment, injunction or any
official or judicial order binding on the Guarantor
or any of its assets, (bb) its constitutional
documents or (cc) any agreement consent or
instruments to which it is a party or is binding
upon it or any of its assets nor result in the
creation or imposition of any Lien on any of its
assets pursuant to the provisions of any such
agreement, consent or instrument;
8.1.3 this Guarantee and Indemnity and the other Relevant
Lease Documents to which the Guarantor is or is to
be a party constitutes, or when executed and
delivered will constitute, the legal, valid and
binding obligations of the Guarantor enforceable in
accordance with its terms subject to general
principles of equity and the law affecting
creditors' rights generally;
8.1.4 no authorisation, approval, consent, licence,
exemption, registration, recording, filing or
notarisation and no payment of any duty or tax and
no other action whatsoever which has not been duly
and unconditionally obtained, made or taken is
necessary or desirable to ensure the validity,
enforceability or priority of the liabilities and
obligations of the Guarantor or the rights of the
Lessor under this Guarantee and Indemnity and the
other Relevant Lease Documents to which the
Guarantor is or is to be a party;
8.1.5 no event has occurred which constitutes, or which
with the giving of notice and/or the lapse of time
and/or a relevant determination would constitute a
contravention of, or a default under, any agreement
by which the Guarantor, its business or any of its
assets is bound or affected, being a contravention
or default which would be likely to either have a
material adverse effect on the business, assets or
financial or trading condition of the Guarantor or
materially and adversely affect its ability to
observe or perform its obligations under this
Guarantee and Indemnity and the other Relevant
Lease Documents to which the Guarantor is or is to
be a party;
8.1.6 no litigation, arbitration or administrative
proceedings or claim which would be likely to, by
itself or together with any other such proceedings
or claims, either have a material adverse effect on
its business, assets or financial or trading
condition or materially and adversely affect its
ability to observe or perform its obligations under
this Guarantee and Indemnity and the other Relevant
Lease Documents to which the Guarantor is or is to
be a party is presently in progress or, to the best
of the knowledge, information and belief of the
Guarantor, pending or threatened against the
Guarantor, its business or any of its assets;
8.1.7 No Termination Event has occurred and is continuing
and no Relevant Event has occurred and is
continuing;
8.1.8 the Guarantor has not taken any corporate action
nor, to the best of its knowledge and belief, have
any other steps been taken or legal proceedings
been started or threatened against it for its
winding up, dissolution, administration or re-
organisation or for the appointment of a receiver,
administrator, administrative receiver, trustee or
similar officer of it or of any or all of its
assets or revenues;
8.1.9 under applicable laws of the State of Delaware and
the federal laws of the United States of America in
force at the date hereof the Guarantor is not
required to deduct any Taxes from any payments that
it may be required to make under this Guarantee and
Indemnity or any of the other Relevant Lease
Documents to which the Guarantor is or is to be a
party;
8.1.10 the Guarantor is conducting its business in all
material respects in compliance with all applicable
laws, regulations and government directives and the
Guarantor has obtained all material licences,
permissions, authorisations and consents necessary
for the conduct of its business and to the best of
its knowledge and belief after due and proper
enquiry all such licences, permissions,
authorisations and consents are in full force and
effect;
8.1.11 the audited consolidated accounts of the Guarantor
for the period ending 31st December 1997 have been
prepared in accordance with US GAAP consistently
applied and fairly represent the financial
condition of the Group at that date and the results
of their operations for the accounting period ended
on that date, that there has been no material
adverse change in the consolidated financial
condition of the Group since that date nor have
there been any unrealised anticipated losses not
disclosed in such accounts or in the Guarantor's
other filings with the United States' Securities
and Exchange Commission;
8.1.12 all information furnished by the Guarantor to the
Lessor relating to the transactions contemplated by
the Guaranteed Agreements is true and accurate in
all material respects and there are no omissions of
material facts or misleading information contained
in such information;
8.1.13 neither the Guarantor nor any of its property or
assets is entitled to immunity on the grounds of
sovereignty or otherwise from any legal action,
suit or proceeding, attachment or other legal
process in any jurisdiction;
8.1.14 the Guarantor is the indirect legal and beneficial
owner of all of the issued share capital of the
Lessee, the Lessor's Agent and GMCRL;
8.1.15 the Guarantor is reviewing the effect of the Year
2000 Issue on the material computer software,
hardware and firmware systems and equipment
containing embedded mircrochips owned or operated
by or for itself, the Lessee and the Sub-Lessee
whether on board the Vessel, any other vessel owned
or operated and insured by a member of the
Guarantor's Group or ashore in the conduct of its
and the Lessee's and the Sub-Lessee's business.
In addition, the Guarantor is reviewing the effect
of the Year 2000 Issue on the material interfaces
between its systems and the systems of its major
suppliers. The costs of any reprogramming and
testing required as a result of the Year 2000 Issue
to permit the proper functioning of the material
systems and equipment of itself, the Lessee and the
Sub-Lessee and the material interfaces between its
systems and the systems of its major suppliers and
the proper processing of data are not reasonably
expected to result in a default by the Guarantor of
its obligations under this Guarantee and Indemnity
or to have a material adverse effect on the
business, assets, operations, prospects or
condition (financial or otherwise) of the
Guarantor;
8.1.16 each member of the Group has complied with all
Taxation laws in all jurisdictions in which it is
subject to Taxation and has paid all Taxes due and
payable by it and no material claims are being
asserted against it with respect to Taxes which
would be likely either to have a material adverse
effect on the business, assets, operations,
prospects or condition (financial or otherwise) of
the guarantor or materially and adversely affect
its ability to observe or perform its obligations
under this Guarantee and Indemnity and the other
Relevant Lease Documents to which the Guarantor is
or is to be a party;
8.1.17 no stamp or registration duty or similar taxes or
charges are payable in the State of Delaware or
Texas in respect of this Guarantee and Indemnity or
any of the other Relevant Lease Documents; and
8.1.18 subject to any qualifications contained in the
legal opinions addressed to the Lessor described in
paragraph 5 of Part 1 of Schedule 5 to the Head
Lease, the choice of English law to govern this
Guarantee and Indemnity and the other Relevant
Lease Documents to which the Guarantor is or is to
be a party is a valid choice of law and English law
will accordingly be applied by the courts in the
States of Delaware and Texas and the federal courts
of the United States of America if this Guarantee
and Indemnity or such other Relevant Lease
Documents or any claim hereunder or thereunder
comes under their jurisdiction upon proof of the
relevant provisions of English law. The submission
hereunder by the Guarantor to the jurisdiction of
the courts of England and the appointment by the
Guarantor of process agents in England to accept
service of process in respect of the jurisdiction
of such courts is valid and binding upon the
Guarantor.
8.2 The representations and warranties by the Guarantor
contained in Clause 8.1 (other than Clauses 8.1.9 and
8.1.11) shall be deemed to be repeated on and as of each
Instalment Date as if made with reference to the facts and
circumstances existing at such date (but so that the
representation and warranty in Clause 8.1.11 shall for
this purpose refer to the then latest audited consolidated
financial accounts of the Guarantor).
8.3 The representations and warranties contained in this
Clause 8 and the rights of the Lessor in respect thereof
shall survive the execution and delivery of this Guarantee
and Indemnity.
9. COVENANTS
9.1 GENERAL COVENENTS
The Guarantor hereby covenants with the Lessor that, so
long as it remains under any liability, actual or
contingent, under this Guarantee and Indemnity:
9.1.1 it will provide to the Lessor such financial and
other information relating to the Group as is
publicly available or as the Guarantor makes
available to its creditors generally including,
without limitation, copies of the quarterly and
annual consolidated audited accounts of the Group
no later than 60 days after the end of the
quarterly period or 120 days after the end of the
annual period (as the case may be) to which they
relate;
9.1.2 it will provide to the Lessor promptly, such
further information as is reasonably available to
the Guarantor or any other member of the Group
regarding the financial condition and operations of
the Guarantor or any other member of the Group, as
the Lessor may reasonably request;
9.1.3 it will at all times, and from time to time,
obtain, maintain, preserve and keep in full force
and effect any permits, consents, licences and
other authorisations governmental or otherwise as
are from time to time necessary for the performance
of its obligations under this Guarantee and
Indemnity and comply with any conditions attached
thereto;
9.1.4 except with the prior written consent of the
Lessor, it will not take or accept any Lien from
the Lessee, the Lessor's Agent or GMCRL or any
other person in respect of the Guarantor's
liability under this Guarantee and Indemnity
PROVIDED HOWEVER THAT any such Lien taken with or
without such consent shall be held by the Guarantor
for the benefit of and on trust for the Lessor so
long as the Guarantor remains under any actual or
contingent liability under this Guarantee and
Indemnity;
9.1.5 forthwith notify the Lessor if the Guarantor
becomes aware of the occurrence of any Termination
Event or Relevant Event;
9.1.6 each of the Lessee and, whilst and for so long as
the Lessor's Agent and GMCRL have any duties,
liabilities or obligations to the Lessor under the
Relevant Lease Documents, the Lessor's Agent and
GMCRL will remain a Subsidiary (US);
9.1.7 it shall take all commercially reasonable action to
complete in all material respects by 31st September
1999, the reprogramming and testing of all material
computer software, hardware and firmware systems,
computer interfaces and equipment containing
embedded microchips owned or operated by/or for
itself, the Lessee or the Sub-Lessee whether on
board the Vessel, any other vessel owned or
operated and insured by a member of the Guarantor's
Group or ashore in the conduct of its and the
Lessee's and the Sub-Lessee's business required as
a result of the Year 2000 Issue to permit the
proper functioning of such computer systems,
interfaces and other equipment. At the request of
the Lessor, the Guarantor shall provide to the
Lessor reasonable assurance of its compliance with
this Clause 9.1.7. Any information so provided by
the Guarantor shall be subject to the provisions of
Clause 18 of this Guarantee and Indemnity; and
9.1.8 its obligations hereunder do and will rank at least
pari passu with all other present and future
unsecured unsubordinated obligations of the
Guarantor other than obligations preferred by laws
applicable to corporations generally in the States
of Delaware and Texas and the federal laws of the
United States of America.
10. PAYMENTS AND TAXES
10.1 PAYMENTS
10.1.1 All sums payable to the Lessor pursuant to or in
connection with this Guarantee and Indemnity or any
document contemplated by or entered into pursuant
hereto, shall be paid in full without any set-off
or counterclaim whatsoever and free and clear of
all deductions or withholdings whatsoever save only
as may be required by law.
10.1.2 If any deduction or withholding is required by law
in respect of any payment due to the Lessor
pursuant to or in connection with this Guarantee
and Indemnity or any document contemplated by or
entered into pursuant hereto, the Guarantor shall:
(a) ensure or procure that the deduction or
withholding is made and that it does not
exceed the minimum legal requirement
therefor;
(b) pay, or procure the payment of, the full
amount deducted or withheld to the relevant
Taxation or other authority in accordance
with the applicable law;
(c) increase the payment in respect of which the
deduction or withholding is required so that
the net amount received by the Lessor after
the deduction or withholding (and after
taking account of any further deduction or
withholding which is required to be made
which arises as a consequence of the
increase) shall be equal to the amount which
the Lessor would have been entitled to
receive in the absence of any requirement to
make a deduction or withholding; and
(d) promptly deliver or procure the delivery to
the Lessor of appropriate receipts
evidencing the deduction or withholding
which has been made;
PROVIDED THAT if the Lessor determines, in its
absolute discretion, that it has received,
realised, utilised and retained a Tax benefit by
reason of any deduction or withholding in respect
of which the Guarantor has made an increased
payment under this Clause 10.1.2, the Lessor
shall, provided it has received all amounts which
are then due and payable by the Guarantor under any
of the provisions of this Guarantee and Indemnity,
pay to the Guarantor (to the extent that the Lessor
can do so without prejudicing the amount of that
benefit and the right of the Lessor to obtain any
other benefit, relief or allowance which may be
available to it) such amount, if any, as the Lessor
in its absolute discretion, shall determine will
leave the Lessor in no better and no worse position
than the Lessor would have been in if the deduction
or withholding had not been required;
PROVIDED FURTHER THAT:
(i) the Lessor shall have an absolute discretion
as to the time at which and the order and
manner in which it realises or utilises any
Tax benefit;
(ii) the Lessor shall not be obliged to disclose
any information regarding its business, Tax
affairs or Tax computation or those of any
member of the Lessor's Group;
(iii) if the Lessor has made a payment to the
Guarantor pursuant to this Clause 10.1.2 on
account of any Tax benefit and it
subsequently transpires that the Lessor did
not receive that Tax benefit, or received a
lesser Tax benefit, the Guarantor shall pay
on demand to the Lessor such sum as the
Lessor may determine being necessary to
restore the after-Tax position of the Lessor
to that which it would have been had no
adjustment under this proviso (iii) been
necessary;
(iv) the Lessor shall not be obliged to make any
payment under this Clause 10.1.2 if, by
doing so, it would contravene the terms of
any applicable law or any notice, direction
or requirement of any governmental or
regulatory authority (whether or not having
the force of law).
(v) if the Guarantor requests the Lessor, in writing,
to make an application pursuant to the provisions
of a double tax treaty for relief (whether in whole
or in part) in respect of any deduction or
withholding required by law, the Lessor shall (at
the cost of the Guarantor) take such action as the
Guarantor shall reasonably request to make such
application to an applicable Tax authority. If the
Lessor subsequently obtains a repayment (whether in
whole or in part) of such deduction or withholding
from that Tax authority in circumstances where the
Lessee has made an increased payment under this
Clause 10.1 the Lessor shall, provided that the
Lessor has received all amounts which are then due
and payable by the Guarantor under any of the
provision of this Guarantee and Indemnity pay to
the Guarantor as great an amount of the repayment
as possible as will leave the Lessor in no worse
position than the Lessor would have been in if the
deduction or withholding had not been required.
10.2 VALUE ADDED TAX
10.2.1 If the Lessor makes any supply for Value Added Tax
purposes pursuant to or in connection with this
Guarantee and Indemnity or any transaction or
document contemplated herein or therein, the
Guarantor shall (save to the extent that the Lessor
is entitled to be indemnified in respect of that
Value Added Tax by an increased payment under
Clause 10.2.2 below) at such time as the Lessor
certifies to the Guarantor that any amount of VAT
payable in respect of that supply has not been paid
to the Lessor and having duly accounted for such
VAT to Customs and Excise at the correct time and
having duly claimed bad debt relief in respect of
that VAT the Lessor either has or has not received
such relief, pay on demand to the Lessor an amount
equal to the aggregate of any Value Added Tax which
is payable in respect of that supply and has not
been the subject of bad debt relief and interest on
an amount equal to any Value Added Tax payable in
respect of the supply at LIBOR ascertained in
respect of the date on which such VAT was accounted
for to Customs and Excise for the period from that
date until the date of the Lessor's certificate or
the date upon which bad debt relief is received.
10.2.2 Save where expressly provided to the contrary, all
payments made under this Guarantee and Indemnity
are calculated without regard to Value Added Tax.
If any such payment constitutes the whole or any
part of the consideration for a taxable or deemed
taxable supply (whether that supply is taxable
pursuant to the exercise of an option or
otherwise), the amount of that payment shall be
increased by an amount equal to the amount of Value
Added Tax which is chargeable in respect of the
taxable supply in question PROVIDED THAT the Lessor
shall not be liable to pay an amount in respect of
Value Added Tax until such time as, and to the
extent that it receives a credit for such VAT as
"INPUT TAX", as defined in sub-section (1) of
section 24 of VATA, under sections 25 and 26 of
VATA, in which case such payment shall be made as
soon as practicable after the credit is received.
10.2.3 If any amount or Value Added Tax paid by the Lessor
pursuant to this Guarantee and Indemnity shall be
Irrecoverable VAT, the Guarantor shall forthwith on
demand by the Lessor indemnify the Lessor and keep
the Lessor fully indemnified at all times against
such Irrevocable VAT PROVIDED THAT if the Lessor
determines that such Irrecoverable VAT subsequently
proves to be recoverable, the Lessor shall pay to
the Guarantor such amount, if any, as the Lessor in
its absolute discretion shall determine will leave
the Lessor in no better and no worse a position
than the Lessor would have been in if no payment
had been made by the Guarantor to the Lessor under
this Clause 10.2.3.
11. ADDITIONAL SECURITY
This Guarantee and Indemnity is in addition to and is not
to prejudice, or be prejudiced by, any other guarantee or
security for the obligations of the Lessee, the Lessor's
Agent or GMCRL or any other person under the Guaranteed
Agreements or otherwise now or hereafter held by the
Lessor and it shall not be necessary for the Lessor before
claiming payment under this Guarantee and Indemnity to
resort to or seek to enforce any other guarantee or
security in respect of the said obligations of the Lessee,
the Lessor's Agent or GMCRL or any other person.
12. ACKNOWLEDGEMENT AND DECLARATION
12.1 The Guarantor agrees, acknowledges and declares that:
12.1.1 if any payment received by the Lessor in respect of
monies owing or due and payable by the Lessee, the
Lessor's Agent or GMCRL shall on the subsequent
insolvency or liquidation of the Lessee, the
Lessor's Agent or, as the case may be, GMCRL be
avoided under any laws relating to insolvency or
liquidation, such payment shall not be considered
as discharging or diminishing the liability of the
Guarantor under this Guarantee and Indemnity and
this Guarantee and Indemnity shall continue to
apply as if such payment had at all times remained
owing by the Lessee, the Lessor's Agent or, as the
case may be, GMCRL;
12.1.2 this Guarantee and Indemnity shall remain the
property of the Lessor and notwithstanding that all
monies and liabilities due or incurred by the
Lessee, the Lessor's Agent and GMCRL to the Lessor
which are guaranteed hereunder shall have been paid
or discharged the Lessor shall be entitled not to
discharge this Guarantee and Indemnity or any
security held by the Lessor for the obligations of
the Guarantor hereunder until the Lessor has
received, at the Guarantor's expense, such legal
opinions as the Lessor shall reasonably require in
terms satisfactory to the Lessor relating to those
aspects of the laws of any relevant jurisdictions
concerning the ability to set aside any such
payment or discharge and in the event of
bankruptcy, winding-up or any similar proceedings
being commenced in respect of the Lessee, the
Lessor's Agent or, as the case may be, GMCRL the
Lessor shall be at liberty not to discharge this
Guarantee and Indemnity or any security held by the
Lessor for the obligations of the Guarantor
hereunder for and during such further period as the
Lessor may reasonably determine;
12.1.3 if the Guarantor has not paid to the Lessor the
full amount of all sums then due under this
Guarantee and Indemnity the Lessor shall be
entitled, for the purpose of enabling the Lessor to
sue the Lessee, the Lessor's Agent or, as the case
may be, GMCRL and/or any other guarantor of the
liabilities which are guaranteed by this Guarantee
and Indemnity or for proving in its or their
liquidation or in any similar proceedings for any
monies due and unpaid by the Lessee, the Lessor's
Agent or, as the case may be, GMCRL to the Lessor,
at any time place and keep for such time as it may
think fit any monies received hereunder, or under
any of such other guarantees or from any other
person, to the credit of an interest bearing
securities realised account or accounts (the rate
of interest being earned on such monies in such
account or accounts being the rate of interest
extended at that time to the other customers of the
Lessor of similar creditworthiness at that time as
the Guarantor) without any obligation on the part
of the Lessor to apply the same or any part
thereof in or towards the discharge of the
indebtedness and liabilities of the Lessee, the
Lessor's Agent or, as the case may be, GMCRL to the
Lessor;
12.1.4 it has received executed copies of, and is aware of
the terms of, the Guaranteed Agreements; and
12.1.5 in respect of the Guarantor's liability hereunder
after the Lessor has made any demand for payment,
the Lessor shall be entitled upon giving notice to
the Guarantor to set off the Guarantor's liability
hereunder against any credit balance to which the
Guarantor is beneficially entitled on any account
or accounts which the Guarantor may have at any of
the offices or branches of any member of Lloyds/TSB
Group plc and to retain as security for the
discharge of the Guarantor's liabilities all
securities or other property of the Guarantor held
by the Lessor (whether for safe custody or
otherwise) PROVIDED THAT nothing herein contained
shall apply to create any charge which depends for
its validity on being duly recorded in any public
registry and PROVIDED FURTHER THAT the failure by
the Lessor to give the notice to the Guarantor
under this Clause 12.1.5 shall in no way prejudice
its rights under this Clause 12.1.5.
13. ASSIGNMENT
13.1 ASSIGNMENT BY LESSOR
The Guarantor acknowledges and agrees that the Lessor
shall be entitled at any time and from time to time to
assign, transfer or otherwise dispose of all of its
interest in the Vessel together with this Guarantee and
Indemnity and the Relevant Lease Documents to which it is
a party to any person to whom the Lessor may assign,
transfer or otherwise dispose of all of its interest in
the Vessel and the benefit and burden of the Relevant
Lease Documents to which it is a party pursuant to
clause 28 of the Head Lease provided that, as at the time
of such assignment, transfer or other disposal (in the
case of an assignment by the Lessor to any person
described in clause 28.1(a) of the Head Lease) or, as the
case may be, at any time thereafter (in the case of an
assignment by the Lessor to any person described in clause
28.1(b) of the Head Lease), the Guarantor shall not be
required to suffer or incur any greater cost under this
Guarantee and Indemnity than would have been the case but
for such assignment.
13.2 ASSIGNMENT BY GUARANTOR
The Guarantor may not assign, transfer or part with any of
its rights or obligations under this Guarantee and
Indemnity or any of the Relevant Lease Documents without
the prior written consent of the Lessor.
14. COSTS AND EXPENSES
The Guarantor shall indemnify the Lessor, on a full
indemnity basis, from and against, and on demand reimburse
the Lessor for, all costs, charges and expenses, properly
(and prior to the occurrence of a Termination Event,
reasonably) incurred by the Lessor in connection with or
incidental to the protection and preservation of the
security hereby constituted or the exercise or
enforcement of, or in endeavouring to exercise or enforce,
any right or remedy conferred upon the Lessor hereunder or
by law including in connection with any action brought by
the Lessor to recover any payment due hereunder, or
relating to any breach of any covenant or obligation in
this Guarantee and Indemnity, whether or not any such
action progresses to judgment.
15. MISCELLANEOUS
15.1 DELAY IN ENFORCEMENT, WAIVERS ETC.
All waivers of any right, power or privilege by either
party hereto shall be in writing signed by such party. No
failure or delay on the part of either party in exercising
any power or right hereunder shall operate as a waiver
thereof nor shall any single or partial exercise of any
such right or power preclude any other or further exercise
of any such right or power. The rights and remedies
herein provided are cumulative and not exclusive of any
rights or remedies provided by law or in equity.
15.2 VARIATION
This Guarantee and Indemnity shall only be amended,
modified or varied by an instrument in writing executed by
or on behalf of the parties hereto.
15.3 INVALIDITY
If any term or provision of this Guarantee and Indemnity
or the application thereof to any person or circumstance
shall to any extent be invalid or unenforceable under any
applicable law neither the remainder of this Guarantee and
Indemnity or application of such term or provision to
persons or circumstances other than those as to which it
is already invalid or unenforceable shall be affected
thereby nor shall the validity, legality and
enforceability of such term or provision under the laws of
any other jurisdiction be in any way affected or impaired.
15.4 NOTICES
15.4.1 Any demand, consent, record, election or notice (a
"NOTICE") required or permitted to be given by
either party to the other under this Guarantee and
Indemnity shall be in writing and sent by first
class prepaid airmail post or by facsimile
transmission or delivered by hand addressed as
follows:
(i) if to the Guarantor to:
Global Marine Inc.
777 N. Eldridge Parkway
Houston
Texas 77079
Attention: General Counsel
Facsimile: + (1) 281 596 5196
(ii) if to the Lessor to:
Nelstar Leasing Company Limited
Great Surrey House
203 Blackfriars Road
London SE1 8NH
England
Attention: The Managing Director
Facsimile: + (44) 171 922 1874
or in each case to such other person or address or
facsimile number as one party may, by not less than
three (3) Business Days' notice, notify in writing
to the other party hereto.
15.4.2 Any notice shall be deemed to have been given or
received to or by the party to whom it is addressed
ten (10) days following posting, if posted by first
class prepaid airmail post and on delivery, if
delivered by hand and, in the case of a facsimile
transmission, upon receipt by the sender of a
transmission report showing the Notice has been
sent in its entirety. The sender of a Notice by
facsimile shall despatch an original of such Notice
in the first class airmail post with postage
prepaid in an envelope addressed to the recipient
of the facsimile at its address stated in Clause
15.4.1 but the facsimile Notice shall be the
definitive Notice for the purposes of this
Guarantee and Indemnity.
15.5 APPLICABLE LAW
This Guarantee and Indemnity shall be governed by and
construed, and performance thereof shall be determined, in
accordance with the laws of England.
15.6 COUNTERPARTS
This Guarantee and Indemnity may be executed in several
counterparts and any single counterpart or set of
counterparts, signed in either case by all of the parties,
shall be deemed to be an original, and all taken together
shall constitute one and the same instrument.
15.7 FURTHER ASSURANCES
The Guarantor agrees from time to time, and at the
Guarantor's expense, to do and perform such other and
further acts and execute and deliver any and all such
other instruments as may be required by law or reasonably
requested by the Lessor to establish, maintain and protect
the rights and remedies of the Lessor and to carry out and
effect the intent and purpose of this Guarantee and
Indemnity and the other Relevant Lease Documents,
including those required by the Lessor in connection with
the rights granted to it under Clause 12.1.5.
15.8 ENTIRE AGREEMENT
This Guarantee and Indemnity, in conjunction with the
Relevant Lease Documents and any letter agreements of even
date herewith between the Guarantor and the Lessor,
constitutes the entire agreement between the parties
hereto in relation to this Guarantee and Indemnity and
supersedes all previous proposals, agreements and other
written and oral communications in relation thereto.
16. SUBMISSION TO JURISDICTION
16.1 For the exclusive benefit of the Lessor, the Guarantor
hereby submits to the non-exclusive jurisdiction of the
courts of England with regard to this Guarantee and
Indemnity. Any legal action or proceedings with respect
to this Guarantee and Indemnity may be brought in the
courts of England or such other jurisdiction, as the
Lessor may elect. By its execution and delivery of this
Guarantee and Indemnity, the Guarantor:
(i) hereby accepts for itself and in respect of its
property, generally and unconditionally, the non-
exclusive jurisdiction of the aforesaid courts with
respect to this Guarantee and Indemnity;
(ii) waives any objections on the grounds of venue or
forum non conveniens or any similar grounds and
agrees that legal proceedings in any one or more
jurisdictions shall not preclude legal proceedings
in any other jurisdiction with respect to this
Guarantee and Indemnity;
(iii) agrees that final judgment against it in any action
or proceedings shall be conclusive and may be
enforced in any other jurisdiction with respect to
this Guarantee and Indemnity within or outside
England by suit on the judgment, a certified copy
of which shall be conclusive evidence of the fact
and of the amount of its indebtedness; and
(iv) hereby consents generally in respect of any legal
action or proceeding arising out of or in
connection with this Guarantee and Indemnity to the
giving of any relief or the issue of any process in
connection with such action or proceeding
including, without limitation, the making,
enforcement or execution against any property
whatsoever (irrespective of its use or intended
use) of any order or judgment which may be made or
given in such action or proceeding.
16.2 The Guarantor, in the case of the courts of England,
hereby designates, appoints and empowers WFW Legal
Services Limited (ref. CALP/DNO 2628.16002) at the address
of its registered office for the time being (presently 15
Appold Street, London EC2A 2HB) to receive, for and on
behalf of it, service of process in such jurisdiction in
any legal action or proceedings with respect to this
Guarantee and Indemnity. The Guarantor undertakes to
maintain an agent for the service of process in England at
all times whilst the Guarantor has any liability, actual
or contingent, under this Guarantee and Indemnity and if,
for any reason such agent named above or its successor
shall no longer serve as agent of the Guarantor to receive
service of process in England the Guarantor shall promptly
appoint a successor in England and advise the Lessor
thereof. It is understood that a copy of any process
served as above will be promptly forwarded (if necessary)
by first class prepaid mail to the Guarantor, but the
failure of the Guarantor to receive such copy shall not
affect in any way the service of such process on the said
person as the agent of the Guarantor.
17. JUDGMENT CURRENCY
If, under any applicable law, whether as a result of a
judgment against the Guarantor or the liquidation of the
Guarantor or for any other reason, any payment under or in
connection with this Guarantee and Indemnity is made or is
recovered in a currency (the "OTHER CURRENCY") other than
that in which it is required to be paid hereunder (the
"ORIGINAL CURRENCY") then, to the extent that the payment
(when converted at the rate of exchange and after
deducting commission on the date of payment or, in the
case of a liquidation, the latest date for the
determination of liabilities permitted by the applicable
law) falls short of the amount which is required to be
paid under or in connection with this Guarantee and
Indemnity as aforesaid, the Guarantor shall as a separate
and independent obligation fully indemnify the Lessor on
demand against the amount of the shortfall; and for the
purposes of this Clause 17 "RATE OF EXCHANGE" means the
rate at which the Lessor is able as at 11.00 a.m. (London
time) on the relevant date to purchase the Original
Currency with the Other Currency.
18. CONFIDENTIALITY
18.1 At all times during the Pre-Lease Period and the Lease
Period, each of the parties hereto shall keep confidential
and shall not, without the prior written consent, in the
case of the Guarantor, of the Lessor and, in the case of
the Lessor, of the Guarantor, issue any press release in
relation to the transactions evidenced by the Lease
Documents, or disclose to any other person the financial
details of any of the Lease Documents and the transactions
contemplated hereby or thereby or any other agreement
entered into after the date hereof by the Lessor and the
Guarantor in connection with any of the Lease Documents,
or release copies or drafts of any such document which
disclose or reveal the identity of the parties (or any of
them) provided that (i) the Lessor will not unreasonably
withhold or delay its consent to any proposed press
release and (ii) the parties hereto shall be entitled,
without any such consent, to disclose the same:
18.1.1 in connection with any proceedings arising out of
or in connection with this Guarantee and Indemnity
or any of the other Lease Documents; or
18.1.2 if required to do so by an order of a court of
competent jurisdiction whether in pursuance of any
procedure for discovery of documents or otherwise;
or
18.1.3 pursuant to any law or regulation having the force
of law; or
18.1.4 to any fiscal, monetary, tax, governmental or other
competent authority; or
18.1.5 to the auditors, legal or other professional
advises, insurance brokers or underwriters of any
member of either the Group or the Lessor's Group;
or
18.1.6 if any of the same is or shall become publicly
known otherwise than as a result of a breach by
such party of this Clause 18; or
18.1.7 in any manner contemplated by any of the Lease
Documents; or
18.1.8 to any other party to the Lease Documents or any
Additional Security Provider to the extent that
such Additional Security Provider has executed a
confidentiality undertaking in favour of the Lessor
in form and content reasonably acceptable to the
Lessor.
19. NATURE OF DOCUMENT
This Guarantee and Indemnity is a deed.
IN WITNESS whereof the Guarantor and the Lessor have caused this
Guarantee and Indemnity to be duly executed and delivered, in the
case of the Guarantor as its deed the day and year first above
written.
EXECUTED AND DELIVERED )
as a DEED by ) WALTER MATHEW RALLS
GLOBAL MARINE INC. )
in the presence of: LISA J. BIGGS )
SIGNED BY )
for and on behalf of )
NELSTAR LEASING COMPANY LIMITED ) Peter Bernard Miles
in the presence of: LISA J. BIGGS )
Date 8 December, 1998
HARLAND AND WOLFF SHIPBUILDING
AND HEAVY INDUSTRIES LIMITED
- and -
BMBF (No.12) LIMITED
- and -
GLOBAL MARINE INTERNATIONAL DRILLING CORPORATION
NOVATION AGREEMENT
(Schedule No. 52/5050 5371-3)
relating to Shipbuilding Contract
dated 28 March, 1998 for the
construction of deepwater
drillship Hull No. 1740
<PAGE>
INDEX
Clause Page
1 DEFINITION AND INTERPRETATION 1
2 REPRESENTATIONS AND WARRANTIES 4
3 CONDITIONS PRECEDENT 7
4 NOVATION 9
5 OTHER TRANSACTIONS 9
6 OFE CONTRACTS 10
7 MEASURE OF DAMAGES 11
8 BUILDER'S RIGHTS AGAINST NEW OWNER 11
9 CERTAIN OBLIGATIONS 12
10 VAT 12
11 STAMP DUTY 13
12 MISCELLANEOUS 14
13 NOTICES 15
14 BUILDER'S COSTS AND EXPENSES 17
15 LAW 17
EXECUTION
APPENDIX A CONTRACT AMENDMENTS
APPENDIX B FORM OF CERTIFICATE (Clause 3.2(a))
APPENDIX C FORM OF CERTIFICATE (Clause 3.2(g))
APPENDIX D FORM OF EFFECTIVE TIME CERTIFICATE
APPENDIX E FORM OF REPLACEMENT BUILDER PARENT COMPANY
GUARANTEE
APPENDIX F FORM OF REPLACEMENT LETTER OF CREDIT
APPENDIX G FORM OF OFE ASSIGNMENT
<PAGE>
THIS NOVATION AGREEMENT is made on 8 December, 1998
BETWEEN:
(1) HARLAND AND WOLFF SHIPBUILDING AND HEAVY INDUSTRIES
LIMITED, a company incorporated under the laws of Northern Ireland
having its registered office at Queen's Island, Belfast, Northern
Ireland, BT3 9DU (the "Builder");
(2) BMBF (No.12) LIMITED, a company incorporated under the laws of England
and Wales having its registered office at Churchill Plaza, Churchill Way,
Basingstoke, Hampshire RG21 7GP (the "New Owner").
(3) GLOBAL MARINE INTERNATIONAL DRILLING CORPORATION (formerly named
Global Marine International Services Corporation), a company incorporated
under the laws of The Bahamas having its registered office at c/o
McKinney, Bancroft & Hughes, Mareva House, 4 George Street, PO Box
No.3937, Nassau, Bahamas (the "Old Owner").
WHEREAS:
(A) The Old Owner and the Builder have entered into the Old Contract (as
defined below) for the construction, completion and delivery by the Builder to
the Old Owner of a deepwater drillship, identified by the Builder as Hull
No. 1740.
(B) At the request of the Old Owner, the New Owner has agreed to assume all
the rights and obligations of the Old Owner under the Old Contract and the
Builder is willing to agree to the substitution of the New Owner in place of
the Old Owner in relation to such rights and obligations, to the release of
the Old Owner in respect thereof and to the amendment of the Old Contract so
as to bring into existence the New Contract (as defined below) between the
Builder and the New Owner, all subject to and upon the terms and conditions of
this Agreement.
IT IS AGREED as follows:
1 DEFINITIONS AND INTERPRETATION
1.1 In this Agreement, unless the context otherwise requires, words and
expressions defined in the Old Contract or the New Contract shall have the
meanings given to them therein when used herein and the following words and
expressions shall have the following meaning:
"Building Agreements" means the Old Contract, this Agreement, the New
Contract, the Put Option Agreement, the OFE Assignments and the OFE
Supervision Agreement;
"Builder's OFE Agent" means the Old Owner in its capacity as agent and
supervisor for the Builder appointed under the OFE Supervision Agreement;
"Contract Amendments" mean the amendments to the Old Contract set out in
Appendix A;
"Cut-Off Date" means 31st December, 1998, or if that date is not a
Working Day, the preceding Working Day;
"Dollars" and "$" means the lawful currency of the United States of
America;
"Effective Time" means the time (on a Working Day) agreed as such in the
certificate to be executed by the parties pursuant to Clause 3.4;
"Excluded OFE Contracts" means OFE Contracts under which title to all
(but not part only) of the applicable OFE the subject thereof has passed from
the applicable OFE Supplier to the Old Owner on or prior to the Effective Time;
"Existing OFE Contracts" means OFE Contracts which are in existence as at
the Effective Time, other than Excluded OFE Contracts;
"Existing Work" means that Work in respect of which, in accordance with
the Old Contract, title has passed or shall have passed to the Old Owner on or
before the Effective Time;
"Future Instalments" means (i) all amounts (whether instalments of
Contract Price, bonuses or otherwise) payable but not yet paid by the Old
Owner to the Builder on or before the Effective Time and (ii) all amounts
(whether instalments of Contract Price, bonuses or otherwise) becoming payable
by the New Owner to the Builder under the New Contract after the Effective
Time;
"Future OFE Contracts" means OFE Contracts which are entered into
(pursuant to the OFE Supervision Agreement) after the Effective Time;
"Initial Payment" means the amount payable in Sterling by the New Owner
to the Builder under Clause 5.1(a);
"Lease" means the lease agreement of even date herewith entered into
between the New Owner and the Old Owner in respect of the leasing of the
Vessel by the New Owner to the Old Owner;
"Lien" means any right, title or interest in favour of any person other
than the New Owner, including (without prejudice to the generality of the
foregoing) any right of ownership, retained title, security, mortgage, pledge,
charge, encumbrance, lease, lien, statutory right in rem, hypothecation, title
retention, attachment, levy, claim or security interest of whatever kind;
"New Contract" means the Old Contract as it is to be amended and restated,
and as it is to be novated to the New Owner by, and subject to and in
accordance with the terms and conditions of, this Agreement;
"New Owner's Agent" means the Old Owner in its capacity as agent and
supervisor for the New Owner appointed under the Supervision Agreement;
"Novated Obligations" means all the obligations and liabilities of "Owner"
expressed to be imposed under, or otherwise arising under, out of or in
connection with, the Old Contract, as such obligations and liabilities are to
be novated and amended subject to and in accordance with the terms and
conditions of this Agreement (which obligations and liabilities shall, for the
avoidance of doubt, include obligations and liabilities arising under the Old
Contract on or before the Effective Time which have not been performed
or discharged on the Effective Time including obligations and liabilities in
respect of amounts invoiced by the Builder but not paid);
"Novated Rights" means all the rights and claims of "Owner" expressed to
be granted under, or otherwise arising under, out of or in connection with,
the Old Contract, as such rights and claims are to be novated and amended
subject to and in accordance with the terms and conditions of this Agreement
(which rights and claims shall, for the avoidance of doubt, include rights and
claims in respect of obligations and liabilities of the Builder arising under
the Old Contract before the Effective Time);
"OFE Assigned Rights" means all right, title and interest of the Old
Owner in and to the Existing OFE Contracts (including, without limitation,
the right to take delivery of and title to the applicable OFE);
"OFE Consideration" means an amount equal to the OFE Cost, payable by
the Builder to the Old Owner subject to and in accordance with Clause 6.3;
"OFE Assignments" means assignments in respect of the Old Owner's
rights, title and interest in and to (but not obligations under) the Existing
OFE Contracts to be entered into between the Old Owner and the Builder
substantially in the form of Appendix G;
"OFE Contracts" means contracts or purchase orders in respect of OFE
with OFE Suppliers (i) entered into or from time to time to be entered into
before the Effective Time by the Old Owner or (ii) from time to time to be
entered into on or after the Effective Time by the Builder's OFE Agent on
behalf of the Builder;
"OFE Cost Instalment" means that part of each instalment of Total
Vessel Cost payable pursuant to Clause 8.3 of the New Contract which is
apportionable to OFE Cost;
"OFE Suppliers" means suppliers of OFE;
"OFE Supervision Agreement" means a supervision agreement entered into
between the Builder and the Builder's OFE Agent of even date herewith
whereby, amongst other things, the Builder's OFE Agent is appointed agent
and supervisor of the Builder in respect of the OFE Contracts;
"Old Contract" means the contract dated 28 March, 1998 between the Old
Owner and the Builder first referred to in Recital (A) above, including all
schedules thereto, as amended, varied and supplemented prior to the date
hereof;
"Pounds" and "Pounds-Sterling" means the lawful currency of the
United Kingdom;
"Put Option Agreement" means the agreement of even date herewith entered
into between the Builder, the New Owner and Global Marine U.K. Limited
providing for the New Contract to be further novated from the New Owner to
Global Marine U.K. Limited at the option of the New Owner in the manner and
in the circumstances therein described;
"Replacement Letter of Credit" means the letter of credit to be issued
by Ulster Bank in favour of the New Owner (but capable of being drawn at the
instance of the New Owner's Agent) in the form of Appendix F;
"Sterling Equivalent" means the equivalent in Pounds of an amount in
Dollars (or any other relevant currency) determined by reference to the spot
rate quoted by Barclays Bank PLC for the purchase of Dollars (or any other
relevant currency) with Pounds at 11:00 a.m. two (2) Working Days prior to
any applicable date of payment under this Agreement;
"Supervision Agreement" means a supervision agreement entered into or
to be entered into between the New Owner and the New Owner's Agent of even
date herewith whereby, amongst other things, the New Owner's Agent is
appointed agent and supervisor of the New Owner in respect of certain matters
relating to the New Contract;
"Working Day" means any day (other than a Saturday or Sunday) on which
banks are open for business in London.
1.2 References in this Agreement to Clauses or Appendices are, unless
otherwise specified, references to clauses of, and appendices to, this
Agreement.
1.3 References to "person" or "persons" or to words importing persons
include, without limitation, individuals, firms, corporations, government
agencies, committees, departments, authorities and other bodies, incorporated
or unincorporated, whether having distinct legal personality or not.
1.4 Clause headings are for ease of reference only.
2 REPRESENTATIONS AND WARRANTIES
2.1 The Builder represents and warrants to each of the other parties to
this Agreement that the following statements are, at the date hereof, true
and accurate:
(a) the Builder is duly incorporated with limited liability under the
laws of Northern Ireland and has full power, authority and right to
enter into and perform its obligations under the Building Agreements
and to consummate the transactions contemplated thereby;
(b) the execution, delivery and performance of the Building Agreements
and the consummation of the transactions contemplated thereby have
been duly authorised by all necessary corporate action on the part
of the Builder, do not require shareholder approval and do not
contravene any applicable law, regulation or order binding on the
Builder or any of its assets or its Memorandum and Articles of
Association;
(c) neither the execution, delivery nor performance by the Builder of
the Building Agreements, nor the consummation of any of the
transactions by the Builder contemplated thereby, require the
consent or approval of, the giving of notice to, the registration
with, or the taking of any other action in respect of, any
governmental authority or agency, except such as have been obtained
and are in full force and effect;
(d) the Building Agreements and any document required to be entered
into by the Builder thereunder constitute, or when entered into
will constitute, legal, valid and binding obligations of the
Builder subject to the following matters:
(i) the other parties to the Building Agreements having the
capacity, power and authority to enter into and perform
their respective obligations thereunder;
(ii) the due execution and delivery of the Building Agreements
by all the other parties thereto; and
(iii) applicable laws relating to bankruptcy, insolvency or
liquidation or any other laws or legal procedures affecting
generally the enforcement of creditors' rights, and
applicable general principles of equity;
(e) title to the Existing Work and the Vessel as it is constructed has
passed or, as the case may be, will have passed, in accordance
with clause 9.1 of the Old Contract, on or prior to the Effective
Time from the Builder to the Old Owner in accordance with the Old
Contract and, as at the Effective Time, there shall be no
other Work, title to which has not passed from the Builder to the
Old Owner; and
(f) at the Effective Time the Existing Work and the Vessel as it is
constructed will be located in Northern Ireland, save for Existing
Work and parts of the Vessel (including, without limitation, OFE)
which may be located elsewhere in the course of manufacture or
transportation.
2.2 The New Owner represents and warrants to each of the other parties to
this Agreement that the following statements are, at the date hereof, true and
accurate:
(a) the New Owner is duly incorporated with limited liability under the
laws of England and Wales, is a wholly-owned indirect subsidiary of Barclays
Bank plc and has full power, authority and right to enter into and perform
its obligations under the Building Agreements to which it is a party and to
consummate the transactions contemplated thereby;
(b) the execution, delivery and performance of the Building Agreements
to which it is a party and the consummation of the transactions contemplated
hereby have been duly authorised by all necessary corporate action on the
part of the New Owner, do not require shareholder approval and do not
contravene any applicable law, order or regulation binding on the New Owner
or any of its assets, or its Memorandum and Articles of Association; and
(c) the Building Agreements to which the New Owner is a party and any
document required to be entered into by the New Owner thereunder constitute,
or when entered into will constitute, legal, valid and binding obligations of
the New Owner subject to the following matters:
(i) the other parties to the Building Agreements having the
capacity, power and authority to enter into and perform
their respective obligations thereunder;
(ii) the due execution and delivery of the Building Agreements
by all the other parties thereto; and
(iii) applicable laws relating to bankruptcy, insolvency or
liquidation or any other laws or legal procedures affecting
generally the enforcement of creditors' rights, and
applicable general principles of equity;
2.3 The Old Owner represents and warrants to each of the other parties to
this Agreement that the following statements are, at the date hereof, true
and accurate:
(a) the Old Owner is duly incorporated under the laws of the Bahamas
and is validly existing with limited liability, has full power
and authority to enter into and perform its obligations under the
Building Agreements to which it is a party and to consummate the
transactions contemplated hereby and thereby;
(b) the execution, delivery and performance of the Building Agreements
to which it is a party and the consummation of the transactions
contemplated thereby have been duly authorised by all necessary
corporate action on the part of the Old Owner, do not require
shareholder approval and do not contravene any law, regulation or
order binding on the Old Owner or any of its assets or its
constitutional documents;
(c) neither the execution, delivery nor performance by the Building
Agreements to which it is a party, nor the consummation of any of
the transactions by the Old Owner contemplated thereby, require the
consent or approval of, the giving of notice to, the registration
with, or the taking of any other action in respect of, any
governmental authority or agency, except such as have been obtained
and are in full force and effect; and
(d) the Building Agreements to which the Old Owner is a party and any
document required to be entered into by the Old Owner thereunder
constitute, or when entered into will constitute, legal, valid and
binding obligations of the Old Owner subject to the following
matters:
(i) the other parties to the Building Agreements having the
capacity, power and authority to enter into and perform
their respective obligations thereunder;
(ii) the due execution and delivery of the Building Agreements
by all the other parties thereto; and
(iii) applicable laws relating to bankruptcy, insolvency or
liquidation or any other laws or legal procedures affecting,
generally the enforcement of creditors' rights and
applicable general principles of equity.
2.4 The Old Owner represents and warrants to the New Owner that the following
statements are, at the date hereof, true and accurate:
(a) the Old Owner has supplied the New Owner with true, complete and
up-to-date copies of the Old Contract including all addenda,
supplements, amendments and collateral agreements related thereto
and all variation orders issued and agreed on or prior to the
date hereof;
(b) all information to be supplied by the Old Owner to the New Owner
pursuant to Clause 3.2 will be true, complete and up-to-date when
supplied;
(c) the Old Contract has not, except by, or as described in, this
Agreement, been amended, waived, varied, modified, nor has it been
novated, cancelled or terminated;
(d) the Old Owner has not sold, assigned, transferred or created any
Lien in or over the Old Contract or its title to the Existing Work
or the Vessel as it is constructed; and
(e) from the execution of this Agreement until the Effective Time the
Old Owner will:
(i) promptly supply the New Owner with copies of all documents
of the type referred to in Clause 2.4(a) which are entered
into during such period;
(ii) not do any of the things referred to in Clause 2.4(c),
except as permitted by or pursuant to the terms of the
Supervision Agreement; and
(iii) not do any of the things referred to in Clause 2.4(d).
2.5 The representations and warranties given in this Clause 2 shall survive
the execution of this Agreement.
3 CONDITIONS PRECEDENT
3.1 The occurrence of the Effective Time and the matters listed below in
this Clause 3.1 are subject to the conditions precedent set out in Clause 3.2
having, by no later than the Cut-Off Date, been fulfilled or waived by the
party or parties for whose benefit such conditions are given as expressed
in parentheses. Those matters are:
(a) the coming into effect of the Contract Amendments;
(b) the novation of the Old Contract in accordance with Clause 4;
(c) the obligation of the New Owner to pay the Builder the Initial
Payment in accordance with Clause 5.1(a) and the obligation of the
Builder to pay the Old Owner the amount referred to in Clause
5.1(b);
(d) the obligation of the Old Owner to pass title to the Existing Work
and the Vessel as it is constructed to the Builder, the obligation
of the Builder to take title to the Existing Work and the Vessel
as it is constructed from the Old Owner and the passing of title
from the Builder to the New Owner, all in accordance with
Clause 5.3; and
(e) the assignment of the Existing OFE Contracts in accordance with
Clause 6 and the other matters relating to OFE set out in
Clause 6.
3.2 The conditions precedent referred to in Clause 3.1 are as follows:
(a) a certificate (in the form of Appendix B) from the New Owner
confirming that the conditions precedent referred to in Schedule 4,
Parts 1 and 2 of the Lease have been fulfilled to the satisfaction
of, or waived by, the New Owner (New Owner);
(b) the execution and delivery to the New Owner of a parent company
guarantee from the Builder's parent company in the form of
Appendix E (New Owner);
(c) the delivery to the New Owner of a letter of credit in the form of
Appendix F issued by Ulster Bank (New Owner);
(d) the delivery by the Old Owner to the New Owner of schedules
describing, respectively, the Existing Work and the Existing OFE
Contracts (New Owner);
(e) the written confirmation by the Old Owner to the New Owner and the
Builder of details of the amount referred to in Clause 5.1(a) and
any amounts referred to in (i) of the definition of Future
Instalments (New Owner and Builder);
(f) the execution and delivery by the Builder, New Owner and Global
Marine U.K. Limited of the Put Option Agreement (Builder, New Owner
and Old Owner);
(g) a certificate (in the form of Appendix C) from the Old Owner
confirming that the conditions precedent referred to in Schedule 4,
Part 4 of the Lease have been fulfilled to the satisfaction of, or
waived by, the Lessee (Old Owner);
(h) the New Owner shall have received an invoice from the Builder for
the Initial Payment complying with the laws relating to Value Added
Tax (New Owner);
(i) the Old Owner shall have received a credit note from the
Builder for an amount equal to the aggregate of all
payments previously made by the Old Owner to the Builder
under the Old Contract (Old Owner);
(j) the Old Owner and the Builder shall have entered into OFE
Assignments in respect of the Existing OFE Contracts (Old Owner,
New Owner and Builder);
(k) the New Owner shall have confirmed to the Builder and the Old
Owner in writing that the Owner Project Manager and the Authorised
Representatives of the Owner Project Manager remain unchanged and
continue to act (by virtue of their appointment by the New Owner's
Agent) on behalf of the New Owner (Builder and Old Owner);
(l) the New Owner being satisfied that payment of the Initial Payment
would not cause the Payment Limit (as defined in the Put Option
Agreement) to be exceeded (New Owner);
(m) evidence reasonably satisfactory to the Old Owner and the New
Owner of the due authorisation and execution (i) by the Builder of
this Agreement and the other Building Agreements (other than the
Old Contract) to which it is a party and (ii) by the Builder's
parent company of the guarantee in the form of Appendix E (Old
Owner and New Owner);
(n) evidence reasonably satisfactory to the Builder and the New Owner
of the due authorisation and execution by the Old Owner of this
Agreement and the other Building Agreements to which it is a party
(Builder and New Owner);
(o) evidence reasonably satisfactory to the Builder and the Old Owner
of the due authorisation and execution by the New Owner of this
Agreement and the other Building Agreements to which it is a party
(Builder and Old Owner);
(p) a legal opinion, in form and substance satisfactory to the Builder,
from Global Marine Inc.'s in-house counsel on the assignability of
the Existing OFE Contracts (Builder);
(q) the New Owner, the New Owner's Agent and the Builder shall have
confirmed in writing their satisfaction as to the terms on which
the insurance arrangements pursuant to Clause 10 of the New
Contract are put in place and/or amended as at the Effective Time
(Builder and Old Owner and New Owner).
3.3 If a party agrees to waive or defer any of the conditions precedent
specified in Clause 3.2 which are expressed to be for its benefit, such party
may attach to such waiver or deferral such requirements and further conditions
as such party may reasonably determine (in the case of Clauses 3.2(a) and (g),
in accordance with the applicable provisions of the Lease), provided that
any such conditions shall not affect the occurrence of the Effective Time.
3.4 At the Effective Time, the parties shall execute a certificate in the
form of Appendix D confirming that the Effective Time has occurred.
3.5 If the Effective Time does not occur on or before the Cut-Off Date, the
Old Contract shall continue in full force and effect as if this Agreement had
never been executed and each of the Old Owner, the Builder and the New Owner
agrees that it shall not have any rights and claims against the others under
this Agreement other than the rights and claims of the Builder against the Old
Owner under Clause 14, and without prejudice to the provisions of the Lease.
3.6 Promptly following the Effective Time the New Owner, the New Owner's
Agent and the Builder shall initial, by way of agreement to its form,
conformed copies of the New Contract (as amended and restated).
4 NOVATION
4.1 On and with effect from (but subject to the occurrence of) the Effective
Time and immediately prior to the effectiveness of the Contract Amendments it
is agreed that the following shall, and hereby does, take place:
(a) the Old Owner releases and discharges the Builder from all
obligations, liabilities, claims and demands under the Old Contract;
(b) the Builder releases and discharges the Old Owner from all
obligations, liabilities, claims and demands under the Old
Contract;
(c) the New Owner has the benefit of the Novated Rights to the
exclusion of the Old Owner and the Builder assumes towards the New
Owner all obligations and liabilities corresponding to the Novated
Rights;
(d) the New Owner assumes the Novated Obligations (including, without
limitation, the obligation to pay all Future Instalments in
accordance with the New Contract) and the Builder has the benefit
of all rights and claims corresponding to the Novated Obligations,
such that with effect from the Effective Time the Old Contract
shall cease to have effect as between the Builder and the Old Owner
and shall be novated so as to bring the New Contract into effect
between the Builder and the New Owner.
4.2 The Builder acknowledges that all obligations and liabilities of the Old
Owner under the Old Contract which have been performed or discharged by the
Old Owner shall, to that extent, be treated by the Builder for the purposes of
the New Contract as having been performed or discharged by the New Owner.
4.3 Except as otherwise expressly provided in this Agreement, nothing in this
Agreement or the New Contract shall subject the Builder to any liability to
which it would not otherwise be subject under the Old Contract or diminish in
any way any rights or remedies to which the Builder would otherwise be
entitled under the Old Contract or modify in any respect the Builder's
contractual rights and obligations thereunder.
4.4 The Contract Amendments shall become effective on the Effective Time
immediately after the novation pursuant to Clause 4.1.
5 OTHER TRANSACTIONS
5.1 At the Effective Time (subject to Clause 5.2), the following payments
shall be made:
(a) the New Owner shall pay to the Builder an amount equal to the
aggregate of:
(i) the Sterling Equivalent of all payments previously made by
the Old Owner to the Builder under the Old Contract; and
(ii) the Sterling Equivalent of all payments previously made by
the Old Owner to OFE Suppliers under the Existing OFE
Contracts; and
(b) the Builder shall subject to, but forthwith upon, receipt of the
payment from the New Owner pursuant to sub-clause (a) above (being
the Initial Payment), pay to the Old Owner an amount equal to the
Initial Payment, such payment to be made to an account of the Old
Owner in London to be separately notified to the Builder and, for
the purposes of the following provision of this Clause, the New
Owner. The Builder hereby directs the New Owner to pay, on the
Builder's behalf, to the Old Owner at the Effective Time an amount
equal to the Initial Payment. The Builder acknowledges that such
payment by the New Owner to the Old Owner shall constitute pro tanto
satisfaction of the New Owner's obligation to make the Initial
Payment to the Builder in accordance with Clause 5.1(a). The Old
Owner acknowledges that such payment by the New Owner to the Old
Owner shall constitute pro tanto satisfaction of the Builder's
obligation to make payment to the Old Owner in accordance with
Clause 5.1(b).
5.2 If the Effective Time occurs after 2:00 p.m (London time) the payments
referred to in Clause 5.1 shall be made on the next Working Day after the day
on which the Effective Time occurs.
5.3 At the Effective Time the Old Owner shall and hereby does pass title to
the Existing Work and the Vessel as it is constructed to the Builder, and the
Builder shall accept such title. Thereupon, title to the Existing Work and
the Vessel as it is constructed shall, and does hereby, pass automatically to
the New Owner in accordance with Clause 9.1 of the New Contract.
5.4 At the Effective Time each of the Parent Guarantee and the Letter of
Credit shall, for the avoidance of doubt, be returned cancelled and shall be
replaced by the guarantee and letter of credit referred to in Clauses 3.2(b)
and (c) respectively.
6 OFE CONTRACTS
6.1 At the Effective Time, the Old Owner and the Builder shall enter into
OFE Assignments in respect of the Existing OFE Contracts.
6.2 On or from time to time after the Effective Time the Builder's OFE Agent
shall enter into the Future OFE Contracts pursuant to the OFE Supervision
Agreement.
6.3 The consideration payable by the Builder for the Old Owner's (i) entering
into the OFE Assignments and (ii) assuming liability (as the Builder's OFE
Agent) to make payment to OFE Suppliers under the Future OFE Contracts shall
be the OFE Consideration. It is hereby agreed that the Builder's obligation
to pay the Old Owner the OFE Consideration shall, without prejudice to the
assignment contained in Clause 6.4, be a limited recourse obligation, and only
to pay such amount at the same time as the Builder receives from the New
Owner:
(a) the payment referred to in Clause 5.1(a)(ii); or
(b) an OFE Cost Instalment pursuant to Clause 8.3 of the New Contract.
6.4 As security for the Builder's obligation to pay the OFE Consideration to
the Old Owner in the manner set out in Clause 6.3, the Builder hereby assigns
and agrees to assign absolutely to the Old Owner all the Builder's right,
title and interest in and to each OFE Cost Instalment. The New Owner, by its
execution of this Agreement, hereby acknowledges such assignment.
6.5 Pursuant to the assignment contained in Clause 6.4 each OFE Cost
Instalment shall be paid direct by the New Owner to the Old Owner to the
account of the Old Owner to be notified pursuant to Clause 5.1(b).
6.6 Title to the OFE shall pass from the Builder to the New Owner in
accordance with Clause 9.1 of the New Contract. At the time of, and with
effect from, such passing of title the Builder hereby assigns and agrees to
assign absolutely to and in favour of the New Owner all the Builder's right,
title and interest in and to the OFE Contracts relating to such OFE. The
Builder shall on the request of the New Owner's Agent from time to time give
notice to the applicable OFE Suppliers in such form as the New Owner's Agent
shall reasonably require.
7 MEASURE OF DAMAGES
7.1 The Builder hereby acknowledges and agrees with the New Owner and the Old
Owner that, if the Builder is in default of its liabilities or breach of its
obligations under the Old Contract, the Old Owner's entitlement to damages
shall be preserved and vest in the New Owner. If the Builder is in breach of
its liabilities or obligations under the Old Contract or New Contract the
measure of such damages shall be that which would have been payable to the
Old Owner under the Old Contract if this Agreement had not been entered into.
7.2 For the avoidance of doubt, without prejudice to the generality of
Clause 21 of the New Contract, the New Owner shall be entitled to assign all
rights and claims in respect of the liabilities and obligations referred to
in Clause 7.1 and all the New Owner's rights under the New Contract, without
limitation.
7.3 The Builder shall not be liable to pay an aggregate amount under
Clauses 17 or 25 of the New Contract in excess of the amount which the Builder
would have been liable to pay under Clauses 17 and 25 of the Old Contract if
this Agreement had not been entered into.
8 BUILDER'S RIGHTS AGAINST NEW OWNER
8.1 The Builder agrees that, in relation to all amounts payable to it under
the New Contract, it will first submit Builder's Quarterly Invoices or other
invoices (in each case addressed to the New Owner) to the New Owner's Agent
and not the New Owner.
8.2 The Builder will not re-submit any Builder's Quarterly Invoice or other
invoices directly to the New Owner, or otherwise look to or make demand on the
New Owner (except as permitted by Clause 8.1), for a period (the "Agreed
Period") which shall be:
(a) seven (7) days, in the case of (i) instalments which are the
subject of invoices submitted pursuant to Clause 8.5(ii) of the
New Contract or (ii) any other amounts payable to the Builder
under the New Contract (other than amounts the subject of Builder's
Quarterly Invoices); and
(b) thirty (30) days, in the case of Builder's Quarterly Invoices.
8.3 On the first Working Day after the expiry of the Agreed Period (the
"Agreed Date") the Builder may make demand directly on the New Owner for
payment of any amount referred to in Clause 8.1 and which then remains unpaid
and the New Owner shall, subject to the terms of the New Contract, thereupon
be obliged to pay such amount on the date falling two (2) Working Days after
the Agreed Date together with, for the avoidance of doubt, (but in the case of
Builder's Quarterly Invoices only if they are undisputed as referred to in
Clause 8.10 of the New Contract) interest from the last day of the Agreed
Period until payment at the rate of two per cent (2%) over one month LIBOR
from time to time in the particular currency.
8.4 For the avoidance of doubt:
(a) references in this Clause 8 to amounts "payable" to the Builder
shall be without prejudice to the New Owner's right to contest
whether such amounts are payable in accordance with the terms of
the New Contract and, for this purpose, the expression "payable"
shall be deemed to include amounts allegedly payable;
(b) payment of any amount to the Builder by the New Owner's Agent
shall constitute pro tanto discharge of the New Owner's obligation
in respect of that amount; and
(c) the New Owner shall not be in default of its payment obligations
under the New Contract unless and until it shall fail to make a
payment in accordance with Clause 8.3.
9 CERTAIN OBLIGATIONS
9.1 The Old Owner (in its own capacity, not as agent of the New Owner and
without liability of the New Owner) agrees to be bound by, and liable under,
the provisions of the New Contract where it is stated in Appendix A that any
obligations are obligations of Global Marine International Drilling
Corporation (the provisions of the New Contract to which this Clause 9.1
applies being Clauses 7.1, 10, 12.6, 17.2, 25.3 and 26.2). The Builder
acknowledges that the New Owner shall have no liability under those provisions.
9.2 The Builder agrees to be bound by, and liable under, the provisions of
the New Contract which are expressed to be for the benefit of the New Owner's
Agent (the provisions of the New Contract to which this Clause 9.2 applies
being Clauses 3.4, 3.5, 17.1, 25.2 and (by reason of the amendment to the
definition of "Owner Group") 26.1.
10 VAT
10.1 If Value Added Tax is chargeable on any supplies hereunder with the
result that the Builder is required to account for Value Added Tax in respect
of any supply made by it under, or as contemplated in, this Agreement, the
New Contract, the OFE Assignments, the Put Option Agreement or the OFE
Supervision Agreement, the Old Owner and/or the New Owner (depending on to
whom the supply is made) shall pay to the Builder on demand such Value
Added Tax against receipt by the Old Owner or the New Owner (as applicable)
of a valid VAT invoice in respect of the relevant supply.
10.2 If the Builder shall make any payments under, or as contemplated in this
Agreement or the other Building Agreements which shall bear or include Value
Added Tax which the Builder shall not be able to recover (by way of repayment
or credit) from the Value Added Tax authority which Value Added Tax it would
not have incurred or would have been able to recover had it not entered into
this Agreement then the Old Owner shall indemnify the Builder against such non-
recoverability by paying to the Builder an amount equal to the Value Added Tax
not recovered by the Builder provided that the Builder shall specify the basis
of calculation and the circumstances in which the claim under this Clause 10.2
has arisen.
10.3 The Old Owner, the Builder and the New Owner agree to co-operate with a
view to minimising any Value Added Tax payable by any of them under this
Agreement, the New Contract, the OFE Assignments, the Put Option Agreement or
the OFE Supervision Agreement. The Builder agrees to use all reasonable
endeavours to ensure that any Value Added Tax in respect of which indemnity
may be available under Clause 10.2 is recovered as aforesaid. If it
subsequently transpires that any Value Added Tax in respect of which the
Builder has been indemnified under Clause 10.2 is recovered by the Builder,
the Builder shall promptly refund to the Old Owner the amount so recovered.
10.4 The consideration for the supplies under, or as contemplated by, this
Agreement or the other Building Agreements shall be exclusive of Value Added
Tax.
11 STAMP DUTY
11.1 The Old Owner is of the understanding that none of the following
documents, that is to say:
(a) the New Contract; this Agreement; the OFE Contracts, the OFE
Assignments, the Put Option Agreement; the Put Notice; the
certificate to be entered into pursuant to Clause 3.4 in the form
of Appendix D (together "the Transaction Documents"); and
(b) any other written instrument of any kind entered into in connection
with or pursuant to the Transaction Documents of which the main
effect or purpose is (or of which one of the main purposes is) to
transfer title to any part of the Work from one of the parties to
this Agreement to another of them (together "the Documents" and
severally "the Document"), is chargeable to United Kingdom stamp
duty. In case any of the Documents is chargeable to stamp duty
the Old Owner shall, subject to Clauses 11.2 and 11.3, indemnify
the Builder against any stamp duty imposed on or in connection
with any of the Documents (including any penalties and interest
accrued up to 3 Working Days after any payment to the Builder under
this Clause).
11.2 The Old Owner shall not be liable under Clause 11.1 in respect of stamp
duty on any document executed before the execution of the Building Agreements.
11.3 The Builder will use its reasonable endeavours to avoid unnecessarily
rendering the Old Owner liable under Clause 11.1 provided always that the
Builder shall be entitled to present an executed original or counterpart
document to the relevant authority for stamping in any case where:
(a) such document is intended to be used by the Builder as evidence in
legal proceedings and would be inadmissible in evidence if left
unstamped; or
(b) an official or authority empowered to require production of the
same has made a written request for the Builder to produce a
stamped executed original or counterpart document (whether in
connection with taxation or otherwise); or
(c) it is obligatory to file a stamped executed original or counterpart
document with any official or authority; or
(d) the New Owner has requested the Builder in writing to present an
executed original or counterpart documents for stamping. Before
communicating with the Inland Revenue in relation to the question
of whether any Document is chargeable to stamp duty, the Builder
shall notify the Old Owner in writing and the Old Owner shall have
the right at its own cost promptly to conduct any such
communications with the Inland Revenue and, if the Inland Revenue
determine that such Document is chargeable to stamp duty, the Old
Owner shall be entitled at its own cost to take on the conduct of
any appeal on behalf of the Builder, keeping the Builder and the
New Owner promptly informed of all matters relating to such
communications or appeal and on the basis that the Old Owner shall
first promptly submit all material communications which are to be
transmitted to the Inland Revenue to the Builder and the New Owner
and shall take account of their reasonable comments. The Old Owner
shall indemnify the Builder on demand against its reasonable costs
incurred in connection with any actions taken by it under this
Clause.
12 MISCELLANEOUS
12.1 This Agreement may be executed in several counterparts and any single
counterpart or set of counterparts signed, in either case, by all of the
parties thereto shall be deemed to be an original, and all counterparts when
taken together shall constitute one and the same instrument.
12.2 This Agreement may be amended only by an instrument in writing signed by
all of the parties hereto.
12.3 Any waiver of any right, power or privilege by any party hereto shall be
in writing signed by such party. No failure or delay by any party hereto to
exercise any right, power or privilege under this Agreement shall operate as
a waiver thereof nor shall any single or partial exercise of such right, power
or privilege preclude any further exercise thereof or of any other right, power
or privilege.
12.4 Each party agrees, at the request of any other party to enter into such
further documents and do all such further acts as the requesting party may
reasonably require to give full effect to the purpose and intent of this
Agreement. The requesting party (or the Old Owner if the requesting party is
the New Owner) shall reimburse the other parties for all out of pocket costs
and expenses (including legal fees and expenses) reasonably incurred by each
other party in furtherance of action taken pursuant to this Clause 12.4.
12.5 The service by the New Owner of a Put Notice (as defined in the Put
Option Agreement) pursuant to and in accordance with the Put Option Agreement
shall release the parties from their obligations under this Agreement except
that the provisions of Clause 7, 10, 11, 12.4, this 12.5, 13, 14 and 15 shall
survive and continue after the service of a Put Notice.
12.6 No party shall be entitled to assign or otherwise transfer its rights
or obligations under this Agreement or the other Building Agreements without
the prior written consent of the other parties, provided that:
(a) the New Owner shall be entitled to assign, transfer, novate or
otherwise dispose of all (but not part only) of its rights and
obligations under this Agreement and the other Building Agreements
to which it is a party to any person who is a member of the New
Owner's group of companies (that is Barclays Bank PLC and all its
Subsidiaries (UK) (as defined in the Lease) from time to time and
its Holding Company (as defined in the Lease) from time to time)
but no other party to this Agreement shall be under any greater
obligation or liability under this Agreement or any of the other
Building Agreements than it would have been under but for such
assignment, transfer, novation or other disposal; and
(b) the New Owner shall be freely entitled to assign its rights
obtained by assignment pursuant to Clause 6.6. This Clause 12.6
is without prejudice to Clause 7.2 or the operation of the Put
Option Agreement.
12.7 The Replacement Letter of Credit will be capable of being drawn in
respect of amounts due from the Builder to Nelstar Leasing Company
Limited ("Nelstar") under the shipbuilding contract (as novated) in
respect of Builder's Hull No. 1739. Accordingly, the New Owner
agrees:
(a) that any amount drawn under the Replacement Letter of Credit
which is in respect of such obligations (as certified by the New
Owner's Agent to the New Owner) will promptly upon receipt by the
New Owner be paid to Nelstar; and
(b) that any amount received by the New Owner from Nelstar pursuant
to Clause 12.7(a) of the novation agreement in respect of Hull
No. 1739 shall promptly be paid by the New Owner to the Old Owner
(in its capacity as lessee under the Lease and pursuant to
Clause 14 thereof).
13 NOTICES
13.1 Every notice, consent, request, demand or other communication (a
"Notice") under this Agreement or the New Contract shall:
(a) be in the English language and in writing delivered personally or
by prepaid first class airmail letter or delivered by hand or
sent by fax;
(b) be sent:
(i) to the Builder to:
The Project Manager
Ship No: 1740
Harland and Wolff Shipbuilding and Heavy Industries Limited
Queen's Island
Belfast
BT3 9DU
Northern Ireland
Fax: 01232-458515
(ii) to the New Owner to:
BMBF (No.12) Limited
c/o Barclays Mercantile Business Finance Limited
Churchill Plaza
Churchill Way
Basingstoke
Hampshire RG21 7GL
England
Fax: +(44) 01256 810283
Attention: Company Secretary
Referring to: "Schedule number 52/5050 5371-3"
(iii) to the Old Owner to:
Global Marine International Drilling Corporation
c/o McKinney, Bancroft & Hughes
Mareva House, 4 George Street
P.O. Box N.3937
Nassau, Bahamas
Fax: 001 242 328 2520
Attention: Mr Richard Lightbourn
With copies to:
Global Marine International Drilling Corporation
Parkstraat 83
2514 JG Den Haag
The Netherlands
Fax: (0031) 70 302 833
Attention: Mr Bruce Watson
and
Global Marine Inc.
777 N. Eldridge Parkway
Houston, Texas 77079
Fax: (1) 281 596 5196
Attention: General Counsel
and
Global Marine Drilling Company
777 N. Eldridge Parkway
Houston, Texas 77079
Fax: (1) 281 596 5179
Attention: John A. Thorson
(Manager Construction and Marine Projects)
or in each case to such other person or address as one party may, by not less
than three (3) Working Days' notice, notify in writing to other parties hereto.
(c) any Notice shall be deemed to have been given or received to or
by the party to whom it is addressed ten (10) days following
posting, if posted by first class prepaid airmail post and on
receipt, if delivered by hand. Any notice sent by fax shall be
treated as received only when the sender has received a fax by
return from the recipient acknowledging receipt;
(d) a Notice to the Old Owner shall be copied as referred to in
sub-clause (b) above but no failure to serve a copy or copies
will invalidate a notice served on the Old Owner.
14 BUILDER'S COSTS AND EXPENSES
14.1 The Old Owner shall reimburse the Builder on demand, on a full indemnity
basis, for all costs and expenses (including legal fees and disbursements plus
any Value Added Tax payable thereon) incurred by the Builder in connection
with or arising out of the negotiation, execution, operation and implementation
of the Building Agreements (other than the Old Contract) and any other
documents required in connection therewith (including, for the avoidance of
doubt, arising out of any assignments by the New Owner pursuant to Clause
12.6(a) or Clause 9.6 of the Put Option Agreement).
15 LAW
15.1 This Agreement and the rights and obligations of the parties hereunder
shall be governed by and construed in accordance with the laws of England and
Wales.
15.2 Each of the parties hereto submits to the jurisdiction of the courts of
England with respect to this Agreement (any such legal action or proceedings
before such courts being "Relevant Proceedings"). By its execution and
delivery of this Agreement each of the parties hereto:
(a) hereby accepts for itself and in respect of its property,
generally and unconditionally, the exclusive jurisdiction of the
aforesaid courts with respect to any Relevant Proceedings;
(b) waives any objections on the grounds of venue or forum non
conveniens or any similar grounds with respect to any Relevant
Proceedings;
(c) agrees that final judgment against it in any Relevant Proceedings
shall be conclusive and may be enforced in any other jurisdiction
by suit on the judgment; and the Old Owner hereby designates,
appoints and empowers WFW Legal Services Limited at its
registered office for the time being (currently at 15 Appold
Street, London EC2A 2HB) to receive, for and on behalf of it,
service of process in such jurisdiction in any Relevant
Proceedings. The Old Owner agrees that it will at all times
continuously maintain an agent to receive service of process in
England on its behalf and on behalf of their property with respect
to any Relevant Proceedings and in the event that, for any reason,
such agent named above or its successor shall no longer serve as
agent of the Old Owner to receive service of process in England
with respect to any Relevant Proceedings it shall promptly appoint
a successor and advise the other parties thereof. It is
understood that a copy of any such process served on any such
agent will be promptly forwarded by first class prepaid mail to
the Old Owner at its address specified in Clause 13 but the
failure of the Old Owner, to receive such copy shall not affect in
any way the service of such process on the said company as the
agent of such party.
15.3 The provisions of this Clause 15 are without prejudice to the provisions
of Clause 20 of the Old Contract and the New Contract, which shall continue
to apply in relation to the Old Contract and the New Contract, respectively.
SIGNED by the representatives of the parties.
___________________________________________
J.P.WARD, Attorney-in-Fact for H&W
Duly authorised for and on behalf of
HARLAND AND WOLFF SHIPBUILDING
AND HEAVY INDUSTRIES LIMITED
___________________________________________
TIM HOLGATE
Duly authorised for and on behalf of
BMBF (No.12) LIMITED
___________________________________________
W.A. BAKER
Duly authorised for and on behalf of
GLOBAL MARINE INTERNATIONAL DRILLING
CORPORATION
APPENDIX A
CONTRACT AMENDMENTS
Capitalised words and expressions defined in the Old Contract, or in the
Novation Agreement of which this Appendix A forms part, shall have the same
meanings when used herein. With effect from the Effective Time the New
Contract shall be and it is hereby supplemented and amended as set out below.
1 General
All references to "Owner" shall be construed as references to the New
Owner rather than the Old Owner save as provided below in this
paragraph 1 or elsewhere in this Appendix A.
(a) in Clause 1.1.20 the references to "Owner" shall mean the Old
Owner before the Effective Time and the New Owner as from the
Effective Time, and the words "(or the Supervisor on behalf of the
Owner)" shall be inserted immediately after "Owner", where it
appears twice;
(b) in Clause 1.1.28 the first reference to "Owner" shall mean the Old
Owner and the second reference to "Owner" shall mean the Old Owner
before the Effective Time and the New Owner as from the Effective
Time, and the words "(or by the Supervisor on behalf of the
Owner)" shall be inserted immediately after the second reference
to "Owner";
(c) in Clause 2.1 the reference to "Owner's design" in the second line
shall mean the Old Owner's design;
(d) in Clause 3.2 the reference to "Owner" in the second line of
sub-clause (a) shall mean the Old Owner and the words "(or by the
Supervisor)" shall be inserted immediately after "Owner" where it
appears elsewhere in Clause 3.2;
(e) in Clause 3.4 the reference to "Owner" in the fourth line shall
mean the Old Owner (so that, for the avoidance of doubt, the Owner
I.P.R. shall be and remain the sole and exclusive property of the
Old Owner and not the New Owner);
(f) in Clause 3.5 the references to "Owner" shall mean the Old Owner
(so that, for the avoidance of doubt, the applicable Builder's
Working Drawings and other applicable rights referred to in that
Clause shall be and remain the property of the Old Owner and not
the New Owner);
(g) in Clause 12.2 (final paragraph) the references to "Owner" where
they occur in the second and fifth lines shall mean the Old Owner
before the Effective Time and the New Owner or the New Owner's
Agent as from the Effective Time, and the words "(or by the
Supervisor") shall be inserted immediately after "Owner" where
it so appears;
(h) in Clause 16.3 the references to "Owner" where they occur twice
shall mean the Old Owner before the Effective Time and the New
Owner as from the Effective Time, and the words "(or the
Supervisor)" shall be inserted immediately after "Owner" where
is so appears; 2 Clause 1.1.16, Clause 8.2 and Schedule Three.
Letter of Credit
The Letter of Credit shall be replaced by, and "Letter of Credit" shall
mean, the letter of credit in the form of Appendix F to the Novation Agreement
and, where the context requires, shall include the letter of credit issued or
to be issued pursuant to the novation agreement in respect of Hull No. 1739.
3 Clause 1.1.19, "Owner Furnished Equipment"
The continued use of the expressions "Owner Furnished Equipment" and
"OFE" in the New Contract shall be for convenience only and shall not affect
the provisions of the New Contract in relation to the rights and obligations
of the parties in relation to such equipment.
4 Clause 1.1.22, Clause 8.2 and Schedule Four. Parent Company Guarantee
The Parent Company Guarantee shall be replaced by, and "Parent Company
Guarantee" shall mean, the guarantee in the form of Appendix E of the
Novation Agreement.
5 Clause 1.1.21. "Owner Project Manager"
The following shall be inserted after "by Owner" in the first line:
"(or by the Supervisor on behalf of the Owner)".
6 Clause 1 - Interpretation
New defined terms shall be inserted as follows:
(a) ""Builder's OFE Agent" means Global Marine International Drilling
Corporation in its capacity as agent and supervisor for the Builder
appointed under the OFE Supervision Agreement;";
(b) ""Novation Agreement" means an agreement relating to this Contract
entered into or to be entered into among the Builder, BMBF (No.12)
Limited and the Owner;";
(c) ""OFE Contract" means any contract for the supply of an item or
items of OFE entered or to be entered into between Global Marine
International Drilling Corporation (whether on its own behalf or
as the Builder's OFE Agent) and an Owner Supplier or Owner
Subcontractor;";
(d) ""OFE Cost" means the cost of OFE specified in Clause 8.1.B;";
(e) ""OFE Supervision Agreement" means a supervision agreement entered
into or to be entered into between the Builder and the Builder's
OFE Agent whereby, amongst other things, the Builder's OFE Agent
is appointed agent and supervisor of the Builder in respect of the
OFE Contracts;";
(f) ""Supervision Agreement" means the supervision agreement relating
to this Contract entered into or to be entered into between BMBF
(No. 12) Limited and Global Marine International Drilling
Corporation;";
(g) ""Supervisor" means Global Marine International Drilling
Corporation, having been appointed by the Owner to act as Owner's
exclusive supervisor and agent for the purposes of this Contract
upon the terms and conditions set out in the Supervision
Agreement;";
(h) ""Total Vessel Cost" means the aggregate of the Contract Price
and the OFE Cost;".
7 Clause 5.16
Clause 5.16 shall be amended by inserting "(including the Supervisor and
Supervisor's Operations Personnel)" after "operations personnel" in the
first line.
8 Clause 7 - Owner Furnished Equipment
Clause 7 shall be amended as follows:
(a) Clause 7.1 shall be deleted and replaced with the following:
"7.1 All items of Owner Furnished Equipment shall be delivered to
the Builder's Yard by the Builder's OFE Agent in accordance with
the delivery date for such item specified in the initial Primavera
critical path project schedule (as amended from time to time by
Permissible Delay), (the "OFE Scheduled Delivery Date") provided
that the Builder shall be under no liability for any failure or
delay in such delivery.";
(b) in Clause 7.6, the word "Owner" in the first line shall be
replaced by "Builder's OFE Agent".
9 Clause 8 - Price and Terms of Payment
Clause 8 shall be amended as follows:
(a) Clause 8.1B shall be deleted and replaced with the following:
"B An estimated sum of United States Dollars One hundred and ten
million (US$110,000,000) for OFE, subject to upward or downward
adjustment as notified by the Supervisor to the Builder from time
to time, having regard to the OFE necessary to complete this
Contract but in no circumstances greater than United States
Dollars One hundred and twenty million (US$120,000,000).";
(b) Clause 8.2 shall be deleted and replaced with the following:
"8.2 Builder shall provide the Parent Company Guarantee (in the
form of Appendix E to the Novation Agreement) and the Letter of
Credit (in the form of Appendix F to the Novation Agreement) at
the time required by, and otherwise in accordance with, the
Novation Agreement.";
(c) Clause 8.3 shall be deleted and replaced with the following:
"8.3 With effect from the Effective Time (as defined in the Novation
Agreement) payment of the Total Vessel Cost shall be made or has
been made (as the case may be) by instalments from or on behalf of
the Owner to the Builder as follows:
8.3.1 Twenty percent (20%) of the Contract Price on signature of this
Contract within seven (7) days of Owner's receipt of Builder's
invoice (receipt of which the Builder hereby acknowledges);
8.3.2 Twenty percent (20%) of the Contract Price at the start of the
continuous cutting of steel but not before September 1 1998
(receipt of which the Builder hereby acknowledges);
8.3.3 Twenty percent (20%) of the Contract Price on keel laying of a
minimum of five hundred (500) tons of steel, but not before
March 1, 1999, together with such amount of the OFE Cost as
equals the aggregate amount paid by Global Marine International
Drilling Corporation (as the party liable under each OFE Contract,
including, where applicable, as the Builder's OFE Agent) to the
applicable suppliers of OFE after the Effective Time (as defined
in the Novation Agreement) and up to and including the due date
for payment pursuant to this Clause 8.3.3;
8.3.4 Twenty percent (20%) of the Contract Price at floatation of the
Vessel in a condition where it can be floated without requiring
new docking, but not before September 15, 1999, together with
such amount of the OFE Cost as equals the aggregate amount paid
by Global Marine International Drilling Corporation (as the party
liable under each OFE Contract, including, where applicable, as
the Builder's OFE Agent) to the applicable suppliers of OFE after
the date of payment pursuant to Clause 8.3.3 and up to and
including the due date for payment pursuant to this clause 8.3.4;
and
8.3.5 Twenty percent (20%) of the Contract Price, plus or minus any
increases or decreases occasioned in accordance with the
provisions of this Contract or any Amendment hereof which have
not previously been accounted for by adjustment of this or any
earlier instalments, at Delivery of the Vessel, estimated to be
February 10, 2000, together with such amount of the OFE Cost as
equals the aggregate amount paid by Global Marine International
Drilling Corporation (as the party liable under each OFE Contract,
including, where applicable, as the Builder's OFE Agent) to the
applicable suppliers of OFE after the date of payment pursuant to
Clause 8.3.4 and up to and including the due date for payment
pursuant to this Clause 8.3.5;
(d) in Clause 8.7, the details of the Builder's Account No. are as
follows:
The Bank of New York
New York, NY
Swift No. 1RVTUS3N
Account No. 890-00337-877
Beneficiary Bank: Ulster Bank Limited, Belfast
P O Box 235
40 Linenhall Street
Belfast BT2 8AZ
Sort Code: 98-00-05
Swift No. ULFBGB2B
Account No. 114546102
Account Name: Harland and Wolff Shipbuilding and Heavy
Industries Limited
For the purposes of calculation of default interest no account shall be taken
of the OFE Cost element of any instalment (and any partial payment of an
instalment shall be appropriated first towards due payment of the Contract
Price).
10 Clause 9 - Property and Jurisdiction
(a) Clause 9.1 shall be deleted and replaced with the following:
"9.1 Upon payment of the sum due under Clause 8.3.1 the Vessel,
as it is constructed, and all machinery, equipment and materials
whether wholly or partially finished or unfinished from time to
time appropriated or intended for it in the Builder's Yard or
elsewhere (including, without limitation, Owner Furnished
Equipment) shall become and remain the absolute property of the
Owner (but at the risk of the Builder) notwithstanding that any
such machinery, equipment and materials shall subsequently be
worked upon by the Builder or its Subcontractors or otherwise
processed or incorporated into the Vessel and shall not be
within the ownership or dispostion of the Builder, but the
Builder shall at all times have a lien thereon (excluding Owner
Furnished Equipment) for any part of the Contract Price which
is unpaid and for any sums due from time to time in accordance
with this Contract provided that such lien shall not continue or
be enforceable by or on behalf of the Builder in any of the
circumstances described in Clauses 15.1 or 15.2.";
(b) Clause 9.3 shall be deleted and replaced with the following:
"9.3 Any items, other than Owner Furnished Equipment, not used
in the construction of the Vessel shall after Delivery revert to
and become the property of the Builder.".
11 Clause 10 - Insurance
The obligations of "Owner" shall not be obligations of the New Owner
but shall be obligations of the Old Owner (in its own capacity, not
as agent of the New Owner and without liability of the New Owner) to
comply with Clause 10 on such amended basis as shall be agreed as
referred to in the Novation Agreement.
12 Clause 12 - Delivery
(a) A new Clause 12.5 shall be inserted as follows (and the existing
Clause 12.5 shall be re-designated 12.6):
"12.5 Any amounts payable to or by the Builder shall be
ascertained two (2) Business Days before Delivery.";
(b) The obligations of "Owner" under the last sentence only of
Clause 12.6 (as re-designated above) shall not be obligations
of the New Owner but shall be obligations of the Old Owner (in
its own capacity, not as agent of the New Owner and without
liability of the New Owner).
13 Clause 13 - Force Majeure
In Clause 13.1, the following shall be inserted after "party affected"
in the second line:
"(which, in relation to an event affecting the Owner, shall include
the Supervisor)".
14 Clause 14 - Default of the Owner
(a) Clause 14.1 shall be amended by adding at the beginning "Subject
to Clause 8 of the Novation Agreement.";
(b) Clause 14.1.1 shall be amended by deleting "Contract Price" and
replacing it with "Total Vessel Cost";
15 Clause 15 - Default of the Builder
(a) In paragraph (i) of Clause 15.2 there shall be deleted the
words "(c) any and all amounts reasonably and properly paid by
Owner for Owner Furnished Equipment which has been incorporated
in the Vessel" (it being acknowledged, for the avoidance of
doubt, that the words in paragraph (a) "the aggregate amount of
all sums paid pursuant to Clause 8" include the Total Vessel
Cost).
(b) In paragraph (ii) of Clause 15.3 after the words "the Letter of
Credit" there shall be inserted "including procuring a demand
under the letter of credit issued pursuant to the shipbuilding
contract (as novated) for hull no. 1739)".
(c) In Clause 15.5 there shall be inserted after "Supplier contracts"
in the third line the words "and the OFE Contracts" and after
"Subcontracts" in the fifth line the words "Supplier contracts
and the OFE Contracts".
16 Clause 17 - Indemnities for Information Supplied
(a) In Clause 17.1 there shall be inserted after "Owner" in the first
line the words "and the Supervisor", after "Owner" in the second
line the words "or the Supervisor", after "Owner" in the third
line the words "Supervisor," and after "Owner" in the fifth line
the words "as Supervisor".
(b) In Clause 17.2 the obligations of "Owner" shall not be
obligations of the New Owner but shall be obligations of the
Old Owner (in its own capacity, not as agent of the New Owner
and without liability of the New Owner).
17 Clause 24 - Entire Contract
In the first line after "Contract" there shall be inserted "(together
with the Novation Agreement and the matters referred to therein)".
18 Clause 25 - Liability and Indemnification
(a) In Clause 25.1 (a), a new paragraph (iii) shall be inserted as
follows:
"Supervisor, its Parent, subsidiary, affiliated, associated
Companies;",
former paragraph (iii) shall be renumbered (iv) accordingly, and the
words "and clause 25.1(a)(iii)" shall be inserted at the end of such
paragraph (iv).
(b) In Clause 25.3 the obligations of "Owner" shall not be
obligations of the New Owner but shall be obligations of the Old
Owner (in its own capacity, not as agent of the New Owner and
without liability of the New Owner).
19 Clause 22 - Notice and communications
Clause 13 of the Novation Agreement (to the extent it relates to the
New Owner and the Builder) shall apply to notices and correspondence
between the New Owner and the Builder, provided that all notices from
the Builder to the New Owner shall be copied to the Supervisor at the
address and other details for the Old Owner set out in the Novation
Agreement.
APPENDIX B
FORM OF CERTIFICATE (CLAUSE 3.2(a))
Novation Agreement dated [ ] 1998 among (i) Harland and Wolff
Shipbuilding and Heavy Industries Limited (ii) BMBF (No.12) Limited and
(iii) Global Marine International Drilling Corporation (the "Novation
Agreement").
[Date]
Reference is made to the Novation Agreement and it is hereby confirmed,
pursuant to Clause 3.2(a) of the Novation Agreement, that the conditions
precedent referred to in Schedule 4, Parts 1 and 2 of the Lease have been
fulfilled to our satisfaction or have been temporarily waived to our
satisfaction pursuant to Clause 3.4 of the Lease.
Words and expressions defined in the Novation Agreement shall have the same
meanings when used herein.
_________________________________________
For and on behalf of
BMBF (No.12) Limited
APPENDIX C
FORM OF CERTIFICATE (CLAUSE 3.2(g))
Novation Agreement dated [ ] 1998 among (i) Harland and Wolff
Shipbuilding and Heavy Industries Limited (ii) BMBF (No.12) Limited and
(iii) Global Marine International Drilling Corporation (the "Novation
Agreement").
[Date]
Reference is made to the Novation Agreement and it is hereby confirmed,
pursuant to Clause 3.2(g) of the Novation Agreement that the conditions
precedent referred to Schedule 4, Part 4 of the Lease have been fulfilled to
the satisfaction of the Lessee or have been temporarily waived to the
satisfaction of the Lessee.
Words and expressions defined in the Novation Agreement shall have the same
meanings when used herein.
_________________________________________
For and on behalf of
GLOBAL MARINE INTERNATIONAL DRILLING CORPORATION
APPENDIX D
FORM OF EFFECTIVE TIME CERTIFICATE
Novation Agreement dated [ ] 1998 among (i) Harland and
Wolff Shipbuilding and Heavy Industries Limited, (ii) BMBF (No.12) Limited
and (iii) Global Marine International Drilling Corporation (the "Novation
Agreement")
[Date]
Reference is made to the Novation Agreement and it is hereby confirmed,
pursuant to Clause 3.4 of the Novation Agreement, that the Effective Time
(as therein defined) is [ ] [am][pm]
(London time) on [ ] 1998.
_________________________________________
For and on behalf of
HARLAND AND WOLFF SHIPBUILDING AND
HEAVY INDUSTRIES LIMITED
_________________________________________
For and on behalf of
BMBF (No.12) LIMITED
_________________________________________
For and on behalf of
GLOBAL MARINE INTERNATIONAL DRILLING CORPORATION
APPENDIX E
FORM OF REPLACEMENT BUILDER PARENT COMPANY GUARANTEE
THIS PARENT COMPANY GUARANTEE (hereinafter called "GUARANTEE") is made this
day of 1998 by HARLAND AND WOLFF HOLDINGS PLC having its
registered office at Queen's Island, Belfast BT3 9DU (hereinafter called
"GUARANTOR") in favour of BMBF (No.12) LIMITED having its registered office
at Churchill Plaza, Churchill Way, Basingstoke, Hampshire RG21 7GP
(hereinafter called "OWNER").
WHEREAS, GUARANTOR has agreed that it will to the extent hereinafter set
forth guarantee the due performance by Harland and Wolff Shipbuilding and
Heavy Industries Limited ("H&W") of its obligations under the Shipbuilding
Contract relating to H&W hull no. 1740 originally made between H&W and Global
Marine International Drilling Corporation (formerly Global Marine
International Services Corporation)] (as subsequently amended, supplemented
and novated in favour of the OWNER, the "CONTRACT").
NOW THEREFORE in consideration of the OWNER's agreeing to enter into the
novation of the CONTRACT referred to above and payment of Pounds-Sterling 1
by the OWNER to the GUARANTOR (the receipt and sufficiency of which is hereby
acknowledged by the GUARANTOR), it is hereby agreed as follows:
1 GUARANTOR guarantees the punctual true and faithful performance and
observance by H&W of all its obligations under or in accordance with the
CONTRACT and in the event of any breach of the obligations of H&W under
the CONTRACT then:
(a) upon being required to do so by OWNER by notice in writing the
GUARANTOR shall of its own expense perform or take whatever steps
may be necessary to procure performance of the obligations of H&W
under the CONTRACT and shall from the date of such notice assume
jointly and severally with H&W all the rights and obligations of
the CONTRACT in every way as if GUARANTOR were party thereto; and
(b) GUARANTOR shall indemnify OWNER against all direct losses, damage
costs and expenses which OWNER may suffer or incur by reason of or
in connection with a breach by H&W of any of its obligations under
the CONTRACT provided that GUARANTOR shall in no event have any
greater liability under this Guarantee in respect of such breach
than that of H&W under the CONTRACT in relation thereto.
2 Without any prejudice to Clause 1, GUARANTOR guarantees to OWNER the
payment by H&W of any and all amounts from time to time or at any time
payable by H&W to OWNER under or in connection with the CONTRACT and
undertakes to pay to OWNER forthwith upon demand by OWNER any and all
amounts which H&W shall have failed, now or in the future, to pay to
OWNER under or in connection with the CONTRACT.
3 GUARANTOR shall not be discharged or released from this GUARANTEE by
any arrangement made between H&W and OWNER under the CONTRACT or by any
forbearance whether as to payment, time, performance or otherwise even
though such arrangement, alteration or forbearance may be without the
assent of GUARANTOR, or by the liquidation, bankruptcy or insolvency of
H&W.
4 This GUARANTEE may be freely assigned by OWNER to any of its permitted
assignees under the CONTRACT.
5 This GUARANTEE shall be construed and governed in accordance with English
Law and GUARANTOR agrees to submit to the jurisdiction of the English
courts.
6 This Guarantee shall expire on the expiry of the Guarantee Period as
defined in the CONTRACT.
IN WITNESS WHEREOF, this GUARANTEE has been executed by duly authorised
representatives of the GUARANTOR and the OWNER in duplicate effective as of
the date and year first above written.
By: .................
By: .................
APPENDIX F
FORM OF REPLACEMENT STANDBY LETTER OF CREDIT
[name and address of Issuing Bank]
Date [ ]
To: BMBF (No.12) Limited
Churchill Plaza
Churchill Way
Basingstoke
Hampshire
RG21 7GP
We refer to the contract originally made on 28 March, 1998 between Global
Marine International Drilling Corporation (formerly Global Marine
International Services Corporation) and Harland and Wolff Shipbuilding and
Heavy Industries Limited (the "Builder", which expression shall include its
successors, assigns or transferees) (as subsequently amended, supplemented
and novated in favour of BMBF (No.12) Limited (the "Buyer" which expression
shall include its successors, assigns, or transferees), (the "Contract"):
In connection with the Contract we hereby issue at the request of the Builder
our irrevocable Standby Letter of Credit No. [ ] in your favour
for the aggregate maximum amount of Twenty Million United States Dollars
(US$20,000,000) expiring on 10th August 2000 (the "Expiry Date").
The amount which may be drawn by you under this Letter of Credit shall be
automatically reduced by the amount of any drawing hereunder. Partial
drawings are permitted.
We hereby undertake that if, before 5pm London time on the Expiry Date,
Global Marine International Drilling Corporation (the "Agent") presents to us
at our counters or the office set out above its sight draft drawn on us,
together with a Certificate of Drawing in strict conformity with the Schedule
below, such certificate of drawing, bearing the following certification by the
Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer
of the Agent as agent of the Buyer, "I hereby certify that the person signing
this Certificate of Drawing is an officer or director of Global Marine
International Drilling Corporation with the authority to sign this
Certificate of Drawing", we shall honour the same by payment to you with
value on the next following banking day. For the purposes of this Letter of
Credit, a banking day is a day on which banks are open for business (including
dealings in foreign exchange and currency deposits) in both London and
New York.
All payments under this Letter of Credit shall be made without any deduction
of any kind, except any which we are required by law to make. In that case,
but subject to the limit set out below, we shall pay such an increased sum as
will ensure that, after the deduction you receive a net amount equal to that
which you would have received had there been no deduction. The aggregate
amount payable by us under or in connection with this Letter of Credit
shall not, in any circumstances whatsoever, exceed the said amount of Twenty
Million United States Dollars (US$20,000,000).
You may assign or transfer your rights under this letter of credit with prior
notice to, and prior written consent of the Builder, who shall not
unreasonably withhold such consent. Such prior written notice and consent
is not required where the assignee or transferee is an associated
company of the Buyer or the Agent, which means and includes any holding
company whether direct or indirect or any subsidiary whether direct or
indirect of the Buyer or, as the case may be, the Agent, or of such holding
company. The terms "holding company" and "subsidiary" having the meanings
assigned to these terms by Section 736 of the Companies Act 1985.
This Letter of Credit is subject to the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce
Publication No. 500.
This Letter of Credit is governed by English law and the courts of England
shall have jurisdiction to settle any disputes which may arise in connection
herewith.
Form of Certificate of Drawing
To: [Name and address of Issuing Bank]
Re: Standby Letter of Credit No: [ ]
Issued by [ ]
Date [ ]
We hereby certify that Harland and Wolff Shipbuilding and Heavy Industries
Limited (the "Builder") [are in default under Clause [ ] of the contract
originally made on 28 March, 1998 between Global Marine International Drilling
Corporation (formerly Global Marine International Services Corporation) (1)
and the Builder (2) (as subsequently amended, supplemented and novated in
favour of BMBF (No. 12) Limited and as the same has been or may be novated to
Global Marine U.K. Limited), that by reason of such default an amount of
US$[ ] has become due and payable by the Builder to BMBF
(No. 12) Limited or, as the case may be, Global Marine U.K. Limited under the
said Contract and that, as at the date of this Certificate, that amount
remains unpaid] * [are in default under Clause [ ] of the contract originally
made on 27th February, 1998 between Global Marine International Drilling
Corporation (formerly Global Marine International Services Limited) (1) and
the Builder (2) as subsequently novated to Global Marine Leasing Corporation
and as further amended, supplemented and novated in favour of Nelstar Leasing
Company Limited ("Nelstar"), as the same has been or may further be novated
to Global Marine C.R. Luigs Limited, that by reason of such default an amount
of US$[ ] has become due and payable by the Builder to Nelstar or,
as the case may be, Global Marine C.R. Luigs Limited under the said Contract
and that, as at the date of this Certificate, that amount remains unpaid].*
We therefore request payment under the above-mentioned Letter of Credit by
US$[ ] and enclose our sight draft drawn on you for
that amount.
Dated: this [ ] day of [ ]
Signed:
duly authorised
for and on behalf of
Global Marine International Drilling Corporation
[Authorised Signatory]
APPENDIX G
FORM OF OFE ASSIGNMENT
THIS ASSIGNMENT is made , 1998
BY:
(1) GLOBAL MARINE INTERNATIONAL DRILLING CORPORATION (formerly
named Global Marine International Services Corporation), a company
incorporated under the laws of The Bahamas having its registered office
at c/o McKinney, Bancroft & Hughes, Mareva House, George Street,
P O Box 3937, Nassau, Bahamas (the "Assignor")
IN FAVOUR OF:
(2) HARLAND AND WOLFF SHIPBUILDING AND HEAVY INDUSTRIES
LIMITED, a company incorporated under the laws of Northern Ireland
having its registered office at Queen's Island, Belfast, Northern
Ireland, BT3 9DU (the "Builder")
WHEREAS
(A) The Builder and the Assignor have entered into a contract dated 28th
March, 1998, as amended, varied and supplemented prior to the date
hereof, for the construction, completion and delivery by the Builder
to the Assignor of a deepwater drillship, identified by the Builder as
Hull No. 1740.
(B) The Builder, BMBF (No.12) Limited (the "New Owner") and the Assignor
have entered into a Novation Agreement dated , 1998
(the "Novation Agreement") in respect of the contract referred to in
Recital (A) above pursuant to which the New Owner agrees to assume all
the rights and obligations of the Assignor thereunder, the Builder
agrees to the substitution of the New Owner in place of the Assignor in
relation to such rights and obligations, to the release of the Old
Owner in respect thereof and to the amendment of the said contract, all
subject to and upon the terms and conditions of the Novation Agreement.
IT IS AGREED as follows:
1 DEFINITIONS AND INTERPRETATION
1.1 In this Assignment, unless the context otherwise requires, words and
expressions defined in the Novation Agreement (either expressly or by
cross-reference to other documents) shall have the meanings given to
them therein when used herein and the following expression shall have
the following meaning:
"Applicable OFE Contracts" means those OFE Contracts which are listed
in Appendix 1.
1.2 References in this Assignment to Clauses or Appendices are, unless
otherwise specified, references to clauses of, and appendices to, this
Assignment.
1.3 References to "person" or "persons" or to words importing persons
include, without limitation, individuals, firms, incorporations,
government agencies, committees, departments, authorities and other
bodies, incorporated or unincorporated, whether having distinct legal
personality or not.
1.4 Clause headings are for ease of reference only.
2 ASSIGNMENT
2.1 For good and valuable consideration provided by the Builder (the
sufficiency of which is hereby acknowledged by the Assignor), the
Assignor hereby assigns absolutely and agrees to assign absolutely
to and in favour of the Builder all the Assignor's right, title and
interest in and to the Applicable OFE Contracts (including, without
limitation, the right to take delivery of and title to the OFE which
is the subject matter of the Applicable OFE Contracts).
2.2 The Assignor shall remain liable for all obligations under the
Applicable OFE Contracts.
2.3 The Assignor shall promptly give notice to the OFE Suppliers which are
party to the Applicable OFE Contracts in the form of Appendix 2. The
Assignor shall forward to the Builder copies of all acknowledgements of
that notice received by the Assignor from the OFE Suppliers.
3 MISCELLANEOUS
3.1 Clauses 12.1 to 12.4 of the Novation Agreement shall apply to this
Assignment as if it were, with any necessary consequential changes,
set out in full herein.
4 NOTICES
4.1 Clause 13 of the Novation Agreement, insofar as it relates to notices
to and from the Assignor and the Builder, shall apply to this Assignment
as if it were, with any necessary consequential changes, set out in
full herein.
5 LAW
5.1 Clause 15 of the Novation Agreement shall apply to this Assignment as
if it were, with any necessary consequential changes, set out in full
herein.
SIGNED by the representatives of the parties
__________________________________________________________
Duly authorised for and on behalf of
GLOBAL MARINE INTERNATIONAL DRILLING
CORPORATION
__________________________________________________________
Duly authorised for and on behalf of
HARLAND AND WOLFF SHIPBUILDING AND HEAVY
INDUSTRIES LIMITED
<TABLE>
APPENDIX 1
Applicable OFE Contracts
<CAPTION>
Vendor P.O. # Description Amount
<S> <C> <S> <C>
Halliburton Energy HOU457000001 Bulk Mud/Cement Tanks $ 2,123,562.00
Victoria Machine Works HOU457000004 350 Ton BOP Cart $ 118,541.76
HOU457000005 100 Ton Subsea Tree Cart $ 161,692.80
HOU457000081 Rails and Skid Jacks $ 157,597.00
National-Oilwell HOU457000010 Mud Pumps $ 2,337,458.34
HOU457000011 Drawworks $ 2,030,017.10
HOU457000012 Rotary $ 264,608.35
HOU457000013 Travelling Block $ 268,197.50
Varco International HOU457000014 PRS-41 Pipe Racker $ 3,818,295.00
HOU457000015 Tubular Conveyor $ 630,875.00
HOU457000017 AR3200 Iron Roughneck $ 408,798.50
HOU457000018 Mousehole Spider Assy. $ 59,692.50
HOU457000027 Casing Roughneck $ 518,080.00
HOU457000040 Top Drive $ 1,182,433.90
HOU457000046 E-Z Torque $ 32,470.00
HOU457000099 Hyd. Power Dist. Manifold $ 64,790.00
Sealtrax HOU457000019 Cranes $ 3,698,810.90
Cameron HOU457000020 BOP Stack $ 5,230,423.00
HOU457000020A Control System $ 6,084,118.00
Stewart & Stevenson HOU457000021 Riser Buoyancy Modules $25,361,865.00
HOU457000039 Diverter $ 683,573.45
HOU457000053 Choke & Kill Manifold $ 564,000.00
HOU457000091 Riser Tensioner Ring $ 926,250.00
Naptech Pressure HOU457000022 APV's $ 789,564.00
Systems, Inc.
Shaffer (Varco) HOU457000023 CMC $ 3,272,446.00
HOU457000024 250K Riser Tensioner $ 6,659,095.00
HOU457000025 Riser Recoil $ 803,244.00
HOU457000026 Spherical BOP $ 952,659.00
ABB Vetco HOU457000028 Wellhead Connector $ 427,754.25
Hal Oilfield Pump HOU457000065 Charging, degasser, $ 89,072.95
and Equipment Co. desander pumps
(Halco) HOU457000090 Salt Water Circulating $ 24,722.20
Pumps
Dreco Inc. HOU457000031 Derrick $ 3,570,516.00
(National-Oilwell)
Hayward Industrial HOU457000035A Hayward Strainers $ 8,013.16
Products, Inc.
Drilling & Production HOU457000052 Gate Valves $ 68,800.00
Resources, Inc. HOU457000054 Mud Manifolds $ 380,162.35
HOU457000055 Cement Manifolds $ 85,837.35
HOU457000078 90 deg. Flange Adapter $ 10,000.00
HOU457000077 Misc. Flanges and Tees $ 124,394.88
Sunbelt Supply HOU457000048 Pipe Unions $ 80,097.96
Tool Co., Inc. HOU457000092 Velan 300# RTJ $ 3,688.00
HOU457000095 Velan Guk Valves $ 24,326.00
Offshore Inland HOU457000041 Drill Floor Hydraulic $ 191,586.00
Service, Inc. Power Unit
Industrial Air Tool HOU457000042 Air Compressors & Dryers $ 305,040.00
HOU457000051 Air Receivers $ 42,664.00
HOU457000059 Air Tuggers $ 248,453.00
Hamworthy Marine Inc. HOU457000043 Air Compressors $ 176,691.00
Brandt Co. HOU457000045 Desanders, Degassers, $ 403,030.00
Agitators
HOU457000085 Bug Blower $ 16,650.00
Mathey Manufacturing Co. HOU457000049 Logger Wireline Unit $ 42,115.50
Drillpro HOU457000050 Discharge Piping Manifolds $ 139,644.00
HOU457000062 Drill Line Spooler $ 58,980.00
HOU457000066 Chemical Mixing Tank $ 4,650.00
Oil States Ind. HOU457000056 Flexjoints $ 997,000.00
Siemens HOU457000058 SCR's $ 1,617,512.00
Martin-Decker HOU457000060 Driller's console/ $ 1,537,399.00
Totco (Varco) instrumentation
Certex HOU457000061 Sand line, tugger wire $ 16,932.66
HOU457000061A 2: Drill line $ 83,719.00
Dryvent, Ltd. HOU457000064 Dryers f/high pressure 62862.52 GBP
air comp.
C.E. Marine HOU457000068 Horizontal Pipe Racker $ 3,511,363.00
Products HOU457000100 350 Ton BOP Transporter $ 1,800,000.00
HOU457000102 50 Ton Riser Skate & Cart $ 335,200.00
Mustang Industrial HOU457000069 Caterpillar 36V Forklift $ 28,347.00
Equipment
Hahn Equipment Co HOU457000070 Electric Submersible Mixer $ 125,712.00
AGI Industries HOU457000073 High Pressure BOP Test $ 60,439.00
Unit
Piper Oilfield Products HOU457000074 Diverter Valve Assy. $ 102,680.75
Adrian Industrial HOU457000076 Test Stump Support & Lift $ 23,840.00
Constructors HOU457000088 Structure
HOU457000088 Telescoping Joint $ 35,322.00
Verhoef Aluminium HOU457000079 Accommodation Ladder 74,900 NLG
Scheepsbouw Ind.
Airdyne Inc. HOU457000080 Wireline Spoolers f/ $ 57,800.00
Riser Tensioner
Forthwright HOU457000082 Trip Tank 122,428.26 GBP
Offshore Service
Dolphin Compactors HOU457000089 Trash Compactor $ 19,300.00
International Electric HOU457000093 Junction Boxes $ 1,500.00
Co., Inc.
Cranemann, Inc. HOU457000104 50 Ton Riser Gantry Crane $ 903,730.00
HOU457000105 100 Ton BOP Gantry Crane $ 869,655.00
HOU457000097 Bridge Dr. Unit & Trolley $ 137,510.00
E2 Engineering HOU457000107 Camera Equipment $ 92,538.00
</TABLE>
APPENDIX 2
Form of Notice to OFE Supplier(s)
To: [OFE Supplier]
[Address]
[Date]
[Applicable OFE Contracts] (the "Contracts")
Gentlemen
We refer to the Contract(s) and hereby notify you that, by an Assignment
dated [ ], 1998 entered into by us in favor of Harland and Wolff
Shipbuilding and Heavy Industries Limited (the "Builder"), we have assigned
absolutely and agreed to assign absolutely to and in favor of the Builder
all our right, title and interest in and to the Contract(s) (including,
without limitation, the right to take delivery of and title to the equipment
which is the subject matter of the Contract(s)).
We remain liable for all obligations of the Buyer under, and as defined in,
the Contract(s).
We further notify you that by a Supervision Agreement dated
[ ], 1998 the Builder has irrevocably appointed
us its agent and supervisor in relation to the Contract(s) to exercise all
rights of the Builder under the Contract(s) as so assigned. You shall, and
are requested to, continue to deal exclusively with ourselves in all matters
relating to the Contract(s).
You are hereby requested to acknowledge receipt of this notice by executing
and returning to us the form of acknowledgement attached to this letter in
the envelope provided. If you have any questions, please contact Walter A.
Baker, Assistant General Counsel at 281 596 5131.
Yours faithfully
________________________
Duly authorised
For and on behalf of
GLOBAL MARINE INTERNATIONAL DRILLING CORPORATION
cc. M A Crispi, Construction Purchasing
M S Jadick, Material Control
Acknowledgement
To: Global Marine International Drilling Corporation (the "Assignor")
c/o Global Marine U.K. Limited
Standbrook House
2/5 Old Bond Street
London W1X 4QH
Re: [Applicable OFE Contracts] (the "Contracts")
We hereby acknowledge receipt of the above notice of assignment from the
Assignor and we hereby consent and agree with the Assignor and the Builder
as follows:
1 To the extent (if any) required by the Contract(s), we hereby consent to
the said assignment.
2 We confirm that we have received no notice of the assignment of the
Contract(s) in favor of any third party.
3 If we are in breach of our obligations under the Contract(s) prior to
assignment in favor of the Builder, the Assignor's entitlement to damages
shall be preserved and vest in the Builder. If we are in breach of our
obligations under the Contract(s) at any time after assignment in favour
of the Builder, the measure of damages payable to the Builder shall be
that which would have been payable to the Assignor had the Contract not been
assigned in favour of the Builder.
Acknowledged this day of , 1998
By:____________________________________
Name: _________________________________
Title: __________________________________
Company: ______________________________
* Note: These are alternatives; delete as applicable. More than one
Certificate of Drawing can be presented on the same day.
DATED 8th December 1998
BMBF (NO.12) LIMITED
as lessor
and
GLOBAL MARINE INTERNATIONAL DRILLING CORPORATION
as lessee
____________________________________________________
HEAD LEASE AGREEMENT
relating to
one double hulled, dynamically positioned,
ultra-deepwater Glomar class 456 drillship "GLOMAR IRISH SEA I"
to be constructed by Harland and Wolff Shipbuilding and
Heavy Industries Ltd. with hull number 1740
____________________________________________________
SCHEDULE NUMBER 52/5050 5371-3
TABLE OF CONTENTS
ClauseHeading Page
1.DEFINITIONS AND INTERPRETATIONS. . . . . . . . . . . . . .1
2.REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . 30
3.CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . 31
4.LEASING AND DELIVERY AND ACCEPTANCE OF EQUIPMENT . . . . 32
5.DISCLAIMERS AND EXCLUSIONS, LESSOR'S COVENANTS . . . . . 33
6.LEASE PERIOD . . . . . . . . . . . . . . . . . . . . . . 36
7.RENT . . . . . . . . . . . . . . . . . . . . . . . . . . 37
8.PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . 38
9.COVENANTS CONCERNING INSURANCES. . . . . . . . . . . . . 40
10.TOTAL LOSS AND DAMAGE. . . . . . . . . . . . . . . . . . 45
11.GENERAL COVENANTS AND UNDERTAKINGS OF THE LESSEE . . . . 48
12.OPERATIONAL COVENANTS IN RELATION TO THE VESSEL. . . . . 51
13.SUB-LEASING AND SERVICE CONTRACTS. . . . . . . . . . . . 59
14.BENEFIT OF THIRD PARTY OBLIGATIONS . . . . . . . . . . . 60
15.RISK . . . . . . . . . . . . . . . . . . . . . . . . . . 61
16.REQUISITION FOR HIRE . . . . . . . . . . . . . . . . . . 61
17.SALVAGE. . . . . . . . . . . . . . . . . . . . . . . . . 62
18.TITLE AND VESSEL LIENS . . . . . . . . . . . . . . . . . 62
19.RE-DELIVERY AND SALE OF THE VESSEL . . . . . . . . . . . 63
20.PROCEEDS OF SALE . . . . . . . . . . . . . . . . . . . . 67
21.TERMINATION PROVISIONS . . . . . . . . . . . . . . . . . 68
22.SECURITY; EXCLUDED OBLIGATIONS . . . . . . . . . . . . . 74
23.CHANGE OF CIRCUMSTANCES ETC. . . . . . . . . . . . . . . 79
24.GENERAL INDEMNITY. . . . . . . . . . . . . . . . . . . . 80
25.GENERAL TAX INDEMNITY AND OTHER TAX PROVISIONS . . . . . 86
26.PRESERVATION OF INDEMNITIES. . . . . . . . . . . . . . . 92
27.ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . 93
28.LESSOR'S RIGHT OF SET-OFF; GROSS PAYMENT OF REBATES. . . 94
29.MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . 95
30.CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . 99
SCHEDULE1 Financial Schedule . . . . . . . . . . . . . . . . . .101
SCHEDULE2 The Vessel . . . . . . . . . . . . . . . . . . . . . .102
SCHEDULE3 Part 1 - Representations and Warranties by the Lessee.103
Part 2 - Representations and warranties by the Lessor.105
SCHEDULE4 Part 1 - Conditions precedent to the obligations of
the Lessor generally . . . . . . . . . . . . 106
Part 2 - Conditions precedent to Lessor's obligations
to make payment of any Instalment . . . . . .108
Part 3 - Conditions precedent to Lessor's obligations
to take delivery of the Vessel and to
deliver the Vessel to the Lessee. . . . . . .110
Part 4 - Lessee's Conditions Precedent generally . . .112
Part 5 - Lessee's Conditions Precedent to Delivery . .113
SCHEDULE5 Form of Acceptance Certificate . . . . . . . . . . . .114
SCHEDULE6 Part 1 - Loss Payable Clause . . . . . . . . . . . . .115
Part 2 - Form of Protection and Indemnity Risks Loss
Payable Clause . . . . . . . . . . . . . . . 116
SCHEDULE7 Form of Pollution Indemnity Clause (Clause 12.18) . .117
THIS AGREEMENT dated 8th December, 1998 is made
BETWEEN:
(1) BMBF (NO.12) LIMITED whose registered office is at Churchill Plaza,
Churchill Way, Basingstoke, Hampshire RG21 7GP, England; and
(2) GLOBAL MARINE INTERNATIONAL DRILLING CORPORATION, a company
incorporated under the laws of the Bahamas, whose registered office
is at Mareva House, 4 George Street, PO Box 3937, Nassau, The Bahamas.
WHEREAS:
The Lessor carries on the trade of leasing and pursuant to the Shipbuilding
Contract and the Novation Agreement has agreed to incur capital expenditure
on the provision of the Vessel for leasing to the Lessee on and subject to
the terms and conditions contained in this Agreement.
NOW IT IS AGREED:
1. DEFINITIONS AND INTERPRETATIONS
1.1 Definitions
In this Agreement the following words and expressions shall each have
the meaning respectively attributed to them below:
"Acceptance Certificate" means the certificate given by the Lessee to
the Lessor pursuant to Clause 4.2, in or substantially in the form of
Schedule 5;
"Accountancy Rental Earnings" has the meaning given to that expression
in Schedule 12 to the Finance Act 1997;
"Accounting Period" means an accounting period as defined in section 12
of ICTA 1988;
"Accounting Standards" means insofar as the same are applicable to the
Lessor or any member of the Lessor's Group:
(i) the accounting requirements of the Companies Acts;
(ii) Statements of Standard Accounting Practice, Financial Reporting
Standards and any other accounting standards having the like effect
as Financial Reporting Standards issued by the Accounting Standards
Board from time to time or such other body or bodies as may be
prescribed by regulations pursuant to Section 256 of the Companies
Act 1995 or any similar regulations;
(iii)any statement, guideline, ruling or notice from time to time issued
and having such effect that compliance therewith by UK companies
of a standing and business type comparable to the Lessor (or as
the case may be the relevant member of the Lessor's Group) is
customary by any of the following:
Accounting Standards Board
Accounting Standards Committee
Financial Reporting Review Panel
Any group or body set up by any of the above for any purpose including
(without limitation) the Urgent Issues Task Force of the
Accounting Standards Board
any similar body from time to time either discharging functions
to effect of which is analogous or corresponds to those of any
of the above bodies;
"Acquisition Documents" means the Shipbuilding Contract, the Novation
Agreement, each of the OFE Assignments (as defined in the Novation
Agreement), the Contribution Deed, the Supervision Agreement, the
Put-Option Agreement and each document and instrument delivered or to
be delivered pursuant to any of them;
"Actual Interest Costs" means the amounts calculated pursuant to
paragraph 3.5.1 of Part 3 of the Financial Schedule;
"Additional Payment" shall have the meaning attributed to that term
in Clause 25.5;
"Additional Security" means additional security for the obligations of
the Lessee under this Agreement, provided in accordance with Clause 22,
which shall be in a form and substance acceptable to the Lessor in its
sole discretion, and shall be recourse to an Additional Security
Provider acceptable to the Lessor in its sole discretion (the Lessor
acknowledging that it will, without commitment, give consideration to
additional security in the form of a security interest over cash
deposited with the London branch of an OECD bank).
"Additional Security Provider" means any entity to which the Lessor
has recourse under Additional Security;
"Adjustment Date" in relation to a Relevant Period means the day
following the day on which that Relevant Period expires;
"Allowance Accounting Period" has the meaning given to such expression
in paragraph 4.5.2 (f) of Part 4 of the Financial Schedule;
"Anticipated Delivery Date" at any time means the latest date notified
to the Lessor by the Lessee in accordance with Clause 3.3(p) of the
Supervision Agreement as the anticipated Delivery Date;
"Applicable Jurisdiction" means, in relation to each of the Lessee,
the Sub-Lessee and (prior to Delivery) the Shipbuilder, the jurisdiction
of any country or state or any political sub-division thereof in which
the Vessel is from time to time registered or located or in which the
Lessee or, as the case may be, the Sub-Lessee or (prior to Delivery)
the Shipbuilder, is from time to time resident or from or in which any
of the business activities of the Lessee or, as the case may be, the
Sub-Lessee or (prior to Delivery) the Shipbuilder are from time to time
conducted;
"Applicable Laws" means all laws, rules, directives and regulations,
national or international, public or private, affecting the Vessel or
(prior to Delivery) the Shipbuilder, the Lessee or the Sub-Lessee in
relation thereto in any Applicable Jurisdiction, including
those in respect of the ownership, delivery, use, possession, operation
or disposal of the Vessel;
"Appraised Value" has the meaning given to it in Clause 22;
"Approved Brokers" means McGriff, Seibels & Williams of Texas, Inc.,
or such other firm or firms of insurance brokers as may from time to
time be approved in writing by the Lessor for the purposes of this
Agreement, such approval not to be unreasonably withheld;
"Arrangement Fee" means the fee payable by the Lessor to the Arranger
pursuant to the Atlas Fee Letter;
"Arranger" means Atlas Oceanic Limited;
"Associated Costs" has the meaning given to such expression in Annex A
to the Financial Schedule;
"Associated Costs Rate" has the meaning given to such expression in
Annex A to the Financial Schedule;
"Assumed Interest Costs" means the amounts calculated pursuant to
paragraph 3.5.2 of Part 3 of the Financial Schedule;
"Assumptions" means the assumptions described in paragraph 2.3 of
Part 2 of the Financial Schedule (as corrected, varied or added to
from time to time in accordance with the Financial Schedule);
"Atlas Fee Letter" means the letter agreement of even date herewith
between the Lessor and the Arranger providing for the payment of a fee
to the Arranger;
"Bank" means Barclays Bank PLC, registered in England with company
registration number 1026167;
"Base Rate" means the base rate from time to time quoted by the Bank
in London as its "Base Rate" or, if no rate of interest is quoted as
such, the rate of interest from time to time certified by the Bank in
London as being the rate which the Bank uses as the base for
determining rates of interest charged to corporate customers;
"BMBF Fee" means the fee payable by the Lessor to Barclays Mercantile
Business Finance Limited ("BMBF") pursuant to the Fee Letter to BMBF;
"BMBF Fee Letter" means the letter agreement of even date herewith
between the Lessor and BMBF providing for the payment of a fee to
BMBF;
"Broken Funding Costs" shall have the meaning attributed to that term
in paragraph 3.8 of the Financial Schedule;
"Business Day" means a day (other than a Saturday or Sunday, or
holiday scheduled by law) on which dealings in Sterling deposits are
carried on in the London inter-bank market, and on which banks are
open for business in the City of London;
"CAA 1990" means the Capital Allowances Act 1990;
"Capitalised Lease Obligations" means (i) all Capitalised Lease
Obligations as defined in the Guarantee and (ii) all obligations of a
person to pay the purchase price for property or services to the
extent that the obligation to make such payment is deferred for one
hundred and eighty (180) days or more;
"Cash Flow" means the Initial Cash Flow, the Termination Cash Flow
or any Revised Cash Flow or Revised Termination Cash Flow or Latest
Cash Flow or Latest Termination Cash Flow as the context may require;
"Change in Law" means, in each case after the date on which this
Agreement is executed:
(a) the implementation, introduction, abolition, withdrawal or
variation of, any applicable law, regulation, practice or
concession or official directive, ruling, request, notice,
guideline, statement of policy or practice statement by the Bank
of England, the European Union or any central bank or tax,
fiscal, revenue, monetary, governmental, local, international,
national or other competent authority or agency (whether or not
having the force of law but in respect of which compliance by
banks or other financial institutions or institutions of a
similar nature to the Lessor in the relevant jurisdiction is
generally customary); or
(b) any change in any interpretation, or the introduction or making
of any new or further interpretation, or any new or different
interpretation of any applicable law, regulation, practice or
concession or official directive, ruling, request, notice,
guideline, statement of policy or practice statement by any court,
tribunal, governmental, local, international, national or other
competent authority or agency or the Bank of England, the
European Union or any central bank or tax, fiscal, revenue or
monetary authority or agency (whether or not having the force
of law but in respect of which compliance by banks or other
financial institutions or institutions of a similar nature to
the Lessor in the relevant jurisdiction is generally customary);
or
(c) compliance with any new or different request or direction from
the Bank of England, the European Union or any central bank,
tax, fiscal, monetary, revenue, governmental, local,
international, national or other competent authority or agency
(whether or not having the force of law but in respect of
which compliance by banks or other financial institutions or
institutions of a similar nature to the Lessor in the relevant
jurisdiction is generally customary);
"CHAPS" means the Clearing Houses Automated Payments System;
"Classification" means the classification of _ A1-E Mobile Offshore
Drilling Unit - DPS-3 AMS, ACCU, R2S with the Classification Society or
such other classification as the Lessor shall, at the request of the
Lessee, have agreed in writing shall be treated as the Classification
for the purposes of this Agreement;
"Classification Society" means the American Bureau of Shipping or any
of Lloyds' Register of Shipping, Germanischer Lloyd, Bureau Veritas or
Det Norske Veritas as the Lessee may, from time to time, specify in
writing to the Lessor or such other classification society which
the Lessor shall have agreed in writing may be treated as the
Classification Society for the purposes of this Agreement;
"Commencement Date" means 31st December 1999;
"Compulsory Acquisition" means requisition for title or other
compulsory acquisition, requisition, appropriation, expropriation,
deprivation, forfeiture or confiscation for any reason of the Vessel
by any Government Entity or other competent authority, whether de jure
or de facto, but shall exclude requisition for use or hire not involving
requisition of title;
"Constitutive Documents" in relation to any English company means that
company's certificate of incorporation and memorandum and articles of
association and, in relation to any overseas person (whether
incorporated, established or otherwise formed, but excluding natural
persons), means the documents having equivalent status and effect in
the relevant jurisdiction;
"Contribution Deed" means a deed so entitled of even date herewith
between the Lessee and the Lessor;
"Corporation Tax" means corporation tax chargeable in the context of
the scheme of Taxation applied to United Kingdom resident companies
generally at the rate applicable to such companies (disregarding the
provisions of section 13 of ICTA 1988 concerning the small companies'
rate) or any Tax of a similar nature enacted in addition to or
substitution for corporation tax;
"Costs of Management Time" means an aggregate amount calculated at the
rate of Pounds-Sterling 150 per hour (indexed in line with the General
Index of Retail Prices for all items (or any comparable index
substituted therefor) from the date hereof) for the time spent by
employees and directors of the Lessor and employees and directors of
the Lessor's Group;
"Cumulative Accountancy Rental Excess" has the meaning given to that
expression in Schedule 12 to the Finance Act 1997;
"Cumulative Normal Rental Excess" has the meaning given to that
expression in Schedule 12 to the Finance Act 1997;
"Current Risk Position" means the risk position of the Lessor as
assessed by the Lessor in relation to liability for pollution damage
as at the date of this Agreement (but assuming the Lessor has become
the owner of the Vessel and Delivery has taken place) under the
regime implemented under the Oil Pollution Act of 1990 of the United
States, as amended and in force as at the date of this Agreement;
"Date of Total Loss" shall have the meaning attributed to that term in
Clause 10.3;
"Default Rate" in respect of Sterling amounts means the percentage rate
per annum which is one point five per cent (1.5%) over Base Rate and,
in respect of other amounts means one point five per cent (1.5%) over
the cost to the Lessor of funding the relevant amount, in the relevant
currency;
"Delivery" means delivery of the Vessel as a whole by the Lessor to
the Lessee in accordance with Clause 4.2.2;
"Delivery Date" means the date on which the Vessel is delivered by the
Lessor to the Lessee in accordance with Clause 4.2.2;
"Document of Compliance" shall have the meaning attributable to that
term in the ISM Code;
"Dollars" and "$" each mean the lawful currency for the time being of
the USA and in respect of all payments to be made under this Agreement
in Dollars, mean immediately available, freely transferable cleared
funds in Dollars;
"Drawing Period" shall have the meaning attributed to that term in
Clause 22.4(b);
"Economically Burdensome" shall be determined for any date in
accordance with the following:
The transactions contemplated by this Agreement shall be regarded as
having become economically burdensome where RIRR exceeds IRR by more
than zero point five per cent.
(0.5%) p.a. where:
IRR is the internal rate of return to the Lessee of the transaction
contemplated by the Lease Documents as determined by the Lessor
from the Initial Cash Flow;
RIRR is the internal rate of return to the Lessee of the transaction
contemplated by the Lease Documents as determined by the Lessor
from the Latest Cash Flow prepared in accordance with the
Financial Schedule as a consequence of an Assumption proving
not to be correct (excluding any of Assumptions 2.3.1,
2.3.16, or 2.3.17 proving not to be correct) but taking into
account any increase in insurance costs incurred by the Lessee
as a result of an increased insurance requirement pursuant to
Clause 9.6 of this Agreement (such amount being debited to the
Latest Cash Flow on the date(s) that such increased costs are
incurred by the Lessee and assuming that such costs will reflect
the ongoing cost of insurance cover thereafter save that to the
extent that such costs prove to be less than those assumed, the
Lessor shall be entitled to determine from a further Revised Cash
Flow the RIRR to be applied in determining whether the
transactions contemplated by this Agreement have in fact become
economically burdensome by taking into account such actual
costs). A certificate signed by the Lessee as to the amounts
and dates of incurral of such costs shall, in the absence of
manifest error, be final and binding on the Lessor;
"Effective Rate of Corporation Tax" in relation to an Accounting Period
means the time-weighted average of the rates of Corporation Tax for the
Financial Years in which such Accounting Period falls in whole or in
part;
"Enactments Relating to Group Relief" means the provisions of Chapter
IV of Part X of and Schedule 18 to ICTA 1988;
"Environment" means:
(i) any land including, without limitation, surface land and
sub-surface strata, sea bed or river bed under any water (as
defined below) and any natural or man-made structures;
(ii) water including, without limitation, coastal and inland waters,
surface waters, ground waters and water in drains and sewers; and
(iii) air, including air within buildings and other natural and
man-made structures above and below ground;
"Environmental Claim" means any written notice from any Government
Entity or, subject to the proviso below, third party, alleging any
breach, contravention or violation of any Environmental Law or the
existence of any liability or potential liability arising from any
such breach, contravention or violation including, without limitation,
in respect of liability to conduct, pay for or for damages in respect
of any investigation or audit, clean-up, redemption, administrative
cost or charge or expense, damage to the Environment or any natural
resource, property loss or damage, personal injury or any penalty
attaching or relating to the presence, emission, release or leak of
any Hazardous Material in or to the Environment in each case
pursuant to any Environmental Law, provided that "Environmental Claim"
shall not include any notice from a third party (not being a Government
Entity) which the Lessee, acting reasonably, believes to be spurious
or ill-founded;
"Environmental Law" means any or all applicable law (whether civil,
criminal or administrative), common law, statute, statutory instrument,
treaty, convention, regulation, directive, by-law, demand, decree,
injunction, resolution, order or judgment (in each case having the
force of law) and applicable codes of practice or conduct, circulars
and guidance notes having legal or judicial import or effect, in each
case of any Government Entity (whether now existing or hereafter
promulgated) in any Applicable Jurisdiction relating to or concerning:
(a) pollution or contamination of the Environment;
(b) harm, whether actual or potential, to mankind and human senses,
other living organisms and ecological systems;
(c) the generation, manufacture, processing, distribution, use
(including abuse), treatment, storage, disposal, transport or
handling of Hazardous Materials; and
(d) the emission, leak, release, spill or discharge into the
Environment of noise, vibration, dust, fumes, gas, odours,
smoke, steam, effluvia, heat, light, radiation (of any kind),
infection, electricity or any Hazardous Material and any matter
or thing capable of constituting a nuisance or an actionable
tort or breach of statutory duty of any kind in respect of such
matters,
including, without limitation, the following laws of the United States
of America: the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, the Hazardous Materials
Transportation Act, as amended, the Oil Pollution Act of 1990, as
amended, the Federal Water Pollution Control Act, as amended, the
Resource Conservation and Recovery Act, as amended and the Toxic
Substance Control Act, as amended, in any such case the failure to
comply with which could result in the imposition of criminal or civil
liability on the Lessor together, in each case, with the regulations
promulgated and the guidance issued pursuant thereto having the force
of law;
"Environmental Permits" means in relation to any person, all or any
permits, licences, consents, approvals, certificates, registrations,
and other authorisations and the filing of all notifications, reports
and assessments required under any Environmental Law in connection
with the conduct of such person's business and the ownership, use,
exploitation or occupation of all of its property and assets;
"Excepted Circumstances" means that either (A) Delivery has not taken
place by 11.00 a.m. (London time) on 31st December 2000 (or such later
date as the Lessor shall have agreed for the purposes of this provision)
and the failure of Delivery to take place by that time was not primarily
as a result of any fault of the Lessee or any other member of the
Guarantor's Group; or (B) the leasing of the Vessel pursuant to this
Agreement has terminated:
(i) pursuant to Clause 10 (total loss) of this Agreement; or
(ii) pursuant to the service of a Put Notice (as defined in the
Put-Option Agreement) pursuant to Clause 3.2(b) of the Put-Option
Agreement; or
(iii) pursuant to the occurrence of the Termination Event referred to
in Clause 21.1(b) in circumstances where the Lessee was unable
to discharge its obligations under Clause 9 of this Agreement
solely by reason of the unavailability of insurance cover on the
terms required by the said Clause 9; or
(iv) at any time after the Lessor has assigned its rights under this
Agreement to a person which is not a member of the Lessor's
Group;
"Excess Risks" means the proportion of claims for general average,
salvage and salvage charges not recoverable under the hull and machinery
policies in respect of the Vessel in consequence of her insured value
being less than the value at which the Vessel is assessed for
the purposes of such claims;
"Excluded Property" means, in respect of the Vessel any items of
equipment installed on, or attached to the Vessel but which does not
become or is not required to become, by virtue of any provision of this
Agreement, part of the Vessel;
"Extension Period" has the meaning given to this term in Clause 19.1(f);
"Exxon Party" has the meaning given to it in Clause 12.18;
"Exxon Contract" means a contract for the provision of the services of
the Vessel to be entered into prior to the Delivery Date between the
Sub-Lessee and the Exxon Party in a form complying with the requirements
of Clauses 12.18 and 13;
"Fee Letters" means the BMBF Fee Letter and the Atlas Fee Letter;
"Final Date" means the date one (1) year following:
(a) the earliest date upon which, assuming assessments are raised in
due time, Corporation Tax would, if there were such profits, be
required to be paid in respect of the profits of the Lessor
arising in the Accounting Period of the Lessor in which the
earlier of:
(i) the expiry by effluxion of time of the Primary Period; and
(ii) the Termination Date;
occurs; or
(b) if more than one such payment of Corporation Tax would be so
required in respect of such profits the earliest date on which
the last such payment would be required;
"Finance Lease" shall have the meaning attributed to that term in the
United Kingdom Statement of Standard Accounting Practice 21;
"Financial Schedule" means Schedule 1;
"Financial Year" has the meaning attributed to "financial year" in
Section 834(1) ICTA 1988;
"First Instalment" shall have the meaning attributed to that term in
the Novation Agreement;
"Flag State" means the Republic of Panama (or such other state as the
Lessor may approve, such approval not to be unreasonably withheld);
"GMIDC" means Global Marine International Drilling Corporation, a company
incorporated under the laws of the Bahamas, whose registered office is
at Mareva House, 4 George Street, P.O. Box 3937, Nassau, The Bahamas;
"Government Entity" means and includes (whether having a distinct legal
personality or not) (i) any national government, political sub-division
thereof or local jurisdiction therein, (ii) any board, commission,
department, division, organ, instrumentality, court or agency of any
entity referred to in (i) above, however constituted, and (iii) any
association, organisation or institution (international or otherwise)
of which any entity mentioned in (i) or (ii) above is a member or to
whose jurisdiction any of the foregoing is subject or in whose
activities any of the foregoing is a participant;
"Guarantee" means the deed of guarantee and indemnity of even date
herewith given by the Guarantor in favour of the Lessor in form
satisfactory to the Lessor;
"Guarantor" means Global Marine Inc., a company incorporated under the
laws of the State of Delaware, U.S.A., whose principal place of business
is at 777 North Eldridge Parkway, Houston, Texas, 77079-4493, USA and
its successors and permitted assigns;
"Guarantor Credit Event" means the Guarantor's unsecured, unguaranteed
and unsubordinated long term debt is rated below BBB- by Standard &
Poor's Ratings Group, a division of McGraw Hill Corporation (or any
successor to its ratings business) ("S&P") or is rated below Baa3 by
Moody's Investors Service Inc. (or any successor to its ratings
business) ("Moody's") or the unsecured, unguaranteed and unsubordinated
long term debt of the Guarantor shall cease to be rated at all by
Moody's or shall cease to be rated at all by S & P;
"Guarantor's Group" means the Guarantor and its Subsidiaries (US) from
time to time;
"Hazardous Material" means any element or substance, whether natural or
artificial, and whether consisting of gas, liquid, solid or vapour,
whether on its own or in any combination with any other element or
substance, which is listed, identified, defined or determined by any
applicable law to be, to have been, or to be capable of being or
becoming harmful to mankind or any living organism or damaging to the
Environment including without limitation oil (as defined in the United
States Oil Pollution Act of 1990, as amended) and all hazardous
substances (as defined in the United States Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended);
"Holding Company" has the meaning given to it in section 736 of the
Companies Act 1985;
"Houston Business Day" means a day (other than a Saturday or Sunday,
or holiday scheduled by English law, Texas law or US federal law) on
which (a) dealings in Sterling deposits are carried on in the London
inter-bank market, (b) banks are open for business in the City of
London and Houston, Texas;
"ICTA 1988" means the Income and Corporation Taxes Act 1988;
"increased cost" shall have the meaning attributed to that term in
Clause 23.4.
"Indemnified Persons" shall have the meaning attributed to that term in
Clause 24.1 (a);
"Indebtedness" of any person means, without duplication, (i) all
indebtedness of such person for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such person or
only to a portion thereof), (ii) all obligations of such person
evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such person in respect of letters of credit or
other similar instruments (or reimbursement obligations with respect
thereto), other than standby letters of credit, performance bonds
and other obligations issued by or for the account of such person in
the ordinary course of business, to the extent not drawn or, to the
extent drawn, if such drawing is reimbursed not later than the third
Business Day following demand for reimbursement,) (iv) all Capitalised
Lease Obligations of such person, (v) all Indebtedness of others secured
by a Lien on any asset of such person, whether or not such Indebtedness
is assumed by such person (provided that if the obligations so secured
have not been assumed in full by such person or are not otherwise such
person's legal liability in full, then such obligations shall be deemed
to be in an amount equal to the greater of (a) the lesser of (1) the
full amount of such obligations and (2) the fair market value of such
assets, as determined in good faith by the board of directors of such
person, which determination shall be evidenced by a board resolution,
and (b) the amount of obligations as have been assumed by such person
or which are otherwise such person's legal liability), and (vii) all
Indebtedness of others (other than endorsements in the ordinary course
of business) guaranteed by such person to the extent of such guarantee;
"Initial Cash Flow" means the cash flow annexed to the Financial
Schedule as Annex B;
"Initial Sub-Lease" means a lease agreement, in a form approved by the
Lessor and initialled by the Lessor for the purposes of identification,
of even date herewith between the Lessee and the Initial Sub-Lessee
relating to the Vessel providing for the Vessel to be let on demise
charter to the Initial Sub-Lessee;
"Initial Sub-Lessee" means Global Marine U.K. Limited, a company
incorporated under the laws of Scotland with registered number SC131375
and registered office at North Norfolk House, Pitmedden Road, Dyce,
Aberdeen, Grampian AB2 ODP;
"Insolvency Event" means, in relation to any person any of the following:
(a) that person is unable to pay its debts as they fall due within
the meaning of section 123(1)(e) of the Insolvency Act 1986 or
has a voluntary arrangement proposed under section 1 of the
Insolvency Act 1986 or admits in writing its inability to pay
its debts as they mature or declares a moratorium on the
payment of all or a substantial part of its indebtedness or
makes a general assignment for the benefit of creditors or is
subject to or applies for winding-up or liquidation proceedings
or is successfully put into forced or voluntary liquidation
(except for the purpose of voluntary reorganisation previously
agreed in writing by the Lessor not involving the insolvency of
that person); or
(b) that person or any creditor or shareholder of that person
petitions or applies to any court, tribunal or authority for
the appointment of, or that person has or suffers to be
appointed, any examiner, administrator, administrative receiver,
receiver, liquidator, trustee or similar officer of it, its
undertaking or any substantial part of its assets (and in the
case of a petition or application by a creditor, such petition
or application is not dismissed within twenty (20) Business Days
and the Lessee has not established to the satisfaction of the
Lessor (acting reasonably) that the same is frivolous or
vexatious and is being contested in good faith by all appropriate
proceedings); or
(c) that person shall suffer a distress, execution, sequestration or
other process or the same is being levied or enforced upon or
sued out against in each case against the whole or a substantial
part of the assets, rights or revenues of that person, and such
distress, execution, sequestration or other process is not
dismissed or released within twenty (20) Business Days; or
(d) that person otherwise takes any corporate action or that person
or any creditor or shareholder of that person takes any steps in
relation to that person under any law, regulation or decree of
any applicable jurisdiction whether now or hereafter in effect
relating to or which has an equivalent effect to any of (a), (b)
or (c) above;
"Instalment" means each amount which the Lessor is required to pay by
way of reimbursement to the Supervisor under or pursuant to the
Supervision Agreement or by way of purchase price under the Shipbuilding
Contract and pursuant to the Novation Agreement;
"Instalment Date" means each date on which the Lessor is required to
make payment of an Instalment;
"Insurances" means all policies and contracts of insurance (which
expression includes all entries of the Vessel in a protection and
indemnity or war risks association) which are from time to time prior
to or during the Lease Period in place or taken out or entered into
(a) pursuant to Clause 9 in respect of any part of the Vessel or (b)
otherwise howsoever in connection with the Vessel and, in each case,
all benefits thereof (including claims of whatsoever nature and return
of premiums);
"Insurance Adviser's Fee" means the fees, charges and expenses paid or
payable by the Lessor to the Lessor's insurance adviser in respect of
the transactions contemplated by the Lease Documents, incurred up to and
including the Delivery Date (excluding any VAT thereon);
"Insurance Side Letter" means a letter agreement so entitled of even
date herewith between the Lessor and the Lessee setting out the Lessee's
obligations with respect to insurance of the Vessel prior to Delivery;
"Irrecoverable VAT" means any amounts paid or payable by or on behalf
of the Lessor in respect of Value Added Tax under or as contemplated by
any of the Lease Documents to the extent the Lessor shall determine that
the Lessor or, if the Lessor is a member of a group for Value Added Tax
purposes, the representative member has not or will not receive a credit
(whether by way of credit or repayment) for that amount as "input tax"
(as that expression is defined in sub-section (1) of section 24 of VATA)
under sections 25 and 26 of VATA (nor receive a credit for it under any
similar or equivalent legislation) PROVIDED THAT in calculating the
amount of Irrecoverable VAT (if any) it shall be assumed that neither
the Lessor nor any representative member has entered into any
transactions other than as contemplated by the Lease Documents and that
accurate and timely VAT returns have been made by the Lessor or the
representative member;
"ISM Code" means:
(i) the International Safety Management Code for the Safe Operation
of Ships and for Pollution Prevention currently known or referred
to as the "ISM Code",
adopted by the Assembly of the International Maritime Organisation
by Resolution A.741(18) on 4th November 1993 and incorporated on
19th May 1994 into chapter IX of the International Convention for
the Safety of Life at Sea 1974 (SOLAS 1974); and
(b) all further resolutions, circulars, codes, guidelines,
regulations and recommendations which are now or may in the
future be issued by or on behalf of the International Maritime
Organisation or any other entity with responsibility for
implementing the ISM code, including, without limitation,
the "Guidelines on implementation or administering of the
International Safety Management (ISM) Code by Administrations"
produced by the International Maritime Organisation pursuant
to Resolution A.788(19) adopted on 25th November 1995;
as the same may be amended, supplemented or replaced form time to time;
"Latest Cash Flow" as at any date upon which reference thereto is to be
made means the most recent Revised Cash Flow produced and in effect as
at that date pursuant to paragraph 3.2 of Part 3 of the Financial
Schedule or if no Revised Cash Flow is in effect as at such date, the
Initial Cash Flow;
"Latest Termination Cash Flow" as at any date upon which reference
thereto is to be made, means the most recent Revised Termination Cash
Flow produced and in effect as at that date pursuant to paragraph 4.5
of Part 4 of the Financial Schedule or, if no Revised Termination Cash
Flow is in effect at that date, the Termination Cash Flow;
"Lease Capital Outstanding" means at a particular date the amount
(positive or negative, as the case may be) shown at that date in the
Latest Cash Flow in the column headed "NCI" or, where for a particular
date no amount is so shown, the amount last so shown at a date
immediately preceding that particular date;
"Lease Documents" means this Agreement, the Acquisition Documents, the
Guarantee, the Security Documents, the Payment Agreements, the Initial
Sub-Lease, each subsequent Sub-Lease, the Sub-Lessee Acknowledgement,
the Exxon Contract, each subsequent Service Contract, the Side Letters,
and each and every other letter, agreement, document or instrument of
even date herewith between any of the parties to the above or given by
any of the parties to the above to another of them expressed or agreed
to be a Lease Document and any other letter, agreement, document or
instrument from time to time entered into pursuant to or in connection
therewith between any of the parties to the above or given by any of
the parties to the above to another of them, in each case as from time
to time amended or supplemented in compliance with the terms hereof or
thereof, as the case may be;
"Lease Period" means the period during which the Lessee shall be
entitled to possession and use of the Vessel in accordance with this
Agreement being the period, if any, commencing on (and including) the
Delivery Date and terminating on (and including) the Termination Date;
"Lease Period End Date" means the later of the Primary Period End Date
and the last day of the final Secondary Lease Period;
"Lessee" means Global Marine International Drilling Corporation;
"Lessee Payment Notice" shall have the meaning given to that term in the
Payment Agreements;
"Lessor" means BMBF (NO.12) Limited, company number 2512609;
"Lessor Action" means any action on the part of the Lessor required or
permitted pursuant to this Agreement, including, but not limited to,
the giving, refusing, revocation or withdrawal of any consent or
approval;
"Lessor's Cost" as at any time means the sum equal to the aggregate of
the amounts paid by the Lessor pursuant to the Shipbuilding Contract,
the Novation Agreement and the Supervision Agreement being the aggregate
of the Instalments (to the extent paid up to and including that time)
calculated in each case, by reference to the date on which the Lessor
makes payment of the relevant Instalment;
"Lessor's Expenses" means the Arrangement Fee, the BMBF Fee, the
Lessor's Legal Expenses and the Insurance Adviser's Fee (if any)
together with any desktop valuation and survey fees incurred by the
Lessor in connection with the Vessel (or any part thereof) prior
to the Delivery Date;
"Lessor's Group" means the Bank and all its Subsidiaries (UK) from time
to time and its Holding Company from time to time;
"Lessor's Legal Expenses" means the amount of fees, disbursements and
incidentals (excluding VAT thereon) paid or payable by the Lessor to
Wilde Sapte (subject, in the case of Wilde Sapte's fees only, to a
maximum amount separately agreed) and any relevant overseas legal
advisers for services rendered to the Lessor in relation to, inter alia,
the preparation, negotiation and completion of the transactions
contemplated by this Agreement and the other Lease Documents;
"Lessor's Mortgage" means the first preferred Panamanian naval mortgage
in relation to the Vessel to be given on the Delivery Date by the Lessor
in favour of the Lessee in the form agreed by the Lessee and the Lessor
and initialled by each of them for the purposes of identification;
"Lessor's Vessel Lien" means a Vessel Lien of the type referred to in
Clause 5.2(b) but excluding Vessel Liens referred to in the proviso to
that Clause;
"Liability" shall have the meaning attributed to that term in Clause
25.1(a);
"Liability Insurances" means the insurances described in
Clause 9.1(a)(ii);
"LIBID" in relation to a particular amount for a particular period,
means LIBOR for the amount and period LESS zero point one two five per
cent (0.125%);
"LIBOR" means, in relation to a particular period:
(i) the offered rate for deposits of Sterling for a period equal to
such period at or about the Relevant Time on the first day of
such period as displayed on Telerate page 3750 (British Bankers'
Association Interest Settlement Rates) or such other page as may
replace page 3750 on such system or on any other system of the
information vendor for the time being designated by the British
Bankers' Association to calculate British Bankers' Association's
Interest Settlement Rate (as defined in the British Bankers'
Association's Recommended Terms and Conditions dated 5th August,
1985); or
(ii) if on such date no such rate as is mentioned in paragraph (i)
above is displayed, LIBOR for such period shall be the arithmetic
mean (rounded upwards if necessary to five decimal places) of the
rates respectively quoted to the Bank by each of the Reference
Banks at the request of the Bank (or, if not all the Reference
Banks provide a quotation when requested, the arithmetic mean of
the rates which are quoted) as such Reference Banks' offered rates
for deposits of Sterling in an amount approximately equal to the
amount in relation to which LIBOR is to be determined for a
period equivalent to such period to prime banks in the London
Inter-bank Market at or about on the first day of such
period; or
(iii) if on such date no such rate can be ascertained pursuant to either
paragraph (i) or paragraph (ii) of this definition, LIBOR for
such period shall be the rate, determined by the Lessor at which
the Bank would be able to obtain deposits of Sterling in an
amount approximately equal to the amount in respect of which
LIBOR is to be determined, from whatever source it may reasonably
select for a period equivalent to such period at or about
11.00 a.m. (London time) on the first day of such period;
provided that for any Instalment Date, in relation to any part of the
Lease Capital Outstanding representing the Lessor's funding of an
Instalment or any of the Lessor's Expenses, LIBOR shall be such rate as
shall be certified by the Lessor to the Lessee as the rate at which the
Lessee actually obtains funds in respect of such part of the Lease
Capital Outstanding;
"Lien" has the meaning given to such term in the Guarantee;
"LLA Event" means the occurrence of circumstances where Part II, Chapter
IVA (long life assets) of CAA 1990 applies or will apply to the Vessel;
"Losses" shall have the meaning attributed to that term in Clause 24.1(a)
and "Loss" shall be construed accordingly;
"Loss Payable Clause" means the loss payable clause in the form set out
in Schedule 6;
"Mandatory Event" means each of the events set out in Clause 21.2.2;
"Manuals and Technical Records" means all such books, records, logs,
manuals, handbooks, technical data, plans, drawings and other materials
and documents required to be kept in compliance with any Applicable Laws
or the requirements of the Classification Society relating to the Vessel;
"Margin" means at a particular date the amount shown as at that date in
the Latest Cash Flow in the column headed "Margin";
"Margin Rate" means in respect of any day:-
(i) where RWB is less than or equal to twenty per cent (20%), the
after tax rate of 0.2646 per annum; or
(ii) where RWB is greater than twenty per cent (20%) the after tax
rate of:
0.2646 + ((A - 20%) x B)
where A is the RWB on that day, and B is 0.4636;
"Material Subsidiary" means any Subsidiary (US) of the Guarantor, the
gross revenues, profits, assets or liabilities of which represent ten
per cent. (10%) or more of the gross revenues, profits, assets or
liabilities (respectively) of the Guarantor's Group;
"Maximum Exposure" for any Relevant Period means the amount of the
highest Non-Collateralised Lessee Exposure determined for any date
falling in that Relevant Period, as most recently determined in
accordance with Clause 22;
"Member" means a member (other than the Lessor) of the group of companies
which the Lessor is for the time being a member, "member" and "group of
companies" to have the meaning which they have in the Enactments Relating
to Group Relief;
"month" or "Month" means a period beginning in one calendar month and
ending in the next succeeding (or stipulated following) calendar month
on the day numerically corresponding to the day of the calendar month
on which it started, provided that (i) if the period started on the last
Business Day in a calendar month or if there is no numerically
corresponding day, it shall end on the last Business Day in such next
calendar month and (ii) if such numerically corresponding day is not a
Business Day, the period shall end on the preceding Business Day and
"months" and "monthly" shall be construed accordingly;
"Net Proceeds of Sale" shall have the meaning attributed to that term
in Clause 20.1.
"Non-Collateralised Lessee Exposure" for any date means the amount
(if any) by which the aggregate of:
(i) the Termination Payment calculated in accordance with Part 4 of
the Financial Schedule for the Adjustment Date for the Relevant
Period in which that date falls,
(ii) all other amounts which would fall due for payment by the Lessee
to the Lessor under this Agreement and the other Lease Documents
if the leasing of the Vessel under this Agreement were to
terminate on such date pursuant to Clause 21.1 (including any
amounts which would become payable by the Lessee under Clause 25
and Clause 28.4); and
(iii) the amount of any Rental which is scheduled to be paid on such
Adjustment Date or, as the case may be, minus the amount of any
rebate of Rental which is scheduled to occur pursuant to
paragraph 3.5 of the Financial Schedule on such Adjustment
Date
would exceed the aggregate Value of the Payment Agreements on such next
succeeding Adjustment Date discounted at LIBID in respect of the period
from such date to the next succeeding Adjustment Date provided that for
all purposes of this definition (a) it shall be assumed that on the date
for which the calculation is made the Lessor will receive Net Proceeds
of Sale equal to the Appraised Value for that date and will make a rebate
in accordance with Clause 20.2 and (b) the operation of Clause 22.5.1
(excluded obligations) shall be disregarded;
"Normal Rent" has the meaning given to that expression in Schedule 12 to
the Finance Act 1997;
"Notice" shall have the meaning attributed to that term in Clause 31.5;
"Novation Agreement" means the agreement so entitled of even date
herewith between the Shipbuilder, the Lessor and GMIDC providing for the
novation of the Shipbuilding Contract from GMIDC to the Lessor, and
providing for certain amendments to the Shipbuilding Contract to take
effect upon such novation;
"Option Party" means the Initial Sub-Lessee in its capacity as party to
the Put-Option Agreement;
"Original Currency" shall have the meaning attributed to that term in
Clause 29.13;
"Other Currency" shall have the meaning attributed to that term in
Clause 29.13;
"Payment Agreements" means each of the three payment agreements of even
date herewith each between one of the Payment Banks, the Lessor, the
Lessee and the Guarantor, each relating to the undertaking by the
relevant Payment Bank to perform certain payment obligations in
connection with this Lease;
"Payment Banks" means each of Commerzbank A.G., Bank of Nova Scotia and
Canadian Imperial Bank of Commerce, each acting through its London branch;
"Payment Date" shall have the meaning given to that term in the Payment
Agreements;
"Permitted Vessel Lien" means:
(i) any Lessor's Vessel Lien;
(ii) any Vessel Lien for Taxes either not yet assessed or, if assessed,
not yet due and payable or being contested in good faith by
appropriate proceedings (and for the payment of which adequate
reserves have been provided) so long as any such proceedings or
the continued existence of such Vessel Lien do not involve
any reasonable likelihood of the sale, forfeiture or loss of, or
of any interest in, the Vessel (or any part thereof);
(iii) Vessel Liens arising out of claims, judgments or awards against
the Lessee or any other member of the Guarantor's Group which are
being contested in good faith or which are subject to a pending
appeal and for which there shall have been granted a stay of
execution pending such appeal and for the payment of which
adequate reserves have been provided so long as any such
proceedings do not involve any reasonable likelihood of the sale,
forfeiture or loss of the Vessel or of any interest therein (or
any part thereof);
(iv) any Vessel Lien for salvage of any amount and any ship repairer's
or outfitter's possessory lien for a sum not exceeding five
million Dollars ($5,000,000) or the equivalent in any other
currency or any lien for general average or for officer's or
crew's wages not more than ten (10) Business Days outstanding in
the ordinary course of trading so long as such Lien does not
involve any reasonable likelihood of the sale, forfeiture or
loss of the Vessel or any interest therein (or any part thereof);
(v) any Vessel Lien created by the Lessor or any other person under
and as permitted by any Lease Document;
(vi) any other Vessel Lien, the creation of which has been expressly
permitted in writing by the Lessor; and
(vii) any Vessel Lien arising by operation of law in the ordinary
course of the business of the Lessee in respect of amounts which
are not overdue;
"Pre-Primary Period" means the period from the date of this Agreement up
to the Delivery Date;
"Pre-Primary Period Rent" means each instalment of Rent in the amount
(if any) determined pursuant to paragraph 1.1.1 of the Financial
Schedule, as adjusted from time to time pursuant to the provisions of
the Financial Schedule;
"Primary Obligor" means the Guarantor, the Lessee and, prior to the
Delivery Date, the Option Party (in that capacity) but excluding the
Sub-Lessee solely in the capacity of sub-lessee under any Sub-Lease;
"Primary Period" means the period commencing on the Delivery Date to
and including the Primary Period End Date, or such shorter period as
may be determined in accordance with the provisions of this Agreement;
"Primary Period End Date" means the twentieth (20th) anniversary of the
Delivery Date;
"Primary Period Rent" means each instalment of Rent in the amount
determined pursuant to paragraph 1.1.2 of the Financial Schedule, as
adjusted from time to time pursuant to the provisions of the Financial
Schedule;
"Principles" means the principles described in paragraph 2.2 of Part 2
of the Financial Schedule;
"Proceeds of Sale" shall have the meaning attributed to that term in
Clause 20.1
"Put-Option Agreement" means the agreement so entitled of even date
herewith between the Lessor, the Option Party and the Shipbuilder,
providing for the re-novation from the Lessor to the Option Party, in
certain circumstances, of the rights and obligations novated to the
Lessor under the Novation Agreement;
"rate of exchange" shall have the meaning attributed to that term in
Clause 29.13,
"Rebate" shall have the meaning attributed to that term in Clause
25.5(b);
"Redelivery Location" means a port in the United Kingdom or elsewhere
reasonably acceptable to the Lessor and, otherwise than on a redelivery
following service of a Termination Notice, agreed by the Lessee;
"Reference Banks" means the principal London offices of each of Midland
Bank PLC, National Westminster Bank Plc, Lloyds Bank Plc and Barclays
Bank PLC;
"Relevant Event" means any Termination Event or any event which, after
the giving of notice by the Lessor or lapse of time or both, or the
satisfaction of any other condition (or any combination thereof), would
constitute a Termination Event;
"Relevant Member" means any member of the Lessor's Group other than the
Lessor;
"Relevant Period" means:
(a) (subject to (c) and (d) below) the period of three (3) months
commencing on the date the Lessor first pays any amount of Total
Cost or, if earlier, Lessor's Expenses;
(b) (subject to (c) and (d) below) each succeeding period of three
(3) months up to but excluding the last day of the Accounting
Period of the Lessor preceding the Accounting Period of the Lessor
in which the Final Date or, as the case may be, the Revised Final
Date falls, or the day before the Termination Payment Date if
earlier;
(c) where there has been a termination, the three month period
commencing on the Termination Payment Date and (subject to (d)
below) each succeeding period of three months up to but excluding
the Final Date or, as the case may be, the Revised Final Date
falls;
(d) if the day before the Anticipated Delivery Date, the Termination
Payment Date, the Final Date or the Revised Final Date does not
fall on the last day of any complete three month period referred
to in (a), (b) or (c) such shorter period as shall exist between
the last day of the last such complete period of three months
and the last day of the Accounting Period of the Lessor preceding
the Accounting Period of the Lessor in which the Final Date, or,
as the case may be, the Revised Final Date falls or the day before
the Anticipated Delivery Date or the Termination Payment Date (as
the case may be) shall constitute a Relevant Period;
PROVIDED THAT
(i) if the Lessor incurs any amount in respect of Total Cost
on a day which does not fall on the last day of the period
referred to in (a) or any period referred to in (b) the
period from and including the date on which the Lessor
incurs any amount in respect of Total Cost to and
including the last day of the then current period referred
to in (a) or (b) above shall constitute a Relevant Period
for that element only of the Total Cost; and
(ii) if the Delivery Date does not occur on the Anticipated
Delivery Date, the period from the Anticipated Delivery
Date to the day before any revised Anticipated Delivery
Date shall constitute a Relevant Period (such that this
proviso shall apply any number of times until the Delivery
Date occurs);
"Rent" means any or all (as the context requires) of the Pre-Primary
Period Rent, the Primary Period Rent, the Secondary Period Rent and any
other sum (including any Termination Rent or Termination Payment) payable
by the Lessee pursuant to this Agreement which is expressed to be by way
of Rent or additional Rent;
"Rent Limit" shall have the meaning attributed to that term in
Clause 22.5.1(a);
"Rent Payment Date" means any date on which a payment of Pre-Primary
Rent, Primary Period Rent or Secondary Period Rent is payable
ascertained in accordance with Part 1 of the Financial Schedule;
"Requisition Compensation" means all sums of money or other compensation
from time to time payable in respect of the Compulsory Acquisition of
the Vessel;
"Restricted Amount" means any amount (or any part of any amount)
expressed to be payable by any of the Payment Banks under the Payment
Agreements in relation to which any one or more of the following apply:
(a) the obligation to pay such amount (or part) is, or is found or
held to be, invalid, illegal or unenforceable under applicable
law for any reason whatsoever, except where such invalidity,
illegality or unenforceability would not have arisen but
for the occurrence of an Insolvency Event in relation to such
Payment Bank or any other person; or
(b) immediate enforcement of the obligation to pay such amount (or
part) is denied under applicable law for any reason whatsoever
except where such enforcement would not have been denied but for
the occurrence of an Insolvency Event in relation to such Payment
Bank or any other person;
(c) the relevant Payment Bank is not required to make payment of such
amount (or part) to the Lessor under the relevant Payment
Agreement as a result of a requirement to make a deduction or
withholding;
"Revised Cash Flow" means any Cash Flow produced pursuant to paragraph
3.1 of Part 3 of the Financial Schedule or sub-paragraph 5.2.2 of Part 5
of the Financial Schedule;
"Revised Final Date" means, in relation to a Revised Termination Cash
Flow or a Revised Cash Flow to which paragraph 3.1.4 of Part 3 of the
Financial Schedule applies, the date one (1) year following:
(a) the earliest date upon which, assuming assessments are raised in
due time, Corporation Tax would, if there were such profits, be
required to be paid in respect of the profits of the Lessor
arising in the Accounting Period of the Lessor in which a payment
or rebate of Rent becomes payable under paragraph 3.1.4 of
Part 3 of the Financial Schedule, paragraph 4.5 of Part 4 of the
Financial Schedule, as the case may be;
(b) if more than one payment of Corporation Tax would be so required
in respect of such profits the earliest date on which the last
such payment would be required;
"Revised Termination Cash Flow" means any Termination Cash Flow produced
pursuant to paragraph 4.5.1 of Part 4 of the Financial Schedule;
"Risk Asset Weighting" means the weighted average of the counterparty
and/or security weightings (expressed as a percentage) attributable
from time to time to the transactions and matters contemplated by this
Agreement and the other Operative Documents, as determined by the Lessor,
and ascertained in accordance with applicable law and with the
terms of official directives, regulatory requirements and official
requests (whether or not having the force of law and including without
limitation the guidance notes to the Capital Adequacy Return BSD 3 or
any equivalent return for the time being in use) of the Bank of
England, the Financial Services Authority, the European Union or the
Bank of International Settlements for the time being in force in the
United Kingdom;
"RWB" means the Risk Asset Weighting in respect of that part of the
Lessor's net investment in the transaction contemplated by this
Agreement and the Lease Documents in respect of (i) that part of the
Lessee's potential obligations to the Lessor under the transactions
contemplated by the Lease Documents which is payable by the Payment
Banks pursuant to the Payment Agreement and (ii) that part of such
potential obligations in respect of which the Lessor has recourse to
Additional Security;
"Sale Assumptions" has the meaning given to such expression in
paragraph 4.3.3(b) of Part 4 of the Financial Schedule;
"Safety Inspectors" means the Classification Society or such other
person approved by the Lessor appointed from time to time as an
independent and competent person for the purpose of verifying
compliance by the Vessel with the requirements of this Agreement
and the Acquisition Documents;
"Secondary Period" means each period for which the leasing of the Vessel
under this Agreement is extended in accordance with Clause 6.2;
"Secondary Period Rent" means each instalment of Rent in the amount
determined pursuant to paragraph 1.2 of the Financial Schedule;
"Security Documents" means any documents granting security to the
Lessor over or in respect of the Additional Security or giving the
Lessor recourse to any Additional Security Provider, including without
limitation any agreements, instruments or other documents now or
hereafter entered into pursuant to or in connection with any Additional
Security;
"Security Party" means each party to a Lease Document other than the
Lessor;
"Service Contract" means (i) initially the Exxon Contract and
subsequently (ii) any extension or renewal of the Exxon Contract and
any further or other contract between the Sub-Lessee (or any other member
of the Guarantor's Group) and any Service Contractor providing for the
Lessee or the Sub-Lessee (or any other such member) to provide services
using the Vessel;
"Service Contractor" means, in relation to the period from the date
hereof to the expiry or termination of the Exxon Contract, the Exxon
Party, and, in relation to any time thereafter, the person for the time
being contracting with the Sub-Lessee or any other member of the
Guarantor Group for the provision of services using the Vessel;
"Settlement Date" means the earlier of:
(i) the first Business Day which falls after the date which falls
ninety (90) days after the Date of Total Loss; and
(ii) the date on which the Total Loss Proceeds in respect of the Total
Loss are received by the Lessor; and
(iii) where a Termination Event has occurred and is continuing, any
date specified as the Settlement Date by notice in writing from
the Lessor to the Lessee;
"Shipbuilder" means Harland and Wolff Shipbuilding and Heavy Industries
Ltd., a company organised and existing under the laws applicable to
Northern Ireland, whose registered office is at Queen's Island, Belfast,
Northern Ireland BT3 9DU;
"Shipbuilding Contract" means the contract dated 28th March 1998 between
the Shipbuilder and GMIDC providing for the construction and sale of
the Vessel;
"Shipping Register" means the official register of ships from time to
time in the Flag State;
"Side Letters" means (a) each of three letter agreements of even date
herewith between the Lessor and the Lessee, respectively entitled Excess
Tax Losses Side Letter, Indexation Side Letter and Tax Consultation Side
Letter, (b) the Fee Letters and (c) the Insurance Side Letter;
"Sterling" and "Pounds Sterling" and "pounds" means the lawful currency
for the time being of the United Kingdom and in respect of all payments
to be made under this Agreement in Sterling means immediately available,
freely transferable cleared funds in Sterling;
"Sterling Equivalent" means the equivalent in Sterling of an amount in
Dollars (or any other relevant currency) determined by reference to the
spot rate quoted by the Bank for the purchase of Dollars (or any other
relevant currency) with Sterling at 11.00a.m. two (2) Business Days prior
to any applicable date of payment under this Agreement;
"Sub-Lease" means (a) the Initial Sub-Lease and (b) after the termination
or expiry of the Initial Sub-Lease, any renewal, replacement or
substitute lease agreement relating to the Vessel entered into by the
Lessee in compliance with Clause 13 and the other provisions of this
Agreement;
"Sub-Lessee" means, initially, the Initial Sub-Lessee, and, after the
termination or expiry of the Initial Sub-Lease, any subsequent
sub-lessee of the Vessel complying with the requirements of Clause 13;
"Sub-Lessee Acknowledgment" means a deed of even date herewith executed
by the Sub-Lessee in favour of the Lessor under which the Sub-Lessee
acknowledges to the Lessor that its rights in and to the Vessel are
subject to and subordinate to the Lessor's rights and interests in and
to the Vessel and under this Agreement;
"Subsidiary (UK)" means any Subsidiary within the meaning of section 736
of the Companies Act 1985 and the expression "Subsidiaries (UK)" shall
be construed accordingly;
"Subsidiary (US)" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Guarantor
or by one or more other Subsidiaries (US), or by the Guarantor and one
or more other Subsidiaries (US). For the purposes of this definition,
"voting stock" means stock that ordinarily has voting power for
the election of directors, whether at all times or only so long as no
senior class of stock has such voting power by reason of any contingency.
A Joint Venture (as defined in the Guarantee) shall not be a Subsidiary
(US). The expression "Subsidiaries (US)" shall be construed accordingly;
"Supervision Agreement" means the agreement so entitled of even date
herewith between the Lessor and GMIDC;
"Surviving Parts" in the event of a Total Loss of the Vessel means
those spares and other parts comprising part of the Vessel which survive
that Total Loss, whether through being stored ashore or otherwise;
"Tax" means all present and future taxes, charges, imposts, duties,
levies of any kind whatsoever (whether levied by deduction, withholding
or otherwise), or any amount payable on account of or as security for
any of the foregoing, payable at the instance of or imposed by any
statutory, governmental, international, state, federal, provincial,
local or municipal authority, agency, body or department whatsoever or
any central bank, monetary agency or European Union institution, in
each case whether in the United Kingdom or elsewhere, together with
any penalties, additions, fines, surcharges or interest relating thereto
and "Taxes", "Taxation" and cognate expressions shall be construed
accordingly;
"Tax Date" has the meaning given to that expression in paragraph 2.3.5
of Part 2 of the Financial Schedule;
"Tax Liability" means in respect of any person:
(i) any liability or any increase in the liability of that person to
make any payment or payments of or in respect of Tax;
(ii) the loss or setting off against income, profits or gains or
against any liability to make a payment or payments of or in
respect of Tax of any relief, allowance, deduction or credit
("Relief") which would otherwise have been available to
that person; and
(iii) the loss or setting off against any liability to make a payment
or payments of or in respect of Tax of a right to repayment of
Tax which would otherwise have been available to that person;
and in any case falling within (ii) or (iii) above the amount that is
to be treated as a Tax Liability shall be determined as follows:
(a) in a case which falls within (ii) above and where the Relief
that was the subject of the loss or setting off was or would have
been a deduction from or offset against Tax, the Tax Liability
shall be the amount of that Relief;
(b) in a case which falls within (ii) above and which involves the
loss of a Relief which would otherwise have been available as a
deduction from or offset against gross income, profits or gains
the Tax Liability shall be the amount of Tax which would (on the
basis of the Tax rates current at the date of the loss and
assuming that the person has sufficient gross income, profits or
gains to utilise the Relief) have been saved but for the loss of
the Relief;
(c) in a case which falls within (ii) above and which involves the
setting off of a Relief which would otherwise have been available
as a deduction from or offset against gross income, profits or
gains, the Tax Liability shall be the amount of Tax which has
been or will be saved in consequence of the setting off;
(d) in a case which falls within (iii) above, the Tax Liability shall
be the amount of the repayment that would have been obtained but
for the loss or setting off.
For the purposes of this definition any question of whether or not any
relief, allowance, deduction, credit or right to repayment of tax has
been lost or set off, and if so, the date on which that loss or set-off
took place, shall be conclusively determined by the Lessor;
"Tax Losses" has the meaning given to that expression in
paragraph 2.3.6(a) of Part 2 of the Financial Schedule;
"Technical Records" means all technical data, manuals, log books,
records and other materials and documents (kept or to be kept for the
Vessel in compliance with any applicable law or regulation of the Flag
State or of any regulatory authority, government entity or international
body or treaty organisation from time to time) and all additions,
renewals, revisions and replacements from time to time made in accordance
with this Agreement;
"Termination Assumptions" means the assumptions described in paragraph
4.3.3 of Part 4 of the Financial Schedule (as corrected, amended or
added to from time to time in accordance with the Financial Schedule);
"Termination Cash Flow" means the Cash Flow produced by the Lessor
pursuant to paragraph 4.3.1 of Part 4 of the Financial Schedule;
"Termination Date" means:
(a) the Lease Period End Date; or
(b) where the leasing of the Vessel to the Lessee or, if Delivery
has not occurred, the obligation of the Lessor to lease the
Vessel to the Lessee pursuant to this Agreement terminates by
virtue of a Total Loss under Clause 10 of this Agreement, the
Date of Total Loss; or
(c) where the leasing of the Vessel to the Lessee, or, if Delivery
has not occurred, the obligation of the Lessor to lease the
Vessel to the Lessee pursuant to this Agreement automatically
terminates upon the termination of the Sub-Lease in accordance
with Clause 21.3, the date on which the sub-leasing of the Vessel
or, if delivery under the Sub-Lease has not occurred, the
obligation of the Sub-Lessee to sub-lease the Vessel pursuant to
the Sub-Lease terminates; or
(d) where the leasing of the Vessel to the Lessee or, if Delivery
has not occurred, the obligation of the Lessor to lease the
Vessel to the Lessee, pursuant to this Agreement terminates by
reason, in either case, of the delivery by the Lessor of
a Termination Notice pursuant to Clause 21.4 following the
occurrence of any Termination Event, the date of the Termination
Notice; or
(e) where the leasing of the Vessel or, if Delivery has not occurred,
the obligation of the Lessor to lease the Vessel to the Lessee
pursuant to this Agreement terminates by reason of the voluntary
termination of the leasing of the Vessel under this Agreement
pursuant to Clause 21.5 of this Agreement, the date upon
which the Voluntary Termination Notice expires;
"Termination Event" means any of the events listed in Clause 21.1 or
Clause 21.3;
"Termination Fee" means the sum calculated in accordance with
paragraph 4.4 of Part 4 of the Financial Schedule;
"Termination Notice" has the meaning attributed to that term in
Clause 21.4;
"Termination Payment" means the sum ascertained in accordance with
paragraph 4.2 of Part 4 of the Financial Schedule;
"Termination Payment Date" means, (i) in the case of a termination
pursuant to Clause 10 or Clause 21.3, the Settlement Date and,
(ii) in any other case, the relevant Termination Date;
"Termination Principles" means the principles described in paragraph
4.3.2 of Part 4 of the Financial Schedule;
"Termination Rent" means an amount calculated in accordance with
paragraph 4.3 of the Financial Schedule;
"Termination Security" at any time, means the aggregate of the security
constituted by the potential obligations of the Payment Banks under
Clause 5.7 of each Payment Agreement;
"Termination Shortfall" means, for any date falling within a Calculation
Period, the amount (if any) by which the Termination Requirement for
that Calculation Period exceeds the aggregate of the Value of all
Termination Security for that date;
"Total Cost" means the aggregate of all capital expenditure expended by
the Lessor pursuant to the Shipbuilding Contract and the Novation
Agreement (excluding VAT, but including Irrecoverable VAT, thereon);
"Total Loss" means:
(a) the actual or constructive or agreed or compromised or arranged
total loss of the Vessel; or
(b) the Compulsory Acquisition of the Vessel; or
(c) the hijacking, theft, condemnation, capture, seizure, arrest,
detention, forfeiture or confiscation of the Vessel (other than
where the same amounts to Compulsory Acquisition of the Vessel),
unless the Vessel be released and restored to the Lessee from
such hijacking, theft, condemnation, capture, seizure, arrest,
detention or confiscation within one hundred and eighty (180)
days after the occurrence thereof;
"Total Loss Proceeds" in relation to the Vessel means any compensation
or insurance proceeds received by the Lessor in respect of a Total Loss
of the Vessel which the Lessor is, as against the payer thereof,
unconditionally entitled to retain;
"Value" means, as calculated at any time in relation to a particular
date, the aggregate value of any security then held by the Lessor being:
(a) in respect of the security constituted by the undertakings of the
Payment Banks under the Payment Agreements the sum of:
(1) the aggregate amount which would (following a demand under
Clause 5 of each Payment Agreement) be payable by the
Payment Banks on that date under Clause 5.7 of each
Payment Agreement, for the avoidance of doubt, after
taking account of any reduction in the amount the
relevant Payment Bank is required to pay by reason
of a requirement to make deduction or withholding
less
(2) any amount which, by virtue of illegality or otherwise
(but excluding any illegality or other circumstance which
would not have arisen but for the occurrence of an
Insolvency Event in relation to that Payment Bank), the
relevant Payment Bank is relieved from its obligation to
make any payment under the relevant Payment Agreement;
(b) in respect of any Additional Security constituting Sterling cash
deposited at a bank, the amount of Sterling to which the Lessor
has direct and unconditional recourse and in respect of which the
Lessor has a valid and enforceable perfected first priority
security interest;
(c) in respect of any Additional Security not falling within
paragraph (b) above, such value as the Lessor shall allocate
acting reasonably;
"Value Added Tax" or "VAT" means value added tax as provided for in VATA
and legislation (whether delegated or otherwise) supplemental thereto or
in any primary or subordinate legislation promulgated by the European
Union or any body or agency thereofaand any tax similar or equivalent
to value added tax imposed by any country other than the United Kingdom
and any similar or turnover Tax replacing or introduced in addition to
any of the same;
"VATA" means the Value Added Tax Act 1994;
"Vessel" means the Glomar class 456 ultra-deepwater drillship to be
constructed by the Shipbuilder pursuant to the Shipbuilding Contract
under hull number 1740 and to be registered on or prior to the Delivery
Date in the name of the Lessor under the Panamanian flag under the name
"GLOMAR IRISH SEA I" (further details of which are set out in Schedule 2)
and includes any share or interest therein and her engines, machinery,
boats, tackle, outfit, equipment, spare gear, belongings and
appurtenances whether on board or ashore (but excluding consumable
stores and provisions, bunkers, diesel fuel and lubricants) which become
the property of the Lessor pursuant to the Acquisition Documents and
belong to the Lessor as at the Delivery Date or are installed on the
Vessel thereafter or which, having been removed therefrom, remain the
property of the Lessor together with any and all substitutions therefor
and replacements and renewals thereof from time to time made in or to
her in accordance with the provisions of this Agreement and, where the
context permits, the expression "Vessel" shall:
(i) include any part thereof and all Technical Records;
(ii) at all times exclude the Excluded Property;
(iii) at any time prior to Delivery, include all items title to which
has passed to the Lessor pursuant to the Shipbuilding Contract
and the Novation Agreement; and
(iv) at all times from and after Delivery, exclude all items to which
Clause 9.3 of the Shipbuilding Contract applies;
"Vessel Lien" means any right of ownership, security, retention of
title, right of possession or detention, mortgage, charge, lien, pledge,
encumbrance, lease or other bailment, assignment, statutory right in
rem, hypothecation, attachment, levy, claim, detention, proceeding or
set-off (other than any right of set-off arising in favour of a banker by
operation of law) or any agreement or arrangement having the effect of
creating a security interest or any other encumbrance or security
interest whatsoever, howsoever and wheresoever created or arising;
"Voluntary Termination Notice" shall have the meaning attributed to
that term under Clause 21.5;
"Writing Down Allowance" shall have the meaning given to it in
Section 24 CAA 1990.
1.2 Interpretation
(a) The expression "this Agreement" includes the recital hereto and
each schedule as the same may from time to time be amended,
supplemented or substituted by agreement of the parties hereto.
(b) In this Agreement references to:
(i) clauses, paragraphs, sub-paragraphs and schedules are,
unless otherwise specified, references to clauses,
paragraphs, sub-paragraphs of, and schedules to, this
Agreement, or the relevant part thereof, as from time to
time amended, supplemented or substituted in accordance
with the provisions of this Agreement;
(ii) subject to Clause 1.2(c)(i) any statute or other
legislative provision shall, unless otherwise specified,
be read to include any statutory or legislative
modification or re-enactment thereof, or substitution
therefor;
(iii) any agreement or instrument shall include such agreement or
instrument as it may from time to time be extended,
amended, supplemented, novated or substituted with the
agreement of the parties thereto;
(iv) "person" shall include any person, company, corporation,
firm, partnership, joint venture, association, trust,
unincorporated organisation or government or state
(including any agency, department or political sub-division
thereof) whether having distinct legal personality or not;
(v) "assignee" or "assignees" of a person shall include any
person who has assumed all or some of the rights and/or
obligations of the relevant person, whether by assignment,
novation or otherwise;
(vi) reference to any person shall include its successors,
permitted assignees and permitted transferees in accordance
with their respective interests;
(vii) the "assets" of any person shall be construed as a
reference to the whole or any part of its business,
undertaking, property, assets and revenue (including any
right to receive revenues);
(viii) "indebtedness" shall be construed so as to include any
obligation (whether incurred as principal or as surety)
for the payment or repayment of money, whether present or
future, actual or contingent;
(ix) the "winding-up", "dissolution" or "administration" of a
company or corporation shall be construed so as to include
any equivalent or analogous proceedings under the law of
the jurisdiction in which such company or corporation is
incorporated or any jurisdiction in which such company or
corporation carries on business including the seeking of
liquidation, winding-up, reorganisation, dissolution,
administration, arrangement, adjustment, protection or
relief of debtors;
(x) words importing the plural include the singular and vice
versa;
(xi) a "law" (1) includes any common law, statute, decree,
constitution, regulation, order, judgment or directive of
any governmental entity; (2) includes any treaty, pact,
compact or other agreement to which any government entity
is a signatory or party; (3) includes any judicial or
administrative interpretation or application thereof and
(4) is a reference to that provision as amended,
substituted or re-enacted;
(xii) the words "other" and "otherwise" shall not be construed
ejusdem generis with any foregoing words where a wider
construction is possible; and
(xiii) the words "including" and "in particular" shall be
construed as being by way of illustration or emphasis and
shall not limit or prejudice the generality of any
foregoing words.
(c) In the Financial Schedule, references to parts, paragraph and
annexes are, unless otherwise stated, references to parts and
paragraphs of, and annexes to, the Financial Schedule as from
time to time amended, supplemented or substituted, and:
(i) references to statutory provisions are to statutory
provisions as at the date of this Agreement and, to that
extent, Clause 1.2(b)(ii) shall not apply to the Financial
Schedule;
(ii) any references to the occurrence of an event shall include
a reference to the failure of an assumed event to occur;
and
(iii) any reference to a change of practice shall be a reference
to a change of practice as that practice is understood and
is or has been experienced by the Lessor's Group and
lessors of equivalent standing to the Lessor.
(d) Clause and other headings are for ease of reference only and
shall not affect the interpretation of this Agreement.
1.3 Conflicts
In the event of any conflict between this Agreement and any of the other
Lease Documents to which the Lessor and the Lessee are a party, the
provisions of this Agreement shall prevail.
1.4 Determinations
(a) Any reference to the timing or amount of any payment to be made
or received, or assumed to be made or received, by the Lessor or
to the making of any determination, calculation or quantification
under this Agreement (each a "Determination" and "determine" shall
be construed accordingly) shall be construed as a reference to
such Determination as determined by the Lessor in accordance with
this Agreement.
(b) If requested in writing by the Lessee, the Lessor shall provide
the Lessee with written details (including any relevant
calculations) of any Determination made in connection with this
Agreement (for the avoidance of doubt Clause 30 (Confidentiality)
of this Agreement shall apply to all information disclosed in
accordance with this paragraph).
(c) The Lessor shall be entitled (but not obliged) to make a
Determination that any Assumption (including for this purpose any
Termination Assumption) is incorrect if in good faith it has
reasonable grounds for believing that a change in that Assumption
will or is likely to occur, but shall be obliged to make a
Determination that a change in that Assumption has occurred as
soon as is reasonably practicable after that change has actually
occurred.
(d) The Lessor shall have reasonable grounds for having a belief that
a legislative change will or is likely to occur if an official
announcement is made by or on behalf of any body mentioned in
the definition of Tax (including, for the avoidance of doubt, a
statement by the Chancellor of the Exchequer) or other competent
authority to that effect, and shall have reasonable grounds for
having a belief that any other change will or is likely to occur
if it has obtained information from any body mentioned in the
definition of Tax (including any challenge or dispute by the
Inland Revenue of anything assumed in or contemplated by the
Financial Schedule) or other competent authority or
professional advice relating to that information or any published
announcement, any practice, concession or judicial decision
(which shall, in each case, be appropriate to the change in
point) from which it appears that a change will or is likely to
occur.
(e) If the Lessee considers that:
(i) any Determination of the Lessor is or may not be accurate
or correct, the Lessee may, within twenty (20) Houston
Business Days of being notified of that Determination,
so inform the Lessor by notice in writing, giving its
reasons for considering it not to be accurate or correct;
or
(ii) the Lessor ought to have made a Determination but has
failed to do so, the Lessee may so inform the Lessor by
notice in writing within twenty (20) Houston Business
Days of the date the Lessee becomes aware of the alleged
omission, giving its written reasons why it considers that
a Determination ought to have been made.
(f) As soon as practicable after a notification under Clause 1.4(e)
by the Lessee, if requested in writing by the Lessee, the Lessor
and the Lessee shall discuss with each other the Determination
in question. If the Lessor and the Lessee cannot agree to the
correctness or otherwise of such Determination within a further
period of twenty (20) Houston Business Days of the Lessee's
notice referred to in Clause 1.4(e) above, then both the Lessee
and the Lessor shall be at liberty to pursue any legal action or
proceedings;
(g) If the Lessor agrees that the Determination in question was
materially inaccurate or incorrect, then:
(i) in relation to a Determination in connection with a Cash
Flow, a revised Cash Flow shall be prepared in accordance
with the Financial Schedule, taking account of the
corrected Determination;
or
(ii) in any other case, and subject to any express provision in
this Agreement, such necessary adjustments by way of
payment between the Lessor and the Lessee shall be made
as are required in order to leave the Lessor in the same
after-Tax position as that in which it would have been if
it had originally made the Determination as corrected.
(h) The foregoing provisions of this Clause 1.4 shall be without
prejudice to the obligations of the Lessee to make payment of
Rent or any other payment pursuant to this Agreement on the due
date for payment in the amount demanded by the Lessor in
accordance with the Lessor's original Determination.
(i) The Lessor shall be entitled to charge for (and the Lessee shall
so pay) for the Costs of Management Time in respect of any matter
undertaken or anything done at the request of the Lessee under
this Clause 1.4 save and to the extent the Lessor would have
undertaken that matter in any event or where the Lessor's
Determination is subsequently established to have been incorrect.
2. REPRESENTATIONS AND WARRANTIES
2.1 Representations and warranties by the Lessee
The Lessee acknowledges that the Lessor has entered or, as the case may
be, shall enter into the Lease Documents to which it is, or is to be, a
party in full reliance on representations by the Lessee in the terms set
out in Schedule 3 Part 1 and the Lessee warrants to the Lessor that the
statements made in Schedule 3 Part 1 are, as at the date of this
Agreement, true and accurate.
2.2 Representations and warranties by the Lessor
The Lessor acknowledges that the Lessee has entered or, as the case
may be, shall enter into the Lease Documents to which it is, or is to
be, a party in full reliance on representations by the Lessor to the
Lessee in the terms set out in Schedule 3 Part 2 and the Lessor warrants
to the Lessee that the statements made in Schedule 3 Part 2 are, as at
the date of this Agreement, true and accurate.
2.3 Repetition of representations and warranties
The representations and warranties referred to in Clause 2.1 (excluding
those set out in paragraphs (D), (E), (H), (J) and (K) of Part 1 of
Schedule 3) shall be deemed to be repeated on, and by reference to the
facts and circumstances existing at, each Instalment Date and the
Delivery Date provided that in respect of each such repetition the words
"wholly-owned" shall be treated as being deleted from sub-paragraph (M).
2.4 Survival of representations and warranties
The representations and warranties referred to in Clauses 2.1 and 2.2
and the rights of the respective parties in respect thereof shall
survive the execution and delivery of this Agreement and Delivery.
2.5 Not prejudiced by the Lessor's investigation
The rights and remedies of the Lessor in relation to any
misrepresentation or breach of warranty on the part of the Lessee shall
not be prejudiced by any investigation by or on behalf of the Lessor
into the affairs of any person (other than the Lessor), by the Lessor
being a party to the Lease Documents, by the performance of any of the
Lease Documents or by any other act or thing which may be done or omitted
to be done by the Lessor under any of the Lease Documents which would or
might, but for this Clause 2.5, prejudice such rights and remedies,
other than an express written waiver of such rights and remedies by
the Lessor.
3. CONDITIONS PRECEDENT
3.1 Lessor's conditions precedent
The obligations of the Lessor under this Agreement and the other Lease
Documents to which it is a party shall be subject to the prior
satisfaction in full, or waiver or deferral in writing by the Lessor to
the extent not so satisfied, of the conditions precedent set out in
Part 1 of Schedule 4.
3.2 Conditions precedent to Lessor's obligations to make payment of any
Instalment
Without prejudice to Clause 3.1, the obligation of the Lessor to make
payment of any Instalment pursuant to the terms of the Shipbuilding
Contract and the Novation Agreement shall be subject to the prior
satisfaction in full, or waiver in writing by the Lessor to the
extent not so satisfied, of the conditions precedent set out in
Part 2 of Schedule 4 in relation to that Instalment.
3.3 Additional conditions precedent to Delivery
Without prejudice to Clauses 3.1 and 3.2, the obligation of the Lessor
to take delivery of the Vessel pursuant to the terms of the Novation
Agreement and to deliver the Vessel to the Lessee shall be subject to
the prior satisfaction in full, or waiver in writing by the Lessor to
the extent not so satisfied, of the conditions precedent set out in Part
3 of Schedule 4 (in addition to those set out in the other Parts of
Schedule 4).
3.4 Waiver or deferral of conditions precedent
If any of the conditions precedent referred to in this Clause 3 are
waived or deferred by the Lessor, the Lessor may attach to such waiver
or deferral such requirements and further or other conditions as it
thinks fit, and the Lessee shall fulfil, or procure fulfilment of, all
such requirements or further or other conditions as may be notified by
the Lessor to the Lessee, in accordance with the terms of such
notification. The Lessor shall be entitled to treat any failure by the
Lessee in fulfilling or procuring the fulfilment of any such
condition as an immediate Termination Event.
3.5 Date for satisfaction of Conditions Precedent
If any of the conditions precedent referred to in Clause 3.1 have not
been satisfied in full, or waived or deferred by the Lessor pursuant to
Clause 3.4 on or before 5.00 p.m. London time on 31st December 1998, all
of the obligations of the Lessor under this Lease and the other Lease
Documents to which it is a party, and the obligation of the Lessor to
lease the Vessel to the Lessee shall, without prejudice to the other
provisions of this Agreement (including the accrued rights of either
party against the other), lapse.
3.6 No Delivery by 31st December 2000
If for any reason Delivery shall not have taken place by 11.00 a.m.
London time on 31st December 2000 (whether by reason of the
non-fulfilment of any of the conditions precedent set out in Clauses 3.2
or 3.3 or otherwise), the Lessor (having consulted with the Lessee for
a reasonable period not extending beyond 31st December 2000) shall be
entitled to treat such circumstance as a Mandatory Event in accordance
with Clause 21.2.
3.7 Lessee's conditions precedent generally
The obligations of the Lessee under this Agreement shall be subject to
the satisfaction or waiver by the Lessee of the conditions precedent
set out in Part 4 of Schedule 4. If such conditions have not been
satisfied on or before 5.00 p.m. London time on 31st December 1998,
the obligations of the Lessee under this Lease, including the
obligations of the Lessee to lease the Vessel from the Lessor shall
without prejudice to the other provisions of this Agreement (including
the accrued rights of either party against the other), lapse.
3.8 Lessee's condition precedent to Delivery
The obligation of the Lessee to accept delivery of the Vessel shall be
subject to the satisfaction or waiver by the Lessee of the conditions
precedent set out in Part 5 of Schedule 4.
4. LEASING AND DELIVERY AND ACCEPTANCE OF EQUIPMENT
4.1 Leasing
The Lessor agrees to lease to the Lessee, and the Lessee agrees to lease
from the Lessor, the Vessel on and subject to the terms and conditions
herein contained.
4.2 Delivery and Acceptance of the Vessel
4.2.1 Prior to Delivery the Lessor shall have no obligation to effect delivery
to the Lessee of any item intended to form part of the Vessel,
notwithstanding that title to such item may be vested in the Lessor
pursuant to the Shipbuilding Contract and the Novation Agreement.
At all times prior to Delivery the Shipbuilder shall maintain possession
of all such items in accordance with the Shipbuilding Contract and the
Lessor shall not have any risk in, or responsibility for, any such item.
4.2.2 As between the Lessor and the Lessee, upon delivery of the Vessel as a
whole to the Lessor pursuant to the terms of the Shipbuilding Contract
and the Novation Agreement, the Lessor shall become unconditionally
bound to deliver the Vessel and the Lessee shall become unconditionally
bound to accept delivery thereof under this Agreement. Simultaneously
therewith, the Lessee shall deliver to the Lessor a duly executed
Acceptance Certificate dated the date of such delivery (provided always
that the representative of the Lessee acting for this purpose shall not
be the same person as the representative of the Lessee acting as agent
of the Lessor under Clause 4.3). Such Acceptance Certificate shall,
without further act, constitute irrevocable evidence of delivery of the
Vessel to the Lessee hereunder and acceptance thereof for all purposes of
this Agreement.
4.3 Lessor's Mortgage
The Lessor agrees that (i) on the Delivery Date it will execute and
deliver the Lessor's Mortgage to the Lessee and (ii) it will from time
to time, at the Lessee's request and expense, do and perform such acts
and execute and deliver such further instruments as may be reasonably
requested by the Lessee in order to register the Lessor's Mortgage with
the Shipping Register.
4.4 Lessor's Charged Account
Not later than the Delivery Date the Lessor shall (i) establish a bank
account in the name of the Lessor with Barclays Bank PLC and (ii)
execute a charge over such account in favour of the Lessee securing the
same obligations as are secured by the Lessor's Mortgage, on terms
agreed by the Lessor and the Lessee, each acting reasonably. Following
the execution of such charge, all loss payee notices shall be amended so
as to direct insurers to pay Total Loss Proceeds into such account.
4.5 If reasonably requested by the Lessee, the Lessor will issue in favour
of any Service Contractor a letter on terms to be agreed between the
Lessee and the Lessor, each acting reasonably, confirming that for
the duration of the relevant Service Contract the Lessor will not
interrupt the quiet enjoyment of the Lessee or, as appropriate, the
Sub-Lessee for so long as the Lessee is entitled to the use and
possession of the Vessel hereunder provided that no such letter shall be
expressed to, or operate so as to, restrict or limit the rights,
interests, remedies and powers of the Lessor under this Agreement and
the other Lease Documents.
4.6 Unincorporated OFE at Delivery
If at Delivery there exists any Owner Furnished Equipment (as defined in
the Shipbuilding Contract) which has not been used in the construction of
the Vessel (as contemplated by Clause 9.3 of the Shipbuilding Contract),
the Lessee shall notify the Lessor, giving details of the items
concerned, and the Lessee will at the request of the Lessor, enter into
such documents as the Lessor shall reasonably specify effecting a
transfer of title from the Lessor to the Lessee of each such item,
without recourse or warranty.
5. DISCLAIMERS AND EXCLUSIONS, LESSOR'S COVENANTS
5.1 Disclaimers and exclusions
(a) The Lessee acknowledges and agrees that:
(i) THE VESSEL HAS BEEN DESIGNED, MANUFACTURED,
ASSEMBLED AND CONSTRUCTED WITHOUT REFERENCE
TO OR INVOLVEMENT OF THE LESSOR AND THAT THE
LESSEE ALONE HAS SELECTED THE VESSEL FOR
PURCHASE BY THE LESSOR PURSUANT TO THE NOVATION
AGREEMENT AND LEASING BY THE LESSOR TO THE
LESSEE HEREUNDER;
(ii )THE LESSOR HAS NOT MADE OR GIVEN NOR SHALL BE
DEEMED TO HAVE MADE OR GIVEN ANY TERM,
CONDITION, REPRESENTATION, WARRANTY OR
COVENANT, EXPRESS OR IMPLIED (WHETHER STATUTORY
OR OTHERWISE), AS TO THE SEAWORTHINESS,
SUITABILITY, CAPACITY, AGE, STATE, VALUE, QUALITY,
DURABILITY, CONDITION, APPEARANCE, SAFETY, DESIGN,
CONSTRUCTION, OPERATION, PERFORMANCE,
DESCRIPTION, MERCHANTABILITY, SATISFACTORY
QUALITY, FITNESS FOR USE OR PURPOSE OR ANY
PARTICULAR USE OR PURPOSE OR SUITABILITY OF THE
VESSEL OR ANY PART THEREOF, AS TO THE ABSENCE OF
LATENT OR OTHER DEFECTS, WHETHER OR NOT
DISCOVERABLE, AS TO THE ABSENCE OF ANY
INFRINGEMENT OF ANY PATENT, TRADEMARK OR
COPYRIGHT, AS TO THE ABILITY OF THE VESSEL TO
SATISFY THE REQUIREMENTS OF ANY LAW, RULE,
SPECIFICATION OR CONTRACT PERTAINING THERETO, OR
AS TO TITLE TO THE VESSEL OR ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER,
EXPRESS OR IMPLIED, WITH RESPECT TO THE VESSEL, ALL
OF WHICH ARE HEREBY EXCLUDED; AND
(iii) THE LESSEE IS TAKING THE VESSEL ON LEASE ON AN "AS
IS, WHERE IS, AND WITH ALL FAULTS" BASIS, AND THAT
THE LESSEE'S ACCEPTANCE OF DELIVERY FROM THE
LESSOR IN ACCORDANCE WITH CLAUSE 4.2 (DELIVERY
AND ACCEPTANCE OF VESSEL) SHALL BE CONCLUSIVE
EVIDENCE (EXCEPT AS AGAINST THE SHIPBUILDER OR
THE MANUFACTURER OF ANY PART OF THE VESSEL)
THAT THE VESSEL IS COMPLETE, IN GOOD ORDER AND
CONDITION, OF SATISFACTORY QUALITY, FIT FOR ANY
PURPOSE FOR WHICH IT MAY BE INTENDED OR REQUIRED,
SEAWORTHY IN ALL RESPECTS, WITHOUT DEFECT OR
INHERENT VICE WHETHER OR NOT DISCOVERABLE BY
THE LESSEE, SUITABLE IN ALL RESPECTS AND IN EVERY
WAY SATISFACTORY.
(b) Save as otherwise expressly and specifically provided by this
Agreement or any other Lease Document, the Lessee hereby waives
as between itself and the Lessor and agrees not to seek to
enforce, all its rights, express or implied (whether statutory
or otherwise), whether against the Lessor in respect of the
Vessel (or any part thereof) or against the Vessel or any part
thereof (except rights arising out of any act or omission of the
Lessor which is a breach by the Lessor of its express and
specific obligations to the Lessee under this Agreement or any
other Lease Document).
(c) The Lessor shall be under no obligation to provide to the Lessee
or to any other person any replacement for the Vessel (or any
part thereof) during any period when the Vessel (or any part
thereof) is unavailable for use for any reason whatever nor,
otherwise to compensate the Lessee in respect of such
unavailability for use.
(d) Save as expressly provided in this Agreement or the other Lease
Documents, and without prejudice to the generality of Clauses 5.1
(a) and 5.1(b) (Disclaimers and exclusions), the Lessor shall be
under no liability to the Lessee or any other person whatsoever
and howsoever arising, and from whatever cause, and whether in
contract, tort or otherwise, in respect of the satisfactory
condition or fitness for purpose of the Vessel or any loss
(consequential or otherwise), liability or damage of, or to, or
in connection with, the Vessel or any part thereof (including
delay in delivery thereof to the Lessee under this Agreement, or
by the Lessee to the Sub-Lessee under any Sub-Lease, or thereafter
or delay of any nature whatsoever) or any person or property
whatsoever irrespective of whether such loss, liability or damage
shall arise from any action or omission of the Lessor and whether
or not the same shall arise from the Lessor's negligence, actual
or imputed (other than any action or omission of the Lessor which
is a breach by the Lessor of its express and specific obligations
to the Lessee under the Lease Documents to which the Lessor is
party).
5.2 Lessor's covenants etc.
(a) The Lessor covenants to the Lessee that throughout the Lease
Period the Lessor (other than through the acts or omissions of
any party to the Lease Documents (other than the Lessor), or any
of such party's agents or representatives, acting as agent or
representative of the Lessor) will not, otherwise than pursuant
to its rights under any of the Lease Documents or which may exist
under any applicable law and except as may be required by law or
any ruling or recommendation of any Government Entity compliance
with which is customary for the Lessor, interfere with the quiet
use, operation, possession and quiet enjoyment of the Vessel by
the Lessee. The Lessee acknowledges that the covenant by the
Lessor contained in this Clause 5.2(a) and in Clause 5.2(b)
is the sole covenant by the Lessor in respect of quiet enjoyment
and is in substitution for, and to the exclusion of, any other
covenant for quiet enjoyment which may have otherwise been given
or implied at law or otherwise, all of which are hereby expressly
excluded and waived by the Lessee.
(b) The Lessor covenants with the Lessee that, subject to the proviso
in this Clause 5.2(b), throughout the Lease Period the Lessor
shall not create or permit to arise or suffer to exist any Vessel
Lien on the Vessel which arises solely from, or solely as a
result of:
(i) any claim against or affecting the Lessor that is not
related to, or does not arise directly or indirectly as
a result of, the transactions contemplated by this
Agreement or any of the other Lease Documents; or
(ii) any claim for Taxes against the Lessor other than Taxes
in respect of which the Lessor is required to be
reimbursed, indemnified against or otherwise compensated
by the Lessee or by any other person under or pursuant to
the Lease Documents;
(iii) any act or omission of the Lessor (but not of any party to
the Lease Documents (other than the Lessor) or any of such
party's agents, employees or representatives acting as
agent or representatives of the Lessor) constituting a
breach by the Lessor of its express and specific
obligations under this Agreement or the other Lease
Documents; or
(iv) any act or omission of the Lessor which constitutes the
wilful misconduct of the Lessor or recklessness of the
Lessor with knowledge of the probable consequences (but
in each case excluding any act, omission or recklessness
of any party to the Lease Documents (other than the
Lessor), or any of such party's agents, employees or
representatives, acting as agent or representative of the
Lessor),
PROVIDED THAT if any of (i), (ii), (iii) or (iv) above applies to
any Vessel Lien, the Lessor shall not be liable to pay or
discharge the same, or the amount of the same or remove the same,
if adequate reserves for the payment of such amount have been
provided and such Vessel Lien is being disputed by the Lessor in
good faith and in a manner effectively staying such Vessel Lien.
5.3 Unfair Contract Terms Act 1977
Without prejudice to the indemnities of the Lessor by the Lessee
contained in any of the Lease Documents, nothing in this Clause 5 shall
afford to the Lessor any wider exclusion of any liability of the Lessor
to any person for death or personal injury than the Lessor may
effectively exclude having regard to the provisions of the Unfair
Contract Terms Act 1977.
6. LEASE PERIOD
6.1 Primary Period
The leasing of the Vessel hereunder shall commence on the Delivery Date
and shall, subject to this Clause 6, continue until the Primary Period
End Date unless earlier terminated in accordance with this Agreement.
6.2 Secondary Period
6.2.1 The Lessee may, by written notice to the Lessor to be received by the
Lessor no later than one month prior to the date upon which the leasing
of the Vessel under this Agreement would otherwise expire by effluxion
of time request that the leasing of the Vessel be extended for a
Secondary Period (or, as the case may be, a further Secondary Period)
of a period specified by the Lessee up to one year, subject to earlier
termination under any provision of this Agreement. Any notice once
given by the Lessor pursuant to this Clause 6.2 may only be withdrawn
with the written consent of the Lessor.
6.2.2 The continuation of the leasing under Clause 6.2.1 shall be subject to:
(i) no Termination Event having occurred and being continuing; and
(ii) the Lessee having satisfied the Lessor (acting reasonably) that
the Vessel has not reached and is not likely to reach during the
relevant Secondary Period, the end of its useful economic life
and is likely to remain, during such Secondary Period, safe and
seaworthy.
6.3 Termination by the Lessor
The Lessee acknowledges that the Lessor will undertake a review of the
transaction constituted by this Agreement and the other Lease Documents,
(taking into account, but without limitation, the return to the Lessor
from such transaction and the business, operations, prospects and
creditworthiness of the Guarantor, the Lessee, each Payment Bank
(including any proposed replacements) and any other Additional Security
Provider). Such review shall be carried out during the period of three
months commencing 1st July 2012 and if, following such review, the
Lessor shall conclude in its absolute discretion (but acting in good
faith) that it is not satisfied with such transaction and such factors
taken into account or with the security for the actual and contingent
obligations (for these purposes disregarding Clause 22.5.1) of
the Lessee provided under the Lease Documents, the Lessor shall be
entitled, by notice in writing given not later than 1st September 2012,
to require the Lessee to serve a notice of voluntary termination in
accordance with Clause 21.5(B), and the Lessee shall comply with
any such requirement not later than one month after receipt of the
notice from the Lessor.
7. RENT
7.1 Pre-Primary Period Rental
If so required by the Lessor as contemplated by paragraph 1.1.1 of the
Financial Schedule, the Lessee shall pay to the Lessor a Pre-Primary
Period Rent on each Rent Payment Date throughout the Pre-Primary Period,
each such Pre-Primary Period Rent to be calculated in accordance with
the provisions of the Financial Schedule. Each such amount of Pre-
Primary Rent shall be subject to adjustment and supplement in accordance
with the provisions of the Financial Schedule.
7.2 Primary Period Rent
The Lessee shall pay to the Lessor, in respect of the Primary Period, a
Primary Period Rent on each Rent Payment Date throughout the Primary
Period, each such Primary Period Rent to be calculated in accordance
with the provisions of the Financial Schedule. Each such amount of
Primary Period Rent shall be subject to adjustment and supplement in
accordance with the provisions of the Financial Schedule.
7.3 Secondary Period Rent
The Lessee shall pay to the Lessor on the first day of each Secondary
Period a Secondary Period Rent calculated in accordance with paragraph
1.2 of the Financial Schedule.
7.4 Additional Rent
The Lessee shall, on the dates ascertained in accordance with the
Financial Schedule (or, if no such date is specified, upon written
demand by the Lessor), whether before, during or after the Lease Period,
pay all amounts calculated and due to the Lessor under the Financial
Schedule and expressed to be payable by way of additional Rent.
8. PAYMENTS
8.1 Accounts
8.1.1 Each payment to be made by the Lessee to the Lessor in Sterling pursuant
to this Agreement shall be made from a bank account in the United
Kingdom in Sterling in cleared funds for value on the due date by means
of CHAPS to the account of Barclays Mercantile Business Finance Limited
(General Account no.2) with the Bank at its branch at 54 Lombard Street,
London EC3V 9EX, England, account number 60152242, CHAPS number 20-00-00,
quoting "Schedule number 52/5050 5371-3" or to such other bank
account in the United Kingdom as the Lessor may from time to time
designate by not less than ten (10) Houston Business Days' notice to
the Lessee. Any payment which is to be made to the Lessor in a currency
other than Sterling pursuant to this Agreement shall be made to such
account as the Lessor shall notify the Lessee in writing.
8.1.2 Each payment to be made by the Lessor to the Lessee in Sterling pursuant
to this Agreement shall be made in Sterling in cleared funds for value
on the due date by means of CHAPS to the account of the Lessee with The
Chase Manhattan Bank at its London branch, sort code 60-92-42, account
number 23106101, or to such other bank account in the United Kingdom as
the Lessee may from time to time designate by not less than ten
(10) Business Days' notice to the Lessor. Any payment which is to be
made to the Lessee in a currency other than Sterling pursuant to this
Agreement shall be made to such account as the Lessee shall notify the
Lessor in writing.
8.2 Payments unconditional
The Lessee's obligation to pay Rent and make other payments, and perform
any obligations, owed to the Lessor pursuant to or in connection with
this Agreement or any of the other Lease Documents to which it is a
party shall be absolute and unconditional and shall not be affected by
and shall be irrespective of any contingency whatsoever including
(but not limited to):
(a) any right of set-off, counterclaim, recoupment, defence,
deduction, withholding or other right;
(b) any unavailability of the Vessel for any reason, including,
but not limited to, requisition thereof, or any prohibition or
interruption of or other restriction against the Lessor's, the
Lessee's, the Sub-Lessee's or any other person's use,
operation or possession of the Vessel, any interference with
such use, operation or possession or failure to deliver any
part of the Vessel or any lack or invalidity of title or any
other defect in the title, suitability, seaworthiness,
satisfactory quality, merchantability, fitness for any purpose,
condition, appearance, safety, design, or operation of any kind
or nature of the Vessel, or the ineligibility of the Vessel for
any particular use or trade, or for want of registration or the
absence or withdrawal of any permit, licence, authorisation
or other documentation required under the applicable law of any
relevant jurisdiction for the ownership, leasing, use, operation
or location of the Vessel, or (subject to Clause 10.1(a) (Total
Loss)) the Total Loss of, or any damage to, the Vessel or any
part thereof;
(c) any insolvency, bankruptcy, winding-up, administration,
reorganisation, reconstruction, arrangement, readjustment or
rescheduling of debt, dissolution, liquidation or similar
proceedings by or against the Lessor, the Bank, the Lessee or
any other person (whether a party to any Lease Document or not);
(d) any invalidity or unenforceability or lack of due authorisation
of, or other defect in, this Agreement or any of the other Lease
Documents or any particular provision hereof or thereof;
(e) any failure or delay on the part of any party, whether with or
without fault on its part, duly to perform or comply with its
obligations under this Agreement or any of the other Lease
Documents; and
(f) any other case which but for this provision would or might have
the effect of terminating or in any way affecting any obligation
of the Lessee hereunder
but without prejudice to the rights of the Lessee to damages or specific
performance or any other injunctive relief in respect of this Agreement
or any of the other Lease Documents, it being the declared intention of
the parties that the provisions of this Clause and the obligations of
the Lessee to pay Rent and make other payments in accordance with this
Agreement and the other Lease Documents shall survive any frustration
and that save as expressly and specifically provided in this Agreement
no moneys payable or paid hereunder by the Lessee to the Lessor shall
in any event or circumstances be repayable to the Lessee.
8.3 Interest on overdue amounts
(a) If any amount payable by the Lessee to the Lessor under this
Agreement or any of the other Lease Documents is not paid in full
on the date such amount becomes due and payable hereunder or
thereunder, the Lessor shall (without prejudice to the rights of
the Lessor under Clause 21 (Termination Provisions)) be entitled,
in addition, to demand interest on the unpaid sum at the Default
Rate from and including such date to and including the date of
actual payment.
(b) If any amount payable by the Lessor to the Lessee under this
Agreement is not paid in full on the date such amount becomes
due and payable hereunder, the Lessee shall be entitled, in
addition, to demand interest on the unpaid sum at Base Rate from
and including such date to and including the date of actual
payment.
(c) All interest under this Clause 8.3 shall accrue (after as well
as before judgment) on a day to day basis and be compounded
quarterly and shall be calculated on the basis of the actual
number of days elapsed and (i) a three hundred and sixty-five
(365) day year in relation to Sterling amounts (unless, as a
result of the introduction of the Euro, the normal bank basis
for interest calculations in Sterling becomes a 360 day year,
in which case the calculation shall be on the basis of a 360 day
year) and amounts in other currencies where that is the normal
bank basis for interest calculations under the relevant currency,
or (ii) a three hundred and sixty (360) day year for amounts in
other currencies.
8.4 Time of the essence
Punctual payment of amounts payable by the Lessee to the Lessor and
performance by the Lessee of each of its obligations under this
Agreement shall, subject to any express periods of grace set out in
Clause 21.1 (Termination Events) and save as may be agreed in writing
by the Lessor, be of the essence and shall be conditions of this
Agreement.
8.5 Business Days
If any payment of Rent under this Agreement is due on a day which is not
a Business Day, it shall, unless expressly provided to the contrary in
this Agreement or the relevant other Lease Document, be paid on the
immediately preceding Business Day. If any payment other than Rent
under this Agreement or any other Lease Document is due on a day which
is not a Business Day, it shall, unless expressly provided to the
contrary in this Agreement or the relevant other Lease Document, be
paid on the succeeding Business Day.
8.6 Application of payments
If the Lessee shall pay to the Lessor, or the Lessor shall otherwise
recover, any amount expressed to be payable by the Lessee under this
Agreement or any of the other Lease Documents in an amount less than the
total amount then due, or due and outstanding, the sum so paid may be
applied by the Lessor (irrespective of any contrary appropriation by
the Lessee) in or towards satisfaction of such amounts which are due for
payment payable by the Lessee under this Agreement and the other Lease
Documents in such manner or order and at such time as the Lessor may
think fit.
9.COVENANTS CONCERNING INSURANCES
9.1 Insurances in respect of the Vessel
The Lessee hereby covenants with the Lessor and undertakes that,
throughout the Lease Period and thereafter until sale of the Vessel,
it will:
(a) insure and keep the Vessel insured free of cost and expense to
the Lessor and in the joint names of the Lessee, the Lessor and
those of the other Indemnified Persons who are involved in the
administration of the Lease Documents, without liability on the
part of the Lessor and the other Indemnified Persons for
premia or calls except, to the extent necessary, in respect of
insurances relating to protection and indemnity risks (each as
their interests may appear) in respect of claims arising in
connection with the ownership or operation of the Vessel:
(i) against fire and usual marine risks (including Excess
Risks to the extent not covered under the Liability
Insurances) and war risks, on an agreed value basis in
accordance with the practice from time to time of
prudent owners of similar types of vessel as the Vessel,
provided that the amount of such insurances shall be equal
to or greater than the highest Tax Written Down Value for
the Vessel for the period of such insurances; and
(ii) against protection and indemnity risks (including oil
pollution liability) on terms and conditions which are
the same or substantially the same as the insurance taken
out with respect to the same risks by other owners of
similar types of vessel as the Vessel operating in the
jurisdictions in which the Vessel is operating at the
relevant time and which is reasonably available to the
Lessee (taking into account the provisions of this
Agreement and the fact that although the Lessor is the
owner of the Vessel it has no operational interest in the
Vessel) and shall be in an amount of two hundred million
Dollars ($200,000,000) any one occurrence or such
greater amount as is either (x) the general practice from
time to time of owners of equivalent tonnage to and similar
types of vessel as the Vessel to obtain in the
jurisdiction(s) in which the Vessel is being operated at
the time when such general practice is being determined
(provided such greater amount is reasonably obtainable by
the Lessee) or (y) required by any rules, regulations,
laws, treaties or conventions of the Flag State from time
to time or of the jurisdiction in which the Vessel is
being operated at any particular time or (z) following a
Change of Law with respect to an Environmental Law in a
jurisdiction in which the Vessel is being operated at any
particular time, and the Lessor reasonably determining
that such a Change of Law has resulted in the actual or
potential liability of the Lessor with respect to an
Environmental Claim increasing above the Lessor's
liability as at the date of this Agreement under the Oil
Pollution Act of 1990, as amended, of the United States of
America (the "Measured Liability"), the amount of such
increase in liability over the Measured Liability or,
where the Vessel is employed in the storage of
hydrocarbons, for the amount which is the general
practice from time to time of owners of similar types of
vessels as the Vessel employed in such use in
jurisdictions in which the Vessel is being operated at
any particular time;
and in each case the Lessor may rely upon the advice of its
legal, insurance and other advisers and the Lessee further agrees
that the Lessor shall be deemed to have acted reasonably in
connection with any Lessor Action under or in connection with
this Clause 9 if the Lessor has relied upon any such advice of
its legal, insurance or other advisers;
(b) if the Lessor requires an increase in the amount insured in
respect of oil pollution liability risks in accordance with the
provisions of Clause 9.1(a)(ii), the Lessee shall effect such
increase within ten (10) Business Days of being notified by the
Lessor to effect such increase or, if later, the date upon which
such increase is required pursuant to the rules, regulations,
laws, treaties or conventions referred to in Clause 9.1(a)(ii)(y)
or, as the case may be, the date upon which the Change of Law
referred to in Clause 9.1(a)(ii)(z) comes into effect;
(c) effect the Insurances, including the Liability Insurances
aforesaid in Dollars (where appropriate in an equivalent amount
at the time of each renewal of the Insurances to the amount
required expressed in Sterling) or such other freely
transferable and convertible currency acceptable to the Lessor
and through the Approved Brokers or such other insurance
companies and/or underwriters or by entry of the Vessel with a
mutual insurance association or club;
(d) punctually pay all premiums, calls, contributions or other sums
payable in respect of all such Insurances and to produce all
relevant receipts or other evidence of payment when so required
by the Lessor and, in the event that any premium or call is
charged to be levied upon the Lessor, the Lessee shall
forthwith reimburse the Lessor with any amount so paid;
(e) at least ten (10) Business Days (or such shorter period as the
Lessor may from time to time agree) before the relevant policies,
contracts or entries expire, notify the Lessor of the names of
the marine and war risks brokers and/or the war risks or
protection and indemnity risks associations and/or underwriters
proposed to be employed by the Lessee for the purposes of the
renewal of such Insurances and of the amounts in which such
Insurances are proposed to be renewed and the risks to be covered
and, subject to compliance with the provisions of this
Clause 9.1, procure that appropriate instructions for the
renewal of such Insurances are given to the Approved Brokers
and/or to the approved war risks and protection and indemnity
risks associations at least ten (10) days (or such shorter period
as the Lessor may from time to time agree) before the relevant
policies, contracts or entries expire, and that the Approved
Brokers and/or the approved war risks and protection and
indemnity risks associations and/or approved underwriters will
at least seven (7) days before such expiry (or within such
shorter period as the Lessor may from time to time agree)
confirm in writing to the Lessor as and when such renewals have
been effected in accordance with the instructions so given;
(f) if any of the Insurances referred to in Clause 9.1(a)(i) form
part of a fleet cover for the Lessee or the Guarantor and any
Subsidiaries (US), and such Approved Brokers are or would be
entitled to exercise rights of set-off or cancellation in
relation to claims under such Insurances relating to the Vessel
for non-payment of premiums in respect of other vessels covered
by the same Insurances, the Lessee shall use all reasonable
endeavours (having regard to the then current market practice
including the practice prescribed by the Lloyd's Insurance
Brokers' Committee and/or any other professional association of
which the Approved Brokers are members) to procure that the
Approved Brokers shall undertake to the Lessor:
(i) not to exercise against the policy or against any claims
in respect of the Vessel any Lien or right of set-off for
unpaid premiums in respect of vessels other than the
Vessel covered under such fleet cover or for unpaid
premiums in respect of any other such policies of
insurance; and
(ii) not to cancel the Insurances for the Vessel by reason of
the non-payment of premiums for vessels covered by such
fleet cover,
or, in lieu of the undertakings referred to in paragraphs (i)
and (ii), shall instruct the Approved Brokers to issue a separate
policy of insurance in respect of the Vessel as and when the
Lessor may so require;
(g) promptly arrange for the execution and delivery of such
guarantees or indemnities as may from time to time be required
by any protection and indemnity or war risks association in
accordance with its rules or the terms of entry of the Vessel;
(h) procure:
(i) that all original slips, cover notes, policies,
certificates of entry and other instruments of insurance
issued from time to time shall forthwith be deposited with
the Approved Brokers in respect of those of the Insurances
in respect of the Vessel which are effected through
Approved Brokers; and
(ii) that the interest of the Lessor shall be endorsed on the
Insurances referred to in Clause 9.1(a)(i) by noting the
interests of the Lessor on the policies and by the
endorsement of the relevant Loss Payable Clause on the
policies required under Clause 9.1(a)(i) and (ii);
(i) procure that the Approved Brokers or the insurers and any
protection and indemnity or war risks association or the war
risks insurers in which the Vessel may from time to time be
entered or with whom cover may be placed shall deliver to the
Lessor a letter or letters of undertaking in such form as the
Lessor may reasonably require having regard to the then current
market practice and the practices prescribed by the
"International Group" of protection and indemnity associations
or successor association or body and/or the Lloyd's Insurance
Brokers' Committees and/or any other professional association of
which the Approved Brokers are members;
(j) comply with the terms and conditions of the Insurances, not do,
consent to or permit any act or omission which might invalidate
or render unenforceable the whole or any part of the Insurances
and not (without first obtaining the consent of the insurers to
such employment and complying with such requirements as to
extra premium or otherwise as the insurers may prescribe) employ
the Vessel or suffer the Vessel to be employed otherwise than in
conformity with the terms of the Insurances (including any
warranties express or implied therein) and within the
geographical limits thereof; and
(k) supply to the Lessor all necessary information, documentation
and assistance which may be required by the Lessor from time to
time in respect of the Insurances and in connection with making
any claim under the Insurances,
PROVIDED HOWEVER THAT if, in the event of requisition of the Vessel for
hire, it is proved to the satisfaction of the Lessor that such
requisition is upon terms whereby the requisitioning authority has
assumed the responsibility of the Lessee to the Lessor to indemnify
or recompense it in respect of or otherwise to make good all losses
which would ordinarily be covered by the insurance required to be
effected by the Lessee under this Agreement, the Lessee shall be
relieved from its insurance obligations under this Agreement in respect
of such period of requisition or in the event that the requisitioning
authority shall have assumed only a partial responsibility as aforesaid,
the insurance obligations of the Lessee under this Agreement shall be
modified in such manner and to such extent as the Lessor may approve in
its absolute discretion having regard to the insurance provisions
contained in this Agreement.
9.2 If, at the time of any renewal of the Insurances, there is, in the
opinion of the Lessor acting reasonably:
(a) any material adverse change in the credit standing or claims
payment record of the relevant insurer or war risks or
protection and indemnity association; or
(b) any material adverse change in the terms on which the relevant
Insurances are placed; or
(c) any change affecting the insurance market which may have, or may
be likely to have, a material adverse effect on the Insurances
in respect of the Vessel,
then the Lessor may, having consulted with its insurance advisers,
stipulate reasonable requirements for the Insurances in the light of
such changes. If the Lessor has stipulated such requirements to the
Lessee, the Lessor and the Lessee shall (at the cost of the Lessee)
respectively cause their insurance advisers to meet to consider the
Lessor's requirements and, if such advisers do not agree promptly with
respect to such requirements, the matter shall be referred to an
appropriate independent insurance adviser agreed by the Lessor and
the Lessee. In the absence of agreement as to an appropriate
independent insurance adviser, either the Lessor or the Lessee may
request the President for the time being of the Law Society to
appoint an appropriate independent insurance adviser who shall act as an
expert and not as an arbitrator and whose assessment with respect to
such requirements shall be final and binding on the Lessor and the
Lessee.
If the insurance advisers of the Lessor and the Lessee agree with
respect to such requirements and on the changes required to be effected
to the then current insurance requirements or if the independent
insurance adviser, appointed by the President of the Law Society,
stipulates changes required to be effected to the then current insurance
requirements then (a) the Lessee shall, at its own cost, promptly, and
in any event within sixty (60) days of such agreement, or as the case
may be stipulation, effect or procure that there is effected such
requirements and (b) the Lessor shall be entitled, at the Lessee's cost,
to effect contingent third party liability insurances for the Lessor and
members of the Lessor's Group to cover such requirements.
9.3 Collection of claims
The Lessee shall do all things necessary and provide all documents,
evidence and information to enable the Lessor to collect or recover all
moneys which shall at any time become due to the Lessor in respect of
the Insurances.
9.4 Application of recoveries
The Lessee shall apply all sums receivable under the Liability
Insurances which are paid to it in accordance with the relevant Loss
Payable Clause and Clause 10.5.
9.5 Other insurances and assureds
The Lessee shall not, without the prior written consent of the Lessor,
during the Lease Period take out additional insurances for the Lessee's
sole benefit, or permit the Lessee or the Lessor to be named insured in
insurances with respect to the Vessel, other than as required under this
Agreement, where such additional insurances will or may prejudice the
Insurances or recovery thereunder or will exceed the amount permitted by
the warranties or other conditions of the Insurances (unless the
insurers under the Insurances have consented thereto) and will, upon the
Lessor's request, immediately furnish the Lessor with particulars of any
such additional insurances (including copies of any cover notes or
policies) and of the written consent of the insurers under the
Insurances in any case where such consent is necessary. The Lessor
acknowledges that the provisions of this Clause 9.5 are without
prejudice to the Lessee's right to take out loss of hire insurances in
respect of the Vessel in accordance with usual market practice.
9.6 Encumbrances
The Lessee shall not create or permit to exist any Lien over the
Lessee's interest in the Insurances or any Requisition Compensation
save as contemplated by this Agreement.
9.7 Broker's report
On the date of this Agreement and on each date when the Insurances are
renewed, the Lessee shall, at its own expense, furnish or cause to be
furnished to the Lessor evidence that the Insurances have been placed
in accordance with this Clause 9 and are in full force and effect
together with an opinion signed by a firm of insurance brokers other
than the Approved Brokers stating that the Insurances then in effect
are consistent with the requirements for the Insurances under this
Agreement and in compliance with the terms of this Clause 9.
9.8 Omission to comply with insurance provisions
If at any time the Lessee shall fail to comply with:
(a) any of the provisions of this Clause 9 in relation to or in
connection with all or any part of the Liability Insurances and
the Vessel; or
(b) any of the material provisions of this Clause 9 in relation to or
in connection with all or any part of the Hull Insurances and
the Vessel,
then the Lessor shall be entitled (at the Lessee's cost and expense),
either (i) to procure such insurance or entries in a war risks
association and/or protection and indemnity association or associations
in accordance with the aforesaid provisions, or (ii) at any time
whilst such failure is continuing to require the Vessel to remain in
port or, as the case may be, to proceed to and remain in a port
designated by the Lessor until such provisions are fully complied with,
or both, but without prejudice to the right of the Lessor in any such
case to treat such failure as being within Clause 21 (Termination
provisions). Rent shall continue to accrue during such time and any
expense incurred by the Lessor in relation to or in connection with any
of the arrangements described above shall be recoverable from
the Lessee on demand.
9.9 Lessor's Insurance
Any insurance effected by the Lessor which the Lessee is not obliged to
effect under this Clause 9 shall not be brought into account in relation
to any claim under any indemnity in favour of any Indemnified Person
under any of the Lease Documents.
9.10 Pre-Delivery Insurances - Insurance Side Letter
The Lessee shall comply with the requirements of the Insurance Side
Letter.
10. TOTAL LOSS AND DAMAGE
10.1 Total Loss
In the event of:
(a) a Total Loss occurring prior to Delivery, the obligation of the
Lessor to lease the Vessel to the Lessee shall terminate on the
Date of Total Loss; or
(b) a Total Loss occurring during the Lease Period, the Lease Period
shall end on the Date of Total Loss and the obligation of the
Lessee to pay Rent (other than any Termination Payment) under
Clause 7 (Rent) becoming due on any Rent Payment Date which falls
on or after the Date of Total Loss shall cease; and
the Lessee shall (without prejudice to the obligations of the Lessee
pursuant to any provision of this Agreement or the Lease Documents to
pay to the Lessor all sums which may become due to the Lessor or be
ascertained after the date of Total Loss) pay to the Lessor, as
compensation for the Lessor's full financial loss consequent upon such
termination, the amounts set out below and on the dates prescribed
below for those amounts (but subject always to its application both
before and after the date on which such payment is made, to the
provisions of the Financial Schedule):
(i) if (during the Lease Period) on or after the Date of Total Loss
but before the Settlement Date there falls a day which, if the
leasing of the Vessel had not terminated, would have been a Rent
Payment Date, the Lessee shall on that Rent Payment Date pay to
the Lessor an amount equal to the Rent which would have become
payable had the Total Loss not occurred; and
(ii) on the Settlement Date, the Lessee shall pay to the Lessor an
amount equal to the aggregate of:
(A) the Termination Payment calculated for the Settlement Date;
(B) all instalments of Rent (if any) which have become due
prior to the Date of Total Loss and remain unpaid; and
(C) all other amounts due and payable from the Lessee to the
Lessor pursuant to any Lease Document, including, without
limitation, any Broken Funding Costs.
10.2 Application of Total Loss Proceeds
All moneys received by the Lessor from insurers in respect of a Total
Loss and all Requisition Compensation received by the Lessor shall be
applied by the Lessor as follows:
(a) firstly, in retention by the Lessor of an amount equal to any
expenses, taxes or duties incurred by the Lessor in connection
with the collection of such proceeds;
(b) secondly, in retention by the Lessor of an amount equal to half
of one per cent. (0.5%) of the amount by which the Total Loss
Proceeds (after deducting the amount referred to in paragraph (a)
above) exceed the Termination Payment;
(c) thirdly, any balance remaining shall be paid to the Lessee by
way of rebate of Rent.
10.3 Date of Total Loss
For the purposes of this Agreement, a Total Loss in respect of the
Vessel shall be deemed to have occurred:
(a) in the case of an actual total loss of the Vessel at noon (London
time) on the actual date the Vessel was lost or, if such date is
not known, on the date on which the Vessel was last reported;
(b) in the case of constructive total loss of the Vessel, on the
date and at the time notice of abandonment of the Vessel is given
to the insurers of the Vessel for the time being (provided a
claim for such constructive total loss is admitted by
the insurers) or, if the insurers do not admit such a claim, on
the date and time at which a constructive total loss is
subsequently adjudged by a competent court of law to have
occurred;
(c) in the case of a compromised or arranged total loss, on the date
upon which a binding agreement as to such compromised or
arranged total loss has been entered into by the insurers of the
Vessel;
(d) in the case of Compulsory Acquisition, on the date on which the
relevant requisition of title or other compulsory acquisition
occurs; and
(e) in the case of hijacking, theft, condemnation, confiscation,
capture, detention or seizure of the Vessel (other than where
the same amounts to Compulsory Acquisition of the Vessel), upon
the expiry of the period of one hundred and eighty (180) days
after the date upon which the relevant hijacking, theft,
condemnation, confiscation, capture, detention or seizure
occurred.
The date on which a Total Loss shall be deemed pursuant to this Clause
10.3 to have occurred is referred to as the "Date of Total Loss".
10.4 Damage Claims
In the event of repairable damage occurring to the Vessel any insurance
moneys receivable in respect thereof shall be paid to the Lessee.
10.5 Third party claims
Any insurance moneys paid under the Liability Insurances shall be paid
to the person to whom the liability (or alleged liability) covered by
such insurances or entry was incurred or to the person otherwise
entitled thereto.
10.6 Insufficient Insurance recovery
The Lessee acknowledges and agrees that in the event of repairable
damage to the Vessel or a liability or alleged liability covered by the
Insurances taken out or entries made referred to in Clause 9.1(a)
(Insurance undertakings) being incurred or alleged, and if the
insurance moneys paid in respect thereof are insufficient to pay the
cost or estimated cost of making good or repairing such damage or
discharging the liability or alleged liability, the Lessor will have
no responsibility to make good or pay the deficiency.
10.7 Notice of abandonment
For so long as no Relevant Event has occurred which is continuing, the
Lessee shall, subject to the prior written consent of the Lessor, be
entitled to determine whether or not a case has arisen for the giving
of notice of abandonment to abandon the Vessel to the insurers and/or
claim a constructive total loss and the Lessee is hereby authorised by
the Lessor, following the Lessor's consent as specified above, to give
such notice of abandonment if the Lessee so determines. Such consent
by the Lessor shall not be unreasonably withheld.
10.8 Further action on part of Lessor
(a) If the Lessee is, pursuant to Clause 10.7 above, entitled to give
a notice of abandonment, the Lessor shall upon the request and
at the cost of the Lessee promptly execute such documents as may
be required to enable the Lessee to abandon the Vessel to the
insurers and/or claim a constructive total loss of the Vessel
and, subject to paragraph (c) below, the Lessor shall give the
Lessee all reasonable assistance in pursuing the said claim,
provided that the Lessor may, (taking into account paragraph
(b) below) in its absolute discretion, refuse to permit the
Lessee or any person claiming through the Lessee to pursue any
such claim in the name of the Lessor or any other member of the
Lessor's Group.
(b) The Lessor shall, at the request of the Lessee consult with the
Lessee for a period not exceeding thirty (30) days in good faith
if the Lessee or any person claiming through the Lessee requests
permission to pursue any claim in the name of the Lessor or any
other member of the Lessor's Group provided that the Lessor shall
be under no obligation and have no liability other than to the
extent of its agreement to hold discussions with the Lessee as
set out above.
(c) The Lessee will indemnify the Lessor against all costs and
expenses incurred by the Lessor in complying with this Clause
10.8. Such indemnity will initially be set at an interim
maximum of Pounds-Sterling 50,000. The Lessor will notify the
Lessee as soon as practicable after the Lessor has incurred
costs and expenses of Pounds-Sterling 50,000. The Lessor will
have no obligation to take any action which would incur further
costs or expenses until all accrued costs and expenses have been
paid and a further interim maximum liability is agreed.
10.9 Sale of Vessel following Total Loss
If the insurers of the Vessel have satisfied or admitted in full their
obligations under the Insurances and have expressly waived any rights
they may have, or would or might require, in the Vessel, the Lessee, as
the agent of the Lessor, shall pursuant to Clause 19.2 (Sale of the
Vessel) as soon as practicable after the date of Total Loss of the
Vessel endeavour to arrange a sale of the Vessel. Any such sale shall
comply with Clause 19 (Re-delivery and sale of the Vessel).
11. GENERAL COVENANTS AND UNDERTAKINGS OF THE LESSEE
11.1 Notification of Relevant Event
The Lessee undertakes with the Lessor that, from the date of this
Agreement and so long as any moneys are owing to the Lessor (actually
or contingently) under this Agreement or any of the other Lease
Documents to promptly notify the Lessor of the occurrence of any
Relevant Event promptly upon becoming aware thereof.
11.2 Notification of termination of Sub-Lease
The Lessee undertakes with the Lessor that, from the date of this
Agreement and so long as any moneys are owing to the Lessor (actually
or contingently) under this Agreement or any of the other Lease
Documents to promptly notify the Lessor of the termination of the
sub-leasing of the Vessel or the obligation of the Lessee to sub-lease
the Vessel pursuant to the Sub-Lease.
11.3 Supply of accounts and financial information
The Lessee shall provide to the Lessor (or, as the case may be, shall
procure that there is provided to the Lessor) such reasonably available
financial information relating to the Lessee as the Lessor may
reasonably require. In particular the Lessee shall, from the date
of this Agreement and so long as any moneys are owing to the Lessor
(actually or contingently) under this Agreement or any of the Lease
Documents, properly prepare or cause to be properly prepared financial
statements for the Lessee in respect of each financial year and, if the
same are available, (on the same basis) each half of each financial
year and will in each case deliver or cause to be delivered a copy of
the same to the Lessor as soon as practicable but in any event not later
than one hundred and twenty (120) days after the end of the financial
period to which they relate. If the financial statements for the
Lessee are not audited, they shall be accompanied by a certificate
signed by an officer of the Guarantor addressed to the Lessor stating
that, to the best of such person's knowledge and belief, having made
due enquiry, such statements represent a true and fair view of the
assets, liabilities, profit, loss and financial condition of the Lessee.
11.4 Information concerning the Vessel
The Lessee undertakes with the Lessor that, from the date of this
Agreement and so long as any moneys are owing to the Lessor (actually
or contingently) under this Agreement, or any of the other Lease
Documents it will promptly furnish the Lessor with all such information
as the Lessor may from time to time reasonably request in writing
regarding the Vessel, its insurance, condition, maintenance, employment,
position and engagements, particulars of all towages and salvages and
copies of all charters, leases and other contracts for the employment
of the Vessel, or otherwise concerning the Vessel.
11.5 Notification requirements in relation to the Vessel
The Lessee shall notify the Lessor in writing promptly at the Lessee's
cost and expense of:
(a) any accident to the Vessel involving repairs the cost whereof
will or is, in the reasonable opinion of the Lessee, likely to
exceed ten per cent. (10%) of the Lessor's Cost or the equivalent
in any other currency;
(b) any occurrence in consequence whereof the Vessel has become or
is, in the reasonable opinion of the Lessee, likely to become a
Total Loss;
(c) any requirement made by any insurer or the Classification Society
or by any competent authority in relation to the Vessel which is
not complied with in accordance with its terms (excluding any
requirement in respect of which non-compliance will not adversely
affect the Insurances and will not materially adversely affect
the operation or safety of the Vessel or the rights and interests
of the Lessor);
(d) any material assistance which has been given to the Vessel
which has resulted or may result in a lien for salvage being
acquired over the Vessel;
(e) any failure to pay promptly and regularly the wages and
allotments or the insurance and pension contributions (if any)
of the crew of the Vessel;
(f) the requisition for hire at any time of the Vessel;
(g) any serious or potentially serious injury to an individual or
group of individuals caused by, or in connection with, the
Vessel which is likely to give rise to any claim against the
Lessor or any other member of the Lessor's Group or to any
other claim or claims in an amount exceeding five million
Dollars ($5,000,000) in aggregate (or the equivalent in any
other currency);
(h) any damage to property caused by, or in connection with, the
Vessel likely to give rise to any claim against the Lessor or
any other member of the Lessor's Group or to any other claim
in an amount exceeding five million Dollars ($5,000,000) (or the
equivalent in any other currency);
(i) any event requiring notification under Clause 11.8 or Clause
13.3; and
(j) any other event which occurs in connection with the Vessel which
in the reasonable opinion of the Lessee affects or might affect
the rights of the Lessor or involves or might involve any
material loss or liability to or of the Lessor.
11.6 Location of the Vessel
The Lessee shall, at its own expense, provide to the Lessor such
information as the Lessor may reasonably request concerning the position
of the Vessel, and in particular the Lessee shall notify the Lessor of
any change of location and the identity of the current Service Contractor
as soon as practical on each occasion it is proposed to change the
jurisdiction(s) of the Vessel's location and, if so requested by the
Lessor, the Lessee shall, to the extent possible, give the Lessor
notice of the jurisdiction(s) of the proposed location or locations
for the forthcoming twelve months.
11.7 Taxes
(a) The Lessee shall not and shall procure that no other member of
the Guarantor's Group shall claim any capital allowances in
respect of any expenditure relating to the Vessel incurred or to
be incurred by the Lessor or otherwise in respect of the Vessel
which would adversely affect the Lessor's claim to capital
allowances.
(b) The Lessee shall pay and discharge from time to time all Taxes
and other outgoings whatsoever lawfully imposed on the Vessel or
any income therefrom (other than Corporation Tax) attributable to:
(i) any Rent or Termination Payment actually receivable
hereunder; or
(ii) any other amounts payable to and unconditionally received
by the Lessor under this Agreement or pursuant to or in
connection with any of the other Lease Documents; or
(iii) any sales or other proceeds (including, without
limitation, insurance moneys) actually received and
retained by the Lessor in respect of the Vessel as a
result of the use, possession, control and command
of the Vessel.
(c) The Lessee will not use any part of the Vessel or permit any part
of the Vessel to be used and shall procure that no part of the
Vessel is used during the requisite period (as defined in section
40 CAA 1990) so as to result in the application of any of
sections 42, 43, 44, and 46 CAA 1990 and shall immediately notify
the Lessor if at any time within such requisite period the
Vessel is used for leasing to a non-resident other than permitted
leasing, "non-resident" and "permitted leasing" bearing for this
purpose the respective meanings set out in section 50 CAA 1990
and the Lessee shall also notify the Lessor of any event or
matter which under section 48 CAA 1990 ought to be notified by
the Lessor to the Board of the Inland Revenue or any Inspector of
Taxes in connection with the Vessel or the leasing thereof and
shall promptly furnish when the Lessor may require such
information as may properly be required to be so furnished by
the Lessor to the Board of the Inland Revenue and Inspector of
Taxes regarding the leasing of the Vessel or the use to which it
is being put or has been put, in order to enable the Lessor to
comply with the provisions of section 48 CAA 1990 or to respond
to such a request.
11.8 Environmental Laws
The Lessee shall comply, or procure compliance with, all requirements of
Environmental Law which are applicable to the Vessel insofar as
non-compliance therewith could reasonably be expected to give rise to
any claim or liability of any description for the Lessor or any other
member of the Lessor's Group (including their respective directors,
employees and agents) or to any other claim or liability which could
reasonably be expected to have a material adverse effect on the
financial condition, business or prospects of (i) the Guarantor's Group
as a whole or (ii) any Primary Obligor (including, without limitation,
obtaining and maintaining in full force and effect all Environmental
Permits required from time to time and all requirements relating to
manning, submission of oil spill response plans, designation of
qualified individuals and establishing financial responsibility) and
promptly notify the Lessor of (i) any Environmental Claim which has
been made or threatened against the Lessor, the Lessee, the Sub-Lessee
or (to the knowledge of the Lessee or the Sub-Lessee) the Service
Contractor in relation to or is caused by or is in connection with the
Vessel; and (ii) any revocation, suspension, amendment, variation,
withdrawal or refusal to grant any Environmental Permit or any
requirement relating to the manning, submission of oil response
plans, designation of qualified individuals and establishing financial
responsibility, which, in the case of either (i) or (ii) above, might
reasonably be expected to have a material adverse effect on the
interests of the Lessor or on the ability of the Lessee to fulfil its
obligations under this Agreement and the other Lease Documents.
12. OPERATIONAL COVENANTS IN RELATION TO THE VESSEL
12.1 Use of Vessel
The Lessee shall, subject to the provisions of this Agreement, as
between itself and the Lessor, have full and exclusive use, possession,
control and command of the Vessel during the Lease Period.
12.2 Design requirements
The Lessee shall ensure that the Vessel is operated in a proper, and
safe manner at all times in accordance with its design requirements and
subject to any limitations placed on such operation by that design or
any recommendations of any builder or repairer of the Vessel in the
manner prescribed by any legislation in force in any applicable
jurisdiction.
12.3 Compliance with Laws and regulations
The Lessee shall not cause nor permit the Vessel to be operated in any
manner which is contrary to international law or any other law or
regulation that is applicable to the Vessel or any member of the
Guarantor's Group relating to the Vessel or to the exploitation or
development, or any accumulation, of hydrocarbons and the Lessee shall
ensure that the Vessel shall only be utilised in accordance with all
safety requirements, codes of practice, guidance notes and the like
from time to time in force or issued by any Safety Inspector and in
accordance with the terms of all applicable permits and consents
including, but not limited to, any such permit or consent from time to
time issued by the Classification Society or any other body. The
Lessee shall ensure that the Vessel is operated in compliance with the
ISM Code at all times from the date on which the ISM Code becomes
applicable to the Vessel up to the sale of the Vessel by the Lessor, and
that at all such times there is a valid Safety Management Certificate
and Document of Compliance (in each case as defined in the ISM Code)
in effect in relation to the Vessel.
12.4 Operation in accordance with insurance arrangements
The Lessee will not use the Vessel nor cause nor permit the Vessel to
be used or operated in any manner or for any purpose excepted from any
insurance policy or policies or certificate or certificates of entry
comprising the whole or part of any Insurances, or for the purpose of
the storage of any goods of any description excepted from any such
insurance policy or policies or certificate or certificates of entry
and shall not do or permit to be done anything which could be expected
to invalidate any insurance policy or certificate of entry or the
Insurances evidenced thereby.
12.5 Alterations
The Lessee may at any time alter any items of equipment or fit any
additional equipment (including Excluded Property) required for the
purpose of the operation of the Vessel and may make any alteration to
the type or performance characteristics of the Vessel that it
considers is necessary or desirable without impairing the safety of
operation of the Vessel, provided that:
(a) if any such alteration or fitting when taken on its own or as a
series of changes constitutes a substantial change to the
Vessel (measured by value or by physical extent), the Lessee
shall promptly notify the Lessor thereof in writing;
(b) such alterations or additional equipment shall not impair the
safety, seaworthiness of the Vessel, prejudice the effectiveness
of any of the Insurances or give rise to any contravention of
any other provision of this Agreement and, without the prior
written consent of the Lessor, they shall not materially reduce
the value of the Vessel;
(c) any additional equipment fitted by the Lessee to the Vessel
shall belong to the Lessee, who may remove such additional
equipment at any time before the expiration of the Lease Period
(subject to the above proviso) or earlier termination of the
chartering of the Vessel under this Agreement. The cost of
fitting or removing any equipment together with the cost of
making good any damage caused by such fitting or removal shall
be payable by the Lessee. The Lessee shall notify the Lessor in
writing of any alterations to the Vessel and of all equipment
that is fitted to the Vessel by the Lessee which, in the Lessee's
reasonable opinion, may have a material adverse impact on the
market value of the Vessel, within a reasonable period of such
alterations being carried out or, as the case may be, the
fitting or removal of such additional equipment; and
(d) any such additional equipment which belongs to any member of the
Guarantor's Group which is not removed pursuant to paragraph (c)
above prior to the expiration of the Lease Period may be sold or
otherwise disposed of by the Lessor (subject to Clause 19.2)
without the need for any further act by the Lessee or any other
person. Where that additional equipment is in addition to
(and not in replacement of) the equipment forming part of the
Vessel as at the Delivery Date, a sum equal to the proceeds of
sale or other disposal of such additional equipment which has
been sold or disposed of by the Lessor shall, subject to Clause
28, be paid to the Lessee as soon as practicable after the
completion of such sale or other disposal.
The cost of fitting or removing any such additional equipment together
with the cost of making good any damage caused by such fitting or
removal shall be payable by the Lessee. The Lessee shall notify the
Lessor in writing of any material alterations to the Vessel and shall
provide details of all that is fitted to or removed from the Vessel by
the Lessee which, in the Lessee's reasonable opinion, may have a
material adverse impact on the market value of the Vessel, within a
reasonable period of such alterations being carried out, or the fitting
or removal of such additional equipment.
12.6 Manning
The Lessee shall be responsible for providing or procuring that there be
provided the officers and crew (together the "Crew") on board the Vessel
who shall remain the employees of the Lessee or the Sub-Lessee, or such
other person as the Lessee shall engage to provide crewing services for
the Vessel. The Crew shall be responsible for the manning and operation
of the Vessel on behalf of the Lessee or, as the case may be, the
Sub-Lessee and, as between the Lessor and the Lessee, at the risk of
the Lessee.
12.7 Expenses incidental to use and operation
The Lessee shall, subject to the provisions of this Agreement, be
responsible for all expenses, charges and penalties of every kind
whatsoever incidental to the use and operation of the Vessel during the
Lease Period and shall ensure that the Vessel is kept and maintained in
accordance with any law, regulation, consent or other requirement from
time to time applicable to the Vessel.
12.8 Maintenance and repair
The Lessee shall, or shall procure that the Sub-Lessee shall, throughout
the Lease Period and thereafter until sale of the Vessel:
(a) at no expense to the Lessor, maintain the Vessel (and each part
thereof) in a good state of repair (fair wear and tear excepted),
in efficient and safe operating condition, and in accordance
with the Lessee's maintenance schedule and practice from time to
time and shall keep the Vessel with the Classification with the
Classification Society in force at all times free of notations,
recommendations and reservations (other than where compliance
with the terms of the relevant notation, recommendation or
reservation is not overdue) affecting class and the Lessee shall
ensure that the Vessel complies at all times with all applicable
requirements recommendations and reservations of the
Classification Society (whether resulting from a survey of the
Vessel or not), the insurers and any applicable law, regulations
and requirements applicable to equipment of a type similar to
the Vessel in force at all times and shall forward to the Lessor
on request subject to availability, copies of all certificates as
may be required for the proper use and operation of the Vessel
for the time being;
(b) procure all repairs to or replacement of any badly worn, damaged,
broken or lost parts or equipment to be effected promptly and in
such manner (with regard to both workmanship and quality of
materials) as not to reduce materially the value of the Vessel
without the prior written consent of the Lessor and the Lessee
shall be responsible for all costs and expenses so incurred; and
(c) procure that (to the extent reasonably practicable) title to all
replacement parts or equipment attached to or installed on the
Vessel under Clause 12.8(b) shall vest (by such delivery) in the
Lessor (and the Lessee shall, at its cost and expense procure
that any necessary action is taken to ensure that such vesting is
effective).
12.9 Obstruction
The Lessee shall, or shall procure that the Sub-Lessee shall, throughout
the Lease Period and thereafter until sale of the Vessel, pay all
charges and expenses of every kind and nature whatsoever incidental to
the use and operation of the Vessel under this Agreement and, if the
Vessel or any part thereof becomes a wreck or an obstruction to
navigation, any costs and expenses arising which may be incurred by or
made or asserted against the Lessor in connection with or as a
consequence of the removal or destruction of the wreck or obstruction,
provided that the Lessee shall have the right to contest in good faith
any such charge or expense (and no person employed to control or operate
the Vessel shall be deemed to be a servant of the Lessor for any purpose
whatsoever) and to this end the Lessor shall upon receipt of the
written request from the Lessee not unreasonably refuse to lend to the
Lessee, at the Lessee's expense, all necessary assistance in connection
with any litigation, arbitration or other administrative proceedings to
which the Lessee may be a party or in which the Lessee may be otherwise
involved in connection with the contest of the validity or amount of
such charge or expense provided that no Primary Obligor shall be
permitted to use the Lessor's name in any such litigation, arbitration
or other administrative proceedings unless the Lessor has given its
express prior written consent.
12.10 Storage and Transport of Hydrocarbons
The Lessee shall procure that, unless the Lessee has given the Lessor
prior written notice and complied with any change in the Insurances
reasonably required by the Lessor taking into account the prudent
practice of owners of vessels of equivalent type and pattern of use
to the Vessel, the Vessel shall not transport hydrocarbons or similar
substances and the Vessel shall not store hydrocarbons or similar
substances unless the requirements of Clause 9 have been complied with
in all respects.
12.11 Safety and operation
The Lessee shall, or shall procure that the Sub-Lessee shall, take such
steps as are reasonably practicable to ensure that the Vessel and all
constituent parts thereof will be safe and without risk to health when
in use and that the Vessel is not operated beyond its specified or
recommended limits or capacity. To this end and without prejudice to the
generality of the foregoing the Lessee shall ensure that any defects in
the Vessel which could be or cause a danger to safety and a risk to
health are repaired and made good so far as is reasonably practicable in
accordance with the Lessee's normal practices. For this purpose the
Lessee shall cause the Vessel to be inspected regularly and its various
systems tested provided that such inspection and testing will only be
carried out in accordance with and at the interval specified in the
Lessee's maintenance schedule for the Vessel or otherwise at times
and in such manner as a prudent operator of vessels of a similar type to
the Vessel and engaged in a similar trade would normally expect to
carry out such inspection and testing. The Lessee shall also take all
reasonable steps to ensure that appropriate safety measures are adopted
and all provisions of all applicable laws, codes and regulations
relating to the Vessel are complied with and the Lessee shall ensure or
procure where required by any applicable law that at all times from the
date on which the ISM Code becomes applicable to the Vessel the Vessel
is subject to a Safety Management System which complies in all respects
with the ISM Code and has a valid Safety Management Certificate and
that there is a valid Document of Compliance which is applicable to the
Vessel.
12.12 Operational control
The Lessor acknowledges that, as between itself and the Lessee, the
Lessee (or, where the Vessel is subject to any Sub-Lease, the Sub-Lessee)
shall have the full operational control of the Vessel throughout the
Lease Period and any Extension Period, but without prejudice to the
operation or enforcement of the covenants of the Lessee set out in this
Agreement or to the right of the Lessor following the delivery by it of
a Termination Notice to repossess the Vessel in accordance with Clause
19.1.
12.13 Consents
The Lessee shall procure that at all times during the Lease Period
there are maintained in full force and effect all relevant
authorisations (governmental and otherwise) and will promptly obtain any
further authorisation in each case which are or may become necessary
for the operational use of the Vessel or the performance by the Primary
Obligors of their respective obligations to the Lessor under this
Agreement and the other Lease Documents.
12.14 Good practice
The Lessee shall ensure that in all respects the Vessel will be operated
and maintained to comply in all material respects with all applicable
laws in accordance with good oil field and marine practice.
12.15 Arrest and detention
If the Vessel is at any time during the Lease Period:
(a) arrested, seized, taken into custody or otherwise detained by
any court or other tribunal or by any Government Entity (other
than by a Compulsory Acquisition or any requisition for hire or
by reason of a Lessor's Vessel Lien); or
(b) subjected to distress or other legal proceedings by reason of
any process, claim, the exercise of any rights conferred by a
Vessel Lien or by any other action whatsoever (other than by
reason of a Lessor's Vessel Lien),
the Lessee shall procure the release of the Vessel from such arrest,
seizure, detention, distress or proceedings not later than 30 days
after receiving notice thereof by providing bail or otherwise as the
circumstances may require. The Lessor acknowledges and accepts that
the Lessee shall, unless and until a Relevant Event shall have occurred
which is continuing, have the sole right to contest any litigation,
arbitration or administrative proceedings in respect of the foregoing
and the Lessor shall, upon receipt of the written request from the
Lessee and being secured to the Lessor's satisfaction against its costs
and expenses of so doing, not unreasonably refuse to render all
necessary assistance as the Lessee may reasonably require in connection
therewith, provided that the Lessor's name may not be used in any manner
in any such litigation, arbitration or other proceedings unless the
Lessor has given its express prior written consent.
12.16 Registration
(a) The Lessee shall not do and shall procure that no other member of
the Guarantor's Group shall do anything or permit anything to be
done whereby the registration of the Vessel in the Shipping
Register under the laws of the Flag State may be forfeited or
imperilled.
(b) The Lessee shall comply with and procure the compliance with the
provisions of all applicable laws and regulations necessary to
maintain the registration of the Vessel in the Shipping Register
in the Flag State.
(c) The Lessee shall be entitled to implement a change of the
registration of the Vessel subject to the prior written consent
of the Lessor, such consent not to be unreasonably withheld
provided that no such change may be permitted which could
reasonably be expected to give rise to a breach of Clause
11.7(c). The Lessor agrees from time to time, at the Lessee's
expense, to do and perform such acts and execute and deliver such
instruments as may be reasonably requested by the Lessee in order
to implement any such change.
(d) Not later than six (6) months after the Delivery Date the Lessee
shall deliver to the Lessor a certified extract in the English
language from the register of the Flag State, evidencing the
definitive registration of the Vessel.
12.17 Notice of lease
(a) The Lessee shall place and keep or procure that there is placed
and kept prominently displayed in the control room of the Vessel
throughout the Lease Period a framed printed notice in plain type
in English of such size that the paragraph of reading matter
shall cover a space of not less than six (6) inches wide by nine
(9) inches high, substantially reading as follows:
"NOTICE OF LEASE"
"This Vessel is the property of BMBF (NO.12) Limited (the
"Lessor") and is subject to a head lease granted by the Lessor
in favour of Global Marine International Drilling Corporation
(the "Lessee "). This Vessel is subject to a sub-lease granted
by GMIDC in favour of Global Marine U.K. Limited (the
"Sub-Lessee").
Neither the Lessee, the Sub-Lessee, nor any charterer, service
contractor, manager, nor any servant or agent of any thereof have
any authority whatsoever to contract on behalf of the Lessor or
to pledge the credit of the Lessor or the involvement of the
Lessor in any liability whatsoever and none of the Lessee,
the Sub-Lessee, the Contractor, any manager of this vessel and
any other person has any right, power or authority to create,
incur or permit to be imposed upon this vessel any lien
whatsoever except for general average, crew's wages or salvage."
The Lessee undertakes that it shall not place or permit to be
placed in or on the Vessel any other notice dealing with the
rights of any person without the prior written consent of the
Lessor.
(b) The Lessee undertakes to procure that the notice specified in
Clause 12.17(a) is not removed or covered up.
(c) The Lessee shall, or shall procure that the Sub-Lessee shall,
throughout the Lease Period and thereafter until sale of the
Vessel, carry a true and complete copy of this Agreement with
the Vessel's papers and on demand exhibit the same to any person
having business with the Vessel which might reasonably be
considered to give rise to any Vessel Lien other than any
Permitted Vessel Lien.
12.18 Service Contractor's Oil Pollution Indemnity
(a) The Lessee shall ensure that:
(i) the party (the "Exxon Party") entering into the Exxon
Contract with the Sub-Lessee shall be a member of the
Exxon group of companies;
(ii) not later than the Delivery Date, the Lessor shall have
received:
(A) an original of the Exxon Contract, duly executed
by the Exxon Party and the Sub-Lessee (or a
certified copy thereof if the confirmation
relating to certified copies is given as
referred to in sub-paragraph (ii)(B) below),
(B) a legal opinion from Watson, Farley & Williams,
New York counsel, addressed to the Lessor, dated
the Delivery Date, confirming that, under the laws
of Texas and the federal laws of the USA, the
pollution indemnity referred to in paragraph
(A) above may be directly enforced against the
Exxon Party by the Lessor and each Indemnified
Person in all respects in the same manner as
if the Lessor or such Indemnified Person were
itself a party to such contract (including
confirmation that such direct enforcement may be
effected on the basis of a certified copy of the
Exxon Contract without the need for an original
thereof).
(b) The Lessee shall use all reasonable efforts and endeavours to (i)
ensure that the Exxon Contract contains a pollution indemnity in
substantially the form set out in Schedule 7 and on the same
terms as that given to the Sub-Lessee and (ii) procure that the
Lessor (on behalf of itself and each of the Indemnified
Persons) receives from each subsequent Service Contractor the
benefit of an indemnity or indemnities with respect to oil
pollution in same form as the Lessor is entitled to receive under
the foregoing provisions from the Exxon Party.
(c) The Lessee shall provide to the Lessor on or shortly prior to,
or, if in the Lessee's reasonable opinion that is impractical, as
soon as practical after, the Sub-Lessee entering into a Service
Contract (other than with the Initial Service Contractor) a
certificate executed by a duly authorised officer of the Lessee,
certifying that:
(i) the Sub-Lessee or, if applicable and subject to the terms
of this Agreement, the Lessee is about to enter into or,
as the case may be, has entered into a Service Contract;
and
(ii) either (A) an original and complete counterpart of such
Service Contract is attached, and the same contains an
indemnity or indemnities with respect to oil pollution
for the benefit of the Indemnified Persons (either
expressly or by an indemnity or indemnities in favour of
a class of persons within which the Indemnified Persons
fall) by operation of the third party beneficiary
doctrine under the law governing the Service Contract and
that such indemnity is in the same terms as the indemnity
given in favour of the Sub-Lessee or (B) that the Lessee
complied with its obligations under sub-paragraph (b)
above but that the relevant Service Contractor nonetheless
refused to issue any such indemnity or indemnities.
Where (ii)(A) applies, such certificate shall be accompanied by
an original counterpart of the entire Service Contract referred
to (or by a certified copy thereof if the confirmation relating
to certified copies is provided as referred to in Clause
12.18(a)(ii)(B) above).
(d) Not less than two months prior to the expiry of the Exxon
Contract, and as soon as practicable upon any earlier termination
of the Exxon Contract, the Lessee shall notify the Lessor of such
termination or expiry.
12.19 Inspection
12.19.1Without imposing or implying any obligation on the Lessor, the Lessor
may inspect, and may instruct an agent on its behalf, at any reasonable
time upon reasonable notice, to inspect the Vessel.
12.19.2The costs of such inspection shall be borne by:
(a) the Lessor if, at the time of the inspection, no Relevant Event
has occurred which is continuing and such inspection reveals
that all provisions of this Agreement with regard to the
operation and maintenance of the Vessel are being substantially
complied with; and
(b) the Lessee in each other case.
12.19.3Provided no Relevant Event has occurred which is continuing, the Lessor
agrees that no such inspection shall interfere with the operation,
maintenance or repair of the Vessel. No more than one inspection shall
take place in any period of 12 months unless the Lessor has grounds for
believing that any of the requirements of this Lease are not being
complied with in all respects.
12.19.4The Lessor also agrees that it or its agent shall comply with all
safety, fire and operational regulations and instructions which may be
given on the occasion of any inspection.
13. SUB-LEASING AND SERVICE CONTRACTS
13.1 The Lessee shall procure that the Vessel is not, without the prior
written consent of the Lessor, sub-leased or chartered to any person
other than to the Sub-Lessee on the terms of the Initial Sub-Lease or
in accordance with Clause 13.2 and, without limiting the foregoing,
such terms shall provide that the Initial Sub-Lease shall automatically
terminate on the date on which the Lessee is required to redeliver the
Vessel under Clause 19. The Lessee shall procure that there is no
further sub-leasing or parting with possession of the Vessel by the
Sub-Lessee and that at all times during the Lease Period the Vessel is
under the management and control of the Sub-Lessee.
13.2 The Lessee may not sub-lease, charter or otherwise part with possession
of the Vessel except under the Initial Sub-Lease or otherwise in
accordance with each of the following requirements:
(i) the sub-lessee must be, and at all times during the period of the
sub-lease remain, either (a) a member of the Guarantor's Group or
(b) another party which has been consented to in writing by the
Lessor for these purposes. The Lessee acknowledges that if during
the term of any sub-lease the condition set out in this
paragraph (i) shall cease to be fulfilled, such failure shall
constitute a Mandatory Termination Event in accordance with
Clause 21.2;
(ii) the rights of the sub-lessee under the sub-lease must be
effectively subject and subordinate to the rights and interests of
the Lessor in the Vessel and under this Agreement, and the
sub-lease must provide that the leasing of the Vessel thereunder
shall automatically terminate upon the date the Lessee is required
to redeliver the Vessel to the Lessor under Clause 19;
(iii) the sub-lessee must provide the Lessor directly with a written
acknowledgement of the matters referred to in paragraph (ii) above
and an undertaking to redeliver the Vessel to the Lessor as
contemplated in paragraph (ii) above upon any termination
of the Lease Period whilst the Vessel is subject to the sub-lease,
without exercising any Vessel Lien over any part of the Vessel;
(iv) no sub-leasing shall be permitted which results in a contravention
of Clause 11.7(c);
(v) any sub-lease must be on terms which are not inconsistent with
the terms of this Agreement and do not adversely affect the rights
of the Lessor hereunder or in relation to the Vessel, and shall
not permit further sub-sub-leasing.
13.3 In the event that any Sub-Lessee performs any act to be performed by
the Lessee hereunder which, if it had been performed by the Lessee, it
would fully satisfy an obligation of the Lessee to the Lessor hereunder,
such obligation of the Lessee shall be deemed satisfied as between the
Lessor and the Lessee to the extent so performed by such Sub-Lessee.
14. BENEFIT OF THIRD PARTY OBLIGATIONS
14.1 The Lessor agrees that, at the request and expense of the Lessee, it
will enter into from time to time an instrument or instruments of
assignment in favour of the Lessee (in such form as the Lessee may
reasonably specify) under which it will assign to the Lessee all or
any of (i) all the Lessor's right, title and interest in and to all
warranties and indemnities given by the Builder (whether in relation to
the OFE (as defined in the Novation Agreement) or any other part of the
Vessel) to the extent that the same are then vested in the Lessor and
are capable of assignment, each OFE Supplier and each other manufacturer,
repairer or supplier of any part of the Vessel, and (ii) all right,
title and interest in and to all other claims and rights or action
whatsoever of the Lessor against the Builder under the Shipbuilding
Contract, each OFE Supplier and all guarantees, letters of credit and
other security for the Builder's, each OFE Supplier's and each other
manufacturer's, repairer's or supplier's obligations to the extent that
the same have been vested in the Lessor by the Shipbuilding Contract or
otherwise and are capable or assignment.
14.2 The Lessor will from time to time, at the request and expense of the
Lessee, give notice of any of such assignment to all relevant parties,
each such notice to be in such form as the Lessee may reasonably
specify.
14.3 The Lessor shall, at the request and expense of the Lessee, and subject
to the Lessor being indemnified and secured to its satisfaction against
all potential costs and expenses to be incurred, take all such actions
as the Lessee may reasonably require in order to give full effect to
any such assignment. The Lessee shall be entitled to take action in
the Lessor's name in relation to any disputes with the Builder, but not
otherwise, subject to Clause 24.4, and such entitlement shall be
subject to the following matters:
(i) the Lessee shall keep the Lessor fully informed as to the conduct
of such disputes and shall give timely notice to the lessor of
any meetings with Counsel or with the Builder or any attendance
at court, and the Lessor shall be entitled to attend any such
meetings;
(ii) the Lessee shall have due regard to the Lessor's wishes in
relation to the conduct of such dispute in relation to the
interest of the lessor and each member of the Lessor Group in
preserving the Lessor's and the Lessor Group's reputation as
financial institutions and their respective business interests
and customer relationships; and
(iii) notwithstanding the above, the Lessor may at any time notify the
Lessee that the Lessor is of the opinion that the continuance of
such dispute in the name of the Lessor is contrary to the
Lessor's or any member of the Lessor Group's reputation as
financial institutions or the business interests or customer
relations of any of them. A certificate signed by a director of
the Lessor shall be conclusive as to the correctness of such
opinion. If the Lessor so notifies the Lessee, the Lessee shall
forthwith cease to be entitled to conduct such dispute in the
name of the Lessor.
15. RISK
Throughout the Lease Period and until redelivery of the Vessel in
accordance with Clause 19.1 (Re-delivery of the Vessel), the Vessel
shall be in every respect at the risk of the Lessee. The Lessee shall
bear all risks howsoever arising whether of navigation of the
Vessel or the operation or maintenance of the Vessel (or any part
thereof) or otherwise. The Lessee agrees that the Lessor shall not be
liable for any liability, claim, loss, damage or expense of any kind or
nature caused directly or indirectly by the Vessel or any part
thereof or any inadequacy thereof for any purpose or any deficiency or
defect therein or the use or performance thereof or any repairs or
servicing thereto or any delay in providing or failure to provide any
thereof or any interruption or loss of service or use thereof or any
loss of business or other consequential damage or any damage whatsoever
and howsoever caused or any other matter which but for this provision
might operate to frustrate this Agreement, save for direct losses and
expenses suffered or incurred by the Lessee (including any losses and
expense against which the Lessee is obliged to indemnify any
third party irrespective of any limit on the right of recourse by that
third party to the Lessee or its assets) which result solely from a
breach by the Lessor of its express and specific obligations under the
Lease Documents to which it is party.
16. REQUISITION FOR HIRE
16.1 If the Vessel is requisitioned for hire by any Government Entity during
the Lease Period, then subject to Clause 10 and to any other provision
for early termination of the leasing of the Vessel (pursuant to a
Mandatory Termination Event or otherwise), the leasing of the Vessel
shall continue in full force and effect for the remainder of the Lease
Period and the Lessee shall remain fully responsible for the due
compliance with all its obligations under this Agreement other than in
respect of provisions which the Lessee is precluded from performing as
a result of such requisition.
16.2 The Lessee shall during the Lease Period be entitled to all requisition
hire paid to the Lessor or to the Lessee by such Government Entity or
other competent authority on account of such requisition in respect of
the Vessel. Following the expiration or earlier termination of the
Lease Period, the Lessee shall pay to the Lessor forthwith upon receipt
of all requisition hire in respect of the Vessel received by it which
relates to any period after the end of the Lease Period and until such
payment shall hold such moneys received by it on trust for the Lessor.
16.3 The Lessee shall be under no liability to the Lessor in respect of any
change in the structure, state and condition of the Vessel in so far as
such change is due to the manner in which the Vessel has been used or
treated or to the events that have occurred during the period of
requisition. Nonetheless the Lessee shall ensure that any compensation
payable by the requisitioning authority in respect of such change shall,
unless the Lessor otherwise agrees in writing:
(a) if relating to any period after the end of the Lease Period be
paid to the Lessor and until payment be held on trust for the
Lessor; and
(b) otherwise be retained by the Lessee,
and, in each such case, applied in accordance with Clause 16.4 or
Clause 16.5 (as applicable).
16.4 Any such compensation as is referred to in Clause 16.3 which relates to
any period prior to the end of the Lease Period shall be applied:
(a) if received and permitted to be retained by the Lessee pursuant
to Clause 16.3, by the Lessee as it thinks fit;
(b) if received by the Lessor, by the Lessor in payment to the Lessee.
16.5 Any such compensation as is referred to in Clause 16.3 which relates to
any period after the end of the Lease Period shall, be applied:
(a) first in reimbursement of the Lessee or, as the case may be, in
direct payment, for any survey costs incurred in connection with
any re-delivery survey required by the Lessor pursuant to Clause
19.1 (re-delivery of the Vessel);
(b) secondly by the Lessor in reimbursement of the Lessee of any
amounts expended by the Lessee in or towards restoring the Vessel
(so far as is possible) to the condition which it was required to
be in hereunder at the time the requisition took place or, as the
case may be, in making direct payment to any relevant shipyard or
other repairer or supplier; or
(c) thirdly provided that the Vessel has at such time (so far as is
possible) been restored to the condition which it was required to
be in hereunder at the time the requisition took place, in
retention by the Lessor of any surplus until the completion of
sale of the Vessel at which time such surplus shall be aggregated
with the moneys received from the purchaser of the Vessel and
shall form part of the Proceeds of Sale.
16.6 In the event that the Vessel shall at the end of the Lease Period for
any reason whatsoever be under requisition for hire the provisions of
this Agreement in respect of re-delivery and sale of the Vessel shall
unless the Lessor otherwise agrees in writing apply at the end of the
period of requisition for hire regardless that the Lease Period shall
have expired before the end of the requisition period.
17. SALVAGE
All salvage and towage and all proceeds from derelicts shall, subject to
the Lessor's prior right (if any Relevant Event has occurred and is
continuing) to retain therefrom any sums which may be due from the
Lessee to the Lessor under this Agreement be for the Lessee's benefit
and the cost of repairing damage occasioned thereby shall be borne by
the Lessee.
18. TITLE AND VESSEL LIENS
18.1 Title
During the Lease Period the Vessel shall at all times be the property of
and belong to the Lessor. Nothing in the Lease Documents shall have the
effect of or be deemed to have the effect of passing title or beneficial
ownership of the Vessel or any part thereof to the Lessee or the
Sub-Lessee. For the avoidance of doubt, it is expressly agreed that,
save for the Lessor's Mortgage none of the Lessee or the Sub-Lessee
shall, as against the Lessor, have an option or right to acquire title
to or any proprietary right or interest in or to all or any of the
Vessel.
18.2 Vessel Liens
The Lessee shall not and shall procure that no member of the Guarantor
Group shall (save as provided in Clause 19.2(e) (Sale of the Vessel) or
pursuant to the Lease Documents) sell nor purport to sell the Vessel or
any part thereof, nor create, incur or permit to arise or be imposed on
the Vessel any Vessel Lien, other than Permitted Vessel Liens.
19.RE-DELIVERY AND SALE OF THE VESSEL
19.1Re-delivery of the Vessel
(a) Except where a sale of the Vessel has been effected on the
required date for redelivery pursuant to Clause 19.2, the event
of a Total Loss (other than as provided in Clause 10.7 (Notice of
abandonment), in which event Clause 19.1(c) shall apply) and
subject to the provisions of Clause 16.6 and sub-paragraph (d)
below, the Lessee shall at the end of the Lease Period re-deliver
the Vessel together with all certificates relating to the Vessel
to the Lessor free of all Vessel Liens (other than Vessel Liens
falling within paragraphs (i), (ii), or (v) of the definition of
Permitted Vessel Liens), and the Lessor shall accept such
re-delivery, at such nearby safe port as the Lessor may require.
Subject to the provisions of Clause 16.5, the Lessee shall at its
expense before such re-delivery make all such repairs and do all
such work as may be necessary so that the Vessel at the date of
re-delivery shall be:
(i) unless otherwise agreed by the Lessor in writing, in such
state of repair and operating condition as it is required
to be maintained in accordance with the provisions of this
Agreement, fair wear and tear and changes and alterations
properly made by the Lessee as permitted under this
Agreement excepted; and
(ii) with all equipment, fittings, spare and replacement parts
installed in or on, or which are attached to, or which are
part of the Vessel in accordance with this Agreement other
than Excluded Property which was entitled to be (and was)
removed prior to re-delivery in accordance with Clause
12.5 (Alterations).
The cost of satisfying the requirements specified in paragraphs
(i) to (iii) above and remedying any defects or deficiencies
shall be borne by the Lessee or the Lessee shall pay to the
Lessor the cost of effecting the same.
(b) At or about the time of re-delivery following a termination of
the leasing of the Vessel pursuant to Clause 21.1 (termination
events), Clause 21.2 (mandatory events) or Clause 21.3
(termination of the Sub-Lease) or following the end of a
period of requisition for hire which ends after the expiration of
the Lease Period, a survey shall, if the Lessor (acting
reasonably) so requires, be made to determine the state and
condition of the Vessel. In that event, the Lessee and the
Lessor shall each appoint surveyors to be present at such survey
and the surveyors present shall determine the condition of the
Vessel and shall state the repairs or work necessary to place the
Vessel at the date of re-delivery in the structure, state and
condition required to demonstrate compliance by the Lessee
with the repair and maintenance covenants contained in this
Agreement. If the said surveyors disagree they shall refer the
matter to a senior surveyor of the Classification Society whose
decision shall be final and binding on the parties hereto.
All reasonable costs occasioned by any such survey including the
costs of the said surveyors appointed by the Lessee and the
Lessor and, if appointed, the costs of the senior surveyor of
the Classification Society shall be payable by the Lessee, but
if the Vessel is found by such senior surveyor to be in the
condition provided for in this Agreement, fair wear and tear
alone and changes and alterations properly made by the Lessee
as permitted under this Agreement excepted, such reasonable
costs shall be payable by the Lessor. If the Lessee
fails to appoint a surveyor as specified, the survey shall be
conducted by the Lessor's appointee alone and references to the
"senior surveyor" in this Clause shall be ignored.
(c) In the event of a Total Loss to which Clause 10.9 applies, the
Lessee shall, at the Lessee's cost and expense, re-deliver the
Vessel and all Surviving Parts to the Lessor at such location
and upon such other terms and conditions as the Lessor and the
Lessee may agree at such time.
(d) Notwithstanding sub-paragraph (a) above, the Lessee may retain
possession of the Vessel following the end of the Lease Period
for the duration of the Extension Period (as defined below)
subject to the following conditions:
(1) the Lease Period has not expired by effluxion of time (or
by reason of the non-renewal of any Secondary Period);
(2) the Vessel has not become a Total Loss;
(3) the Lessee has provided the Lessor with confirmation from
the relevant insurers that the Insurances required under
Clause 9 are and (subject to insurer's usual rights of
cancellation) will throughout a period specified by the
relevant insurers (being the relevant expiry date of the
relevant insurances, referred to as the "Next Expiry
Date") remain in full force and effect and in full
compliance with Clause 9 notwithstanding the occurrence
of the events which caused the Lease Period to terminate;
and
(4) no Insolvency Event has occurred in relation to the Lessee
or the Guarantor.
(e) Throughout any Extension Period the Lessee shall comply with the
requirements of Clauses 9, 10, 11, 12, 13, 14, 15, 16, 17 and 18
as if the Lease Period had not ended and for the avoidance of
doubt the provisions of Clauses 24, 25 and 26 shall continue to
apply in respect of any Extension Period. The Lessee shall
comply with the requirements of Clause 19.1(a) and (b) forthwith
upon the termination or expiry of the Extension Period.
(f) "Extension Period" means the period commencing on the date on
which a Termination Notice has been served and ending on the
earlier of:
(i) the date falling ninety (90) days after service of the
Termination Notice; or
(ii) the date falling ninety (90) days after service of any
notice to remedy served by the Lessor as contemplated by
Clause 21; or
(iii) the date of any Sale or other disposal of the Vessel by
the Lessor; or
(iv) where an Insolvency Event has occurred in relation to the
Lessee or the Guarantor, or where the requirements of
Clause 9.1(a)(ii) cease to be complied with at any time,
the date of any notice served by the Lessor on the Lessee
terminating the Extension Period; or
(v) the Next Expiry Date.
19.2 Sale of the Vessel
(a) Upon any termination of the leasing of the Vessel (or, as the
case may be, the right of the Lessee to take the Vessel on lease)
under this Agreement through effluxion of time or otherwise (but
in the case of a Total Loss, only to the extent that the Lessor
is free to dispose of the same) the Vessel shall be sold in
accordance with the remaining provisions of this Clause 19.2.
(b) To the extent of its entitlement to act as the Lessor's sales
agent in accordance with paragraph (d) below, the Lessee shall
have the right to decide the means, timing and terms of disposal
of the Vessel subject always to compliance with paragraphs (c)
and (d) below and all the other provisions of this Agreement.
(c) Any sale pursuant to this Clause 19 shall comply with the
following conditions:
(i) the sale shall be at a cash price payable by the purchaser
in full on completion in Dollars or such other currency
as the Lessor may agree (such agreement not to be
unreasonably withheld) direct to the Lessor;
(ii) the sale shall be at a price which (excluding VAT or other
similar taxes wheresoever and howsoever arising) shall be
not less than open market value of the Vessel;
(iii) the sale may be to any person other than:
(A) the Lessee; or
(B) the Sub-Lessee; or
(C) any person who is purchasing on behalf of or in
trust for the Lessee or the Sub-Lessee; or
(D) any person who is purchasing as part of an
arrangement under which title will or may pass to
any of the persons mentioned in (A), (B) or (C)
above;
(iv) the sale shall be made without any condition,
representation, recourse or warranty whatsoever to or on
the part of the Lessor or any member of the Lessor's Group
upon terms which do not otherwise expose the Lessor to any
liability, including but not limited to any Tax Liability
(excluding Corporation Tax chargeable on capital gains and
any Tax Liability from a disposal for capital allowances
purposes), which it would not have had but for execution
of the relevant sale documents (save for liability for
breach of the warranty set out in this Clause 19.2(c)) and
otherwise without any representation, recourse or warranty
whatsoever to or on the part of the Lessor other than a
warranty that the Lessor shall pass such title to the
Vessel as the Lessor has acquired pursuant to the
Shipbuilding Contract and the Novation Agreement and this
Agreement subject to all Vessel Liens, save for Lessor's
Vessel Liens;
(v) a sale shall be on an "as is, where is and with all faults"
basis and, unless the Lessor otherwise agrees, on terms
that risk in the Vessel shall pass to the purchaser on
entry into of the contract for sale, and the sale
contract shall be governed by the laws of England;
(vi) a sale shall exclude, so far as permitted by the laws of
England and any other laws governing or applicable to the
sale of the Vessel, all liability of the Lessor, in
contract or tort, in relation to the Vessel to the same
extent as such liabilities are excluded by Clause 5
(disclaimers and exclusions) but save for the warranty
given by the Lessor pursuant to Clause 19.2(d)(iv) above;
and
(vii) if the Vessel is at the date of entry into any contract
for the sale of the Vessel subject to any requisition for
hire, the sale shall be subject to such requisition.
The Lessee shall, whether or not the Vessel is sold through the
Lessee as sales agent pursuant to Clause 19.2(e) and whether or
not the Vessel is in the possession of the Lessee, the Sub-Lessee
or the Lessor, indemnify the Lessor on demand and keep the Lessor
indemnified on a full indemnity basis (subject to Clause 24.2
(exclusions from general indemnity) against all Losses from
time to time suffered or incurred by or made against the Lessor
which are connected with the repossession, re-delivery, storage,
maintenance, protection, sale or attempted sale of the Vessel.
(d) the Lessee is hereby irrevocably appointed by the Lessor as its
sole and exclusive marketing agent for the Vessel (including all
equipment referred to in Clause 12.5(d)), any sale of the Vessel
to be completed only at the time of or following the expiration
or earlier termination of the leasing of (or the obligation of
the Lessor to lease) the Vessel pursuant to this Agreement,
PROVIDED THAT:
(i) such agency shall terminate if no sale has been completed
within one year of the expiration or earlier termination
of the Lease Period (or such longer period as the Lessor
may agree in writing); and
(ii) the Lessee shall keep the Lessor fully informed at all
times of all actions taken in the capacity as the Lessor's
agent under this Clause, and in particular the Lessee
shall promptly notify the Lessor of all offers received
for the purchase of the Vessel, giving full details of
the terms of the offer and the party making the offer;
(iii) the authority of the Lessee is limited to the extent that
the Lessee shall not be authorised to sell the Vessel or
any part thereof or to approve or execute on behalf of the
Lessor any document (including, but not limited to, any
term sheet or heads of terms) relating to the sale of the
Vessel, but the Lessor agrees that it shall, at the
Lessee's cost and expense upon reasonable notice, execute
such agreement as may be requested for the sale of the
Vessel provided that the same complies with the provisions
of Clause 19.2(c).
(e) The Lessor is hereby appointed and constituted by the Lessee as
the Lessee's attorney-in-fact for the Lessee and in the Lessee's
name and place to take all steps necessary to obtain
deregistration of the Vessel from the applicable registry of a
Flag State, provided that:
(i) such power shall not be exercised until the termination of
the leasing of the Vessel under and in accordance with
this Agreement; and
(ii) (for the avoidance of doubt) shall be without prejudice to
any rights of the Lessee as mortgagee of the Vessel,
and provided further that no registry or other third party
relying on any action taken by the Lessor purporting to act
pursuant to such power shall be concerned to ascertain whether
the conditions set out in sub-paragraph (i) have been satisfied.
20. PROCEEDS OF SALE
20.1 Proceeds of Sale
The "Proceeds of Sale" of the Vessel shall be (i) the total proceeds of
sale thereof (excluding Value Added Tax and other similar taxes
wheresoever and howsoever arising) unconditionally and irrevocably
received and retained by the Lessor, including any compensation received
by the Lessor for any breach of any contract for the sale of the
Vessel; or (ii) any capital sums unconditionally received by the Lessor,
before Delivery, by way of purchase price for the Vessel (or
compensation for the loss of the Lessor's rights under the Novation
Agreement) but excluding any sums received by the Lessor pursuant to
the Put-Option Agreement. If the Vessel is sold (or such compensation
is received) in a currency other than Sterling, the "Proceeds of Sale"
thereof shall be the amount of Sterling which the Lessor is able to
purchase with the foreign currency by reference to the spot rate of
exchange of the Bank for purchasing Sterling with such currency which
it receives for such sale on the day of receipt of such foreign currency
or as soon thereafter as foreign exchange transactions are able to be
made in the City of London. The "Net Proceeds of Sale" shall be the
balance of the Proceeds of Sale after deduction of broker's commission
and all other costs and expenses reasonably incurred by the Lessor in
connection with the sale.
20.2 Application of Proceeds of Sale
Following the termination or expiration of the leasing of the Vessel and
if the completion of a sale or other disposition of the Vessel or the
rights and obligations of the Lessor under the Novation Agreement takes
place, the Net Proceeds of Sale (or any part thereof) shall be applied
by the Lessor as soon as practicable after receipt, but in any event not
later than the next Business Day, as follows:
(i) firstly, in retention by the Lessor of an amount equal to zero
point five per cent. (0.5%) of the amount by which the Net
Proceeds of Sale exceed the Termination Payment;
(ii) secondly, the Lessor shall pay an amount equal to the balance, if
any, of such money to the Lessee by way of rebate of Rent.
21. TERMINATION PROVISIONS
21.1 Termination Events
The Lessor and the Lessee agree that it is a fundamental term and
condition of this Agreement that none of the following events shall
occur at any time after the date of this Agreement, and that the
occurrence of any of the following events shall constitute a
repudiation of this Agreement by the Lessee:
(a) any Primary Obligor fails to pay any amount due to the Lessor or
any agent or trustee for the account of the Lessor under this
Agreement or any other Lease Document on the due date and such
default is not remedied within five (5) Houston Business Days
after the Lessee or such Primary Obligor is notified by
the Lessor of such non-payment; or
(b) any of the following events occur:
(1) the Lessee fails to obtain and/or maintain or procure that
there are obtained and maintained the Insurances or if any
insurer in respect of any of such insurances cancels any
of such insurances or disclaims liability by reason, in
either case, of mis-statement in any proposal for any of
such insurances or for any other failure or default on the
part of any person (other than the Lessor), and, in the
case only of the insurances required to be maintained
pursuant to Clause 9.1(a)(i) the Lessee shall fail within
ten (10) Business Days to obtain or procure that
replacement Insurances complying in all respects with
Clause 9 are effected, or
(2) the Lessor gives notice pursuant to Clause 9.1(b)
requiring an increase in the amount insured in respect of
oil pollution liability risks in accordance with
Clause 9.1(a)(ii) and such insurances are not increased
within ten (10) Business Days, or such later date as
provided for in the case of Clause 9.1(a)(ii)(y) or Clause
9.1(a)(ii)(z) of the Lessor serving such notice on the
Lessee pursuant to Clause 9.1(b); or
(c) the provisions of Clause 9 (financial covenants) of the Guarantee
are not complied with at any time and such non-compliance is not
remedied within a period of sixty (60) days of the Lessor serving
notice on the Guarantor or the Lessee requiring such remedy; or
(d) the provisions of Clause 22 (Security) are not complied with at
any time; or
(e) the Lessee fails to comply with any obligation imposed by
Clause 6.3, Clause 21.2 or Clause 21.5 on the required date; or
(f) any Primary Obligor fails to observe or perform any of its
obligations to the Lessor under any Lease Document to which it
is party (other than an obligation referred to in paragraphs
21.1(a), 21.1(b), 21.1(c), 21.1(d) or 21.1(e) above and
does not remedy the failure within thirty (30) days of receipt
by such Primary Obligor of a notice from the Lessor notifying
such Primary Obligor of the relevant failure and requiring the
failure to be remedied; or
(g) an Insolvency Event occurs in relation to any Primary Obligor
and (x) in the case only of the Put-Option Party, arrangements
satisfactory to the Lessor have not been implemented within
thirty (30) days of such event for another member of the
Guarantor's Group (in relation to which no Insolvency Event
has occurred) to assume all the obligations of the Put-Option
Party under the Lease Documents and (y) in the case only of the
Sub-Lessee, arrangements satisfactory to the Lessor have not
been implemented within thirty (30) days of such event (by means
of another member of the Guarantor's Group (in relation
to which no Insolvency Event has occurred) assuming all the
rights and obligations of the Sub-Lessee under the Sub-Lease or
entering into a replacement sub-lease in compliance with
Clause 13 or otherwise) so as to ensure that the requirements of
Clause 11.7(c) are satisfied at all times during the Lease
Period; or
(h) the Guarantor, the Lessee or any Primary Obligor which is the
Sub-Lessee for the time being suspends or ceases or threatens
in writing to suspend or cease to carry on its business and, in
the case only of the Sub-Lessee, arrangements satisfactory to
the Lessor as mentioned in Clause 21.1(g)(y) above have not
been implemented within thirty (30) days; or
(i) any Indebtedness of any Primary Obligor or any Material
Subsidiary in an aggregate amount of at least twenty-five million
Dollars ($25,000,000) becomes due before its stated maturity by
reason of a breach or event of default (howsoever described), or
any Indebtedness of any Primary Obligor in an aggregate amount of
at least twenty five million Dollars ($25,000,000) is not
discharged at maturity or when called; or
(j) any representation or warranty made to the Lessor by any Primary
Obligor in any Lease Document (other than the Sub-Lease) or, in
each case, in any certificate, opinion or statement delivered or
made by any Primary Obligor (or any officer of such person in
each case) to the Lessor pursuant thereto proves to have been
incorrect or inaccurate when made or when deemed to be repeated
pursuant to the terms of the relevant Lease Document and the
incorrectness or inaccuracy (a) if, in the Lessor's reasonable
opinion, capable of remedy, has not been remedied within twenty
(20) Business Days of a notice from the Lessor to the Lessee
requiring such remedy and (b) gives rise to a material adverse
effect on the rights or interests of the Lessor under or
pursuant to this Agreement and the Lease Documents; or
(k) any Lease Document (excluding the Service Contract and the
Sub-Lease) does not or ceases to constitute the legal, valid,
binding and enforceable obligation in accordance with its terms
of each Security Party which is party to it by reason of any
breach of any Lease Document by a Primary Obligor or by
reason of any representation or warranty of any Primary Obligor
set out in any Lease Document (including each Payment Agreement
but excluding the Service Contract and the Sub-Lease) being
incorrect in a manner which gives rise to a material adverse
effect on the rights and interests of the Lessor under the Lease
Documents and, except in the case of the Guarantee, if the same
is in the Lessor's reasonable opinion capable of remedy, has not
been remedied within twenty (20) Business Days of a notice from
the Lessor to the Lessee requiring such remedy; or
(l) the Safety Inspector or any successor body having the supervisory
responsibility exercised as at the date of this Agreement by the
Safety Inspector gives notice or otherwise requires that the
operation of the Vessel (or any part thereof) be terminated or
varied in any material respect and either (i) such notice or
requirement is not complied with in all material respects or
(ii) if such notice or requirement relates to the termination of
the operation of the Vessel such notice or requirement is not
cancelled or withdrawn within sixty (60) days or such longer
period as the Lessor may agree; or
(m) the Guarantor disclaims, repudiates, challenges or contests the
validity of the Guarantee; or
(n) the Lessee fails to comply with any condition or requirement
imposed as contemplated by Clause 3.4 on the required date; or
(o) while the Vessel is subject to a Sub-Lease, the Sub-Lessee ceases
to satisfy the conditions set out in Clause 13.2.
21.2 Mandatory Termination
21.2.1 The Lessee acknowledges and agrees that the occurrence of any of the
events set out in Clause 21.2.2 (each a "Mandatory Event") shall entitle
the Lessor to serve a notice on the Lessee requiring the Lessee to serve
a notice of voluntary termination in accordance with Clause 21.5(D),
and the Lessee shall comply with any such requirement not later than ten
(10) Business Days after receipt of the notice from the Lessor:
21.2.2 Each of the following events is a Mandatory Event, namely if:
(a) any Additional Security Provider fails to make a payment under
any Additional Security and within fifteen (15) Houston Business
Days the Lessee has not provided the Lessor with alternative
Additional Security with the same Value;
or
(b) any Additional Security Provider fails to perform any other
obligation to the Lessor under any Additional Security and the
same has not been remedied to the satisfaction of the Lessor
within fifteen (15) Houston Business Days of a notice from the
Lessor to the Lessee requiring such remedy;
(c) an Insolvency Event (or any other event which, at the time of
giving the relevant Additional Security, the Lessee agreed
should constitute a Mandatory Event) shall occur in relation to
an Additional Security Provider and within fifteen (15) Houston
Business Days of a notice from the Lessor to the Lessee
requiring such remedy the Lessee shall not have replaced the
relevant Additional Security in a manner satisfactory in all
respects to the Lessor in accordance with the requirements of
Clause 22.3.1; or
(d) other than by reason of any breach of any Lease Document by a
Primary Obligor or by reason of any representation or warranty of
any Primary Obligor set out in any Lease Document being
incorrect, any Lease Document (including each Payment Agreement
but excluding the Service Contract and the Sub-Lease) does not
or ceases to constitute the legal, valid, binding and enforceable
obligations of each Security Party which is party to it in
accordance with its terms (in the case of enforceability,
subject to applicable laws relating to bankruptcy, insolvency or
liquidation or any other laws or legal procedures affecting
generally the enforcement of creditors' rights and the
applicable general principles of equity) and, except in the case
of the Guarantee, the same shall not have been remedied to the
satisfaction of the Lessor within a period of thirty (30) days of
a notice from the Lessor to the Lessee requiring such
remedy; or
(e) any permit or consent required for any reason in connection with
the transactions contemplated by the Lease Documents (excluding
the Sub-Lease and the Service Contract) by or for the Vessel or
by any Security Party shall cease to be in full force and effect
in any respect and, in the Lessor's opinion, such cessation has a
material adverse effect on the ability of any Security Party
to perform its obligations under the Lease Documents to which it
is party and the cessation shall not have been remedied within a
period of thirty (30) days of a notice from the Lessor to the
Lessee requiring such remedy; or
(f) prior to Delivery, any event occurs which entitles the Lessor to
terminate the Shipbuilding Contract or to serve a Put Notice
(as defined in the Put-Option Agreement) under the Put-Option
Agreement; or
(g) any Payment Bank gives notice pursuant to any of Clauses 5.1,
5.2 or 5.3 of the relevant Payment Agreement of its intention to
make a payment in accordance with Clause 5.7 of the relevant
Payment Agreement and satisfactory alternative arrangements
(as contemplated by Clause 5.6 of each Payment Agreement)
which are satisfactory to the Lessor in its sole discretion have
not been implemented; or
(h) any amount which any Payment Bank is (or would otherwise be)
required to pay to the Lessor under any Payment Agreement
(actually or contingently) is or will be reduced (after taking
account of the operation of Clause 4.4 of the relevant Payment
Agreement) by reason of a requirement for such Payment
Bank to make a deduction or withholding, and within the period of
consultation referred to in Clause 4.8 of the relevant Payment
Agreement alternative arrangements (as contemplated by
Clause 22.6.2) which are satisfactory to the Lessor in its
sole discretion have not been implemented;
(i) for any reason Delivery shall not have taken place by 11.00 a.m.
London time on 31st December 2000 (whether by reason of the
non-fulfilment of any of the conditions precedent referred to in
Clauses 3.2 or 3.3 or otherwise); or
(j) if during the term of any Sub-Lease the condition set out in
Clause 13.2(i) shall cease to be fulfilled unless at such time
and at all times thereafter there is no Sub-Lease and the Vessel
is in the possession of the Lessee and (b) at all times
the requirements of Clause 11.7(c) are fully complied with.
21.3 Termination of the Sub-Lease and Compulsory Acquisition
The leasing of the Vessel (or, prior to Delivery, the obligation of the
Lessor to lease the Vessel to the Lessee) under this Agreement shall
immediately terminate without the need for any notice or declaration or
other act on the part of any party:
(i) if at any time the requirements of Clause 11.7(c) shall cease to
be complied with whether by reason of the Compulsory Acquisition
of the Vessel or otherwise, or
(ii) if for any reason (other than as a result of a Total Loss, in
which case Clause 10 (Total Loss) shall apply, or after the end
of the requisite period as defined in Section 40 CAA 1990) the
sub-leasing of the Vessel (or, prior to delivery thereof to
the Lessee, the obligation of the Lessee to sub-lease the Vessel
to the Sub-Lessee) under the Sub-Lease shall terminate, any such
termination hereunder to be simultaneous with the termination of
the leasing under the Sub-Lease, provided that the leasing of the
Vessel under this Agreement shall not terminate pursuant to this
paragraph if, simultaneously with the termination of the leasing
under the Sub-Lease, the Vessel becomes subject to a replacement
Sub-Lease complying in all respects with Clause 13, such that at
all times the requirements of Clause 11.7(c) are fully complied
with.
The Lessee shall promptly notify the Lessor in writing of any such
termination.
21.4 Termination by Lessor
The Lessee acknowledges and agrees that the occurrence of a Termination
Event shall go to the root of this Agreement and accordingly shall be a
breach of a condition which the Lessor shall be entitled to treat as a
repudiation by the Lessee of this Agreement and the Lessor shall be
entitled to give a notice (a "Termination Notice") to the Lessee to
terminate forthwith the leasing of the Vessel and the Lessor's consent
to the Lessee's possession of the Vessel and, if Delivery has not
occurred, to terminate the obligation of the Lessor to take delivery of
and lease the Vessel to the Lessee.
21.5 Voluntary termination by Lessee
(A) The Lessee may, upon giving the Lessor the relevant period of
written notice specified in paragraphs (B), (C), (D) and (E)
below (each a "Voluntary Termination Notice") terminate the
leasing of the Vessel or, as the case may be, the Lessor's
obligation to lease the Vessel (without prejudice to any
continuing obligations on the part of the Lessee including,
without limitation, its indemnity obligations pursuant to this
Agreement). Any Voluntary Termination Notice shall be irrevocable.
(B) Where the Lessee has been so required by the Lessor under Clause
6.3, the Lessee shall serve a Voluntary Termination Notice within
the required time period in accordance with the requirements of
Clause 6.3 and any notice served by the Lessee thereunder shall
expire on a date specified by the Lessee, being not later than
the first Business Day in January 2013 and not earlier than one
month after the date of the notice.
(C) Any Voluntary Termination Notice (other than one served pursuant
to Clause 6.3 or Clause 22.2(ii)) shall specify a date for
termination, being a Rent Payment Date falling not later than
forty-five (45) Business Days after the date of the notice.
(D) Where the Lessee has been so required by the Lessor under Clause
21.2, the Lessee shall serve a Voluntary Termination Notice
within the required time period in accordance with the
requirements of Clause 21.2 and any notice served by the Lessee
thereunder shall expire on a date specified by the Lessee,
being not later than five (5) Houston Business Days after the
last date on which the notice is required to be given (or, if
earlier, in the case of a notice served pursuant to Clause
21.2(c) or (d), the Houston Business Day prior to the date on
which the relevant Lease Document will cease to be legal, valid
or binding or, as the case may be, on which the permit or consent
will cease to be in full force and effect).
(E) Where the Lessee has elected to do so pursuant to Clause 22.2(ii),
the Lessee shall serve a Voluntary Termination Notice within the
fifteen (15) Business Day period referred to in that Clause, and
any notice served by the Lessee thereunder shall expire on a date
specified by the Lessee, being not later than ten (10) Houston
Business Days after the date of the notice.
21.6 Payments on termination
(a) On the Termination Payment Date the Lessee shall pay to the
Lessor an amount equal to the Termination Payment, calculated as
at the Termination Payment Date.
(b) For the avoidance of doubt, the Lessee shall continue to be
liable to the Lessor to pay all other sums due or to become due
under the Lease Documents (including, without limitation, Broken
Funding Costs) as and when the same become due and payable in
accordance with the Lease Documents.
(c) The payment required from the Lessee pursuant to Clause 21.6(a)
shall, in the case of a notice given by the Lessor pursuant to
the occurrence of a Termination Event set out in Clause 21.1, be
by way of agreed compensation for loss of bargain and, in all
other cases, shall be by way of a liquidated sum or debt.
Such payment shall be the exclusive monetary compensation payable
by the Lessee to the Lessor as a direct consequence of the
termination of the leasing of the Vessel but shall be without
prejudice to:
(i) the Lessor's right to recover damages from the Lessee in
an amount up to (but not exceeding) the Termination
Payment in circumstances where the obligation of the
Lessee to pay the Termination Payment is unenforceable
(in whole or in part) for any reason; and
(ii) the Lessor's right to recover payments from the Lessee
pursuant to any provisions of this Agreement and the
Financial Schedule which expressly provide for the Lessee
to make payments to the Lessor (other than the
Termination Payment), whether on, before or after the
Termination Date.
(d) This Clause 21.6 is, for the avoidance of doubt, expressly
subject to the provisions of Clause 22.5.
21.7 Other obligations and liabilities
If the leasing of the Vessel or, as the case may be, the right of the
Lessee to take the Vessel on lease, is terminated (otherwise than
following a Total Loss, in which case Clause 10.1 (Total Loss) shall
apply), the obligation of the Lessee to pay Primary Period Rent or
Secondary Period Rent which would otherwise have fallen due on any Rent
Payment Dates which fall on or after the Termination Payment Date shall
cease but without prejudice to the obligations of the Lessee to make
payment of any other moneys then due and unpaid, or which may become
due or be ascertained thereafter (including under the Financial
Schedule and whether by way of additional Rent or otherwise), or to
perform any of its other obligations, under any other provisions of this
Agreement or the other Lease Documents.
21.8 Rights of the Lessor
The Lessor shall on and at any time following the Termination Date be
entitled to take any one or more of the following courses of action:
(i) proceed by appropriate court action or actions to enforce its
rights and remedies under and pursuant to this Agreement and the
other Lease Documents;
(ii) take possession of the Vessel, for which purpose the Lessor may
enter any premises belonging to or in the occupation of or under
the control of the Lessee or the Sub-Lessee where the Vessel may
be located;
(iii) cause the Vessel to be redelivered to the Lessor at the
Redelivery Location; and
(iv) by serving notice require the Lessee to redeliver the Vessel to
the Lessor at the Redelivery Location.
For the avoidance of doubt, the Lessor shall not be obliged to take
possession of the Vessel following a termination of the leasing of the
Vessel under this Agreement.
21.9 Payments after termination
The Lessee shall, on the dates ascertained in accordance with the
Financial Schedule (or, if no such date is specified, upon written
demand by the Lessor), pay all amounts calculated and due to the Lessor
under the Financial Schedule and expressed to fall due after the Lease
Period.
22. SECURITY; EXCLUDED OBLIGATIONS
22.1 The Guarantee
The Lessor shall at all times during the Lease Period and for so long
thereafter as the Lessee may have any actual or contingent obligations
or liabilities to the Lessor hereunder or under any of the other Lease
Documents have the benefit of the Guarantee from the Guarantor.
22.2 Guarantor Credit Event and LLA Event Occurrence
22.2.1 If a Guarantor Credit Event or an LLA Event shall occur, the Lessee
shall promptly notify the Lessor of such occurrence and shall within
fifteen (15) Houston Business Days of the date upon which such Guarantor
Credit Event or, as the case may be, LLA Event shall have occurred,
either (i) provide Additional Security to the Lessor in accordance with
the provisions of Clause 22.3 or (ii) make an irrevocable election, by
written notice to the Lessor, to terminate the leasing of the Vessel in
accordance with Clause 21.5(E).
22.2.2 If at any time either of S&P or Moody's ceases to publish ratings in
respect of companies generally, the Lessor will, without commitment,
consult with the Lessee and give consideration to nominating an
alternative internationally recognised credit rating organisation, and
an equivalent alternative ratings trigger, to apply for the purpose of
the definition of "Guarantor Credit Event" in Clause 1.1 and with a view
to agreeing with the Lessee appropriate amendments to such definition.
22.3 Provision of Security following Guarantor Credit Events or LLA Event
22.3.1 If a Guarantor Credit Event or an LLA Event shall occur, then, unless
the Lessee has made an election in accordance with Clause 22.2(ii), the
Lessee shall provide Additional Security acceptable to the Lessor in its
sole discretion, in addition to the Guarantee and the Payment Agreements,
of a Value not less than the Maximum Exposure for the then current
Relevant Period and shall thereafter be obliged to maintain Additional
Security of a Value at least equal to the Maximum Exposure for each
successive Relevant Period. Such Additional Security shall initially be
provided within 15 (fifteen) Houston Business Days of the date upon
which a Guarantor Credit Event or, as the case may be, LLA Event first
occurs and shall be adjusted by, as appropriate, the provision of
further Additional Security by the Lessee to the Lessor (acceptable to
the Lessor in its sole discretion) to reflect any increase in the amount
of Maximum Exposure no later than 10 (ten) Houston Business Days prior
to the commencement of each successive Relevant Period or by the
release by the Lessor, so far as reasonably practical, of Security
provided pursuant to this Clause 22.3, to reflect any decrease in the
amount of Maximum Exposure no later than ten (10) Business Days after
the commencement of each Relevant Period.
22.3.2 If Clause 22.3.1 applies in relation to any Relevant Period and on the
Adjustment Date therefor any amount would otherwise be payable by the
Lessor to the Lessee pursuant to this Agreement (other than under Clause
10.2 or Clause 10.4), the obligation of the Lessor to pay such amount
shall be conditional upon the Lessee first having complied with its
obligations under Clause 22.3.1 with respect to the Relevant Period
ending on such Adjustment Date.
22.3.3 If at any time a Guarantor Credit Event or an LLA Event shall have
occurred and be continuing, the Lessee shall thenceforth procure that
no later than 31st December in each year during the Primary Period,
there is provided to the Lessor a desktop valuation of the Vessel in
Dollars, prepared by an independent valuer of international standing
with respect to vessels of similar type to the Vessel, and prepared on
the basis (a) that the Vessel is free of the leases under this Agreement
and the Sub-Lease and free of any Lessor's Vessel Liens but otherwise
subject to any subsisting Vessel Liens and (b) of a sale between a
willing buyer and a willing seller. If the Lessee shall fail to procure
the delivery of such a valuation by 31st December in any year, the
Lessor shall be entitled to do so at the Lessee's expense. At any date
the "Appraised Value" of the Vessel shall be the Sterling Equivalent
as at such date of the Dollar value of the Vessel as shown in the
valuation most recently prepared under this Clause.
22.3.4 Where Clause 22.3.3 applies, the Lessee shall be obliged to provide the
first valuation without any need for a request from the Lessor, but
thereafter shall be obliged to provide valuations only following receipt
of a request from the Lessor.
22.3.5 If at any time after the occurrence of a Guarantor Credit Event such
Guarantor Credit Event shall no longer be continuing, the Lessor shall,
at the request and expense of the Lessee, take such actions as may be
necessary in order to release any Additional Security which has then
been provided to the Lessor pursuant to this Clause 22.3.
22.4 Payment Agreements
22.4.1 The Lessor shall at all times during the Lease Period and for so long
thereafter as the Termination Sum or any part thereof shall remain due
and payable hereunder have the benefit of security which shall take the
form of the Payment Agreements. The Value of such security shall, on
any date on which an Instalment is payable by the Lessor under the
Shipbuilding Contract and the Novation Agreement (other than the final
Instalment), be not less than the aggregate of such Instalment and all
previous such Instalments previously paid by the Lessor under the
Shipbuilding Contract and the Novation Agreement. The Value of such
Security shall thereafter be in accordance with the requirements of
Clause 22.4.2.
22.4.2 The Lessee shall procure that on or prior to the date for payment by the
Lessor of the final Instalment under the Shipbuilding Contract and the
Novation Agreement, the Lessor receives evidence from each Payment Bank
that all necessary notices have been given, and all necessary payments
have been made to the Payment Banks, such that the Payment Banks have
become unconditionally liable under the Payment Agreements:
(i) (on the assumption that for the purposes of the Payment Agreements
LIBOR will at all times be equal to eight per cent. (8%)), to
pay, on each Rent Payment Date up to and including the thirteenth
Rent Payment Date, an aggregate amount pursuant to Clause 4.1 of
each of the Payment Agreements not less than the Rent which will
be payable on such Rent Payment Date as shown in the Revised
Cash Flow produced by the Lessor immediately prior to the Delivery
Date; and
(ii) (on the assumptions that (1) for the purposes of the Payment
Agreements LIBOR will at all times be equal to eight per cent.
(8%) and (2) the Lessor will make a demand on each Payment Bank
pursuant to Clause 5.4 of the relevant Payment Agreement
requiring it to make a payment under Clause 5.7 thereof the first
Business Day in January 2013) to pay, on the first Business Day
in January 2013, an aggregate amount which is not less than the
Termination Payment calculated in accordance with Part 4 of the
Financial Schedule for such date, as shown in a Termination Cash
Flow produced by the Lessor immediately prior to the Delivery
Date.
22.5 Excluded Obligations
22.5.1 The parties hereto agree that, the Lessee shall have no obligation to
make payment to the Lessor, and accordingly the Lessor shall have no
right of recourse against the Lessee or its assets and the Lessee
shall have no personal liability:
(a) in respect of each instalment of Primary Period Rent, to the
extent (the "Rent Limit") of the aggregate amount which the
Payment Banks are expressed to be obliged to pay to the Lessor
pursuant to Clause 4.1 of the Payment Agreements to the Lessor
on the due date for payment of such instalment, to the extent
that such aggregate amount does not constitute a Restricted
Amount;
(b) in respect of the Termination Payment (where it falls due for
payment after Delivery), to the extent (the "Termination Payment
Limit") of the aggregate amount which the Payment Banks are
expressed to be obliged to pay to the Lessor pursuant to Clause
5.7 of the Payment Agreements to the Lessor on the due date for
payment of the Termination Payment, to the extent that such
aggregate amount does not constitute a Restricted Amount; and
(c) in respect of the Termination Payment (where it falls due for
payment on or prior to Delivery), to the extent (the
"Termination Payment Limit") of the balance (if any) remaining
after deducting (1) the amount (if any) falling due
for payment by the Option Party to the Lessor under Clause 5.1
of the Put-Option Agreement on the Termination Payment Date from
(2) the aggregate amount which the Payment Banks are expressed to
be obliged to pay to the Lessor pursuant to Clause 5.7 of the
Payment Agreements to the Lessor on the due date for payment of
the Termination Payment, to the extent that such aggregate
amount does not constitute a Restricted Amount.
22.5.2 Retained Obligations
Save insofar as the Lessor has expressly agreed to release the Lessee's
obligations and the Lessor's rights of recourse against the Lessee under
Clause 22.5.1, the Lessee shall remain fully liable and the Lessor shall
have full recourse against the Lessee and its assets, and the
Lessee shall be personally liable, for all of the obligations of the
Lessee expressed to arise under the Lease Documents (but without
prejudice to Clause 28.2). Accordingly and without limiting the
generality of the foregoing, to the extent that the amount of any
instalment of Primary Period Rent exceeds the Rent Limit for that
instalment or the amount of any Termination Rent exceeds the Termination
Payment Limit, and to the extent that any amount received by the Lessor
from a Payment Bank is required to be repaid by the Lessor as a result
of such amount constituting a Restricted Amount, the Lessee shall be
obliged to make payment of the relevant excess, or as the case may be,
the amount required to be repaid, in full and the Lessor shall have
full recourse to the Lessee and to its assets, and the Lessee shall be
personally liable, to the extent that such payment is not made.
22.5.3 Excess Payments under Payment Agreements
(a) If on any Rent Payment Date the aggregate amount payable to the
Lessor by the Payment Banks under Clause 4.1 of the Payment
Agreements (less any parts thereof which constitute Restricted
Amounts) exceeds the aggregate amount due and payable by the
Lessee to the Lessor under this Agreement on that date
(disregarding for this purpose the operation of Clause 22.5.1),
the Lessor, shall, within five (5) Business Days of such Rent
Payment Date, pay to the Lessee, by way of rebate of Rent, an
amount equal to the excess.
(b) If on the Termination Payment Date the aggregate amount payable
to the Lessor from the Payment Banks under Clause 5.7 of the
Payment Agreements (less any parts thereof which constitute
Restricted Amounts and after deducting the amount (if any)
falling due for payment by the Option Party to the Lessor
under Clause 5.1 of the Put-Option Agreement) exceeds the
aggregate amount due and payable by the Lessee to the Lessor
under this Agreement on that date (disregarding for this purpose
the operation of Clause 22.5.1), the Lessor, shall, within five
(5) Business Days of such date, pay to the Lessee, by way of
rebate of Rent, an amount equal to the excess.
(c) The Lessor agrees to pay to the Lessee an amount equal to each
amount payable to the Lessor by any Payment Bank under Clause 4.6
of the relevant Payment Agreement within (less any parts thereof
which constitute Restricted Amounts) five (5) Business Days of
the due date for payment thereof.
(d) Any payment under this Clause 22.5.3 shall be subject to the
provisions of Clause 25.7 and Clause 28.1.
22.6 Claims under the Payment Agreements
22.6.1 If any Payment Bank gives notice pursuant to any of Clauses 5.1, 5.2 or
5.3(b) of the relevant Payment Agreement giving details of any of the
events or circumstances referred to therein, the Lessor and the Lessee
shall consult with each other for a period not exceeding 60 days (or 30
days in the case of Clause 5.3(b) thereof) with a view to agreeing
on alternative arrangements (as contemplated by Clause 5.6 of each
Payment Agreement) which are satisfactory to both the Lessor and the
Lessee. The Lessor agrees that it will not serve a notice on any
Payment Bank under Clause 5.6 of any Payment Agreement without
the Lessee's prior written consent.
22.6.2 If any amount which any Payment Bank is (or would otherwise be) required
to pay to the Lessor under any Payment Agreement (actually or
contingently) is or will be reduced (after taking account of the
operation of Clause 4.4 of the relevant Payment Agreement) by reason of
a requirement for that Payment Bank to make a deduction or withholding,
the Lessor and the Lessee shall consult with each other for a period not
exceeding the period referred to in Clause 4.8 of the relevant Payment
Agreement with a view to agreeing on alternative arrangements for
providing alternative security to the Lessor in a manner satisfactory to
the Lessor in its sole discretion. If such alternative arrangements
have not been agreed by the Lessor within such period, the Lessor shall
be at liberty to serve notice under Clause 5.4 of any of the Payment
Agreements and/or to treat such circumstance as a Mandatory Event within
Clause 21.2.2(h).
22.6.3 The Lessor shall be at liberty to serve any notice under Clause 5 of the
Payment Agreement at any time when the Termination Payment has become
due for payment (whether immediately or on a determinable date in the
future).
22.6.4 The Lessor shall be at liberty to serve any notice under Clause 5 of any
of the Payment Agreements at any time upon the occurrence of an
Insolvency Event in relation to the relevant Payment Bank. No
Insolvency Event in relation to any Payment Bank shall of itself
constitute a Termination Event under this Agreement or a breach or
default on the part of the Lessee hereunder.
22.6.5 The Lessor agrees that, other than as permitted in this Clause 22.6,
the Lessor shall not serve any notice under Clause 5.4 of any of the
Payment Agreements without the prior written consent of the Lessee.
The Lessee agrees that the Lessor's undertakings in this Clause 22.6
may be enforced only in damages and may not be enforced by specific
performance or injunction and the Lessee agrees not to seek to assert
any remedy in respect of such undertakings other than a claim in damages.
23. CHANGE OF CIRCUMSTANCES ETC.
23.1 Change of circumstances
This Clause 23.1 applies if at any time the Lessor shall be of the
opinion that the effect of a Change in Law including, without limitation,
any such change that relates to the application or modification of any
reserve, deposit, cash ratio, liquidity or similar requirement or to
capital adequacy or that affects the manner in which or the extent to
which the Lessor or any Relevant Member allocates capital resources to
its obligations or to any other form of banking or monetary controls) is
that:
(a) the Lessor or a Relevant Member incurs a cost or an additional
cost as a result of the Lessor having entered into or assuming,
performing, maintaining or funding its obligations under or
pursuant to any of this Agreement or the other Lease Documents; or
(b) the Lessor or a Relevant Member incurs a cost or an additional
cost in making payment of, funding or maintaining all or any
amounts of Balance, or all or any commitments or obligations
under or pursuant to any of this Agreement or the other Lease
Documents; or
(c) any amount payable to the Lessor or a Relevant Member or the
effective return to the Lessor or a Relevant Member under or
pursuant to any of this Agreement or the other Lease Documents or
on all or any of its capital is reduced; or
(d) the Lessor or a Relevant Member makes any payment or foregoes any
interest or other return on or calculated by reference to any
amount received or receivable by it under or pursuant to any of
this Agreement or the other Lease Documents.
23.2 Demands by Lessor
If Clause 23.1 applies, then the Lessor may serve one or more demands on
the Lessee, notifying the Lessee of the relevant event as and when the
same shall occur and reasonable details of the basis of the calculation
of the amount referred to in Clause 23.3 provided that the Lessor shall
not be entitled to serve any demand in respect of a Change in Law which
arises as a consequence of (or of any law or regulation implementing)
directive 93/6/EEC, as amended by directives 98/31/EEC and 98/33/EEC or
any other proposals for international convergence of capital measurement
and capital standards published by the Basle Committee on Banking
Regulations and Supervisory Practices in July 1988 unless it
results from any change in such directives or proposals (or any law or
regulation implementing the same) occurring or change in the official
interpretation or application thereof after 10th September 1998.
23.3 Payment by the Lessee
Promptly following the service of any demand, the Lessee shall pay to
the Lessor such amount as the Lessor determines and certifies in the
demand will compensate it or a Relevant Member for the applicable
increased cost and in relation to the period expressed to be covered
by such demand.
23.4 Meaning of "increased cost"
In this Clause 23 "increased cost" means the aggregate of:
(a) the cost or additional cost incurred referred to in Clause 23.1
(a); and/or
(b) the cost or additional cost incurred referred to in Clause 23.1
(b) that is attributable to the Lessor or the relevant member of
the Lessor's Group in making payment of, funding or maintaining
all or any amounts of Balance, or all or any commitments or
obligations under or pursuant to any of this Agreement or the
other Lease Documents; and/or
(c) the reduction in the amount payable or in the return referred to
in Clause 23.1 (c); and/or
(d) the payment or foregone interest or return referred to in Clause
23.1(d) as appropriate;
PROVIDED THAT an increased cost does not include:
(i) any increased cost compensated for by the payment of
Associated Costs;
(ii) any Tax Liability; and
(iii) any Risk Asset Weighting.
23.5 Method of calculation
When calculating an increased cost, the Lessor may allocate or spread
costs, liabilities and losses to or across the liabilities or assets of
itself or members of the Lessor's Group, or any class of such
liabilities or assets, and on such basis, as it considers appropriate,
provided that the Lessor shall allocate or spread costs, liabilities and
losses which affect a class of transactions including the transaction
constituted by the Lease Documents on a proportionate basis as among the
transactions in that class. A certificate under hand of an officer of
the Lessor specifying the amount of such compensation shall in the
absence of manifest error be conclusive. Nothing contained in this
Clause shall oblige the Lessor to disclose any information relating to
the way in which it and members of the Lessor's Group employ their
capital or arrange their internal financial affairs.
24. GENERAL INDEMNITY
24.1 General indemnity
(a) The Lessee hereby agrees at all times to pay promptly or, as the
case may be, indemnify and hold the Lessor and each member of
the Lessor's Group and their respective officers, directors,
secondees, agents and employees (together the "Indemnified
Persons") harmless on a full indemnity basis from and against
each and every liability, loss, charge, claim, demand, action,
proceeding, damage, judgment, order or other sanction,
enforcement, penalty, fine, fee, commission, interest, Vessel
Liens, salvage, general average cost and expense of whatsoever
nature suffered or incurred by or imposed on any Indemnified
Person, including Costs of Management Time (together "Losses"):
(i) arising directly or indirectly out of or in any way
connected with the purchase, manufacture, ownership,
possession, performance, transportation, management, sale,
import to or export from any jurisdiction, control, use
or operation, registration, navigation, certification,
classification, management, manning, provisioning, the
provision of bunkers and lubricating oils, testing,
design, condition, delivery to or by the Lessor,
acceptance, leasing, sub-leasing, insurance,
maintenance, repair, drydocking, service, modification,
refurbishment, survey, conversion, overhaul, replacement,
removal, repossession, return, redelivery, sale or
disposal by the Lessee or any other person of the Vessel,
or otherwise in connection with the Vessel including,
without prejudice to the generality of the foregoing,
any Losses arising from any pollution or other
environmental damage caused by or emanating from the
Vessel or caused by the Vessel becoming a wreck or an
obstruction to navigation, whether or not any such
Liability may be attributable to any defect in the Vessel
or to the design, construction or use thereof or from any
maintenance, service, repair, overhaul, inspection or to
any other reason whatsoever (whether similar to any of the
foregoing or not), and regardless of when the same shall
arise (whether prior to, during or after termination of
the leasing of the Vessel under this Agreement) and
whether or not the Vessel (or any part thereof) is in the
possession or control of the Lessee or the Sub-Lessee or
any other person and whether or not the same is in the
United Kingdom waters or abroad;
(ii) as a consequence of any claim that any design, article or
material in the Vessel or any part thereof or relating
thereto or the operation or use thereof constitutes an
infringement of patent, copyright, design or other
proprietary right;
(iii) in preventing or attempting to prevent the arrest,
seizure, taking in execution, requisition, impounding,
forfeiture or detention of the Vessel or in securing or
attempting to secure the release of the Vessel (but
excluding, in a case where Clause 12.15 applies, any
Losses incurred prior to the thirty day period mentioned
in such clause, unless it was reasonable to have incurred
such Losses);
(iv) as a consequence (direct or indirect) of the breach by any
Primary Obligor of any of their respective obligations to
the Lessor under any of the Lease Documents or of any of
the warranties and representations on the part of any
Primary Obligor made in this Agreement or in any of the
other Lease Documents being untrue or inaccurate in any
respect whatsoever when made;
(v) any costs and expenses incurred by the Lessor in
connection with the sale or Total Loss of the Vessel
(including, without limitation, broker's commissions,
redelivery costs (if any), marketing expenses,
legal costs, storage, insurance, registration fees and
any other expenses of the Lessor incurred pending the
sale or disposal of the Vessel or otherwise in connection
with the sale or disposal of the Vessel), in each case
unless incurred by reason of a contravention by the
Lessor of Clause 19;
(vi) any costs, expenses, damages, liabilities, penalties,
fees and other outgoing expended, incurred or suffered by
the relevant Indemnified Person in connection with:
(A) the arrest, seizure, taking into custody or other
detention by any court or other tribunal or by any
Government Entity (other than by reason of a
Lessor's Vessel Lien); or
(B) the subjection to distress by reason of any
process, claim, the exercise of any rights
conferred by a Vessel Lien (other than Lessor's
Vessel Liens) or by any other action whatsoever,
of any vessel owned or leased by any member of the
Lessor's Group, which are expended, suffered or incurred
as a result of or in connection with any claim or alleged
claim against, or liability or alleged liability of, any
member of the Guarantor's Group together with any costs
and expenses or other outgoings which may be paid or
incurred by any member of the Lessor's Group in releasing
such vessel from any such arrest, seizure, custody,
detention or distress, which shall be deemed to include,
in the event that such release is secured by the provision
by any member of the Lessor's Group of any guarantee or
bond or other security (including a cash deposit):
(1) any fee paid to any third party for the issue of
any such guarantee or bond; or
(2) if such guarantee or bond is issued by a member of
the Lessor's Group, an amount equal to the fee
which the Lessor certifies would have been charged
by such member of the Lessor's Group to the Lessee
had the Lessee requested the issue in favour of a
third party of a guarantee or bond in an equivalent
maximum principal amount of the same currency; or
(3) in the case of a cash deposit, interest on the
amount of such deposit (less any interest actually
received by the Lessor thereon, but after adding
back the amount of any Tax Liability in respect of
such interest) for the period from (and including)
the date on which such deposit is provided to
(but excluding) the earlier of (a) the date
upon which the Lessee either pays to the Lessor or,
as the Lessor may require, ensures that there is
credited to an account with the Bank and charged in
favour of the Lessor upon terms acceptable to the
Lessor an amount equal to such deposit in
substitution or security therefor and (b) the date
of the release of such deposit at the rate per
annum which is the aggregate of the cost to the
Lessor or the applicable Relevant Member of funding
such deposit in the relevant currency plus one
point five per cent. (1.5%); or
(4) in the case of any other security, the cost to the
Lessor or the applicable Relevant Member in
providing such security;
(vii) if the Vessel becomes a wreck or obstruction to
navigation, against all losses, costs, damages and
expenses which such Indemnified Person may in consequence
thereof incur, including in respect of the removal or
destruction of the wreck or obstruction under statutory or
other powers,
other than a Tax Liability or any amount in respect of which the
Indemnified Person is entitled to be indemnified pursuant to
Clause 26.1 (General Tax indemnity) or would, but for an
exception contained in Clause 26.2 (Restriction on General Tax
indemnity), be so indemnified (each of the above other than a
Tax Liability being referred to as a "Liability").
(b) Without prejudice to the generality of the provisions of Clause
24.1(a), Clause 24.1 (a) shall extend to claims of persons
(including governments or other bodies whether corporate or
otherwise) who have incurred expenditure in taking preventative
measures against loss or damage or have suffered or allege
that they have suffered loss, damage or injury in connection
with anything done or omitted to be done by any person in
relation to, in respect of, or in connection with, the Vessel,
including in connection with any oil or other substance
emanating or threatening to emanate from the Vessel and shall
extend to levies, impositions, calls or contributions on, or
required to be made by, the Lessor during or in respect of the
period commencing on the date hereof and terminating on a sale
of the Vessel following the termination or expiration
of the leasing of the Vessel hereunder.
(c) The indemnities contained in Clause 24.1(a) shall extend to
include:
(i) the Sterling cost (including fees and commissions) to
the Indemnified Person in acquiring any currency (other
than Sterling) with Sterling in order to satisfy or
discharge in a currency other than Sterling any Liability;
(ii) all costs of interest, fees and other amounts whatsoever
suffered or incurred by any Indemnified Person in order to
fund the satisfaction or discharge of any Liability; and
(iii) each Loss suffered or incurred by the Lessor in satisfying
or discharging, or indemnifying any Indemnified Person
(other than itself) against, any Liability, or any matter
referred to in (i) or (ii) above, whether or not such
Liability is suffered or incurred by the Lessor under
any formal or informal arrangement, and whether or
not any such formal or informal arrangement existed at the
time the Liability was suffered or incurred by such
Indemnified Person.
24.2 Exclusions from general indemnity
The indemnities contained in Clauses 24.1(a) and 24.1(b) shall not
extend to any Liability:
(a) to the extent that such Liability is caused by any act of an
Indemnified Person which constitutes the wilful or reckless
misconduct of such Indemnified Person;
(b) to the extent that such Liability is caused by any failure on
the part of the Lessor to comply with any of its express and
specific obligations under any of the Lease Documents to which
the Lessor is party;
(c) to the extent that such Liability constitutes the Lessor's Cost
or any part thereof;
(d) to the extent that such Liability constitutes a cost which is
expressly to be borne by the Lessor under any other provision of
this Agreement or the Novation Agreement and which the Lessee
establishes was not intended to be within the scope of the
indemnities granted in favour of the Lessor or any other member
of the Lessor's Group in any Lease Document; or
(e) to the extent that such Liability is solely caused by a failure
by any Payment Bank to comply with any of its obligations under
the relevant Payment Agreement to which it is party, excluding
any part thereof constituting a Restricted Amount; or
(f) to pay any survey costs which are expressed to be payable by the
Lessor in this Agreement.
24.3 Notification of indemnity claims
Without prejudice to the provisions of this Clause 24 and without
limiting in any way whatsoever, or being a condition precedent or
subsequent to, the indemnities in favour of any Indemnified Person
hereunder or prompt payment thereunder, the Lessor shall:
(a) notify the Lessee in writing as soon as practicable after receipt
by the Lessor of notice of a Liability (provided such notice is
in writing). Such notification to the Lessee from the Lessor
shall give such details as the Lessor then has and which are in
all the circumstances reasonable having regard to the contents of
the notice of a Liability received by the Lessor; and
(b) where reasonably practicable notify the Lessee of the Lessor's
intention to pay or procure the payment of any moneys in respect
of any such Liability before any such payment is made, provided
that interest on any moneys payable to the Lessor or any
Indemnified Person under Clause 24.1 in respect of such
Liability shall only accrue at LIBOR (or, in relation to any
currency other than Sterling, the Lessor's funding cost in that
other currency) from the date on which the Lessor or that
Indemnified Person incurs that Liability, until such time as the
Lessor notifies the Lessee of that Liability, after which
interest will accrue at the Default Rate until reimbursed in
full under Clause 24.1.
24.4 Defence of Claims
Without prejudice to the provisions of this Clause 24, the Lessee shall
(subject to having first obtained the consent of the relevant insurers,
if any, and complying in all respects with its obligations under this
Agreement) be entitled to take (at its own cost) such actions as the
Lessee reasonably deems fit to defend or avoid any liability arising in
respect of a liability or to take such action in the name of the Lessor,
provided that the Lessee's ability to take action in the name of the
Lessor shall be subject to:
(a) the Lessor first being indemnified and secured to its reasonable
satisfaction against all losses, costs, damages and expenses
incurred and from time to time reasonably anticipated to be
incurred in connection therewith;
(b) the ability of the Lessee to commence court proceedings in the
name of the Lessor, or to instigate a counterclaim in the name
of the Lessor, shall be subject to the prior written consent of
the Lessor (which consent the Lessor shall be at full liberty
to withhold);
(c) if court proceedings have been commenced by a third party
against the Lessor as defendant or if, pursuant to sub-clause
(b) above, the Lessor gives its consent to the use of its name
in court proceedings (whether by way of claim or counterclaim),
the Lessor shall permit the Lessee to have the full conduct of the
court proceedings, or to instigate a counterclaim in the name of
the Lessor, but the Lessee shall (i) consult with the Lessor and
keep the Lessor fully informed in relation to their conduct and
have due regard to the wishes of the Lessor in relation to the
conduct of such court proceedings acknowledging the interest of
the Lessor and each member of the Lessor Group in preserving the
Lessor's and the Lessor Group's reputation as financial
institutions and their respective business interests and customer
relations and (ii) give timely notice to the Lessor of any
meetings with Counsel or attendance at court, and the Lessor
shall be entitled to attend any such meetings or court
attendances;
(d) in relation to all other matters, the Lessee shall keep the
Lessor fully informed and have due regard to the wishes of the
Lessor in relation to the use of the Lessor's name acknowledging
the Lessor's interest in preserving the Lessor's and each member
of the Lessor's Group's reputation as financial institutions
and their respective business interests and customer relations;
and
(e) notwithstanding sub-paragraph (c) above, the Lessor may at any
time notify the Lessee that the Lessor is of the opinion that the
continuance of such proceedings by the Lessee in the name of the
Lessor is contrary to the Lessor's or any member of the Lessor
Group's reputation as financial institutions or the business
interests or customer relations of any of them. A certificate
signed by a director of the Lessor shall be conclusive as to the
correctness of such opinion. If the Lessor so notifies the
Lessee, the Lessee shall forthwith cease to be entitled to
conduct the court proceedings in the name of the Lessor, and the
Lessor shall be at liberty to conduct, settle or discontinue
such proceedings as it sees fit.
24.5 Recoveries from third parties
If any Indemnified Person shall recover from or be paid by, any person
(other than the Lessee, the Guarantor or the Sub-Lessee) any amount
(other than under Clause 26) in respect of any payments paid or
discharged by the Lessee in accordance with this Clause 25, then
provided that the Lessor has received payment of such amount and is
satisfied that such amount is unconditionally available for retention
by the Lessor, the Lessor shall pay to the Lessee a sum equal to the
value of such recovered or paid amount together with any interest
actually earned on such recovered or paid amount (less the amount of any
Tax Liability thereon), such payment by the Lessor to be subject always
to the provisions of Clause 25.5.
24.6 Other indemnities
Each of the indemnities contained in this Clause 24 or otherwise
contained in this Agreement or in any other of the Lease Documents is
in addition to, and not in substitution for, and shall not be affected
or prejudiced by, any other security, guarantee or indemnity (including
the other indemnities aforesaid) now or hereafter held by the Lessor.
24.7 Pass through of indemnity benefits
Where in this Clause 24 or in Clause 25 below an indemnity is expressed
to be for the benefit of any person who is not a party to this Agreement
the Lessor shall be entitled to indemnify such person on the same terms
(and subject in particular to Clause 25.4) mutatis mutandis as the
indemnities expressed to be for the benefit of such person in this Clause
25 and the Lessee shall indemnify the Lessor and hold the Lessor
harmless on a full indemnity basis from and against each amount paid or
payable by the Lessor to such person under any such indemnity. Any
insurance effected by the Lessor shall not be brought into account in
relation to any claim under any indemnity in favour of the Lessor
or any other Indemnified Person under this Agreement.
24.8 Waiver of rights
The Lessee further agrees and does hereby agree, without prejudice to
the express provisions of this Agreement, to waive any rights as against
the Lessor that the Lessee may have under the 1976 Convention on the
Limitation of Liability for Maritime Claims (as most recently enacted in
the United Kingdom pursuant to the Merchant Shipping Act 1995) to
limit or reduce any amount that the Lessee is or may be obliged to pay.
25. GENERAL TAX INDEMNITY AND OTHER TAX PROVISIONS
25.1 General Tax indemnity and payment of certain outgoings
The Lessee shall pay and discharge or cause to be paid and discharged,
as soon as the same arise or become payable (and shall, if requested by
the Lessor, produce to the Lessor evidence of the payment and discharge
thereof) and indemnify the Lessor and each Relevant Member and keep the
Lessor and each Relevant Member fully indemnified against:
(a) any Tax Liabilities; and
(b) any licence duties, registration, recording, titling or filing
fees, charges or levies and any interest or penalties payable in
connection with any of the same;
which arise or become payable at any time in respect of, in consequence
of or by reference to:
(i) the Vessel (or any part thereof) or any interest therein; or
(ii) any document, payment, matter, circumstance or transaction
entered into, made or occurring pursuant to, contemplated by or
in accordance with this Agreement or by any of the other Lease
Documents including (without limitation) the agreement to
purchase, ownership, delivery to or by the Lessor, leasing,
use, possession, operation, import, export, return, storage,
maintenance, protection, sale, attempted sale or other
disposition of the Vessel (or any part thereof) or any interest
therein;
or which arise or become payable as a result (whether alone or in
connection with any other matter or circumstance) of anything done in
response to any request by the Lessee or any other member of the
Guarantor's Group.
25.2 Restriction on general tax indemnity
The Lessee shall not be obliged to indemnify the Lessor or as the case
may be the applicable Relevant Member pursuant to Clause 25.1:
(a) against Corporation Tax attributable to any Rent or Termination
Payment or interest actually receivable hereunder by the Lessor
or to any other amounts payable to and unconditionally received
by the Lessor under this Agreement or pursuant to or in
connection with any of the other Lease Documents or to any
sales or other proceeds (including, without limitation,
insurance moneys) actually received and retained by the Lessor
in respect of the Vessel;
(b) against any Tax Liability or liability in respect of any of the
matters referred to in Clause 25.1(b) to the extent it would not
have arisen but for the reasonably avoidable delay or failure by
the Lessor or, as the case may be, the applicable Relevant
Member in the filing of Tax returns or the payment of Taxes or any
duties, fees, charges or levies referred to in Clause 25.1(b)
assessed on or payable by the Lessor or, as the case may be, the
applicable Relevant Member which delay or failure has not been
consented to, or requested by the Lessee or any other member of
the Guarantor's Group or unless such failure or delay by the
Lessor or, as the case may be, the applicable Relevant Member
arises from a failure by the Lessee or any other member of the
Guarantor's Group promptly to provide the Lessor or, as the case
may be, the applicable Relevant Member with correct, suitable and
adequate information to enable the Lessor or, as the case may
be, the applicable Relevant Member to file the relevant Tax
return or pay such Taxes or other amounts;
(c) against any Tax Liability to the extent that it is taken into
account in accordance with the provisions of the Financial
Schedule in computing the amount of any Rent or Termination
Payment or any adjustment thereto or would be so taken into
account but for the operation of paragraph 3.4.1 of part 3 of
the Financial Schedule;
(d) against any Tax Liability which is imposed by way of deduction or
withholding from any payment due from the Lessee under this
Agreement to the Lessor, whether or not the Lessee is required
to make any payment or increased payment in respect thereof
under Clause 25.3;
(e) against any Tax Liability which is suffered by the Lessor by
reason of the non-deductibility for the purposes of Taxation of
any payment made by the Lessor to the Lessee, whether or not the
Lessor is entitled to make any withholding in respect thereof
under Clause 25.7;
(f) to the extent that such Tax Liability is caused by any act of the
Lessor which constitutes wilful or reckless misconduct of the
Lessor;
(g) against any Tax Liability in respect of VAT or Irrecoverable
VAT, whether or not the Lessee is required to make any payment or
increased payment in respect thereof under Clause 25.4.
25.3 Payments and Taxes
(a) All sums payable to the Lessor and/or any member of the Lessor's
Group pursuant to or in connection with this Agreement or any of
the other Lease Documents shall be paid in full without any
set-off or counterclaim whatsoever and free and clear of all
deductions or withholdings whatsoever save only as may be
required by law.
(b) If any deduction or withholding is required by law in respect of
any payment due to the Lessor and/or any member of the Lessor's
Group pursuant to or in connection with this Agreement or any of
the other Lease Documents or any document contemplated by or
entered into pursuant hereto or thereto , the Lessee shall:
(i) ensure or procure that the deduction or withholding is
made and that it does not exceed the minimum legal
requirement therefor;
(ii) pay, or procure the payment of, the full amount deducted
or withheld to the relevant Taxation or other authority in
accordance with the applicable law;
(iii) (A) if the payment is to be made by the Lessee, increase
the payment in respect of which the deduction or
withholding is required so that the net amount
received by the Lessor or, as the case may be, the
applicable Relevant Member as aforesaid after the
deduction or withholding (and after taking account
of any further deduction or withholding which is
required to be made which arises as a consequence
of the increase) shall be equal to the amount which
the Lessor or, as the case may be, that Relevant
Member would have been entitled to receive in the
absence of any requirement to make a deduction or
withholding; or (as the case may be)
(B) (except to the extent that the deduction or
withholding arises under a Payment Agreement and
constitutes an Excluded Amount (as defined in the
relevant Payment Agreement) and the relevant
Payment Bank is required under Clause 4.4 thereof
to make an increased payment in respect thereof)
if the payment is to be made by any person other
than the Lessee, pay directly to the Lessor
or, as the case may be, that Relevant Member such
sum (a "compensating sum") as will, after taking
into account any deduction or withholding which is
required to be made in respect of the compensating
sum, enable the Lessor or, as the case may be, that
Relevant Member to receive, on the due date for
payment, a net sum equal to the sum which the
Lessor or, as the case may be, that Relevant
Member would have received in the absence of
any obligation to make a deduction or withholding;
and
(iv) promptly deliver or procure the delivery to the Lessor or,
as the case may be, that Relevant Member of appropriate
receipts evidencing the deduction or withholding which has
been made.
(c) If the Lessor or, as the case may be, the applicable Relevant
Member determines in its absolute discretion that it has
received, realised, utilised and retained a Tax benefit by reason
of any deduction or withholding in respect of which the Lessee
has made an increased payment or paid a compensating sum under
this Clause 25.3 the Lessor or, as the case may be, that Relevant
Member shall, provided the Lessor or, as the case may be, that
Relevant Member has received all amounts which are then due and
payable under any of the provisions of this Agreement and the
other Lease Documents, pay to the Lessee (to the extent that the
Lessor or, as the case may be, that Relevant Member can do so
without prejudicing, the amount of that benefit and the right of
the Lessor or, as the case may be, that Relevant Member to obtain
any other benefit relief or allowance which may be available to
it) as soon as reasonably practicable such amount, if any, as the
Lessor shall determine in its absolute discretion will leave the
Lessor or, as the case may be, that Relevant Member in no better
and no worse position than the Lessor or, as the case may be,
that Relevant Member would have been in if the deduction or
withholding had not been required,
PROVIDED THAT:
(i) the Lessor or, as the case may be, that Relevant Member
shall have an absolute discretion as to the time at which
and the order and manner in which it realises or utilises
any Tax benefit;
(ii) the Lessor or, as the case may be, that Relevant Member
shall not be obliged to disclose any information regarding
its business, Tax affairs or Tax computations;
(iii) if the Lessor or, as the case may be, that Relevant Member
has made a payment to the Lessee pursuant to Clause
25.3(c) on account of any Tax benefit and it subsequently
transpires that the Lessor or, as the case may be, that
Relevant Member did not receive that Tax benefit, or
received a lesser Tax benefit, the Lessee shall pay on
demand to the Lessor such sum as the Lessor may determine
as being necessary to restore the after-Tax position of
the Lessor or, as the case may be, that Relevant Member to
that which it would have been had no adjustment under this
proviso (iii) been necessary. Any sums payable by the
Lessee to the Lessor under this proviso (iii) shall be
subject to the provisions of Clause 25.5;
(iv) the Lessor or, as the case may be, that Relevant Member
shall not be obliged to make any payment under this Clause
25.3 if, by doing so, it would contravene the terms of
any applicable law or any notice, direction or
requirement of any governmental or regulatory authority
(whether or not having the force of law);
PROVIDED FURTHER THAT if the Lessee requests the Lessor, in
writing, to make an application pursuant to the provisions of a
double tax treaty for relief (whether in whole or in part) in
respect of any deduction or withholding required by law, the
Lessor shall (at the cost of the Lessee) take such action as
the Lessee shall reasonably request to make such application to
an applicable Tax authority. If the Lessor subsequently obtains
a repayment (whether in whole or in part) of such deduction or
withholding from that Tax authority in circumstances where the
Lessee has made an increased payment or paid a compensating sum
under this Clause 26.3 the Lessor shall, provided that the
Lessor has received all amounts which are then due and payable
by the Lessee under any of the provision of this Agreement and
the other Lease Documents, pay to the Lessee as great an amount
of the repayment as possible as will leave the Lessor in no
worse position than the Lessor would have been in if the
deduction or withholding had not been required.
25.4 Value Added Tax
(a) If the Lessor makes any supply for Value Added Tax purposes
pursuant to or in connection with this Agreement or any of the
other Lease Documents or any transaction or document contemplated
herein or therein, the Lessee shall (save to the extent that the
Lessor is entitled to be indemnified in respect of that Value
Added Tax by an increased payment under Clause 25.4(b) below) at
such time as the Lessor certifies to the Lessee that any amount
of VAT payable in respect of that supply has not been paid to the
Lessor and having duly accounted for such VAT to Customs and
Excise at the correct time and having duly claimed bad debt
relief in respect of that VAT the Lessor either has or has
not received such relief, pay on demand to the Lessor an amount
equal to the aggregate of any Value Added Tax which is payable in
respect of that supply and has not been the subject of bad debt
relief and interest on an amount equal to any Value Added Tax
payable in respect of the supply at LIBOR ascertained in respect
of the date on which such VAT was accounted for to Customs and
Excise for the period from that date until the date of the
Lessor's certificate or the date upon which bad debt relief is
received.
(b) Save where expressly provided to the contrary, all payments made
under this Agreement and the other Lease Documents are calculated
without regard to Value Added Tax. If any such payment
constitutes the whole or any part of the consideration for a
taxable or deemed taxable supply (whether that supply is
taxable pursuant to the exercise of an option or otherwise), the
amount of that payment shall be increased by an amount equal to
the amount of Value Added Tax which is chargeable in respect of
the taxable supply in question PROVIDED THAT the Lessor shall not
be liable to pay an amount in respect of Value Added Tax until
such time as, and to the extent that it receives a credit
for such VAT as "input tax", as defined in sub-section (1) of
section 24 of VATA, under sections 25 and 26 of VATA, in which
case such payment shall be made as soon as practicable after the
credit is received.
(c) If any amount of Value Added Tax paid by the Lessor pursuant to
this Agreement or any of the Lease Documents shall be
Irrecoverable VAT, the Lessee shall forthwith on demand by the
Lessor indemnify the Lessor and keep the Lessor fully indemnified
at all times against such Irrevocable VAT PROVIDED THAT if the
Lessor determines that such Irrecoverable VAT subsequently proves
to be recoverable, the Lessor shall pay to the Lessee such
amount, if any, as the Lessor in its absolute discretion shall
determine will leave the Lessor in no better and no worse a
position than the Lessor would have been in if no payment had
been made by the Lessee to the Lessor under this Clause 25.4(c).
25.5 Grossing-up of indemnity payment
If the Lessor makes a payment or suffers a loss in respect of which it
is entitled to be indemnified or reimbursed or otherwise kept harmless
pursuant to any provision of this Agreement or any of the other Lease
Documents and the Lessor determines in its absolute discretion that:
(a) (i) the loss or payment is not or will not be wholly
deductible in computing the profits of the Lessor for the
purposes of Tax whilst the payment to be made by way of
indemnity or reimbursement (for the purpose of this
Clause 25.5, the "Payment") will or is likely to
give rise to a Tax Liability for the Lessor; or
(ii) the Payment is likely to give rise to a Tax Liability for
the Lessor in any Accounting Period of the Lessor earlier
than the Accounting Period in which the loss or payment is
deductible;
then, at the time of the Payment the Lessee shall pay such an
amount (the "Additional Payment") as will, after taking into
account any Tax Liability likely to be suffered or incurred by
the Lessor in respect of the Payment or the Additional Payment,
leave the Lessor in the same after-Tax position as it would
have been in had the Payment not given rise to any Tax Liability
and the loss or payment had not been deductible PROVIDED THAT if
at the time of the Payment the Lessor considers that no
Additional Payment is necessary but subsequently determines that
an Additional Payment is necessary to indemnify the Lessor, the
Additional Payment shall be paid by the Lessee to the Lessor
following a demand by the Lessor;
(b) the loss or payment has proved to be wholly deductible in
computing the profits of the Lessor for the purposes of Tax
whilst the Payment by the Lessee has provided not to give rise to
any Tax Liability for the Lessor, then the Lessor shall pay to
the Lessee a rebate of Rent (for the purposes of this Clause 26.5
the "Rebate") of such amount as will leave the Lessor in no
better and no worse position than it would have been in if the
Payment had not given rise to a Tax Liability for the Lessor and
the loss or payment had not been deductible,
PROVIDED THAT if the Lessor subsequently determines that any payment by
the Lessee to the Lessor under this Clause 25.5 by way of an Additional
Payment or, as the case may be, any Rebate was calculated on an
incorrect basis, such adjustment shall be made between the Lessor and
Lessee as the Lessor determines necessary to restore the after-Tax
position of the Lessor to that which it would have been if no adjustment
had been necessary.
25.6 Documentary and other similar Taxes
All stamp, documentary, registration or other like duties or Taxes,
including any penalties, additions, fines, surcharges or interest
relating thereto, which are imposed on or chargeable on or in
connection with this Agreement or any of the other Lease Documents shall
be paid by the Lessee PROVIDED THAT the Lessor shall be entitled but not
obliged to pay any such duties or Taxes, whether or not they are its
primary responsibility, whereupon the Lessee shall on demand indemnify
the Lessor against those duties or Taxes. The Lessor agrees that if
it decides to pay any such duties or Taxes, it shall give the Lessee not
less than five (5) Houston Business Days' notice before making such
payment.
25.7 Deductibility
Notwithstanding anything contained in this Agreement or any of the other
Lease Documents, if the Lessor determines that any payment which it is
required to make to the Lessee under this Agreement or under any of the
other Lease Documents, by way of rebate of Rent or otherwise (but
excluding any rebate of Rent under Clause 10.2 or Clause 20.2), will
not or may not be fully deductible in computing the Lessor's liability
to Corporation Tax for the Accounting Period of the Lessor in which the
payment is made, the Lessor shall be entitled to withhold and retain
from that payment such amount as the Lessor determines to be necessary
to enable it to occupy the same after-Tax position as it would
occupy if the payment were fully deductible as aforesaid;
PROVIDED THAT if:
(a) any such payment is made without withholding and the Lessor
subsequently determines that the payment will not or may not be
fully deductible as aforesaid; or
(b) any such payment is made subject to withholding and the Lessor
subsequently determines that no such withholding ought to have
been made or the basis on which the withholding was calculated
was incorrect;
such adjustment shall be made between the Lessor and the Lessee as the
Lessor determines to be necessary, taking into account the time value of
money, to enable the Lessor to occupy the same after-Tax position as it
would occupy if no such adjustment were necessary. Any sum payable by
the Lessee to the Lessor under this proviso shall be subject to the
provisions of Clause 25.5.
26. PRESERVATION OF INDEMNITIES
Without prejudice to damages or other claim which either party may, at
any time, have against the other hereunder or under any of the Lease
Documents it is hereby agreed and declared that the indemnities given by
the Lessee in favour of the Lessor or any member of the Lessor's Group
contained in this Agreement shall continue in full force and effect
notwithstanding any sale or other disposition of the Vessel, a Total
Loss having occurred or any breach of the terms hereof or thereof by
the Lessor (including fundamental breach), the repudiation by the Lessor
or the Lessee of this Agreement or any of the Lease Documents or the
expiration of the Lease Period through effluxion of time or otherwise
or the termination of the leasing or sale of the Vessel hereunder or
any other circumstance whatsoever.
27. ASSIGNMENT
27.1 Assignment by Lessor
27.1.1 The Lessee acknowledges and agrees that the Lessor shall be entitled at
any time and from time to time to assign, transfer, novate or otherwise
dispose of all (but not part only) of its interest in the Vessel and
the Lease Documents:
(a) to any person (the "Transferee") who is not a member of the
Lessor's Group with the consent of the Lessee (such consent not
to be unreasonably withheld) PROVIDED ALWAYS THAT:
(i) the assignment, transfer, novation or other disposal shall
be on terms that the Lessee shall be under no greater
obligation or liability under this Agreement and the other
Lease Documents to which it is a party than it would have
been under but for such assignment, transfer, novation or
other disposal;
(ii) the transferee (or its ultimate parent company) is a bank
or financial institution rated with one of Moody's
Investors Service, Inc. (or any successor to its ratings
business) or Standard & Poor's, a division of the
McGraw-Hill Companies (or any successor to its ratings
business) with a rating no lower than the rating of
Barclays Bank Plc with that ratings agency at that time;
(iii) the rights of the Lessee under the Lease Documents shall
not be adversely affected and shall be on equivalent
terms to the Lease Documents in force prior to the
assignment, transfer, novation or other disposal (and,
without prejudice to the generality of the foregoing,
the Lessee shall receive a mortgage from the replacement
lessor and a parent support letter from the replacement
lessor's ultimate parent in equivalent terms to those
granted pursuant to this Agreement); and
(iv) it shall, without limitation, be reasonable for the Lessee
to withhold its consent if it certifies that the proposed
transferee (or its ultimate parent company or a Subsidiary
(UK) of its ultimate parent company) is a company which
the Lessee or any other company or the Guarantor's Group
has valid business reasons for not entering into a
relationship with, without specifying those reasons; and
(b) to any person who is a member of the Lessor's Group without the
need for the Lessee's consent provided that the Lessee shall be
under no greater obligation or liability under this Agreement
and the other Lease Documents to which it is party than it would
have been under but for such assignment, transfer, novation
or other disposal,
and in each case, and the Lessee hereby agrees and undertakes that it
will upon the request of the Lessor execute such further documents and
give such notices as the Lessor may reasonably require in order to
effect such assignment, transfer, novation or other disposal, provided
that any costs incurred by the Lessee (including any reasonable legal
fees and Irrecoverable VAT thereon) in connection therewith or with any
consequential amendments to the Lease Documents shall be reimbursed by
the Lessor.
27.1.2 The Lessor agrees to notify the Lessee promptly after any acquisition
by the Lessor of any vessel or any rights to acquire any vessel, ship or
similar seagoing structure (other than the Vessel). If so requested by
the Lessee within two (2) months following any such notification, the
Lessor shall procure that the rights and interests of the Lessor in
the Vessel and the rights and obligations of the Lessor under the Lease
Documents are transferred at the cost of the Lessor to another member of
the Lessor Group (which does not own any vessel, ship or similar
seagoing structure) within a period of two (2) months following the
request.
27.2 Assignment by the Lessee
(A) Except as expressly permitted by Clause 27.2(B), the Lessee may
not assign, transfer or part with any of its rights or
obligations under, or the benefit or burden of, this Agreement or
the other Lease Documents to which the Lessee is a party
without the prior written consent of the Lessor.
(B) The Lessee shall be entitled at any time and from time to time to
assign and transfer the entire burden and benefit of this
Agreement and each of the other Lease Documents to which it is a
party (together but not separately) to any person who is a member
of the Guarantor's Group without the need for the Lessor's
consent provided that:
(i) the transferee, the Guarantor and any other necessary
person shall have entered into such documentation as may
be necessary to give effect to such assignment and
transfer (including any amendment that may be necessary
to the terms of the Guarantee to ensure that the
Guarantee extends to the obligations of the assignee
hereunder) and the Lessor shall be under no greater
obligation or liability under this Agreement and the other
Lease Documents than it would have been under but for such
transfer, and the Lessor shall not suffer or incur any
greater cost or loss of benefit under this Agreement and
the other Lease Documents as a result of such assignment
or transfer; and
(ii) any costs and expenses (including stamp duty) in respect
of such transfer shall be for the Lessee's account.
(C) The Lessor agrees from time to time, and at the Lessee's expense,
to co-operate with the Lessee and do and perform such acts and
execute and deliver such instruments as the Lessee may reasonably
request to effect such assignment and transfer referred to in
Clause 27.2(B).
28. LESSOR'S RIGHT OF SET-OFF; GROSS PAYMENT OF REBATES
28.1 Subject to the following provisions of this Clause 28, if at any time a
Relevant Event shall have occurred and be continuing, the Lessor shall
be entitled to set off or withhold from any sum or sums expressed in
this Agreement or any of the Lease Documents to be payable by the Lessor
to the Lessee any amounts due or expressed to be due (or which
would, if demanded, be due) from the Lessee, to the Lessor under this
Agreement or any of the Lease Documents. Save as aforesaid the Lessee,
authorises the Lessor to apply any credit balance to which the Lessee is
entitled on any account of the Lessee with the Lessor in satisfaction of
any sum due and payable from the Lessor hereunder or under any of the
other Lease Documents but unpaid; for this purpose, the Lessor is
authorised to purchase with the moneys standing to the credit of any
such account such other currencies as may be necessary to effect such
application. The Lessor shall not be obliged to exercise any right
given to it by this Clause 28.1
28.2 All sums payable by the Lessor under Clause 10.2 and Clause 20.2 shall
be paid in full without any set-off or counterclaim whatsoever and free
and clear of all deductions or withholdings whatsoever save only as may
be required by law.
28.3 If any deduction or withholding is required by law in respect of any
payment due to the Lessee under Clause 10.2 or Clause 20.2, the Lessor
shall increase the payment in respect of which the deduction or
withholding is required so that the net amount received by the
Lessee after the deduction or withholding (and after taking account of
any further deduction or withholding which is required to be made which
arises as a consequence of the increase) shall be equal to the amount
which the Lessee would have been entitled to receive in the absence of
any requirement to make a deduction or withholding.
28.4 If the Lessor has been required to make any payment under Clause 28.3,
the Lessee shall, on the date on which the Lessor is required to make the
payment, pay to the Lessor an amount equal to the amount which the Lessor
is required to pay under Clause 28.3. Any such payment shall be subject
to the terms of Clause 25.5.
29. MISCELLANEOUS
29.1 General Fees and Expenses
The Lessee shall on demand:
(a) pay or reimburse to the Lessor all costs and expenses (including,
without limitation, the Lessor's Expenses and survey costs) of
the Lessor properly incurred in connection with the negotiation,
preparation or execution of the Lease Documents and any
amendment, variation or waiver from time to time hereto or
thereto or any consent from time to time hereunder or thereunder
and with delivery to or by the Lessor, redelivery or sale of the
Vessel or any part thereof, save to the extent that such costs
and expenses have been taken into account in the Financial
Schedule;
(b) pay or reimburse to the Lessor all costs and expenses (including,
without limitation, legal fees and survey costs and expenses)
properly incurred by the Lessor in connection with the operation
of Clauses 4.3 to 4.6 inclusive and paragraph 2 of Schedule 4,
Part 5 and of Clause 3.6 of the Novation Agreement and in
connection with or incidental to the breach by any party (other
than the Lessor and any Payment Bank) of any of its respective
obligations under the Lease Documents, the protection,
preservation or enforcement of any right or remedy conferred upon
the Lessor under any of the Lease Documents or by law, or to any
action or act to recover possession of the Vessel or any part
thereof, whether or not any such action progresses to judgment;
(c) pay or reimburse to the Lessor all costs and expenses (including,
without limitation, fees of legal and other advisers) incurred in
connection with any action or act brought by the Lessor to
recover any Rent or other payments due from any party (other than
the Lessor and any Payment Bank) under this Agreement or any of
the other Lease Documents; and
(d) pay or reimburse to the Lessor all costs and expenses (including
without limitation, legal, insurance and other advisers) properly
incurred by the Lessor in connection with a Total Loss of the
Vessel.
29.2 The Lessee acknowledges receipt of a copy of the Fee Letters setting out
arrangement and other fees and hereby authorises the payment of these
fees as set out in such letters.
29.3 The Lessee shall pay to the Lessor, by way of fee, the Costs of
Management Time to the extent provided in Clause 1.4 and the Costs of
Management Time incurred by the Lessor in connection with any of the
matters referred to in Clauses 4.3 to 4.6 inclusive, Clause 10 and
Clause 24.1, the operation of Clause 12 and Clause 21, any exercise of
the Lessee's rights under Clause 27.2, the operation of the letter of
even date herewith from the Lessor to the Lessee entitled "Tax
Consultation", any amendment or supplement to this Agreement or the Lease
Documents and any restructuring of the transaction implemented by this
Lease and the Lease Documents (unless requested by, and for the sole
benefit of, the Lessor).
29.4 Delay in enforcement, waivers etc.
All waivers of any right, power or privilege by any of the Lessor or the
Lessee shall be in writing signed by the Lessor or, as the case may be,
the Lessee. No failure or delay on the part of the Lessor or the Lessee
in exercising any power or right hereunder shall operate as a waiver
thereof nor shall any single or partial exercise of any such right or
power preclude any other or further exercise of any such right or power.
The rights and remedies herein provided are cumulative and not exclusive
of any rights or remedies provided by law or in equity.
29.5 Variation
This Agreement shall only be varied by an instrument in writing executed
by the parties hereto.
29.6 Invalidity
If any term or provision of this Agreement or the application thereof to
any person or circumstance shall to any extent be invalid or
unenforceable the remainder of this Agreement or application of such
term or provision to persons or circumstances other than those as to
which it is already invalid or unenforceable shall not be affected
thereby and each term and provision of this Agreement shall be valid and
shall be enforceable to the fullest extent permitted by law.
29.7 Notices
(a) Any demand, consent, record, election or notice (a "Notice")
required or permitted to be given by either party to the other
under this Agreement shall be in writing and sent by first class
prepaid airmail post or delivered by hand or sent by fax
addressed as follows:
(i) if to the Lessor to:
BMBF (NO.12) LIMITED
c/o Barclays Mercantile Business Finance Limited
Churchill Plaza
Churchill Way
Basingstoke
Hampshire RG21 7GL
Fax:+(44) (0)1256 810283
Attention:Company Secretary
Referring to:"Schedule number 52/5050 5371-3"
(ii) if to the Lessee to:
Global Marine International Drilling Corporation
c/o McKinney Bancroft & Hughes,
Mareva House,
4 George Street,
PO Box 3937,
Nassau,
The Bahamas.
Fax:+ (1) 242 328 2520
Attention:Richard H.R. Lightbourn
or in each case to such address or facsimile number as one party
may, by not less than three (3) Houston Business Days' notice,
notify in writing to the other party hereto.
(b) Any Notice shall be deemed to have been given or received to or
by the party to whom it is addressed ten (10) days following
posting, if posted by first class prepaid airmail post and on
receipt, if delivered by hand. Any notice sent by fax shall
be treated as received only when the sender has received a fax by
return from the recipient acknowledging receipt.
(c) Any notice to the Lessee shall be copied to the Guarantor in
accordance with the notice provisions of the Guarantee but no
failure to serve a copy on the Guarantor will invalidate a
notice served on the Lessee.
29.8 Applicable law
This Agreement shall be governed by and construed, and performance
thereof shall be determined, in accordance with the laws of England.
29.9 Counterparts
This Agreement may be executed in several counterparts and any single
counterpart or set of counterparts, signed in either case by all of the
parties, shall be deemed to be an original, and all taken together shall
constitute one and the same instrument.
29.10 Further assurances
The Lessee agrees from time to time, and at the Lessee's expense, to do
and perform such other and further acts and execute and deliver any and
all such other instruments as may be required by law or reasonably
requested by the Lessee to establish, maintain and protect the rights
and remedies of the Lessor and to carry out and effect the intent and
purpose of this Agreement and the other Lease Documents.
29.11 Entire agreement
This Agreement, in conjunction with the other Lease Documents to which
the Lessor is a party and any letter agreements of even date herewith or
subsequent hereto between the Lessor and any other party to the Lease
Documents, constitute the entire agreement between the parties hereto in
relation to the leasing of the Vessel by the Lessor to the Lessee, and
supersede all previous proposals, term sheets, agreements and other
written and oral communications in relation thereto.
29.12 Submission to jurisdiction
(a) The Lessee (which shall include its respective successors and
permitted assigns from time to time) hereby submits to the
non-exclusive jurisdiction of the courts of England with regard
to this Agreement and the other Lease Documents to which the
Lessor is a party (the "Relevant Agreements"). Any legal
action or proceedings with respect to this Agreement and the
other Lease Documents may be brought in the courts of England or
such other jurisdiction as the Lessor may elect. By its
execution and delivery of this Agreement, the Lessee:
(i) hereby accepts for itself and in respect of its property,
generally and unconditionally, the non-exclusive
jurisdiction of the aforesaid courts with respect to the
Relevant Agreements;
(ii) waives any objections on the grounds of venue or forum
non conveniens or any similar grounds and agrees that
legal proceedings in any one or more jurisdictions shall
not preclude legal proceedings in any other jurisdiction
with respect to the Relevant Agreements;
(iii) agrees that final judgment against it in any action or
proceedings shall be conclusive and may be enforced in
any other jurisdiction with respect to the Relevant
Agreements within or outside England by suit on the
judgment, a certified copy of which shall be conclusive
evidence of the fact and of the amount of its
Indebtedness; and
(iv) hereby consents generally in respect of any legal action
or proceeding arising out of or in connection with the
Relevant Agreements to the giving of any relief or the
issue of any process in connection with such action or
proceeding including, without limitation, the making,
enforcement or execution against any property whatsoever
(irrespective of its use or intended use) of any order
or judgment which may be made or given in such action or
proceeding.
(b) The Lessee in the case of the courts of England, hereby
designates, appoints and empowers WFW Legal Services Limited
(ref: CALP/2628.16002), at the address of its registered office
for the time being, (presently of 15 Appold Street, London EC2A
2HB) to receive, for it and on behalf of it, service of
process in any legal action or proceedings with respect to the
Relevant Agreements. The Lessee agrees that it will at all
times continuously maintain an agent to receive service of
process in England on its behalf and on behalf of its property
with respect to the Relevant Agreements and if, for any reason,
such agent named above or its successor shall no longer serve as
agent of the Lessee to receive service of process in England, the
Lessee shall promptly appoint a successor in England and advise
the Lessor thereof. It is understood that a copy of any process
served as above will be promptly forwarded (if necessary) by
first class prepaid air mail post to the Lessee but the failure
of the Lessee to receive such copy shall not affect in any way
the service of such process on the said person as the agent of
the Lessee.
29.13 Judgment currency
If, under any applicable law, whether as a result of a judgment against
any of the parties hereto or the liquidation of any of the parties
hereto for any other reason, any payment under or in connection with
this Agreement or any of the other Lease Documents is made or is
recovered in a currency (the "Other Currency") other than that in which
it is required to be paid hereunder or thereunder (the "Original
Currency") then, to the extent payment (when converted at the rate of
exchange and after deducting commission on the date of payment or, in
the case of a liquidation, the latest date for the determination of
liabilities permitted by the applicable law) falls short of the amount
which is required to be paid under or in connection with this Agreement
or any of the other Lease Documents as aforesaid, the payer shall as a
separate and independent obligation fully indemnify the payee on demand
against the amount of the shortfall; and for the purposes of this Clause
29.11 "rate of exchange" means the rate at which the payee is able as at
11.00 a.m. (London time) on the relevant date to purchase the Original
Currency from the Bank in London with the Other Currency.
30. CONFIDENTIALITY
30.1 The Lessor hereby undertakes to the Lessee not to disclose and shall
ensure that its officers, employees, agents and advisers shall treat as
confidential the terms of the Lease Documents and any and all business
or financial or other information supplied in or in connection with the
Lease Documents ("Confidential Information") and that it shall not
(except, where reasonably required in connection with this transaction,
to any Government Entity of the United Kingdom), without the prior
written consent of the Lessee, disclose to any third party any of the
Confidential Information, save that it shall be entitled to disclose
any Confidential Information:-
(a) to another member of the Lessor's Group or to any agent or
adviser of the Lessor or of such other member; or
(b) to the extent required by law or a valid court order or in
connection with any proceedings, enforcement of rights or
benefits, or protection of rights or benefits, under this
Agreement or any of the other Lease Documents or
pursuant to a direction of the Bank of England or the Financial
Services Authority or required by any regulatory, governmental or
taxing authority; or
(c) to the extent it has become part of the public knowledge or
literature (except through a breach of this Clause 30.1).
30.2 The Lessee hereby undertakes not to disclose and shall ensure that its
officers, employees, agents and advisers shall not directly or
indirectly disclose (without the consent of the Lessor) to any third
party (except, where reasonably required in connection with this
transaction, to any Government Authority of the United Kingdom or the
United States of America, including, for the avoidance of doubt, the
Securities and Exchange Commission) information relating to the
commercial terms of transactions effected by the Lease Documents, as
evidenced by the form, terms or substance of the Lease Documents
PROVIDED THAT the restriction contained in this Clause 30.2 shall not
apply to any disclosure:-
(a) to another member of the Guarantor's Group or to any agent or
adviser of the Lessee or of such other member in which case the
Lessee shall be liable for any such person's breach of this
Clause 30.2; or
(b) to the extent required by law or a valid court order or in
connection with any proceedings, enforcement of rights or
benefits, or protection of rights or benefits, under this
Agreement or any of the other Lease Documents or
required by any governmental, regulatory or taxing authority;
or
(c) to the extent it has become part of the public knowledge or
literature (except through breach of this Clause 30.2).
30.3 The provisions of this Clause 30 shall survive the expiry or earlier
termination of the Lease Period, the Final Date and the sale or Total
Loss of the Vessel.
AS WITNESS this Agreement is executed by each of the parties hereto, in the
case of the Lessee as its deed and is intended to be and is hereby delivered by
the Lessee and in the case of the Lessor, under the hands of its duly
authorised representative, in each case the day and year above written.
SCHEDULE 1
Financial Schedule
SCHEDULE 2
The Vessel
Name of Vessel GLOMAR IRISH SEA I
Registration
Registered Owner To be registered in the name of:
BMBF (NO.12) Limited
Churchill Plaza, Churchill Way,
Basingstoke, Hampshire RG21 7GP
England
Flag of Registration To be registered under the
Panamanian flag under the laws of
the Republic of Panama
Shipbuilder Harland & Wolff Shipbuilding and
Heavy Industries Ltd.
Queens Island, Belfast,
Northern Island BT3 9DU
Class/Type Class 456 Ultra-Deepwater Drillship
Hull Number 1740
Main dimensions at normal drilling draft
Length Between Perpendiculars 210.0 metres
Breadth (molded) 36.0 metres
Depth (molded) 17.8 metres
Design Variable Deck Load 25,000 tonnes
Deadweight (approximately) 30,000 tonnes
SCHEDULE 3
Part 1
Representations and Warranties by the Lessee
(A) The Lessee is a company duly incorporated with limited liability and
validly existing under the laws of the Bahamas and has the corporate
power to own its assets and carry on its business as it is being
presently conducted.
(B) The Lessee has the corporate power and authority to enter into and
perform its obligations under each of the Lease Documents to which it
is a party and to consummate the transactions contemplated thereby.
(C) The execution, delivery and performance of each of the Lease Documents
to which the Lessee is a party and the consummation of the transactions
contemplated thereby have been duly authorised by all necessary or
appropriate corporate action on the part of the Lessee, do not require
any shareholder approval, or approval or consent of any trustee or
holders of any indebtedness or obligations of the Lessee except such as
have been duly obtained and are in full force and effect, and do not
contravene any law, governmental rule, regulation or decree, judgment,
injunction or order binding on the Lessee or any of its assets, or the
Constitutive Documents of the Lessee or contravene the provisions of,
or constitute a default under, any mortgage, contract or other agreement
or instrument to which the Lessee is a party or by which it or any of
its assets is bound or affected, or will result in the creation of any
Lien upon the property or assets of the Lessee (other than as provided
in the Lease Documents).
(D) Neither the execution nor the delivery nor the performance by the
Lessee of any of the Lease Documents to which it is a party nor the
consummation by the Lessee of any of the transactions contemplated
thereby, require the consent or approval of, the giving of notice
to, the registration with, or the taking of any other action in
respect of, any governmental or other authority or agency.
(E) Each of the Lease Documents to which the Lessee is a party constitutes,
or when executed and delivered will constitute, the legal, valid and
binding obligations of the Lessee, enforceable against it in accordance
with its terms, subject to applicable laws relating to bankruptcy,
insolvency or liquidation or any other laws or legal procedures
affecting generally the enforcement of creditors' rights and the
applicable general principles of equity;
(F) There are no pending or threatened litigation, arbitration or
administrative actions or proceedings against the Lessee or any of its
property or assets before any court, arbitrator or administrative agency
or authority which will or might reasonably be expected to have a
materially adverse effect on the financial condition, business or
operation of the Lessee or on the ability of the Lessee to perform at
all times its obligations under each of the Lease Documents to which it
is a party.
(G) No Termination Event has occurred and is continuing or would result
from the entry into or performance of this Agreement or any of the
other Lease Documents to which the Lessee is a party.
(H) It is not necessary or advisable under any applicable laws, in order to
ensure the validity of this Agreement or any of the other Lease
Documents, to establish or protect the property rights of the Lessor in
the Vessel or any part thereof that any of the Lease Documents or
any other instrument relating thereto be filed, registered or recorded
or that any other action be taken or if any such filings, registrations,
recordings or other actions are necessary or advisable, the same have
been effected or will have been effected on or before the Delivery Date.
(I) The claims of the Lessor against the Lessee under this Agreement and
under any of the other Lease Documents to which it and the Lessor are
parties will rank at least pari passu with the claims of all its other
unsecured creditors save those whose claims are preferred solely by
mandatory application of any bankruptcy, insolvency, liquidation or
other analogous laws of general application.
(J) The choice by the Lessee of English law to govern this Agreement and any
of the other Lease Documents to which it is a party and the submission
by it to the jurisdiction of the High Court of Justice in London in the
Lease Documents to which it is a party is valid and binding.
(K) Neither the Lessee nor any of its assets is entitled to any immunity on
the grounds of sovereignty or otherwise from any legal actions or
proceedings (which shall include, without limitation, suit, attachment
prior to judgment, execution or other enforcement).
(L) Under the law in force at the date of this Agreement, all payments to be
made by the Lessee to the Lessor under this Agreement and any of the
other Lease Documents to which it is party may be made by it free and
clear of and without deduction for any Taxes and no deductions or
withholdings are required to be made therefrom.
(M) The Lessee is a wholly-owned direct or indirect Subsidiary (US) of the
Guarantor.
(N) The Vessel on the Delivery Date will:
(i) be eligible in all respects for registration in the Flag State;
(ii) maintain the Classification free of all overdue recommendations,
reservations, notations and requirements of the Classification
Society and will be tight, staunch, strong and seaworthy and
will have placed on board full classification and other
certificates required under all Applicable Laws and the rules,
regulations and requirements of the Classification Society and
the International Maritime Organisation including those to which
the Vessel, her Master, officers and crew are subject at the
Delivery Date; and
(iii) in compliance with all material applicable Environmental Laws
and Environmental Permits required in connection with the Vessel;
(O) At Delivery, the United States Oil Pollution Act 1990 will not apply to
any of the Primary Obligors in relation to the Vessel at Delivery, but,
to the extent it does so apply in the light of its location, the Primary
Obligors will at Delivery comply with all applicable requirements in
relation to the Vessel of such act, as amended, the regulations
promulgated and guidance having the force of law issued pursuant thereto.
SCHEDULE 3
Part 2
Representations and Warranties by the Lessor
(A) The Lessor is duly incorporated and validly existing under the laws of
England as a limited liability company and has the corporate power to
own its assets and to carry on its business as it is being presently
conducted.
(B) The Lessor has the power to execute, deliver and perform its obligations
under the Lease Documents to which it is a party and all necessary
corporate, shareholder and other action has been duly obtained or taken
to authorise the execution, delivery and performance of the same.
(C) The execution, delivery and performance of each of the Lease Documents
to which the Lessor is a party and the consummation of the transactions
contemplated thereby have been duly authorised by all necessary or
appropriate corporate action on the part of the Lessor, do not require
any shareholder approval, or approval or consent of any trustee or
holders of any indebtedness or obligations of the Lessor except such as
have been duly obtained and are in full force and effect, and do not
contravene any law, governmental rule, regulation or decree, judgment,
injunction or order binding on the Lessee or any of its assets, or
the Constitutive Documents of the Lessor or contravene the provisions
of, or constitute a default under, any mortgage, contract or other
agreement or instrument to which the Lessor is a party or by which it
or any of its assets is bound or affected, or will result in the
creation of any Lien upon the property or assets of the Lessor (other
than the mortgage over the Vessel to be provided to the Lessee or as
otherwise provided in the Lease Documents).
(D) Neither the execution nor the delivery nor the performance by the Lessor
of any of the Lease Documents to which it is a party nor the
consummation by the Lessor of any of the transactions contemplated
thereby, require the consent or approval of, the giving of notice
to, the registration with, or the taking of any other action in
respect of, any governmental or other authority or agency.
(E) Each of the Lease Documents to which the Lessor is a party constitutes,
or when executed and delivered will constitute, the legal, valid and
binding obligations of the Lessor, enforceable against it in accordance
with its terms, subject to applicable laws relating to bankruptcy,
insolvency or liquidation or any other laws or legal procedures
affecting generally the enforcement of creditors' rights and the
applicable general principles of equity.
(F) The Lessor does not own or have any rights to acquire any vessel other
than the Vessel.
SCHEDULE 4
Part 1
Conditions precedent to the obligations of the Lessor generally
The Lessor shall have received each of the following in form and substance
satisfactory to the Lessor:
1. In respect of each Primary Obligor
(a) a copy certified by a duly authorised officer of the relevant
person to be a true, complete and up-to-date copy of the
Constitutive Documents of that person;
(b) a copy, certified by a duly authorised officer of the relevant
person to be a true copy, and as being in full force and effect
and not amended or rescinded, of resolutions of the board of
directors or governors (or of a committee of the board of
directors or governors) of that person:
(i) authorising the entering into by that person of such of
this Agreement and the other Lease Documents to which
such person is party; and
(ii) authorising an individual or individuals to sign and
deliver on behalf of that person such of this Agreement
and the other Lease Documents to which such person is
party,
or, in each case such other evidence as the Lessor may require
that all necessary corporate action has been taken for the
authorisations referred to in paragraphs (i) and (ii) above;
(c) a copy certified by a duly authorised officer of that person to
be a true copy, and as being in full force and effect and not
revoked or withdrawn, of any power of attorney issued by that
person pursuant to the said resolutions; and
(d) a certificate of incumbency in relation to each Primary Obligor
together with a list of authorised signatories with specimen
signatures and, in relation to each Primary Obligor a certificate
of goodstanding in relation to that person.
2. Evidence that the Shipbuilding Contract and the Novation Agreement have
each been approved by the board of directors of the Shipbuilder, and
that the signatory for the Shipbuilder is authorised to execute the
Shipbuilding Contract and the Novation Agreement.
3. Insurances
3.1 Evidence that all items intended to form part of the Vessel or to which
the Lessor has title are insured on terms acceptable to the Lessor
including, but not limited to, receipt by the Lessor of letters of
undertaking from the Approved Brokers.
3.2 An opinion from the insurance advisers to the Lessor, as to the adequacy
of the Insurances.
4. A power of attorney or a certified true copy extract of the up-to-date
signature book of each Payment Bank, evidencing the extent of the
signing authority of all relevant signatories and specimen signatures of
those signatories or other evidence reasonably acceptable to the Lessor
of the authority of the relevant signatories to execute each of the
Lease Documents to which the relevant entity is party.
5. Evidence that all governmental and other licences, approvals, consents,
registrations and filings necessary for any matter or thing contemplated
by the Lease Documents and for the legality, validity, enforceability,
admissibility and evidence and effectiveness thereof have been obtained
or effected on an unconditional basis and remain in full force and
effect (or, in the case of effecting any registrations and filings,
that arrangements are satisfactory to the Lessor have been made for the
effecting of the same within any applicable time limit).
6. Legal opinions, in each form satisfactory to the Lessor:
(i) from Higgs & Johnson, Bahamas counsel to the Lessee;
(ii) from Richards, Layton & Finger, Delaware counsel to the Guarantor
(including confirmation as to the US tax implications for the
Lessor of entering into this Agreement and the other Lease
Documents);
(iii) from Watson, Farley & Williams, New York, in relation to the
ability of the Lessor to enforce the benefit of the pollution
indemnity provisions in the Service Contract; and
(iv) such other legal opinions as the Lessor may reasonably request.
7. Evidence that any consents which may be required for the due execution
and performance of any Security Party (excluding the Service Contractor)
of any Lease Document to which it is party have been obtained and are
in full force and effect.
8. Evidence of the acceptance of appointment by each service of process
agent appointed or required to be appointed under the Lease Documents to
which the Lessor is a party.
9. An original counterpart of the Service Contract (if it has then been
executed) (or a certified copy to the extent permitted by
Clause 12.18(a)(ii)(A)) and an original counterpart of each
other Lease Document to which the Lessor is a party, and a copy,
certified by an officer of the Lessee as a true, complete and up to
date copy, of each other Lease Document in each case duly executed and
delivered by each party thereto other than the Lessor.
10. A copy, certified as a true and up-to-date copy by a duly authorised
officer of the Lessee, of the Shipbuilding Contract and all amendments
thereto as well as evidence that notices, invoices and certificates
required thereunder have been duly executed and delivered together with
a certified copy thereof.
11. Evidence that the conditions precedent to the Lease Documents, including
each of the Payment Agreements, the Shipbuilding Contract, the Novation
Agreement, the Put-Option Agreement and the Sub-Lease (other than the
conditions precedent contained in this Agreement) have been fulfilled or
waived in accordance with the respective terms of the Lease Documents.
12. A certificate from the Lessee stating that all the conditions precedent
set out in Schedule 4, Part 4 have been satisfied or waived.
SCHEDULE 4
Part 2
Conditions precedent to Lessor's obligations to make payment of any Instalment
The Lessor shall have received each of the following in form and substance
satisfactory to the Lessor in relation to each Instalment:
1 Corporate power and authority
1.1 Confirmation from a duly authorised officer of each Primary Obligor that
there has been no change in the Constitutive Documents of the relevant
person since the date on which a certified copy thereof was provided to
the Lessor, or, as the case may be a copy certified by a duly authorised
officer of the relevant person of any amendments thereto and
confirmation that the board resolutions or other corporate authorisation
referred to in paragraph 1.2 of part 1 of this schedule 4 remain
unamended and in force.
1.2 In relation to each Payment Bank either (i) confirmation that any
document to be executed by that Payment Bank, as the case may be, will
be executed by the individuals in respect of which valid and existing
powers of attorney appointing such individual as attorneys in fact
for the relevant party has already been received or in respect of which
a certified true copy extract of an up-to-date signature book has been
received and that the respective powers of attorney or signature books
of each Payment Bank, remain valid, in full force and unamended or
(ii) a further certified copy of the relevant power of attorney
appointing such individual as an attorney in fact with power to sign
such documents on behalf of the Payment Bank, or signature book of each
Payment Bank.
2 Payments and Accounts
2.1 Evidence that the requirements of Clause 22.4.1 have been satisfied in
relation to the Instalment Date for that Instalment, including
confirmation from each Payment Bank that it has received (a) all
applicable conditions precedent (including 'bring-down' legal opinions)
under the relevant Payment Agreement and (b) the relevant payment or
payments due from the Lessee on the relevant date to such Payment Bank
pursuant to the terms of the relevant Payment Agreement.
2.2 Evidence that any consents which may be required for the due execution
and performance of any Primary Obligor and each Payment Bank of any
Lease Document to which it is party have been obtained and are in full
force and effect.
2.3 Each of the representations and warranties to the Lessor on the part of
each of the Payment Banks under the relevant Payment Agreement shall be
true and accurate on the relevant Instalment Date as if given on that
date by reference to the facts and circumstances then existing
(excluding any representations and warranties which are not repeated on
such date);
2.4 Any costs and expenses required by the terms of this Agreement to be
paid by the Lessee and which are not taken into account in the
Financial Schedule.
3. The Vessel
Evidence that amounts, the Sterling Equivalent of which (as at the
respective payment dates under the Shipbuilding Contract) equals or
exceeds the amount of the applicable Instalment, have fallen due under
the Shipbuilding Contract.
4. Representations and Warranties
Confirmation from each Primary Obligor that each of the representations
and warranties to the Lessor on the part of that Primary Obligor under
any Lease Document are true and accurate on the date for payment of the
relevant Instalment as if given on that date by reference to the facts
and circumstances then existing.
5. No Relevant Event
Confirmation that no Relevant Event has occurred or would result from
the payment of that Instalment.
SCHEDULE 4
Part 3
Conditions precedent to Lessor's obligations to take delivery of the Vessel and
to deliver the Vessel to the Lessee
In addition to the conditions set out in Parts 1 and 2 of this Schedule 4, the
Lessor shall have received each of the following in form and substance
satisfactory to the Lessor:
1. Delivery of the Vessel from the Contractor and a protocol of delivery
and acceptance in respect thereof;
2. the Acceptance Certificate duly executed by the Lessee;
3. a certificate duly executed by the person appointed in that behalf
pursuant to the Supervision Agreement evidencing such person's
acceptance of the Vessel on behalf of the Lessor in accordance with the
terms of the Shipbuilding Contract and the Novation Agreement.
4. all other documents required to be delivered by the Shipbuilder on the
Delivery Date pursuant to the Shipbuilding Contract, including a
confirmation of class certificate for the Vessel dated no earlier than
ten (10) days prior to the Delivery Date showing the Vessel to
be free from any overdue recommendations affecting class.
5. a certificate duly executed by the Sub-Lessee evidencing the
Sub-Lessee's unconditional acceptance of the Vessel in accordance with
the terms of the Sub-Lease;
6. a certificate from the Lessee as to the exact location of the Vessel;
7. Classification Certificate in relation to the Vessel showing the Vessel
to be free from any overdue recommendations affecting class;
8. certified extract in the English language from the register of the Flag
State, evidencing the provisional registration of the Vessel;
9. confirmation that each of the representations and warranties to the
Lessor on the part of each of the Primary Obligors under each Lease
Document to which they are respectively party are true and accurate on
the Delivery Date as if given on that date by reference to the
facts and circumstances then existing (excluding any representations and
warranties which are not repeated on the Delivery Date);
10. confirmation that no Relevant Event has occurred or would result from
the Delivery of the Vessel on the Delivery Date or the leasing of the
Vessel to the Lessee pursuant to this Agreement.
11. Payment of any costs and expenses required to be paid by the Lessee and
which are not taken into account in the Financial Schedule.
12. A legal opinion, in form satisfactory to the Lessor, from Watson, Farley
& Williams, New York, in relation to the ability of the Lessor to
enforce the benefit of the pollution indemnity provisions in the Service
Contract.
13. An original counterpart of the Exxon Contract, duly executed by the
Exxon Party, (or a certified copy to the extent permitted by Clause
12.18(a)(ii)(A)) together with the legal opinion required to be provided
pursuant to Clause 12.18.
14. Insurances - evidence that the Vessel is insured on terms acceptable to
the Lessor including, but not limited to, an opinion from the insurance
advisors to the Lessor as to the adequacy of the insurances and receipt
by the Lessor of a certificate and letters of undertaking from the
Approved Brokers and the mutual association or club with which the
Liability Insurances are placed and a certified copy certificate of
entry in respect of the insurance cover for the Vessel referred to in
Clause 9.
15. An opinion from the insurance advisers to the Lessor, as to the
adequacy of the Insurances.
16. A valuation of the Vessel addressed to the Lessor from Kennedy Marr,
dated not earlier than one month prior to the Delivery Date,
establishing that the market value of the Vessel is not less than the
aggregate of the amounts paid or to be paid by the Lessor under the
Shipbuilding Contract and the Novation Agreement.
17. An opinion issued to the Lessor by suitably experienced independent
engineers or valuers establishing that the Primary Period does not
exceed the useful life of the Vessel.
18. A certificate from the Guarantor confirming that all Consents and
Licences required for the operation of the Vessel under the Contract
have been acquired or, as the case may be, specifying those consents
and licences which have not yet been obtained, provided however that
the Lessor reserves the right to request copies of any such consents
and licences.
19. A certificate from the Lessee stating that all conditions precedent set
out in Schedule 4, Part 5 have been satisfied or waived.
SCHEDULE 4
Part 4
Lessee's Conditions Precedent generally
The Lessee shall have received:
1. In respect of the Lessor:
(a) a copy, certified by the secretary of the Lessor to be a true,
complete and up-to-date copy of the Constitutive Documents of the
Lessor;
(b) a copy, certified by a duly authorised officer of the Lessor to
be a true copy, and as being in full force and effect and not
amended or rescinded, of resolutions of the board of directors
of the Lessor:
(i) authorising the Lessor to enter into this Agreement and
the Lease Documents to which it is a party; and
(ii) authorising an individual or individuals to sign and
deliver on behalf of the Lessor this Agreement and the
other Lease Documents to which the Lessor is a party.
2. A letter from Barclays Bank PLC addressed to the Lessee and the
Guarantor relating to the Lessor in the form previously agreed.
SCHEDULE 4
Part 5
Lessee's Conditions Precedent to Delivery
1. The Lessor shall have executed the Lessor's Mortgage as required under
Clause 4.3(i).
2. The Lessor shall have complied with Clause 4.4.
SCHEDULE 5
Form of Acceptance Certificate
Acceptance Certificate dated [ ], BMBF (NO.12) Limited pursuant to a Lease
Agreement dated[ ], December 1998 (the "Head Lease") between BMBF (NO.12)
Limited (the "Lessor") as the lessor and Global Marine International Drilling
Corporation (the "Lessee") as lessee.
Terms used herein shall have the meaning given thereto in the Head Lease.
1. the Lessee confirms that, as between the Lessee and the Lessor
(and without prejudice to any claims the Lessee may have against the
Shipbuilder) the Vessel has been delivered by the Lessor to the Lessee
and accepted by the Lessee from the Lessor as of [ ], 199[ ]
in a condition and otherwise all in accordance with the Head Lease free
of all Liens other than Permitted Liens.
2. the Lessee confirms that on the aforesaid date of delivery the Vessel
became subject to and governed by the provisions of the Head Lease.
3. Each of the Lessee and the Guarantor confirms that as at the date hereof:
(i) no Relevant Event has occurred and is continuing; and
(ii) the representations and warranties on its part set out in
Schedule 3 of the Head Lease are true and accurate.
SCHEDULE 6
PART 1
Form of Hull and Machinery (Marine and War Risks) Loss Payable Clause
All recoveries under this policy shall be applied as follows:
(a) at any time during the Lease Period, all claims hereunder in respect of
actual or constructive or compromised or arranged total loss shall be
paid in full to such account of the Lessor as the Lessor may notify to
the insurers;
(b) all other claims hereunder shall be paid in full to the Lessee or to
its order, unless and until the Lessor shall have notified insurers
hereunder to the contrary, whereupon all such claims shall be paid to
such account of the Lessor as the Lessor may notify to the insurers.
SCHEDULE 6
PART 2
Form of Protection and Indemnity Risks Loss Payable Clause
Payment of any recovery which BMBF (NO.12) Limited (the "Lessor") or Global
Marine International Drilling Corporation (the "Lessee") or Global Marine U.K.
Limited (the "Sub-Lessee") is entitled to make out of the funds of the
Association in respect of any liability, costs or expenses incurred by the
Lessor, the Lessee or the Sub-Lessee, shall be paid to the person to whom the
liability (or alleged liability) covered by the entry was incurred or to the
extent that the liability (or alleged liability) to such person has previously
been discharged by the Lessor, the Lessee or the Sub-Lessee, such moneys shall
be paid to the Lessor or its order or, as the case may be, the Lessee or its
order or, as the case may be the Sub-Lessee or its order in reimbursement of
the moneys so expended by it in satisfaction of such liability or alleged
liability. The Association shall be at liberty at the request of the Lessor
and/or the Lessee and/or the Sub-Lessee to provide bail or other security to
prevent the arrest or obtain the release of the Vessel, without liability to
the Lessor.
SCHEDULE 7
Form of Pollution Indemnity Clause (Clause 12.18)
Company shall be responsible for and shall defend, indemnify and hold harmless
Contractor, the legal and beneficial owners of the Drilling Unit, any party
who is the mortgagee, lessor, lessee or charterer of the Drilling Unit,
affiliates, officers, directors, agents, employees, representatives,
subcontractors, owners and shareholders and insurers of each (individually
and collectively hereinafter sometimes referred to as "Contractor Group")
from and against any and all claims, demands, judgements and causes of action
made, raised or asserted by any party for all pollution, contamination or
seepage (including cost of clean-up, control and damages to third parties)
resulting from a blowout or uncontrolled well flow arising out of the Contract
Services, even if caused by the sole or joint fault, negligence of any degree,
wilful misconduct or breach of contract of a member of Contractor Group;
except to the extent Contractor is liable therefor under Subsection 5.1(f)
above.
SIGNED )
for and on behalf of )
BMBF (NO.12) LIMITED ) Tim Holgate
by )
its duly authorised signatory )
in the presence of: )
Tony Price
EXECUTED as a DEED and DELIVERED )
for and on behalf of GLOBAL MARINE )
INTERNATIONAL DRILLING )
CORPORATION ) Walter A. Baker
by )
its duly authorised attorney-in-fact )
in the presence of: )
Tony Price
CONFORMED COPY
PRIVATE & CONFIDENTIAL
DATED 8th December 1998
GLOBAL MARINE INC.
as Guarantor
and
BMBF (NO.12) LIMITED
as Lessor
DEED OF
GUARANTEE AND INDEMNITY
relating to
Global Marine International Drilling Corporation
and a Glomar Hull 456 class Deepwater Drillship with
Harland and Wolff hull number 1740
Schedule Number: 52/5050 5371-3
LIST OF CONTENTS
Clause Title Page Number
1. DEFINITIONS AND INTERPRETATION 1
1.1 Definitions 1
1.2 Interpretation 5
2. GUARANTEE AND INDEMNITY 6
3. DEMANDS AND CERTIFICATES 7
4. TIME AND INDULGENCE 8
5. CONTINUING SECURITY 9
6. NO COMPETITION 9
7. GUARANTOR'S OBLIGATIONS 10
8. REPRESENTATIONS AND WARRANTIES 10
9. COVENANTS 13
10. PAYMENTS AND TAXES 17
10.1 Payments 17
11. ADDITIONAL SECURITY 19
12. ACKNOWLEDGEMENT AND DECLARATION 19
13. ASSIGNMENT 20
13.1 Assignment by Lessor 20
13.2 Assignment by Guarantor 21
14. COSTS AND EXPENSES 21
15. MISCELLANEOUS 21
15.1 Delay in Enforcement, Waivers etc. 21
15.2 Variation 21
15.3 Invalidity 21
15.4 Notices 22
15.5 Applicable Law 22
15.6 Counterparts 22
15.7 Further Assurances 23
15.8 Entire Agreement 23
16. SUBMISSION TO JURISDICTION 23
17. JUDGMENT CURRENCY 24
18. NATURE OF DOCUMENT 24
THIS GUARANTEE AND INDEMNITY dated 8th December 1998 is made
BETWEEN:
(1) GLOBAL MARINE INC., a company incorporated under the laws of
the State of Delaware in the United States of America and
having its principal place of business at 777 North Eldridge
Parkway, Houston, Texas 77079, United States of America (the
"GUARANTOR"); and
(2) BMBF (No.12) limited, a company incorporated under the laws
of England and Wales with company registration number
2512609 whose registered office is at Churchill Plaza,
Churchill Way, Basingstoke, Hampshire RG21 7GP, England
(the "LESSOR").
WHEREAS:
(A) Pursuant to the Novation Agreement and the Head Lease, the
Lessor has agreed, inter alia, to purchase the Vessel from
the Builder and lease the same to the Lessee subject to the
terms and conditions therein contained.
(B) The Guarantor desires the Lessor to purchase the Vessel from
the Builder, to lease the same to the Lessee, for the
purposes of the Lessee sub-chartering the same to the Sub-
Lessee and the Sub-Lessee entering into the Exxon Contract
with the Exxon Party, and to enter into the Lease Documents
to which the Lessor is or is to be a party.
(C) The Lessee and the other Primary Obligors are wholly owned
Subsidiaries (US) of the Guarantor.
(D) It is a condition precedent to the obligations of the Lessor
under the Head Lease that the Guarantor executes and
delivers this Guarantee and Indemnity to the Lessor.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. DEFINITIONS AND INTERPRETATION
1.1 Definitions
Save as otherwise expressly provided herein, words and
expressions used in this Guarantee and Indemnity shall have
the meanings, if any, respectively attributed thereto in the
Head Lease. In this Guarantee and Indemnity (including the
Recitals) the following words and expressions shall have the
meanings respectively attributed to them below:
"ATTRIBUTABLE INDEBTEDNESS" when used with respect to any
Sale/Leaseback Transaction, means, as at the time of
determination, the present value (discounted at the rate set
forth or implicit in the terms of the lease included in such
transaction) of the total obligations of the lessee for
rental payments (other than amounts required to be paid on
account of taxes, maintenance, repairs, insurance,
assessments, utilities, operating and labour costs and other
items which do not constitute payments for property rights)
during the remaining term of the lease included in such
Sale/Leaseback Transaction (including any period for which
such lease has been extended). In the case of any lease
which is terminable by the lessee upon the payment of a
penalty, such net amount shall be the lesser of the net
amount determined assuming termination upon the first date
such lease may be terminated (in which case the net amount
shall also include the amount of the penalty, but no rent
shall be considered as required to be paid under such lease
subsequent to the first date upon which it may be so
terminated) or the net amount determined assuming no such
termination;
"ASSET" means every kind of property, asset, interest or
right, including but not limited to any future or contingent
rights to any revenues or other payment which would, in
accordance with GAAP consistently applied, be classified as
assets on that day;
"BOARD OF DIRECTORS" means the Board of Directors of the
Guarantor or any committee thereof duly authorised, with
respect to any particular matter, to act by or on behalf of
the Board of Directors of the Guarantor;
"BOARD RESOLUTION" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Guarantor to
have been duly adopted by the Board of Directors and to be
in full force and effect on the date of such certification,
and delivered to the Lessor;
"CAPITALISED LEASE OBLIGATION" of any person means any
obligation of such person to pay rent or other amounts under
a lease of property, real or personal, that is required to
be capitalised for financial reporting purposes in
accordance with GAAP; and the amount of such obligation
shall be the capitalised amount thereof determined in
accordance with GAAP;
"CONSOLIDATED NET TANGIBLE ASSETS" means the total amount of
assets (less applicable reserves and other properly
deductible items) after deducting (i) all current
liabilities (excluding the amount of those which are by
their terms extendible or renewable at the option of the
obligor to a date more than twelve (12) months after the
date as of which the amount is being determined and current
maturities of long-term debt) and (ii) all goodwill,
tradenames, trademarks, patents, unamortised debt discount
and expense and other like intangible assets, all as set
forth on the most recent quarterly balance sheet of the
Guarantor and its consolidated subsidiaries and determined
in accordance with GAAP;
"EMCUMBRANCE" means any mortgage, pledge, lien, charge
(whether fixed or floating), assignment, hypothecation,
security interest, title retention, preferential right or
trust arrangement and any other security agreement or
arrangement;
"FUNDED INDEBTEDNESS" means all Indebtedness (including
Indebtedness incurred under any revolving credit, letter of
credit or working capital facility) that matures by its
terms, or that is renewable at the option of any obligor
thereon to a date more than one year after the date on which
such Indebtedness is originally incurred;
"GAAP" means generally accepted accounting principles in the
United States of America set forth in the opinions and
pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the
accounting profession of the United States of America, as in
effect from time to time;
"GROUP" means the Guarantor and its Subsidiaries (US) from
time to time;
"GUARANTEED AGREEMENTS" means each of the Lease Documents to
which the Lessor and the Lessee and/or any other Primary
Obligor is a party;
"GUARANTEED OBLIGATIONS" means any and all monies,
liabilities and obligations (whether actual or contingent,
whether now existing or hereafter arising, whether arising
in respect of or attributable to the period prior to the
date of this Guarantee and Indemnity or to any time
hereafter whether or not for the payment of money, and
including, without limitation, any obligation or liability
to pay damages and including any interest which, but for the
application of bankruptcy or insolvency laws, would have
accrued on the amounts in question) which are now or which
may at any time and from time to time hereafter be due,
owing, payable or incurred or be expressed to be due, owing,
payable or incurred from or by the Lessee and/or any other
Primary Obligor to the Lessor under or in connection with
the Guaranteed Agreements and references to "GUARANTEED
OBLIGATIONS" include references to any part thereof;
"HEAD LEASE" means the lease in respect of the Vessel
entered or to be entered into between the Lessor and the
Lessee;
"INDEBTEDNESS" of any person means, without duplication, (i)
all indebtedness of such person for borrowed money (whether
or not the recourse of the lender is to the whole of the
assets of such person or only to a portion thereof), (ii)
all obligations of such person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all
obligations of such person in respect of letters of credit
or other similar instruments (or reimbursement obligations
with respect thereto), other than standby letters of credit,
performance bonds and other obligations issued by or for the
account of such person in the ordinary course of business,
to the extent not drawn or, to the extent drawn, if such
drawing is reimbursed not later than the third Business Day
following demand for reimbursement, (iv) all obligations of
such person to pay the deferred and unpaid purchase price of
property or services, except trade payables and accrued
expenses incurred in the ordinary course of business, (v)
all Capitalised Lease Obligations of such person, (vi) all
Indebtedness of others secured by a Lien on any asset of
such person, whether or not such Indebtedness is assumed by
such person (provided that if the obligations so secured
have not been assumed in full by such person or are not
otherwise such person's legal liability in full, then such
obligations shall be deemed to be in an amount equal to the
greater of (a) the lesser of (1) the full amount of such
obligations and (2) the fair market value of such assets, as
determined in good faith by the board of directors of such
person, which determination shall be evidenced by a board
resolution, and (b) the amount of obligations as have been
assumed by such person or which are otherwise such person's
legal liability), and (vii) all Indebtedness of others
(other than endorsements in the ordinary course of business)
guaranteed by such person to the extent of such guarantee;
"JOINT VENTURE" means (1) with respect to properties located
in the United States of America, any partnership,
corporation or other entity, in which up to and including 50
percent. (50%) of the partnership interests, outstanding
voting stock or other equity interests is owned, directly or
indirectly, by the Guarantor and/or one or more Subsidiaries
(US), and (2) with respect to properties located outside the
United States of America, any partnership, corporation or
other entity, in which up to and including 60 percent. (60%)
of the partnership interests, outstanding voting stock or
other equity interests is owned, directly or indirectly, by
the Guarantor and/or one or more Subsidiaries (US). A Joint
Venture shall not be a Subsidiary (US);
"LESSEE" means Global Marine International Drilling
Corporation, a company incorporated under the laws of the
Bahamas and having its registered office at c/o McKinney,
Bancroft & Hughes, Mareva House, 4 George Street, PO Box No.
3937, Nassau, Bahamas;
"LIABILITY" means a liability, loss, charge, claim,
proceeding, damage, judgment, enforcement, penalty, fine,
fee, cost and expense of whatsoever nature;
"LIEN" means any mortgage, pledge, lien, encumbrance, charge
or security interest. For purposes of this Guarantee and
Indemnity, the Guarantor or any Subsidiary (US) of the
Guarantor shall be deemed to own subject to a Lien any asset
which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement,
Capitalised Lease Obligation or other title retention
agreement relating to such asset;
"PARI PASSU INDEBTEDNESS" means any Indebtedness of the
Guarantor, whether outstanding on the date of this Guarantee
and Indemnity or thereafter created, incurred or assumed,
unless, in the case of any particular Indebtedness, the
instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such
Indebtedness shall be subordinated in right of payment to
the obligations of the Guarantor under this Guarantee and
Indemnity;
"PERMITTED LIENS" shall mean (i) Liens existing on the date
of this Guarantee and Indemnity, (ii) Liens on property or
assets of, or any shares of stock of, or other equity
interests in, or indebtedness of, any person existing at the
time such person becomes a Subsidiary (US) of the Guarantor
or at the time such person is merged into or consolidated
with the Guarantor or any of its Subsidiaries (US) or at the
time of a sale, lease or other disposition of the properties
of a person (or a division thereof) as an entirety or
substantially as an entirety to the Guarantor or a
Subsidiary (US); (iii) Liens in favour of the Guarantor or
any of its Subsidiaries (US); (iv) Liens in favour of
governmental bodies to secure progress or advance payments;
(v) Liens securing industrial revenue or pollution control
bonds; (vi) Liens on assets existing at the time of
acquisition thereof, securing all or any portion of the cost
of acquiring, constructing, improving, developing or
expanding such assets or securing Indebtedness incurred
prior to, at the time of, or within twenty-four (24) months
after, the later of the acquisition, the completion of
construction, improvement, development or expansion or the
commencement of commercial operation of such assets, for the
purpose of (a) financing all or any part of the purchase
price of such assets or (b) financing all or any part of the
cost of construction, improvement, development or expansion
of any such assets; (vii) statutory liens or landlords',
carriers', warehouseman's, mechanics', suppliers',
materialmen's, repairmen's or other like Liens arising in
the ordinary course of business and with respect to amounts
not yet delinquent or being contested in good faith by
appropriate proceedings; (viii) Liens on current assets of
the Guarantor or any Subsidiary (US) securing Indebtedness
of the Guarantor or such Subsidiary (US), respectively (ix)
Liens on the stock, partnership or other equity interest of
the Guarantor or any Subsidiary (US) in any Joint Venture or
any Subsidiary (US) that owns an equity interest in such
Joint Venture to secure Indebtedness, provided the amount of
such Indebtedness is contributed and/or advanced solely to
such Joint Venture; and (x) any extensions, substitutions,
replacements or renewals in whole or in part of a Lien
enumerated in clauses (i) through (ix) above;
"PRINCIPAL PROPERTY" means any drilling rig or drillship, or
integral portion thereof, owned or leased by the Guarantor
or any Subsidiary (US) and used for drilling offshore oil
and gas wells, which, in the opinion of the board of
directors, is of material importance to the business of the
Guarantor and its Subsidiaries (US) taken as a whole, but no
such drilling rig or drillship, or portion hereof, shall be
deemed of material importance if its net book value (after
deducting accumulated depreciation) is less than two
percent. (2%) of Consolidated Net Tangible Assets;
"PRIMARY OBLIGOR" means each member of the Guarantor's Group
(other than the Guarantor) which is a party to any Lease
Document, including in any event the Lessee, the Sub-Lessee
and, prior to the Delivery Date, the Option Party;
"SALE/LEASEBACK TRANSACTION" means any arrangement with any
person pursuant to which the Guarantor or any Subsidiary
(US) leases any Principal Property that has been or is to be
sold or transferred by the Guarantor or the Subsidiary (US)
to such person, other than (1) temporary leases for the
term, including renewals at the option of the lessee, of not
more than five years, (2) leases between the Guarantor and
a Subsidiary (US) or between Subsidiaries (US), (3) leases
of Principal Property executed by the time of, or within 12
months after the latest of, the acquisition, the completion
of construction or improvement, or the commencement of
commercial operation of the Principal Property, and (4)
arrangements pursuant to any provision of law with an effect
similar to the former Section 168(f)(8) of the Internal
Revenue Code of 1954;
"VESSEL" means the Glomar class 456 ultra-deepwater
drillship to be constructed by the Shipbuilder pursuant to
the Shipbuilding Contract under hull number 1740 and to be
registered on or prior to the Delivery Date in the name of
the Lessor under the Panamanian flag under the name "GLOMAR
IRISH SEA I" (further details of which are set out in the
Head Lease);
"VESSEL SYSTEMS" shall have the meaning given thereto in
Clause 8.1.15; and
"YEAR 2000 ISSUE" means the failure of computer software,
hardware and firmware systems and equipment containing
embedded computer chips to properly receive, transmit,
process, manipulate, store, retrieve, re-transmit or in any
other way utilise data and information due to the occurrence
of the year 2000 or the inclusion of dates on or after 1
January, 2000.
1.2 INTERPRETATION
(A) In this Guarantee and Indemnity references to:
(i) clauses, paragraphs, sub-paragraphs, or the
schedule are, unless otherwise specified,
references to clauses, paragraphs, sub-
paragraphs of, and the schedule to, this
Guarantee and Indemnity as from time to time
amended in accordance with the provisions of
this Guarantee and Indemnity;
(ii) any statute or other legislative provisions
shall, unless otherwise specified, be read to
include any statutory or legislative
modification or re-enactment thereof, or
substitution therefor;
(iii) this Guarantee and Indemnity or any other
agreement or instrument shall include this
Guarantee and Indemnity or such other
agreement or instrument as it may from time to
time be amended, novated, supplemented or
substituted with the agreement of the parties
hereto or thereto as the case may be;
(iv) "PERSON" means any individual, corporation,
partnership, limited liability company, joint
venture, incorporated or unincorporated
association, joint stock company, trust,
unincorporated organisation or government or
other agency or political subdivision thereof
or other entity of any kind;
(v) "ASSIGNEE" of a person shall include any
person who has assumed all or some of the
rights and/or obligations of the relevant
person, whether by assignment, novation or
otherwise;
(vi) reference to any person shall include its
successors (whether of the same name or
another name) and permitted assignees;
(vii) words denoting the singular number shall
include the plural and vice versa;
(viii) the words "OTHER" and "OTHERWISE" shall not be
construed ejusdem generis with any foregoing
words where a wider construction is possible;
(ix) the "WINDING-UP" of a person also includes the
amalgamation, reconstruction, reorganisation,
administration, dissolution, liquidation,
merger or consolidation of that person, and
any equivalent or analogous procedure under
the law of any jurisdiction in which that
person is incorporated, domiciled or resident
or carries on business or has assets; and
(x) the words "INCLUDING" and "IN PARTICULAR"
shall be construed as being by way of
illustration or emphasis only and shall not be
construed as, nor shall they take effect as,
limiting the generality of the foregoing
words.
(B) Clause and other headings are for ease of reference
only and shall not affect the interpretation of this
Guarantee and Indemnity.
2. GUARANTEE AND INDEMNITY
2.1 In consideration of the Lessor, inter alia, entering, and
agreeing to enter, into the Head Lease and the other Lease
Documents to which it is or is to be a party, the Guarantor:
2.1.1 as primary obligor and not as surety only, hereby
unconditionally and irrevocably guarantees to the
Lessor the due and punctual observance and
performance by the Lessee and/or any other Primary
Obligor of each and every one of the Guaranteed
Obligations;
2.1.2 hereby unconditionally and irrevocably covenants with
and undertakes with the Lessor that in the event of
a default by the Lessee and/or any other Primary
Obligor in the observance or performance for whatever
reason of any of the Guaranteed Obligations, as and
when the same shall be expressed to be due to be
observed or performed, the Guarantor shall forthwith
on demand by the Lessor perform such Guaranteed
Obligation or cause such Guaranteed Obligation to be
performed, punctually as if such Guaranteed
Obligation were performed by the Lessee and/or any
other Primary Obligor; and
2.1.3 hereby irrevocably and unconditionally undertakes,
covenants and agrees with the Lessor as a primary
obligation to indemnify the Lessor and keep the
Lessor indemnified on demand and on a full indemnity
basis for and against any and all Liabilities
incurred or sustained by the Lessor in relation to
and arising out of the failure of the Lessee and/or
any other Primary Obligor duly and punctually to
perform the Guaranteed Obligations.
2.2 As a separate and alternative stipulation in addition to its
liabilities in Clause 2.1, the Guarantor hereby
unconditionally and irrevocably agrees with the Lessor that
any of the Guaranteed Obligations which is expressed to be
performed by the Lessee and/or any other Primary Obligor but
which may not be recoverable from the Guarantor on the
footing of a guarantee (whether by reason of the dissolution
of the Lessee and/or any other Primary Obligor or any
reconstruction or amalgamation in which or as a consequence
of which the Lessee and/or any other Primary Obligor loses
its respective separate corporate identity or any other fact
or circumstance whatsoever and whether or not known or
becoming known to the Lessor) shall nevertheless be
recoverable from the Guarantor as if it were the principal
debtor.
2.3 In addition to its liabilities under Clauses 2.1 and 2.2
above the Guarantor shall pay or cause to be paid to the
Lessor on demand interest at the Default Rate (both before
and after judgment) accruing on a day to day basis, and on
the basis of a 365 day year (or a 360 day year when the
amount in respect of which Default Interest is payable under
this Clause 2.3 is denominated in a currency where it is
customary for banks or financial institutions to calculate
interest on such a basis), on each amount (or any part
thereof) for the time being due to the Lessor under this
Guarantee and Indemnity and unpaid from the date of demand
on the Guarantor for payment until payment is made (but
excluding the day on which value for any payment made is
received by the Lessor).
2.4 the Guarantor hereby agrees that for the purposes of this
Guarantee and Indemnity, service by the Lessor on the Lessee
of a Termination Notice shall constitute a valid and
effective service of such notice and the Lessee shall be
conclusively deemed to have become liable to make the
payments expressed in Clause 21.5 of the Head Lease to be
payable by the Lessee to the Lessor upon service of such
notice, notwithstanding that, as between the Lessee and the
Lessor, the Lessor is, by virtue of any laws of England and
Wales or any other applicable jurisdiction, relating to
bankruptcy, insolvency or administration or any similar
laws, prohibited from serving such notice, repossessing the
Vessel or commencing or continuing any proceedings or other
legal process in England and Wales or such other
jurisdiction against the Lessee would not be effective
according to its terms.
3. DEMANDS AND CERTIFICATES
3.1 In order to make any demand under this Guarantee and
Indemnity the Lessor shall serve upon the Guarantor a notice
in writing.
3.2 Any certificate from any director, officer or authorised
person of the Lessor or any agent of the Lessor contained in
any demand, notice or other communication given or made by
the Lessor under this Guarantee and Indemnity in relation to
the amount of the Guarantor's liability in relation to the
Guaranteed Obligations or any other amount payable by the
Guarantor under this Guarantee and Indemnity shall be prima
facie evidence that the facts stated in such certificate are
true and correct.
3.3 The Guarantor acknowledges and agrees with the Lessor that,
whenever the Lessor cannot reasonably ascertain with
certainty the amount of any liability of the Lessee and/or
any other Primary Obligor to the Lessor under any of the
Guaranteed Agreements, the Lessor may make demand on the
Lessee and/or any other Primary Obligor on the basis of a
provisional estimate thereof by the Lessor, and if any such
demand is not satisfied in full the Lessor may make demand
on the Guarantor under this Guarantee and Indemnity in
accordance with and subject to Clause 2 for the sum so
demanded from the Lessee and/or any other Primary Obligor.
Without prejudice to Clauses 2 and 3.2, the Guarantor agrees
that no such demand on the Guarantor shall be vitiated or
invalidated if it subsequently transpires that the amount
demanded from the Lessee, any other Primary Obligor or the
Guarantor was less than or greater than the amount which was
properly due. If it subsequently transpires that an amount
(including interest) paid by the Guarantor was greater than
the amount which was properly due from the Guarantor, the
Lessor shall refund the excess to the Guarantor together
with an amount equal to interest at Base Rate on the excess
from the date paid to the date refunded.
3.4 Without prejudice to Clauses 3.1, 3.2 and 3.3 the Lessor may
at any time and from time to time issue further or corrected
demands on the Guarantor in respect of any Guaranteed
Obligation.
4. TIME AND INDULGENCE
4.1 The Lessor shall be at liberty at all times and from time to
time, whether before or after any demand for payment under
this Guarantee and Indemnity and without discharging or in
any way affecting the Guarantor's liability hereunder, to do
all or any of the following:
4.1.1 terminate, amend or novate or agree to the
termination, amendment or novation (in accordance
with the terms of the Guaranteed Agreements) any of
the Guaranteed Agreements in any manner whatsoever;
4.1.2 grant to the Lessee, any other Primary Obligor or to
any other person any time or indulgence;
4.1.3 terminate or cancel the Shipbuilding Contract and/or
the purchase of the Vessel thereunder;
4.1.4 deal with, exchange, renew, vary, release, modify or
abstain from perfecting or enforcing any securities,
guarantees or rights which the Lessor may now or
hereafter have from or against the Lessee, any other
Primary Obligor or any other person in respect of the
respective obligations of the Lessee, any other
Primary Obligor or such other person under or in
respect of the Guaranteed Agreements or the
transactions contemplated thereby;
4.1.5 compound with, discharge or vary the liability of the
Lessee, any other Primary Obligor or any other person
or guarantor to the Lessee and/or any other Primary
Obligor or concur in, accept or vary any compromise,
arrangement or settlement with the Lessee, any other
Primary Obligor or any other person or guarantor or
concur in or vary any deed of arrangement or deed of
assignment for the benefit of creditors of any such
person;
4.1.6 omit to prove or fail to maintain any right of proof
for or to claim or enforce payment of any dividend or
composition; and
4.1.7 take or omit to take any security from the Lessee,
any other Primary Obligor or any other person or
guarantor in respect of the obligations of the Lessee
and/or any other Primary Obligor under or in respect
of the Guaranteed Agreements or the transactions
contemplated thereby whether contemporaneously with
this Guarantee and Indemnity or otherwise.
5. CONTINUING SECURITY
5.1 This Guarantee and Indemnity shall be a continuing security
and accordingly:
5.1.1 shall be binding on the Guarantor and its successors
and assigns;
5.1.2 shall not be discharged by any partial payment by the
Lessee, any other Primary Obligor or any other person
under or in respect of any of the Guaranteed
Agreements;
5.1.3 shall extend to cover the balance due at any time
from the Lessee and/or any other Primary Obligor to
the Lessor under or in respect of the Guaranteed
Agreements or the transactions contemplated thereby;
5.1.4 shall be in addition to and not in substitution for
or derogation of any other security which the Lessor
may at any time hold in respect of the obligations of
the Lessee and/or any other Primary Obligor under or
in respect of the Guaranteed Agreements or the
transactions contemplated thereby;
5.1.5 except to the extent that the Lessor expressly waives
the Guarantor's obligations under this Guarantee and
Indemnity, shall not be discharged or in any way
affected by any action taken or not taken by the
Lessor; and
5.1.6 shall not be discharged or in any way affected by any
merger with any other person or persons or
restructuring of any nature whatsoever of, or any
change of name by, the Lessee and/or any other
Primary Obligor, or the disposal of any interest in
the Lessee and/or any other Primary Obligor (whether
or not the same is consented to, or otherwise
approved by, the Lessor).
6. NO COMPETITION
6.1 From the date or dates upon which any demand is properly
made against the Guarantor under this Guarantee and
Indemnity until such time as the Lessor has received, and is
entitled to retain, payment of the Guaranteed Obligations in
full, the Guarantor shall not:
6.1.1 claim any set-off or counterclaim against the Lessee
and/or any other Primary Obligor in respect of any
payment by the Guarantor hereunder or in respect of
any outstanding actual or contingent liability
between the Guarantor and the Lessee and/or any other
Primary Obligor; or
6.1.2 make or enforce any claim or right (including a right
of subrogation or contribution) against the Lessee
and/or any other Primary Obligor or prove in
competition with the Lessor in the event of the
liquidation of the Lessee and/or any other Primary
Obligor in respect of any payment by the Guarantor
hereunder or in respect of any outstanding actual or
contingent liability between the Guarantor and the
Lessee and/or any other Primary Obligor; or
6.1.3 in competition with the Lessor claim the benefit of
any security or guarantee now or hereafter held by
the Lessor for any money or liabilities due or
incurred by the Lessee and/or any other Primary
Obligor to the Lessor or any share therein.
7. GUARANTOR'S OBLIGATIONS
7.1 The Guarantor's obligations under this Guarantee and
Indemnity are those of primary obligor and exist
irrespective of any total or partial invalidity, illegality
or unenforceability of any of the Guaranteed Agreements.
7.2 The Lessor shall not be obliged before making demand under
or taking steps to enforce this Guarantee and Indemnity:
7.2.1 to take action or obtain judgment against the Lessee,
any other Primary Obligor or any other person in any
court or tribunal; or
7.2.2 to make or file any claim in a bankruptcy or
liquidation of the Lessee, any other Primary Obligor
or any other person; or
7.2.3 to exercise diligence against the Lessee, any other
Primary Obligor or any other person under any of the
Guaranteed Agreements or the transactions
contemplated thereby.
7.3 The Guarantor waives and agrees not to enforce or claim the
benefit of any and all rights it has or may from time to
time have as surety under any applicable law which is or may
be inconsistent with any of the provisions of this Guarantee
and Indemnity.
8. REPRESENTATIONS AND WARRANTIES
8.1 The Guarantor acknowledges that the Lessor has entered into
the Lease Documents in full reliance on representations and
warranties by the Guarantor in the terms set out in this
Clause 8 and the Guarantor now represents and warrants to
the Lessor that the following statements are at the date
hereof true and accurate, namely that:
8.1.1 the Guarantor is a company duly incorporated and
validly existing under the laws of the State of
Delaware in the United States of America and has the
corporate power and authority to own its assets and
carry on its business as it is being presently
conducted and to enter into and perform its
obligations under this Guarantee and Indemnity and to
consummate the transactions contemplated hereby;
8.1.2 the execution, delivery and performance by the
Guarantor of this Guarantee and Indemnity and the
consummation of the transactions contemplated hereby
have been duly authorised by all necessary or
appropriate corporate action on the part of the
Guarantor, do not require any shareholder approval,
or approval or consent of any trustee or holders of
any indebtedness or obligations of the Guarantor
except such as have been duly obtained and are in
full force and effect, and do not contravene or
constitute a default under (aa) any law, governmental
rule, regulation or decree, directive, convention,
treaty, judgment, injunction or any official or
judicial order binding on the Guarantor or any of its
assets, (bb) its constitutional documents or (cc) any
agreement consent or instruments to which it is a
party or is binding upon it or any of its assets nor
result in the creation or imposition of any Lien on
any of its assets pursuant to the provisions of any
such agreement, consent or instrument;
8.1.3 this Guarantee and Indemnity constitutes, or when
executed and delivered will constitute, the legal,
valid and binding obligations of the Guarantor
enforceable in accordance with its terms subject to
general principles of equity and the law affecting
creditors' rights generally;
8.1.4 no authorisation, approval, consent, licence,
exemption, registration, recording, filing or
notarisation and no payment of any duty or tax and no
other action whatsoever which has not been duly and
unconditionally obtained, made or taken is necessary
or desirable to ensure the validity, enforceability
or priority of the liabilities and obligations of the
Guarantor or the rights of the Lessor under this
Guarantee and Indemnity;
8.1.5 no event has occurred which constitutes, or which
with the giving of notice and/or the lapse of time
and/or a relevant determination would constitute a
contravention of, or a default under, any agreement
by which the Guarantor, its business or any of its
assets is bound or affected, being a contravention or
default which would be likely to either have a
material adverse effect on the business, assets or
financial or trading condition of the Guarantor or
materially and adversely affect its ability to
observe or perform its obligations under this
Guarantee and Indemnity;
8.1.6 no litigation, arbitration or administrative
proceedings or claim which would be likely to, by
itself or together with any other such proceedings or
claims, either have a material adverse effect on its
business, assets or financial or trading condition or
materially and adversely affect its ability to
observe or perform its obligations under this
Guarantee and Indemnity is presently in progress or,
to the best of the knowledge, information and belief
of the Guarantor, pending or threatened against the
Guarantor, its business or any of its assets;
8.1.7 No Termination Event has occurred and is continuing;
8.1.8 the Guarantor has not taken any corporate action nor,
to the best of its knowledge and belief, have any
other steps been taken or legal proceedings been
started or threatened against it for its winding up,
dissolution, administration or re-organisation or for
the appointment of a receiver, administrator,
administrative receiver, trustee or similar officer
of it or of any or all of its assets or revenues;
8.1.9 under applicable laws of the State of Delaware and
the federal laws of the United States of America in
force at the date hereof the Guarantor is not
required to deduct any Taxes from any payments that
it may be required to make under this Guarantee and
Indemnity;
8.1.10 the Guarantor is conducting its business in all
material respects in compliance with all applicable
laws, regulations and government directives and the
Guarantor has obtained all material licences,
permissions, authorisations and consents necessary
for the conduct of its business and to the best of
its knowledge and belief after due and proper enquiry
all such licences, permissions, authorisations and
consents are in full force and effect;
8.1.11 the audited consolidated accounts of the Guarantor
for the period ending 31st December 1997 have been
prepared in accordance with generally accepted
accounting principles and practices in the United
States of America consistently applied and fairly
represent the financial condition of the Group at
that date and the results of their operations for the
accounting period ended on that date, and there has
been no material adverse change in the consolidated
financial condition of the Group since that date;
8.1.12 there have been no significant losses not disclosed
either in the accounts referred to in Clause 8.1.11
or otherwise disclosed to the Lessor in writing;
8.1.13 to the best of the knowledge, information and belief
of the Guarantor, all information furnished by the
Guarantor to the Lessor relating to the transactions
contemplated by the Guaranteed Agreements is true and
accurate in all material respects and there are no
omissions of material facts or misleading information
contained in such information;
8.1.14 to the best of the knowledge, information and belief
of the Guarantor, neither the Guarantor nor any of
its property or assets is entitled to immunity on the
grounds of sovereignty or otherwise from any legal
action, suit or proceeding, attachment or other legal
process in any jurisdiction;
8.1.15 the Lessee and the other Primary Obligors are wholly
owned direct or indirect Subsidiaries (US) of the
Guarantor;
8.1.16 the Guarantor is reviewing the effect of the Year
2000 Issue on the material computer software,
hardware and firmware systems and equipment
containing embedded microchips owned or operated by
itself, the Lessee and the Sub-Lessee on board the
Vessel (the "VESSEL SYSTEMS"). The costs of any
reprogramming and testing required as a result of the
Year 2000 Issue to permit the proper functioning of
the Vessel Systems and the proper processing of data
are not reasonably expected to result in a default by
the Guarantor in respect of its obligations under
this Guarantee and Indemnity or to have a materially
adverse effect on the business, assets, operations,
prospects or condition (financial or otherwise) of
the Guarantor.
8.1.17 each member of the Group has complied in all material
respects with all Taxation laws in all jurisdictions
in which it is subject to Taxation and has paid all
Taxes due and payable by it and no claims are being
asserted against any member of the Group with respect
to Taxes which, if adversely determined, would be
likely either to have a material adverse effect on
the business or assets or financial condition of the
Group as a whole or materially and adversely to
affect the Guarantor's ability to observe and perform
its obligations under this Guarantee and Indemnity;
8.1.18 no stamp or registration duty or similar taxes or
charges are payable in the States of Delaware or
Texas or under the federal laws of the United States
of America in respect of this Guarantee and Indemnity
or any of the other Lease Documents; and
8.1.19 subject to any qualifications contained in the
Delaware legal opinions addressed to the Lessor (as
referred to in Schedule 5 to the Head Lease) the
choice of English law to govern this Guarantee and
Indemnity is a valid choice of law and English law
will accordingly be applied by the courts in the
State of Delaware and the federal courts of the
United States of America if this Guarantee and
Indemnity or any claim hereunder comes under their
jurisdiction upon proof of the relevant provisions of
English law. The submission hereunder by the
Guarantor to the jurisdiction of the courts of
England and the appointment by the Guarantor of
process agents in England to accept service of
process in respect of the jurisdiction of such courts
is valid and binding upon the Guarantor.
8.2 The representations and warranties by the Guarantor
contained in Clause 8.1 (other than Clauses 8.1.3, 8.1.4,
8.1.9, 8.1.11, 8.1.15, 8.1.17 and 8.1.18) shall be deemed to
be repeated on and as of each Instalment Date as if made
with reference to the facts and circumstances existing at
such date (but so that the representation and warranty in
Clause 8.1.12 shall for this purpose refer to the then
latest audited consolidated financial accounts of the
Guarantor).
8.3 The representations and warranties contained in this Clause
8 and the rights of the Lessor in respect thereof shall
survive the execution and delivery of this Guarantee and
Indemnity.
9. COVENANTS
The Guarantor hereby covenants with the Lessor that, so long
as it remains under any liability, actual or contingent,
under this Guarantee and Indemnity:
9.1 it will provide to the Lessor such financial and
other information relating to the Group as is
publicly available or as the Guarantor makes
available to its creditors generally including,
without limitation, copies of the quarterly and
annual consolidated audited accounts of the Guarantor
and the Group no later than 60 days after the end of
the quarterly period or 180 days after the end of the
annual period (as the case may be) to which they
relate;
9.2 it will provide to the Lessor promptly, such further
information in the possession or control of the
Guarantor or of any of its Subsidiaries (US)
regarding the financial condition and operations of
the Guarantor or any of its Subsidiaries (US), as the
Lessor may reasonably request;
9.3 it will at all times, and from time to time, obtain,
maintain, preserve and keep in full force and effect
any permits, consents, licences and other
authorisations governmental or otherwise as are from
time to time necessary for the performance of its
obligations under this Guarantee and Indemnity and
comply in all material respects with any conditions
attached thereto;
9.4 except with the prior written consent of the Lessor,
not take or accept any Lien (as defined in the Head
Lease) from the Lessee, any other Primary Obligor or
any other person in respect of the Guarantor's
liability under this Guarantee and Indemnity PROVIDED
HOWEVER THAT any such Lien (as defined in the Head
Lease) taken with or without such consent shall be
held by the Guarantor for the benefit of and on trust
for the Lessor so long as the Guarantor remains under
any actual or contingent liability under this
Guarantee and Indemnity;
9.5 forthwith notify the Lessor if the Guarantor becomes
aware of the occurrence of (i) any Termination Event
and (ii) any Guarantor Credit Event;
9.6 it shall procure that the Lessee and the other
Primary Obligors shall remain Subsidiaries (US) of
the Guarantor;
9.7 it shall take all commercially reasonable action to
complete in all material respects by 31 September
1999, the reprogramming and testing of all Vessel
Systems needed as a result of the Year 2000 Issue to
permit the proper functioning of the Vessel Systems.
At the request of the Lessor, the Guarantor shall
provide to the Lessor reasonable assurance of its
compliance with this Clause 9.7;
9.8 its obligations hereunder do and will rank at least
pari passu with all other present and future
unsecured unsubordinated obligations of the Guarantor
other than obligations preferred by laws applicable
to corporations generally in the State of Delaware
and the federal laws of the United States of America.
9.9 Subject to Clause 9.10, the Guarantor shall do or
cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence
and the corporate, partnership and other existence of
each of its Subsidiaries (us) and all rights (charter
and statutory) and franchises of the Guarantor and
its Subsidiaries (us), provided that the Guarantor
shall not be required to preserve the corporate
existence of any Subsidiary (US) of the Guarantor
(excluding in all events the Lessee and, prior to the
Delivery Date, the Option Party) or any such right or
franchise if the Board of Directors shall determine
that the preservation thereof is no longer desirable
in the conduct of the business of the Guarantor and
its Subsidiaries (US) taken as a whole and that the
loss thereof would not have a material adverse effect
on the business, prospects, assets or financial
condition of the Guarantor and its Subsidiaries (US)
taken as a whole and would not have any material
adverse effect on the payment and performance of the
obligations of the Guarantor under this Guarantee and
Indemnity.
9.10 The Guarantor shall not, in any transaction or series
of transactions, consolidate with or merge into any
person, or sell, lease, convey, transfer or otherwise
dispose of all or substantially all of its assets to
any person, unless:
(1) either (a) the Guarantor shall be the
continuing corporation or (b) the person (if
other than the Guarantor) formed by such
consolidation or into which the Guarantor is
merged, or to which such sale, lease,
conveyance, transfer or other disposition
shall be made (collectively, the "Successor"),
is organised and validly existing under the
laws of the United States of America, any
political subdivision thereof or any State
thereof or the District of Columbia, and
expressly assumes the performance of the
Guarantor's covenants and obligations under
this Guarantee and Indemnity;
(2) immediately after giving effect to such
transaction or series of transactions, no
Termination Event shall have occurred and be
continuing or would result therefrom; and
(3) the Guarantor delivers to the Lessor a
certificate certified by a duly authorised
officer of the Guarantor and a legal opinion
in form satisfactory to the Lessor, each
stating that the transaction complies with
this Guarantee and Indemnity.
9.11 The Guarantor will not, and will procure that none of
its Subsidiaries (US) will, either in a single
transaction or in a series of transactions whether
related or not and whether voluntarily or
involuntarily, sell, transfer, or otherwise dispose
of all or a substantial part of the Assets of the
Guarantor or such Subsidiary (US) (in the case of a
Subsidiary (US), being Assets which are substantial
in relation to the Guarantor and its Subsidiaries
(US) taken as a whole), provided that the Guarantor
and any of its Subsidiaries (US) may, either in a
single transaction or in a series of transactions
whether related or not and whether voluntarily or
involuntarily, sell, transfer, or otherwise dispose
of all or a substantial part of the Assets of the
Guarantor or such Subsidiary (US) (in the case of a
Subsidiary (US), being assets which are substantial
in relation to the Guarantor and its Subsidiaries
(US) taken as a whole) if the Board of Directors
shall determine that the retention of such Assets is
no longer desirable in the conduct of the business of
the Guarantor and its Subsidiaries (US) taken as a
whole and that the disposal thereof would not have a
material adverse effect on the business, prospects,
assets or financial condition of the Guarantor and
its Subsidiaries (US) taken as a whole and would not
have any material adverse effect on the payment and
performance of the obligations of the Guarantor under
this Guarantee and Indemnity.
9.12 Limitation on Liens
The Guarantor shall not, and shall not permit any of
its Subsidiaries (US) to, issue, assume or guarantee
any Indebtedness for borrowed money secured by any
Lien upon any Principal Property or any shares of
stock or indebtedness of any Subsidiary (US) that
owns or leases a Principal Property (whether such
Principal Property, shares of stock or indebtedness
are now owned or hereafter acquired) without making
effective provision whereby the Guaranteed
Obligations (together with, if the Guarantor shall so
determine, any other Indebtedness or other obligation
of the Guarantor) shall be secured equally and
ratably with (or, at the option of the Guarantor,
prior to) the Indebtedness so secured for so long as
such Indebtedness is so secured. The foregoing
restrictions will not, however, apply to Indebtedness
secured by Permitted Liens.
Notwithstanding the foregoing, the Guarantor and its
Subsidiaries (US) may, without securing the liability
of the Guaranteed Obligations, issue, assume or
guarantee Indebtedness that would otherwise be
subject to the foregoing restrictions in an aggregate
principal amount that, together with all other such
Indebtedness of the Guarantor and its Subsidiaries
(US) that would otherwise be subject to the foregoing
restrictions (not including Indebtedness permitted to
be secured under the definition of Permitted Liens)
and the aggregate amount of Attributable Indebtedness
deemed outstanding with respect to Sale/Leaseback
Transactions (other than those in connection with
which the Company has voluntarily retired any Pari
Passu Indebtedness or any Funded Indebtedness
pursuant to Clause 9.12(c)) does not at any one time
exceed fifteen percent. (15%) of Consolidated Net
Tangible Assets of the Guarantor and its consolidated
Subsidiaries (US).
9.13 Limitation on Sale/Leaseback Transactions
The Guarantor shall not, and shall not permit any
Subsidiary (US) to, enter into any Sale/Leaseback
Transaction with any person (other than the Guarantor
or a Subsidiary (US)) unless:
(a) the Guarantor or such Subsidiary (US) would be
entitled to incur Indebtedness in a principal
amount equal to the Attributable Indebtedness
with respect to such Sale/Leaseback
Transaction secured by a Lien on the property
subject to such Sale/Leaseback Transaction
pursuant to Clause 9.13 without equally and
ratably securing the obligations of the
Guarantor under the Guarantee and Indemnity
pursuant to such covenant;
(b) after the date of this Guarantee and Indemnity
and within a period commencing nine months
prior to the consummation of such
Sale/Leaseback Transaction and ending nine
months after the consummation thereof, the
Guarantor or such Subsidiary (US) shall have
expended for property used or to be used in
the ordinary course of business of the
Guarantor and its Subsidiaries (US) an amount
equal to all or a portion of the net proceeds
of such Sale/Leaseback Transaction and the
Guarantor shall have elected to designate such
amount as a credit against such Sale/Leaseback
Transaction (with any such amount not being so
designated to be applied as set forth in
clause (c) below or as otherwise permitted);
or
(c) the Guarantor, during the nine-month period
after the effective date of such
Sale/Leaseback Transaction, shall have applied
to either (i) the voluntary defeasance or
retirement of any Pari Passu Indebtedness or
any Funded Indebtedness or (ii) the
acquisition of one or more Principal
Properties at fair value, an amount equal to
the greater of the net proceeds of the sale or
transfer of the property leased in such
Sale/Leaseback Transaction and the fair value,
as determined by the board of directors of the
Guarantor and evidenced by a board resolution,
of such property at the time of entering into
such Sale/Leaseback Transaction (in either
case adjusted to reflect the remaining term of
the lease and any amount expended by the
Guarantor as set forth in clause (b) above),
less an amount equal to the sum of the
principal amount of Pari Passu Indebtedness
and Funded Indebtedness voluntarily defeased
or retired by the Guarantor plus any amount
expended to acquire any Principal Properties
at fair value, within such nine-month period
and not designated as a credit against any
other Sale/Leaseback Transaction entered into
by the Guarantor or any Subsidiary (US) during
such period.
9.14 The Guarantor hereby covenants with the Lessor that,
so long as it remains under any liability, actual or
contingent, under this Guarantee and Indemnity it
shall provide to the Lessor a certificate, signed by
a Director of the Guarantor, stating that (i) the
Lessee is complying with clause 11.7(c) of the Head
Lease and (ii) the Guarantor shall procure that the
Lessee will continue to comply with clause 11.7(c) of
the Head Lease, such certificate to be provided at
the same time as it is required to provide to the
Lessor the annual consolidated audited accounts of
the Guarantor and the Group pursuant to Clause 9.1.
10. PAYMENTS AND TAXES
10.1 PAYMENTS
10.1 PAYMENTS AND TAXES
(a) All sums payable to the Lessor pursuant to or in
connection with this Guarantee or Indemnity shall be
paid in full without any set-off or counterclaim
whatsoever and free and clear of all deductions or
withholdings whatsoever save only as may be required
by law.
(b) If any deduction or withholding is required by law in
respect of any payment due to the Lessor pursuant to
or in connection with this Guarantee and Indemnity or
any document contemplated by or entered into pursuant
hereto, the Guarantor shall:
(i) ensure or procure that the deduction or
withholding is made and that it does not
exceed the minimum legal requirement therefor;
(ii) pay, or procure the payment of, the full
amount deducted or withheld to the relevant
Taxation or other authority in accordance with
the applicable law;
(iii) increase the payment in respect of which the
deduction or withholding is required so that
the net amount received by the Lessor after
the deduction or withholding (and after taking
account of any further deduction or
withholding which is required to be made which
arises as a consequence of the increase) shall
be equal to the amount which the Lessor would
have been entitled to receive in the absence
of any requirement to make a deduction or
withholding; and
(iv) promptly deliver or procure the delivery to
the Lessor of appropriate receipts evidencing
the deduction or withholding which has been
made.
(c) If the Lessor determines in its absolute discretion
that it has received, realised, utilised and retained
a Tax benefit by reason of any deduction or
withholding in respect of which the Guarantor has
made an increased payment or paid a compensating sum
under this Clause 10.1 the Lessor shall, provided the
Lessor has received all amounts which are then due
and payable under any of the provisions of this
Guarantee and Indemnity, pay to the Guarantor (to the
extent that the Lessor can do so without prejudicing,
the amount of that benefit and the right of the
Lessor to obtain any other benefit relief or
allowance which may be available to it) as soon as
reasonably practicable such amount, if any, as the
Lessor shall determine in its absolute discretion
will leave the Lessor in no better and no worse
position than the Lessor would have been in if the
deduction or withholding had not been required,
PROVIDED THAT:
(i) the Lessor shall have an absolute discretion
as to the time at which and the order and
manner in which it realises or utilises any
Tax benefit;
(ii) the Lessor shall not be obliged to disclose
any information regarding its business, Tax
affairs or Tax computations;
(iii) if the Lessor has made a payment to the Lessee
pursuant to Clause 10.1(c) on account of any
Tax benefit and it subsequently transpires
that the Lessor did not receive that Tax
benefit, or received a lesser Tax benefit, the
Guarantor shall pay on demand to the Lessor
such sum as the Lessor may determine as being
necessary to restore the after-Tax position of
the Lessor to that which it would have been
had no adjustment under this proviso (iii)
been necessary.
(iv) the Lessor shall not be obliged to make any
payment under this Clause 10.1 if, by doing
so, it would contravene the terms of any
applicable law or any notice, direction or
requirement of any governmental or regulatory
authority (whether or not having the force of
law);
PROVIDED FURTHER THAT if the Guarantor requests the
Lessor, in writing, to make an application pursuant
to the provisions of a double tax treaty for relief
(whether in whole or in part) in respect of any
deduction or withholding required by law, the Lessor
shall (at the cost of the Guarantor) take such action
as the Guarantor shall reasonably request to make
such application to an applicable Tax authority. If
the Lessor subsequently obtains a repayment (whether
in whole or in part) of such deduction or withholding
from that Tax authority in circumstances where the
Guarantor has made an increased payment or paid a
compensating sum under this Clause 10.1 the Lessor
shall, provided that the Lessor has received all
amounts which are then due and payable by the
Guarantor under any of the provisions of this
Guarantee and Indemnity, pay to the Guarantor as
great an amount of the repayment as possible as will
leave the Lessor in no worse position than the Lessor
would have been in if the deduction or withholding
had not been required.
10.2 VALUE ADDED TAX
(a) If the Lessor makes any supply for Value Added Tax
purposes pursuant to or in connection with this
Guarantee and Indemnity or any transaction or
document contemplated herein, the Guarantor shall
(save to the extent that the Lessor is entitled to be
indemnified in respect of that Value Added Tax by an
increased payment under Clause 10.2(b) below) at such
time as the Lessor certifies to the Guarantor that
any amount of VAT payable in respect of that supply
has not been paid to the Lessor and having duly
accounted for such VAT to Customs and Excise at the
correct time and having duly claimed bad debt relief
in respect of that VAT the Lessor either has or has
not received such relief, pay on demand to the Lessor
an amount equal to the aggregate of any Value Added
Tax which is payable in respect of that supply and
has not been the subject of bad debt relief and
interest on an amount equal to any Value Added Tax
payable in respect of the supply at LIBOR ascertained
in respect of the date on which such VAT was
accounted for to Customs and Excise for the period
from that date until the date of the Lessor's
certificate or the date upon which bad debt relief is
received.
(b) Save where expressly provided to the contrary, all
payments made under this Guarantee and Indemnity are
calculated without regard to Value Added Tax. If any
such payment constitutes the whole or any part of the
consideration for a taxable or deemed taxable supply
(whether that supply is taxable pursuant to the
exercise of an option or otherwise), the amount of
that payment shall be increased by an amount equal to
the amount of Value Added Tax which is chargeable in
respect of the taxable supply in question PROVIDED
THAT the Lessor shall not be liable to pay an amount
in respect of Value Added Tax until such time as, and
to the extent that it receives a credit for such VAT
as "INPUT TAX", as defined in sub-section (1) of
section 24 of VATA, under sections 25 and 26 of VATA,
in which case such payment shall be made as soon as
practicable after the credit is received.
(c) If any amount of Value Added Tax paid by the Lessor
pursuant to this Guarantee and Indemnity shall be
Irrecoverable VAT, the Guarantor shall forthwith on
demand by the Lessor indemnify the Lessor and keep
the Lessor fully indemnified at all times against
such Irrevocable VAT PROVIDED THAT if the Lessor
determines that such Irrecoverable VAT subsequently
proves to be recoverable, the Lessor shall pay to the
Guarantor such amount, if any, as the Lessor in its
absolute discretion shall determine will leave the
Lessor in no better and no worse a position than the
Lessor would have been in if no payment had been made
by the Guarantor to the Lessor under this
Clause 10.2(c).
11. ADDITIONAL SECURITY
This Guarantee and Indemnity is in addition to and is not to
prejudice, or be prejudiced by, any other guarantee or
security for the obligations of the Lessee, any other
Primary Obligor or any other person under the Guaranteed
Agreements or otherwise now or hereafter held by the Lessor
and it shall not be necessary for the Lessor before claiming
payment under this Guarantee and Indemnity to resort to or
seek to enforce any other guarantee or security in respect
of the said obligations of the Lessee, any other Primary
Obligor or any other person.
12. ACKNOWLEDGEMENT AND DECLARATION
12.1 The Guarantor agrees, acknowledges and declares that:
12.1.1 if any payment received by the Lessor in respect of
monies owing or due and payable by the Lessee and/or
any other Primary Obligor shall on the subsequent
insolvency or liquidation of the Lessee and/or any
other Primary Obligor be avoided under any laws
relating to insolvency or liquidation, such payment
shall not be considered as discharging or diminishing
the liability of the Guarantor under this Guarantee
and Indemnity and this Guarantee and Indemnity shall
continue to apply as if such payment had at all times
remained owing by the Lessee and/or any other Primary
Obligor;
12.1.2 this Guarantee and Indemnity shall remain the
property of the Lessor and notwithstanding that all
monies and liabilities due or incurred by the Lessee
and/or any other Primary Obligor to the Lessor which
are guaranteed hereunder shall have been fully paid
and discharged the Lessor shall be entitled not to
discharge this Guarantee and Indemnity or any
security held by the Lessor for the obligations of
the Guarantor hereunder until the Guarantor shall
have procured that the Lessor receives legal opinions
in form and content reasonably satisfactory to the
Lessor in relation to the risk to the Lessor of
payments received by the Lessor being avoided, set
aside or being required to be repaid in the event of
bankruptcy, winding-up or any similar proceedings
being commenced in respect of the Lessee and/or any
other Primary Obligor and in the event of bankruptcy,
winding-up or any similar proceedings being commenced
in respect of the Lessee and/or any other Primary
Obligor the Lessor shall be at liberty not to
discharge this Guarantee and Indemnity or any
security held by the Lessor for the obligations of
the Guarantor hereunder for and during such further
period as the Lessor may reasonably determine;
12.1.3 if the Guarantor has not paid to the Lessor the full
amount of all sums then due under this Guarantee and
Indemnity the Lessor shall be entitled, for the
purpose of enabling the Lessor to sue the Lessee, any
other Primary Obligor and/or any other guarantor of
the liabilities which are guaranteed by this
Guarantee and Indemnity or for proving in its or
their liquidation or in any similar proceedings for
any monies due and unpaid by the Lessee and/or any
other Primary Obligor to the Lessor, at any time
place and keep for such time as it may think fit any
monies received hereunder, or under any of such other
guarantees or from any other person, to the credit of
an interest bearing securities realised account or
accounts without any obligation on the part of the
Lessor to apply the same or any part thereof in or
towards the discharge of the indebtedness and
liabilities of the Lessee and/or any other Primary
Obligor to the Lessor;
12.1.4 it has received executed copies of, and is aware of
the terms of, the Guaranteed Agreements; and
12.1.5 in respect of the Guarantor's liability hereunder
after the Lessor has made any demand for payment, the
Lessor upon giving the Guarantor notice (except where
set off operates by law) shall be entitled to set off
the Guarantor's liability against any credit balance
to which the Guarantor is beneficially entitled on
any account or accounts which the Guarantor may have
at any of the offices or branches of any member of
Barclays Bank plc and to retain as security for the
discharge of the Guarantor's liabilities all
securities or other property of the Guarantor held by
the Lessor (whether for safe custody or otherwise)
PROVIDED THAT nothing herein contained shall apply to
create any charge which depends for its validity on
being duly recorded in any public registry.
13. ASSIGNMENT
13.1 ASSIGNMENT BY LESSOR
The Guarantor acknowledges and agrees that the Lessor shall
be entitled at any time and from time to time to assign,
transfer or otherwise dispose of all of its interest in the
Vessel together with this Guarantee and Indemnity and the
Lease Documents to which it is a party to any person to whom
the Lessor may assign, transfer or otherwise dispose of all
of its interest in the Vessel and the benefit and burden of
the Lease Documents to which it is a party pursuant to
Clause 28 of the Head Lease provided that, the Guarantor
shall not be required to suffer or incur any greater cost
under this Guarantee and Indemnity than would have been the
case but for such assignment.
13.2 ASSIGNMENT BY GUARANTOR
Save as contemplated by Clause 9.10 the Guarantor may not
assign, transfer or part with any of its rights or
obligations under this Guarantee and Indemnity or any of the
Lease Documents without the prior written consent of the
Lessor.
14. COSTS AND EXPENSES
The Guarantor shall indemnify the Lessor, on a full
indemnity basis, from and against, and on demand reimburse
the Lessor for, all costs, charges and expenses, properly
incurred following a Relevant Event by the Lessor in
connection with or incidental to the protection and
preservation of the security hereby constituted or the
exercise or enforcement of, or in endeavouring to exercise
or enforce, any right or remedy conferred upon the Lessor
hereunder or by law including in connection with any action
brought by the Lessor to recover any payment due hereunder,
or relating to any breach of any covenant or obligation in
this Guarantee and Indemnity, whether or not any such action
progresses to judgment.
15. MISCELLANEOUS
15.1 DELAY IN ENFORCEMENT, WAIVERS ETC.
All waivers of any right, power or privilege by either party
hereto shall be in writing signed by such party. No failure
or delay on the part of either party in exercising any power
or right hereunder shall operate as a waiver thereof nor
shall any single or partial exercise of any such right or
power preclude any other or further exercise of any such
right or power. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies
provided by law or in equity.
15.2 Variation
This Guarantee and Indemnity shall only be amended, modified
or varied by an instrument in writing executed by or on
behalf of the parties hereto.
15.3 INVALIDITY
If any term or provision of this Guarantee and Indemnity or
the application thereof to any person or circumstance shall
to any extent be invalid or unenforceable under any
applicable law neither the remainder of this Guarantee and
Indemnity or application of such term or provision to
persons or circumstances other than those as to which it is
already invalid or unenforceable shall be affected thereby
nor shall the validity, legality and enforceability of such
term or provision under the laws of any other jurisdiction
be in any way affected or impaired.
15.4 NOTICES
15.4.1 Any demand, consent, record, election or notice (a
"NOTICE") required or permitted to be given by either
party to the other under this Guarantee and Indemnity
shall be in writing and sent by first-class prepaid
airmail post or delivered by hand or sent by fax
addressed as follows:
(i) if to the Guarantor to:
Global Marine Inc.
777 North Eldridge Parkway
Houston
Texas 77079
United States of America
Fax: +(1) 281 596 5196
Attention: General Counsel
(ii) if to the Lessor to:
BMBF (No.12) Limited
Churchill Plaza
Churchill Way
Basingstoke
Hampshire
RG21 7GL
Fax: +(44) (0)1256 810 283
Attention: Company Secretary
Referring to: "Schedule Number 52/5050 5371-3"
or in each case to such address or facsimile number
as one party may, by not less than three (3) Houston
Business Days' notice, notify in writing to the other
party hereto.
15.4.2 Any notice shall be deemed to have been given or
received to or by the party to whom it is addressed
ten (10) days following posting, if posted by first
class prepaid airmail post and on receipt, if
delivered by hand. Any notice sent by fax shall be
treated as received only when the sender has received
a fax by return from the recipient acknowledging
receipt.
15.5 APPLICABLE LAW
This Guarantee and Indemnity shall be governed by and
construed, and performance thereof shall be determined, in
accordance with the laws of England.
15.6 COUNTERPARTS
This Guarantee and Indemnity may be executed in several
counterparts and any single counterpart or set of
counterparts, signed in either case by all of the parties,
shall be deemed to be an original, and all taken together
shall constitute one and the same instrument.
15.7 FURTHER ASSURANCES
The Guarantor agrees from time to time, and at the
Guarantor's expense, to do and perform such other and
further acts and execute and deliver any and all such other
instruments as may be required by law or reasonably
requested by the Lessor to establish, maintain and protect
the rights and remedies of the Lessor and to carry out and
effect the intent and purpose of this Guarantee and
Indemnity and the other Lease Documents.
15.8 ENTIRE AGREEMENT
This Guarantee and Indemnity, in conjunction with the Lease
Documents and any letter agreements of even date herewith
between the Guarantor and the Lessor, constitutes the entire
agreement between the parties hereto in relation to this
Guarantee and Indemnity and supersedes all previous
proposals, agreements and other written and oral
communications in relation thereto.
16. SUBMISSION TO JURISDICTION
16.1 For the exclusive benefit of the Lessor, the Guarantor
hereby submits to the non-exclusive jurisdiction of the
courts of England with regard to this Guarantee and
Indemnity. By its execution and delivery of this Guarantee
and Indemnity, the Guarantor:
(i) hereby accepts for itself and in respect of its
property, generally and unconditionally, the non-
exclusive jurisdiction of the aforesaid courts with
respect to this Guarantee and Indemnity;
(ii) waives any objections on the grounds of venue or
forum non conveniens or any similar grounds and
agrees that legal proceedings in any one or more
jurisdictions shall not preclude legal proceedings in
any other jurisdiction with respect to this Guarantee
and Indemnity; and
(iii) agrees that final judgment against it in any action
or proceedings shall be conclusive and may be
enforced in any other jurisdiction with respect to
this Guarantee and Indemnity within or outside
England by suit on the judgment, a certified copy of
which shall be conclusive evidence of the fact and of
the amount of its indebtedness.
16.2 The Guarantor, in the case of the courts of England, hereby
designates, appoints and empowers WFW Legal Services Limited
(ref. CALP/2628.16002) at its registered office for the time
being, currently 15 Appold Street, London EC2A 2HB to
receive, for and on behalf of it, service of process in such
jurisdiction in any legal action or proceedings with respect
to this Guarantee and Indemnity. The Guarantor undertakes
to maintain an agent for the service of process in England
at all times whilst the Guarantor has any liability, actual
or contingent, under this Guarantee and Indemnity. It is
understood that a copy of any process served as above will
be promptly forwarded (if necessary) by first class prepaid
mail to the Guarantor, but the failure of the Guarantor to
receive such copy shall not affect in any way the service of
such process on the said person as the agent of the
Guarantor.
16.3 To the extent that the Guarantor or any of the property of
the Guarantor is or becomes entitled at any time to any
immunity on the grounds of sovereignty or otherwise from any
legal action, suit or proceeding, from set-off or
counterclaim, from the jurisdiction of any competent court,
from service of process, from attachment prior to judgment,
from attachment in aid of execution, or from execution prior
to judgment, or other legal process in any jurisdiction, the
Guarantor for itself and its property does hereby
irrevocably and unconditionally waive, and agrees not to
plead or claim, any such immunity with respect to its
obligations, liabilities or any other matter under or
arising out of or in connection with this Guarantee and
Indemnity or the subject matter hereof or thereof.
17. JUDGMENT CURRENCY
If, under any applicable law, whether as a result of a
judgment against the Guarantor or the liquidation of the
Guarantor or for any other reason, any payment under or in
connection with this Guarantee and Indemnity is made or is
recovered in a currency (the "OTHER CURRENCY") other than
that in which it is required to be paid hereunder (the
"ORIGINAL CURRENCY") then, to the extent that the payment
(when converted at the rate of exchange and after deducting
commission on the date of payment or, in the case of a
liquidation, the latest date for the determination of
liabilities permitted by the applicable law) falls short of
the amount which is required to be paid under or in
connection with this Guarantee and Indemnity as aforesaid,
the Guarantor shall as a separate and independent obligation
fully indemnify the Lessor on demand against the amount of
the shortfall; and for the purposes of this Clause 17 "RATE
OF EXCHANGE" means the rate at which the Lessor is able as
at 11.00 a.m. (London time) on the relevant date to purchase
the Original Currency with the Other Currency.
18. NATURE OF DOCUMENT
This Guarantee and Indemnity is a deed.
IN WITNESS whereof the Guarantor and the Lessor have caused this
Guarantee and Indemnity to be duly executed and delivered the day
and year first above written.
EXECUTED AND DELIVERED )
as a DEED by W. Matt Ralls ) W. Matt Ralls
GLOBAL MARINE INC. )
in the presence of: )
Tony Price
SIGNED by T. Holgate ) T. Holgate
For and on behalf of )
BMBF (NO.12) LIMITED )
Employment Agreement
This EMPLOYMENT AGREEMENT (this "AGREEMENT"), dated as of
March 1, 1999, is by and among GLOBAL MARINE INC., a Delaware
corporation ("GMI"), GLOBAL MARINE CORPORATE SERVICES INC., a
California corporation (the "COMPANY"), and JOHN G. RYAN (the
"EMPLOYEE").
WHEREAS, GMI and the Company have determined that the
Employee, a former President and Chief Operating Officer of GMI,
has a disability as such term is used in that certain letter
agreement between the Employee and GMI dated August 5, 1998 (the
"SEVERANCE AGREEMENT), which letter agreement relates to the
Employee's right to a severance payment as a result of termination
of his employment under certain circumstances, including
disability; and
WHEREAS, GMI and the Company have determined that the Employee
could terminate his employment due to his disability and that,
under such circumstance, he would be entitled to, among other
things, a severance payment consisting of salary continuation and
the continuation of his medical, dental and life insurance benefits
for an additional 24 months pursuant to the terms of the Severance
Agreement; and
WHEREAS, GMI and the Company have requested that the Employee
remain an employee, providing such services and undertaking such
duties and responsibilities as GMI or the Company may request from
time to time consistent with the Employee's ability, to all of
which the Employee has agreed;
NOW THEREFORE, the parties agree as follows:
1. EMPLOYMENT, DUTIES, AND ACCEPTANCE.
1.1 EMPLOYMENT AND DUTIES. GMI and the Company hereby agree
to continue the Employee's employment for a 24-month term
commencing March 1, 1999, and expiring at the end of the day on
February 28, 2001 (such date, or later date to which this Agreement
is extended in accordance with the terms hereof, the "TERMINATION
DATE"), unless earlier terminated as provided in Article 4 or
unless extended as provided herein (the "TERM"). During the Term,
the Employee will initially serve in an untitled capacity and will
also serve in those offices and directorships of GMI, the Company,
and GMI's other Subsidiaries and Affiliates (as hereinafter
defined) to which he may from time to time be appointed or elected.
During the Term, the Employee will provide such services and
undertake such duties and responsibilities as GMI or the Company
may request from time to time consistent with the Employee's
ability, subject to the direction of the Chief Executive Officer of
GMI, the Board of Directors of GMI (the "GMI BOARD"), and the Board
of Directors of the Company (the "COMPANY BOARD" and together with
the GMI Board, the "BOARDS"). The Employee will not engage in any
other business activities except for passive investments and such
other activities as may be approved in writing by GMI or the
Company, which activities will not materially interfere with the
Employee's obligations hereunder.
1.2 ACCEPTANCE BY THE EMPLOYEE. The Employee hereby accepts
such continuation of his employment and agrees to provide the
services and undertake the duties and responsibilities described
above.
2. COMPENSATION, BENEFITS, AND PERQUISITES.
2.1 ANNUAL SALARY. During the Term, the Company will
continue to pay to the Employee his present annual salary (the
"ANNUAL SALARY"). The Annual Salary will be payable in accordance
with the payroll policies of the Company as from time to time in
effect, but in no event less frequently than once each month, less
such deductions as may be required to be withheld by applicable law
and regulations and as may otherwise be agreed to by the Employee.
2.2 EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN. The Employee is
and will remain a participant in the Global Marine Executive
Supplemental Retirement Plan (the "SERP") and will have a vested
benefit under the SERP, whether or not he attains age 55 as an
employee, and the second sentence of Section 2.8 of the SERP will
not apply; provided, however, that this provision will not
accelerate any payment under the SERP or under any other retirement
plan sponsored by GMI, the Company, or any other Subsidiary or GMI
Affiliate to a date earlier than the date such payment would have
been made if the Employee had actually attained age 55 as an
employee on August 26, 2007.
2.3 PARTICIPATION IN EMPLOYEE BENEFIT PLANS AND CERTAIN
PERQUISITES. The Company and GMI agree to permit the Employee
during the Term, if and to the extent eligible, to participate in
any 401(k) plan, retirement plan, group life, hospitalization or
disability insurance plan, health program, pension plan, similar
benefit plan or other so-called "fringe benefits" of GMI, the
Company, or any other Subsidiary or GMI Affiliate (collectively,
"BENEFITS") which may be available to other employees on terms no
less favorable to the Employee than the terms offered to such other
employees. In addition, during the Term the Company will provide
the Employee with an automobile allowance in an amount no less than
the amount of his present automobile allowance.
3. CONFIDENTIALITY, NON-SOLICITATION, AND NON-COMPETITION.
Because it is important that GMI, the Company, and each other
Subsidiary and GMI Affiliate protect secret, proprietary and
confidential information pertaining to their businesses, and
because it is reasonable to expect that the Employee has obtained
or will obtain such information in the course of his employment,
the Employee agrees that he will not:
(a) divulge or appropriate to the Employee's own use or to the
use of others any secret, proprietary or confidential
information pertaining to the business of GMI, the Company, or
any other Subsidiary or GMI Affiliate obtained in any way
during the Employee's employment by GMI, the Company, or any
other Subsidiary or GMI Affiliate, it being understood and
agreed that the Employee will promptly deliver to GMI, the
Company, or any Subsidiary or GMI Affiliate upon the earlier
of the request of any such entity or the date of the
Employee's termination of such employment all documents,
copies thereof, and other material in the Employee's
possession or under his control relating to any of the kinds
of information identified above; or
(b) during the period of two years commencing with any
termination of his employment with GMI, the Company, or any
other Subsidiary or GMI Affiliate, solicit on his own behalf,
or on behalf of any other firm, company or other Person (as
hereinafter defined) the employment of any person employed by
GMI, the Company, or any other Subsidiary or GMI Affiliate; or
(c) during the period of two years commencing with any
termination of his employment with GMI, the Company, or any
other Subsidiary or GMI Affiliate, compete with GMI, the
Company, or any other Subsidiary or GMI Affiliate in obtaining
or performing offshore drilling contracts or services,
offshore turnkey drilling, integrated drilling or drilling
management contracts or services, or other similar offshore
contracts or services, either as an employee, officer,
director, consultant, independent contractor or agent of a
direct competitor of GMI, the Company, or any other Subsidiary
or GMI Affiliate or on his own behalf, it being understood and
agreed, however, that this agreement will not preclude the
Employee from working for any firm, company or other Person
that drills oil and gas wells for its own account or provides
onshore oil and gas drilling services and does not compete
with GMI, the Company, or any other Subsidiary or GMI
Affiliate in obtaining or performing offshore drilling
contracts or services, offshore turnkey drilling, integrated
drilling or drilling management contracts or services, or
other similar offshore services;
and the Employee further agrees that if he violates any provision
of this paragraph (i) GMI and/or the Company may bring such action
or actions in such court and/or courts as either or both of them
may deem necessary or advisable in order to enforce the Employee's
compliance with this provision and for damages in respect of such
violation, and (ii) GMI and/or the Company may terminate this
Agreement, in which case the Employee will be ineligible to receive
any further salary, benefit, perquisite or other compensation
hereunder from and after such termination.
4. TERMINATION.
4.1 TERMINATION IN THE EVENT OF DEATH. In the event of the
Employee's death during the Term, the Company will continue to pay
the Employee's Annual Salary, at the times and upon the terms
provided for herein, for the remainder of the Term to his
designated beneficiary or his estate, and any Benefits that have
vested in the Employee at the time of his death as a result of his
participation in any benefit plans sponsored by GMI, the Company,
or any other Subsidiary or GMI Affiliate will be paid to his
designated beneficiary or his estate in accordance with the
provisions of such plan.
4.2 TERMINATION WITH CAUSE. GMI and the Company each has the
right, at any time during the Term, subject to all of the
provisions hereof, exercisable by serving notice, effective on or
after the date of service of such notice as specified therein, to
terminate the Employee's employment under this Agreement and
discharge the Employee with Cause. If such right is exercised, the
Term will terminate on the date of such termination and the
obligation of GMI and the Company to the Employee will be limited
solely to the payment of unpaid Annual Salary accrued and, subject
to the provisions of the applicable benefit plans, any benefits
vested up to the effective date specified in the notice of
termination. As used in this Agreement, the term "Cause" will mean
an act of fraud, dishonesty or other misconduct on the part of the
Employee that is harmful to GMI, the Company, or any other
Subsidiary or GMI Affiliate, but will not mean inadequate
performance, incompetence, or failure to perform due to inability
caused by his disability as determined in his sole discretion.
Prior to the effectiveness of termination for Cause, the Employee
will be given 30 days' prior notice from the GMI Board specifically
identifying the reasons which are alleged to constitute Cause for
any termination hereunder and an opportunity to be heard by the GMI
Board in the event the Employee disputes such allegations.
4.3 TERMINATION WITHOUT CAUSE. GMI and the Company each has
the right, at any time during the Term, subject to all of the
provisions hereof, exercisable by serving notice, effective on or
after the date of service of such notice as specified therein, to
terminate the Employee's employment under this Agreement and
discharge the Employee without Cause. If the Employee is
terminated during the Term without Cause (including any termination
which is deemed to be a constructive termination without Cause
under Section 4.5 hereof), the Term will terminate on the date of
such termination and the obligation of GMI and the Company to the
Employee will be limited to (i) the payment, at the times and upon
the terms provided for herein, of the Employee's Annual Salary for
the remainder of the Term of this Agreement had the Employee not
been so terminated, and (ii) the continuation of the Employee's
medical, dental and life insurance benefits for the remainder of
such Term. In the event of a termination by the Company without
Cause within 180 days after a Change of Control (as hereinafter
defined), including a constructive termination without Cause
pursuant to Section 4.5, the amounts due to the Employee pursuant
to this Section 4.3 will be due and payable in one lump-sum payment
within 60 days after such termination. In all other cases, any
amounts due to the Employee pursuant to this Section 4.3 will be
due and payable as and when they would have become due and payable
absent such termination. In addition, any Benefits that have
vested in the Employee at the time of such termination as a result
of his participation in any benefit plans sponsored by GMI, the
Company, or any other Subsidiary or GMI Affiliate will be paid to
the Employee, or to his estate or designated beneficiary, subject
to the provisions of such plans.
4.4 TERMINATION BY THE EMPLOYEE. Any termination of this
Agreement by the Employee during the Term, except such termination
as is deemed to be a constructive termination without Cause by the
Company under Section 4.5 of this Agreement, will be deemed to be
a breach of the terms of this Agreement and will entitle GMI and
the Company to discontinue payment of all Annual Salary and
benefits accruing from and after the date of such termination. Any
Benefits that have vested in the Employee at the time of such
termination as a result of his participation in any benefit plans
sponsored by GMI, the Company, or any other Subsidiary or GMI
Affiliate will be paid to the Employee, or to his estate or
designated beneficiary, subject to the provisions of such plans.
4.5 CONSTRUCTIVE TERMINATION WITHOUT CAUSE. Notwithstanding
any other provision of this Agreement, the Employee's employment
under this Agreement may be terminated during the Term by the
Employee, which termination will be deemed to be constructive
termination by the Company without Cause if such employment is
terminated by the Employee within 12 months following a Change of
Control, as hereinafter defined, of GMI, of the Company, or of any
other Subsidiary or GMI Affiliate by which he is employed or which
directly or indirectly owns or controls any Subsidiary or GMI
Affiliate by which he is employed.
4.6 CHANGE OF CONTROL. For the purposes hereof, a "CHANGE OF
CONTROL" will be deemed to have occurred if direct or indirect
beneficial ownership of securities representing, or other direct or
indirect control of, 35% or more of the voting power of the subject
entity is held by one holder or by a group of holders working in
concert for the purpose of such ownership or control where such
holder or holders are not GMI, the Company, or any other Subsidiary
or GMI Affiliate.
4.7 CONTINUATION OF "SERVICE". It is expressly understood
and agreed that any and all periods through the earlier of the date
the Employee's employment is terminated with Cause, the date the
Employee's employment is terminated by death, or the Termination
Date will be "Service" for all purposes under any and all
retirement plans sponsored by GMI, the Company, or any other
Subsidiary or GMI Affiliate in which the Employee participates.
5. LEGAL FEES. In the event of a dispute or disagreement
regarding the right of the Employee to receive any compensation or
other benefit under this Agreement or the amount of such
compensation or other benefit, the Employee will be reimbursed by
GMI for any and all attorney's fees and other costs and expenses as
and when expended by the Employee in connection with such dispute
or disagreement, regardless of the outcome thereof. Further, in
the event the Employee becomes entitled to any monies or benefits
hereunder, GMI agrees to pay such monies and provide such benefits
without regard to any and all claims, offsets or causes of action
which GMI may have against the Employee until such time, if ever,
as GMI or the Company obtains a final judgment in its favor in a
court of competent jurisdiction regarding such claim, offset or
cause of action.
6.OTHER PROVISIONS.
6.1 CERTAIN DEFINITIONS. As used in this Agreement, the
following terms have the following meanings unless the context
otherwise requires:
6.1.1 "AFFILIATE" with respect to a person means any
other person controlled by or under common control with such
person but will not include any stockholder or director of an
entity, as such.
6.1.2 "PERSON" means any individual, corporation,
partnership, firm, joint company, association, joint-stock
company, trust, unincorporated organization, governmental or
regulatory body or other entity.
6.1.3 "SUBSIDIARY" means any corporation 50% or more
of the voting securities of which are owned directly or
indirectly by GMI or the Company.
6.2 NOTICES. Any notice or other communication required or
permitted hereunder will be in writing and will be delivered
personally, telegraphed, telexed, sent by facsimile transmission or
sent by certified, registered or express mail, postage prepaid.
Any such notice will be deemed given when so delivered personally,
telegraphed, telexed or sent by facsimile transmission or, if
mailed, on the date of actual receipt thereof, as follows:
If to the Company and GMI, to:
Global Marine Inc.
777 North Eldridge Parkway
Houston, Texas 77079-4493
Attn: General Counsel
If to the Employee, to:
John G. Ryan
19322 Oak View Terrace
Houston, Texas 77094
Any party may change its address for notice hereunder by notice to
the other parties hereto.
6.3 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements or other undertakings,
written or oral, with respect thereto, including without limitation
the Severance Agreement.
6.4 WAIVERS AND AMENDMENTS. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms and
conditions hereof may be waived, only by a written instrument
signed by the parties hereto or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder will operate as
a waiver thereof. Nor will any waiver on the part of any party of
any such right, power or privilege hereunder, nor any single or
partial exercise of any right, power or privilege hereunder,
preclude any other or further exercise thereof or the exercise of
any other right, power or privilege hereunder.
6.5 GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the laws of the state of Texas
(without giving effect to the choice of law provisions thereof)
where the employment of the Employee will be deemed, in part, to be
performed, and enforcement of this Agreement or any action taken or
held with respect to this Agreement will be taken in the courts of
appropriate jurisdiction in Houston, Texas.
6.6 ASSIGNMENT. This Agreement, and any rights and
obligations hereunder, may not be assigned by the Employee and may
be assigned by GMI and the Company only to any successor in
interest, whether by merger, consolidation, acquisition or the
like, or to purchasers of substantially all of the assets of GMI.
6.7 COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered will be
deemed an original, but all of which together will constitute one
and the same instrument.
6.8 HEADINGS. The headings in this Agreement are for
reference purposes only and will not in any way affect the meaning
or interpretation of this Agreement.
6.9 NO PRESUMPTION AGAINST INTEREST. This Agreement has been
negotiated, drafted, edited and reviewed by the respective parties,
and, therefore, no provision arising directly or indirectly here
from will be construed against any party as being drafted by said
party.
6.10 VALIDITY CONTEST. GMI will promptly pay any and all
legal fees and expenses incurred by the Employee from time to time
as a direct result of GMI or the Company contesting the due
execution, authorization, validity or enforceability of this
Agreement.
6.11 BINDING AGREEMENT. This Agreement will inure to the
benefit of and be binding upon (i) GMI, the Company, and their
respective successors and assigns, and (ii) the Employee, his
beneficiaries, his estate, and their legal representatives.
6.12 AUTHORIZATION. GMI and the Company each represents and
warrants that its Board of Directors has approved and authorized
the execution of this Agreement, and GMI represents and warrants
that the Compensation Committee of its Board of Directors has
approved and authorized the provisions of this Agreement that
modify the terms of stock options granted to the Employee by GMI.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
GLOBAL MARINE INC. THE EMPLOYEE
By: /s/ James L. McCulloch /s/ John G. Ryan
Name: James L. McCulloch John G. Ryan
Title: Vice President and General
Counsel
GLOBAL MARINE CORPORATE
SERVICES INC.
By: /s/ Thomas R. Johnson
Name: Thomas R. Johnson
Title: Vice President
EXHIBIT 10.33
NOTICE OF GRANT OF STOCK OPTIONS Global Marine Inc.
ID: 95-1849298
777 N. Eldridge Parkway
P. O. Box 4577
Houston, TX 77210
[Optionee's Name and Address] Option Number:
Plan: GM98
ID:
Effective , you have been granted a(n) Non-
Qualified Stock Option to buy shares of Global Marine
Inc. (the Company) stock at $ per share.
The total option price of the shares granted is $ .
Shares in each period will become fully vested on the date shown.
SHARES VEST TYPE FULL VEST EXPIRATION
On Vest Date
On Vest Date
On Vest Date
On Vest Date
This option is granted under and governed by the terms and
conditions of the Global Marine 1998 Stock Option and Incentive
Plan and the attached terms and conditions, all of which are made
a part of this document.
Form 1B(2)
(2-99)
GLOBAL MARINE INC.
TERMS AND CONDITIONS
OF
NON-QUALIFIED STOCK OPTION GRANT
(Global Marine 1998 Stock Option and Incentive Plan)
GLOBAL MARINE INC. (the "Company"), desiring to afford you an
opportunity to purchase shares of the Company's Common Stock, $.10
par value ("Common Stock"), and to provide you with an added
incentive as an employee of, consultant to, or other person
providing key services to the Company or of one or more of its
Related Companies, has established the following terms and
conditions under which it has granted you an option ("Option")
under the Global Marine 1998 Stock Option and Incentive Plan to
purchase a number of shares of such Common Stock during a specified
term and at a specified price, all as set forth on the cover page
of this Notice of Grant of Stock Options ("Notice"), subject to and
upon the terms and conditions set forth on the cover page and
below. This Option is a non-qualified stock option and is not
subject to incentive stock option treatment under the U.S. federal
Internal Revenue Code or applicable rules thereunder. YOU ARE
URGED TO CONSULT YOUR TAX ADVISOR PRIOR TO EXERCISING THIS OPTION
AND PRIOR TO DISPOSING OF ANY SHARES ACQUIRED UPON SUCH EXERCISE.
1. SPECIFICATION OF DATE, NUMBER OF SHARES, OPTION PRICE AND
TERM.
(a) The date of this Option is the effective date set forth
in the first paragraph on the cover page of this Notice.
(b) The number of shares of the Company's Common Stock
optioned hereby is the number of shares set forth
in the first paragraph on the cover page of this Notice,
subject to adjustments under Section 7.
(c) Subject to acceleration under Sections 2 and 5 and to
adjustments under Section 7, the shares optioned hereby
first become purchasable in the four installments set
forth under "Shares" in the table on the cover page of
this Notice, each installment first becoming purchasable
at the date set forth for that installment under "Full
Vest" in said table.
(d) The per share option price under this Option is the price
set forth in the first paragraph on the cover page of
this Notice, subject to adjustments under Section 7.
(e) The term of this Option is ten years beginning on the
date of this Option and expiring on the date set forth
under "Expiration" in the table on the cover page of
this Notice; upon the expiration of such term, this
Option shall expire and may not be exercised.
2. INSTALLMENT PROVISIONS AND ACCELERATION. This Option is not
exercisable in any part until the earliest of the dates
specified in this Section and in Section 5 below.
The installments set forth in the table on the cover page of
this Notice and referred to in Section 1(c) are cumulative, so
that each matured installment or any portion thereof may be
exercised at any time until the expiration or prior
termination of this Option.
In the event that stock of the Company representing more than
fifty percent of the voting power of the stock of the Company
then outstanding is acquired by an individual, partnership,
joint venture, corporation or other entity ("Purchaser"), or
by a group of Purchasers acting in concert for purposes of
acquiring such stock, or by any "person" as defined in Section
13(d) or Section 14(d) of the Securities Exchange Act of 1934,
as amended, this Option will immediately become exercisable as
to the full number of shares optioned hereby and referred to
in Section 1(b), to the extent not previously exercised, and
will remain exercisable as to said full number of shares until
the expiration or prior termination of this Option; provided,
however, that if the foregoing acceleration provision becomes
operative during the six-month period immediately following
the date of this Option, then this Option shall immediately
become exercisable as to said full number of shares upon the
expiration of said six-month period and remain exercisable
until the expiration or prior termination of this Option.
Nothing contained in this section shall be interpreted in a
way which permits you to purchase a number of shares in excess
of the number of shares optioned hereby and referred to in
Section 1(b).
3. METHOD OF EXERCISE. This Option may be exercised from time to
time, in accordance with its terms, by written notice thereof
signed and delivered by you or another person entitled to
exercise this Option to the Corporate Secretary of the Company
at its principal executive office in Houston, Texas, or as it
may hereafter be located. Such notice shall state the number
of shares being purchased and shall be accompanied by the
payment in full in cash of the option price for such number of
shares. Such payment may also be made, in whole or in part,
by the surrender of shares of Common Stock of Global Marine
Inc., any such shares of Common Stock so surrendered to be
deemed to have a value equal to the Fair Market Value of the
shares. Promptly after receipt of such notice and payment,
the Company shall issue certificates to you or such other
person exercising this Option.
4. TRANSFERABILITY. You may not transfer this Option other than
by will or by the laws of descent and distribution or, if
applicable, as authorized by the following sentence, and this
Option shall be exercisable during your lifetime only by you
or, if applicable, by a transferee authorized by the following
sentence. This Option or any portion thereof may be
transferred by you to (i) your spouse, children or
grandchildren ("Immediate Family Members"), (ii) a trust or
trusts for your exclusive benefit and/or the exclusive benefit
of Immediate Family Members, (iii) a partnership in which you
and/or Immediate Family Members are the only partners, (iv) a
transferee pursuant to a judgment, decree or order relating to
child support, alimony or marital property rights that is made
pursuant to a domestic relations law of a state or country
with competent jurisdiction (a "Domestic Relations Order"), or
(v) such other transferee as may be approved by the
Compensation Committee of the Company's Board of Directors in
its sole and absolute discretion; provided, however, that (x)
the Board of Directors of the Company and its Compensation
Committee each reserves the right to prohibit any transfer
with or without cause in its sole and absolute discretion, and
(y) subsequent transfers of this Option or any portion thereof
are prohibited except those to or by you in accordance with
this Section, by will or the laws of descent and distribution,
or pursuant to a Domestic Relations Order. Following any
transfer, this Option shall continue to be subject to the same
terms and conditions as were applicable immediately prior to
transfer, and any and all references to you in this Notice
shall be deemed to refer to the transferee; provided, however,
that any and all references to employment or events of
termination of employment shall continue to mean your
employment or events of termination of your employment, and
following any such event the options shall be exercisable by
the transferee only to the extent and for the periods
specified in this Notice. In addition, notwithstanding any
transfer of this Option or any portion thereof, you will
continue to be subject to withholding in connection with any
exercise, if applicable, as provided for in the Global Marine
1998 Long-Term Stock Option and Incentive Plan. Each transfer
shall be effected by written notice thereof duly signed and
delivered by the transferor to the Corporate Secretary of the
Company at its principal executive office in Houston, Texas,
or as it may hereafter be located. Such notice shall state
the name and address of the transferee, the amount of this
Option being transferred, and such other information as may be
requested by the Corporate Secretary. The person or persons
entitled to exercise this Option shall be that person or those
persons appearing on the registry books of the Company as the
owner or owners of this Option, and the Company may treat the
person or persons in whose name or names this Option is
registered as the owner or owners of this Option for all
purposes. The Company shall have no obligation to, or
liability for any failure to, notify you or any transferee of
any termination of this Option at or prior to its normal
expiration date or of any event that will or might result in
such termination.
5. TERMINATION OF EMPLOYMENT. If your employment by the Company
and its Related Companies is terminated by reason of your
death, disability or retirement, or your active employment by
the Company and its Related Companies is terminated by the
Company or any such Related Company other than for cause (to
mean acts of misconduct harmful to the Company, inadequate
performance or incompetence), this Option will immediately
become exercisable as to the full number of shares optioned
hereby and referred to in Section 1(b), to the extent not
previously exercised, and will remain exercisable as to said
full number of shares until the expiration or prior
termination of this Option; provided, however, that if the
foregoing acceleration provision becomes operative during the
six-month period immediately following the date of this
Option, then this Option shall immediately become exercisable
as to said full number of shares upon the expiration of said
six-month period and remain exercisable until the expiration
or prior termination of this Option. Except in cases of
termination of employment by reason of death, disability or
retirement, this Option shall remain exercisable for the
longer of three months after termination of active employment
or such acceleration, whichever is later, the period during
which you are entitled to receive salary continuation under
any agreement, policy, plan or other arrangement with the
Company or any of its Related Companies, or the period during
which you continue as a member of the Company's board of
directors, said period in any event not to extend beyond the
expiration of the term of this Option. Upon expiration of the
foregoing period, this Option shall terminate in all respects.
At the time your employment by the Company and its Related
Companies terminates, this Option shall expire and terminate
in all respects as to all shares other than the shares as to
which this Option can be exercised at the time or as a result
of such termination. For purposes of this Notice: (a) a
termination of your "active employment" with the Company and
its Related Companies will be deemed to occur (i) at the close
of business on the last day on which you are assigned to a
position with the Company or any Related Company for the
purpose of performing your occupation, in the case of
termination by the Company or any Related Company other than
for cause or (ii) at the time of termination of your
employment with the Company and its Related Companies in any
other case; and (b) a termination of your "employment" with
the Company and its Related Companies will be deemed to occur
at the close of business on the earliest of (i) the last day
on which you are assigned to a position with the Company or
any of its Related Companies for the purpose of performing
your occupation, in the case of termination by reason of your
death, disability or retirement, (ii) the last day of the
period during which you are entitled to receive salary
continuation under any agreement, policy, plan or other
arrangement with the Company or any of its Related Companies,
in the case of termination by the Company or any of its
Related Companies other than for cause, (iii) the last day of
an approved leave of absence if you do not resume the
performance of your occupation for the Company or any of its
Related Companies on or before the next business day, and (iv)
the last day on which you are assigned to a position with the
Company or any of its Related Companies for the purpose of
performing your occupation in any other case.
6. DEATH, DISABILITY OR RETIREMENT. In the event of your death,
disability or retirement, you or your legal representative or
representatives, or the person or persons entitled to do so
under your last will and testament or under applicable
intestate laws, shall have the right to exercise this Option,
to the extent not previously exercised, as to the lesser of
the full number of shares optioned hereby and referred to in
Section 1(b) hereof or such lesser number of shares as shall
have resulted from the operation of Section 5, and such right
shall lapse and this Option shall terminate upon the later of
(i) three years after the date of termination of employment,
(ii) three years after the date this Option accelerates under
Section 5, (iii) three years after the date of your death,
disability or retirement if it occurs during or at the end of
any period of salary continuation under any agreement, policy,
plan or other arrangement with the Company or any of its
Related Companies, or (iv) the end of the period during which
you continue as a member of the Company's board of directors,
but in no event later than the expiration of the specified
term of this Option. For purposes of Section 5 and this
Section 6, the term "disability" shall mean a physical or
mental condition which totally and permanently prevents you
from engaging in any substantial gainful activity, as
reasonably determined in good faith by the Compensation
Committee of the Board of Directors of Global Marine Inc.
7. ADJUSTMENTS. If outstanding shares of the class then subject
to this Option are increased, decreased, changed into or
exchanged for a different number or kind of shares or
securities of the Company through reorganization,
recapitalization, reclassification, stock dividend, stock
split or reverse stock split, then there shall be substituted
for each share then subject to the unexercised portion of this
Option the number and class of shares or securities into or
for which each outstanding share of the class subject to this
Option shall be so changed or exchanged, all without any
change in the aggregate purchase price for the shares then
subject to the unexercised portion of this Option, but with a
corresponding adjustment in the purchase price per share.
Such adjustments shall become effective on the effective date
of any such transaction; except that in the event of a stock
dividend or of a stock split effected by means of a stock
dividend or distribution, such adjustments shall become
effective immediately after the record date therefor.
Upon a dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with
one or more corporations as a result of which the Company is
not the surviving corporation, or upon a sale of substantially
all of the property of the Company ("Terminating
Transactions"), this Option shall terminate, unless provision
be made in writing in connection with such transaction for the
assumption of options theretofore granted under the Plan under
which this Option was granted, or the substitution for such
options of any options covering the stock of a successor
employer corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares
and prices, in which event this Option shall continue in the
manner and under the terms so provided. If this Option shall
terminate pursuant to the foregoing sentence, the person then
entitled to exercise any unexercised portions of this Option
shall have the right, at such time immediately prior to the
consummation of the Terminating Transaction as the Company
shall designate, to exercise this Option to the extent not
theretofore exercised.
Adjustments under this Section 7 shall be made by the
Company's Board of Directors whose determination as to what
adjustment shall be made, and the extent thereof, shall be
final, binding and conclusive. No fractional shares of stock
shall be issued under this Option or in connection with any
such adjustment.
8. LIMITATION. You or any other person entitled to exercise this
Option shall be entitled to the privileges of stock ownership
in respect of shares subject to this Option only when such
shares have been issued and delivered as fully paid shares
upon exercise of this Option in accordance with its terms.
9. REQUIREMENTS OF LAW AND OF STOCK EXCHANGES. The issuance of
shares upon the exercise of this Option shall be subject to
compliance with all of the applicable requirements of law with
respect to the issuance and sale of such shares. In addition,
neither the Company nor any Related Company shall be required
to issue or deliver any certificate or certificates for such
purchase upon exercise of this Option prior to the admission
of such shares to listing on notice of issuance on any stock
exchange on which shares of the same class are then listed.
By accepting this Option, you represent and agree for yourself
and your transferees by will or by the laws of descent and
distribution or otherwise that unless a registration statement
under the Securities Act of 1933 is in effect as to shares
purchased upon any exercise of this Option, any and all shares
so purchased shall be acquired for investment and not for sale
or distribution and each notice of the exercise of any portion
of this Option shall be accompanied by a representation and
warranty in writing, signed by the person entitled to exercise
the same, that the shares are being so acquired by good faith
for investment and not for sale or distribution. In the event
the Company's legal counsel shall, at the Company's request,
advise it that registration under the Securities Act of 1933
of the shares as to which this Option is at the time being
exercised is required prior to issuance thereof, neither the
Company nor any Related Company shall be required to issue or
deliver such shares unless and until such legal counsel shall
advise that such registration has been completed or is not
required.
By accepting this Option you further represent and agree for
yourself and your transferees by will or the laws of descent
and distribution that if you are an officer of the Company or
any other person who might be deemed an "affiliate" of the
Company under the Securities Act of 1933 at the time any
shares acquired upon exercise of this Option are proposed to
be sold, you or they will not sell any shares purchased on
exercise of this Option (a) without giving thirty-days'
advance notice in writing to the Company, and (b) until the
Company has advised you or them that such sale may be made
without registration under the Securities Act of 1933 or, if
such registration is required, that such registration has been
effected.
10. CONTINUED EMPLOYMENT. As further consideration for the
granting of this Option, and by accepting this Option, you
agree to remain in the employment of the Company or one or
more of its Related Companies at the pleasure of the Company
or such Related Company for a continuous period of at least
one year after the date hereof or up to your 65th birthday,
whichever may be earlier, at the salary rate in effect on the
date hereof or at such higher rate as may be fixed from time
to time by the Company or such Related Company. Military
service leave and/or sick leave shall be counted toward this
period of employment. You agree that you will during such
employment devote your time, energy and skills during all
normal working hours to the service of the Company or Related
Company and the promotion of its interests subject to
vacations, military service leave, sick leave and other
absences in accordance with the regular policies of the
Company or its Related Company.
11. GLOBAL MARINE 1998 STOCK OPTION AND INCENTIVE PLAN. This
Option is subject to, and the Company and you are bound by,
all of the terms and conditions of the Global Marine 1998
Stock Option and Incentive Plan as the same shall have been
amended from time to time in accordance with the terms
thereof, provided that no such amendment shall deprive you,
without your consent, of this Option or any rights hereunder.
Pursuant to such Plan, the Board of Directors of the Company
or its Committee established for such purposes is authorized
to adopt rules and regulations not inconsistent with the Plan
and to take such action in the administration of the Plan as
it shall deem proper. A copy of the Plan in its present form
is available for inspection at the Company's principal office
during business hours by you or any other persons entitled to
exercise this Option.
12. DEFINITION OF CERTAIN TERMS. Capitalized terms used in this
Notice and not defined herein are used as they are defined in
the Global Marine 1998 Stock Option and Incentive Plan as the
same shall have been amended from time to time. The term
"you," and related terms such as "your" used in this Notice
refer to the individual whose name appears first on the cover
page of this Notice.
EXHIBIT 10.34
NOTICE OF GRANT OF STOCK OPTIONS Global Marine Inc.
ID: 95-1849298
777 N. Eldridge Parkway
P. O. Box 4577
Houston, TX 77210
[Optionee's Name and Address] Option Number:
Plan: GM98
ID:
Effective , you have been granted a(n) Incentive
Stock Option to buy shares of Global Marine Inc. (the
Company) stock at $ per share.
The total option price of the shares granted is $ .
Shares in each period will become fully vested on the date shown.
SHARES VEST TYPE FULL VEST EXPIRATION
On Vest Date
On Vest Date
On Vest Date
On Vest Date
This option is granted under and governed by the terms and
conditions of the Global Marine 1998 Stock Option and Incentive
Plan and the attached terms and conditions, all of which are made
a part of this document.
Form 1A(2)
(2-99)
GLOBAL MARINE INC.
TERMS AND CONDITIONS
OF
INCENTIVE STOCK OPTION GRANT
(Global Marine 1998 Stock Option and Incentive Plan)
GLOBAL MARINE INC. (the "Company"), desiring to afford you an
opportunity to purchase shares of the Company's Common Stock, $.10
par value ("Common Stock"), and to provide you with an added
incentive as an employee of, consultant to, or other person
providing key services to the Company or of one or more of its
Related Companies, has established the following terms and
conditions under which it has granted you an option ("Option")
under the Global Marine 1998 Stock Option and Incentive Plan to
purchase a number of shares of such Common Stock during a specified
term and at a specified price, all as set forth on the cover page
of this Notice of Grant of Stock Options ("Notice"), subject to and
upon the terms and conditions set forth on the cover page and
below. This Option is intended, to the extent permitted at any
given time, to qualify as an "incentive stock option" within the
meaning of Section 422A of the U.S. federal Internal Revenue Code
of 1986, as amended and in effect at such time (an "Incentive Stock
Option"), but no warranty is made as to such qualification. YOU
ARE URGED TO CONSULT YOUR TAX ADVISOR PRIOR TO EXERCISING THIS
OPTION AND PRIOR TO DISPOSING OF ANY SHARES ACQUIRED UPON SUCH
EXERCISE.
1. SPECIFICATION OF DATE, NUMBER OF SHARES, OPTION PRICE AND
TERM.
(a) The date of this Option is the effective date set forth
in the first paragraph on the cover page of this Notice.
(b) The number of shares of the Company's Common Stock
optioned hereby is the number of shares set forth
in the first paragraph on the cover page of this Notice,
subject to adjustments under Section 7.
(c) Subject to acceleration under Sections 2 and 5 and to
adjustments under Section 7, the shares optioned hereby
first become purchasable in the four installments set
forth under "Shares" in the table on the cover page of
this Notice, each installment first becoming purchasable
at the date set forth for that installment under "Full
Vest" in said table.
(d) The per share option price under this Option is the price
set forth in the first paragraph on the cover page of
this Notice, subject to adjustments under Section 7.
(e) The term of this Option is ten years beginning on the
date of this Option and expiring on the date set forth
under "Expiration" in the table on the cover page of
this Notice; upon the expiration of such term, this
Option shall expire and may not be exercised.
2. INSTALLMENT PROVISIONS AND ACCELERATION. This Option is not
exercisable in any part until the earliest of the dates
specified in this Section and in Section 5 below.
The installments set forth in the table on the cover page of
this Notice and referred to in Section 1(c) are cumulative, so
that each matured installment or any portion thereof may be
exercised at any time until the expiration or prior
termination of this Option.
In the event that stock of the Company representing more than
fifty percent of the voting power of the stock of the Company
then outstanding is acquired by an individual, partnership,
joint venture, corporation or other entity ("Purchaser"), or
by a group of Purchasers acting in concert for purposes of
acquiring such stock, or by any "person" as defined in Section
13(d) or Section 14(d) of the Securities Exchange Act of 1934,
as amended, this Option will immediately become exercisable as
to the full number of shares optioned hereby and referred to
in Section 1(b), to the extent not previously exercised, and
will remain exercisable as to said full number of shares until
the expiration or prior termination of this Option; provided,
however, that if the foregoing acceleration provision becomes
operative during the six-month period immediately following
the date of this Option, then this Option shall immediately
become exercisable as to said full number of shares upon the
expiration of said six-month period and remain exercisable
until the expiration or prior termination of this Option.
Nothing contained in this section shall be interpreted in a
way which permits you to purchase a number of shares in excess
of the number of shares optioned hereby and referred to in
Section 1(b).
3. METHOD OF EXERCISE. This Option may be exercised from time to
time, in accordance with its terms, by written notice thereof
signed and delivered by you or another person entitled to
exercise this Option to the Corporate Secretary of the Company
at its principal executive office in Houston, Texas, or as it
may hereafter be located. Such notice shall state the number
of shares being purchased and shall be accompanied by the
payment in full in cash of the option price for such number of
shares. Such payment may also be made, in whole or in part,
by the surrender of shares of Common Stock of Global Marine
Inc., any such shares of Common Stock so surrendered to be
deemed to have a value equal to the Fair Market Value of the
shares. Promptly after receipt of such notice and payment,
the Company shall issue certificates to you or such other
person exercising this Option.
4. TRANSFERABILITY. You may not transfer this Option other than
by will or by the laws of descent and distribution or, if
applicable, as authorized by the following sentence, and this
Option shall be exercisable during your lifetime only by you
or, if applicable, by a transferee authorized by the following
sentence. To the extent this Option is a nonqualified stock
option and is not subject to incentive stock option treatment
under the Internal Revenue Code or applicable rules or
regulations thereunder, this Option or any portion thereof may
be transferred by you to (i) your spouse, children or
grandchildren ("Immediate Family Members"), (ii) a trust or
trusts for your exclusive benefit and/or the exclusive benefit
of Immediate Family Members, (iii) a partnership in which you
and/or Immediate Family Members are the only partners, (iv) a
transferee pursuant to a judgment, decree or order relating to
child support, alimony or marital property rights that is made
pursuant to a domestic relations law of a state or country
with competent jurisdiction (a "Domestic Relations Order"), or
(v) such other transferee as may be approved by the
Compensation Committee of the Company's Board of Directors in
its sole and absolute discretion; provided, however, that (x)
the Board of Directors of the Company and its Compensation
Committee each reserves the right to prohibit any transfer
with or without cause in its sole and absolute discretion, and
(y) subsequent transfers of this Option or any portion thereof
are prohibited except those to or by you in accordance with
this Section, by will or the laws of descent and distribution,
or pursuant to a Domestic Relations Order. Following any
transfer, this Option shall continue to be subject to the same
terms and conditions as were applicable immediately prior to
transfer, and any and all references to you in this Notice
shall be deemed to refer to the transferee; provided, however,
that any and all references to employment or events of
termination of employment shall continue to mean your
employment or events of termination of your employment, and
following any such event the options shall be exercisable by
the transferee only to the extent and for the periods
specified in this Notice. In addition, notwithstanding any
transfer of this Option or any portion thereof, you will
continue to be subject to withholding in connection with any
exercise, if applicable, as provided for in the Global Marine
1998 Long-Term Stock Option and Incentive Plan. Each transfer
shall be effected by written notice thereof duly signed and
delivered by the transferor to the Corporate Secretary of the
Company at its principal executive office in Houston, Texas,
or as it may hereafter be located. Such notice shall state
the name and address of the transferee, the amount of this
Option being transferred, and such other information as may be
requested by the Corporate Secretary. The person or persons
entitled to exercise this Option shall be that person or those
persons appearing on the registry books of the Company as the
owner or owners of this Option, and the Company may treat the
person or persons in whose name or names this Option is
registered as the owner or owners of this Option for all
purposes. The Company shall have no obligation to, or
liability for any failure to, notify you or any transferee of
any termination of this Option at or prior to its normal
expiration date or of any event that will or might result in
such termination.
5. TERMINATION OF EMPLOYMENT. If your employment by the Company
and its Related Companies is terminated by reason of your
death, disability or retirement, or your active employment by
the Company and its Related Companies is terminated by the
Company or any such Related Company other than for cause (to
mean acts of misconduct harmful to the Company, inadequate
performance or incompetence), this Option will immediately
become exercisable as to the full number of shares optioned
hereby and referred to in Section 1(b), to the extent not
previously exercised, and will remain exercisable as to said
full number of shares until the expiration or prior
termination of this Option; provided, however, that if the
foregoing acceleration provision becomes operative during the
six-month period immediately following the date of this
Option, then this Option shall immediately become exercisable
as to said full number of shares upon the expiration of said
six-month period and remain exercisable until the expiration
or prior termination of this Option. Except in cases of
termination of employment by reason of death, disability or
retirement, this Option shall remain exercisable for the
longer of three months after termination of active employment
or such acceleration, whichever is later, the period during
which you are entitled to receive salary continuation under
any agreement, policy, plan or other arrangement with the
Company or any of its Related Companies, or the period during
which you continue as a member of the Company's board of
directors, said period in any event not to extend beyond the
expiration of the term of this Option. Upon expiration of the
foregoing period, this Option shall terminate in all respects.
At the time your employment by the Company and its Related
Companies terminates, this Option shall expire and terminate
in all respects as to all shares other than the shares as to
which this Option can be exercised at the time or as a result
of such termination. For purposes of this Notice: (a) a
termination of your "active employment" with the Company and
its Related Companies will be deemed to occur (i) at the close
of business on the last day on which you are assigned to a
position with the Company or any Related Company for the
purpose of performing your occupation, in the case of
termination by the Company or any Related Company other than
for cause or (ii) at the time of termination of your
employment with the Company and its Related Companies in any
other case; and (b) a termination of your "employment" with
the Company and its Related Companies will be deemed to occur
at the close of business on the earliest of (i) the last day
on which you are assigned to a position with the Company or
any of its Related Companies for the purpose of performing
your occupation, in the case of termination by reason of your
death, disability or retirement, (ii) the last day of the
period during which you are entitled to receive salary
continuation under any agreement, policy, plan or other
arrangement with the Company or any of its Related Companies,
in the case of termination by the Company or any of its
Related Companies other than for cause, (iii) the last day of
an approved leave of absence if you do not resume the
performance of your occupation for the Company or any of its
Related Companies on or before the next business day, and (iv)
the last day on which you are assigned to a position with the
Company or any of its Related Companies for the purpose of
performing your occupation in any other case. It is
expressly noted that an exercise of this Option after
termination of your employment or active employment (including
an exercise within the time limits set forth in this Section
5 or in Section 6) may, depending on the reason for such
termination and the manner in which this Option is exercised,
disqualify this Option as an Incentive Stock Option for
federal income tax purposes, and that you should consult your
tax advisor before relying on this Option's qualification as
an Incentive Stock Option.
6. DEATH, DISABILITY OR RETIREMENT. In the event of your death,
disability or retirement, you or your legal representative or
representatives, or the person or persons entitled to do so
under your last will and testament or under applicable
intestate laws, shall have the right to exercise this Option,
to the extent not previously exercised, as to the lesser of
the full number of shares optioned hereby and referred to in
Section 1(b) hereof or such lesser number of shares as shall
have resulted from the operation of Section 5, and such right
shall lapse and this Option shall terminate upon the later of
(i) three years after the date of termination of employment,
(ii) three years after the date this Option accelerates under
Section 5, (iii) three years after the date of your death,
disability or retirement if it occurs during or at the end of
any period of salary continuation under any agreement, policy,
plan or other arrangement with the Company or any of its
Related Companies, or (iv) the end of the period during which
you continue as a member of the Company's board of directors,
but in no event later than the expiration of the specified
term of this Option. For purposes of Section 5 and this
Section 6, the term "disability" shall mean a physical or
mental condition which totally and permanently prevents you
from engaging in any substantial gainful activity, as
reasonably determined in good faith by the Compensation
Committee of the Board of Directors of Global Marine Inc.
7. ADJUSTMENTS. If outstanding shares of the class then subject
to this Option are increased, decreased, changed into or
exchanged for a different number or kind of shares or
securities of the Company through reorganization,
recapitalization, reclassification, stock dividend, stock
split or reverse stock split, then there shall be substituted
for each share then subject to the unexercised portion of this
Option the number and class of shares or securities into or
for which each outstanding share of the class subject to this
Option shall be so changed or exchanged, all without any
change in the aggregate purchase price for the shares then
subject to the unexercised portion of this Option, but with a
corresponding adjustment in the purchase price per share.
Such adjustments shall become effective on the effective date
of any such transaction; except that in the event of a stock
dividend or of a stock split effected by means of a stock
dividend or distribution, such adjustments shall become
effective immediately after the record date therefor.
Upon a dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with
one or more corporations as a result of which the Company is
not the surviving corporation, or upon a sale of substantially
all of the property of the Company ("Terminating
Transactions"), this Option shall terminate, unless provision
be made in writing in connection with such transaction for the
assumption of options theretofore granted under the Plan under
which this Option was granted, or the substitution for such
options of any options covering the stock of a successor
employer corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares
and prices, in which event this Option shall continue in the
manner and under the terms so provided. If this Option shall
terminate pursuant to the foregoing sentence, the person then
entitled to exercise any unexercised portions of this Option
shall have the right, at such time immediately prior to the
consummation of the Terminating Transaction as the Company
shall designate, to exercise this Option to the extent not
theretofore exercised.
Adjustments under this Section 7 shall be made by the
Company's Board of Directors whose determination as to what
adjustment shall be made, and the extent thereof, shall be
final, binding and conclusive. No fractional shares of stock
shall be issued under this Option or in connection with any
such adjustment.
8. LIMITATION. You or any other person entitled to exercise this
Option shall be entitled to the privileges of stock ownership
in respect of shares subject to this Option only when such
shares have been issued and delivered as fully paid shares
upon exercise of this Option in accordance with its terms.
9. REQUIREMENTS OF LAW AND OF STOCK EXCHANGES. The issuance of
shares upon the exercise of this Option shall be subject to
compliance with all of the applicable requirements of law with
respect to the issuance and sale of such shares. In addition,
neither the Company nor any Related Company shall be required
to issue or deliver any certificate or certificates for such
purchase upon exercise of this Option prior to the admission
of such shares to listing on notice of issuance on any stock
exchange on which shares of the same class are then listed.
By accepting this Option, you represent and agree for yourself
and your transferees by will or by the laws of descent and
distribution or otherwise that unless a registration statement
under the Securities Act of 1933 is in effect as to shares
purchased upon any exercise of this Option, any and all shares
so purchased shall be acquired for investment and not for sale
or distribution and each notice of the exercise of any portion
of this Option shall be accompanied by a representation and
warranty in writing, signed by the person entitled to exercise
the same, that the shares are being so acquired by good faith
for investment and not for sale or distribution. In the event
the Company's legal counsel shall, at the Company's request,
advise it that registration under the Securities Act of 1933
of the shares as to which this Option is at the time being
exercised is required prior to issuance thereof, neither the
Company nor any Related Company shall be required to issue or
deliver such shares unless and until such legal counsel shall
advise that such registration has been completed or is not
required.
By accepting this Option you further represent and agree for
yourself and your transferees by will or the laws of descent
and distribution that if you are an officer of the Company or
any other person who might be deemed an "affiliate" of the
Company under the Securities Act of 1933 at the time any
shares acquired upon exercise of this Option are proposed to
be sold, you or they will not sell any shares purchased on
exercise of this Option (a) without giving thirty-days'
advance notice in writing to the Company, and (b) until the
Company has advised you or them that such sale may be made
without registration under the Securities Act of 1933 or, if
such registration is required, that such registration has been
effected.
10. CONTINUED EMPLOYMENT. As further consideration for the
granting of this Option, and by accepting this Option, you
agree to remain in the employment of the Company or one or
more of its Related Companies at the pleasure of the Company
or such Related Company for a continuous period of at least
one year after the date hereof or up to your 65th birthday,
whichever may be earlier, at the salary rate in effect on the
date hereof or at such higher rate as may be fixed from time
to time by the Company or such Related Company. Military
service leave and/or sick leave shall be counted toward this
period of employment. You agree that you will during such
employment devote your time, energy and skills during all
normal working hours to the service of the Company or Related
Company and the promotion of its interests subject to
vacations, military service leave, sick leave and other
absences in accordance with the regular policies of the
Company or its Related Company.
11. GLOBAL MARINE 1998 STOCK OPTION AND INCENTIVE PLAN. This
Option is subject to, and the Company and you are bound by,
all of the terms and conditions of the Global Marine 1998
Stock Option and Incentive Plan as the same shall have been
amended from time to time in accordance with the terms
thereof, provided that no such amendment shall deprive you,
without your consent, of this Option or any rights hereunder.
Pursuant to such Plan, the Board of Directors of the Company
or its Committee established for such purposes is authorized
to adopt rules and regulations not inconsistent with the Plan
and to take such action in the administration of the Plan as
it shall deem proper. A copy of the Plan in its present form
is available for inspection at the Company's principal office
during business hours by you or any other persons entitled to
exercise this Option.
12. DEFINITION OF CERTAIN TERMS. Capitalized terms used in this
Notice and not defined herein are used as they are defined in
the Global Marine 1998 Stock Option and Incentive Plan as the
same shall have been amended from time to time. The term
"you," and related terms such as "your" used in this Notice
refer to the individual whose name appears first on the cover
page of this Notice.
EXHIBIT 10.37
GLOBAL MARINE EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN OF 1990
SECOND AMENDMENT
Global Marine Inc. ("the "Company") established the Global
Marine Executive Supplemental Retirement Plan of 1979 (the "Prior
Plan") for the purpose of providing a method of attracting mid-
career executives for key positions within top management by
supplementing the retirement benefit under the Global Marine
Retirement Plan for Employees and any other retirement plan.
Effective May 9, 1990, the Prior Plan was amended and restated in
its entirety as the Global Marine Executive Supplemental Retirement
Plan of 1990 (as subsequently amended, the "Plan"), and Global
Marine Corporate Services Inc. ("GMCSI") was substituted for the
Company as Plan sponsor with the Company guaranteeing all benefits
under the Plan. The Plan was subsequently amended by the First
Amendment thereto. The Company and GMCSI, in the exercise of the
power under Section 3.2 of the Plan to amend the Plan, do by these
presents further amend the Plan, effective February 1, 1999, as
follows:
7. Section 2.8 of the Plan is hereby amended in its entirety to
read as follows:
"2.8 VESTING OF BENEFITS AND FORFEITURE OF
BENEFITS: On and after the date a participant becomes
entitled to receive, or to then terminate employment and
receive, Normal Retirement Benefits or Early Retirement
Benefits under the Plan, such benefits shall be deemed to
be vested. A participant who terminates employment with
the Employers prior to the earlier of (a) both attainment
of age fifty-five (55) and completion of five years of
employment with the Employers or (b) attainment of age
sixty-five (65), will not be entitled to a benefit under
the Plan. Notwithstanding anything in the Plan to the
contrary, however, a participant who has completed five
years of employment with the Employers and terminates
employment with the Employers before attainment of age
fifty-five (55) due to death or disability shall, as of
the date of such termination, be deemed vested in and
become entitled under the Plan to Normal Retirement
Benefits commencing at any time on or after his Normal
Retirement Date or Early Retirement Benefits commencing
at any time on or after he attains or would have attained
age fifty-five (55). The determination of whether a
participant has terminated employment due to death or
disability shall be made by the Compensation Committee of
the Company's Board of Directors in its sole and absolute
discretion."
1. A new Section 2.9 is hereby added to Article II of the Plan to
read as follows:
"2.9 DEATH BENEFITS: A participant shall be
entitled to a death benefit payable to the participant's
surviving spouse, if any, pursuant to the provisions of
this Section 2.9 if the participant (i) terminates
service due to death with a right to a vested retirement
benefit pursuant to Section 2.8, or (ii) terminates
service due to disability with a right to a vested
retirement benefit pursuant to Section 2.8, but dies
prior to the date benefits commence under this Plan. The
death benefit payable hereunder shall be actuarially
adjusted using the actuarial assumptions applicable to
survivor benefits under the other retirement plans
sponsored by the Employers and shall be paid out in the
same form and at the same time or times as such other
plan benefits."
Terms used in this Amendment and not defined herein are used
as they are defined in the Plan. References in the Plan to "the
Plan" (and indirect references such as "hereof" and "herein") are
amended to refer to the Plan as amended by this Amendment.
Except as expressly amended hereby, the Plan shall remain in
full force and effect and is hereby ratified and confirmed in all
respects.
IN WITNESS WHEREOF, GMCSI and the Company have caused these
presents to be executed by their duly authorized officers this 23rd
day of February 1999.
GLOBAL MARINE CORPORATE GLOBAL MARINE INC.
SERVICES INC.
By: S/JAMES L. MCCULLOCH By: S/THOMAS R. JOHNSON
James L. McCulloch Thomas R. Johnson
Vice President Vice President
EXHIBIT 10.48
GLOBAL MARINE INC.
1999 MANAGEMENT INCENTIVE AWARD PLAN
PURPOSE AND PARTICIPANTS
The purpose of the 1999 Management Incentive Award Plan is to
provide management employees of Global Marine Inc. and its
subsidiaries with effective incentives in respect of their service
during 1999. The plan does this by focusing management on and
rewarding performance that is superior when evaluated against the
company's own internal performance measures and against measures of
performance relative to other companies in Global Marine's industry
peer group, particularly in areas that enhance shareholder value.
All employees of Global Marine Inc. and its subsidiaries in grades
34 and above who are on active, layoff or leave status on the last
day of 1999 are participants in the plan.
PLAN
THE TWO BONUS POOLS. There are two bonus pools under the plan - a
"Qualified Pool" and a "Non-Qualified Pool." The Qualified Pool
accounts for 75% of each participant's maximum potential bonus and
is designed to qualify for deductibility under section 162(m) of
the Internal Revenue Code. The amount authorized for bonuses from
this pool will be determined by 1999 company performance relative
to goals established under objective performance measures
previously approved by the stockholders of Global Marine Inc. and
selected by the Compensation Committee of the company's board of
directors. The Non-Qualified Pool accounts for 25% of each
participant's maximum potential bonus and is not designed to
qualify under section 162(m). The amount authorized for bonuses
from this pool will be determined by company performance in areas
and against subjective measures selected by the Compensation
Committee.
A base dollar amount will be assigned to each of the two bonus
pools. The total 1999 base pay received by all participants in
each salary grade range listed in Table A in the attachment will be
multiplied by the target bonus percentage indicated for that range,
and the resulting amounts for all ranges will be added. The total
base dollar amount will then be allocated to the performance
measures used in the two bonus pools, which are listed in Table B,
based on the percentages indicated for the various measures. This
will result in a division of the total base amount between the two
bonus pools, with 75% going to the Qualified Pool and 25% going to
the Non-Qualified Pool.
THE QUALIFIED POOL. The Qualified Pool is based on two objective,
stockholder-approved measures, one of which is an internal measure
and one of which is a measure of performance relative to other
companies in Global Marine's industry peer group. The two measures
for 1999 are: 1) net income compared to budget; and 2) return on
capital (net income relative to invested capital) compared to the
company's peers. A specific goal has been set for each of the two
performance measures, such that exactly meeting the goal will
result in authorization to pay 100% of the base dollar amount
allocated to that performance measure. If the goal is not fully
met, then a percentage between 0% and 100%, the exact percentage
dependent on the exact amount of the shortfall, of that measure's
base amount will be authorized for bonus awards. If the goal is
exceeded, then a percentage between 100% and a maximum 200%, the
exact percentage dependent on the exact amount by which the goal is
exceeded, of that measure's base dollar amount will be authorized.
At the first Compensation Committee meeting in 2000, the Committee
will certify the level of 1999 company performance achieved under
each of the Qualified Pool's two objective performance measures.
The appropriate multiplier for each measure, determined from
Table B in the attachment, will then be applied to the base dollar
amount allocated to that measure, and the resulting amounts for
both measures will be added to determine the total amount
authorized for bonuses from the Qualified Pool. The total amount
authorized for the Qualified Pool will then be allocated to the
salary grade ranges in Table A in the same relative proportions
represented by the amounts initially used from the various ranges
to make up the total base dollar amount allocated to the two pools.
The amount allocated to each salary range will be divided by the
total number of days on active employment status during 1999 for
all participants in that range, and for each participant the result
will be multiplied by his number of days on active employment
status during 1999 to determine his maximum bonus from the
Qualified Pool. The Committee can award a participant's maximum
bonus from the Qualified Pool, or it can consider individual merit
and apply "negative discretion" to reduce his bonus below the
maximum if so desired. The reduction, however, can not be used to
increase anyone else's bonus, and any unused portion of the
Qualified Pool can not be used to increase the Non-Qualified Pool.
THE NON-QUALIFIED POOL. The Non-Qualified Pool, which is not
designed to qualify under section 162(m), is tied to company
performance in areas and against measures selected by the
Committee. For 1999, the Non-Qualified Pool is tied to performance
in three areas: 1) safety, 2) operating cost (for Global Marine
Drilling Company and corporate) and operating margin (for drilling
management services and Challenger Minerals Inc.), and
3) environmental impact. Instead of measuring performance in each of
these three areas against an objective measure, the Compensation
Committee, at its first meeting in 2000, will subjectively rate the
company's 1999 performance from "poor" to "outstanding" in each
area individually or all three as a group, at the Committee's
discretion. Overall poor performance will result in none of the
Non-Qualified Pool's base dollar amount being authorized for
awards, outstanding performance will result in 200% being
authorized, and the midpoint will result in 100% being authorized,
with the Committee having discretion to authorize awards from the
Non-Qualified Pool equal to none or 200% of the pool's base dollar
amount or any percentage in between.
Individual bonuses from the Non-Qualified Pool will be based on
individual merit. The total bonus a participant can earn from the
Non-Qualified Pool and the Qualified Pool combined, however, is
capped at double the percentage of his base salary indicated for
his salary grade in Table A in the attachment; for example, the
maximum individual bonus from both pools combined is limited to 40%
of base salary at the lowest salary grades up to 120% of base
salary for the CEO. The total of the bonuses from both pools will
be paid in cash or, at the Compensation Committee's discretion, can
be paid in shares of Global Marine Inc. common stock in lieu of
cash (applicable withholding taxes being paid in cash).
RESPONSIBILITY AND AUTHORITY
The Chief Executive Officer and the Chief Financial Officer of
Global Marine Inc. shall take all such actions, do all such things,
make all such payments and sign and deliver all such documents and
instruments as either or both of them may at any time or from time
to time deem necessary or desirable in order to implement this
plan.
1999 Management Bonus Plan
TABLE A
Target Bonus
Percent of
Salary Grades Base Pay
34-37 20%
38-39 25%
40-42 30%
43 35%
Executive Oficers 45%
CEO 60%
<TABLE>
TABLE B
<CAPTION>
Performance Percentage of Factors Determining
Measure Target Bonus Performance Measure Multiplier
QUALIFIED POOL
<S> <C> <S> <C> <C> <C> <C> <C>
Net Income 37.5% Company Performance as a Percentage of Budget <=50% 75% 100% 125% 150%+
Performance Measure Multiplier 0 0.5 1.0 1.5 2.0
Return Capital(1) 37.5% Company Performance - Relative Ranking
vs. Peer Group(2) 5th-8th 4th 3rd 2nd 1st
Performance Measure Multiplier 0 0.5 1.0 1.5 2.0
NON-QUALIFIED POOL
Safety
Performance, Level of Subjective Performance Poor Outstanding
Operating Cost
(GMDC & Corporate) 25%
or Operating Margin
(DMS & CMI), and
Environmental Performance Multiplier 0 2.0
Performance
Total 100%
</TABLE>
(1) Minimum return for any payout under this measure is one-half of the
company's weighted average cost of capital.
(2) PEER GROUP COMPANIES ARE: Global Marine Inc., Transocean Offshore
Drilling, Inc., Diamond Offshore Drilling, Inc., Rowan Companies,
ENSCO Int'l. Inc., R&B Falcon Corp., Noble Drilling Corp., Santa Fe
International Corp.
GLOBAL MARINE INC. AND SUBSIDIARIES
as of January 31, 1999
STATE OR OTHER PERCENT OF VOTING
JURISDICTION OF STOCK OWNED BY
NAME OF COMPANY INCORPORATION IMMEDIATE PARENT
Global Marine Inc. Delaware -
Applied Drilling Technology Inc. Texas 100%
Arctic Systems Ltd. Canada 100%
Campeche Drilling Services Inc. Delaware 100%
Challenger Minerals Inc. California 100%
Global Marine Arctic Ltd. Canada 100%
Global Marine Drilling Company California 100%
Global Marine Caribbean, Inc. California 100%
Global Marine Development Inc. California 100%
Global Marine do Brasil
Perfuracoes Ltda. Brazil 50% (1)
Global Marine Leasing Corporation Bahamas 100%
Global Marine C. R. Luigs
Limited England 100%
Global Marine Baltic Inc. Delaware 100%
Global Marine International
Drilling Corporation Bahamas 85.1% (2)
Global Marine B.V. The Netherlands 100%
Global Marine Norway AS Norway 100%
Glomar International (Canada) Nova Scotia 100%
Drilling Company
Global Marine North Sea Limited Bahamas 100%
Global Marine Overseas Limited Bahamas 100%
Global Marine West Africa Bahamas 100%
Drilling Company Limited
Global Marine South America LLC Delaware 100%
Global Marine U.K. Limited Scotland 100%
Global Offshore Drilling Limited Nigeria 60%
Glomar International S.A.R.L. France 100%
Global Marine Capital
Investments Inc. Delaware 100%
Global Marine Beaufort Sea Inc. Delaware 100%
Global Marine Corporate Services Inc. California 100%
Global Marine de Venezuela Inc. Delaware 100%
Global Marine Drilling
(Malaysia) Sdn. Bhd. Malaysia 100%
Global Marine Integrated Services -
International Inc. Delaware 100%
Intermarine Services Inc. Texas 100%
Marican Offshore Drilling
Services, Inc. Canada 100%
Turnkey Ventures de Mexico Inc. Delaware 100%
___________________________
(1) The remaining 50% of the voting stock is owned directly by Global Marine
Inc.
(2) The remaining 14.9% of the voting stock is owned by Global Marine Drilling
Company.
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference of our report dated February
22, 1999 on our audits of the consolidated financial statements and our
report dated February 22, 1999 on our audits of the financial statement
schedule of Global Marine Inc. and subsidiaries, as of December 31, 1998
and 1997, and for the years ended December 31, 1998, 1997 and 1996, which
reports are included in this Annual Report on Form 10-K, into (i) the
prospectus constituting part of the Company's Registration Statements on
Form S-8 (Registration Nos. 33-32088, 33-40961 and 33-63326), respectively,
for the Global Marine Inc. 1989 Stock Option and Incentive Plan, (ii) the
prospectus constituting part of the Company's Registration Statement on
Form S-8 (Registration No. 33-40266) for the Global Marine Savings Incentive
Plan, (iii) the prospectus constituting part of the Company's Registration
Statement on Form S-8 (Registration No. 33-40961) for the Global Marine Inc.
1990 Non-Employee Director Stock Option Plan, and (iv) the prospectus
constituting part of the Company's Registration Statement on Form S-8
(Registration No. 33-57691) for the Global Marine Inc. 1994 Non-Employee
Stock Option and Incentive Plan, and (v) the prospectus constituting part of
the Company's Registration Statement on Form S-3 (Registration Nos. 33-58577
and 333-49807) for the proposed offering of up to $500,000,000 of debt
securities, preferred stock and/or common stock.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
March 16, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet of Global Marine Inc. and subsidiaries
as of 12-31-98 and the related condensed consolidated statement of operations
for the twelve months ended 12-31-98, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 56,900
<SECURITIES> 0
<RECEIVABLES> 167,200
<ALLOWANCES> 4,200
<INVENTORY> 0
<CURRENT-ASSETS> 269,400
<PP&E> 1,908,300
<DEPRECIATION> 396,200
<TOTAL-ASSETS> 1,971,600
<CURRENT-LIABILITIES> 152,400
<BONDS> 595,700
0
0
<COMMON> 17,300
<OTHER-SE> 1,023,100
<TOTAL-LIABILITY-AND-EQUITY> 1,971,600
<SALES> 3,800
<TOTAL-REVENUES> 1,162,200
<CGS> 3,500
<TOTAL-COSTS> 832,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,900
<INCOME-PRETAX> 284,100
<INCOME-TAX> 60,800
<INCOME-CONTINUING> 223,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 223,300
<EPS-PRIMARY> 1.29
<EPS-DILUTED> 1.27
</TABLE>
