SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
__X___ ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
______ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________ to ___________.
Commission File No. 1-5587
READING & BATES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 73-0642271
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
901 Threadneedle, Suite 200, Houston, TX 77079
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 713-496-5000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
Common Stock, $.05 par value New York Stock Exchange
Pacific Stock Exchange
$1.625 Convertible Preferred Stock,
$1.00 par value New York Stock Exchange
Pacific Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Pacific 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. [ ]
AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY
NONAFFILIATES ON FEBRUARY 29, 1996 - $1,039,141,231
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING
ON FEBRUARY 29, 1996 - 61,978,771
DOCUMENTS INCORPORATED BY REFERENCE
1) Proxy Statement for Annual Meeting of Stockholders to be held on
May 14, 1996 - Part III
TABLE OF CONTENTS
Page
PART I
Item 1.Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . .
Item 4.Submission of Matters to a Vote of Security Holder . . . . . . . .
PART II
Item 5.Market for the Registrant's Common Stock and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.Selected Financial Data . . . . . . . . . . . . . . . . . . . . .
Item 7.Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . .
Item 8.Financial Statements and Supplementary Data . . . . . . . . . . .
Item 9.Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . .
PART III
Item 10.Directors and Executive Officers of the Registrant. . . . . . . .
Item 11.Executive Compensation . . . . . . . . . . . . . . . . . . . . .
Item 12.Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13.Certain Relationships and Related Transactions . . . . . . . . .
PART IV
Item 14.Exhibits, Financial Statements and Reports on Form 8-K. . . . . .
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
READING & BATES CORPORATION AND SUBSIDIARIES
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 1995
PART I
Item 1. Business and Item 2. Properties
Business Developments
Reading & Bates Corporation was incorporated in 1955 under the laws of
the State of Delaware. Unless the context otherwise indicates, the term
"Company" herein refers to the total business conducted by the Company and
its subsidiaries.
The Company provides contract drilling and other related services in
major offshore oil and gas producing areas worldwide. The Company began
as one of the first offshore contract drillers in 1956, and considers
itself one of the most experienced offshore drilling contractors in the
world. The Company's offshore fleet currently consists of three fourth-
generation and two third-generation semisubmersible drilling units, a
third-generation deepwater semisubmersible support vessel, nine
international-class 300-foot cantilever jack-ups, a 250-foot mat-supported
jack-up, two self-erecting tenders and two second-generation
semisubmersibles that are candidates for conversion to high
specification/deepwater drilling units or floating production units.
The Company's fleet is internationally diversified. Two of the
Company's rigs are located in the Gulf of Mexico. The remainder of the
Company's units are located in various parts of the world, including in
waters offshore Angola, Australia, Bangladesh, Egypt, Greece, Indonesia,
Italy, Nigeria, Singapore, Tunisia, the United Kingdom and Vietnam.
On February 28, 1995, the Company announced that it had received an
unsolicited merger proposal from Sonat Offshore Drilling Inc. ("Sonat
Offshore") providing for the acquisition of 100% of the common stock of
the Company for a combination of Sonat Offshore common stock and $100
million in cash. As proposed by Sonat Offshore, the Company's
shareholders would have, at their election, received either (i) .357
shares of Sonat Offshore common stock or (ii) $7.50 of cash for each share
of the Company. To the extent that the election resulted in an under- or
oversubscription as to the $100 million of cash, a proration formula would
have been utilized. The Company engaged Morgan Stanley & Co. Incorporated
to act as its financial advisor with respect to evaluating the Sonat
Offshore proposal. On March 16, 1995, the Company announced that its
board of directors had rejected the Sonat Offshore proposal on the basis
that it was not in the best interests of the Company and its shareholders.
On April 18, 1995, Sonat Offshore announced that the merger discussions
had broken off following the rejection by the Company of Sonat Offshore's
proposal. The Company responded the same day announcing that discussions
with Sonat Offshore had not to that date demonstrated a willingness on the
part of Sonat Offshore to consider a transaction that would be reflective
of the short-term or long-term business prospects and value of the
Company. Subsequent to their announcing their intent to break off
discussions in April 1995, Sonat Offshore initiated additional discussions
in May 1995 with regard to potential merger transactions. However, these
subsequent discussions similarly did not result in terms that recognized
the Company's current or long-term value. The Company and Sonat Offshore
discontinued discussions in June 1995. The Company remains willing to
engage in discussions regarding possible business combinations that would
potentially strengthen its competitive position in the offshore drilling
industry, appropriately reflect the underlying value of the Company and
maximize shareholder value. See "Business Strategy" below.
In 1994 and 1995, the Company acquired and sold certain assets and
terminated an operating lease. See "FINANCIAL CONDITION" under Item 7 for
discussions of the 1994 purchase of a second-generation semisubmersible
drilling unit "RIG 41" (ex "BENVRACKIE") , the 1995 purchase of a third-
generation semisubmersible support vessel "IOLAIR" and a second-generation
semisubmersible drilling unit "RIG 42" , the 1995 sale/lease-back of the
"M.G. HULME, JR.", the 1995 purchase of an oil & gas interest in the Gulf
of Mexico, the 1994 purchase of certain notes and interests relating to
the three previously leased drilling units "GEORGE H. GALLOWAY", "C.E.
THORNTON" and "F.G. McCLINTOCK" and the 1994 early termination of the
operating lease on the "SONNY VOSS".
In 1994, as part of the Company's strategy of geographic
diversification and increasing participation in the fourth-generation
semisubmersible sector of the offshore drilling market, the Company
significantly increased its ownership in Arcade Drilling AS ("Drilling"),
a Norwegian company which owns the fourth-generation semisubmersibles
"HENRY GOODRICH" and "PAUL B. LOYD, JR." (ex "SONAT ARCADE FRONTIER"). A
1994 transaction, which included the Company selling its entire ownership
in Arcade Shipping AS ("Shipping") and purchasing from Shipping its entire
ownership in Drilling, increased the Company's ownership in Drilling to
68.1%. As of December 31, 1995, the Company had acquired approximately
74.4% of the outstanding stock of Drilling, at an accumulated cost of
approximately $113.5 million. See Note B of Notes to Consolidated
Financial Statements and "FINANCIAL CONDITION - Arcade Acquisition" under
Item 7.
Mobile Offshore Unit Descriptions
Mobile offshore drilling rigs consist of a hull, positioning equipment
and drilling equipment. The design of a rig determines the marine
environment in which it can operate. The drilling equipment determines
the drilling operations which a rig is capable of performing and is
principally comprised of hoisting equipment, power plant, fluid handling
systems, well control apparatus and a means of rotating the drill string
and tubulars. A rig also has living quarters, cranes, a heliport and
material storage facilities.
Although the Company's fleet consists of jack-up rigs,
semisubmersibles, drilling tenders and a support vessel, there are several
other types of units that compete with the Company's units for contracts.
The major categories of units include the following:
1. Jack-Up Rigs. Jack-up rigs are mobile self-elevating drilling
platforms equipped with legs which can be lowered to the ocean
floor until a foundation is established to support the drilling
platform. The rig hull includes the drilling rig, jacking system,
crew quarters, loading and unloading facilities, storage areas for
bulk and liquid materials, helicopter landing deck and other
related equipment. The rig legs may have a lower hull ("mat")
attached to the bottom of them in order to provide a more stable
foundation in soft bottom areas. Independent leg rigs are better
suited for harder or uneven seabed conditions. Jack-up rigs are
generally subject to maximum water depth of approximately 350
feet, and some jack-up rigs may drill in water depths as shallow
as ten feet. The water depth limit of a particular rig is
determined by the length of the rig's legs and the operating
environment. Moving a rig from one drill site to another involves
jacking the hull down into the water until it is afloat and then
jacking up its legs with the hull floating on the surface of the
water. The hull is then towed to the new drilling site by tugs
and the legs are then jacked down to the ocean floor. The
jacking operation continues until the hull is raised out of the
water, preloaded with sea water and elevated to a level that
provides a final air gap above the effects of the sea. Drilling
operations are then conducted with the hull in its raised
position. A cantilever jack-up has a feature which allows the
drilling platform to be extended out from the hull, allowing it to
perform drilling or workover operations over pre-existing
platforms or structures. Certain cantilever jack-up rigs have
"skid-off" capability, which allows the derrick equipment set to
be skidded onto an adjacent platform, thereby increasing the
operational capability of the rig. Slot type jack-up rigs are
configured for the drilling operations to take place through a
slot in the hull. Slot type rigs are usually used for exploratory
drilling, in that their configuration makes them difficult to
position over existing platforms or structures.
2. Semisubmersible Rigs. Semisubmersible rigs are floating platforms
which, by means of a water ballasting system, can be submerged to
a predetermined depth so that the lower hulls, or pontoons, are
below the water surface during drilling operations. The rig is
"semi-submerged", remaining afloat, in a position in which the
lower hull is about 60-80 feet below the water line and the upper
deck protrudes well above the surface. The upper deck is attached
to the pontoons with columns. These rigs maintain their position
over the well through the use of an anchoring system or computer
controlled thruster system. They have lower wave-induced motions
than other types of floating units because of their geometry at
the water line. Some semisubmersible rigs are designed to work in
water depths up to 6,000 feet. Some are self-propelled and move
between locations under their own power when afloat on the
pontoons; however, most semisubmersible rigs are relocated with
the assistance of tugs. Some semisubmersible rigs are capable of
operating in the "submersible" mode, sitting on the bottom in
water depths of approximately 40 to 50 feet.
3. Submersible Rigs. Submersible rigs are somewhat similar in
configuration to semisubmersible rigs, but the lower hull of the
rig rests on the sea floor during drilling operations. A
submersible rig is towed to the well site where it is submerged by
flooding its lower hull until it rests on the sea floor, with the
upper hull above the water surface. After completion of the
drilling operations, the rig is refloated by pumping water out of
the lower hull and it is towed to another location. Submersible
rigs typically operate in water depths of 12 to 70 feet, although
some submersible rigs are capable of operating at greater depths.
4. Self-Contained Platform Rigs. Platform rigs consist of drilling
equipment, power generation machinery and quarters arranged in
modular packages which are transported to and assembled, using
derrick barges, on fixed offshore platforms provided by the
customer. Upon completion of drilling operations, the rig is
disassembled and moved to another location. Platform rigs are
typically used for development drilling and workover operations.
Fixed offshore platforms are steel tower-like structures which
stand on the sea floor, with the top portion, or deck, being above
the water level and providing the site for the platform rig.
Platform rigs are dependent on the availability of derrick barges
or other lifting assistance, and transport barges.
5. Drilling Tenders. Drilling tenders are usually non-self-propelled
barges or semisubmersibles which are moored alongside a platform
and contain the quarters, mud pits, mud pumps, power generation,
etc. Thus, the only equipment on the platform is the derrick
equipment set consisting of the substructure, drillfloor, derrick
and drawworks. Drilling tenders allow smaller, less costly
platforms to be used for development projects. Self-erecting
tenders carry their own derrick equipment set and have a crane
capable of erecting it on the platform, thereby eliminating the
cost associated with a separate derrick barge and related
equipment. Older tenders frequently require the assistance of a
derrick barge to erect the derrick equipment set.
6. Drillships. Drillships are ships equipped for drilling and are
typically self-propelled and move from one location to another
under their own power. Drillships are positioned over the well
through use of either an anchoring system or computer controlled
thruster system similar to those used on semisubmersible rigs.
Certain drillships are capable of drilling in water depths of more
than 6,000 feet. However, drillships normally require water depth
of at least 200 feet in order to conduct operations.
7. Support Vessels. Support vessels are monohull or semisubmersible
type vessels that provide services to offshore drilling rigs,
platforms or other vessels in drilling and field installation and
development operations. These types of offshore support services
include, but are not limited to, emergency support, diving
operations, Remote Operating Vehicle (ROV) operations,
accommodation, subsea well workover operations, subsea well
abandonments, subsea construction support and subsea inspections.
These vessels can operate in various water depths and are normally
self-propelled, dynamically positioned through the use of computer
controlled thrusters and are outfitted with a large crane lift
capacity.
There are several factors that determine the type of offshore
rig most suitable for performing a particular drilling contract. The most
significant factors are the marine environment and water depth. Seabed
conditions at the proposed drilling location, whether the drilling is
being done over a platform or other structure, the intended well depth,
variable load requirements and well control equipment requirements (i.e.
high pressure and high temperature wells) are other important factors.
Thus, the market tends to be segmented and considerable variation in
utilization and dayrates often exists for various rigs as a function of
demand for their capabilities.
The Company's Fleet
At March 1, 1996, eighteen of the Company's twenty drilling and
support units were operating or committed under contract. Twelve of the
contracts expire prior to the end of 1996 with six contracts extending
past 1996. The Company's fleet currently operates pursuant to contracts
having anticipated durations from less than one year to up to two years.
The number of units working at any given date can fluctuate considerably.
No representation can be made with respect to the continuance of current
utilization rates, or the length, conditions or terms of any new contracts
or commitments.
The following table sets forth the types of equipment operated by the
Company and the locations and status of such equipment as of March 1,
1996.
OFFSHORE DRILLING AND SUPPORT UNITS
<TABLE>
<CAPTION>
Water Drilling
Year Depth Depth
Type and Name Constructed Capability Capability Location Status
------------- ----------- ---------- ---------- -------- ------
(expressed in feet)
<S> <C> <C> <C> <C> <C
Fourth-Generation
Semisubmersibles
JACK BATES (1) 1986 4,000 30,000 Vietnam Operating
HENRY GOODRICH (2) 1985 2,000 30,000 United
Kingdom Operating
PAUL B. LOYD, JR.(2) 1987 2,000 25,000 United
Kingdom Operating
Third-Generation
Semisubmersibles
JIM CUNNINGHAM (3) 1982 1,500 25,000 Vietnam Operating
M. G. HULME, JR. (4) 1983 2,500 25,000 Gulf of
Mexico Operating
IOLAIR (5) 1982 2,000 - United
Kingdom Operating
Other Semisubmersibles
RIG 41(6) 1976 660 25,000 United
Kingdom Cold Stacked
RIG 42 (7) 1974 1,500 25,000 United
Kingdom Committed
Jack-Ups
F. G.
McCLINTOCK (8)(9) 1975 300 25,000 United
Kingdom Operating
D. K. McINTOSH (10) 1978 250 20,000 Singapore Stacked
RON TAPPMEYER 1978 300 25,000 Bangladesh Operating
C. E. THORNTON (8) 1974 300 25,000 Nigeria Operating
RANDOLPH YOST (3) 1979 300 25,000 Angola Operating
D. R. STEWART (1) 1980 300 25,000 Italy Operating
HARVEY H. WARD 1981 300 25,000 Australia Operating
ROGER W. MOWELL 1982 300 25,000 Greece Operating
J. T. ANGEL 1982 300 25,000 Tunisia Operating
GEORGE H.
GALLOWAY(8)(9) 1985 300 25,000 Gulf of
Mexico Operating
Drilling Tenders
CHARLEY GRAVES 1975 400 20,000 Egypt Operating
W. D. KENT 1977 400 20,000 Indonesia Operating
<FN>
(1) Subject to a first preferred mortgage in favor of Christiania Bank og
Kreditkasse. See Note C of Notes to Consolidated Financial
Statements.
(2) Drilling unit is owned by Drilling and subject to a first preferred
mortgage in favor of The Chase Manhattan Bank, N.A. In February 1996,
the "SONAT ARCADE FRONTIER" was renamed the "PAUL B. LOYD, JR.". See
Notes B and C of Notes to Consolidated Financial Statements.
(3) Subject to a preferred mortgage in favor of Deep Sea Investors, L.L.C.
Such mortgage is additional collateral relating to the sale/lease-back
of the "M. G. HULME, JR." (see Note (4) below). The drilling unit is
scheduled to be upgraded to operate in 4,600 feet of water in 1996.
(4) The "M. G. HULME, JR." is accounted for as an operating lease as a
result of the sale/lease-back in November 1995. The drilling unit is
scheduled to be upgraded to operate in 3,300 feet of water in 1996.
See Note E of Notes to Consolidated Financial Statements.
(5) In September 1995, the Company purchased the third-generation
semisubmersible vessel "IOLAIR". The "IOLAIR" is designed for support
and living accommodations and is currently working for BP Exploration.
However, the vessel is expected to be upgraded in late 1996 or early
1997 to include a derrick floor and ancillary workover equipment. Upon
completion of the upgrade, the vessel is expected to be used under a
long-term contract with BP Exploration for up to 200 days a year.
(6) The second-generation semisubmersible "RIG 41" (ex "BENVRACKIE") was
purchased by the Company in September 1994 and the rig is currently
stacked and available for conversion to a floating production system
or deployment, after completion of upgrades, as a conventional
drilling unit.
(7) In September 1995, the Company purchased the second-generation
semisubmersible drilling unit "RIG 42". "RIG 42" is a candidate for
the extended well test market in the North Sea, for upgrade to
deepwater and/or harsh environment drilling or eventual conversion to
a floating production service. "RIG 42" is currently being
reactivated for an extended well testing contract to commence in the
second quarter of 1996.
(8) In the third quarter of 1994, the Company purchased certain notes and
interests relating to the lease debt outstanding associated with the
operating leases of the "GEORGE H. GALLOWAY" and "C.E. THORNTON", and
the secured contingent obligations associated with the capital lease
of the "F.G. McCLINTOCK". In the second quarter of 1995, the Company
acquired title to the "GEORGE H. GALLOWAY". See Note E of Notes to
Consolidated Financial Statements.
(9) Subject to a first preferred mortgage in favor of the CIT
Group/Equipment Financing, Inc. See Note C of Notes to Consolidated
Financial Statements.
(10) The rig is currently stacked and available for sale.
</TABLE>
All but three of the Company's drilling rigs ("D.K. McINTOSH", "RIG
41" and "RIG 42") have top drive units which increase the rig's
marketability and dayrates. A top drive unit is a drilling tool which
allows drilling with 90-foot lengths of drill pipe rather than 30-foot
lengths, thus reducing the number of connections. A top drive unit also
permits rotation of the drill string while tripping in and out of the
hole. These characteristics increase drilling speed and efficiency and
reduce the risk of the drill string sticking during operations, especially
during the drilling of highly deviated directional wells which are common
in development drilling operations.
The Company's active semisubmersible drilling rigs are capable of
drilling to depths of 25,000 feet to 30,000 feet in maximum water depths
ranging from 1,500 feet to 4,000 feet. The "JACK BATES", the "PAUL B.
LOYD, JR." and the "HENRY GOODRICH" are among the most technically
advanced "fourth-generation" semisubmersible drilling units in existence.
Semisubmersibles are frequently classified into four generations, based
primarily on rig capabilities. The fourth-generation classification
generally refers to semisubmersibles that have been built since 1984, and
have large physical size, harsh environment capability, high variable
loads, top drive units, 15,000 psi blowout preventers and superior motion
characteristics. There are currently 13 fourth-generation
semisubmersibles worldwide. These rigs are the best choice for operators
in deepwater and/or harsh environments or for drilling that requires
larger variable loads and the ability to handle large pieces of subsea
equipment. There are limited markets for this type of rig and a
relatively small group of users. The principal markets are the North
Sea/Norway, the Gulf of Mexico, the Far East and offshore Brazil.
The "JACK BATES" was built in 1986. This rig was designed for moored
drilling operations, with the assistance of a computer-controlled thruster
system, in up to 7,500 feet of water and is currently outfitted for
operations in up to 4,000 feet of water. This rig was also specifically
designed for operations in harsh marine environments. Its low-heave
motion response characteristics reduce the effects of wave motions and
thus reduce downtime in harsh environments. Other features of this unit
are its mechanized drilling and handling systems, its mooring system and
equipment, its payload capabilities and its engineering design
characteristics that facilitate upgrades in water depth capabilities at
significantly lower expense relative to other semisubmersibles. The "JACK
BATES" has a variable load capacity of approximately 6,000 tons. The rig
is currently contracted through August 1996 and will commence a fifteen
month contract in March 1997, with additional options.
The "PAUL B. LOYD, JR." is one of the most modern dynamically-
positioned drilling units in existence and is also equipped with a
conventional mooring system, enabling it to perform a wide range of
drilling assignments. Built in 1987, this rig has a 4,000 ton variable
load capacity and is currently capable of drilling high-pressure wells in
up to 2,000 feet of water, but can be upgraded to operate in depths of up
to 6,000 feet of water. The "PAUL B. LOYD, JR." started its first
contract in 1991 with Conoco (U.K.) Ltd. in the North Sea and is certified
to operate in both the Norwegian and the U.K. sectors of the North Sea.
In 1991, the rig also completed operations in the Barents Sea for Conoco
Norway and Esso Norge AS, for which it was specially outfitted for
temperatures as low as minus 25 degrees Celsius. The rig is currently
operating for British Petroleum offshore the U.K.
The "HENRY GOODRICH" has a 6,800 ton variable load capacity and can be
upgraded to operate in depths of up to 10,000 feet of water, although it
is currently outfitted for drilling high-pressure, deep wells in water
depths of up to 2,000 feet. Built in 1985, this rig is one of the few
drilling units capable of drilling under arctic conditions. The rig has a
conventional mooring system and is designed to accept a dynamic
positioning system. The "HENRY GOODRICH" is certified to operate offshore
the U.K. and is currently operating for Shell U.K. Limited in the U.K.
sector of the North Sea.
Pursuant to an agreement dated August 31, 1991 (the "Standstill
Agreement") with Sonat Offshore, which owns approximately 25% of the stock
of Drilling, the Company and its affiliates are subject to certain
restrictions on engaging in various transactions with Drilling, including
transactions with respect to the rigs owned by Drilling and the stock of
Drilling (unless, in some cases, the terms are no less favorable to
Drilling or to Sonat Offshore than similar transactions with an
unaffiliated third party). Such restrictions continue (so far as the
Company's obligations are concerned) until the earliest of (i) the date
when the Company no longer owns the 46% of Drilling stock previously
owned by Shipping, (ii) September 1, 1998, or (iii) the date when Sonat
Offshore owns less than 5% of Drilling (the "Standstill Period").
The Standstill Agreement further provides that during the Standstill
Period the Company may not permit Drilling to early terminate the
management agreement pursuant to which Sonat Offshore manages the "HENRY
GOODRICH" for a variable management fee from Drilling. Sonat Offshore's
management agreement for the "PAUL B. LOYD, JR." expired in December 1995
and a subsidiary of the Company now manages the drilling unit. The
management agreement for the "HENRY GOODRICH" was modified in connection
with a drilling contract to allow Sonat Offshore to bareboat charter such
rig with renewal options up to September 1997, subject to continuation of
such drilling contract by the present operator.
The Company's jack-up drilling rigs are capable of drilling to depths
of 20,000 to 25,000 feet in water depths ranging between 10 and 300 feet,
depending on the rig. All but one of the Company's jack-up rigs ("D.K.
McINTOSH") have the cantilever feature, which allows the drilling platform
to be extended out from the hull of the rig, facilitating operations over
existing structures such as well platforms. Nine of the Company's jack-up
rigs are independent leg rigs and one is a mat-supported rig.
The Company's two drilling tenders are specialized self-erecting
drilling tenders. These units are equipped with a large crane which
provides the capability of erecting their derrick equipment sets on
offshore platforms without the need for separate crane barges or
associated equipment. Both of these units are capable of drilling to
depths of 20,000 feet.
The Company follows a policy of keeping its equipment well maintained
and technologically competitive. However, its equipment could be made
obsolete by the development of new techniques and equipment. In addition,
industry-wide shortages of supplies, services, skilled personnel and
equipment necessary to conduct the Company's business have occurred in the
past, and such shortages could occur again.
Utilization Statistics
Published industry statistics of unit utilization include data based
on both the "contract method", which measures the number of days under
contract (whether or not earning revenues) compared to the total days the
units were owned, and the "operating method", which measures utilization
in terms of the number of days the units are earning revenues to the total
days the units are owned. Consequently, the available industry data set
forth below may not be directly comparable to the Company's data
calculated based on the operating method, the more conservative measure.
The following table sets forth certain data regarding unit utilization and
average total units available for the industry and the Company's fleet.
Industry data is based upon all operational units of the types indicated
for the periods indicated and includes many units that are dissimilar to
the Company's units in many respects, including performance capabilities,
age, operational criteria and environmental capabilities. The increase in
the Company's semisubmersibles in 1992 reflects the two units owned by
Drilling and in 1995 reflects the purchase of the "IOLAIR". The decrease
in the Company's jack-ups in 1995 reflects the early termination of the
leased "SONNY VOSS" in the latter part of 1994.
<TABLE>
<CAPTION>
Averages for
Years Ended December 31,
----------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> C>
Company:
Jack-Ups
Total Rigs 10 11 11 11 11
Utilization Rate
(Operating Method) 84% 69% 84% 71% 89%
Semisubmersibles(1)
Total Units 6 5 5 5 3
Utilization Rate
(Operating Method) 92% 80% 80% 64% 76%
Drilling Tenders
Total Rigs 2 2 2 2 2
Utilization Rate
(Operating Method) 76% 100% 100% 100% 18%
Industry:(2)
Jack-Ups
Total Rigs 316 319 323 331 340
Utilization Rate 81% 78% 82% 71% 76%
Semisubmersibles
Total Rigs 124 133 134 141 147
Utilization Rate 83% 74% 76% 73% 81%
Drilling Tenders
Total Rigs 31 31 31 32 33
Utilization Rate 69% 70% 77% 80% 74%
______________________
<FN>
(1) The Company's semisubmersible utilization percentage for 1994 does
not include the second-generation semisubmersible "RIG 41" and for
1995 does not include the second-generation semisubmersibles "RIG
41" and "RIG 42" but does include the support vessel "IOLAIR".
(2) Industry averages were calculated from data derived from the
Offshore Rig Locator.
</TABLE>
Industry Conditions and Competition
The financial performance of the offshore contract drilling industry,
domestically and abroad, is dependent upon the exploration and production
programs of oil and gas producers. These programs are substantially
influenced by producing companies' cost to find, develop and produce oil
and gas, demand for and price of oil and natural gas, technological
advancements, exploration success, restrictions and incentives relative to
exploration and production imposed by governmental authorities controlling
offshore production areas and economic conditions in general. A dramatic
decline in demand for offshore drilling services began in 1985. This
decline reflected the effects of lower earnings of oil and gas producers
and the unstable oil and gas price environment. As a result, the entire
offshore drilling industry experienced lower dayrates and associated
earnings. Demand for drilling services turned upward in the latter part
of 1987. This upward trend continued through 1990 but conditions
deteriorated in 1991 and 1992, primarily as a result of depressed
conditions in the Gulf of Mexico. However, as U.S. natural gas prices
increased in late 1992, conditions in the Gulf of Mexico improved and
continued to improve throughout most of 1993. Overall industry conditions
improved in 1993 from 1992, as industry utilization increased. This
improvement continued into the first part of 1994, but toward the end of
1994, market conditions in the Gulf of Mexico, primarily for jack-ups, had
again begun to deteriorate due to a weakening price for natural gas. As a
result, industry utilization for 1994 remained essentially flat as
compared to 1993. Industry utilization for 1995 has improved over 1994,
mainly due to increased demand due to somewhat higher oil and natural gas
prices as compared to 1994 and 1993, and a tightening of the deeper water
drilling markets. Dayrates for semisubmersibles also strengthened
significantly in the second half of 1995. Recent technological
advancements have made it more economical for oil and gas producers to
pursue deepwater, harsh environment programs and demand for high
specification semisubmersibles has, therefore, increased.
The Company's operations have benefitted from a decline in the
availability of operational rigs during the last several years. The
decline in the number of available operational rigs is expected to
continue in the near future because of the continued aging and
deterioration of existing rigs. In addition, the construction of new rigs
is generally uneconomical under current market conditions. Nevertheless,
there continues to be an excess of capacity in the industry. Further,
there continues to be a number of available rigs not currently active in
the market. The reentry of this idle capacity into the active market
could depress dayrates and utilization rates of the Company's rigs.
However, many of these inactive rigs would require significant capital
expenditures to reenter the market.
In response to changing demand, offshore units can be moved from one
region to another. The cost of such moves is significant, however, and is
weighed against the benefits expected to be derived. The Company normally
will not undertake a major mobilization of a drilling or support unit
without its customer agreeing to reimburse the Company for all or a
substantial portion of such costs, unless the dayrates in the new area are
expected to be sufficient to justify such expenditures.
Political and military events in the Middle East and in the former
Soviet Union are an example of the factors which can contribute to the
volatility of world oil prices. Other factors which influence demand for
the Company's services include the ability of the Organization of
Petroleum Exporting Countries ("OPEC") to set and maintain production
targets, the level of production by non-OPEC countries, worldwide demand
for oil and gas, domestic production of natural gas, general economic and
political conditions, availability of new offshore oil and gas leases and
concessions to explore and develop, and governmental regulations.
Accordingly, there is and probably will continue to be uncertainty as to
the future level of demand for the Company's services and the timing and
duration of any increases in demand.
The offshore contract drilling market is highly competitive and no one
competitor is dominant. There are over 75 competitors in the offshore
drilling industry deploying approximately 500 rigs around the world. The
supply of such equipment has, since 1982, substantially exceeded demand.
The result has been a prolonged period of intense price competition during
which many rigs have been idle for long periods of time. Consequently,
some drilling contractors have gone out of business, sought protection
under the bankruptcy laws or consolidated with other contractors.
Notwithstanding these events, the industry remains fragmented and
competitive. The Company believes that competition for drilling contracts
will continue to be intense for the foreseeable future. Certain of the
Company's competitors are larger and have greater financial resources than
the Company, which may enable them to better withstand industry downturns,
to compete on the basis of dayrates, or to build new rigs or acquire
existing rigs that become available for purchase.
The harsh environment or deepwater capabilities of the Company's
fourth-generation semisubmersibles and the versatility of its nine 300-
foot cantilever jack-up rigs, the geographical dispersion of the Company's
rigs throughout the world and its experienced drilling personnel are
positive elements in the pursuit of the Company's strategy and have
enabled the Company to maintain a relatively strong competitive position
in the industry. Further, the Company believes that the reputation for
quality equipment, performance and safety it has built over the past four
decades compares favorably with many of its competitors.
Assuming available rigs meet customer requirements, price is the most
important competitive factor in obtaining a drilling contract. Confidence
of customers in the financial stability of the contractor, the quality of
its rigs, the competence of its personnel, the reputation for reliability
and condition of its rigs and its safety record are also important in
securing drilling contracts.
Business Strategy
The Company engages in contract drilling and other related services in
major offshore oil and gas exploration and producing areas worldwide. The
Company's principal operating strategy is to achieve a high utilization of
its fleet by operating in promising areas throughout the world and to earn
premium dayrates by concentrating its capabilities in the harsh
environment and/or deepwater drilling segments of the market. The
Company's emphasis on the harsh environment and/or deepwater segments is
also reflected in its acquisitions of the capital stock of Drilling. In
addition, the Company will selectively accept opportunities to manage
and/or market rigs owned by third parties.
The offshore drilling industry is highly competitive. In addition to
price, factors such as the quality of a drilling company's fleet, the
overseas operating experience of its management and employees, the
experience and reputation of its engineering staff, its reputation as a
deepwater operator and customer relationships determine a contract
drilling company's ability to compete favorably with the many other
contractors in the international offshore drilling market. In addition,
high utilization of a drilling company's rigs, as compared to the industry
average, may enhance its operational capabilities and safety performance
by promoting retention of trained personnel and equipment maintenance.
The Company intends to continue to modernize and expand its fleet, in
order to meet with the requirements of competitive conditions and the
changing needs of its customers. In this regard, the Company has from time
to time in the past engaged in, and currently continues to engage in,
preliminary discussions with other industry participants with respect to
business combinations that would potentially strengthen its competitive
position in the offshore drilling industry. The Company continues to
consider the selective acquisition of existing vessels, directly or
through business combination transactions. In September 1995, the Company
purchased the support vessel "IOLAIR" from BP Exploration. The "IOLAIR"
is a dynamically positioned third-generation semisubmersible support
vessel built in 1982 for field support and living accommodations. Also in
September 1995, the Company purchased the second-generation
semisubmersible drilling unit "RIG 42" from FPS II, Inc. "RIG 42" is a
candidate for the extended well test market, deepwater and/or harsh
environment drilling or eventual conversion to a floating production unit.
The Company has not yet entered into arrangements for the construction of
any new units. However, if the Company were able to enter into a firm
contract or contracts of sufficient duration and dayrate magnitude to
allow the Company to achieve a reasonable rate of return and obtain
financing, the Company may consider the construction of a new unit or
units.
The Company is also evaluating various opportunities to expand its
activities in the area of floating production facilities, and is reviewing
a range of potential floating production projects. These potential
projects include the acquisition and/or construction of specific floating
production units, the provision of management and other contract services
involving floating production facilities, and the establishment of joint
ventures or other cooperative arrangements with various third parties.
Additionally, the Company may on a limited basis share in the reservoir
and oil price risks with the operator through acquisition of an actual
partial ownership in a field and thus share in profits from the field. In
October 1995, the Company purchased an approximately 20% working interest
in the Green Canyon 254 Allegheny oil and gas development project in the
U.S. Gulf of Mexico from the operator, Enserch Exploration, Inc. See
"FINANCIAL CONDITION" under Item 7 for further discussion of the purchase
of the oil and gas interest.
The Company's wholly owned subsidiary, Reading & Bates Development
Co., was the General Contractor for the provision of a semisubmersible
floating production system for the Liuhua 11-1 Project jointly developed
by Amoco Orient Petroleum Company and China Offshore Oil Nanhai East
Corporation in the South China Sea. On August 13, 1995, the Company
announced that its subsidiary, Reading & Bates Development Co. had
successfully completed its portion of the Liuhua 11-1 project. Reading &
Bates Development Co.'s contribution to the project was the procurement,
engineering, conversion, life extension, and project management for
conversion of a second-generation semisubmersible drilling unit into the
floating production system, "NANHAI TIAO ZHAN".
Drilling Contracts, Marketing and Customers
Rigs are generally employed under individual contracts which extend
over a period of time covering either the drilling of a well or wells (a
"well-to-well contract") or a stated term (a "term contract"). Contracts
for the employment of rigs are most often awarded based on competitive
bidding; however, some contracts are the result of negotiations between
the drilling contractor and the customer. Most contracts provide for
early termination and many provide for extension options exercisable by
the customer. The Company's contracts generally provide for payment in
U.S. dollars. In general, the Company seeks to have a reasonable balance
of short- and long-term contracts to minimize the downside impact of a
decline in the market, while obtaining the benefit of increasing market
prices in a rising market. The Company's contracts also typically provide
for compensation on a "daywork" basis, under which the Company receives a
fixed amount per day that the unit is operating under contract. Certain
of the contracts may allow the Company to recover some or all of its
mobilization and demobilization costs associated with moving a unit
between contracts, depending on market conditions then prevailing. The
dayrate under such daywork contracts may be lower or not payable when the
rig is under tow to or from the drill site (other than field moves) or
when operations are suspended because of weather or mechanical problems.
Under daywork contracts, the Company generally is responsible for paying
the operating expenses of the unit, including wages and the cost of
incidental supplies. Although the majority of the Company's contracts are
constructed under the traditional "daywork" basis as described above, the
Company has participated via a joint venture in "turnkey" contracts.
Essentially, a turnkey contract provides for the drilling of a well on a
fixed price basis. In 1993, the Company formally established a turnkey
department and in 1994 the Company entered into a joint venture with F. J.
Brown & Associates, Inc. to offer turnkey services in both the
international markets and the U.S. Gulf of Mexico market. So far, the
cumulative net results of the Company's turnkey contracts are immaterial
in total and insignificant as compared to the Company's operating income
from the traditional daywork contracting method. Additionally, the
Company's joint venture approach to entering the turnkey market has
minimized the Company's overhead costs and capital investment costs, thus
somewhat reducing financial risks to the Company.
The Company maintains a decentralized organization, with foreign
regional and area offices throughout the world. The Company's primary
marketing efforts are carried out through these regional and area offices
and its Houston office.
When the Company's rigs operate in foreign locations, operations are
often conducted in conjunction with local companies. Representative of
the offshore areas where the Company has arrangements with local companies
are Abu Dhabi, Brazil, Brunei, China, Egypt, India, Indonesia, Italy,
Korea, Malaysia and Nigeria. The purpose of these arrangements is to draw
on the marketing, technical, supply and government relations assistance of
local third parties and in some cases to comply with local legal
requirements. Typically, the financial terms of these arrangements are
such that the third party receives a stated percentage of drilling
revenues. Most of the Company's existing arrangements are with third
parties with which the Company has had a relationship for ten or more
years. The drilling unit "HENRY GOODRICH" is operated under a management
agreement with Sonat Offshore which could extend to September 1997, as
previously discussed.
The Company has a base of customers which includes major and
independent foreign and domestic oil and gas companies, as well as foreign
state-owned oil companies. During 1995, the Company performed services
for approximately 33 different customers.
The following is a listing of customers from whom the Company received
revenues equal to or in excess of ten percent of total operating revenues:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
% of Total % of Total % of Total
Customer Revenue Revenues Revenue Revenues Revenue Revenues
------- -------- ------- -------- ------- --------
(in millions) (in millions) (in millions)
<S> <C> <C> <C> <C> <C> <C>
Royal Dutch/Shell
Group and affiliates $ 29.4 14% $ 35.2 21% $ 39.6 22%
British Petroleum $ 28.9 14% $ * * $ * *
AGIP S.p.A. and
affiliates $ * * $ * * $ 37.7 20%
British Gas Exploration
and Production Limited
and affiliates $ * * $ * * $ 20.3 11%
*Less than 10%
</TABLE>
As is typical in the industry, the Company does business with a
relatively small number of customers at any given time. The loss of any
one of such customers could, at least on a short-term basis, have a
material adverse impact on the Company's business or results of operations.
Management believes, however, that the Company would have alternative
customers for its services in the event of the loss of any single customer
and that the loss of any one customer would not have a material adverse
effect on the Company on a long-term basis.
Financial information by geographic area is furnished in Note K of Notes
to Consolidated Financial Statements.
Floating Production Facilities
The Company is actively pursuing opportunities to participate in the
design, construction, project management and/or ownership of floating
production facilities.
Floating production offers a lower cost alternative to fixed platforms
as water depth increases. There are two major categories of floating
production facilities, those with surface (dry) wellheads and those with
subsea (wet) wellheads. Those with surface wellheads, such as tension leg
platforms and deep draft vessels like the SPAR buoy, generally require
larger investments than systems utilizing subsea wellheads.
The systems utilizing subsea wellheads generally have the flexible
production risers connected to a moored vessel, either a semisubmersible or
a monohull, with the processing equipment mounted on deck.
If a semisubmersible vessel is utilized, it is called a floating
production unit or system. This unit or system does not provide any
storage, and the processed crude oil must be exported either through a
pipeline or a floating storage vessel which is, in turn, offloaded by
shuttle tankers.
If a monohull vessel is utilized, it has inherent storage capability and
is called a floating production, storage and offloading vessel. These
vessels can be spread moored in mild/moderate environments but are turret
moored in harsh environments to minimize mooring forces and vessel motion.
These vessels normally export processed crude directly to shuttle tankers.
Environmental Matters
In recent years, increased concern has been raised over protection of
the environment. Offshore drilling in certain areas has been opposed by
environmental groups and, in certain areas, has been restricted. To the
extent laws are enacted or other governmental actions are taken that
prohibit or restrict offshore drilling or impose environmental protection
requirements that result in increased costs to the oil and gas industry in
general and the offshore contract drilling industry in particular, the
business and prospects of the Company could be adversely affected.
The Company's operations may involve the use or handling of materials
that may be classified as environmentally hazardous substances.
Environmental laws and regulations applicable in the United States and
other countries in which the Company conducts operations 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 on the part of such person. Such laws and
regulations may expose the Company to liability for the conduct of or
conditions caused by others, or for acts of the Company which were in
compliance with all applicable laws at the time such acts were taken. The
Company does not believe that environmental regulations have had any
material adverse effect on its capital expenditures, results of operations
or competitive position, and does not anticipate that any material
expenditures will be required to enable it to comply with existing laws and
regulations. However, the modification of existing laws or regulations or
the adoption of new laws or regulations curtailing exploratory or
developmental drilling for oil and gas for economic, environmental or other
reasons could have a material adverse effect on the Company's operations.
The Oil Pollution Act of 1990 ("OPA '90") and regulations promulgated
pursuant thereto impose a variety of regulations on "responsible parties"
related to the prevention of oil spills and liability for damages resulting
from such spills. A "responsible party" includes the owner or operator of
a facility or vessel, or the lessee or permittee of the area in which an
offshore facility is located. OPA '90 assigns liability to each
responsible party for oil removal costs and a variety of public and private
damages. While liability limits apply in some circumstances, a party
cannot take advantage of liability limits if the spill was caused by gross
negligence or willful misconduct or resulted from violation of a federal
safety, construction or operating regulation. If the party fails to report
a spill or to cooperate fully in the cleanup, liability limits likewise do
not apply. Few defenses exist to the liability imposed by OPA '90. OPA
'90 also imposes ongoing requirements on a responsible party. These
include proof of financial responsibility (to cover at least some costs in
a potential spill) and preparation of an oil spill contingency plan. A
failure to comply with ongoing requirements or inadequate cooperation in a
spill event may subject a responsible party to civil or criminal
enforcement action. In short, OPA '90 places a burden on drilling rig
owners or operators to conduct safe operations and take other measures to
prevent oil spills. If a spill occurs, OPA '90 then imposes liability for
resulting damages.
The Company generally seeks to obtain indemnity agreements whenever
possible from the Company's customers requiring such customers to hold the
Company harmless in the event of liability for pollution that originates
below the water surface, including, where applicable, liability under OPA
'90, and maintains marine liability insurance and contingent operators
extra expense coverage which affords limited protection to the Company.
There is no assurance that such insurance or contractual indemnification
will be sufficient or effective to protect the Company from liability under
OPA '90.
In addition, the Outer Continental Shelf Lands Act and regulations
promulgated pursuant thereto impose a variety of regulations relating to
safety and environmental protection applicable to lessees, permitees and
other parties operating on the Outer Continental Shelf. Specific design
and operational standards may apply to Outer Continental Shelf vessels,
rigs, platforms, vehicles and structures. Violations of lease conditions
or regulations issued pursuant to the Outer Continental Shelf Lands Act can
result in substantial civil and criminal penalties as well as potential
court injunctions curtailing operations and the cancellation of leases.
Such enforcement liabilities can result from either governmental or citizen
prosecution.
Governmental Regulation
Many aspects of the Company's operations are affected by domestic and
foreign political developments and are subject to numerous domestic and
foreign governmental laws and regulations that may relate directly or
indirectly to the contract drilling industry, including, without
limitation, laws and regulations controlling the discharge of materials
into the environment, requiring removal and cleanup under certain
circumstances or otherwise relating to the protection of the environment,
and certification, licensing, safety and training and other requirements
imposed by treaties, laws, regulations and conventions in the jurisdictions
in which the Company operates. The contract drilling industry is dependent
on demand for services from the oil and gas exploration industry and,
accordingly, is affected by changing taxes, regulations and other laws
relating to the energy business generally. The Company does not believe
that governmental regulations have had any material adverse effect on its
capital expenditures, results of operations or competitive position, and
does not anticipate that any material expenditures will be required to
enable it to comply with existing laws and regulations. However, the
modification of existing laws and regulations or the adoption of new laws
and regulations curtailing or increasing the effective cost of exploratory
or developmental drilling for oil and gas for economic, environmental or
other reasons could have a material adverse effect on the Company's
operations. The Company cannot currently determine the extent to which
future earnings may be affected by new legislation or regulations or
compliance with new or existing regulations which may become applicable as
a result of rig relocation.
Operating Risks and Insurance
The Company's contract drilling operations are subject to the many
hazards inherent in the offshore drilling industry. In the drilling of oil
and gas wells, especially exploratory wells where little is known of the
subsurface formations, there always exists a possibility of encountering
unexpected conditions of extreme pressure and temperature and the risk of a
blowout, cratering and fires that could cause injury or death to personnel,
substantial damages to the property of the Company and others, pollution,
and suspension of drilling operations. The Company's offshore fleet is
also subject to hazards inherent in marine operations, either while on site
or under tow, such as capsizing, grounding, collision, damage from heavy
weather or sea conditions and unsound location. The Company may also be
subject to liability for oil spills, reservoir damage and other accidents
that could cause substantial damage. The Company maintains such insurance
protection as it deems prudent, including physical damage or loss and
liability insurance on its offshore fleet. In addition, the Company
generally seeks to obtain indemnity agreements whenever possible from the
Company's customers, requiring such customers to hold the Company harmless
in the event of loss of production, reservoir damage or liability for
pollution that originates below the water surface. When obtained, such
contractual indemnification protection may not in all cases be supported by
adequate insurance maintained by the customer. There is no assurance that
such insurance or contractual indemnity protection will be sufficient or
effective under all circumstances or against all hazards to which the
Company may be subject. The principal hazards against which the Company
may not be fully insured or indemnified are environmental liabilities which
may result from a blowout or similar accident or a liability resulting from
reservoir damage alleged to be caused by the negligence of the Company.
Further, there is no assurance that the Company will be able to obtain
adequate insurance coverage at the rates it deems reasonable in the future.
Recognizing these risks, the Company has various programs that are designed
to promote a safe environment for its personnel and equipment.
The Company's foreign operations are also subject to certain political,
economic and other uncertainties, including, among others, risks of war,
expropriation, nationalization, renegotiation or nullification of existing
contracts, taxation policies, foreign exchange restrictions, changing
political conditions, international monetary fluctuations and other hazards
arising out of foreign governmental sovereignty over certain areas in which
the Company conducts operations. Currently, when conducting foreign
drilling operations in areas the Company perceives as politically unstable,
the Company may (i) negotiate contracts providing for indemnification
against expropriation and certain other political risks or (ii) purchase
insurance covering such risks, to the extent available at reasonable cost.
The Company believes it is adequately covered by insurance, but no
assurance can be given with respect to the availability of such insurance
at acceptable rates in the future. Since 1979, the Company has not
experienced any material losses associated with the above-described
political risks.
Employees
At January 31, 1996, the Company had approximately 1,200 employees.
Although a shortage of trained labor would be likely if demand for contract
drilling services, including those performed by the Company, rapidly
increases, management believes the effects upon the Company would be
mitigated as a result of the manner in which it reduced its work force in
response to declines during the recent downturn in industry drilling
activity. Specifically, the Company followed a practice of laying off less
experienced, lower-level employees before others. The Company does not
consider a possibility of a shortage of qualified personnel currently to be
a major factor in its business. Retention might become more difficult
without significant increases in compensation, however, if demand for
contract drilling services, including those performed by the Company,
increases further. The Company does not have any material collective
bargaining agreements.
Item 3. Legal Proceedings
The Company is one of the defendants in certain litigation brought in
July 1984 by the Cheyenne-Arapaho Tribes of Oklahoma in the U.S. District
Court for the Western District of Oklahoma, seeking to set aside two
communitization agreements with respect to three leases involving tribal
lands in which the Company previously owned interests and to have those
leases declared expired. In June 1989, the U.S. District Court entered an
interim order in favor of the plaintiffs. On appeal, the U.S. Court of
Appeals for the Tenth Circuit upheld the decision of the trial court and
petitions for rehearing of that decision were denied. Petitions for writs
of certiorari filed by the parties with the U.S. Supreme Court have been
denied, and the case has been remanded to the trial court for determination
of damages.
In November 1988, a lawsuit was filed in the U.S. District Court for the
Southern District of West Virginia against Reading & Bates Coal Co., a
wholly owned subsidiary of the Company, by SCW Associates, Inc. claiming
breach of an alleged agreement to purchase the stock of Belva Coal Company,
a wholly owned subsidiary of Reading & Bates Coal Co. with coal properties
in West Virginia. When those coal properties were sold in July 1989 as
part of the disposition of the Company's coal operations, the purchasing
joint venture indemnified Reading & Bates Coal Co. and the Company against
any liability Reading & Bates Coal Co. might incur as the result of this
litigation. A judgment for the plaintiff of $32,000 entered in February
1991 was satisfied and Reading & Bates Coal Co. was indemnified by the
purchasing joint venture. On October 31, 1990, SCW Associates, Inc., the
plaintiff in the above-referenced action, filed a separate ancillary action
in the Circuit Court, Kanawha County, West Virginia against the Company and
a wholly owned subsidiary of Reading & Bates Coal Co., Caymen Coal, Inc.
(former owner of the Company's West Virginia coal properties), as well as
the joint venture, Mr. William B. Sturgill personally (former President of
Reading & Bates Coal Co.), three other companies in which the Company
believes Mr. Sturgill holds an equity interest, two employees of the joint
venture, First National Bank of Chicago and First Capital Corporation. The
lawsuit seeks to recover compensatory damages of $50 million and punitive
damages of $50 million for alleged tortious interference with the
contractual rights of the plaintiff and to impose a constructive trust on
the proceeds of the use and/or sale of the assets of Caymen Coal, Inc. as
they existed on October 15, 1988. Subsequently, the court entered an
order dismissing the Company's indirect subsidiary. The Company intends to
defend its interests vigorously and believes the damages alleged by the
plaintiff in this action are highly exaggerated. In any event, the Company
believes that it has valid defenses and that it will prevail in this
litigation.
On March 17, 1995, an action was filed by Louis Silverman, individually
and on behalf of all other shareholders of Reading & Bates Corporation
similarly situated, against the Company and the individual members of its
board of directors in the Court of Chancery of the State of Delaware, New
Castle County. On April 7, 1995 three additional actions were filed on
behalf of Congregation Beth Joseph, Harry Lewis and Mortimer Shulman
against the Company and its directors in the Court of Chancery of the State
of Delaware. In each of the four actions, the plaintiff alleges, inter
alia, that the directors breached their fiduciary duties by rejecting the
previously announced unsolicited merger proposal made by Sonat Offshore
Drilling Inc. and by adopting the previously announced shareholder rights
plan. Each of the named plaintiffs in the four actions purports to be an
owner of the Company's Common Stock and seeks to represent a class of
shareholders of the Company who are similarly situated. Each of the
plaintiffs seeks injunctive relief, damages in unspecified amounts and
certain other relief, including costs and expenses. The Company believes
each of the plaintiff's claims in these four actions are groundless and
that the defendants have meritorious defenses in each action. The Company
intends to defend each action vigorously.
The Company is involved in these and various other legal actions arising
in the normal course of business. After taking into consideration the
evaluation of such actions by counsel for the Company, management is of the
opinion that outcome of all known and potential claims and litigation will
not have a material adverse effect on the Company's business or
consolidated financial position or results of operations. See Note E of
Notes to Consolidated Financial Statements.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders of the Company
during the fourth quarter of fiscal year 1995.
Regulation S-K Item 401(b)
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning each
executive officer of the Company. Unless otherwise indicated, each has
served in the positions set forth for more than five years. Executive
officers are elected for a term of one year. There are no family
relationships between any of the persons named.
<TABLE>
<CAPTION>
Positions and Offices
Name and Age Presently Held with the Registrant
------------ -----------------------------------
<S> <C>
P. B. Loyd, Jr., 49 (1) Chairman, Director, President and
Chief Executive Officer
C. K. Rhein, Jr., 43 (2) Vice Chairman and Director
T. W. Nagle, 45 (3) Executive Vice President, Finance and
Administration
W. K. Hillin, 54 (4) Senior Vice President, General Counsel and
Secretary
L. E. Voss, Jr., 56 (5) Vice President - Operations
C. R. Ofner, 50 (6) Vice President - Business Development
D. L. McIntire, 58 (7) Vice President - Human Resources
- ------------------
<FN>
(1) Mr. Loyd was named President for the Company in October 1993, Chairman
and Chief Executive Officer for the Company in June 1991 and has been
a Director since April 1991. Mr. Loyd controls Greenwing Investments,
Inc., a stockholder of the Company, and has been President of Loyd &
Associates, Inc., a financial consulting firm, since 1989. Mr. Loyd
was Chief Executive Officer and a Director of Chiles-Alexander
International, Inc. from 1987 to 1989, President and a Director of
Griffin-Alexander Drilling Company from 1984 to 1987 and prior to
that, a Director and Chief Financial Officer of Houston Offshore
International, all of which are companies in the offshore drilling
industry.
(2) Mr. Rhein was named Vice Chairman for the Company in June 1991 and has
been a Director since April 1991. Mr. Rhein has also been President,
Chief Executive Officer and Director of Danielson Holding Corporation,
a financial services holding company, since 1990, and a Director of
National American Insurance Company of California, an insurance
company, since 1987. Since 1987, he has been a Managing Director of
Whitman Heffernan Rhein & Co., Inc., and a general partner of WHR
Management Company, L.P., which manages various partnerships which are
stockholders of the Company. Prior to April 1, 1987, he was a partner
in the law firm of Anderson Kill Olick & Oshinsky, P.C.
(3) Mr. Nagle was named Director - Finance and Administration for RBDC in
June 1985. In January 1989, he was named Director - Business
Development for the Company. In April 1990, he was named Director -
Support Services for RBDC. In August 1991, he was named Vice
President and Chief Financial Officer. He was appointed to his
present position with the Company in September 1995.
(4) Mr. Hillin was named Vice President - Legal for Reading & Bates
Drilling Co. ("RBDC"), a wholly owned subsidiary of the Company, in
1978. In March 1986 he was named Vice President - Legal with the
Company, was appointed Vice President - Finance and Legal in January
1988, was appointed Senior Vice President - Finance and Administration
in November 1988 and in July 1990 was also appointed General Counsel
and Secretary. He was appointed to his present position with the
Company in August 1991.
(5) Mr. Voss was named Vice President - Operations Far East for RBDC in
March 1982 and Vice President and General Manager - North and South
America for RBDC in January 1987. In April 1988, he was appointed
Vice President and General Manager - Worldwide Operations and
Engineering and was appointed Senior Vice President - Operations in
April 1990. He was appointed to his present position with the Company
in August 1991 and was appointed President of RBDC in May 1992.
(6) Mr. Ofner was named Vice President and General Manager for RBDC in
January 1987. In April 1988, he was appointed Vice President and
Regional Manager and was appointed Senior Vice President - Sales and
Marketing in April 1990. He was appointed to his present position
with the Company in August 1991.
(7) Mr. McIntire was named Director - Human Resources for RBDC in April
1986, Manager - Personnel Operations in January 1989 and Director -
Human Resources for the Company in January 1990. He was appointed to
his present position with the Company in August 1991.
</TABLE>
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
The Company's Common Stock is traded on the New York and Pacific Stock
Exchanges under the symbol "RB". The following table shows for the periods
indicated the high and low sales prices of the Common Stock as reported on
the New York Stock Exchange Composite Transactions Tape.
<TABLE>
<CAPTION>
1995 1994
--------------- --------------
Quarter High Low High Low
------- ------ ----- ----- -----
<S> <C> <C> <C> <C>
First 8 1/8 5 1/2 7 3/4 5 3/8
Second 9 3/8 7 7 1/4 5 3/8
Third 13 1/8 8 5/8 7 1/4 5 5/8
Fourth 15 3/8 10 3/4 7 5 1/2
</TABLE>
There were approximately 7,100 holders of record of the Company's
Common Stock as of February 29, 1996.
The Company has not paid cash dividends on the Common Stock since the
first quarter of 1986 and management does not expect any cash dividends
will be declared or paid on the Common Stock in the reasonably foreseeable
future.
In March 1995, the Company adopted a Preferred Share Rights Agreement.
See "FINANCIAL CONDITION" under Item 7.
Item 6. Selected Financial Data
READING & BATES CORPORATION
AND SUBSIDIARIES
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------
1995 1994 1993 1992 1991(1)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating revenues $ 212,795 $ 169,058 $ 183,752 $ 156,659 $ 126,800
========= ========= ========= ========= =========
Income (loss) from
continuing operations
before cumulative effect
and extraordinary items $ 18,392 $ (17,146) $ 4,656 $ 3,402 $ (17,385)
========= ========= ========= ========= =========
Income from discontinued
operations $ - $ - $ - $ - $ 2,156
========= ========= ========= ========= =========
Cumulative effect and
extraordinary items (2) $ 3,430 $ - $ - $ - $ (15,135)
========= ========= ========= ========= =========
Net income (loss) $ 21,822 $ (17,146) $ 4,656 $ 3,402 $ (30,364)
Dividends on preferred
stock 4,855 4,859 2,052 - -
Accretion in redemption
price of redeemable
stocks - - - 5,275 1,862
--------- --------- --------- --------- ---------
Net income (loss)
applicable to
common stockholders $ 16,967 $ (22,005) $ 2,604 $ (1,873) $ (32,226)
========= ========= ========= ========= =========
Income (loss) from
continuing operations
before cumulative effect
and extraordinary items
per share (3) $ .22 $ (.39) $ .05 $ (.04) $ (.51)
========= ========= ========= ========= =========
Income from
discontinued operations
per share (3) $ - $ - $ - $ - $ .06
========= ========= ========= ========= =========
Cumulative effect and
extraordinary items
per share (2)(3) $ .06 $ - $ - $ - $ (.40)
========= ========= ========= ========= =========
Net income (loss)
per share (3) $ .28 $ (.39) $ .05 $ (.04) $ (.85)
========= ========= ========= ========= =========
Total assets (4) $ 605,780 $ 586,801 $ 612,474 $ 614,628 $ 443,521
========= ========= ========= ========= =========
Long-term obligations
(including current
portion) and
redeemable stocks $ 113,373 $ 126,036 $ 116,796 $ 143,385 $ 95,510
========= ========= ========= ========= =========
Dividends on
Common Stock $ - $ - $ - $ - $ -
========= ========= ========= ========= =========
_____________________
<FN>
(1) The Company's financial position at December 31, 1991 and the net loss
for the year then ended reflect a recapitalization and related quasi-
reorganization of the Company in 1991.
(2) Year ended December 31, 1995 consists of an extraordinary gain due to
the extinguishment of a debt obligation. Year ended December 31, 1991
includes an $18,860,000 expense ($.50 per share) for cumulative effect
of change in accounting principle.
(3) Years prior to 1992 have been restated to reflect the one-for-five
reverse stock split on October 2, 1992.
(4) Certain amounts in 1994 have been reclassified for comparative
purposes. Such reclassifications had no effect on the net loss or the
overall financial condition of the Company.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
Merger Proposal
On February 28, 1995, the Company announced that it had received an
unsolicited merger proposal from Sonat Offshore Drilling Inc. ("Sonat
Offshore") providing for the acquisition of 100% of the common stock of
the Company for a combination of Sonat Offshore common stock and $100
million in cash. As proposed by Sonat Offshore, the Company's
shareholders would have, at their election, received either (i) .357
shares of Sonat Offshore common stock or (ii) $7.50 of cash for each share
of the Company. To the extent that the election resulted in an under- or
oversubscription as to the $100 million of cash, a proration formula would
have been utilized. The Company engaged Morgan Stanley & Co. Incorporated
to act as its financial advisor with respect to evaluating the Sonat
Offshore proposal. On March 16, 1995, the Company announced that its
board of directors had rejected the Sonat Offshore proposal on the basis
that it was not in the best interests of the Company and its shareholders.
On April 18, 1995, Sonat Offshore announced that the merger discussions
had broken off following the rejection by the Company of Sonat Offshore's
proposal. The Company responded the same day announcing that discussions
with Sonat Offshore had not to that date demonstrated a willingness on the
part of Sonat Offshore to consider a transaction that would be reflective
of the short-term or long-term business prospects and value of the
Company. Subsequent to their announcing their intent to break off
discussions in April 1995, Sonat Offshore initiated additional discussions
in May 1995 with regard to potential merger transactions. However, these
subsequent discussions similarly did not result in terms that recognized
the Company's current or long-term value. The Company and Sonat Offshore
discontinued discussions in June 1995. The Company remains willing to
engage in discussions regarding possible business combinations that would
potentially strengthen its competitive position in the offshore drilling
industry, appropriately reflect the underlying value of the Company and
maximize shareholder value.
Arcade Acquisition
In June 1994, the Company completed a transaction which increased its
direct ownership in Arcade Drilling AS ("Drilling") and sold its entire
ownership in Arcade Shipping AS ("Shipping"). The transaction consisted
of the Company selling its entire 82.6% ownership in Shipping for
approximately $27.8 million, purchasing from Shipping its entire 46.2%
ownership in Drilling and equity securities in Dragon Oil for
approximately $45.4 million and Shipping repaying a loan of approximately
$12.9 million to the Company. This transaction resulted in a net cash
outflow of $4.7 million. Also in September 1994, the Company purchased an
additional 5.7% of Drilling's outstanding shares pursuant to a mandatory
tender offer in Norway required by the Oslo Stock Exchange. In December
1995, the management agreement for one of Drilling's drilling units
expired and a subsidiary of the Company now manages the drilling unit.
See "The Company's Fleet" under Items 1 and 2. As of December 31, 1995,
the Company's direct ownership in Drilling was 74.4%. See Note B of Notes
to Consolidated Financial Statements.
Purchase of Semisubmersibles
In September 1994, the Company purchased the second-generation
semisubmersible "RIG 41" (ex "BENVRACKIE") with the intent to contribute
the drilling unit to a new joint venture with DeepTech International Inc.
The objective of the new joint venture company was to acquire and operate
semisubmersible drilling units to be converted for use as floating
production systems. However, it was subsequently agreed by the Company
and DeepTech International Inc. not to establish the new joint venture and
the rig is currently stacked and available for conversion to a floating
production system or deployment, after completion of upgrades, as a
conventional drilling unit.
In September 1995, the Company purchased the support vessel "IOLAIR"
from BP Exploration Operating Company Limited ("BP Exploration"). The
"IOLAIR" is a dynamically positioned third-generation deepwater
semisubmersible support vessel built in 1982 for field support and living
accommodations. The "IOLAIR" is currently contracted with BP Exploration
and is expected to undergo a comprehensive upgrade in 1996 after which it
would be used under a long-term contract with BP Exploration for its west
of Shetland development program for up to 200 days per year. The vessel
would be available for use by other North Sea area operators for the
remaining period of each year. Also in September 1995, the Company
purchased the second-generation semisubmersible drilling unit "RIG 42"
from FPS II, Inc. "RIG 42" is a candidate for the extended well test
market, deepwater and/or harsh environment drilling or eventual
conversion to a floating production system. In connection with the
purchase of "RIG 42" the Company issued 1,232,057 shares of the Company's
Common Stock, par value $.05 per share and filed a shelf registration
statement in September 1995 registering such 1,232,057 shares (see "Shelf
Registration" below).
Sale/Lease-back of Drilling Units
In November 1995, the Company entered into a sale/lease-back of the
"M. G. HULME, JR.". As part of this transaction the Company could receive
up to $60 million in cash, inclusive of a $10 million funding provision
for upgrades, and agreed to lease the drilling unit for ten years. As of
December 31, 1995, the Company had received $52.5 million. The lease-back
is accounted for as an operating lease and a deferred gain of $7.4 million
was recorded and is being amortized over the life of the lease. In
addition, the lease contains a provision which allows the Company to
repurchase the drilling unit at the end of the lease for a fair market
price. See Note E of Notes to Consolidated Financial Statements.
In March 1992, the Company entered into a sale/lease-back of the
"SONNY VOSS". Proceeds received of $27.7 million resulted in a gain of
$6.3 million which was deferred and was being amortized over the lease
term. In December 1994, for a fee of $.5 million, the Company negotiated
an early release from all of its remaining lease obligations with
respect to the "SONNY VOSS". Such lease obligations were scheduled to
have expired in September 1995 and the net effect of the early release on
the Company's results of operations was a gain of $.5 million recognized
as a reduction of operating expenses in the fourth quarter of 1994. See
Note E of Notes to Consolidated Financial Statements.
Purchase of Oil & Gas Interest
In October 1995, the Company purchased an approximately 20% working
interest in the Green Canyon 254 Allegheny oil and gas development project
in the U.S. Gulf of Mexico from the operator, Enserch Exploration, Inc.
("Enserch"). The third-generation semisubmersible "M. G. HULME, JR." has
been contracted for three years to drill the development wells upon
completion of an upgrade of the unit for operations in up to 3,300 feet of
water, and the Company is expected to convert either its second-generation
semisubmersible "RIG 41", or an equivalent unit, to a floating
production vessel capable of processing up to 70,000 barrels of oil per
day. In addition, Mobil Exploration & Producing U.S. Inc., an affiliate
of Mobil Corporation, has a 40% working interest in the project. Enserch
is expected to retain the remaining 40% working interest. As of December
31, 1995, the Company had accumulated costs related to the project of
approximately $23.3 million which are included in Property and Equipment,
Other.
Purchase of Lease Debt
In the third quarter of 1994, the Company purchased certain notes and
interests relating to the lease debt outstanding associated with the
operating leases of the drilling units "GEORGE H. GALLOWAY" and "C.E.
THORNTON", and the secured contingent obligations associated with the
capital lease of the "F.G. McCLINTOCK". Total consideration for the
transaction was approximately $36.5 million which consisted of the Company
paying cash of approximately $12.2 million and issuing 4,230,235 shares of
the Company's Common Stock, par value $.05 per share, totalling
approximately $24.3 million at then prevailing stock prices. In October
1994, the Company filed a shelf registration registering such shares (see
"Shelf Registration" below). In the second quarter of 1995, the Company
acquired title to the "GEORGE H. GALLOWAY". See Note E of Notes to
Consolidated Financial Statements.
Public Offering
In July 1993, the Company effected a public offering (the "1993
Offering") of 2,990,000 shares of $1.625 Convertible Preferred Stock, par
value $1.00 per share (the "Preferred Stock"), pursuant to which the
Company raised gross proceeds of approximately $74.7 million in cash (net
proceeds of approximately $71.2 million). The proceeds were utilized to
repay indebtedness under two credit facilities, both under the ING
Facility, totalling approximately $17.1 million. See "LIQUIDITY AND
CAPITAL RESOURCES - ING Facility". The remaining proceeds were used by
the Company for working capital and general corporate purposes. The
Preferred Stock is convertible at the option of the holder at any time
into shares of the Company's Common Stock at a conversion rate of 2.899
shares of Common Stock for each share of Preferred Stock (equivalent to a
conversion price of $8.625 per share of Common Stock), subject to
adjustment in certain events. Annual dividends are $1.625 per share and
are cumulative and are payable quarterly commencing September 30, 1993.
The Preferred Stock is redeemable at any time on and after September 30,
1996, at the option of the Company, in whole or in part, at a redemption
price of $26.1375 per share, and thereafter at prices decreasing ratably
annually to $25.00 per share on and after September 30, 2003, plus accrued
and unpaid dividends. The holders of the Preferred Stock do not have any
voting rights, except as required by applicable law, and except that,
among other things, whenever accrued and unpaid dividends on the Preferred
Stock are equal to or exceed the equivalent of six quarterly dividends
payable on the Preferred Stock, the holders of the Preferred Stock will be
entitled to elect two directors to the Board until the dividend arrearage
has been paid in full. The term of office of all directors so elected will
terminate immediately upon such payment. The Preferred Stock has a
liquidation preference of $25.00 per share, plus accrued and unpaid
dividends. The Company has declared and paid all cumulative dividends
accrued on the Preferred Stock through December 31, 1995.
Shelf Registration
In October 1994, the Company filed a shelf registration registering
the 4,230,235 shares of the Company's Common Stock issued for the purchase
of the leased rigs as discussed above. In September 1995, the Company
filed a shelf registration registering the 1,232,057 shares of the
Company's Common Stock issued for the purchase of "RIG 42", as previously
discussed, and the Company has been informed that all of such shares have
been sold. Pursuant to the terms of the registration rights agreements
among the Company and certain other holders of the Company's Common Stock,
as currently in effect, the Company is required to maintain continuously
effective shelf registration statements with respect to approximately 7.4
million shares of its Common Stock until the earlier to occur of (i) the
sale of such shares by the holders thereof or (ii) August 1, 1996 (in the
case of approximately 5.4 million shares) or September 14, 1996 (in the
case of approximately 2 million shares).
Preferred Share Rights Agreement
On March 15, 1995, the Company's board of directors declared a
dividend of one preferred share purchase right (a "Right") for each
outstanding share of the Company's Common Stock outstanding on March 31,
1995 (the "Record Date"). Each Right entitles the registered holder to
purchase from the Company one one-hundredth of a share of Series B Junior
Participating Preferred Stock, par value $1.00 per share (the "Preferred
Shares") of the Company at a price of $30.50, subject to adjustment. The
Rights will not become exercisable until 10 days after a public
announcement that a person or group has acquired 10% or more of the
Company's Common Stock (thereby becoming an "Acquiring Person") or the
commencement of a tender or exchange offer upon consummation of which such
person or group would own 10% or more of the Company's Common Stock (the
earlier of such dates being called the "Distribution Date"). Rights will
be issued for all shares of the Company's Common Stock issued and
outstanding on the Record Date. Until the Distribution Date, the Rights
will be evidenced by the certificates representing the Company's Common
Stock and will be transferrable only with the Company's Common Stock. In
the event that any person or group becomes an Acquiring Person, each
Right, other than Rights beneficially owned by the Acquiring Person (which
will thereafter be void), will thereafter entitle its holder to purchase
shares of the Company's Common Stock having a market value of two times
the exercise price of the Right. After any person or group has become an
Acquiring Person and prior to the acquisition by such person or group of
50% or more of the outstanding shares of Common Stock, the Company's board
of directors may exchange each Right (other than Rights of the Acquiring
Person), in whole or in part, at an exchange ratio of one Common Share or
one one-hundredth of a Preferred Share per Right. If after a person or
group has become an Acquiring Person, the Company is acquired in a merger
or other business combination transaction or 50% or more of its assets or
earning power are sold, each Right will entitle its holder to purchase, at
the Right's then current exercise price, that number of shares of common
stock of the acquiring company which at the time of such transaction will
have a market value of two times the exercise price of the Right. The
board of directors of the Company may redeem the Rights in whole, but not
in part, at a price of $.01 per Right at any time prior to such time as
any person or group becomes an Acquiring Person. The Rights expire on
March 31, 2005. Preferred Shares purchasable upon exercise of the Rights
will not be redeemable. Each Preferred Share will be entitled to a
preferential quarterly dividend payment equal to the greater of $1 per
share or 100 times the dividend declared per Common Share. Liquidation
preference will be equal to the greater of $100 per share or 100 times the
payment made per Common Share. Each Preferred Share will have one vote,
voting together with the Common Stock. See "LIQUIDITY AND CAPITAL
RESOURCES".
Reverse Stock Split
On October 2, 1992, the Company effected a one-for-five reverse stock
split of the Common Stock. All share and per share amounts have been
restated.
Miscellaneous
In February 1992, Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes ("SFAS 109") was issued and supersedes
substantially all existing income tax pronouncements. The Company adopted
SFAS 109 effective January 1, 1993. The cumulative effect of the
accounting change at January 1, 1993 was not material to the Company's
consolidated results of operations or financial position. See Note A of
Notes to Consolidated Financial Statements.
In October 1993, the Company announced that Mr. J. T. Angel, President
and Chief Operating Officer, as well as a member of the Board of
Directors, resigned from those positions in order to pursue other business
interests. In the fourth quarter of 1993, the Company recorded a charge
of approximately $1.1 million against earnings related to a severance
agreement with Mr. Angel.
In March 1995, Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of ("SFAS 121") was issued. SFAS 121, which becomes
effective in 1996, requires that certain long-lived assets be reviewed for
impairment whenever events indicate that the carrying amount of an asset
may not be recoverable, and that an impairment loss be recognized under
certain circumstances in the amount by which the carrying value exceeds
the fair value of the asset. In 1995, the Company adopted SFAS 121 which
had no effect on the Company's consolidated results of operations or
consolidated financial position. See Note A of Notes to Consolidated
Financial Statements.
For a discussion of certain legal proceedings see Part I, Item 3.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
At December 31, 1995, the Company had working capital of $41.3 million
compared to $6.7 million at December 31, 1994. The $34.6 million increase
is primarily due to improved cash flow and new term financing in 1995 that
was used to repay the ING Facility (as discussed below) and the Company's
debentures that matured in 1995.
Cash provided by operating activities during 1995 amounted to $34.5
million, an increase of $3.7 million from 1994. Cash provided by
operating activities during 1994 amounted to approximately $30.8 million,
an increase of $4.3 million from 1993.
Cash used in investing activities was $3.5 million in 1995 compared to
$48.8 million in 1994 compared to $29.4 million in 1993. During 1995, the
Company entered into a sale/lease-back transaction of the "M.G. HULME,
JR." drilling unit that provided approximately $50 million of cash and
used $51.9 million to purchase property and equipment, such as the oil and
gas interest in the Gulf of Mexico as previously discussed. During 1994,
the Company used $10.7 million to purchase additional shares in Drilling
and $38.4 million to purchase property and equipment, such as the purchase
of certain notes and interests relating to the lease debt outstanding
associated with the operating leases of the drilling units "GEORGE H.
GALLOWAY" and "C. E. THORNTON" and the secured contingent obligations
associated with the capital lease of the drilling unit "F. G. McCLINTOCK",
and the purchase of the second-generation semisubmersible drilling unit
"RIG 41". During 1993, the Company used $20.6 million to purchase
additional shares in Drilling and Shipping. See "FINANCIAL CONDITION".
Cash used in financing activities was $37.1 million in 1995 compared
to $20 million in 1994 compared to cash provided by financing activities
of $30.1 million in 1993. During 1995, the Company made principal
payments of $85.3 million which was primarily the repayment of the ING
Facility and the 8% Convertible Subordinated Debentures which matured in
1995, paid Preferred Stock dividends of $4.9 million and received $50
million from two new financing sources and $3 million from the exercise of
employee stock options. During 1994, the Company made principal payments
of $24.6 million, paid Preferred Stock dividends of $4.9 million and
received $9.5 million from the ING Facility. During 1993, the Company
received $71.2 million of net proceeds from the 1993 Offering, received
$11.6 million from the ING Facility and made principal payments of $50.6
million and paid dividends of $2.1 million on the Preferred Stock. See
"FINANCIAL CONDITION".
Liquidity of the Company should be considered in light of the
fluctuations in demand experienced by drilling contractors as changes in
oil and gas producers' expectations and budgets occur. These fluctuations
can impact the Company's liquidity as supply and demand factors directly
affect utilization and dayrates, which are the primary determinants of
cash flow from the Company's operations. The Company's management
currently expects that its cash flow from operations, in combination with
cash on hand and other sources, including new debt, new equity, asset
disposals and/or by proper scheduling of its planned capital or other
expenditures, will be sufficient to satisfy the Company's 1996 working
capital needs, dividends on and the possible redemption of the Preferred
Stock, planned investments, capital expenditures, debt and other payment
obligations. The Company currently expects to call for redemption its
Preferred Stock in accordance with its terms on or after September 30,
1996. The Company expects that most, if not all, holders of the Preferred
Stock will convert their shares into Common Stock rather than allow the
Company to redeem their shares. At present, the Company would expect to
fund the Preferred Stock redemption, if any, out of working capital.
At December 31, 1995, approximately $17.1 million of total
consolidated cash and cash equivalents of $36.2 million were restricted
from the Company's use outside of Drilling's activities. See "Drilling"
below regarding recent changes in such restrictions.
Capital Expenditures and Deferred Charges
Planned capital expenditures and deferred charges (including
mobilization, demobilization and contract preparation costs not
recoverable from the Company's customers or claim proceeds from insurance
underwriters) for 1996 are expected to aggregate in excess of $73 million
principally for upgrades or replacement of equipment either to fulfill
obligations under existing contracts or to improve the marketability of
certain of the Company's drilling units and for mobilization of the
Company's drilling units between drilling sites. Additionally, the
Company has capital funding obligations for its participation in the
previously discussed oil and gas development project estimated to be in
excess of $17 million for 1996. The Company anticipates that such capital
expenditures will be funded through cash provided by operations
and/or an increase of an existing credit facility and/or new
financing. Certain projects currently being considered by the Company
would require, if they materialize, capital expenditures or other cash
requirements not included in the above estimate. In addition to planned
capital expenditures referred to above, the Company will also continue to
review acquisitions of drilling units from time to time and will also
consider further investments in floating production equipment. See "Item
1. Business - Business Strategy".
ING Facility
The Company's principal credit facility agreement (the "ING Facility")
with ING Bank was fully repaid in November 1995 from funds provided by the
sale/lease-back of the "M. G. HULME, JR." and the CBK Facility, as
discussed below. The ING Facility consisted of four facilities, "Facility
A", "Facility C", "Facility D" and "Facility E". A fifth credit facility
("Facility F") was both created and repaid during 1993. Facility A was in
the form of a term loan with an original balance of $30 million.
Facilities C, D & E consisted of $30 million of working capital financing.
Facility C was in the form of an overdraft account up to a maximum of $15
million. Facility D was in the form of a $5 million long-term letter of
credit which collateralized a $15 million note payable relating to the
"HARVEY H. WARD" drilling unit. Facility E was in the form of short-term
letters of credit aggregating $10 million, which supported bid,
performance and other bonds needed by the Company in the ordinary course
of its business. Facility F consisted of a revolving credit facility in
an amount not to exceed $15.5 million, for the purchase of shares of
Shipping and Drilling. In March 1993, the Company received approximately
$11.6 million from Facility F and in July 1993 the Company repaid Facility
F from proceeds from the 1993 Offering. In addition, a separate facility
("Facility B") provided by ING Bank was in the form of a term loan with an
original balance of $45 million. Facility B was the result of ING Bank
acquiring, in June 1991, certain interests in two promissory notes issued
in connection with the previous sale and lease-back to the Company of the
"C.E. THORNTON" and the "GEORGE H. GALLOWAY" drilling units. The present
value of the Company's obligations under such operating leases at date of
repayment amounted to approximately $23.2 million. Substantially all of
the Company's assets (including its shares of Drilling) that did not serve
as collateral for other obligations of the Company collateralized the ING
Facility. See Notes C, D and E of Notes to Consolidated Financial
Statements.
CBK Facility
In November 1995, the Company entered into a five year $55 million
credit facility agreement (the "CBK Facility") with Christiania Bank og
Kreditkasse. The CBK Facility consists of a $45 million reducing
revolving credit facility ("CBK Facility A") and a $10 million standby
letter of credit facility ("CBK Facility B"). CBK Facility A allows the
Company to make drawdowns, minimum of $1 million, as funds are needed,
shall be reduced/repaid by nine semi-annual installments of $3.4 million
commencing in May 1996 and one final reduction/repayment of $14.4 million
in November 2000 and bears interest at the London Interbank Offered Rate
("LIBOR") (5.719% at December 31, 1995) plus 1.75%. In addition, a
commitment fee of .75% per annum is paid on the unused portion of CBK
Facility A. CBK Facility B is in the form of stand-by letters of credit
aggregating $10 million, for use in the ordinary course of business. Any
amounts available under CBK Facility A may be utilized under CBK Facility
B. At December 31, 1995, $20 million was outstanding under CBK Facility A
and $13.3 million was outstanding under CBK Facility B, leaving $21.7
million available under CBK Facility A. The CBK Facility contains
covenants which require the Company to meet certain ratios and working
capital conditions, and is collateralized by vessel mortgages on two of
the drilling units owned by the Company and related assignments of
insurance and earnings. See Notes C and E of Notes to Consolidated
Financial Statements.
CIT Financing
In May 1995, the Company entered into a $25 million loan agreement
with The CIT Group/Equipment Financing, Inc. In December 1995, the
Company borrowed an additional $5 million under such loan agreement. The
loan bears interest at the one month LIBOR (5.719 % at December 31, 1995)
plus 2.5%, and interest is payable monthly. Principal repayments are
$5,416,667 in November 1996, 34 monthly installments of $416,667
commencing in December 1996 and one payment of $10,416,655 in October
1999. The loan agreement contains covenants which require the Company to
meet certain financial conditions, including, among others, a cash flow
coverage ratio and a long-term debt to total assets ratio, and is
collateralized by vessel mortgages on two of the drilling units owned by
the Company and related assignments of insurance and earnings.
Drilling
As of December 31, 1995, Drilling had a $42.5 million term loan
payable to The Chase Manhattan Bank, N.A. as agent for a syndicate of
banks (including itself). The adjusted payment terms of this bank
obligation currently provide for repayment of principal in 17 semiannual
installments which commenced in August 1991. The Company has not
guaranteed repayment of such obligation. Drilling has also entered into
an interest rate swap agreement, which is combined with the bank credit
facility for payment purposes (as set forth below). The swap agreement
terminates in August 1996 and the notional principal swapped amount will
have been reduced on a semiannual basis to $30.6 million at that time. At
December 31, 1995, the notional principal amount of $34.1 million bears
interest at 10.69% and the remaining principal amount bears interest at
the 6 month LIBOR (5.531% at December 31, 1995) plus 1.75%. Following the
termination of the swap agreement, the remaining balance of the loan will
bear interest at LIBOR plus 1.75%. The loan is collateralized by the
drilling units "HENRY GOODRICH" and "PAUL B. LOYD, JR." (ex "SONAT ARCADE
FRONTIER"). The loan agreement was amended in November 1995 to change
certain financial condition requirements and such changes are reflected
below. The amended loan agreement requires Drilling to meet certain
financial conditions, including maintaining current assets of at least
twice the level of current liabilities and liquid assets of at least $2
million ($10 million if Drilling can not annually provide to the lenders
satisfactory contractual commitments for the employment of both drilling
units for the next twelve months), maintaining a ratio of operating cash
flow (including actual and projected cash flows) to interest charges of at
least 1.75 to 1 and maintaining a ratio of total liabilities to tangible
net worth of no more than 1 to 1. Additionally, the amended loan
agreement (i) restricts the payment of dividends by Drilling to not more
than 50% of net earnings after tax per year, (ii) prohibits Drilling from
making loans, granting credit, giving any guarantee or indemnity to or for
the benefit of any other person or assuming any liability with respect to
any obligation of any other person, (iii) prohibits Drilling from engaging
in any merger or consolidation and (iv) prohibits the encumbrance of
Drilling's assets or the sale of such assets other than at fair market
value, in each case without the prior written consent of the banks party
to the loan agreement holding a majority of the outstanding balance. The
amended loan agreement allows Drilling to declare a distribution to
stockholders in the first quarter of 1996 up to $15 million provided $2
million of liquid assets remain after payment of such distribution. The
Company currently expects to receive approximately $11.2 million with
respect to such distribution in the first quarter of 1996. It is also an
event of default if there should occur a material adverse change in the
financial or business condition of Drilling. Pursuant to a series of
waivers, for the period from May 1, 1992 to May 1, 1993, the bank
syndicate waived the requirement that Drilling comply with the actual
operating cash flow ratio covenant. For the period from January 1, 1992,
to April 30, 1993, the bank syndicate waived the requirement that Drilling
comply with the projected operating cash flow ratio covenant. In
connection with the most recent waiver, Drilling was required to pay on
April 30, 1993 (i) a fee to the bank syndicate of approximately $.1
million and (ii) the last two semiannual installments (totalling $8
million). Since May 1, 1993, Drilling has not requested any additional
waivers. Drilling expects to meet its repayment obligations under the
facility through cash flow generated from operations and current working
capital. At December 31, 1995, Drilling held $17.1 million in cash and
cash equivalents available to satisfy such obligations, but otherwise
subject to the restrictions on use of such cash and cash equivalents set
out in such amended loan agreement. See Note C of Notes to Consolidated
Financial Statements.
RESULTS OF OPERATIONS
The Company reported net income for 1995 of $21.8 million ($.28
earnings per share after preferred stock dividends of $4.9 million),
compared to a net loss of $17.1 million ($.39 loss per share after
preferred stock dividends of $4.9 million) for 1994 and net income of $4.7
million ($.05 earnings per share after preferred stock dividends of $2.1
million) for 1993. Included in the 1995 results is an extraordinary gain
of $3.4 million related to the extinguishment of a debt obligation.
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------
1995 1994 1993
--------- --------- ----------
<S> <C> <C> <C>
Operating Revenues (in thousands) $ 212,795 $ 169,058 $ 183,752
========= ========= ==========
</TABLE>
Operating revenues are primarily a function of dayrates and
utilization. The $43.7 million increase in 1995 over 1994 is primarily
due to the increased utilization of the fourth-generation semisubmersible
and jack-up fleets. Also contributing to the increased operating revenues
is the increase in average dayrates earned by the units, again
particularly in the semisubmersible and jack-up fleets. The $14.7 million
decrease in 1994 compared to 1993 is primarily due to the decreased
utilization of these fleets between those two years.
Unit utilization measured in terms of the number of days the units
were earning revenues to the total days the units were owned or leased by
the Company (the operating method) for the years ended December 31, 1995,
1994 and 1993 is shown below by class:
<TABLE>
<CAPTION>
Years Ended
Unit Utilization December 31,
---------------- ---------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Fourth-Generation Semisubmersibles . . . 97% 76% 82%
Third-Generation Semisubmersibles . . . . 85% 85% 78%
Jack-Ups . . . . . . . . . . . . . . . . 84% 69% 84%
Drilling Tenders . . . . . . . . . . . . 76% 100% 100%
Total Fleet . . . . . . . . . . . . . . . 85% 75% 85%
</TABLE>
The utilization trends experienced by the Company are generally
consistent with those experienced by the industry.
Average dayrates for the Company's units for the years ended
December 31, 1995, 1994 and 1993 are shown below by class (in thousands):
<TABLE>
<CAPTION>
Years Ended
Average Dayrates December 31,
---------------- ------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Fourth-Generation Semisubmersibles . . $ 64.9 $ 59.2 $ 63.7
Third-Generation Semisubmersibles . . . 39.6 32.7 29.6
Jack-Ups . . . . . . . . . . . . . . . . 27.8 24.4 24.6
Drilling Tenders . . . . . . . . . . . . 28.1 29.4 26.9
Total Fleet . . . . . . . . . . . . . . 36.7 32.0 31.7
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Operating Expenses (in thousands) $ 127,070 $ 122,981 $ 117,596
========= ========= =========
Operating Expenses as Percentage
of Revenues 59.7% 72.7% 64.0%
========= ========= =========
</TABLE>
Operating expenses do not necessarily fluctuate in proportion to
changes in operating revenues due to the continuation of personnel on
board and equipment maintenance when the Company's units are stacked. It
is only during prolonged stacked periods that the Company is significantly
able to reduce labor costs and equipment maintenance expense.
Additionally, labor costs fluctuate due to the geographic diversification
of the Company's units and the mix of labor between expatriates and
nationals as stipulated in the contracts. Labor costs have increased in
the last three fiscal years primarily due to higher salary levels,
inflation and the decline of the U.S. dollar relative to certain foreign
currencies of countries where the Company operates. Equipment maintenance
expenses fluctuate depending upon the type of activity the drilling unit
is performing and the age and condition of the equipment. Scheduled
maintenance of equipment and overhauls are performed on a basis of number
of hours operated in accordance with the Company's preventive maintenance
program.
Operating expenses increased in 1995 as compared to 1994 due to higher
operating costs for several rigs and the addition of the "IOLAIR" to the
fleet. This increase was offset somewhat by lease expense which
decreased between the two years due to the 1994 termination of the lease
for the "SONNY VOSS" and the elimination of the "GEORGE H. GALLOWAY" and
"C. E. THORNTON" leases due to a 1994 purchase of the lease obligations by
the Company.
Despite the increase in operating expenses in 1995, operating expenses
as a percentage of revenues decreased by 13.0% in 1995 compared to 1994
due mainly to increased revenues in 1995. Also contributing to this
decrease is the reduction of operating expenses in 1995 as compared to
1994 associated with reduced lease expense in the amount of $8.3 million.
Currently, management expects operating expenses as a percentage of
revenue to continue to decrease over the next two years. Although
management currently expects operating expenses to rise during this period
due to higher operating costs and the addition of two rigs to the fleet,
operating revenues are currently expected to rise at a faster rate due to
contracts with higher dayrates, some of which are already in place.
Included in operating expenses for 1994 is a credit of approximately
$3.1 million due to the recognition of the remaining deferred gain on the
sale/lease-back of the "SONNY VOSS" as the Company was prematurely
released from its lease obligation.
Operating expenses as a percentage of revenues increased by 8.7% in
1994 compared to 1993 due to decreased revenues as well as increased
operating costs in Australia and overall equipment maintenance costs.
Included in operating expenses for 1993 is a credit of approximately
$1.8 million due to the recognition of the deferred gain on the
sale/lease-back of the "SONNY VOSS" and a credit of approximately $1.2
million due to the recognition of a gain on the "JACK BATES" casualty
caused by Hurricane Andrew in 1992.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Depreciation and
Amortization (in thousands) $ 30,369 $ 28,909 $ 29,758
======== ======== ========
</TABLE>
Depreciation and amortization expense increased $1.5 million in 1995
compared to 1994 due to increased utilization of the fleet.
Depreciation and amortization expense decreased $.8 million in 1994
compared to 1993.
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
General and Administrative
Expenses (in thousands) $ 17,139 $ 17,993 $ 18,086
========= ========= =========
</TABLE>
General and administrative expenses decreased $.9 million in 1995
compared to 1994 primarily related to the reduction of expenses for
Drilling's office located in Oslo.
General and administrative expenses increased $1 million in 1994
compared to 1993 after adjusting 1993 by $1.1 million of termination
benefits that were accrued in 1993. The increase is primarily due to an
increase in payroll and related expenses.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Interest Expense (in thousands) $ 15,303 $ 13,694 $ 13,818
======== ======== ========
</TABLE>
Despite a decrease in the average principal debt balance outstanding
during 1995 as compared to 1994 due to the refinancing of the Company's
principal credit facility with ING Bank in the fourth quarter of 1995 as
well as the repayment of scheduled principal payments on the Company's
long-term obligations, interest expense increased by $1.6 million. This
increase is primarily attributable to the purchase of certain notes and
interest relating to the lease debt outstanding for the previously leased
rigs, "C.E. THORNTON" and "GEORGE H. GALLOWAY" in the latter part of 1994.
Noncash interest expense attributable to amortization of discount and
deferrals associated with the 8% Senior Subordinated Convertible
Debentures due 1998 and the 8% Convertible Subordinated Debentures which
were repaid in the fourth quarter of 1995 for the year ended December 31,
1995 was $4 million.
Despite a decrease in the average principal debt balance outstanding
during 1994 compared to 1993 due to the repayment of scheduled principal
payments on the Company's long-term obligations, interest expense remained
constant in 1994 compared to 1993 due to higher interest rates in 1994.
Noncash interest expense attributable to amortization of discount and
deferrals associated with the 8% Senior Subordinated Convertible
Debentures due 1998 and the 8% Convertible Subordinated Debentures which
were repaid in the fourth quarter of 1995 for the year ended December 31,
1994 was $3.6 million.
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Interest Income (in thousands) $ 1,832 $ 3,263 $ 2,070
======== ======== ========
</TABLE>
Interest income decreased $1.4 million in 1995 compared to 1994 due
to interest earned on decreased average cash and cash equivalents
balance. Conversely, interest income increased $1.2 million in 1994
compared to 1993 due to interest earned on the increased average
outstanding cash and cash equivalents balance primarily due to proceeds
received from the 1993 Offering.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Other Income (Expenses),
Net (in thousands) $ (2,008) $ (2,647) $ (508)
======== ======== ========
</TABLE>
For 1995, other, net included $1.2 million of expenses associated
with the merger discussions with Sonat Offshore.
For 1994, other, net included the recognition of a $1.2 million
loss associated with interests in the exploration and production of oil
and gas, a $.8 million expense for the change in the estimate of the
reserve for prior workers compensation claims and a $.7 million loss on
the sale of a cash investment due to the decline in the market value.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Income Tax Expense (in thousands) $ 2,824 $ 4,093 $ 4,008
======== ======== ========
</TABLE>
Income tax expense for 1995 decreased as compared to 1994 despite
increases in revenues and income before income taxes. Such decrease is
primarily due to a change in the Company's foreign geographic areas of
operations coupled with the resolution, in the third quarter of 1995, of a
foreign tax assessment at less than expected cost.
Income tax expense was recognized for the year ended December 31,
1994 despite losses before income taxes of $13.9 million. This represents
income tax expense incurred with respect to certain foreign operations.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Minority Interest (in thousands) $ (1,522) $ 850 $ 2,608
======== ======== ========
</TABLE>
Minority interest relates primarily to the results of Drilling and
the percentage attributable to stockholders other than the Company.
Drilling reported income in 1995 of $5.6 million and losses of $3 million
and $4.5 million in 1994 and 1993, respectively. The ownership
percentages attributable to stockholders other than the Company were
25.7%, 26.1% and 46.8% for the years ending December 31, 1995, 1994 and
1993, respectively.
The impact of inflation on the Company's operations for the three
years ended December 31, 1995 has not been material.
Item 8. Financial Statements and Supplementary Data
READING & BATES CORPORATION AND SUBSIDIARIES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Reading & Bates Corporation
We have audited the accompanying consolidated balance sheets of
Reading & Bates Corporation (a Delaware corporation) and Subsidiaries as
of December 31, 1995 and 1994, and the related consolidated statements of
operations, cash flows and stockholders' equity for each of the three
years in the period ended December 31, 1995. 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 in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Reading & Bates Corporation and Subsidiaries as of December 31, 1995 and
1994, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1995
in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Houston, Texas
February 13, 1996
READING & BATES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1995 and 1994
(dollars in thousands)
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 36,171 $ 42,319
Accounts receivable:
Trade, net 41,324 34,430
Other 4,815 2,952
Materials and supplies inventory 8,911 8,421
Other current assets 4,567 4,627
--------- ---------
Total current assets 95,788 92,749
--------- ---------
PROPERTY AND EQUIPMENT:
Drilling 758,688 775,189
Other 29,898 6,270
--------- ---------
Total property and equipment 788,586 781,459
Accumulated depreciation and
amortization (282,981) (291,140)
--------- ---------
Net property and equipment 505,605 490,319
--------- ---------
DEFERRED CHARGES AND OTHER ASSETS 4,387 3,733
--------- ---------
TOTAL ASSETS $ 605,780 $ 586,801
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
READING & BATES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1995 and 1994
(in thousands except share amounts)
<TABLE>
<CAPTIONS>
1995 1994
--------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term obligations $ 12,000 $ 12,222
Long-term obligations due within one year 18,333 44,099
Accounts payable - trade 3,639 12,398
Accrued liabilities 20,518 17,322
--------- ---------
Total current liabilities 54,490 86,041
LONG-TERM OBLIGATIONS 95,040 81,937
OTHER NONCURRENT LIABILITIES 51,718 49,717
DEFERRED INCOME TAXES 2,977 3,075
--------- ---------
Total liabilities 204,225 220,770
--------- ---------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 44,504 43,871
--------- ---------
STOCKHOLDERS' EQUITY:
$1.625 convertible preferred stock, $1.00
par value, 2,990,000 shares authorized,
2,985,000 shares and 2,990,000 shares
issued and outstanding at December 31,
1995 and 1994, respectively (liquidation
preference at December 31, 1995, $74,625) 2,985 2,990
Common stock, $.05 par value, 425,000,000
shares authorized, 61,900,408 shares and
59,711,023 shares issued and outstanding
at December 31, 1995 and 1994,
respectively 3,095 2,986
Capital in excess of par value 362,910 337,406
Accumulated deficit from March 31, 1991 (3,017) (19,984)
Other (8,922) (1,238)
--------- ---------
Total stockholders' equity 357,051 322,160
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 605,780 $ 586,801
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
READING & BATES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
OPERATING REVENUES $ 212,795 $ 169,058 $ 183,752
--------- --------- ---------
COSTS AND EXPENSES:
Operating expenses 127,070 122,981 117,596
Depreciation and amortization 30,369 28,909 29,758
General and administrative 17,139 17,993 18,086
--------- --------- ---------
Total costs and expenses 174,578 169,883 165,440
--------- --------- ---------
OPERATING INCOME (LOSS) 38,217 (825) 18,312
--------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense (15,303) (13,694) (13,818)
Interest income 1,832 3,263 2,070
Other, net (2,008) (2,647) (508)
--------- --------- ---------
Total other income (expense) (15,479) (13,078) (12,256)
--------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAX
EXPENSE, MINORITY INTEREST AND
EXTRAORDINARY GAIN 22,738 (13,903) 6,056
INCOME TAX EXPENSE 2,824 4,093 4,008
MINORITY INTEREST (1,522) 850 2,608
--------- --------- ---------
INCOME (LOSS) BEFORE EXTRAORDINARY GAIN 18,392 (17,146) 4,656
EXTRAORDINARY GAIN 3,430 - -
--------- --------- ---------
NET INCOME (LOSS) 21,822 (17,146) 4,656
DIVIDENDS ON PREFERRED STOCK 4,855 4,859 2,052
--------- --------- ---------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCKHOLDERS $ 16,967 $ (22,005) $ 2,604
========= ========= =========
EARNINGS (LOSS) PER COMMON SHARE:
INCOME (LOSS) BEFORE EXTRAORDINARY
GAIN $ .22 $ (.39) $ .05
EXTRAORDINARY GAIN .06 - -
--------- --------- ---------
NET INCOME (LOSS) $ .28 $ (.39) $ .05
========= ========= =========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 60,208 56,900 55,497
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
READING & BATES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 21,822 $(17,146) $ 4,656
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 30,369 28,909 29,758
Loss (gain) on dispositions of
property and equipment 650 (1,982) (1,900)
Recognition of deferred expenses 7,051 4,640 2,654
Extraordinary gain from extinguish-
ment of debt (3,430) - -
Minority interest in income (loss) of
consolidated subsidiaries 1,522 (850) (2,608)
Changes in assets and liabilities:
Accounts receivable, net (8,685) 2,973 (3,828)
Materials and supplies inventory (490) 288 (556)
Deferred charges and other assets (7,880) (3,678) (3,366)
Accounts payable - trade (8,759) 4,742 2,959
Accrued interest 4,472 4,000 3,418
Accrued lease expense - 3,344 (5,014)
Accrued liabilities 1,367 4,692 (1,486)
Deferred income taxes (98) 268 388
Other, net (3,426) 572 1,469
-------- -------- --------
Net cash provided by operating
activities 34,485 30,772 26,544
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Dispositions of property and equipment 49,946 141 1,088
Purchases of property and equipment,
net of noncash items (51,906) (38,424) (10,149)
Decrease (increase) in investments
in and advances to unconsolidated
investees (310) 209 187
Business acquisitions (1,229) (10,738) (20,558)
-------- -------- --------
Net cash used in investing
activities (3,499) (48,812) (29,432)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (payments) from short-
term obligations (12,222) 9,487 (10,747)
Proceeds from long-term obligations 50,000 - 11,624
Net proceeds from issuance of
preferred stock - - 71,184
Principal payments on long-term
obligations (73,057) (24,654) (39,858)
Exercise of stock options 3,000 - -
Dividends paid on preferred stock (4,855) (4,859) (2,052)
-------- -------- --------
Net cash provided by (used in)
financing activities (37,134) (20,026) 30,151
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (6,148) (38,066) 27,263
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 42,319 80,385 53,122
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 36,171 $ 42,319 $ 80,385
======== ======== ========
Supplemental Cash Flow Disclosures:
Interest paid $ 11,874 $ 9,368 $ 10,649
Income taxes paid $ 2,975 $ 3,877 $ 3,648
Noncash investing activities:
Purchase of property and equipment
in exchange for equity or debt $ 36,708 $ 24,324 $ -
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
READING & BATES CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Three Years Ended December 31, 1995
(in thousands)
<TABLE>
<CAPTION>
Convertible
Preferred Common
Stock Stock Capital in Retained
------------- ------------- Excess of Earnings
Shares Amount Shares Amount Par Value (Deficit) Other
----- ------- ------ ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1992 - $ - 55,502 $ 2,775 $244,654 $ (583) $ (1,423)
Net income 4,656
Public offering 2,990 2,990 68,194
Dividends paid on
preferred stock (2,052)
Conversion of
debentures 3
Activity in Company
stock plans 34 2 754 848
Additional minimum
liability (583)
Other (47) (3) (689)
----- ------- ------ ------- -------- -------- --------
Balances at
December 31, 1993 2,990 2,990 55,489 2,774 312,916 2,021 (1,158)
Net loss (17,146)
Dividends paid on
preferred stock (4,859)
Purchase of leased
drilling units 4,230 212 24,112
Activity in Company
stock plans 507 265
Additional minimum
liability (342)
Other (8) (129) (3)
----- ------- ------ ------- -------- -------- --------
Balances at
December 31, 1994 2,990 2,990 59,711 2,986 337,406 (19,984) (1,238)
Net income 21,822
Dividends paid on
preferred stock (4,855)
Conversion of
preferred stock (5) (5) 14 1 4
Purchase of drilling
unit 1,232 62 14,643
Activity in Company
stock plans 407 20 3,107 168
Restricted stock
grant 544 27 7,524 (7,551)
Additional minimum
liability (307)
Other (8) (1) 226 6
----- ------- ------ ------ --------- -------- --------
Balances at
December 31, 1995 2,985 $ 2,985 61,900 $ 3,095 $362,910 $ (3,017) $ (8,922)
===== ======= ====== ======= ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
READING & BATES CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
______________
(A) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION - The consolidated financial statements include
the accounts of Reading & Bates Corporation ("Reading & Bates") and
its subsidiaries, including its majority-owned subsidiary Arcade
Drilling AS ("Drilling") (collectively, the "Company"). As of
December 31, 1995, Reading & Bates owned approximately 74.4% of the
outstanding stock of Drilling (see Note B). Investments in
unconsolidated investees are accounted for on the equity method. All
significant intercompany accounts and transactions have been
eliminated.
CASH AND CASH EQUIVALENTS - The Company considers all highly
liquid investments purchased with a maturity of three months or less
to be cash equivalents. At December 31, 1995, $17.1 million of the
cash and cash equivalents balance related to Drilling. Such cash and
cash equivalents balance is available to Drilling for all purposes
subject to certain debt covenants under a credit facility provided by
The Chase Manhattan Bank, N.A. ("Chase Manhattan") which require the
maintenance of a minimum of $10 million in liquid assets and, under
certain circumstances, prohibit Drilling from paying dividends or
granting loans (including to the Company). In the fourth quarter of
1995, the credit facility was amended to i) lower the $10 million
requirement of liquid assets to $2 million provided that Drilling
could annually provide to the lenders satisfactory contractual
commitments for employment of both of the drilling units for the next
twelve months and ii) allow Drilling to declare a distribution to
stockholders in the first quarter of 1996 up to $15 million provided
$2 million of liquid assets remained after payment of such
distribution.
MATERIALS AND SUPPLIES INVENTORY - Materials and supplies are
stated at the lower of average cost or market.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at
historical cost as adjusted in the Company's quasi-reorganization in
1989. Reading & Bates' drilling units are depreciated under either
the units-of-production method or the straight-line method.
Drilling's drilling units are depreciated under the straight-line
method. Estimated useful lives for drilling equipment range from
three to twenty-five years. Gain (loss) on disposal of properties is
credited (charged) to income. Effective January 1, 1993, the Company
changed its estimate of the useful lives of its fourth-generation
semisubmersible fleet from an average of 16 years to 25 years. This
change was made to reflect the estimated period during which such
assets will remain in service. For the year ended December 31, 1993,
the change had the effect of reducing depreciation expense and
increasing net income by approximately $6.8 million or $.12 per share.
In 1995, the Company purchased an approximately 20% working interest
in the Green Canyon 254 Allegheny oil and gas development project in
the U.S. Gulf of Mexico from the operator, Enserch Exploration, Inc.
As of December 31, 1995, the Company had accumulated costs related to
the project of approximately $23.3 million which are included in
Property and Equipment, Other (see Note D).
STOCKHOLDERS' EQUITY - The Company's accumulated deficit at
March 31, 1991 was eliminated as a result of the Company's
recapitalization in 1991.
INCOME TAXES - Deferred income taxes are recognized for revenues
and expenses reported in different years for financial statement
purposes and income tax purposes. In February 1992, Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes
("SFAS 109") was issued and supersedes substantially all existing
income tax pronouncements. The Company adopted SFAS 109 effective
January 1, 1993. The cumulative effect of the accounting change at
January 1, 1993 was not material to the Company's consolidated results
of operations or financial position.
REVENUE RECOGNITION - Revenues from drilling contracts are
recognized as they are earned. Proceeds associated with the early
termination of a contract for a drilling unit are recorded as deferred
income and recognized as drilling contract revenues over the remaining
term of the contract or until such time as the drilling unit begins a
new contract. There were no such amounts deferred at December 31,
1995 or 1994. In 1993, the Company secured a contract to convert a
semisubmersible drilling unit into a floating production system.
Under this contract the Company, for a fixed fee and certain
incentives, functioned as an agent for its customer and accordingly,
disbursements made on behalf of the customer were netted against
receipts from the customer in the accompanying financial statements.
The contract was completed in the third quarter of 1995 and the
disbursements and receipts associated with the contract through that
date amounted to approximately $123 million.
FOREIGN CURRENCY TRANSACTIONS - The net gains and losses
resulting from foreign currency transactions included in determining
net income amounted to a net loss of $.8 million in 1995, a net loss of
$.6 million in 1994 and a net gain of $.1 million in 1993. The Company
may enter into forward exchange contracts to hedge specific commitments
and anticipated transactions. During 1995 and 1994, the Company did
not enter into any forward exchange contracts.
EXTRAORDINARY GAIN - In December 1995, the Company recorded an
extraordinary gain of $3,430,000 for the extinguishment of a debt
obligation (see Note C).
EARNINGS (LOSS) PER COMMON SHARE - Earnings (loss) per common
share is computed by dividing income (loss), after deducting the
preferred stock dividend, by the weighted average number of common
shares outstanding during the year. The effects of common equivalent
shares were antidilutive or immaterial for all periods presented and,
accordingly, no adjustment was made for these common equivalent
shares. The computation of fully diluted earnings per share is not
presented as the results are antidilutive.
CONCENTRATION OF CREDIT RISK - The Company maintains cash
balances with commercial banks throughout the world. The Company's
cash equivalents generally consist of commercial paper, money-market
mutual funds and interest-bearing deposits with strong credit rated
financial institutions and generally mature within three months,
therefore, bearing minimal risk. However, in 1994 the Company
incurred a $.7 million loss on the sale of a cash investment due to
the decline in the market value. No losses were incurred during 1995.
The Company's revenues were generated primarily from its
drilling units. Revenues can be generated from a small number of
customers which are primarily major U.S. oil and gas companies or
their subsidiaries and foreign government-owned oil and gas companies.
The Company performs ongoing credit evaluations of its customers'
financial conditions and generally requires no collateral from its
customers. The Company's allowance for doubtful accounts at
December 31, 1995 and 1994 was $1,123,000 and $373,000, respectively.
INDUSTRY CONDITIONS - Results of operations and financial
condition of the Company should be considered in light of the
fluctuations in demand experienced by drilling contractors as changes
in oil and gas producers' expectations and budgets occur. These
fluctuations can impact the Company's results of operations and
financial condition as supply and demand factors directly affect
utilization and dayrates, which are the primary determinants of cash
flow from the Company's operations.
LIQUIDITY - As of December 31, 1995, the Company's total
consolidated cash and cash equivalents were $36.2 million. Of this
amount, approximately $17.1 million is restricted from the Company's
use outside of Drilling (see CASH AND CASH EQUIVALENTS above). The
Company's management currently expects that its cash flow from
operations, in combination with cash on hand and other sources,
including new debt, new equity, asset disposals and/or by proper
scheduling of its planned capital or other expenditures, will be
sufficient to satisfy the Company's 1996 working capital needs,
dividends on and possible redemption of the preferred stock, planned
investments, capital expenditures, debt and other payment obligations.
The Company currently expects to call for redemption its preferred
stock in accordance with its terms on or after September 30, 1996.
Also, the Company expects that most, if not all, holders of the
preferred stock will convert their shares into common stock rather
than allow the Company to redeem their shares. At present, the
Company would expect to fund the preferred stock redemption, if any,
out of working capital.
NEWLY ISSUED ACCOUNTING STANDARD - In March 1995, Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of
("SFAS 121") was issued. SFAS 121, which becomes effective in 1996,
requires that certain long-lived assets be reviewed for impairment
whenever events indicate that the carrying amount of an asset may not
be recoverable, and that an impairment loss be recognized under
certain circumstances in the amount by which the carrying value
exceeds the fair value of the asset. In 1995, the Company adopted
SFAS 121 which had no effect on the Company's consolidated results of
operations or financial position.
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.
RECLASSIFICATION - Certain prior period amounts in the
consolidated financial statements have been reclassified for
comparative purposes. Such reclassifications had no effect on the net
income (loss) or the overall financial condition of the Company.
(B) INVESTMENT IN ARCADE
ARCADE ACQUISITION - In June 1991, as part of its strategy of
emphasizing geographic diversification and "fourth-generation"
semisubmersible drilling technology, the Company began acquiring the
stock of Arcade Shipping AS ("Shipping") and Drilling, both of which
are Norwegian companies (the "Arcade Acquisition"). Beginning with
the first quarter of 1992, the Company began to consolidate the
accounts of Drilling and Shipping into the consolidated financial
statements of the Company. Drilling owns the "HENRY GOODRICH" and the
"PAUL B. LOYD, JR." (ex "SONAT ARCADE FRONTIER"), two fourth-
generation semisubmersible drilling units. Shipping, which the
Company sold its ownership interest in June 1994, had two principal
lines of operations, the shipping operations which included owning and
chartering vessels and the drilling operations which principally
consisted of the ownership of approximately 46.2% of the
outstanding stock of Drilling. The shipping operations of Shipping
had been accounted for as discontinued operations until June 1994,
when the Company completed a transaction which consisted of
the Company selling its entire 82.6% ownership in Shipping for
approximately $27.8 million, purchasing from Shipping its entire 46.2%
ownership in Drilling and equity securities in Dragon Oil for
approximately $45.4 million and Shipping repaying a loan of
approximately $12.9 million to the Company. This transaction resulted
in a net cash outflow of $4.7 million.
The Arcade Acquisition has been funded through short-term
financing, a private placement of both preferred and common stocks and
the Company's working capital. As of December 31, 1995, the Company
had acquired approximately 74.4% of the outstanding stock of
Drilling, at an accumulated cost of approximately $113.5 million.
The following unaudited pro forma selected financial data for
the three years ended December 31, 1995 show the consolidated data as
if the Arcade Acquisition (ownership percentage as of December 31,
1995) and related financing activities had occurred on January 1,
1993, (in thousands except per share amounts):
<TABLE>
<CAPTION>
(unaudited)
Years Ended December 31,
----------------------------------
1995 1994 1993
---------- ---------- ---------
<S> <C> <C> <C>
Operating revenues $ 212,795 $ 169,058 $ 183,752
========== ========= =========
Net income (loss) $ 21,705 $ (17,908) $ 2,444
========== ========= =========
Earnings (loss) per share $ .28 $ (.40) $ .01
========== ========= =========
</TABLE>
DISCONTINUED OPERATIONS OF SHIPPING - On June 22, 1994,
the Company sold its entire ownership in Shipping (see above).
Shipping's operating revenues and net loss from January 1, 1994 to the
date of sale were approximately $6.5 million and $2 million,
respectively. Operating revenues and net loss of discontinued
operations not included in the Consolidated Statement of Operations
for the year ended December 31, 1993 were $14.8 million and $4.6
million, respectively.
(C) LONG-TERM OBLIGATIONS
Long-term obligations at December 31, 1995 and 1994 consisted of
the following (in thousands):
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Chase Manhattan (1) $ 42,500 $ 52,500
The CIT Group (2) 30,000 -
Christiania Bank (3) 20,000 -
Deferred payment obligation (4) 10,000 -
8% Senior Subordinated
Convertible Debentures due
December 1998 ("New
Debentures") (5) 10,873 9,190
8% Convertible Subordinated
Debentures due December
1995 ("Old Debentures") (5) - 14,026
Variable rate note payable (6) - 3,750
ING Bank - Facility A (7) - 15,000
ING Bank - Facility B (7) - 27,321
Notes payable (8) - 4,249
--------- ---------
Total 113,373 126,036
Less long-term obligations
due within one year (18,333) (44,099)
--------- ---------
Long-term obligations $ 95,040 $ 81,937
========= =========
________________________
<FN>
(1) The adjusted payment terms of this bank obligation of Drilling
provide for repayment of principal in seventeen semiannual
installments which commenced in August 1991. Drilling has also
entered into an interest rate swap agreement, which is combined
with the bank credit facility for payment purposes (as set forth
below). The fair value at December 31, 1995 of the interest
rate swap is estimated to be $1 million which represents the
estimated amount Drilling would pay to terminate the agreement,
taking into consideration current interest rates as quoted from
the parties to the agreement. The swap agreement terminates in
August 1996 and the notional principal swapped amount will have
been reduced on a semiannual basis to $30.6 million at that
time. At December 31, 1995, the notional principal amount of
$34.1 million bears interest at 10.69% and the remaining
principal amount bears interest at the 6 month London Interbank
Offered Rate ("LIBOR") (5.531% at December 31, 1995) plus
1.75%. Following the termination of the swap agreement, the
remaining balance of the loan will bear interest at LIBOR plus
1.75%. The bank obligation is collateralized by the drilling
units "HENRY GOODRICH" and "PAUL B. LOYD, JR.", related
assignments of insurance and drilling contracts, and
receivables. The loan agreement requires Drilling to meet
certain financial conditions including, among others, minimum
current ratio levels, liquid assets and a ratio of operating
cash flow to interest charges and maintaining a ratio level of
total liabilities to tangible net worth below a certain maximum.
It is also an event of default should circumstances arise which
give reasonable grounds in the opinion of the bank syndicate for
the belief that Drilling may not (or may be unable to) perform
or comply with its obligation.
(2) In May 1995, the Company entered into a $25 million loan
agreement with The CIT Group/Equipment Financing, Inc. In
December 1995, the Company borrowed an additional $5 million
under such loan agreement. The loan bears interest at the one
month LIBOR (5.719% at December 31, 1995) plus 2.5%, and
interest is payable monthly. Principal repayments are
$5,416,667 in November 1996, 34 monthly installments of
$416,667 commencing in December 1996 and one payment of
$10,416,655 in October 1999. The loan agreement contains
covenants which require the Company to meet certain financial
conditions, including, among others, a cash flow coverage ratio
and a long-term debt to total assets ratio, and is
collateralized by vessel mortgages on two of the drilling units
owned by the Company and related assignments of insurance and
earnings.
(3) In November 1995, the Company entered into a five year $55
million credit facility (the "CBK Facility") with Christiania
Bank og Kreditkasse. The CBK Facility consists of a $45 million
reducing revolving credit facility ("CBK Facility A") and a $10
million standby letter of credit facility ("CBK Facility B").
CBK Facility A allows the Company to make drawdowns, minimum of
$1 million, as funds are needed, shall be reduced/repaid by nine
semi-annual installments of $3.4 million commencing in May 1996
and one final reduction/repayment of $14.4 million in November
2000 and bears interest at LIBOR (5.719% at December 31, 1995)
plus 1.75%. In addition, a commitment fee of .75% per annum is
paid on the unused portion of CBK Facility A. CBK Facility B is
in the form of stand-by letters of credit aggregating $10
million, for use in the ordinary course of business (see Note
E). Any amounts available under CBK Facility A may be utilized
under CBK Facility B. At December 31, 1995, $20 million was
outstanding under CBK Facility A and $13.3 million was
outstanding under CBK Facility B, leaving $21.7 million
available under CBK Facility A. The CBK Facility contains
covenants which require the Company to meet certain ratios and
working capital conditions, and is collateralized by vessel
mortgages on two of the drilling units owned by the Company and
related assignments of insurance and earnings.
(4) In September 1995, the Company entered into a $10 million
deferred payment obligation in connection with the purchase of
the support vessel "IOLAIR". The deferred payment obligation
bears interest at a fixed rate of 8%, principal repayments are
$2.5 million in September 1996, $7 million in September 1998 and
$.5 million in September 2000, and the obligation is
collateralized by a vessel mortgage on the support vessel
"IOLAIR".
(5) The New Debentures are convertible into the Company's Common
Stock at $37.035 per share. Accrued interest associated with
the New Debentures at December 31, 1995 and 1994, was
$11,907,000 and $10,419,000, respectively. The New Debentures
were recorded at amounts equal to the net present value of their
respective future cash payments required, discounted at 15%,
which is the interest rate the Company believes it would have
been required to pay to obtain financing of a similar nature
from other sources during 1991. Based on limited information
available to the Company, the recorded amounts of the New
Debentures at December 31, 1995 approximate their fair market
value. The face amount of the New Debentures and the related
unamortized discount at December 31, 1995 totalled $18,605,000
and $7,732,000, respectively. The face amount of the New
Debentures and the related unamortized discount at December 31,
1994 totalled $18,605,000 and $9,415,000 respectively. In
December 1995, the Old Debentures matured and were repaid. The
accrued interest expense associated with the Old Debentures at
December 31, 1994 was $100,000. The face amount of the Old
Debentures and the related unamortized discount at December 31,
1994 totalled $14,995,000 and $969,000, respectively. During
1995 and 1994, there were no conversions of New or Old
Debentures to Common Stock.
(6) The variable rate note payable was paid in full in December 1995
and bore interest at the 3 month LIBOR plus 1%. Prior to
January 3, 1995 the note bore interest at the prime rate plus
1%. The note was collateralized by a drilling unit and by a $5
million letter of credit.
(7) In the second quarter of 1995, the Company agreed to repay its
principal credit facility (the "ING Facility") with
Internationale Bank N.V. ("ING Bank") by December 31, 1995, and
in November 1995, the outstanding balances of Facility A and
Facility B were paid with funds provided by the sale/lease-back
of the "M.G. HULME, JR." (see Note E) and the CBK Facility.
Facility A bore interest at a varying rate equal to the 6 month
LIBOR plus 1.5% and was collateralized by vessel mortgages on
eleven of the drilling units owned by the Company, related
assignments of insurance and drilling contracts, receivables and
the shares of stock of the principal subsidiaries of the
Company. Facility B bore interest at the 3 month LIBOR plus
1.9375%. In the fourth quarter of 1994, Facility B was
reclassed from other liabilities to debt obligations as a result
of the Company purchasing certain notes and interests relating
to the lease debt outstanding associated with the operating
leases of the drilling units "GEORGE H. GALLOWAY" and "C.E.
THORNTON", and the secured contingent obligations associated
with the capital lease of the "F.G. McCLINTOCK" (see Note E).
(8) The Company suspended payments on debt collateralized by bank
letters of credit in 1987 and, as a result, such letters of
credit were drawn and the related obligations and accrued
interest were paid. One such obligation provided for a
prepayment penalty of $6,450,000 which was accrued by the
Company in 1987. During the first quarter of 1989, an agreement
was reached with the original creditor which allows the Company,
under two notes, to pay interest only on 65% of the prepayment
penalty ("Note 1") through December 1991 and to repay 70% of the
principal of Note 1 in equal quarterly installments from March
1992 through December 1995 with a final payment due in March
1997. The remaining 35% ("Note 2") and accrued interest thereon
will be forgiven if all principal and interest payments are made
when due on Note 1, but otherwise will be due in April 1997.
Both notes bore interest at 6.5% until March 29, 1992, and
thereafter at 13.5%. The Company reclassified $6,450,000 from
accrued liabilities to long-term obligations as of March 31,
1989. In December 1995, the Company prepaid the final payment
of Note 1 due in March 1997 and Note 2 was therefore forgiven.
The forgiveness of Note 2 and its accrued interest resulted in
an extraordinary gain of $3,430,000 for 1995.
Aggregate annual maturities of long-term obligations,
(including the current portion) for the next five years are as follows
(in thousands):
</TABLE>
<TABLE>
<S> <C>
1996 $ 18,333
1997 16,500
1998 43,605
1999 24,367
2000 18,300
---------
121,105
Less the unamortized discount
on the New Debentures (7,732)
---------
Total long-term obligations
and long-term obligations
due within one year
at December 31, 1995 $ 113,373
=========
</TABLE>
(D) SHORT-TERM OBLIGATIONS
Short-term obligations at December 31, 1995 and 1994 consisted
of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Enserch Exploration (1) $ 12,000 $ -
ING Bank revolving credit facility (2) - 12,222
--------- ---------
$ 12,000 $ 12,222
========= =========
<FN>
(1) In October 1995, the Company entered into a $12 million short-term
obligation with Enserch Exploration, Inc. for the purchase of an
approximately 20% working interest in an oil and gas development
project (see PROPERTY AND EQUIPMENT of Note A). The obligation
bears interest at 8.56% and principal repayments are $6 million in
March 1996 and $6 million in September 1996.
(2) The Company had a $15 million revolving credit facility in the
form of an overdraft account maintained with ING Bank ("Facility
C"). A substantial portion of collections on the Company's
receivables was paid into the account and was applied
automatically against any outstanding balance. Facility C was
used primarily for working capital requirements. Facility C bore
interest at prime (8.5% at December 31, 1994) plus 1.25%. In the
second quarter of 1995, the Company agreed to repay the ING
Facility with ING Bank by December 31, 1995, and in November 1995,
the outstanding balance of Facility C was paid with funds provided
by the sale/lease-back of the "M. G. HULME, JR." and the CBK
Facility (see Notes C and E).
</TABLE>
(E) COMMITMENTS AND CONTINGENCIES
CAPITAL EXPENDITURES - At December 31, 1995, the Company had
purchase commitments of $3.4 million for equipment on drilling units.
OPERATING LEASES - The Company has operating leases covering
premises and equipment. Certain operating leases contain renewal
options and have options to purchase the asset at fair market value
at the end of the lease term. Net rent expense amounted to $2.3
million (1995), $11.2 million (1994) and $12.7 million (1993). As of
December 31, 1995, future minimum rental payments relating to
operating leases were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 Thereafter
------- ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Drilling Unit $ 7,361 $ 7,361 $ 7,361 $ 7,361 $ 7,361 $ 36,194
Other 1,664 1,213 1,081 71 41 3
------- ------- ------- ------- ------- --------
Total $ 9,025 $ 8,574 $ 8,442 $ 7,432 $ 7,402 $ 36,197
======= ======= ======= ======= ======= ========
</TABLE>
In November 1995, the Company entered into a sale/lease-back of
the "M. G. HULME, JR.". As part of this transaction the Company
could receive up to $60 million in cash, inclusive of a $10 million
funding provision for upgrades, and agreed to lease the drilling unit
for ten years. As of December 31, 1995, the Company had received
$52.5 million. The lease-back is accounted for as an operating lease
and a deferred gain of $7.4 million was recorded and is being
amortized over the life of the lease (see Note F).
In the third quarter of 1994, the Company purchased certain
notes and interests relating to the lease debt outstanding associated
with the operating leases of the drilling units "GEORGE H. GALLOWAY"
and "C.E. THORNTON", and the secured contingent obligations
associated with the capital lease of the "F.G. McCLINTOCK". Total
consideration for the transaction was approximately $36.5 million
which consisted of cash of approximately $12.2 million and the
Company issuing 4,230,235 shares of the Company's Common Stock, par
value $.05 per share, totalling approximately $24.3 million at then
prevailing stock prices. Since through such purchases, the Company
now controls and has effective ownership of the three rigs, it
recorded the purchase of the notes and interests as purchases of the
rigs. The Company now has title to the "GEORGE H. GALLOWAY" and "F.
G. McCLINTOCK". In the fourth quarter of 1994, the Company reclassed
the remaining lease obligation (Facility B) from other liabilities to
debt obligations (see Note C).
In March 1992, the Company entered into a sale/lease-back of the
"SONNY VOSS". Proceeds received of $27.7 million resulted in a gain
of $6.3 million which was deferred and was being amortized over the
lease term. In December 1994, for a fee of $.5 million, the Company
negotiated an early release from all of its remaining lease
obligations with respect to the "SONNY VOSS". Such lease obligations
were scheduled to have expired in September 1995 and the net effect
of the early release on the Company's statement of operations was a
gain of $.5 million recognized as a reduction of operating expenses
in the fourth quarter of 1994.
LITIGATION - The Company is one of the defendants in certain
litigation brought in July 1984 by the Cheyenne-Arapaho Tribes of
Oklahoma in the U.S. District Court for the Western District of
Oklahoma, seeking to set aside two communitization agreements with
respect to three leases involving tribal lands in which the Company
previously owned interests and to have those leases declared expired.
In June 1989, the U.S. District Court entered an interim order in
favor of the plaintiffs. On appeal, the U.S. Court of Appeals for the
Tenth Circuit upheld the decision of the trial court and petitions
for rehearing of that decision were denied. Petitions for writs of
certiorari filed by the parties with the U.S. Supreme Court have been
denied, and the case has been remanded to the trial court for
determination of damages.
In November 1988, a lawsuit was filed in the U.S. District Court
for the Southern District of West Virginia against Reading & Bates
Coal Co., a wholly owned subsidiary of the Company, by SCW
Associates, Inc. claiming breach of an alleged agreement to purchase
the stock of Belva Coal Company, a wholly owned subsidiary of Reading
& Bates Coal Co. with coal properties in West Virginia. When those
coal properties were sold in July 1989 as part of the disposition of
the Company's coal operations, the purchasing joint venture
indemnified Reading & Bates Coal Co. and the Company against any
liability Reading & Bates Coal Co. might incur as the result of this
litigation. A judgment for the plaintiff of $32,000 entered in
February 1991 was satisfied and Reading & Bates Coal Co. was
indemnified by the purchasing joint venture. On October 31, 1990,
SCW Associates, Inc., the plaintiff in the above-referenced action,
filed a separate ancillary action in the Circuit Court, Kanawha
County, West Virginia against the Company and a wholly owned
subsidiary of Reading & Bates Coal Co., Caymen Coal, Inc. (former
owner of the Company's West Virginia coal properties), as well as the
joint venture, Mr. William B. Sturgill personally (former President
of Reading & Bates Coal Co.), three other companies in which the
Company believes Mr. Sturgill holds an equity interest, two employees
of the joint venture, First National Bank of Chicago and First
Capital Corporation. The lawsuit seeks to recover compensatory
damages of $50 million and punitive damages of $50 million for
alleged tortious interference with the contractual rights of the
plaintiff and to impose a constructive trust on the proceeds of the
use and/or sale of the assets of Caymen Coal, Inc. as they existed on
October 15, 1988. Subsequently, the court entered an order
dismissing the Company's indirect subsidiary. The Company intends to
defend its interests vigorously and believes the damages alleged by
the plaintiff in this action are highly exaggerated. In any event,
the Company believes that it has valid defenses and that it will
prevail in this litigation.
The Company is involved in these and various other legal actions
arising in the normal course of business. After taking into
consideration the evaluation of such actions by counsel for the
Company, management is of the opinion that the outcome of all known
and potential claims and litigation will not have a material adverse
effect on the Company's business or consolidated financial position
or results of operations.
EMPLOYMENT CONTRACTS - The Company has committed under
employment contracts to provide two key executives with severance
benefits totalling approximately $3.7 million which vest in September
2003 or earlier if the executive both reduces his ownership of the
Company's common stock below a specified level and resigns. The
Company amortizes the cost of the severance benefits over the ten
year period from September 1993 to September 2003, unless the
executive reduces his stock ownership and resigns prior to September
2003 in which case the unamortized severance cost would be expensed.
LETTERS OF CREDIT - At December 31, 1995, the Company had
letters of credit outstanding and unused totalling $13.3 million and
$21.7 million, respectively (see Note C). At December 31, 1994, the
Company had letters of credit outstanding and unused totalling $13.1
million and $11.9 million, respectively.
(F) ACCRUED LIABILITIES AND OTHER NONCURRENT LIABILITIES
The components of "Accrued liabilities" at December 31, 1995 and
1994 were as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Accrued expenses - general $ 11,051 $ 8,831
Accrued interest expense 2,657 1,666
Other 6,810 6,825
-------- --------
Total $ 20,518 $ 17,322
======== ========
</TABLE>
The components of "OTHER NONCURRENT LIABILITIES" at December 31,
1995 and 1994 were as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Postretirement benefit obligations $ 15,993 $ 15,950
Pension obligations 5,090 6,994
Accrued interest expense related
to the New Debentures 10,410 10,419
Net liabilities associated with
discontinued operations 5,818 7,003
Foreign income taxes 5,893 6,759
Gain on sale of drilling unit 7,229 -
Other 1,285 2,592
-------- --------
Total $ 51,718 $ 49,717
======== ========
</TABLE>
(G) INCOME TAXES
Income tax expense for the years ended December 31, 1995, 1994
and 1993 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Current:
Foreign $ 2,395 $ 3,825 $ 3,620
Federal 527 - -
-------- -------- --------
Total current 2,922 3,825 3,620
Deferred (98) 268 388
-------- -------- --------
Total $ 2,824 $ 4,093 $ 4,008
======== ======== ========
</TABLE>
The domestic and foreign components of income (loss) before
income taxes for the years ended December 31, 1995, 1994 and 1993 were
as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Domestic $ (22,028) $ (27,211) $ (22,056)
Foreign 44,766 13,308 28,112
--------- --------- ---------
Total $ 22,738 $ (13,903) $ 6,056
========= ========= =========
</TABLE>
The effective tax rate, as computed on income before income
taxes, differs from the statutory U.S. income tax rate for the years
ended December 31, 1995, 1994 and 1993 due to the following:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Statutory rate 35 % 35 % 35 %
Limitation on recognition
of tax benefits (33) (35) (35)
Foreign tax settlement (6) - -
Foreign tax expense 16 28 60
Other - 1 6
--- --- ---
Effective rate 12 % 29 % 66 %
=== === ===
</TABLE>
Income taxes of $4,093,000 were recognized in 1994 despite
losses before income taxes. The expense resulted primarily from
income tax expense incurred with respect to certain foreign
operations. The Company was limited in utilization of tax benefits
from investment tax credits prior to 1986 and operating losses in
1994.
Deferred income taxes result from those transactions which
affect financial and taxable income in different years. The nature of
these transactions (all of which were long-term) and the income tax
effect of each as of December 31, 1995 and 1994 was as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Deferred tax liability - depreciation $ 99,513 $ 128,232
--------- ---------
Deferred tax assets:
Rig leases (15,342) (24,247)
Postretirement benefits (8,183) (7,007)
Tax benefit loss carryforwards (149,952) (133,140)
Valuation allowance 76,989 39,318
Other (48) (81)
--------- ---------
Total deferred tax assets (96,536) (125,157)
--------- ---------
Net deferred tax liability $ 2,977 $ 3,075
========= =========
</TABLE>
Valuation allowance is necessary to reflect the anticipated
expiration of tax benefits (primarily net operating loss
carryforwards) prior to their utilization. The estimated amount of
net operating loss carry forward available increased in 1995 and the
Company recognized corresponding additional valuation allowance.
Recapitalizations of the Company in 1989 and 1991 resulted in
ownership changes for federal income tax purposes. As a result of
these ownership changes, the amount of tax benefit carryforwards
generated prior to the ownership changes which may be utilized to
offset federal taxable income is limited by the Internal Revenue Code
to approximately $2.7 million annually plus certain built-in gains
that existed as of the date of such changes. Net tax operating losses
of $18,283,000 arising since the 1991 ownership change are not subject
to this limitation. Any tax benefits due to the utilization of
carryforwards which were generated prior to the recapitalization in
1991 will be reported as a credit to "Capital in excess of par value".
(H) CAPITAL SHARES
On March 15, 1995, the Company's board of directors declared a
dividend of one preferred share purchase right (a "Right") for each
outstanding share of the Company's Common Stock outstanding on March
31, 1995 (the"Record Date"). Each Right entitles the registered
holder to purchase from the Company one one-hundredth of a share of
Series B Junior Participating Preferred Stock, par value $1.00 per
share (the "Preferred Shares") of the Company at a price of $30.50,
subject to adjustment. The Rights will not become exercisable until
10 days after a public announcement that a person or group has
acquired 10% or more of the Company's Common Stock (thereby becoming
an "Acquiring Person") or the commencement of a tender or exchange
offer upon consummation of which such person or group would own 10% or
more of the Company's Common Stock (the earlier of such dates being
called the "Distribution Date"). Rights will be issued for all shares
of the Company's Common Stock issued and outstanding on the Record
Date. Until the Distribution Date, the Rights will be evidenced by
the certificates representing the Company's Common Stock and will be
transferrable only with the Company's Common Stock. In the event that
any person or group becomes an Acquiring Person, each Right, other
than Rights beneficially owned by the Acquiring Person (which will
thereafter be void), will thereafter entitle its holder to purchase
shares of the Company's Common Stock having a market value of two
times the exercise price of the Right. After any person or group has
become an Acquiring Person and prior to the acquisition by such person
or group of 50% or more of the outstanding shares of Common Stock, the
Company's board of directors may exchange each Right (other than
Rights of the Acquiring Person), in whole or in part, at an exchange
ratio of one Common Share or one one-hundredth of a Preferred Share
per Right. If after a person or group has become an Acquiring Person,
the Company is acquired in a merger or other business combination
transaction or 50% or more of its assets or earning power are sold,
each Right will entitle its holder to purchase, at the Right's then
current exercise price, that number of shares of common stock of the
acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the Right. The board
of directors of the Company may redeem the Rights in whole, but not in
part, at a price of $.01 per Right at any time prior to such time as
any person or group becomes an Acquiring Person. The Rights expire on
March 31, 2005. Preferred Shares purchasable upon exercise of the
Rights will not be redeemable. Each Preferred Share will be entitled
to a preferential quarterly dividend payment equal to the greater of
$1 per share or 100 times the dividend declared per Common Share.
Liquidation preference will be equal to the greater of $100 per share
or 100 times the payment made per Common Share. Each Preferred Share
will have one vote, voting together with the Common Stock.
CONVERTIBLE PREFERRED STOCK - In July 1993, the Company effected
a public offering of 2,990,000 shares of $1.625 Convertible Preferred
Stock, par value $1.00 per share (the "Preferred Stock"), pursuant to
which the Company raised gross proceeds of approximately $74.7 million
in cash (net proceeds of approximately $71.2 million). The proceeds
were utilized to repay indebtedness under two credit facilities, both
under the ING Facility, totalling approximately $17.1 million. The
remaining proceeds were used by the Company for working capital and
general corporate purposes. The Preferred Stock is convertible at the
option of the holder at any time into shares of the Company's Common
Stock at a conversion rate of 2.899 shares of Common Stock for each
share of Preferred Stock (equivalent to a conversion price of $8.625
per share of Common Stock), subject to adjustment in certain events.
Annual dividends are $1.625 per share and are cumulative and are
payable quarterly commencing September 30, 1993. The Preferred Stock
is redeemable at any time on and after September 30, 1996, at the
option of the Company, in whole or in part, at a redemption price of
$26.1375 per share, and thereafter at prices decreasing ratably
annually to $25.00 per share on and after September 30, 2003, plus
accrued and unpaid dividends. The holders of the Preferred Stock do
not have any voting rights, except as required by applicable law and
except that, among other things, whenever accrued and unpaid dividends
on the Preferred Stock are equal to or exceed the equivalent of six
quarterly dividends payable on the Preferred Stock, the holders of the
Preferred Stock will be entitled to elect two directors to the Board
until the dividend arrearage has been paid in full. The term of office
of all directors so elected will terminate immediately upon such
payment. The Preferred Stock has a liquidation preference of $25.00
per share, plus accrued and unpaid dividends. During 1995, 5,000
shares of the Preferred Stock were converted into 14,495 shares of the
Company's Common Stock.
COMMON STOCK - In the third quarter of 1994, the Company issued
4,230,235 shares of the Company's Common Stock in association with the
purchase of certain notes and interests relating to the lease debt
outstanding on the drilling units "GEORGE H. GALLOWAY" and the "C. E.
THORNTON", and the secured contingent obligations on the "F. G.
McCLINTOCK" (see Note E).
In September 1995, the Company issued 1,232,057 shares of the
Company's Common Stock in association with the purchase of "RIG 42" and
filed a shelf registration statement in September 1995 registering such
1,232,057 shares. The Company has been informed that all of such shares
have been sold. Pursuant to the terms of registration rights agreements
among the Company and certain other holders of the Company's Common
Stock, as currently in effect, the Company is required to maintain
continuously effective shelf registration statements with respect to
approximately 7.4 million shares of its Common Stock until the
earlier to occur of (i) the sale of such shares by the holders thereof
or (ii) August 1, 1996 (in the case of approximately 5.4 million shares)
or September 14, 1996 (in the case of approximately 2 million shares).
As of December 31, 1995, authorized, unissued shares of Common
Stock were reserved for issuance as follows:
<TABLE>
<S> <C>
Issuance under the Company's
stock plans (net of forfeitures) 4,215,267
Conversion of Preferred Stock 8,653,515
Conversion of 8% Senior Subordinated
Convertible Debentures 944,391
Conversion of Class A Stock 81
----------
Total 13,813,254
==========
</TABLE>
Class A (Cumulative Convertible) Capital Stock (the "Class A
Stock") has been included with "Capital in excess of par value" due to
the insignificance of the $880 outstanding at December 31, 1995 and
1994.
(I) EMPLOYEE BENEFIT PLANS
PENSION PLANS - The Company has three noncontributory pension
plans. Substantially all of its employees are covered by one or more
of these plans. Plan benefits are primarily based on years of service
and average high thirty-six month compensation.
The Reading & Bates Pension Plan (the "Domestic Plan") is
qualified under the Employee Retirement Income Security Act (ERISA).
It is the Company's policy to fund this plan not less than the minimum
required by ERISA. It is the Company's policy to contribute to the
Reading & Bates Offshore Pension Plan (the "Offshore Plan") an amount
equal to the normal cost plus amounts sufficient to amortize the
initial unfunded actuarial liability and subsequent unfunded liability
caused by plan or assumption changes over thirty years. The unfunded
liability arising from actuarial gains and losses is funded over
fifteen years. The Offshore Plan is a nonqualified plan and is not
subject to ERISA funding requirements. The Domestic and Offshore
Plans invest in cash equivalents, fixed income and equity securities.
The Reading & Bates Retirement Benefit Replacement Plan (the
"Replacement Plan") is a self-administered unfunded excess benefit
plan. All members of the Domestic Plan or the Reading & Bates Savings
Plan are potential participants in the Replacement Plan.
Net Pension costs for the years ended December 31, 1995, 1994
and 1993 included the following components (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Service cost - benefits
earned during the year $ 1,355 $ 1,412 $ 1,354
Interest cost on projected
benefit obligation 4,504 4,284 4,328
Actual (gain) loss on
plan assets (10,000) 1,004 (3,694)
Net amortization and deferral 5,186 (5,953) (1,454)
------- ------- -------
Net pension costs $ 1,045 $ 747 $ 534
======= ======= =======
</TABLE>
The funded status of the plans at December 31, 1995 was as follows (in
thousands):
<TABLE>
<CAPTION>
Domestic Offshore Replacement
Plan Plan Plan
-------- -------- -----------
<S> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $ 42,433 $ 11,822 $ 2,174
Nonvested benefit obligation 807 667 139
-------- -------- --------
Accumulated benefit obligation 43,240 12,489 2,313
Effect of projected future
compensation levels 4,835 1,826 158
-------- -------- --------
Projected benefit obligation 48,075 14,315 2,471
Plan assets at fair value 41,965 10,958 -
-------- -------- --------
Projected benefit obligation
in excess of plan assets 6,110 3,357 2,471
Unrecognized cumulative net
(loss) gain (9,816) (2,591) 3,890
Prior service cost unrecognized
in pension cost 2,136 286 249
Unrecognized net implementation
asset (obligation) 2,066 25 (2,672)
Additional minimum liability 779 454 -
-------- -------- --------
Accrued pension cost $ 1,275 $ 1,531 $ 3,938
======== ======== ========
</TABLE>
The additional minimum liability is shown as a reduction of
stockholders' equity.
The weighted average discount rate and rate of increase in
future compensation levels used in determining the actuarial present
value of the projected benefit obligations was 7.4% and 4.5%,
respectively. The weighted average expected long-term rate of return
on assets was 10%.
POSTRETIREMENT BENEFITS - In addition to providing pension
benefits, the Company provides certain health care and life insurance
benefits for retired employees. The Company's employees may become
eligible for these benefits if they reach normal or early retirement
age while working for the Company and if they have accumulated 15
years (25 years effective January 1, 1996) of service. Health care
costs are paid as they are incurred. Life insurance benefits are
provided through an insurance company whose premiums are based on
benefits paid during the year.
Postretirement benefit costs for the years ended December
31, 1995, 1994 and 1993 included the following (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Service cost - benefits earned
during the year $ 223 $ 350 $ 258
Interest cost on projected
benefit obligations 986 1,241 1,128
Amortization (benefit) cost -
Accumulated Projected
Benefit Obligation (768) (539) (728)
------- ------- -------
Total postretirement
benefit costs $ 441 $ 1,052 $ 658
======= ======= =======
</TABLE>
The health care cost trend rates used to measure the expected
cost in 1996 for medical, dental and vision benefits were 8%, 5.5% and
5.5%, respectively, each graded down to an ultimate trend rate of 5%,
4.5% and 4.5%, respectively, to be achieved in the year 2021. The
weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of
the projected benefit obligation was 7.4% and 4.5%, respectively. The
effect of a one-percentage-point increase in health care cost trend
rates for future periods would increase the service cost and interest
cost portion of net periodic postretirement benefit cost approximately
16%. The accumulated postretirement benefit obligation would increase
by approximately 12.8%.
The amounts recognized in the Company's Consolidated
Balance Sheet at December 31, 1995 and 1994 was as follows (in
thousands):
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Plan assets at fair value $ - $ -
Accumulated postretirement
benefit obligation:
Retirees 8,808 9,330
Fully eligible active plan
participants 640 540
Other active plan participants 1,687 2,183
Unrecognized prior service cost 3,679 3,963
Unrecognized cumulative net gain 2,210 1,288
Other (591) (789)
-------- --------
Postretirement benefit liability
recognized in the Consolidated
Balance Sheet $ 16,433 $ 16,515
======== ========
</TABLE>
SAVINGS PLANS - The Company has two savings plans, the Reading &
Bates Savings Plan and the Reading & Bates Offshore Savings Plan.
Under the plans, an employee may contribute up to 10% of base salary
(subject to certain limitations) and the Company may make matching
contributions at a rate of up to $1.00 for each dollar contributed by
the employee up to 6% of the employee's base salary. Since January 1,
1992, the Company has made matching contributions at a rate of $.50
for each dollar contributed by the employee. Employees may direct the
investment of their contributions and the contributions of the Company
in various plan options.
Twenty-five percent of the Company's contribution vests after
two years of an employee's service with the Company, 50% after three
years, 75% after four years and 100% after five years. Compensation
costs under the plans amounted to $518,000 in 1995, $531,000 in 1994
and $502,000 in 1993.
STOCK OPTION PLAN - The Company's 1990 Stock Option Plan (the
"1990 Plan") is intended to provide an incentive that will allow the
Company to retain in its employ, persons of the training, experience
and ability necessary for the development and financial success of the
Company. The 1990 Plan authorized options with respect to 1,966,000
shares of Common Stock to be granted to certain employees of the
Company at an adjusted option price of $7.375 per share. On
September 25, 1991, options with respect to all 1,966,000 shares were
granted. Total adjusted compensation under the 1990 Plan of
approximately $1,550,000 represents the excess of market price at the
measurement date over the option price multiplied by the number of
options granted. This amount was recognized as expense over the four
year vesting period which commenced in March 1991. Compensation
recognized under the plan for the three years ending December 31,
1995, 1994 and 1993 totalled approximately $126,000, $507,000 and
$507,000, respectively. The plan will terminate on March 29, 2001.
STOCK INCENTIVE PLANS - The Company has two stock incentive
plans, the 1992 Long-Term Incentive Plan (the "1992 Plan") and the
1995 Long-Term Incentive Plan (the "1995 Plan"). Both plans provide
for grants of stock options, stock appreciation rights, stock awards
and cash awards, which may be granted singly, in combination or in
tandem. An aggregate of 1,000,000 and 2,500,000 shares of Common
Stock is available for awards granted wholly or partly in Common Stock
under the 1992 Plan and 1995 Plan, respectively. In 1992, the Company
granted Restricted Stock Awards under the 1992 Plan totalling 300,000
shares of Common Stock. Such shares awarded are restricted as to
transfer until vested pursuant to a schedule whereby 1/24th of the
total number of shares is vested per calendar quarter from June 30,
1992 through March 31, 1998 (subject to certain conditions). The
market value at the date of grant of the Common Stock granted was
recorded as unearned compensation and is amortized to expense over the
periods during which the restrictions lapse or shares vest. In 1995,
the Company granted Stock Options under the 1992 Plan and 1995 Plan
with respect to 700,000 and 600,000 shares of Common Stock,
respectively, at option prices ranging from $9.00 to $13.875 per share
(the market price on the date of grants). Such options become
exercisable either over a three or four year period from the date of
grant and no options are exercisable within six months or later than
ten years from the date of grant. Also in 1995, the Company granted
Restricted Stock Awards under the 1995 Plan totalling 544,200 shares
of Common Stock. Such shares awarded are restricted as to transfer
until fully vested three years from the date of grant. The market
value at the date of grant of the Common Stock granted was recorded as
unearned compensation and is amortized to expense over the period
during which the shares vest. Unearned compensation is shown as a
reduction of stockholders' equity.
DIRECTOR STOCK OPTION PLAN - The Company's 1995 Director Stock
Option Plan (the "1995 Director Plan") is intended to obtain and
retain non-employee members of the board of directors by rewarding
them for making major contributions to the success of the Company.
The 1995 Director Plan authorized options with respect to 200,000
shares of Common Stock to be granted at an option price of $7.375 per
share. In 1995, the Company granted 120,000 options. The market
value of the Company's Common Stock at the date of grant was less than
the option price, and no compensation expense was recorded.
Stock option transactions under the plans were as follows:
<TABLE>
<CAPTION>
1995
1990 1992 1995 Director
Plan Plan Plan Plan
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Outstanding at
December 31, 1992 1,810,000 - - -
Exercised at $7.375 (33,700) - - -
Forfeited (6,000) - - -
--------- -------- -------- --------
Outstanding at
December 31, 1993 1,770,300 - - -
Forfeited (2,000) - - -
--------- -------- -------- --------
Outstanding at
December 31, 1994 1,768,300 - - -
Granted at
$7.375-$13.875 - 700,000 600,000 120,000
Exercised at $7.375 (406,833) - - -
Forfeited (2,000) (5,000) - -
--------- -------- -------- --------
Outstanding at
December 31, 1995 1,359,467 695,000 600,000 120,000
========= ======== ======== ========
Exercisable at
December 31,
1993 1,155,100 - - -
1994 1,461,100 - - -
1995 1,359,467 - - 105,000
Available for grant at
December 31,
1993 - 700,000 - -
1994 - 700,000 - -
1995 - 5,000 1,355,800 80,000
</TABLE>
(J) RELATED PARTY TRANSACTIONS
In 1994, as a part of the purchase of certain notes and
interests relating to two of the leased drilling units "C.E. THORNTON"
and "F.G. McCLINTOCK" (see Note E), the Company paid cash of $93,500
and issued 44,000 shares of Common Stock to BCL Investment Partners,
L.P. ("BCL"), a major shareholder of the Company during 1994. Such
cash and Common Stock represented payment for BCL's proportionate
holdings of such notes and interests and was paid pro rata to all
sellers of such notes and interests.
Drilling has rig management agreements with Sonat Offshore
Drilling Inc. ("Sonat Offshore"), a major shareholder of Drilling, for
the operation and marketing of both of its drilling units. In
December 1995, the management agreement for one of Drilling's drilling
units expired and a subsidiary of the Company now manages the drilling
unit. For each of the years ending December 31, 1995, 1994 and 1993,
Drilling paid to Sonat Offshore approximately $2.6 million, $2.5
million and $2.5 million, respectively, for such management services.
In addition, Drilling has a bareboat charter agreement with Sonat
Offshore for the other drilling unit. For the years ended December
31, 1995, 1994 and 1993, Drilling received from Sonat Offshore
approximately $11.8 million, $13.9 million, and $14.7 million,
respectively, for such bareboat charter. At December 31, 1995 and
1994, Drilling had a net receivable from Sonat Offshore of $5.4
million and $4.9 million, respectively.
(K) MAJOR CUSTOMERS AND GEOGRAPHIC INFORMATION
The Company, together with its 50% or less owned unconsolidated
investees, operates principally in international offshore contract
drilling of oil and gas wells. For the year ended December 31, 1995,
revenues from two customers of $29.4 million and $28.9 million each
accounted for 14% of the Company's total operating revenues. For the
year ended December 31, 1994, revenues from one customer of $35.2
million accounted for 21% of the Company's total operating revenues.
For the year ended December 31, 1993, revenues from three customers of
$39.6 million, $37.7 million and $20.3 million accounted for 22%, 20%
and 11%, respectively, of the Company's total operating revenues.
Geographic information about the Company's operations for
the three years ended December 31, 1995 is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Operating revenues:
United States $ 24,451 $ 20,151 $ 10,878
Southeast Asia 63,562 69,751 54,119
Mediterranean-
Middle East 31,406 19,344 53,777
Europe 63,639 43,646 50,292
Australia 20,940 11,516 5,890
Other Foreign 8,797 4,650 8,796
Corporate - - -
--------- --------- ---------
Total $ 212,795 $ 169,058 $ 183,752
========= ========= =========
Operating profit (loss):(1)
United States $ 3,541 $ (3,691) $ (268)
Southeast Asia 22,358 18,413 13,756
Mediterranean-
Middle East 10,661 463 17,654
Europe 16,230 1,874 6,313
Australia (283) 1,500 832
Other Foreign 2,778 (3,395) (3,481)
Corporate (19,076) (18,636) (17,002)
--------- --------- ---------
Total $ 36,209 $ (3,472) $ 17,804
========= ========= =========
Identifiable assets:
United States $ 52,564 $ 82,639 $ 19,032
Southeast Asia 163,119 166,896 139,522
Mediterranean-
Middle East 61,022 37,892 112,879
Europe 258,934 218,755 240,973
Australia 3,947 17,175 21,399
Other Foreign 14,418 13,072 2,313
Corporate 51,776 50,372 76,144
--------- --------- ---------
Total $ 605,780 $ 586,801 $ 612,262
========= ========= =========
<FN>
(1) Operating profit (loss) represents operating revenues less
operating expenses, depreciation and amortization, general and
administrative and other, net.
</TABLE>
READING & BATES CORPORATION
AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION
QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial data for the two years ended December 31,
1995, are as follows (in thousands except for per share amounts):
<TABLE>
<CAPTION>
Quarter
-----------------------------------------------------
First Second Third Fourth Total
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
1995:
Operating revenues $ 47,975 $ 50,382 $ 54,661 $ 59,777 $ 212,795
Gross income (1) $ 8,421 $ 11,296 $ 16,100 $ 17,531 $ 53,348
Income (loss) before
extraordinary gain $ (369) $ 2,432 $ 9,100 $ 7,229 $ 18,392
Extraordinary gain $ - $ - $ - $ 3,430 $ 3,430
Net income (loss) $ (369) $ 2,432 $ 9,100 $ 10,659 $ 21,822
Earnings (loss)
per share:
Income (loss) before
extraordinary gain $ (.03) $ .02 $ .13 $ .10 $ .22
Extraordinary gain $ - $ - $ - $ .05 $ .06
Net income (loss)
per share applicable
to common
stockholders $ (.03) $ .02 $ .13 $ .15 $ .28
1994:
Operating revenues $ 42,357 $ 39,493 $ 42,773 $ 44,435 $ 169,058
Gross income (1) $ 6,420 $ 1,032 $ 3,413 $ 3,656 $ 14,521
Net loss $ (1,491) $ (6,038) $ (4,005) $ (5,612) $ (17,146)
Net loss per share
applicable to
common stockholders $ (.05) $ (.13) $ (.09) $ (.11) $ (.39)
___________________________
<FN>
(1) Gross income represents operating revenues less operating expenses,
depreciation and amortization, and other, net.
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
The information called for by Part III of Form 10-K is incorporated by
reference from the Registrant's Proxy Statement relating to its annual
meeting of Stockholders to be held May 14, 1996, which will be filed by
the Registrant with the Securities and Exchange Commission no later than
120 days after the close of the fiscal year. Also reference is made to
the information contained under the captioned "Executive Officers of
Registrant" contained in Part I hereof.
PART IV
Item 14. Exhibits, Financial Statements and Reports on Form 8-K
(a) Financial Statements and Exhibits
1. Financial Statements:
Report of Independent Public Accountants
Consolidated Balance Sheet as of December 31, 1995 and 1994
Consolidated Statement of Operations for the years ended December
31, 1995, 1994 and 1993
Consolidated Statement of Cash Flows for the years ended December
31, 1995, 1994 and 1993
Consolidated Statement of Stockholders' Equity for the years ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Supplemental Consolidated Financial Information (unaudited)
2. Exhibits:
Exhibit 3.1- The Registrant's Restated Certificate of
Incorporation. (Filed as Exhibit 3.1 to Post-Effective
Amendment No. 2 to the Company's Registration
Statement on Form 8-A/A dated May 27, 1994 and
incorporated herein by reference.)
Exhibit 3.2- Certificate of Designations of Series B Junior
Participating Preferred Stock of the Registrant.
Exhibit 3.3- The Registrant's Bylaws, as amended and restated
effective March 2, 1995. (Filed as Exhibit 3.1 to the
Registrant's Form 8-K dated March 3, 1995 and
incorporated herein by reference.)
Exhibit 4.1- Indenture relating to the Registrant's 8% Senior
Subordinated Convertible Debentures due 1998 dated
as of August 29, 1989, between the Registrant and IBJ
Schroder Bank & Trust Company, as Trustee. (Filed as
Exhibit 4.1 to the Company's Annual Report on Form 10-
K for 1989 and incorporated herein by reference.)
Exhibit 4.2- Form of the Registrant's registered 8% Senior
Subordinated Convertible Debentures due 1998. (Filed
as Exhibit 4.2 to Registration No. 33-28580 and
incorporated herein by reference.)
Exhibit 4.3- Form of the Registrant's bearer 8% Senior Subordinated
Convertible Debentures due 1998. (Filed as Exhibit
4.3 to Registration No. 33-28580 and incorporated
herein by reference.)
Exhibit 4.4- Form of the Registrant's Common Stock Certificate.
(Filed as Exhibit 4.6 to Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 4.5- Form of Preferred Stock Certificate for $1.625
Convertible Preferred Stock ($1.00 par value). (Filed
as Exhibit 4.4 to Registration No. 33-65476 and
incorporated herein by reference.)
Exhibit 4.6- Registration Rights Agreement dated as of March 29,
1991 among the Registrant, Holders as referred therein
and members of Offering Committee as referred therein.
(Filed as Exhibit 4.22 to the Company's Annual Report
on Form 10-K for 1990 and incorporated herein by
reference.)
Exhibit 4.7- Amendment No. 1, dated as of September 1, 1992, to the
Registration Rights Agreement filed as Exhibit 4.7
hereto. (Filed as Exhibit 4.18 to Registration No. 33-
51120 and incorporated herein by reference.)
Exhibit 4.8- Amendment No. 2, dated as of June 1, 1993, to the
Registration Rights Agreement. (Filed as Exhibit 4.8
to Registration No. 33-65476 and incorporated herein
by reference.)
Exhibit 4.9- Amendment No. 3, dated as of August 1, 1994, to the
Registration Rights Agreement. (Filed as Exhibit 4.5
to the Registration No. 33-56029 and incorporated
herein by reference.)
Exhibit 4.10- Common Stock Issuance Agreement dated as of August 24,
1994 between the Company and BCL Investment Partners
L.P. (Filed as Exhibit 4.24 to the Company's Annual
Report on Form 10-K for 1994 and incorporated herein
by reference.)
Exhibit 4.11- Common Stock Issuance Agreement dated August 31, 1995
between the Company and DeepFlex Production Partners
L.P. (Filed as Exhibit 4.7 to Registration No. 33-
62727 and incorporated herein by reference.)
Exhibit 4.12- Rights Agreement dated as of March 15, 1995, including
Exhibit A, "Form of Certificate of Designations";
Exhibit B, "Form of Rights Certificate"; Exhibit C,
"Summary of Rights to Purchase Preferred Shares".
(Filed as Exhibit 4 to the Company's Registration
Statement on Form 8-A dated March 22, 1995 and
incorporated herein by reference.)
Exhibit 10.1- Amended and Restated Lease Restructuring Agreement
dated as of March 29, 1991 among the Registrant, other
obligors, the Lessors, the Lease Lenders, the Lease
Trustees, the Lease Equity Participant and the Lease
Agent, all as named therein. (Filed as Exhibit 4.26
to the Company's Annual Report on Form 10-K for 1990
and incorporated herein by reference.)
Exhibit 10.2- Bareboat Charter Party Amendment No. 2 dated March 29,
1991 between The Connecticut National Bank, as Owner
Trustee and Reading & Bates Drilling Co., a subsidiary
of the Registrant, as Charterer. (Filed as Exhibit
4.27 to the Company's Annual Report on Form 10-K for
1990 and incorporated herein by reference.)
Exhibit 10.3- Bareboat Charter Party Amendment No. 3 dated as of
March 29, 1991 between The Connecticut National Bank,
as Owner Trustee and Reading & Bates Exploration Co.,
a subsidiary of the Registrant, as Charterer. (Filed
as Exhibit 4.28 to the Company's Annual Report on Form
10-K for 1990 and incorporated herein by reference.)
Exhibit 10.4- Amendment No. 1 to Trust Indenture and First Preferred
Ship Mortgage dated as of March 29, 1991 between
Reading & Bates Exploration Co., a subsidiary of the
Registrant, and State Street Bank and Trust Company of
Connecticut, National Association, as Indenture
Trustee. (Filed as Exhibit 4.29 to the Company's
Annual Report on Form 10-K for 1990 and incorporated
herein by reference.)
Exhibit 10.5- Amended and Restated Credit Facility Agreement dated
as of April 27, 1995 among the Registrant, Reading &
Bates Drilling Co., Reading & Bates Exploration Co.,
Reading and Bates, Inc., Reading and Bates Borneo
Drilling Co., Ltd. and Reading & Bates (A) Pty. Ltd.,
subsidiaries of the Registrant, and Internationale
Nederlanden Bank N.V. (Filed as Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the Second
Quarter of 1995 and incorporated herein by reference.)
Exhibit 10.6- Amendment No. 1, dated July 31, 1995, to the Amended
and Restated Credit Facility Agreement dated as of
April 27, 1995 among the Registrant, Reading & Bates
Drilling Co., Reading & Bates Exploration Co., Reading
and Bates, Inc., Reading and Bates Borneo Drilling
Co., Ltd. and Reading & Bates (A) Pty. Ltd.,
subsidiaries of the Registrant, and Internationale
Nederlanden Bank N.V. (Filed as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the Third
Quarter of 1995 and incorporated herein by reference.)
Exhibit 10.7- Amendment No. 2, dated November 29, 1995, to the
Amended and Restated Credit Facility Agreement dated
as of April 27, 1995 among the Registrant, Reading &
Bates Drilling Co., Reading & Bates Exploration Co.,
Reading and Bates, Inc., Reading and Bates Borneo
Drilling Co., Ltd. and Reading & Bates (A) Pty. Ltd.,
subsidiaries of the Registrant, and Internationale
Nederlanden Bank N.V.
Exhibit 10.8- Amendment No. 3 to Trust Indenture dated November 29,
1995 among the Registrant, Reading & Bates Drilling
Co., Reading & Bates Exploration Co., Reading and
Bates, Inc., Reading and Bates Borneo Drilling Co.,
Ltd. and Reading & Bates (A) Pty. Ltd., subsidiaries
of the Registrant, and Bank One, Texas, N.A., as
trustee.
Exhibit 10.9- Amendment No. 7, dated November 29, 1995, to Preferred
Fleet Mortgage dated March 29, 1991 between Reading &
Bates Drilling Co., a subsidiary of the Registrant,
and Bank One, Texas, N.A., as trustee.
Exhibit 10.10- Amendment No. 3 to Assignment of Drilling Contract
Revenues and Earnings dated November 29, 1995 among
the Registrant, Reading & Bates Drilling Co., Reading
& Bates Exploration Co. and Reading & Bates, Inc.,
subsidiaries of the Registrant, and Bank One, Texas,
N.A., as trustee.
Exhibit 10.11- Amendment No. 3 to Assignment of Insurances dated
November 29, 1995 among the Registrant, Reading &
Bates Drilling Co., Reading & Bates Exploration Co.
and Reading & Bates, Inc., subsidiaries of the
Registrant, and Bank One, Texas, N.A., as trustee.
Exhibit 10.12- Galloway Assignment Agreement dated November 29, 1995
between Internationale Nederlanden Bank N.V. and
Reading & Bates Offshore, Limited, a subsidiary of the
Registrant.
Exhibit 10.13- Thornton Assignment Agreement dated November 29, 1995
between Internationale Nederlanden Bank N.V. and
Reading & Bates Offshore, Limited, a subsidiary of the
Registrant.
Exhibit 10.14- Termination of Charter Payments Agreement dated
November 29, 1995 among the Registrant, Reading &
Bates Drilling Co., Reading & Bates Exploration Co.
and Reading & Bates, Inc., subsidiaries of the
Registrant, and Internationale Nederlanden Bank N.V.
Exhibit 10.15- Termination Agreement dated November 29, 1995 among
the Registrant, Reading & Bates Drilling Co., Reading
& Bates Exploration Co. and Reading & Bates, Inc.,
Reading & Bates Borneo Drilling Co., Ltd. and Reading
& Bates (A) Pty. Ltd., subsidiaries of the Registrant,
and Internationale Nederlanden Bank N.V.
Exhibit 10.16- Letter of Credit Wind-Down Agreement dated November
28, 1995 between the Registrant and Internationale
Nederlanden Bank, N.V.
Exhibit 10.17- Termination of Pledge Agreement dated November 29,
1995 among the Registrant, Reading & Bates Drilling
Co., Reading & Bates Exploration Co. and Reading &
Bates, Inc., Reading & Bates Borneo Drilling Co., Ltd.
and Reading & Bates (A) Pty. Ltd., subsidiaries of the
Registrant, and Internationale Nederlanden Bank N.V.
Exhibit 10.18- Termination of Assignment of Drilling Contract
Revenues and Earnings dated November 29, 1995 among
the Registrant, Reading & Bates Drilling Co., Reading
& Bates Exploration Co. and Reading & Bates, Inc.,
subsidiaries of the Registrant, and Bank One, Texas,
N.A., as trustee.
Exhibit 10.19- Termination of Assignment of Drilling Contract
Revenues and Earnings dated November 29, 1995 among
Reading & Bates Borneo Drilling Co., Ltd., a
subsidiary of the Registrant, and Bank One, Texas,
N.A., as trustee.
Exhibit 10.20- Termination of Assignment of Drilling Contract
Revenues and Earnings dated November 29, 1995 among
Reading & Bates (A) Pty. Ltd., a subsidiary of the
Registrant, and Bank One, Texas, N.A., as trustee.
Exhibit 10.21- Termination of Assignment of Insurances dated November
29, 1995 among the Registrant, Reading & Bates
Drilling Co., Reading & Bates Exploration Co. and
Reading & Bates, Inc., subsidiaries of the Registrant,
and Bank One, Texas, N.A., as trustee.
Exhibit 10.22- Termination of Assignment of Insurances dated November
29, 1995 among Reading & Bates Borneo Drilling Co.,
Ltd., a subsidiary of the Registrant, and Bank One,
Texas, N.A., as trustee.
Exhibit 10.23- Termination of Assignment of Insurances dated November
29, 1995 among Reading & Bates (A) Pty. Ltd., a
subsidiary of the Registrant, and Bank One, Texas,
N.A., as trustee.
Exhibit 10.24- Termination of Pledge Agreement and Irrevocable Proxy
dated November 29, 1995 between the Registrant and
Bank One, Texas, N.A., as trustee.
Exhibit 10.25- Termination of Pledge Agreement and Irrevocable Proxy
dated November 29, 1995 between Reading & Bates
Drilling Co., a subsidiary of the Registrant, and Bank
One, Texas, N.A., as trustee.
Exhibit 10.26- Termination of Pledge Agreement and Irrevocable Proxy
dated November 29, 1995 between Reading & Bates
Exploration Co., a subsidiary of the Registrant, and
Bank One, Texas, N.A., as trustee.
Exhibit 10.27- Termination of Indenture of Trust dated November 29,
1995 among the Registrant, Reading & Bates Drilling
Co., Reading & Bates Exploration Co. and Reading &
Bates, Inc., Reading & Bates Borneo Drilling Co., Ltd.
and Reading & Bates (A) Pty. Ltd., subsidiaries of the
Registrant, and Bank One, Texas, N.A., as trustee.
Exhibit 10.28*- Reading & Bates 1990 Stock Option Plan. (Filed as
Appendix A to the Company's Proxy Statement dated
April 26, 1993 and incorporated herein by reference.)
Exhibit 10.29*- 1992 Long-Term Incentive Plan of Reading & Bates
Corporation. (Filed as Exhibit B to the Registrant's
Proxy Statement dated April 27, 1992 and incorporated
herein by reference.)
Exhibit 10.30*- 1995 Long-Term Incentive Plan of Reading & Bates
Corporation (Filed as Exhibit 99.A to the Company's
Proxy Statement dated March 29, 1995 and incorporated
herein by reference.)
Exhibit 10.31*- 1995 Director Stock Option Plan of Reading & Bates
Corporation (Filed as Exhibit 99.B to the Company's
Proxy Statement dated March 29, 1995 and incorporated
herein by reference.)
Exhibit 10.32*- Director Stock Option Agreement dated as of September
14, 1993 between the Registrant and C. A. Donabedian.
(Filed as Exhibit 10.15 to the Company's Annual Report
on Form 10-K for 1993 and incorporated herein by
reference.)
Exhibit 10.33*- Surrender Letter dated as of February 7, 1995 by C. A.
Donabedian.
Exhibit 10.34*- Director Stock Option Agreement dated as of September
14, 1993 between the Registrant and J. W. McLean.
(Filed as Exhibit 10.16 to the Company's Annual Report
on Form 10-K for 1993 and incorporated herein by
reference.)
Exhibit 10.35*- Surrender Letter dated as of February 7, 1995 by J. W.
McLean.
Exhibit 10.36*- Director Stock Option Agreement dated as of September
14, 1993 between the Registrant and R. L. Sandmeyer.
(Filed as Exhibit 10.17 to the Company's Annual Report
on Form 10-K for 1993 and incorporated herein by
reference.)
Exhibit 10.37*- Surrender Letter dated as of February 7, 1995 by R. L.
Sandmeyer.
Exhibit 10.38*- Director Stock Option Agreement dated as of September
14, 1993 between the Registrant and S. A. Webster.
(Filed as Exhibit 10.18 to the Company's Annual Report
on Form 10-K for 1993 and incorporated herein by
reference.)
Exhibit 10.39*- Surrender Letter dated as of February 7, 1995 by S. A.
Webster.
Exhibit 10.40*- Stock Option Agreement dated as of February 7, 1995
between A.L. Chavkin and the Registrant.
Exhibit 10.41*- Stock Option Agreement dated as of February 7, 1995
between Willem Cordia and the Registrant.
Exhibit 10.42*- Stock Option Agreement dated as of February 7, 1995
between C.A. Donabedian and the Registrant.
Exhibit 10.43*- Stock Option Agreement dated as of February 7, 1995
between Ted Kalborg and the Registrant.
Exhibit 10.44*- Stock Option Agreement dated as of February 7, 1995
between J.W. McLean and the Registrant.
Exhibit 10.45*- Stock Option Agreement dated as of February 7, 1995
between R.L. Sandmeyer and the Registrant.
Exhibit 10.46*- Stock Option Agreement dated as of February 7, 1995
between S.A. Webster and the Registrant.
Exhibit 10.47*- Stock Option Agreement dated as of April 19, 1995
between M.A.E. Lacqueur and the Registrant.
Exhibit 10.48*- Stock Option Agreement with respect to the 1995 Long-
Term Incentive Plan dated February 6, 1996 between the
Registrant and Paul B. Loyd, Jr.
Exhibit 10.49*- Stock Option Agreement with respect to the 1992 Long-
Term Incentive Plan dated February 6, 1996 between the
Registrant and Paul B. Loyd, Jr.
Exhibit 10.50*- Employment Agreement dated as of November 1, 1991
between the Registrant and L. E. Voss, Jr. (Filed as
Exhibit 10.34 to the Company's Annual Report on Form
10-K for 1991 and incorporated herein by reference.)
Exhibit 10.51*- Amendment No. 1, dated as of October 1, 1993, to the
Employment Agreement dated as of November 1, 1991
between the Registrant and L. E. Voss, Jr. (Filed as
Exhibit 10.22 to the Company's Annual Report on Form
10-K for 1993 and incorporated herein by reference.)
Exhibit 10.52*- Employment Agreement dated as of November 1, 1991
between the Registrant and T. W. Nagle. (Filed as
Exhibit 10.35 to the Company's Annual Report on Form
10-K for 1991 and incorporated herein by reference.)
Exhibit 10.53*- Amendment No. 1, dated as of October 1, 1993, to the
Employment Agreement dated as of November 1, 1991
between the Registrant and T. W. Nagle. (Filed as
Exhibit 10.24 to the Company's Annual Report on Form
10-K for 1993 and incorporated herein by reference.)
Exhibit 10.54*- Employment Agreement dated as of November 1, 1991
between the Registrant and C. R. Ofner. (Filed as
Exhibit 10.36 to the Company's Annual Report on Form
10-K for 1991 and incorporated herein by reference.)
Exhibit 10.55*- Amendment No. 1, dated as of October 1, 1993, to the
Employment Agreement dated as of November 1, 1991
between the Registrant and C. R. Ofner. (Filed as
Exhibit 10.26 to the Company's Annual Report on Form
10-K for 1993 and incorporated herein by reference.)
Exhibit 10.56*- Employment Agreement dated as of November 1, 1991
between the Registrant and D. L. McIntire. (Filed as
Exhibit 10.37 to the Company's Annual Report on Form
10-K for 1991 and incorporated herein by reference.)
Exhibit 10.57*- Amendment No. 1, dated as of October 1, 1993, to the
Employment Agreement dated as of November 1, 1991
between the Registrant and D. L. McIntire. (Filed as
Exhibit 10.28 to the Company's Annual Report on Form
10-K for 1993 and incorporated herein by reference.)
Exhibit 10.58*- Employment Agreement dated as of November 1, 1991
between the Registrant and W. K. Hillin. (Filed as
Exhibit 10.38 to the Company's Annual Report on Form
10-K for 1991 and incorporated herein by reference.)
Exhibit 10.59*- Amendment No. 1, dated as of October 1, 1993, to the
Employment Agreement dated as of November 1, 1991
between the Registrant and W. K. Hillin. (Filed as
Exhibit 10.30 to the Company's Annual Report on Form
10-K for 1993 and incorporated herein by reference.)
Exhibit 10.60*- Employment Agreement dated as of January 1, 1992
between the Registrant and Paul B. Loyd, Jr. (Filed
as Exhibit 10.42 to Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.61*- Amendment No. 1, dated as of October 1, 1993, to the
Employment Agreement dated as of January 1, 1992
between the Registrant and Paul B. Loyd, Jr. (Filed
as Exhibit 10.32 to the Company's Annual Report on
Form 10-K for 1993 and incorporated herein by
reference.)
Exhibit 10.62*- Employment Agreement dated as of January 1, 1992
between the Registrant and C. Kirk Rhein, Jr. (Filed
as Exhibit 10.43 to Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.63*- Amendment No. 1, dated as of October 1, 1993, to the
Employment Agreement dated as of January 1, 1992
between the Registrant and C. Kirk Rhein, Jr. (Filed
as Exhibit 10.34 to the Company's Annual Report on
Form 10-K for 1993 and incorporated herein by
reference.)
Exhibit 10.64*- Employment Agreement dated as of January 1, 1992
between the Registrant and J. T. Angel. (Filed as
Exhibit 10.44 to Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.65*- Agreement amending Employment Agreement dated October
7, 1993 between the Registrant and J. T. Angel.
(Filed as Exhibit 10.36 to the Company's Annual Report
on Form 10-K for 1993 and incorporated herein by
reference.)
Exhibit 10.66- Agreement dated as of August 31, 1991 among Registrant,
Arcade Shipping AS and Sonat Offshore Drilling Inc.
(Filed as Exhibit 10.40 to the Company's Annual Report
on Form 10-K for 1991 and incorporated herein by
reference.)
Exhibit 10.67- Thornton Waiver Agreement dated as of May 31, 1991
among the Noteholders, the Owner Trustee and the
Indenture Trustee named therein. (Filed as Exhibit
10.46 to Registration No. 33-51120 and incorporated
herein by reference.)
Exhibit 10.68- Thornton Rescission Agreement dated as of June 28, 1991
among Reading & Bates Exploration Co., the Registrant,
the Noteholders, the Owner Trustee, the Indenture
Trustee and the Owner Participant named therein.
(Filed as Exhibit 10.49 to Registration No. 33-51120
and incorporated herein by reference.)
Exhibit 10.69- Thornton Assignment Agreement dated as of June 28, 1991
between the Holders named therein and NMB Postbank
Groep N.V. (Filed as Exhibit 10.50 to Registration No.
33-51120 and incorporated herein by reference.)
Exhibit 10.70- Facility Agreement dated February 21, 1991 between
Arcade Drilling AS, Chase Investment Bank Limited and
The Chase Manhattan Bank, N.A. (Filed as Exhibit 10.51
to Registration No. 33-51120 and incorporated herein by
reference.)
Exhibit 10.71- Amendment Agreement dated November 30, 1995 to Facility
Agreement dated February 21, 1991 between Arcade
Drilling AS, Chase Investment Bank Limited and The
Chase Manhattan Bank, N.A.
Exhibit 10.72- Hull 515 Rig Management Agreement dated October 26,
1990 between Arcade Drilling AS and Sonat Offshore
Drilling Inc. (Filed as Exhibit 10.52 to Registration
No. 33-51120 and incorporated herein by reference.)
Exhibit 10.73- HG Rig Management Agreement dated October 26, 1990
between Arcade Drilling AS and Sonat Offshore Drilling
Inc. (Filed as Exhibit 10.53 to Registration No. 33-
51120 and incorporated herein by reference.)
Exhibit 10.74- Modification Agreement dated as of May 27, 1992 between
Arcade Drilling AS and Sonat Offshore Drilling Inc.
(Filed as Exhibit 10.54 to Registration No. 33-51120
and incorporated herein by reference.)
Exhibit 10.75- Charter Payments Agreement dated as of September 30,
1991 among the Registrant, Reading & Bates Drilling
Co., Reading & Bates Exploration Co., Reading and
Bates, Inc. and NMB Postbank Groep, N.V. (Filed as
Exhibit 10.57 to Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.76- Amendment No. 1, dated as of June 30, 1992, to Charter
Payments Agreement dated as of September 30, 1991 among
the Registrant, Reading and Bates Drilling Co., Reading
and Bates Exploration Co., Reading and Bates, Inc. and
Internationale Nederlanden Bank N.V. (formerly known as
NMB Postbank Groep N.V.). (Filed as Exhibit 10.36 to
the Company's Annual Report on Form 10-K for 1992 and
incorporated herein by reference.)
Exhibit 10.77- ISDA Interest and Currency Exchange Agreement dated as
of October 26, 1990 between The Chase Manhattan Bank,
N.A. and K/S Frontier Drilling, and Novation Agreement
with respect thereto dated February 28, 1991. (Filed as
Exhibit 10.62 to Registration No. 33-51120 and
incorporated herein by reference.)
Exhibit 10.78- Assignment Agreement "F. G. McClintock" dated as of
August 24, 1994 between the Company and BCL Investment
Partners L.P. (Filed as Exhibit 10.55 to the Company's
Annual Report on Form 10-K for 1994 and incorporated
herein by reference.)
Exhibit 10.79- Assignment Agreement "F. G. McClintock" dated as of
September 27, 1994 between the Company and BT Advisors,
Inc. (Filed as Exhibit 10.56 to the Company's Annual
Report on Form 10-K for 1994 and incorporated herein by
reference.)
Exhibit 10.80- Assignment Agreement "C. E. Thornton" dated as of
August 24, 1994 between the Company and BCL Investment
Partners L.P. (Filed as Exhibit 10.57 to the Company's
Annual Report on Form 10-K for 1994 and incorporated
herein by reference.)
Exhibit 10.81- Assignment Agreement "C. E. Thornton" dated as of
September 27, 1994 between the Company and BT Advisors,
Inc. (Filed as Exhibit 10.58 to the Company's Annual
Report on Form 10-K for 1994 and incorporated herein by
reference.)
Exhibit 10.82- Assignment Agreement "George H. Galloway" dated as of
August 24, 1994 between the Company and Elliott
Associates L.P. (Filed as Exhibit 10.59 to the
Company's Annual Report on Form 10-K for 1994 and
incorporated herein by reference.)
Exhibit 10.83- Loan Agreement dated as of May 25, 1995 among the
Registrant and Reading & Bates Offshore, Limited, a
subsidiary of the Registrant, and the CIT
Group/Equipment Financing, Inc. (Filed as Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the
Second Quarter of 1995 and incorporated herein by
reference.)
Exhibit 10.84- Amendment No. 1 dated as of December 20, 1995 Loan
Agreement dated as of May 25, 1995 among The CIT
Group/Equipment Financing, Inc. and Reading & Bates
Offshore, Limited, a subsidiary of the Registrant and
the Registrant.
Exhibit 10.85- Amendment No. 1 dated as of December 20, 1995 to the
Guaranty dated as of May 25, 1995 made by the
Registrant in favor of The CIT Group/Equipment
Financing, Inc.
Exhibit 10.86- First Preferred Fleet Mortgage dated May 25, 1995
between The CIT Group/Equipment Financing, Inc. and
Reading & Bates Offshore, Limited, a subsidiary of the
Registrant.
Exhibit 10.87- Supplement No. 1 dated July 13, 1995 to First Preferred
Fleet Mortgage dated May 25, 1995 between The CIT
Group/Equipment Financing, Inc. and Reading & Bates
Offshore, Limited, a subsidiary of the Registrant.
Exhibit 10.88- Supplement No. 2 dated December 20, 1995 to First
Preferred Fleet Mortgage dated May 25, 1995 between The
CIT Group/Equipment Financing, Inc. and Reading & Bates
Offshore, Limited, a subsidiary of the Registrant.
Exhibit 10.89- General Assignment of Earnings dated May 25, 1995 by
Reading & Bates Offshore, Limited, a subsidiary of the
Registrant, in favor of The CIT Group/Equipment
Financing, Inc.
Exhibit 10.90- Assignment of Insurance dated May 25, 1995 by Reading &
Bates Offshore, Limited, a subsidiary of the
Registrant, in favor of The CIT Group/Equipment
Financing, Inc.
Exhibit 10.91- Memorandum of Agreement dated August 31, 1995 between
FPS II, Inc., as holder of legal title for the benefit
of DeepFlex Production Partners, L.P. and Reading &
Bates (U.K.) Limited, a subsidiary of the Registrant.
(Filed as Exhibit 10.2 to the Company's Quarterly
Report on Form 10-Q for the Third Quarter of 1995 and
incorporated herein by reference.)
Exhibit 10.92- Agreement for the sale and purchase of Semi-Submersible
Emergency Support Vessel Iolair dated September 8, 1995
between BP Exploration Operating Company Limited and
Reading & Bates (Caledonia) Limited, a subsidiary of
the Registrant. (Filed as Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the Third
Quarter of 1995 and incorporated herein by reference.)
Exhibit 10.93- Mortgage of a Ship dated September 8, 1995 between
Reading & Bates (Caledonia) Limited, a subsidiary of
the Registrant, and BP Exploration Operating Company
Limited. (Filed as Exhibit 10.4 to the Company's
Quarterly Report on Form 10-Q for the Third Quarter of
1995 and incorporated herein by reference.)
Exhibit 10.94- Mortgage of a Ship dated September 8, 1995 between
Reading & Bates (Caledonia) Limited, a subsidiary of
the Registrant, and Britoil plc. (Filed as Exhibit
10.5 to the Company's Quarterly Report on Form 10-Q for
the Third Quarter of 1995 and incorporated herein by
reference.)
Exhibit 10.95- Deed of Covenant dated September 8, 1995 between
Reading & Bates (Caledonia) Limited, a subsidiary of
the Registrant, and BP Exploration Operating Company
Limited. (Filed as Exhibit 10.6 to the Company's
Quarterly Report on Form 10-Q for the Third Quarter of
1995 and incorporated herein by reference.)
Exhibit 10.96- Deed of Covenant dated September 8, 1995 between
Reading & Bates (Caledonia) Limited, a subsidiary of
the Registrant, and Britoil Public Limited Company.
(Filed as Exhibit 10.7 to the Company's Quarterly
Report on Form 10-Q for the Third Quarter of 1995 and
incorporated herein by reference.)
Exhibit 10.97- Performance Guarantee dated September 8, 1995 by the
Registrant in favour of BP Exploration Operating
Company Limited. (Filed as Exhibit 10.8 to the
Company's Quarterly Report on Form 10-Q for the Third
Quarter of 1995 and incorporated herein by reference.)
Exhibit 10.98- Performance Guarantee dated September 8, 1995 by the
Registrant in favour of Britoil plc. (Filed as Exhibit
10.9 to the Company's Quarterly Report on Form 10-Q for
the Third Quarter of 1995 and incorporated herein by
reference.)
Exhibit 10.99- Initial Services Agreement dated September 8, 1995
between Britoil Public Limited Company and Reading &
Bates (Caledonia) Limited, a subsidiary of the
Registrant. (Filed as Exhibit 10.10 to the Company's
Quarterly Report on Form 10-Q for the Third Quarter of
1995 and incorporated herein by reference.)
Exhibit 10.100- Heads of Agreement for the provision of Vessel Services
dated September 8, 1995 between Britoil Public Limited
Company, Reading & Bates (Caledonia) Limited, a
subsidiary of the Registrant, and the Registrant.
(Filed as Exhibit 10.11 to the Company's Quarterly
Report on Form 10-Q for the Third Quarter of 1995 and
incorporated herein by reference.)
Exhibit 10.101- Credit Facility Agreement dated November 16, 1995 among
the Registrant, Reading & Bates Drilling Co. and
Reading & Bates Exploration Co., subsidiaries of the
Registrant, and Christiania Bank Og Kreditkasse, as
agent.
Exhibit 10.102- Guarantee dated November 28, 1995 by the Registrant in
favor of Christiania Bank Og Kreditkasse.
Exhibit 10.103- First Preferred Mortgage on the "Jack Bates" dated
November 28, 1995 between Reading & Bates Drilling Co.,
a subsidiary of the Registrant, and Wilmington Trust
Company, as Indenture Trustee.
Exhibit 10.104- First Preferred Mortgage on the "D.R. Stewart" dated
November 28, 1995 between Reading & Bates Exploration
Co., a subsidiary of the Registrant, and Wilmington
Trust Company, as Indenture Trustee.
Exhibit 10.105- Indenture of Trust dated November 16, 1995 among
Reading & Bates Drilling Co. and Reading & Bates
Exploration Co., subsidiaries of the Registrant, and
Wilmington Trust Company, as Indenture Trustee.
Exhibit 10.106- General Assignment with respect to the "Jack Bates"
dated November 28, 1995 by Reading & Bates Drilling
Co., a subsidiary of the Registrant, in favor of
Christiania Bank Og Kreditkasse, as agent.
Exhibit 10.107- General Assignment with respect to the "D.R. Stewart"
dated November 28, 1995 by Reading & Bates Exploration
Co., a subsidiary of the Registrant, in favor of
Christiania Bank Og Kreditkasse, as agent.
Exhibit 10.108- Assignment of Insurances with respect to the "Jack
Bates" dated November 28, 1995 by Reading & Bates
Drilling Co., a subsidiary of the Registrant, in favor
of Christiania Bank Og Kreditkasse, as agent.
Exhibit 10.109- Assignment of Insurances with respect to the "D.R.
Stewart" dated November 28, 1995 by Reading & Bates
Exploration Co., a subsidiary of the Registrant, in
favor of Christiania Bank Og Kreditkasse, as agent.
Exhibit 10.110- Memorandum of Agreement dated November 28, 1995 between
Reading and Bates, Inc., a subsidiary of the
Registrant, and Deep Sea Investors, L.L.C.
Exhibit 10.111- Bareboat Charter "M.G. Hulme, Jr." dated November 28,
1995 between Deep Sea Investors, L.L.C. and Reading &
Bates Drilling Co., a subsidiary of the Registrant.
Exhibit 10.112- Purchase and Sale Agreement dated October 18, 1995
between Enserch Exploration, Inc. and Reading & Bates
Development Co., a subsidiary of the Registrant.
Exhibit 10.113- Assignment and Bill of Sale (OCS-G-8504) effective as
of May 1, 1995 between Enserch Exploration, Inc. and
Reading & Bates Development Co., a subsidiary of the
Registrant.
Exhibit 10.114- Assignment and Bill of Sale (OCS-G-8012 effective as of
May 1, 1995 between Enserch Exploration, Inc. and
Reading & Bates Development Co., a subsidiary of the
Registrant.
Exhibit 10.115- Assignment and Bill of Sale (OCS-G- 7049) effective as
of May 1, 1995 between Enserch Exploration, Inc. and
Reading & Bates Development Co., a subsidiary of the
Registrant.
Exhibit 10.116- Assignment and Bill of Sale (OCS-G-8010) effective as
of May 1, 1995 between Enserch Exploration, Inc. and
Reading & Bates Development Co., a subsidiary of the
Registrant.
Exhibit 10.117- Assignment and Bill of Sale (OCS-G-13696) effective as
of May 1, 1995 between Enserch Exploration, Inc. and
Reading & Bates Development Co., a subsidiary of the
Registrant.
Exhibit 10.118- Assignment and Bill of Sale (OCS-G-13171) effective as
of May 1, 1995 between Enserch Exploration, Inc. and
Reading & Bates Development Co., a subsidiary of the
Registrant.
Exhibit 10.119- Assignment and Bill of Sale (OCS-G-8005) effective as
of May 1, 1995 between Enserch Exploration, Inc. and
Reading & Bates Development Co., a subsidiary of the
Registrant.
Exhibit 10.120- Assignment and Bill of Sale (OCS-G-8000) effective as
of May 1, 1995 between Enserch Exploration, Inc. and
Reading & Bates Development Co., a subsidiary of the
Registrant.
Exhibit 10.121- Assignment and Bill of Sale (OCS-G-8006) effective as
of May 1, 1995 between Enserch Exploration, Inc. and
Reading & Bates Development Co., a subsidiary of the
Registrant.
Exhibit 10.122- Assignment and Bill of Sale (OCS-G-8876) effective as
of May 1, 1995 between Enserch Exploration, Inc. and
Reading & Bates Development Co., a subsidiary of the
Registrant.
Exhibit 10.123- Payment Agreement dated October 18, 1995 between
Enserch Exploration, Inc. and Reading & Bates
Development Co., a subsidiary of the Registrant.
Exhibit 10.124- Mortgage and Security Agreement dated October 18, 1995
between Enserch Exploration, Inc. and Reading & Bates
Development Co., a subsidiary of the Registrant.
Exhibit 10.125- Operating Agreement made effective as of May 1, 1995
among Enserch Exploration, Inc., Mobil Oil Corporation,
Mobil Oil exploration & Producing Southeast Inc. and
Reading & Bates Development Co., a subsidiary of the
Registrant.
Exhibit 10.126- Option Agreement made effective as of May 1, 1995
between Enserch Exploration, Inc. and Reading & Bates
Development Co., a subsidiary of the Registrant.
Exhibit 11 - Computation of Earnings Per Common Share
Exhibit 21 - Schedule of Subsidiaries of the Company
Exhibit 23 - Consent of Arthur Andersen LLP
Exhibit 27 - Financial Data Schedule. (Exhibit 27 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 99 - Annual Report on Form 11-K with respect to Reading &
Bates Savings Plan.
Instruments with respect to certain long-term obligations of
the Company are not being filed as exhibits hereto as the securities
authorized thereunder do not exceed 10% of the Company's total assets.
The Company agrees to furnish a copy of each such instrument to the
Securities and Exchange Commission upon its request.
* Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to the requirements of
Item 14(c) of Form 10-K.
(b) Reports on Form 8-K
There were four Current Reports on Form 8-K filed during the
three months ended December 31, 1995. A Current Report on
Form 8-K was filed on October 16, 1995 disclosing the
Company's 3rd quarter 1995 earnings; filed October 25, 1995
disclosing the Company's purchase of a 20% working interest in
the Green Canyon 254 Allegheny project from Enserch
Exploration, Inc.; filed November 9, 1995 disclosing that ARCO
China Inc. elected to exercise three option wells for the
"JACK BATES"; and filed December 4, 1995 disclosing the
closing of two separate financings aggregating approximately
$115 million, which included the sale/lease-back of the "M.G.
HULME, JR.".
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed by the undersigned, thereunto duly authorized on March 11, 1996.
READING & BATES CORPORATION
By /s/ Paul B. Loyd, Jr.
-------------------------
Paul B. Loyd, Jr.
President, Chief
Executive Officer,
Chairman and Director
Pursuant to the requirements of the Securities Exchange Act of l934, this
report has been signed below by the following persons on behalf of
the Registrant in the capacities indicated on March 11, 1996.
By /s/ Paul B. Loyd Jr. By /s/Macko A. E. Laqueur
--------------------------- ---------------------------
Paul B. Loyd, Jr. Macko A. E. Laqueur
President, Chief Director
Executive Officer,
Chairman and Director
By /s/ C. Kirk Rhein, Jr. By /s/ Charles A. Donabedian
--------------------------- --------------------------
C. Kirk Rhein, Jr. Charles A. Donabedian
Vice Chairman and Director Director
By /s/ Tim W. Nagle By /s/ J. W. McLean
--------------------------- --------------------------
Tim W. Nagle J. W. McLean
Executive Vice President, Director
Finance and Administration
Principal Accounting Officer
By /s/ Ted Kalborg By /s/ Arnold L. Chavkin
--------------------------- ---------------------------
Ted Kalborg Arnold L. Chavkin
Director Director
By /s/ Steven A. Webster By /s/ Robert L. Sandmeyer
--------------------------- ---------------------------
Steven A. Webster Robert L. Sandmeyer
Director Director
EXHIBIT 3.2
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 10:30 AM 03/23/1995
950064055 - 493325
CERTIFICATE OF DESIGNATIONS
of
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
of
READING & BATES CORPORATION
(Pursuant to Section 151 of the
Delaware General Corporation Law)
____________________________________
Reading & Bates Corporation, a corporation organized and existing
under the General Corporation Law of the State of Delaware (hereinafter
called the "Corporation"), hereby certifies that the following resolution
was adopted by the Board of Directors of the Corporation as required by
Section 151 of the General Corporation Law at a meeting duly called and
held on March 15, 1995:
RESOLVED, that pursuant to the authority granted to and vested in
the Board of Directors of this Corporation (hereinafter called the "Board
of Directors" or the "Board") in accordance with the provisions of the
Restated Certificate of Incorporation of the Corporation (hereinafter
called the "Certificate of Incorporation"), the Board of Directors hereby
creates a series of Preferred Stock, par value $1.00 per share (the
"Preferred Stock"), of the Corporation and hereby states the designation
and number of shares, and fixes the relative rights, preferences, and
limitations thereof as follows:
Series B Junior Participating Preferred Stock:
Section 1. Designation and Amount. The shares of this series
shall be designated as "Series B Junior Participating Preferred Stock"
(the "Series B Preferred Stock") and the number of shares constituting the
Series B Preferred Stock shall be One million (1,000,000). Such number of
shares may be increased or decreased by resolution of the Board of
Directors; provided, that no decrease shall reduce the number of shares of
Series B Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the conversion
of any outstanding securities issued by the Corporation convertible into
Series B Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of Class A
(Cumulative Convertible) Capital Stock, no par value, and the holders
of any shares of any series of Preferred Stock (or any other stock)
ranking prior and superior to the Series B Preferred Stock with
respect to dividends, the holders of shares of Series B Preferred
Stock, in preference to the holders of Common Stock, par value $.05
per share (the "Common Stock"), of the Corporation, and of any other
junior stock, shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on the last day of March,
June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing
on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series B Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of
(a) $1 or (b) subject to the provision for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all cash dividends,
and 100 times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions, other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on
the Common Stock since the immediately preceding Quarterly Dividend
Payment Date or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of
Series B Preferred Stock. In the event the Corporation shall at any
time declare or pay any dividend on the Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount to which holders of shares of
Series B Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on
the Series B Preferred Stock as provided in paragraph (A) of this
Section immediately after it declares a dividend or distribution on
the Common Stock (other than a dividend payable in shares of Common
Stock); provided that, in the event no dividend or distribution shall
have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1 per share on the Series B
Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series B Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the record date
for the first Quarterly Dividend Payment Date, in which case dividends
on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment
Date or is a date after the record date for the determination of
holders of shares of Series B Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the
shares of Series B Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series B
Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be not more
than 60 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series B
Preferred Stock shall have the following voting rights:
(A) Each share of Series B Preferred Stock shall entitle the
holder thereof to one vote on all matters submitted to a vote of the
stockholders of the Corporation.
(B) Except as otherwise provided herein, in any other Certificate
of Designations creating a series of Preferred Stock or any similar
stock, in the Certificate of Incorporation of the Corporation or by
law, the holders of shares of Series B Preferred Stock and the holders
of shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together as one
class on all matters submitted to a vote of stockholders of the
Corporation.
(C) Except as set forth herein, or as otherwise provided by law,
holders of Series B Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series B Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of
Series B Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends, or make any other distributions,
on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series B
Preferred Stock;
(ii) declare or pay dividends, or make any other distributions,
on any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series B
Preferred Stock, except dividends paid ratably on the Series B
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series B Preferred
Stock, provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such junior stock in
exchange for shares of any stock of the Corporation ranking junior
(as to dividends and upon dissolution, liquidation or winding up)
to the Series B Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration
any shares of Series B Preferred Stock, or any shares of stock
ranking on a parity with the Series B Preferred Stock, except in
accordance with a purchase offer made in writing or by publication
(as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series B Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized
but unissued shares of Preferred Stock and may be reissued as part of a
new series of Preferred Stock subject to the conditions and restrictions
on issuance set forth herein, in the Certificate of Incorporation, or in
any other Certificate of Designations creating a series of Preferred Stock
or any similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (1) to the holders of shares of stock ranking junior (upon
liquidation, dissolution or winding up) to the Series B Preferred Stock
unless, prior thereto, the holders of shares of Series B Preferred Stock
shall have received $100 per share, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to
the date of such payment, provided that the holders of shares of Series B
Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth,
equal to 100 times the aggregate amount to be distributed per share to
holders of shares of Common Stock, or (2) to the holders of shares of
stock ranking on a parity (upon liquidation, dissolution or winding up)
with the Series B Preferred Stock, except distributions made ratably on
the Series B Preferred Stock and all such parity stock in proportion to
the total amounts to which the holders of all such shares are entitled
upon such liquidation, dissolution or winding up. In the event the
Corporation shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the aggregate amount to which holders of shares of
Series B Preferred Stock were entitled immediately prior to such event
under the proviso in clause (1) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which
is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation
shall enter into any consolidation, merger, combination or other
transaction in which the shares of Common Stock are exchanged for or
changed into other stock or securities, cash and/or any other property,
then in any such case each share of Series B Preferred Stock shall at the
same time be similarly exchanged or changed into an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the event the
Corporation shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series B Preferred Stock
shall be adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to such event.
Section 8. No Redemption. The shares of Series B Preferred Stock
shall not be redeemable.
Section 9. Rank. The Series B Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets, junior
to all other series of Preferred Stock and junior to all Class A
(Cumulative Convertible) Capital Stock, no par value.
Section 10. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series B
Preferred Stock so as to affect them adversely without the affirmative
vote of the holders of at least two-thirds of the outstanding shares of
Series B Preferred Stock, voting together as a single class.
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation by its Chairman of the Board this 15th day of
March, 1995.
READING & BATES CORPORATION
______________________________
Chairman of the Board
EXHIBIT 10.7
SECOND AMENDMENT TO AMENDED AND RESTATED
CREDIT FACILITY AGREEMENT
THIS SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT FACILITY
AGREEMENT, dated as of November 29, 1995 (this "Amendment"), is entered
into by and among READING & BATES CORPORATION, a Delaware corporation
("RBC"), READING & BATES DRILLING CO., an Oklahoma corporation ("RBD"),
READING & BATES EXPLORATION CO., an Oklahoma corporation ("RBX"),
READING AND BATES, INC., an Oklahoma corporation ("RBI"), READING AND
BATES BORNEO DRILLING CO., LTD., an Oklahoma corporation ("RBB"), READING
& BATES (A) PTY. LTD., a company incorporated under the laws of the state
of Western Australia, Commonwealth of Australia ("RBA") (RBC, RBD, RBX,
RBI, RBB and RBA being referred to collectively as the "Borrowers" and
individually as a "Borrower"), and INTERNATIONALE NEDERLANDEN BANK N.V.,
a company incorporated under the laws of The Netherlands, formerly known
as NMB POSTBANK GROEP N.V. (the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrowers and the Lender are parties to a certain
Amended and Restated Credit Facility Agreement dated as of April 27,
1995 (as amended by that certain First Amendment to Amended and Restated
Credit Facility Agreement, dated as of July 31, 1995, and as the same
may hereafter be amended, the "Credit Agreement"; all terms used herein
without definition shall have the meanings ascribed to such terms in the
Credit Agreement);
WHEREAS, the Borrowers desire to repay Facility A and Facility
B, terminate Facility F, and obtain the release of the first preferred
ship mortgage on the semi-submersible drilling unit "M. G. HULME, JR."
and the preferred fleet mortgage on the semi-submersible drilling unit
"JIM CUNNINGHAM", together with the related Assignments of Insurances
and Drilling Contract Earnings and Revenues applicable to those rigs;
and
WHEREAS, the Borrowers and the Lender have agreed to amend the
Credit Agreement, all upon the terms and subject to the conditions and
requirements acceptable to the Lender as set forth herein;
NOW THEREFORE, for and in consideration of the mutual premises
contained herein and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
1. Definitions. Section 1.1 of the Credit Agreement is hereby
amended by deleting the following definitions:
(a) deleting the existing definitions of "Charter Trustee",
"Charters", "Facility A", "Facility A Maturity Date", "Facility B",
"Facility F", "Facility F Maturity Date", "Installment Payment
Dates", "Interest Period" and "LIBOR".
(b) deleting the existing definitions of "Advance" "Assign-
ments", "Business Day", "Commitment", "Facility", "Interest Payment
Date", "Letters of Credit", "Mortgage Amendment", "Notes", "Rigs"
and "Security Deposits" and substituting in lieu thereof the
following:
"Advance" means a loan by the Lender to any Borrower
under Facility C.
"Assignments" means the Assignment, Assumption and
Amendment of the Assignment of Insurances and the Assignment,
Assumption and Amendment of the Assignment of Drilling Contract
Revenues and Earnings dated March 27, 1991, as amended,
substantially in the forms of Exhibits M-1 and N-1,
respectively, attached hereto.
"Business Day" means any day on which commercial banks are
open for business in Amsterdam, The Netherlands, and New York,
New York.
"Commitment" means a maximum of USD 35,000,000.
"Facility" means any facility described in Section 4, 5 or
6 of this Credit Agreement.
"Interest Payment Date" means June 1, 1995, September 1,
1995, December 1, 1995 and December 31, 1995.
"Letters of Credit" means the standby letters of credit
issued by Lender pursuant to Section 5.1 and 6.1 below,
respectively, under Facility D or Facility E, substantially in
the forms attached hereto as Exhibit H-1 and H-2 or as agreed
to by Lender.
"Mortgage Amendment" means Amendment No. 7 to the U.S.
Preferred Fleet Mortgage, substantially in the form of Exhibit
E-1 attached hereto.
"Notes" means the amended and restated promissory notes of
the Borrower substantially in the form of Exhibits A-2, A-3 and
A-4.
"Rigs" means the seven (7) U.S. flag drilling rigs, the
one (1) Panamanian flag drilling rig and the one (1) Australian
flag drilling rig listed in Schedule 1-A attached hereto.
"Security Deposits" means the deposits required to be made
by the Borrowers with the Lender pursuant to Sections 5.1, 6.1,
10.4, 10.8(a), 10.8(b)(iii)(C), 10.9(b) and 17.1 hereof
(c) adding the following definition in appropriate alphabetical
order:
"Hulme Leveraged Lease" means the sale of the semi-
submersible drilling unit "M. G. HULME, JR." by Reading and Bates,
Inc. to a group of investors including GATX Capital Corporation, ATT
Capital Corporation, McDonald Douglas Finance Corporation and Heller
Financial for a purchase price of not less than USD 50,000,000, the
lease of such unit by Reading and Bates, Inc., on a bareboat charter
basis for a term of ten (10) years.
2. Facility A. Facility A is repaid in full, and Section 2 of the
Credit Agreement and Exhibit A-1 attached thereto are hereby deleted in
their entirety.
3. Facility B. By separate instrument Lender has sold all of its
rights, title and interest in and to the Charter Notes to Reading & Bates
Offshore, Limited, an Affiliate of the Borrowers, the Charter Payments
Guaranty has been terminated and Section 3 of the Credit Agreement is
hereby deleted in its entirety.
4. Facility F. Section 7 of the Credit Agreement and Exhibit A-5
attached thereto are hereby deleted in their entirety.
5. Manner of Drawdown and Issuance of Letters of Credit. Section 8
of the Credit Agreement is hereby amended by:
(a) deleteing reference to "Facility F" in subsection 8.1(c)(i),
8.2(c) and 8.3(a);
(b) deleting subsection 8.2(a); and
(c) deleting reference to "Facility F Notes" in subsection 8.3(b).
6. Interest. Section 9 of the Credit Agreement is hereby amended by:
(a) deleting subsections 9.1(a)(i) and (v) and 9.1(c);
(b) deleting subsection 9.1(b) in its entirety and substituting
in lieu thereof the following:
"Interest on unpaid principal amounts outstanding under this
Agreement shall be computed on the basis of a year of 365
days and the actual number of days elapsed for all
Facilities."
(c) deleting subsection 9.1(d) in its entirety and substituting
in lieu thereof the following subsection 9.1(d):
"(d) All Interest Periods shall end on March 31, June 30,
July 31, August 31, September 30, October 31, November 30 or
December 31.
(d) deleting Section 9.2 in its entirety and substituting in lieu
thereof the following Section 9.2:
"9.2 Payment of Interest. Interest shall be paid by the
relevant Borrowers as follows:
(a) In respect of the unpaid principal amounts outstanding
under Facility C, in arrears, on June 1, 1995, September 1, 1995,
December 1, 1995 and December 31, 1995; provided, however, that
all amounts of unpaid Interest outstanding under Facility C shall
be paid in full on the Facility C Maturity Date.
(b) In respect of any Guaranty Payment under Facility D or
Facility E interest from the date of such Guarantee Payment up to
the date such amount is paid by the relevant Borrowers on the
date such payment is made; provided, however, that all amounts of
unpaid Interest outstanding under Facility D and Facility E shall
be paid in full on the Facility D Maturity Date and the Facility
E Maturity Date, respectively."
7. Payments; Repayment. Section 10 of the Credit Agreement is hereby
amended by:
(a) deleting subsection 10.2(a) in its entirety;
(b) deleting Section 10.3 in its entirety;
(c) deleting subsection 10.4(a) in its entirety and substituting
in lieu thereof the following:
"(a) Upon the sale or actual or constructive total loss of any
Rig the sale or insurance proceeds shall be used to (i) prepay any
amounts outstanding under Facility C along with all interest accrued
on such amounts and all fees and other costs incurred by the Lender
and (ii) if all amounts referred to in (i) above have been paid, any
such proceeds shall be paid to the Lender and held in an interest
bearing account at the Lender which shall serve as additional security
for the Credit Facility (unless the Borrowers provide the Lender with
other security acceptable to the Lender in an amount equal to, or in
excess of, any such proceeds). If such proceeds are placed in an
interest bearing account, such funds and any interest earned on them
will be returned to the Borrowers upon the repayment of all amounts
due under this Agreement and the termination of all Letters of Credit.
The Borrowers shall immediately upon receipt of the payments referred
to in this Section 10.4 place such proceeds of such sale as are
necessary to make the prepayment required by this Section 10.4 in an
interest bearing account at the Lender for the benefit of the Lender
and all amounts in such account shall be paid to the Lender on the
next Interest Payment Date; provided, however, that all interest
earned thereon shall be paid to the Borrowers."; and
(d) deleting subsection 10.8(b)(iii)(B) in its entirety and
substituting in lieu thereof the following:
"(B) if the efforts referred to in (A) above fail to have the
effect of eliminating the increased cost or the reduction in the
amount of any payment received, the Borrowers shall on demand (whether
made before or after any repayment of the amounts outstanding under
Facilities C and E pay to the Lender such amount as the Lender
certifies together with supporting documentation to be necessary to
compensate it for such additional cost or reduction; and".
8. Fees and Expenses. Section 13 is amended by deleting subsection
13.1(e) and (f) in their entirety.
9. Negative Covenants of Borrowers. Section 16 of the Credit
Agreement is hereby amended by:
(a) deleting subsection 16.1(g) and the paragraph following
subsection 16.1(g) in their entirety and substituting in lieu thereof
the following:
"(g) liens incurred on the semi-submersible drilling unit
"JIM CUNNINGHAM" pursuant to the Hulme Leveraged Lease; and
(h) liens existing as of the date of this Agreement and
disclosed in writing to the Lender.
Notwithstanding anything in this Section 16.1 to the
contrary, in no event shall the liens, encumbrances and security
interests permitted by this Section 16.1 materially impair (in
the opinion of the Lender in its sole discretion) the business or
financial condition of the Borrowers or the value of the
properties of the Borrowers taken as a whole.";
(b) deleting subsection 16.12 in its entirety and substituting
in lieu thereof the following subsection 16.12:
"Sale of Rigs, Etc. Sell, transfer or assign any of the Rigs,
any right to receive the revenue from the Rigs or any other
material asset, other than pursuant to the Hulme Leveraged Lease.
10. Representations and Warranties. Borrowers, without limiting
the representations and warranties provided in the Credit Agreement,
represent and warrant to the lender as follows:
(a) The execution, delivery and performance by the
Borrowers of this Amendment have been duly authorized by all
necessary action on the part of each of the Borrowers and do not
and will not (i) violate any provision of any Borrower's articles
of incorporation, by-laws, or other organizational documents or
any Applicable Law, or (ii) be in conflict with, result in a
breach of, or constitute (following notice or lapse of time or
both) a default under any agreement to which any Borrower is a
party or by which any Borrower or any of its property is bound.
(b) This Amendment creates legal, valid and binding
obligations of each of the Borrowers enforceable against each of
the Borrowers in accordance with its terms, subject to laws
affecting creditors' rights generally and applicable equitable
legal principles.
(c) No Event of Default or event which with the giving of
notice or lapse of time or both would constitute an Event of
Default exists.
(d) All representations and warranties by the Borrowers
contained in the Credit Agreement, as amended hereby, are true
and correct in all material respects with the same effect as
though such representations and warranties had been made on and
as of the date hereof.
11. Credit Agreement Ratified and Confirmed. Except as expressly
amended and modified herein, all terms and covenants and provisions of the
Credit Agreement and all Loan Documents shall remain unaltered and in full
force and effect, and the parties hereto do expressly ratify and confirm
the Credit Agreement and all Loan Documents as modified herein. All future
references to the Credit Agreement shall be deemed to refer to the Credit
Agreement as amended hereby.
12. Expenses. The Borrowers agree to pay on demand all reasonable
costs and expenses of the Lender in connection with the preparation,
execution and delivery of this Amendment and the other instruments and
documents to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Lender with
respect thereto and with respect to advising the Lender as to its rights
and responsibilities hereunder and thereunder.
13. Conditions Precedent. This Amendment shall be effective upon
receipt by the Lender of all of the following, each in form and substance
satisfactory to the Lender:
(a) Fully executed counterparts of this Amendment.
(b) Certified copies of the resolutions of the Boards of
Directors of each of the Borrowers authorizing the execution and
delivery by each of the Borrowers of this Amendment on behalf of each
of the Borrowers, and all documents evidencing other necessary
corporate action with respect to this Amendment.
(c) Certificate of the Secretary or the Assistant Secretary of
each Borrower certifying the names and true signatures of the officers
of each Borrower authorized to sign this Amendment on behalf of such
Borrower and the other documents or certificates to be executed by
such Borrower pursuant to this Amendment.
(d) Copies certified as of a recent date by the Secretary or the
Assistant Secretary of each Borrower of its By-Laws.
(e) A copy of each Borrower's Certificate of Incorporation
certified by the Secretary of State of the state of incorporation
within thirty (30) days from the date of this Amendment and
certificates dated as of a recent date of the Secretary of State of
the state of incorporation as to the existence and good standing of
each Borrower.
(f) An opinion of counsel to the Borrowers in form and substance
acceptable to the Lender.
(g) If the date of this Amendment is not a Drawdown Date, a
certificate dated the first Drawdown Date of an officer of each of the
Borrowers certifying that:
(i) The representations and warranties contained in
Section 14 of the Credit Agreement are correct on and as of the
Drawdown Date as though made on and as of such date; and
(ii) No event has occurred and is continuing, or would
result from the Advance, or the issuance of a Letter of Credit
which constitutes an Event of Default or with the passing of time
or the giving of notice would constitute an Event of Default.
(h) All orders, consents, approvals, licenses, authorizations
and validations of, filings, recordings and registrations with and
exemptions by any Governmental Agency or any Person (other than any
routine filings which may be required after the date hereof with
appropriate governmental authorities in connection with the operation
of the Rigs) required to (i) authorize the execution, delivery and
performance by the Borrowers of this Amendment or (ii) prevent the
execution, delivery and performance by the Borrowers of this Amendment
from resulting in a breach of any of the terms and conditions of, or
resulting in a breach of any of the terms or conditions of, or
resulting in the imposition of any lien, charge or encumbrance upon
any properties of the Borrowers pursuant to, or constituting a default
(with due notice or lapse of time or both), if such breach, imposition
or default would result in a materially adverse change in the
financial position of the Borrowers, or resulting in an occurrence of
any event for which any holder or holders of Indebtedness may declare
the same due and payable under, any indenture, agreement, order,
judgment or instrument under which any Borrower is a party (other than
the Mortgage, the Pledges or the Assignments) or to the Borrowers'
knowledge after due inquiry by which the Borrowers or their property
may be bound or affected, or under the Certificates of Incorporation
or By-Laws of the Borrowers, shall have been obtained or made.
(i) Hulme Leveraged Lease shall have been closed, Facility A,
Facility B, Facility F and the Charter Payments Guaranty shall have
been repaid, terminated or otherwise satisfied, the Borrower shall
have purchased all of the Lender's interests in the Charter Notes for
the aggregate price of USD 44,197,422.51 [less the principal portion
of all Charter Payments (as defined in the Charter Payments Guaranty)
heretofore made to Lender] and the Lender shall have received copies
of all of the material agreements executed in connection therewith in
a form reasonably satisfactory to the Lender.
14. Successors and Assigns. This Amendment shall be binding upon and
inure to the benefit of the parties hereto, their respective heirs,
successors, successors-in-titles, and assigns.
15. Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York, notwithstanding any
principles regarding conflicts of laws thereof.
16. Entire Agreement. This Amendment sets forth the entire under-
standing of the parties with respect to the matters set forth herein,
and shall supersede any prior negotiations or agreements, whether written
or oral, with respect thereto.
17. Counterparts. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts and
may be delivered by telecopier. Each counterpart so executed and delivered
shall be deemed an original and all of which taken together shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment through
their authorized officers as of the date first above written.
READING & BATES CORPORATION
By:
Name: T. W. Nagle
Title: Executive Vice President,
Finance and Administration
READING & BATES DRILLING CO.
By:
Name: T. W. Nagle
Title: Vice President and Treasurer
READING & BATES EXPLORATION CO.
By:
Name: T. W. Nagle
Title: Vice President and Treasurer
READING AND BATES, INC.
By:
Name: T. W. Nagle
Title: Vice President and Treasurer
READING AND BATES BORNEO DRILLING CO., LTD.
By:
Name: T. W. Nagle
Title: Vice President and Treasurer
THE COMMON SEAL OF READING & BATES (A) PTY. LTD.
READING & BATES (A)
PTY. LTD. was hereunto
affixed by authority of
the Board of Directors By: _________________________________
in the presence of: Name: T. W. Nagle
Title: Vice President and Treasurer
-----------------------
T. W. Nagle, Director
-----------------------
W. K. Hillin, Secretary
INTERNATIONALE NEDERLANDEN BANK N.V.
By:
Name:
Title:
[SIGNATURE PAGE FOR SECOND AMENDMENT TO
AMENDED AND RESTATED CREDIT FACILITY AGREEMENT]
Schedule 1-A
List of Rigs
Name Official No. Flag Owner
RON TAPPMEYER - Australian Reading & Bates
(A) Pty. Ltd.
D. R. STEWART 626904 U.S. Reading & Bates
Exploration Co.
D. K. McINTOSH 591662 U.S. Reading & Bates
Exploration Co.
W. D. KENT 583169 U.S. Reading & Bates
Exploration Co.
CHARLEY GRAVES 6618-76-B Panamanian Reading and Bates
Borneo Drilling Co.,
Ltd.
RANDOLPH YOST 601699 U.S. Reading & Bates
Drilling Co.
ROGER W. MOWELL 645360 U.S. Reading & Bates
Drilling Co.
J. T. ANGEL 651645 U.S. Reading & Bates
Drilling Co.
JACK BATES 906283 U.S. Reading & Bates
Drilling Co.
EXHIBIT 10.8
AMENDMENT NO. 3 TO TRUST INDENTURE
THIS AMENDMENT NO. 3 TO TRUST INDENTURE dated as of November 29, 1995,
among Reading & Bates Corporation, a corporation organized and existing
under the laws of the State of Delaware ("RBC"), Reading & Bates Drilling
Co., a corporation organized and existing under the laws of the State of
Oklahoma ("RBD"), Reading & Bates Exploration Co., a corporation organized
and existing under the laws of the State of Oklahoma ("RBX"), Reading and
Bates, Inc., a corporation organized and existing under the laws of the
State of Oklahoma ("RBI"), Reading and Bates Borneo Drilling Co., Ltd., a
corporation organized and existing under the laws of the State of Oklahoma
("RBB"), Reading & Bates (A) Pty. Ltd., a corporation organized and
existing under the laws of Australia ("RBA") (RBC, RBD, RBX, RBI, RBB and
RBA being referred to collectively as the "Borrowers" and individually as a
"Borrower") and Bank One, Texas, N.A., a national banking association,
as Trustee (the "Trustee").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Facility Agreement dated as of
March 27, 1991, as amended May 24, 1991, June 28, 1991, August 30, 1991,
June 30, 1992 and February 25, 1993 (as so amended, the "Original Credit
Agreement"), Internationale Nederlanden Bank (formerly known as NMB
Postbank Groep, the "Lender") agreed to provide funding to certain of the
Borrowers in the aggregate principal amount of up to USD 112,000,000;
and
WHEREAS, the Borrowers and the Lender have restated the Original
Credit Agreement as of April 27, 1995, as amended as of July 31, 1995 (as
so amended the "Restated Credit Agreement"); and
WHEREAS, the Borrowers have repaid Facility A and terminated
Facility B, with the agreement of the Lenders, and the Lenders have agreed
to release and delete the M. G. HULME, JR., Official No. 651644 and JIM
CUNNINGHAM, Official No. 651643 as Vessels under this Indenture; and
WHEREAS, the Lenders, the Borrowers and the Assignee wish to
further amend the terms of the Restated Credit Agreement and the Indenture.
NOW THEREFORE, in consideration of the above recitals and for
other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree to assign, assume and amend the
Indenture effective as of the date hereof as follows:
Amendments to Indenture
The Borrowers and the Assignee hereby agree that the Indenture shall be
amended as follows:
A. The definition of "Mortgages" in the Indenture is hereby amended
to read as follows:
"Mortgages" means the First Preferred Fleet Mortgage granted by
RBX to the Trustee, the Australian First Registered Ship Mortgage
granted by RBA to the Trustee, the First Preferred Fleet Mortgage
granted by RBD to the Trustee, the Panamanian First Naval Mortgage
granted by RBB to the Trustee, and the Preferred Fleet Mortgage
granted by RBD to the Trustee, all as amended from time to time and
executed or to be executed in respect of the Vessels as security for
all amounts due and payable under the Credit Agreement.
B. The definition of Pledges in the Indenture is hereby amended to
read as follows:
"Pledges" means the pledge of all of the issued and outstanding
shares of RBD by RBC, the pledge of all of the issued and outstanding
shares of RBI, RBX and RBB by RBD, and the pledge of all of the issued
and outstanding shares of RBA by RBX, all in favor of the Trustee as of
the date hereof (with all renewals, extensions and amendments thereof)
as security for the Borrowers' obligations under the Loan Documents.
C. The definition of "Vessels" in the Indenture is hereby amended
to read as follows:
"Vessels" means the Australian flag rig RON TAPPMEYER, Official
No. , the United States flag rigs D. R. STEWART, Official
No. 626904, D. K. McINTOSH, Official No. 591662, W. D. KENT, Official
No. 583169, RANDOLPH YOST, Official No. 601699, ROGER W. MOWELL,
Official No. 645360, J. T. ANGEL, Official No. 651645, JACK BATES,
Official No. 906283 and the Panamanian flag rig CHARLEY GRAVES,
Permanent Patente No. 6618-76-B.
D. All references in the Indenture to the Original Credit Facility
Agreement shall mean the Restated Credit Agreement.
E. Except as specifically amended by this Assignment, Assumption and
Amendment, all of the terms and provisions of the Indenture shall remain
in full force and effect.
All capitalized terms used herein but not defined herein shall have
the meanings given to them in the Indenture.
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF TEXAS.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment on the date first written above.
READING & BATES CORPORATION
By:
Name:
Title:
READING & BATES DRILLING CO.
By:
Name:
Title:
READING & BATES EXPLORATION CO.
By:
Name:
Title:
READING AND BATES, INC.
By:
Name:
Title:
READING AND BATES BORNEO DRILLING
CO., LTD.
By:
Name:
Title:
THE COMMON SEAL OF READING & BATES (A) PTY. LTD.
READING & BATES (A)
PTY. LTD. was hereunto
affixed by authority of
the Board of Directors By:
in the presence of : Name:
Title:
__________________
T. W. Nagle, Director
__________________
W. K. Hillin, Secretary
BANK ONE, TEXAS, N.A., as
Trustee
By:
Name:
Title:
ACKNOWLEDGMENT
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
BEFORE ME, , a notary public in and for said
county and state, on this day personally appeared , known
to me to be the person whose name is subscribed to the foregoing instrument
and known to me to be the of Reading & Bates
Corporation, a corporation organized under the laws of Delaware, and
acknowledged to me that he executed said instrument for the purposes
and consideration therein expressed, and as the act of said corporation.
Given under my hand and seal of office this day of , 1995.
Notary Public
ACKNOWLEDGMENT
STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, , a notary public in and for said
county and state, on this day personally appeared , known
to me to be the person whose name is subscribed to the foregoing instrument
and known to me to be the of Reading & Bates
Drilling Co., a corporation organized under the laws of Oklahoma, and
acknowledged to me that he executed said instrument for the purposes
and consideration therein expressed, and as the act of said corporation.
Given under my hand and seal of office this day of , 1995.
Notary Public
ACKNOWLEDGMENT
STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, , a notary public in and for said county
and state, on this day personally appeared , known to me
to be the person whose name is subscribed to the foregoing instrument and
known to me to be the of Reading & Bates
Exploration Co., a corporation organized under the laws of Oklahoma, and
acknowledged to me that he executed said instrument for the purposes and
consideration therein expressed, and as the act of said corporation.
Given under my hand and seal of office this day of , 1995.
Notary Public
ACKNOWLEDGMENT
STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, , a notary public in and for said county
and state, on this day personally appeared , known to me
to be the person whose name is subscribed to the foregoing instrument and
known to me to be the of Reading and Bates,
Inc., a corporation organized under the laws of Oklahoma, and acknowledged
to me that he executed said instrument for the purposes and consideration
therein expressed, and as the act of said corporation.
Given under my hand and seal of office this day of , 1995.
Notary Public
ACKNOWLEDGMENT
STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, , a notary public in and for said county and
state, on this day personally appeared , known to me to be
the person whose name is subscribed to the foregoing instrument and known
to me to be the of Reading and Bates Borneo
Drilling Co., Ltd., a corporation organized under the laws of Oklahoma, and
acknowledged to me that he executed said instrument for the purposes and
consideration therein expressed, and as the act of said corporation.
Given under my hand and seal of office this day of , 1995.
Notary Public
ACKNOWLEDGMENT
STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, , a notary public in and for said county
and state, on this day personally appeared , known to me
to be the person whose name is subscribed to the foregoing instrument and
known to me to be the of Reading & Bates
(A) Pty. Ltd., a corporation organized under the laws of , and
acknowledged to me that he executed said instrument for the purposes and
consideration therein expressed, and as the act of said corporation.
Given under my hand and seal of office this day of , 1995.
Notary Public
ACKNOWLEDGMENT
STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, , a notary public in and for said county and
state, on this day personally appeared , known to me to be
the person whose name is subscribed to the foregoing instrument and known
to me to be the of Bank One, Texas, N.A.,
a national banking association, organized under the laws of ,
and acknowledged to me that he executed said instrument for the purposes
and consideration therein expressed, and as the act of said corporation.
Given under my hand and seal of office this day of , 1995.
Notary Public
EXHIBIT 10.9
Amendment No. 7 to Preferred Fleet Mortgage
Amendment No. 7 dated November 29, 1995 to the Preferred Fleet
Mortgage dated March 29, 1991 (the "Original Mortgage") , as amended
(hereinafter the Original Mortgage as amended being referred to as the
"Mortgage") given by READING BATES DRILLING CO., a corporation organized
and existing under the laws of the State of Oklahoma, with its principal
place of business at 901 Threadneedle, Suite 200, Houston, Texas 77079,
(the "Shipowner"), to Bank One, Texas, N.A., a national banking
association, as Trustee, with its principal place of business at 910
Travis Houston Texas 77002 (the "Trustee").
WHEREAS, the Shipowner is the owner of 100% of the following
U.S. flag drilling rigs (the "Vessels"):
Name Official No.
ROGER W. MOWELL 645360
J.T. ANGEL 651645
JIM CUNNINGHAM 651643
which Vessels have been duly registered in the name of the Shipowner in
accordance with the laws of the United States of America; and
WHEREAS, the Original Mortgage was received for record at 2:35 p.m.
on March 29, 1991 at the U.S. Coast Guard Vessel Documentation Office at
the Port of Houston, Texas and was recorded in Book No. PM-244 at Inst.
No. 1, and
WHEREAS, the Original Mortgage mortgaged one hundred percent (l00%)
of the Vessels, together with all of their boilers, engines, machinery,
masts, spars, sails, rigging, boats, anchors, chains, tackle, apparel,
furniture, fittings, equipment, drilling equipment, pumps, drill pipes,
collars, racking, housing, spare parts and supporting inventory, vehicles
and living quarters (excluding equipment aboard the Vessels which is not
owned by the Shipowner) and all other appurtenances to the Vessels
appertaining or belonging, whether now owned or hereafter acquired,
whether on board or not, and all additions, improvements and replacements
made in or to such Vessels; and
WHEREAS, the Original Mortgage was granted by the Shipowner to the
Assignor for the purpose of securing the obligation of the Shipowner to
pay to NMB Postbank Groep N.V. (now known as Internationale Nederlanden
Bank N.V.) (the "Lender") all amounts due and payable under that certain
Credit Facility Agreement dated as of March 27, 1991 among the Shipowner,
the other Borrowers name therein and the Lender (the "Credit Agreement");
and
WHEREAS, a true and accurate copy of the Credit Agreement is
attached to the Mortgage as Exhibit A and forms a part thereof; and
WHEREAS, pursuant to Amendment No. 1 to Credit Facility Agreement
dated as of May 24, 1991 among the Shipowner, the other Borrowers and the
Lender ("Amendment No. 1"), certain terms of the Credit Agreement were
amended; and
WHEREAS, the Shipowner and the Assignor amended the Original
Mortgage in order to reflect the changes made to the Credit Agreement by
Amendment No.1; and
WHEREAS, Amendment No. 1 to the Mortgage dated May 31, 1991 was
received for record at 2:00 p.m. on June 5, 1991 at the U.S. Coast Guard
Vessel Documentation Office at the Port of Houston, Texas and was recorded
in Book No. PM-248 at Inst. No. 2; and
WHEREAS, pursuant to Amendment No. 2 to Credit Facility Agreement
dated June 28, 1991 among the Shipowner, the other Borrowers and the
Lender ("Amendment No. 2"), certain terms of the Credit Agreement were
amended; and
WHEREAS, the Shipowner and the Assignor amended the Mortgage,
pursuant to the terms of Amendment No. 2 to the Mortgage, in order to
reflect the changes made to the Credit Agreement by Amendment No. 2; and
WHEREAS, Amendment No. 2 to the mortgage dated June 28, 1991, was
received for record at 1:31 p.m. on August 6, 1991 at the U.S. Coast Guard
Vessel Documentation Office, Port of Houston, Texas an was recorded at
Book PM-250, I-3; and
WHEREAS, pursuant to Amendment No. 3 to Credit Facility Agreement
dated August 30, 1991 among the Shipowner, the other Borrowers and the
Lender ("Amendment No. 3"), certain terms of the Credit Agreement were
amended; and
WHEREAS, the Shipowner and the Assignor amended the Mortgage to
reflect the changes made to the Credit Agreement by Amendment No. 3; and
WHEREAS, Amendment No. 3 to the Mortgage dated August 30, 1991 was
received for record at 8:07 a.m. on September 6, 1991 at the U.S. Coast
Guard Vessel Documentation Office, Port of Houston, Texas and was recorded
at Book PM-252, I-17; and
WHEREAS, pursuant to Amendment No. 4 to Credit Facility Agreement
dated as of June 30, 1992 among the Shipowner, the other Borrowers and the
Lender ("Amendment No. 4"), certain terms of the Credit Agreement were
amended; and
WHEREAS, the Shipowner and the Assignor amended the Mortgage to
reflect the changes made to the Credit Agreement by Amendment No. 4; and
WHEREAS, Amendment No. 4 to the Mortgage dated September 9, 1992 was
received for record at the U.S. Coast Guard Vessel Documentation Office
for the Port of Houston, Texas September 10, 1992 at 1:05 p.m. and
recorded at Book PM-263, Instrument 82; and
WHEREAS, pursuant to the terms of Amendment No. 6 to Credit Facility
Agreement dated as of February 25, 1993, among the Shipowner, the other
Borrowers and the Lender ("Amendment No. 5"), certain terms of the Credit
Agreement were amended; and
WHEREAS, the Shipowner and the Assignor amended the Mortgage in
order to reflect the changes made to the Credit Agreement by Amendment No.
5; and
WHEREAS, Amendment No. 5 to Mortgage dated February 25, 1993 was
received for record at 10:32 a.m. in the United States Coast Guard Vessel
Documentation Office for the Port of Houston, and was recorded at Book PM-
269, Instrument 93; and
WHEREAS, pursuant to the Amended and Restated Credit Facility
Agreement dated the date hereof (the "Restated Agreement") among the
Shipowner, the Borrowers listed therein and the Lender, the Credit
Agreement was restated and certain of its terms were amended; and
WHEREAS, Texas Commerce Bank National Association, as Trustee has
agreed, at the request of Lender, to assign its rights and obligations
under the Mortgage to the Trustee, and the Trustee has agreed to assume
such rights and obligations; and
WHEREAS, the Assignment, Assumption and Amendment No. 6 dated April
27, 1995 was received for record at the U.S. Coast Guard Vessel
Documentation Office for the Port of Houston on April 27, 1995 and was
recorded in Book 95/5 at page 175; and
WHEREAS, pursuant to Amendment No. 1 to the Restated Agreement
dated as of July 31, 1995 and Amendment No. 2 to the Restated Agreement
dated as of , 1995, the Borrower and the Lender amended
certain terms of the Restated Agreement (including, inter alia, the
release of the lien of this Mortgage on the JIM CUNNINGHAM, Official No.
651643)
WHEREAS, the Shipowner and the Trustee wish to amend the Mortgage to
reflect the changes made by Amendment No. 1 and Amendment No. 2 to the
Restated Agreement.
NOW, THEREFORE, in consideration of the above recitals, and other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree to assign, assume and amend
the Mortgage as follows:
Amendment No. 7 to Mortgage
The Shipowner and the Trustee hereby agree to amend the Mortgage as
follows:
A. The first WHEREAS clause on page 1 of the Mortgage is amended
to read as follows:
"1. The Shipowner is the owner of 100% of the following U.S.
flag drilling rigs (the "Vessels"):
RECITALS
NAME OFF. NO. PLACE OF BUILD HOME PORT
ROGER W. MOWELL 645360 Singapore Houston, TX.
J. T. ANGEL 651645 Argentina Houston, TX.
(Cuidad de
Corrientes)
which Vessels have been duly registered in the name of the Shipowner in
accordance with the laws of the United States of America."
B. Exhibit A to the Mortgage is hereby amended to add
Amendment No. 1 and Amendment No. 2 of the Restated Agreement in the
form of Exhibit A attached hereto.
C. Hereinafter each reference in the Mortgage, as amended to the
Credit Agreement shall refer to the Restated Agreement as so amended.
D. For purposes of recording this Amendment No. 7 to Preferred
Fleet Mortgage pursuant to 46 U.S.C. 31321, it amends mortgage covenants.
The total amount of the Mortgage is reduced to USD 35,000,000 plus interest
and performance of mortgage covenants.
E. Except as specifically amended herein, the Mortgage shall remain
in full force and effect.
All capitalized terms used herein but not defined herein shall have
the meanings given to them in the Mortgage.
THIS AMENDMENT NO. 7 TO PREFERRED FLEET MORTGAGE SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE UNITED STATES
OF AMERICA AND, TO THE EXTENT THEY DO NOT APPLY, TO THE INTERNAL LAWS
OF THE STATE OF NEW YORK.
IN WITNESS HEREOF, the parties hereto have duly executed this Amend-
ment No. 7 to Preferred Fleet Mortgage on the date first written above.
READING & BATES DRILLING CO.
By:
Name: T. W. Nagle
Title: Vice President and
Treasurer
BANK ONE, TEXAS, N.A.
By:
Name:
Title:
ACKNOWLEDGMENT
STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, , a notary public in and for
said county and state, on this day personally appeared T. W. Nagle, known
to me to be the person whose name is subscribed to the foregoing instrument
and known to me to be the Vice President and Treasurer of Reading &: Bates
Drilling Co., a corporation organized under the laws of Oklahoma, and
acknowledged to me that he executed said instrument for the purposes an
consideration therein expressed, and as the act of said corporation.
Given under my hand and seal of office this day of , 1995.
Notary Public
ACKNOWLEDGMENT
STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, , a notary public in and for said county
and state, on this day personally appeared ,
known to me to be the person whose name is subscribed to the foregoing
instrument and known to me to be the of Bank One, Texas, N.A.,
a national banking association and acknowledged to me that he executed
said instrument for the purposes and consideration therein expressed,
and as the act of said association.
Given under my hand and seal of office this day of , 1995.
Notary Public
EXHIBIT 10.10
AMENDMENT NO. 3 TO
ASSIGNMENT OF DRILLING CONTRACT REVENUES AND EARNINGS
THIS AMENDMENT NO. 3 TO ASSIGNMENT OF DRILLING CONTRACT REVENUES AND
EARNINGS dated as of November 29, 1995, among Reading & Bates Corporation,
a corporation organized and existing under the laws of the State of
Delaware ("RBC"), Reading & Bates Drilling Co., a corporation organized
and existing under the laws of the State of Oklahoma ("RBD"), Reading &
Bates Exploration Co., a corporation organized and existing under the laws
of the State of Oklahoma ("RBX"), Reading and Bates, Inc., a corporation
organized and existing under the laws of the State of Oklahoma ("RBI"),
(RBC, RBD, RBX and RBI being referred to hereafter collectively as the
"Original Borrowers") and Bank One, Texas, N.A., a national banking
association, as Trustee (the "Assignee").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Facility Agreement dated as of March
27, 1991, as amended May 24, 1991, June 28, 1991, August 30, 1991, June 30,
1992 and February 23, 1993 (as so amended, the "Original Credit
Agreement"), Internationale Nederlanden Bank (formerly known as NMB
Postbank Groep, the "Lender") agreed to provide funding to certain of the
Original Borrowers in the aggregate principal amount of up to USD
112,000,000; and
WHEREAS, Reading & Bates Borneo Drilling Co., Ltd., a corporation
organized and existing under the laws of the State of Oklahoma ("RBB") and
Reading & Bates (A) Pty. Ltd., a corporation organized and existing under
the laws of Australia ("RBA"), the Original Borrowers and the Lender have
restated the Original Credit Agreement in order to add RBB and RBA as
Borrowers (the Original Borrowers, RBB and RBA being referred to collective-
ly as the "Borrowers"), increase the amount of Facility E, add a new letter
of credit facility and amend certain terms and covenants (the "Restated
Credit Agreement"); and
WHEREAS, the Assignor, by operation of assignment has succeeded to
and assumed all of the rights and obligations as the successor trustee
under that certain Trust Indenture dated March 29, 1991 (the "Indenture")
among the Original Borrowers and First City Texas-Houston, N.A., as
trustee, as amended, pursuant to which Assignee acts on behalf of the
Lender with respect to certain security interests granted by the Borrowers
to secure their obligations under the Restated Credit Agreement; and
WHEREAS, the Assignee and the Original Borrowers wish to amend the
Assignment of Drilling Contract Revenues and Earnings as hereinafter
follows.
NOW THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Borrowers and the Assignee agree to amend the
Assignment of Drilling Contract Revenues and Earnings effective as of the
date hereof as follows:
A. Schedule 1 to the Assignment of Drilling Contract Revenues and
Earnings is hereby amended to delete the reference to:
"M. G. HULME 651644 U.S. Reading and Bates, Inc."
"JIM CUNNINGHAM 651643 U.S. Reading & Bates Drilling Co."
B. Except as specifically amended by this Amendment, all of the terms
and provisions of the Assignment of Drilling Contract Revenues and Earnings
shall remain in full force and effect.
All capitalized terms used herein but not defined herein shall have the
meanings given to them in the Assignment of Drilling Contract Revenues
and Earnings.
THIS AMENDMENT NO. 3 TO ASSIGNMENT OF DRILLING CONTRACT REVENUES AND
EARNINGS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK AND MAY NOT BE AMENDED OR CHANGED
EXCEPT BY AN INSTRUMENT IN WRITING.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment No. 3 to Assignment of Drilling Contract Revenues and Earnings on
the date first written above.
READING & BATES CORPORATION
By:
Name:
Title:
READING & BATES DRILLING CO.
By:
Name:
Title:
READING & BATES EXPLORATION CO.
By:
Name:
Title:
READING AND BATES, INC.
By:
Name:
Title:
BANK ONE, TEXAS, N.A.
By:
Name:
Title:
EXHIBIT 10.11
AMENDMENT NO. 3 TO ASSIGNMENT OF INSURANCES
THIS AMENDMENT NO. 3 TO ASSIGNMENT OF INSURANCES dated as of November
29, 1995, among Reading & Bates Corporation, a corporation organized
and existing under the laws of the State of Delaware ("RBC"), Reading &
Bates Drilling Co., a corporation organized and existing under the laws of
the State of Oklahoma ("RBD"), Reading & Bates Exploration Co., a
corporation organized and existing under the laws of the State of Oklahoma
("RBX"), Reading and Bates, Inc., a corporation organized and existing
under the laws of the State of Oklahoma ("RBI"), (RBC, RBD, RBX and RBI
being referred to hereafter collectively as the "Original Borrowers") and
Bank One, Texas, N.A., a national banking association, as Trustee (the
"Assignee").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Facility Agreement dated as of March
27, 1991, as amended May 24, 1991, June 28, 1991, August 30, 1991, June
30, 1992 and February 23, 1993 (as so amended, the "Original Credit
Agreement"), Internationale Nederlanden Bank (formerly known as NMB
Postbank Groep, the "Lender") agreed to provide funding to certain of the
Original Borrowers in the aggregate principal amount of up to USD
112,000,000; and
WHEREAS, Reading & Bates Borneo Drilling Co., Ltd., a corporation
organized and existing under the laws of the State of Oklahoma ("RBB") and
Reading & Bates (A) Pty. Ltd., a corporation organized and existing under
the laws of Australia ("RBA"), the Original Borrowers and the Lender have
restated the Original Credit Agreement in order to add RBB and RBA as
Borrowers (the Original Borrowers, RBB and RBA being referred to
collectively as the "Borrowers"), increase the amount of Facility E, add a
new letter of credit facility and amend certain terms and covenants (the
"Restated Credit Agreement"); and
WHEREAS, the Assignor, by operation of assignment has succeeded to
and assumed all of the rights and obligations as the successor trustee
under that certain Trust Indenture dated March 29, 1991 (the "Indenture")
among the Original Borrowers and First City Texas-Houston, N.A., as
trustee, as amended, pursuant to which Assignee acts on behalf of the
Lender with respect to certain security interests granted by the Borrowers
to secure their obligations under the Restated Credit Agreement; and
WHEREAS, the Assignee and the Original Borrowers wish to amend the
Assignment of Insurances as hereinafter follows.
NOW THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Borrowers and the Assignee agree to amend the Assignment
of Insurances effective as of the date hereof as follows:
A.Schedule 1 to the Assignment of Insurances is hereby amended to delete
the reference to:
"M. G. HULME 651644 U.S. Reading and Bates, Inc."
"JIM CUNNINGHAM 651643 U.S. Reading & Bates Drilling Co."
B.Except as specifically amended by this Amendment, all of the terms and
provisions of the Assignment of Insurances shall remain in full force and
effect.
All capitalized terms used herein but not defined herein shall have the
meanings given to them in the Assignment of Insurances.
THIS AMENDMENT NO. 3 TO ASSIGNMENT OF INSURANCES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
AND MAY NOT BE AMENDED OR CHANGED EXCEPT BY AN INSTRUMENT IN WRITING.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment
No. 3 to Assignment of Insurances on the date first written above.
READING & BATES CORPORATION
By:
Name:
Title:
READING & BATES DRILLING CO.
By:
Name:
Title:
READING & BATES EXPLORATION CO.
By:
Name:
Title:
READING AND BATES, INC.
By:
Name:
Title:
BANK ONE, TEXAS, N.A.
By:
Name:
Title:
EXHIBIT 10.12
GALLOWAY ASSIGNMENT AGREEMENT
GALLOWAY ASSIGNMENT AGREEMENT, dated as Of November 29, 1995,
between Internationale Nederlanden Bank N.V., a corporation organized
under the laws of The Netherlands (the "Assignor") and Reading & Bates
Offshore, Limited, a corporation organized under the laws of the State of
Oklahoma, U.S.A. (the "Assignee").
W I T N E S S E T H:
WHEREAS, The Connecticut National Bank, a national banking
association, not in its individual capacity but solely as trustee under
the Trust Agreement (the "Owner Trustee"), has issued its 13 5/8% Secured
Notes due June 21, 2000 (Reading & Bates "George H. Galloway" Equipment
Trust) (the "Notes") pursuant to the Trust Indenture and Security
Agreement, dated June 21, 1985, as amended and restated as of March 27,
1991 (the "Indenture"), between the Owner Trustee and State Street Bank
and Trust Company of Connecticut, National Association, a national banking
association, as trustee thereunder (the "Indenture Trustee") (capitalized
terms used herein which are defined in the Indenture are used herein with
the same meaning); and
WHEREAS, Assignee desires to purchase all of Assignor's
rights, title and interest in and to such Notes equivalent to the future
payment of Alternative Basic Hire (or Regular Basic Hire) under the
Charter;
NOW THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, it is agreed as follows:
1. Assignment. Assignor hereby sells to Assignee, and
Assignee hereby purchases from Assignor all of Assignor's rights, title
and interest in and to the Notes (the "Assignment") (less the principal
portion of all Charter Payments (as defined in the Charter Payments
Guaranty) made with respect to the "GEORGE H. GALLOWAY" Equipment Trust).
2. Payments on Assignment. Assignor shall instruct the
Indenture Trustee in compliance with Section 2.04 of the Indenture to pay
directly to Assignee all, payments of principal and interest on the Notes
held by such Holder to which the Assignment entitles Assignee.
3. No Recourse. (a) Assignor makes no representation or
warranty, and shall have no responsibility, liability or obligation to
Assignee, with respect to (i) any statement, warranty or representation
made in or in connection with the Indenture or Charter, (ii) the financial
condition of the Owner Trustee, Charterer, any of their respective
affiliates, any guarantor or other person or entity, (iii) the performance
or observance of any of the terms, covenants or conditions of the
Indenture or Charter, (iv) the due execution, legality, validity,
enforceability, value, genuineness, sufficiency, collectibility, filing,
recording of or with respect to, or taking of any other action with
respect to, the Indenture or Charter or any collateral therefor, or (v)
any other matter relating to the Owner Trustee, Charterer, any guarantor,
the Indenture, the Charter, any collateral therefor or any other document
not specifically set forth herein.
(b) Assignor shall not be deemed to be a trustee, agent or
other fiduciary for Assignee in connection with the Notes, the Indenture,
the Charter or any collateral therefor and shall not be liable to Assignee
with respect to any error of judgment or anything Assignor may do or omit
to do in relation to the Notes, the Indenture or the Charter or any
collateral therefor.
(c) Assignor shall have no obligation to make any claim
against, or to assert any lien upon, any property of the Owner Trustee,
Charterer or any Guarantor, any of their respective affiliates, any other
guarantor or other person or to assert any offset thereagainst.
5. No Collateral. Assignee shall have no interest in any
property taken by the Owner Trustee, the Indenture Trustee or the Holders
as collateral for the Notes or Regular Basic Hire or Alternative Basic
Hire or any other loans or extensions of credit made to or for Charterer,
the owner Participant, the Assignor or any other person or entity by an
Assignor or any of its affiliates, or in any property which in any way may
hereafter become collateral for or otherwise available for payment of the
Notes or Regular Basic Hire or Alternative Basic Hire.
6. No Rights Against Owner-Trustee, Indenture Trustee,
Charterer. etc. Assignee acknowledges that it does not have, and agrees
not to assert or seek to exercise as a result of the Assignment hereunder,
any legal right or claim against the Owner Trustee, the Indenture Trustee,
Charterer, the Owner Participant, the Holders or an Guarantor or other
guarantor with respect to the Indenture, the Charter or the Notes,
including, without limitation, any right to give instructions under the
Indenture to the Owner Trustee or the Indenture Trustee.
7. Reimbursement for Expenses; Indemnity. To the extent
not reimbursed by Charterer, and without limiting the obligation of
Charterer to do so, Assignee agrees to reimburse Assignor for, indemnify
Assignor against, and hold Assignor harmless from, on demand, any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever that may at
any time be imposed on, incurred by, or asserted against Assignor at a
time when Assignee holds any Assignment in any way relating to this
Agreement, or any transactions contemplated hereby, or any action taken or
omitted to be taken by Assignor under or in connection with any of the
foregoing. The covenants contained in this paragraph 7 shall survive ter-
mination of this Agreement.
8. Representations. Assignee represents that it is
acquiring each Assignment solely for the purpose of investment. No
transfer or further assignment by Assignee shall relieve Assignee of its
obligations hereunder.
9. Governing Law. This Agreement and the respective rights
and obligations of the parties hereunder shall be governed by and
interpreted in accordance with the internal laws of the State of New York.
10. Consent to Jurisdiction. Each of the parties hereto
hereby irrevocably and unconditionally submits to the non-exclusive
jurisdiction of the United States District Court for the Southern District
of New York and (without waiving any right to removal to the United States
District Court) any court of the State of New York located in The City of
New York in any action, suit or proceeding arising in connection with this
Agreement or any transaction herein or therein contemplated, and
irrevocably waives any objection which it may now or hereafter have to the
laying of venue or to the in personam and subject matter jurisdiction of
any such court in any such action, suit or proceeding. Assignee further
agrees that such final judgment obtained in New York shall be a
definitive, final and binding judgment upon it, and, to the maximum extent
permitted by law, not subject to collateral attack by it.
11. Miscellaneous. This Agreement shall be binding upon and
inure to the benefit of the parties hereunder and their respective legal
representatives, successors and assigns. The descriptive headings of the
several paragraphs of this Agreement are inserted for convenience only and
form no part of this agreement. This Agreement supersedes any prior
agreements, and sets forth the entire agreement, between Assignor and
Assignee with respect to the matters covered hereby and may not be
modified or supplemented orally. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof thereof to produce or account for more
than one such counterpart.
IN WITNESS WHEREOF, the parties have caused these presents to
be executed by their duly authorized officers the day and year first above
written.
INTERNATIONALE NEDERLANDEN BANK N.V.
By:
Name:
Title:
READING & BATES OFFSHORE, LIMITED
By:
Name:
Title:
EXHIBIT 10.13
THORNTON ASSIGNMENT AGREEMENT
THORNTON ASSIGNMENT AGREEMENT, dated as Of November 29, 1995,
between Internationale Nederlanden Bank N.V., a corporation organized
under the laws of The Netherlands (the "Assignor") and Reading & Bates
Offshore, Limited, a corporation organized under the laws of the state of
Oklahoma, U.S.A. (the "Assignee").
W I T N E S S E T H:
WHEREAS, The Connecticut National Bank, a national banking
association, as successor trustee to The First National Bank of Boston, a
national banking association, not in its individual capacity but solely as
trustee under the Trust Agreement (the "Owner Trustee"), has issued its
15% Secured Notes due December 7, 1999 (Reading & Bates "C. E. Thornton"
Equipment Trust) (the "Notes") pursuant to the Trust Indenture and
Security Agreement, dated December 7, 1984, as amended and restated as of
March 27, 1991 (the "Indenture"), between the Owner Trustee and State
Street Bank and Trust Company of Connecticut, National Association, a
national banking association, as trustee thereunder (the "Indenture
Trustee") (capitalized terms used herein which are defined in the
Indenture are used herein with the same meaning); and
WHEREAS, Assignee desires to purchase all of Assignor's
rights, title and interest in and to such Notes equivalent to the future
payment of Alternative Basic Hire (or Regular Basic Hire) under the
Charter;
NOW THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, it is agree follows:
1. Assignment. Assignor hereby sells to Assignee, and
Assignee hereby purchases from Assignor all of Assignor's rights, title
and interest in and to the Notes (the "Assignment") for an aggregate price
of USD 19,337,141.46 (less the principal portion of all Charter Payments
(as defined in the Charter Payments Guaranty) made with respect to the "C.
E. THORNTON" Equipment Trust).
2. Payments on Assignment. Assignor shall instruct the
Indenture Trustee in compliance with Section 2.04 of the Indenture to pay
directly to Assignee all, payments of principal and interest on the Notes
held by such Holder to which the Assignment entitles Assignee.
3. No Recourse. (a) Assignor makes no representation or
warranty, and shall have no responsibility, liability or obligation to
Assignee, with respect to (i) any statement, warranty or representation
made in or in connection with the Indenture or Charter, (ii) the financial
condition of the Owner Trustee, Charterer, any of their respective
affiliates, any guarantor or other person or entity, (iii) the performance
or observance of any of the terms, covenants or conditions of the
Indenture or Charter, (iv) the due execution, legality, validity,
enforceability, value, genuineness, sufficiency, collectibility, filing,
recording of or with respect to, or taking of any other action with
respect to, the Indenture or Charter or any collateral therefor, or (v)
any other matter relating to the Owner Trustee, Charterer, any guarantor,
the Indenture, the Charter, any collateral therefor or any other document
not specifically set forth herein.
(b) Assignor shall not be deemed to be a trustee, agent or
other fiduciary for Assignee in connection with the Notes, the Indenture,
the Charter or any collateral therefor and shall not be liable to Assignee
with respect to any error of judgment or anything Assignor may do or omit
to do in relation to the Notes, the Indenture or the Charter or any
collateral therefor.
(c) Assignor shall have no obligation to make any claim
against, or to assert any lien upon, any property of the Owner Trustee,
Charterer or any Guarantor, any of their respective affiliates, any other
guarantor or other person or to assert any offset thereagainst.
5. No Collateral. Assignee shall have no interest in any
property taken by the Owner Trustee, the Indenture Trustee or the Holders
as collateral for the Notes or Regular Basic Hire or Alternative Basic
Hire or any other loans or extensions of credit made to or for Charterer,
the owner Participant, the Assignor or any other person or entity by an
Assignor or any of its affiliates, or in any property which in any way may
hereafter become collateral for or otherwise available for payment of the
Notes or Regular Basic Hire or Alternative Basic Hire.
6. No Rights Against Owner-Trustee, Indenture Trustee,
Charterer. etc. Assignee acknowledges that it does not have, and agrees
not to assert or seek to exercise as a result of the Assignment hereunder,
any legal right or claim against the Owner Trustee, the Indenture Trustee,
Charterer, the Owner Participant, the Holders or an Guarantor or other
guarantor with respect to the Indenture, the Charter or the Notes,
including, without limitation, any right to give instructions under the
Indenture to the Owner Trustee or the Indenture Trustee.
7. Reimbursement for Expenses; Indemnity. To the extent
not reimbursed by Charterer, and without limiting the obligation of
Charterer to do so, Assignee agrees to reimburse Assignor for, indemnify
Assignor against, and hold Assignor harmless from, on demand, any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever that may at
any time be imposed on, incurred by, or asserted against Assignor at a
time when Assignee holds any Assignment in any way relating to this
Agreement, or any transactions contemplated hereby, or any action taken or
omitted to be taken by Assignor under or in connection with any of the
foregoing. The covenants contained in this paragraph 7 shall survive ter-
mination of this Agreement.
8. Representations. Assignee represents that it is
acquiring each Assignment solely for the purpose of investment. No
transfer or further assignment by Assignee shall relieve Assignee of its
obligations hereunder.
9. Governing Law. This Agreement and the respective rights
and obligations of the parties hereunder shall be governed by and
interpreted in accordance with the internal laws of the State of New York.
10. Consent to Jurisdiction. Each of the parties hereto
hereby irrevocably and unconditionally submits to the non-exclusive
jurisdiction of the United States District Court for the Southern District
of New York and (without waiving any right to removal to the United States
District Court) any court of the State of New York located in The City of
New York in any action, suit or proceeding arising in connection with this
Agreement or any transaction herein or therein contemplated, and
irrevocably waives any objection which it may now or hereafter have to the
laying of venue or to the in personam and subject matter jurisdiction of
any such court in any such action, suit or proceeding. Assignee further
agrees that an such final judgment obtained in New York shall be a
definitive, final and binding judgment upon it, and, to the maximum extent
permitted by law, not subject to collateral attack by it.
11. Miscellaneous. This Agreement shall be binding upon and
inure to the benefit of the parties hereunder and their respective legal
representatives, successors and assigns. The descriptive headings of the
several paragraphs of this Agreement are inserted for convenience only and
form no part of this agreement. This Agreement supersedes any prior
agreements, and sets forth the entire agreement, between Assignor and
Assignee with respect to the matters covered hereby and may not be
modified or supplemented orally. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof thereof to produce or account for more
than one such counterpart.
IN WITNESS WHEREOF, the parties have caused these presents to
be executed by their duly authorized officers the day and year first above
written.
INTERNATIONALE NEDERLANDEN BANK N.V.
By:
Name:
Title:
READING & BATES OFFSHORE, LIMITED
By:
Name:
Title:
EXHIBIT 10.14
TERMINATION OF CHARTER PAYMENTS AGREEMENT
Agreement dated as of November 29, 1995 (the "Agreement")
among Reading & Bates Corporation, a corporation organized and
existing under the laws of the State of Delaware ("RBC"),
Reading & Bates Drilling Co., a corporation organized and
existing under the laws of the State of Oklahoma ("RBD"),
Reading & Bates Exploration Co., a corporation organized and
existing under the laws of the State of Oklahoma ("RBX") and
Reading and Bates, Inc., a corporation organized and existing
under the laws of the State of Oklahoma ("RBI") (RBC, RBD, RBX
and RBI being referred to collectively as the "Borrowers") and
Internationale Nederlanden Bank N.V., a company incorporated
under the laws of The Netherlands (the "Lender").
W I T N E S S E T H:
WHEREAS, the Lender and the Borrowers wish to terminate,
by mutual agreement that Charter Payments Agreement dated as
of September 30, 1991, as amended by Amendment No. 1 dated as
of June 30, 1992 (as so amended, the "Charter Payments
Agreement") among the Borrowers and Lenders;
NOW THEREFORE, in consideration of the above recitals and
for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged:
The Borrowers and the Lender mutually agree to terminate
the Charter Payments Agreement, effective as of the date first
written above (the "Effective Date"), with neither Borrowers
nor Lender having any liability or obligation to the other
under the Charter Payments Agreement after the Effective Date.
All capitalized terms used herein but not defined herein
shall have the meanings given to them in the Charter Payments
Agreement.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first written above.
READING & BATES CORPORATION
By:
Name:
Title:
READING & BATES DRILLING CO.
By:
Name:
Title:
READING & BATES EXPLORATION CO.
By:
Name:
Title:
READING AND BATES, INC.
By:
Name:
Title:
INTERNATIONALE NEDERLANDEN BANK N.V.
By:
Name:
Title:
EXHIBIT 10.15
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT, dated November 29, 1995 (this
"Amendment"), is entered into by and among READING & BATES CORPORATION, a
Delaware corporation ("RBC"), READING & BATES DRILLING CO., an Oklahoma
corporation ("RBD"), READING & BATES EXPLORATION CO., an Oklahoma
corporation ("RBX"), READING AND BATES, INC., an Oklahoma corporation
("RBI"), READING AND BATES BORNEO DRILLING CO., LTD., an Oklahoma
corporation ("RBB"), READING & BATES (A) PTY. LTD., a company incorporated
under the laws of the state of Western Australia, Commonwealth of
Australia ("RBA") (RBC, RBD, RBX, RBI, RBB and RBA being referred to
collectively as the "Borrowers" and individually as a "Borrower"), and
INTERNATIONALE NEDERLANDEN BANK, N.V., a company incorporated under the
laws of the Netherlands, formerly known as NMB POSTBANK GROEP N.V. (the
"Lender").
W I T N E S S E T H:
WHEREAS, the Borrowers and the Lender are parties to a certain
Amended and Restated Credit Facility Agreement dated as of April 27, 1995,
as amended (as so amended, the "Credit Agreement"), all terms used herein
without definition shall have the meanings ascribed to such terms in the
Credit Agreement;
WHEREAS, the Borrowers desire to repay Facility C and
terminate Facility D and Facility E, and obtain the release of all
collateral granted under and pursuant to the Credit Agreement; and
WHEREAS, the Borrowers and the Lender have agreed to terminate
the Credit Agreement, all upon the terms and subject to the conditions and
requirements acceptable to the Lender as set forth herein;
NOW THEREFORE, for and in consideration of the mutual premises
contained herein and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, agree as follows:
1. Termination of Credit Agreement. Effective the date first
shown above, (i) Facility C is repaid in full, (ii) by separate Letter of
Credit Wind-Down Agreement Lender has received a back-up standby letter of
credit meeting the requirements of Sections 5.1(z) and 6.1(z) to secure
Lender with respect to the Existing Facility D Letter of Credit and all
Existing Facility E Letters of Credit, (iii) Lender has released or
instructed the Trustee to release all collateral including the Notes,
Mortgages, Assignments, Pledges and Pledge of Earnings Accounts, and (iv)
the Credit Agreement is terminated by mutual agreement among the Lender
and the Borrowers.
2. Representations and Warranties. Borrowers, without limiting
the representations and warranties provided in the Credit Agreement,
represent and warrant to the Lender that the execution, delivery and
performance by the Borrowers of this Agreement have been duly authorized
by all necessary action on the part of each of the Borrowers and do not
and will not (i) violate any provision of any Borrower's articles of
incorporation, by-laws, or other organizational documents or any
Applicable Law, or (ii) be in conflict with, result in a breach of, or
constitute (following notice or lapse of time or both) a default under any
material agreement to which any Borrower is a party or by which any
Borrower or any of its property is bound.
3. Expenses. The Borrowers agree to pay on demand all reasonable
costs and expenses of the Lender in connection with the preparation,
execution and delivery of this Agreement and the other instruments and
documents to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Lender with
respect thereto and with respect to advising the Lender as to its rights
and responsibilities hereunder and thereunder.
4. Conditions Precedent. This Agreement shall be effective upon
receipt by the Lender of all of the following, each in form and substance
satisfactory to the Lender:
(a) Fully executed counterparts of this Agreement.
(b) Certified copies of the resolutions of the Boards of
Directors of each of the Borrowers authorizing the execution and
delivery by each of the Borrowers of this Agreement on behalf of
each of the Borrowers, and all documents evidencing other necessary
corporate action with respect to this Agreement.
(c) Certificate of the Secretary or the Assistant Secretary
of each Borrower certifying the names and true signatures of the
officers of each Borrower authorized to sign this Agreement on
behalf of such Borrower and the other documents or certificates to
be executed by such Borrower pursuant to this Agreement.
(d) Copies certified as of a recent date by the Secretary or
the Assistant Secretary of each Borrower of its By-Laws.
(e) A copy of each Borrower's Certificate of Incorporation
certified by the Secretary of State of the state of incorporation
within thirty (30) days from the date of this Agreement and
certificates dated as of a recent date of the Secretary of State of
the state of incorporation as to the existence and good standing of
each Borrower.
(f) An opinion of counsel to the Borrowers in form and
substance acceptable to the Lender.
(g) All orders, consents, approvals, licenses,
authorizations and validations of, filings, recordings and
registrations with and exemptions by any Governmental Agency or any
Person (other than any routine filings which may be required after
the date hereof with appropriate governmental authorities in
connection with the operation of the Rigs) required to (i) authorize
the execution, delivery and performance by the Borrowers of this
Agreement or (ii) prevent the execution, delivery and performance by
the Borrowers of this Agreement from resulting in a breach of any of
the terms and conditions of, or resulting in a breach of any of the
terms or conditions of, or resulting in the imposition of any lien,
charge or encumbrance upon any properties of the Borrowers pursuant
to, or constituting a default (with due notice or lapse of time or
both), if such breach, imposition or default would result in a
materially adverse change in the financial position of the
Borrowers, or resulting in an occurrence of any event for which any
holder or holders of Indebtedness may declare the same due and
payable under, any indenture, agreement, order, judgment or
instrument under which any Borrower is a party (other than the
Mortgage, the Pledges or the Assignments) or to the Borrowers'
knowledge after due inquiry by which the Borrowers or their property
may be bound or affected, or under the Certificates of Incorporation
or By-Laws of the Borrowers, shall have been obtained or made.
(h) Facility C shall have been repaid in full, the Lender
shall have been provided a standby letter of credit meeting the
requirements of Sections 5.1(z) and 6.1(z) with respect to the
Existing Facility D Letter of Credit and all Existing Facility E
Letters of Credit, pursuant to a separate Letter of Credit Wind-Down
Agreement between Lender and the Borrowers and the Lender shall have
received copies of all of the agreements executed in connection
therewith in a form reasonably satisfactory to the Lender.
5. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto, their respective heirs,
successors, successors-in-titles, and assigns.
6. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
NOTWITHSTANDING ANY PRINCIPLES REGARDING CONFLICTS OF LAWS THEREOF.
7. Entire Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the matters set forth herein,
and shall supersede any prior negotiations or agreements, whether written
or oral, with respect thereto.
8. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts and
may be delivered by telecopier. Each counterpart so executed and
delivered shall be deemed an original and all of which taken together
shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
through their authorized officers as of the date first above written.
READING & BATES CORPORATION
By:
Name: T. W. Nagle
Title: Executive Vice President,
Finance and Administration
READING & BATES DRILLING CO.
By:
Name: T. W. Nagle
Title: Vice President and Treasurer
READING & BATES EXPLORATION CO.
By:
Name: T. W. Nagle
Title: Vice President and Treasurer
READING AND BATES, INC.
By:
Name: T. W. Nagle
Title: Vice President and Treasurer
READING AND BATES BORNEO DRILLING
CO., LTD.
By:
Name: T. W. Nagle
Title: Vice President and Treasurer
THE COMMON SEAL OF READING & BATES (A) PTY. LTD.
READING & BATES (A)
PTY. LTD. was hereunto
affixed by authority of
the Board of Directors By:
in the presence of: Name: T. W. Nagle
Title: Vice President and Treasurer
T. W. Nagle, Director
W. K. Hillin, Secretary
INTERNATIONALE NEDERLANDEN BANK, N.V.
By: ________________________
Name:
Title:
[SIGNATURE PAGE FOR TERMINATION AGREEMENT]
EXHIBIT 10.16
LETTER OF CREDIT WIND-DOWN AGREEMENT
LETTER OF CREDIT WIND-DOWN AGREEMENT dated as of November 28, 1995
between READING & BATES CORPORATION, a corporation duly organized and
validly existing under the laws of the State of Delaware (the "Company")
and INTERNATIONALE NEDERLANDEN BANK, N.V. ("ING").
ING has issued for account of the Company and certain of its
subsidiaries standby letters of credit, including the letters of credit
listed on Schedule 1 hereto (the "ING Letters of Credit"). The ING
Letters of Credit were issued or otherwise maintained under the Amended
and Restated Credit Facility Agreement dated as of April 27, 1995, as
amended, among, inter alia, ING and the Company (the "Existing
Agreement").
Because it is not practicable on the date hereof to terminate the
extensions of credit from ING to the Company represented by the ING
Letters of Credit, the Company has arranged for Christiania Bank og
Kreditkasse, New York Branch, to issue to ING on the date hereof a letter
of credit (the "CBK Letter of Credit") permitting ING to draw thereunder
the amounts drawn under the ING Letters of Credit, accrued fees on the ING
Letters of Credit and interest, if any, accrued on unpaid reimbursement
obligations owing by the Company to ING in connection therewith. The
Company has prepaid to ING all fees on the ING Letters of Credit
calculated as if each ING Letter of Credit will remain undrawn until its
stated expiration date.
It is the intention of the Company and ING that the ING Letters of
Credit be terminated as promptly as practicable.
Accordingly, the parties hereto hereby agree as follows:
Section 1. ING Letters of Credit. The Company will use its best
efforts to cause the ING Letters of Credit to be surrendered to ING for
cancellation as promptly as practicable.
Section 2. Reduction of CBK Letter of Credit. From time to time
after the surrender to ING for cancellation of an ING Letter of Credit or
the passing of the final expiration date of an ING Letter of Credit, ING
will, upon the request of the Company with five Business Days' (as defined
in Section 6(a) hereof) prior notice, agree to an amendment to the CBK
Letter of Credit to permit a reduction in the face amount thereof in an
amount not exceeding 101% of the face amount of such ING Letter of Credit
remaining available to be drawn at the time of such surrender or
immediately prior to such expiration, as the case may be.
Section 3. Termination of CBK Letter of Credit. After the
surrender to ING for cancellation, and/or the passing of the final
expiration dates, of all ING Letters of Credit, ING will, upon the request
of the Company with five Business Days' (as defined in Section 6(a)
hereof) prior notice, surrender the CBK Letter of Credit to the Company
for cancellation.
Section 4. Refund of Letter of Credit Fees. On the last Business
Day (as defined in Section 6(a) hereof) in each calendar quarter, ING will
refund to the Company (to the extent not theretofore refunded) an amount
equal to the fees prepaid by the Company on the date hereof in respect of
each ING Letter of Credit to the extent that, as at such Business Day, ING
determines that (by reason of a drawing under such ING Letter of Credit or
the early termination thereof) such fee exceeds the amount to which ING
would have been entitled had the face amount of such ING Letter of Credit
that is available and undrawn on the date hereof remained available until
the stated expiration date of such ING Letter of Credit.
Section 5. Reimbursement Obligations.
Section 6. Miscellaneous.
(a) As used herein, the term "Business Day" means any day on which
commercial banks are not authorized or required to close in New York City.
(b) Notices by the Company to ING hereunder shall be in writing
and telecopied, mailed or delivered to ING at:
Internationale Nederlanden Bank, N.V.
De Amsterdamse Poort
P.O. Box 23432
1100 DX Amsterdam-Zuidoost
The Netherlands
All notices shall be effective upon receipt.
(c) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
READING & BATES CORPORATION
By:
Title:
INTERNATIONALE NEDERLANDEN BANK, N.V.
By:
Title:
EXHIBIT 10.17
TERMINATION OF PLEDGE AGREEMENT
The undersigned,
A. Internationale Nederlanden Bank, N.V., which has its registered
office in Amsterdam, The Netherlands, acting herein through its
Amsterdam branch, The Netherlands,
hereinafter referred to as the "Bank"
B. Reading & Bates Corporation, a corporation organized and existing
under the laws of Delaware ("RBC"), Reading & Bates Drilling Co.
("RBC"), Reading & Bates Exploration Co. ("RBX"), Reading and Bates,
Inc. ("RBI") and Reading and Bates Borneo Drilling Co., Ltd.
("RBB"), RBD, RBX, RBI and RBB each being corporations organized and
existing under the laws of the State of Oklahoma and Reading & Bates
(A) Pty. Ltd. ("RBA"), a company incorporated under the laws of the
State of Western Australia,
RBC, RBD, RBX, RBI, RBB and RBA hereinafter referred to collectively
as the "Pledgors" and individually as a "Pledgor"
hereby agree as follows:
Effective as of the date of execution of this Agreement, the Pledge
Agreement dated April 27, 1995 among the Bank and the Pledgors is
terminated, and the Pledgors are released from any liability or
obligation thereunder.
The Agreement shall be governed by Dutch law. Any disputes relating to it
shall be brought before the competent Dutch court, unless the Bank, as
plaintiff, chooses to institute proceedings before the foreign court
competent to hear the case in respect of the Pledgors, as defendants.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
on November 29, 1995.
INTERNATIONALE NEDERLANDEN BANK, READING & BATES CORPORATION
BANK, N.V.
By: By:
Name: Name:
Title: Title:
READING & BATES DRILLING CO. READING & BATES EXPLORATION CO.
By: By:
Name: Name:
Title: Title:
READING AND BATES, INC. READING AND BATES BORNEO
DRILLING CO., LTD.
By: By:
Name: Name:
Title: Title:
THE COMMON SEAL OF READING & BATES (A) PTY. LTD.
READING & BATES (A)
PTY. LTD. was hereunto
affixed by authority of By:
the Board of Directors Name:
in the presence of: Title:
T. W. Nagle, Director
W. K. Hillin, Secretary
EXHIBIT 10.18
TERMINATION OF
ASSIGNMENT OF DRILLING CONTRACT REVENUES AND EARNINGS
THIS AGREEMENT dated as of November 29, 1995, among Reading & Bates
Corporation, a corporation organized and existing under the laws of the
State of Delaware ("RBC"), Reading & Bates Drilling Co., a corporation
organized and existing under the laws of the State of Oklahoma ("RBD"),
Reading & Bates Exploration Co., a corporation organized and existing
under the laws of the State of Oklahoma ("RBX")and Reading and Bates,
Inc., a corporation organized and existing under the laws of the State of
Oklahoma ("RBI"), (RBC, RBD, RBX and RBI being referred to hereafter
collectively as the "Original Borrowers" or "Assignors") and Bank One,
Texas, N.A., a national banking association, as Trustee (the "Assignee").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Facility Agreement dated as of March
27, 1991, as amended May 24, 1991, June 28, 1991, August 30, 1991, June
30, 1992 and February 23, 1993 (as so amended, the "Original Credit
Agreement"), Internationale Nederlanden Bank, N. V. (formerly known as NMB
Postbank Groep, N.V., the "Lender") agreed to provide funding to certain
of the Original Borrowers in the aggregate principal amount of up to USD
112,000,000; and
WHEREAS, the Original Borrowers (the "Assignors"), as security for
their obligations under the Original Credit Agreement, entered into that
Assignment of Drilling Contract Revenues and Earnings dated March 29, 1991
(as amended, from time to time, the "Assignment");
WHEREAS, with Reading and Bates Borneo Drilling Co., Ltd., a
corporation organized and existing under the laws of the State of Oklahoma
("RBB") and Reading & Bates (A) Pty. Ltd., a corporation organized and
existing under the laws of Australia ("RBA"), the Original Borrowers and
the Lender amended and restated the Original Credit Agreement pursuant to
the terms of that certain Amended and Restated Credit Facility Agreement
dated as of April 27, 1995, as amended (as so amended, the "Restated
Credit Agreement"); and
WHEREAS, the Original Borrowers, RBB, RBA and the Lender have agreed
to terminate the Restated Credit Agreement and for Lender to release all
collateral given in security for the obligations of the Original
Borrowers, RBB and RBA thereunder, including this Assignment, as follows.
NOW THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Trustee, upon instructions of the Lender, agrees
to terminate and release the Assignment, effective as of the date hereof,
as follows.
1. The Assignment is terminated, effective as of the date hereof,
and the Original Borrowers are released from any and all
obligations thereunder.
2. The Trustee agrees to execute and deliver to the Original
Borrowers any and all UCC-3 Termination Statements for filing
in all relevant jurisdictions.
All capitalized terms used herein but not defined herein shall have
the meanings given to them in the Assignment.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK AND MAY NOT BE AMENDED OR CHANGED
EXCEPT BY AN INSTRUMENT IN WRITING.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Termination Agreement on the date first written above.
READING & BATES CORPORATION
By:
Name:
Title:
READING & BATES DRILLING CO.
By:
Name:
Title:
READING & BATES EXPLORATION CO.
By:
Name:
Title:
READING AND BATES, INC.
By:
Name:
Title:
BANK ONE, TEXAS, N.A., as Trustee
By: __________________________
Name: ___________________
Title: ___________________
EXHIBIT 10.19
TERMINATION OF
ASSIGNMENT OF DRILLING CONTRACT REVENUES AND EARNINGS
THIS AGREEMENT dated as of November 29, 1995, among Reading and
Bates Borneo Drilling Co., Ltd., a corporation organized and existing
under the laws of the State of Oklahoma ("Assignor") and Bank One, Texas,
N.A., a national banking association, as Trustee (the "Assignee").
W I T N E S S E T H:
WHEREAS, pursuant to that Amended and Restated Credit Facility
Agreement dated April 27, 1995, as amended (the "Restated Credit
Agreement") among the Borrowers (as defined therein) (including Assignor)
and Internationale Nederlanden Bank, N.V. (the "Lender") the Lender agreed
to provide funding to the Borrowers in the aggregate principal amount of
up to $65,000,000; and
WHEREAS, the Assignor, as security for its obligations under the
Restated Credit Agreement, entered into that Assignment of Drilling
Contract Revenues and Earnings dated April 27, 1995 (as amended, from time
to time, the "Assignment");
WHEREAS, the Borrowers and the Lender have agreed to terminate the
Restated Credit Agreement and for Lender to release all collateral given
in security for the obligations of the Borrowers, including this
Assignment, as follows.
NOW THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Assignee, upon instructions of the Lender, agrees
to terminate and release the Assignment, effective as of the date hereof,
as follows.
1. The Assignment is terminated, effective as of the date hereof,
and the Assignor is released from any and all obligations
thereunder.
2. The Trustee agrees to execute and deliver to the Assignor any
and all UCC-3 Termination Statements for filing in all
relevant jurisdictions.
All capitalized terms used herein but not defined herein shall have
the meanings given to them in the Assignment.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK AND MAY NOT BE AMENDED OR CHANGED
EXCEPT BY AN INSTRUMENT IN WRITING.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Termination Agreement on the date first written above.
READING AND BATES BORNEO DRILLING CO., LTD.
By: ___________________________
Name: ____________________
Title: ____________________
BANK ONE, TEXAS, N.A., as Trustee
By: __________________________
Name: ___________________
Title: ___________________
EXHIBIT 10.20
TERMINATION OF
ASSIGNMENT OF DRILLING CONTRACT REVENUES AND EARNINGS
THIS AGREEMENT dated as of November 29, 1995, among Reading & Bates
(A) Pty. Ltd., a corporation organized and existing under the laws of the
State of Western Australia ("Assignor") and Bank One, Texas, N.A., a
national banking association, as Trustee (the "Assignee").
W I T N E S S E T H:
WHEREAS, pursuant to that Amended and Restated Credit Facility
Agreement dated April 27, 1995, as amended (the "Restated Credit
Agreement") among the Borrowers (as defined therein) (including Assignor)
and Internationale Nederlanden Bank, N.V. (the "Lender") the Lender agreed
to provide funding to the Borrowers in the aggregate principal amount of
up to $65,000,000; and
WHEREAS, Assignor, as security for its obligations under the
Restated Credit Agreement, entered into that Assignment of Drilling
Contract Revenues and Earnings dated April 27, 1995 (as amended, from time
to time, the "Assignment");
WHEREAS, the Borrowers and the Lender have agreed to terminate the
Restated Credit Agreement and for Lender to release all collateral given
in security for the obligations of the Borrowers, including this
Assignment, as follows.
NOW THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the Assignee, upon instructions of the Lender, agrees
to terminate and release the Assignment, effective as of the date hereof,
as follows.
1. The Assignment is terminated, effective as of the date hereof,
and the Assignor is released from any and all obligations
thereunder.
2. The Trustee agrees to execute and deliver to the Assignor any
and all UCC-3 Termination Statements for filing in all
relevant jurisdictions.
All capitalized terms used herein but not defined herein shall have
the meanings given to them in the Assignment.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK AND MAY NOT BE AMENDED OR CHANGED
EXCEPT BY AN INSTRUMENT IN WRITING.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Termination Agreement on the date first written above.
READING & BATES (A) PTY. LTD.
By:
Name:
Title:
BANK ONE, TEXAS, N.A., as Trustee
By:
Name:
Title:
EXHIBIT 10.21
TERMINATION OF
ASSIGNMENT OF INSURANCES
THIS AGREEMENT dated as of November 29, 1995, among
Reading & Bates Corporation, a corporation organized and
existing under the laws of the State of Delaware ("RBC"),
Reading & Bates Drilling Co., a corporation organized and
existing under the laws of the State of Oklahoma ("RBD"),
Reading & Bates Exploration Co., a corporation organized and
existing under the laws of the State of Oklahoma ("RBX") and
Reading and Bates, Inc., a corporation organized and existing
under the laws of the State of Oklahoma ("RBI"), (RBC, RBD,
RBX and RBI being referred to hereafter collectively as the
"Original Borrowers" or "Assignors") and Bank One, Texas,
N.A., a national banking association, as Trustee (the
"Assignee").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Facility Agreement dated
as of March 27, 1991, as amended May 24, 1991, June 28, 1991,
August 30, 1991, June 30, 1992 and February 23, 1993 (as so
amended, the "Original Credit Agreement"), Internationale
Nederlanden Bank, N.V. (formerly known as NMB Postbank Groep,
N.V., the "Lender") agreed to provide funding to certain of
the Original Borrowers in the aggregate principal amount of up
to USD 112,000,000; and
WHEREAS, the Original Borrowers (the "Assignors"), as
security for their obligations under the Original Credit
Agreement, entered into that Assignment of Insurances dated
March 29, 1991 (as amended, from time to time, the
"Assignment");
WHEREAS, with Reading and Bates Borneo Drilling Co.,
Ltd., a corporation organized and existing under the laws of
the State of Oklahoma ("RBB") and Reading & Bates (A) Pty.
Ltd., a corporation organized and existing under the laws of
Australia ("RBA"), the Original Borrowers and the Lender
amended and restated the Original Credit Agreement pursuant to
the terms of that certain Amended and Restated Credit Facility
Agreement dated as of April 27, 1995, as amended (as so
amended the "Restated Credit Agreement"); and
WHEREAS, the Original Borrowers, RBB, RBA and the Lender
have agreed to terminate the Restated Credit Agreement and for
Lender to release all collateral given in security for the
obligations of the Original Borrowers, RBB and RBA thereunder,
including this Assignment, as follows.
NOW THEREFORE, in consideration of the above recitals and
for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Assignee,
upon instructions of the Lender, agrees to terminate and
release the Assignment, effective as of the date hereof, as
follows.
1. The Assignment is terminated, effective as of the
date hereof, and the Assignors are released from any
and all obligations thereunder.
2. The Trustee agrees to execute and deliver to the
Assignors any and all UCC-3 Termination Statements
for filing in all relevant jurisdictions.
All capitalized terms used herein but not defined herein
shall have the meanings given to them in the Assignment.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AND
MAY NOT BE AMENDED OR CHANGED EXCEPT BY AN INSTRUMENT IN
WRITING.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Termination Agreement on the date first written above.
READING & BATES CORPORATION
By:
Name:
Title:
READING & BATES DRILLING CO.
By:
Name:
Title:
READING & BATES EXPLORATION CO.
By:
Name:
Title:
READING AND BATES, INC.
By:
Name:
Title:
BANK ONE, TEXAS, N.A., as Trustee
By:
Name:
Title:
EXHIBIT 10.22
TERMINATION OF
ASSIGNMENT OF INSURANCES
THIS AGREEMENT dated as of November 29, 1995, among
Reading and Bates Borneo Drilling Co., Ltd., a corporation
organized and existing under the laws of the State of Oklahoma
("Assignor") and Bank One, Texas, N.A., a national banking
association, as Trustee (the "Assignee").
W I T N E S S E T H:
WHEREAS, pursuant to that Amended and Restated Credit
Facility Agreement dated April 27, 1995, as amended (the
"Restated Credit Agreement") among the Borrowers (as defined
therein) (including Assignor) and Internationale Nederlanden
Bank, N.V. (the "Lender") the Lender agreed to provide funding
to the Borrowers in the aggregate principal amount of up to
$65,000,000; and
WHEREAS, the Assignor, as security for its obligations
under the Restated Credit Agreement, entered into that
Assignment of Insurances dated April 27, 1995 (as amended,
from time to time, the "Assignment");
WHEREAS, the Borrowers and the Lender have agreed to
terminate the Restated Credit Agreement and for Lender to
release all collateral given in security for the obligations
of the Borrowers, including this Assignment, as follows.
NOW THEREFORE, in consideration of the above recitals and
for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Assignee,
upon instructions of the Lender, agrees to terminate and
release the Assignment, effective as of the date hereof, as
follows.
1. The Assignment is terminated, effective as of the
date hereof, and the Assignor is released from any
and all obligations thereunder.
2. The Trustee agrees to execute and deliver to the
Assignor any and all UCC-3 Termination Statements
for filing in all relevant jurisdictions.
All capitalized terms used herein but not defined herein
shall have the meanings given to them in the Assignment.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AND
MAY NOT BE AMENDED OR CHANGED EXCEPT BY AN INSTRUMENT IN
WRITING.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Termination Agreement on the date first written above.
READING AND BATES BORNEO
DRILLING CO., LTD.
By:
Name:
Title:
BANK ONE, TEXAS, N.A., as Trustee
By:
Name:
Title:
EXHIBIT 10.23
TERMINATION OF
ASSIGNMENT OF INSURANCES
THIS AGREEMENT dated as of November 29, 1995, among
Reading & Bates (A) Pty. Ltd., a corporation organized and
existing under the laws of the State of Western Australia
("Assignor") and Bank One, Texas, N.A., a national banking
association, as Trustee (the "Assignee").
W I T N E S S E T H:
WHEREAS, pursuant to that Amended and Restated Credit
Facility Agreement dated April 27, 1995 (the "Restated Credit
Agreement") among the Borrowers (as defined therein)
(including Assignor) and Internationale Nederlanden Bank, N.V.
(the "Lender") the Lender agreed to provide funding to the
Borrowers in the aggregate principal amount of up to
$65,000,000; and
WHEREAS, the Assignor, as security for its obligations
under the Restated Credit Agreement, entered into that
Assignment of Insurances dated April 27, 1995 (as amended,
from time to time, the "Assignment");
WHEREAS, the Borrowers and the Lender have agreed to
terminate the Restated Credit Agreement and for Lender to
release all collateral given in security for the obligations
of the Borrowers, including this Assignment, as follows.
NOW THEREFORE, in consideration of the above recitals and
for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Assignee,
upon instructions of the Lender, agrees to terminate and
release the Assignment, effective as of the date hereof, as
follows.
1. The Assignment is terminated, effective as of the
date hereof, and the Assignor is released from any
and all obligations thereunder.
2. The Trustee agrees to execute and deliver to the
Assignor any and all UCC-3 Termination Statements
for filing in all relevant jurisdictions.
All capitalized terms used herein but not defined herein
shall have the meanings given to them in the Assignment.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK AND
MAY NOT BE AMENDED OR CHANGED EXCEPT BY AN INSTRUMENT IN
WRITING.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Termination Agreement on the date first written above.
READING & BATES (A) PTY. LTD.
By:
Name:
Title:
BANK ONE, TEXAS, N.A., as Trustee
By:
Name:
Title:
EXHIBIT 10.24
TERMINATION OF
PLEDGE AGREEMENT
AND
IRREVOCABLE PROXY
AGREEMENT, dated November 29, 1995, between READING &
BATES CORPORATION, a corporation organized and existing under
the laws of the State of Delaware (the "Pledgor"), and BANK
ONE, TEXAS, N.A., as Trustee, its successors and assigns (the
"Pledgee").
W I T N E S S E T H:
WHEREAS, the Pledgor owns of record and beneficially all
of the issued and outstanding shares of Reading & Bates
Drilling Co. (the "Company") (the Company and the Pledgor are
hereinafter collectively referred to as the "Obligors").
WHEREAS, the Obligors have entered into an Amended and
Restated Credit Facility Agreement dated as of April 27, 1995,
as amended (the "Credit Agreement") with INTERNATIONALE
NEDERLANDEN BANK, N.V. (the "Bank"), which Credit Agreement
provides for advances and the issuance of letters of credit by
the Bank to or for the account of the Obligors of up to USD
65,000,000 (the "Commitment") to be used for the purposes of
refinancing certain indebtedness of the Obligors and providing
working capital and credit for operations; and
WHEREAS, pursuant to the Trust Indenture dated March 29,
1991 between the Trustee and the Obligors as amended by
Amendment No. 1 to the Trust Indenture dated as of February
25, 1993 and as further amended by Assignment, Assumption and
Amendment No. 2 to Trust Indenture dated as of April 27, 1995,
the Pledgee has agreed to act as trustee for the Bank in
connection with the security provided by the Obligors for the
advances made and letters of credit issued pursuant to the
Credit Agreement; and
WHEREAS, the Pledgor and the Pledgee entered into the
Pledge Agreement and Irrevocable Proxy dated April 27, 1995
(the "Pledge Agreement"); and
WHEREAS, the Obligors have paid, or otherwise satisfied
or secured the repayment of, the Obligations, and the Bank has
agreed to release all collateral granted thereunder by the
Obligors, including the Pledge Agreement and Irrevocable Proxy
dated April 27, 1995 between Pledgor and Pledgee.
NOW THEREFORE, in consideration of the premises and other
good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged, the parties hereby agree as
follows:
1. Termination. Effective as of the date hereof, the
Pledge Agreement is terminated, and all of the Pledged
Securities and the Irrevocable Proxy have been delivered to
the Pledgor. Unless otherwise defined herein, all capitalized
terms shall have the meanings ascribed to them in the Pledge
Agreement.
2. General. This Agreement shall bind and inure to the
benefit of the respective successors and assigns of the
parties. This Agreement and the rights of the parties and of
any subsequent holder shall be construed in accordance with
and governed by the internal laws of the State of New York,
and may not be changed orally, but only by an instrument in
writing signed by the person against whom enforcement of such
change, modification or discharge is sought.
3. Counterparts. This Pledge Agreement may be executed
in any number of counterparts, each of which for all purposes
shall be deemed to be an original.
IN WITNESS WHEREOF, the parties have caused this Pledge
Agreement to be executed the day and year first above written.
READING & BATES CORPORATION
By:
Name:
Title:
BANK ONE, TEXAS, N.A. as Trustee
By:
Name:
Title:
EXHIBIT 10.25
TERMINATION OF
PLEDGE AGREEMENT
AND
IRREVOCABLE PROXY
AGREEMENT, dated Novmeber 29, 1995, between READING &
BATES DRILLING CO., a corporation organized and existing under
the laws of the State of Oklahoma (the "Pledgor"), and BANK
ONE, TEXAS, N.A., as Trustee, its successors and assigns (the
"Pledgee").
W I T N E S S E T H:
WHEREAS, the Pledgor owns of record and beneficially all
of the issued and outstanding shares of Reading & Bates
Drilling Co. (the "Company") (the Company and the Pledgor are
hereinafter collectively referred to as the "Obligors").
WHEREAS, the Obligors have entered into an Amended and
Restated Credit Facility Agreement dated as of April 27, 1995,
as amended (the "Credit Agreement") with INTERNATIONALE
NEDERLANDEN BANK N.V. (the "Bank"), which Credit Agreement
provides for advances and the issuance of letters of credit by
the Bank to or for the account of the Obligors of up to USD
65,000,000 (the "Commitment") to be used for the purposes of
refinancing certain indebtedness of the Obligors and providing
working capital and credit for operations; and
WHEREAS, pursuant to the Trust Indenture dated March 29,
1991 between the Trustee and the Obligors as amended by
Amendment No. 1 to the Trust Indenture dated as of February
25, 1993 and as further amended by Assignment, Assumption and
Amendment No. 2 to Trust Indenture dated as of April 27, 1995,
the Pledgee has agreed to act as trustee for the Bank in
connection with the security provided by the Obligors for the
advances made and letters of credit issued pursuant to the
Credit Agreement; and
WHEREAS, the Pledgor and the Pledgee entered into the
Pledge Agreement and Irrevocable Proxy dated April 27, 1995
(the "Pledge Agreement"); and
WHEREAS, the Obligors have paid, or otherwise satisfied
or secured the repayment of, the Obligations, and the Bank has
agreed to release all collateral granted thereunder by the
Obligors, including the Pledge Agreement and Irrevocable Proxy
dated April 27, 1995 between Pledgor and Pledgee.
NOW THEREFORE, in consideration of the premises and other
good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged, the parties hereby agree as
follows:
1. Termination. Effective as of the date hereof, the
Pledge Agreement is terminated, and all of the Pledged
Securities and the Irrevocable Proxy have been delivered to
the Pledgor. Unless otherwise defined herein, all capitalized
terms shall have the meanings ascribed to them in the Pledge
Agreement.
2. General. This Agreement shall bind and inure to the
benefit of the respective successors and assigns of the
parties. This Agreement and the rights of the parties and of
any subsequent holder shall be construed in accordance with
and governed by the internal laws of the State of New York,
and may not be changed orally, but only by an instrument in
writing signed by the person against whom enforcement of such
change, modification or discharge is sought.
3. Counterparts. This Pledge Agreement may be executed
in any number of counterparts, each of which for all purposes
shall be deemed to be an original.
IN WITNESS WHEREOF, the parties have caused this Pledge
Agreement to be executed the day and year first above written.
READING & BATES DRILLING CO.
By:
Name:
Title:
BANK ONE, TEXAS, N.A. as Trustee
By:
Name:
Title:
EXHIBIT 10.26
TERMINATION OF
PLEDGE AGREEMENT
AND
IRREVOCABLE PROXY
AGREEMENT, dated November 29, 1995, between READING &
BATES EXPLORATION CO., a corporation organized and existing
under the laws of the State of Oklahoma (the "Pledgor"), and
BANK ONE, TEXAS, N.A., as Trustee, its successors and assigns
(the "Pledgee").
W I T N E S S E T H:
WHEREAS, the Pledgor owns of record and beneficially all
of the issued and outstanding shares of Reading & Bates
Drilling Co. (the "Company") (the Company and the Pledgor are
hereinafter collectively referred to as the "Obligors").
WHEREAS, the Obligors have entered into an Amended and
Restated Credit Facility Agreement dated as of April 27, 1995,
as amended (the "Credit Agreement") with INTERNATIONALE
NEDERLANDEN BANK N.V. (the "Bank"), which Credit Agreement
provides for advances and the issuance of letters of credit by
the Bank to or for the account of the Obligors of up to USD
65,000,000 (the "Commitment") to be used for the purposes of
refinancing certain indebtedness of the Obligors and providing
working capital and credit for operations; and
WHEREAS, pursuant to the Trust Indenture dated March 29,
1991 between the Trustee and the Obligors as amended by
Amendment No. 1 to the Trust Indenture dated as of February
25, 1993 and as further amended by Assignment, Assumption and
Amendment No. 2 to Trust Indenture dated as of April 27, 1995,
the Pledgee has agreed to act as trustee for the Bank in
connection with the security provided by the Obligors for the
advances made and letters of credit issued pursuant to the
Credit Agreement; and
WHEREAS, the Pledgor and the Pledgee entered into the
Pledge Agreement and Irrevocable Proxy dated April 27, 1995
(the "Pledge Agreement"); and
WHEREAS, the Obligors have paid, or otherwise satisfied
or secured the repayment of, the Obligations, and the Bank has
agreed to release all collateral granted thereunder by the
Obligors, including the Pledge Agreement and Irrevocable Proxy
dated April 27, 1995 between Pledgor and Pledgee.
NOW THEREFORE, in consideration of the premises and other
good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged, the parties hereby agree as
follows:
1. Termination. Effective as of the date hereof, the
Pledge Agreement is terminated, and all of the Pledged
Securities and the Irrevocable Proxy have been delivered to
the Pledgor. Unless otherwise defined herein, all capitalized
terms shall have the meanings ascribed to them in the Pledge
Agreement.
2. General. This Agreement shall bind and inure to the
benefit of the respective successors and assigns of the
parties. This Agreement and the rights of the parties and of
any subsequent holder shall be construed in accordance with
and governed by the internal laws of the State of New York,
and may not be changed orally, but only by an instrument in
writing signed by the person against whom enforcement of such
change, modification or discharge is sought.
3. Counterparts. This Pledge Agreement may be executed
in any number of counterparts, each of which for all purposes
shall be deemed to be an original.
IN WITNESS WHEREOF, the parties have caused this Pledge
Agreement to be executed the day and year first above written.
READING & BATES EXPLORATION CO.
By:
Name:
Title:
BANK ONE, TEXAS, N.A. as Trustee
By:
Name:
Title:
EXHIBIT 10.27
TERMINATION OF INDENTURE OF TRUST
THIS AGREEMENT dated as November 29, 1995, among
Reading & Bates Corporation, a corporation organized and
existing under the laws of the State of Delaware ("RBC"),
Reading & Bates Drilling Co., a corporation organized and
existing under the laws of the State of Oklahoma ("RBD"),
Reading & Bates Exploration Co., a corporation organized and
existing under the laws of the State of Oklahoma ("RBX"),
Reading and Bates, Inc., a corporation organized and existing
under the laws of the State of Oklahoma ("RBI"), Reading and
Bates Borneo Drilling Co., Ltd., a corporation organized and
existing under the laws of the State of Oklahoma ("RBB"),
Reading & Bates (A) Pty. Ltd., a corporation organized and
existing under the laws of Australia ("RBA") (RBC, RBD, RBX,
RBI, RBB and RBA being referred to collectively as the
"Borrowers" and individually as a "Borrower") and Bank One,
Texas, N.A., a national banking association, as Trustee (the
"Trustee").
W I T N E S S E T H:
WHEREAS, pursuant to the Credit Facility Agreement dated as of
March 27, 1991, as amended May 24, 1991, June 28, 1991, August
30, 1991, June 30, 1992 and February 25, 1993 (as so amended,
the "Original Credit Agreement"), Internationale Nederlanden
Bank, N.V. (formerly known as NMB Postbank Groep, N.V. the
"Lender") agreed to provide funding to certain of the
Borrowers in the aggregate principal amount of up to USD
112,000,000; and
WHEREAS, in connection therewith, the Borrowers and the
Trustee entered into that certain Indenture of Trust dated
March 27, 1991, as amended (the "Indenture"); and
WHEREAS, the Borrowers and the Lender restated the Original
Credit Agreement pursuant to the terms of that certain Amended
and Restated Credit Facility Agreement dated as of April 27,
1995, as amended (as so amended the "Restated Credit
Agreement"); and
WHEREAS, the Borrowers have repaid Facility C and terminated
Facility D and Facility E, with the agreement of the Lenders,
and the Lenders have agreed to release all collateral
(including the Mortgages, Assignments and Pledges) and delete
all Vessels under the Indenture; and
WHEREAS, the Borrowers and the Trustee wish to terminate the
Indenture.
NOW THEREFORE, in consideration of the above
recitals and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties agree to terminate this Indenture effective as of the
date hereof as follows:
1. Termination of Indenture. Effective as of the date
hereof Obligors have paid or caused to be paid or
provided adequate security to the Lender for repayment of
the Notes theretofore delivered to the Trustee, the Notes
have been delivered to the Trustee for cancellation, and
the Obligors have delivered to the Trustee (a) a written
notice that all conditions precedent provided for in
Section 401 of the Indenture relating to the satisfaction
and discharge of this Indenture have been complied with
and (b) an opinion of counsel acceptable to the Trustee
to the same effect.
2. Section 306 of Indenture. Notwithstanding Section 1
above, the liabilities and obligations of the Obligors to
the Trustee under Section 306 shall survive the
termination of this Indenture.
All capitalized terms used herein but not defined herein
shall have the meanings given to them in the Indenture.
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF TEXAS.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Amendment on the date first written above.
READING & BATES CORPORATION
By:
Name:
Title:
READING & BATES DRILLING CO.
By:
Name:
Title:
READING & BATES EXPLORATION CO.
By:
Name:
Title:
READING AND BATES, INC.
By:
Name:
Title:
READING AND BATES BORNEO DRILLING
CO., LTD.
By:
Name:
Title:
THE COMMON SEAL OF READING & BATES (A) PTY. LTD.
READING & BATES (A)
PTY. LTD. was hereunto
affixed by authority of
the Board of Directors By:
in the presence of : Name:
Title:
__________________
T. W. Nagle, Director
__________________
W. K. Hillin, Secretary
BANK ONE, TEXAS, N.A., as Trustee
By:
Name:
Title:
ACKNOWLEDGMENT
STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, , a notary public in
and for said county and state, on this day personally appeared
, known to me to be the person whose
name is subscribed to the foregoing instrument and known to me
to be the of Reading & Bates
Corporation, a corporation organized under the laws of
Delaware, and acknowledged to me that he executed said
instrument for the purposes and consideration therein
expressed, and as the act of said corporation.
Given under my hand and seal of office this day of
, 1995.
Notary Public
ACKNOWLEDGMENT
STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, , a notary public in
and for said county and state, on this day personally appeared
, known to me to be the person whose
name is subscribed to the foregoing instrument and known to me
to be the of Reading & Bates
Drilling Co., a corporation organized under the laws of
Oklahoma, and acknowledged to me that he executed said
instrument for the purposes and consideration therein
expressed, and as the act of said corporation.
Given under my hand and seal of office this day of
, 1995.
Notary Public
ACKNOWLEDGMENT
STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, , a notary public in
and for said county and state, on this day personally appeared
, known to me to be the person whose
name is subscribed to the foregoing instrument and known to me
to be the of Reading & Bates
Exploration Co., a corporation organized under the laws of
Oklahoma, and acknowledged to me that he executed said
instrument for the purposes and consideration therein
expressed, and as the act of said corporation.
Given under my hand and seal of office this day of
, 1995.
Notary Public
ACKNOWLEDGMENT
STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, , a notary public in
and for said county and state, on this day personally appeared
, known to me to be the person whose
name is subscribed to the foregoing instrument and known to me
to be the of Reading and
Bates, Inc., a corporation organized under the laws of
Oklahoma, and acknowledged to me that he executed said
instrument for the purposes and consideration therein
expressed, and as the act of said corporation.
Given under my hand and seal of office this day of
, 1995.
Notary Public
ACKNOWLEDGMENT
STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, , a notary public in
and for said county and state, on this day personally appeared
, known to me to be the person whose
name is subscribed to the foregoing instrument and known to me
to be the of Reading and
Bates Borneo Drilling Co., Ltd., a corporation organized under
the laws of Oklahoma, and acknowledged to me that he executed
said instrument for the purposes and consideration therein
expressed, and as the act of said corporation.
Given under my hand and seal of office this day of
, 1995.
Notary Public
ACKNOWLEDGMENT
STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, , a notary public in
and for said county and state, on this day personally appeared
, known to me to be the person whose
name is subscribed to the foregoing instrument and known to me
to be the of Reading & Bates
(A) Pty. Ltd., a corporation organized under the laws of
, and acknowledged to me that he executed said
instrument for the purposes and consideration therein
expressed, and as the act of said corporation.
Given under my hand and seal of office this day of
, 1995.
Notary Public
ACKNOWLEDGMENT
STATE OF TEXAS )
)
COUNTY OF HARRIS )
BEFORE ME, , a notary public in
and for said county and state, on this day personally appeared
, known to me to be the person whose
name is subscribed to the foregoing instrument and known to me
to be the of Bank One,
Texas, N.A., a national banking association, organized under
the laws of , and acknowledged to me that he
executed said instrument for the purposes and consideration
therein expressed, and as the act of said corporation.
Given under my hand and seal of office this day of
, 1995.
Notary Public
Exhibit 10.33
As of February 7, 1995
I hereby irrevocably surrender the options granted by
that Stock Option Agreement between Reading & Bates
Corporation and the undersigned dated October 7, 1993 and
(effective as of the 14th day of September, 1993), contingent
upon the 1995 Director Stock Option Plan being approved by the
Company's stockholders (in accordance with SEC Rule 16b-3) at
the Annual Meeting of Stockholders scheduled for May 2, 1995,
or any adjournment thereof. If that plan is not so approved
by stockholders, this surrender shall be deemed void ab initio
and of no further legal effect.
C.A. Donabedian
Exhibit 10.35
As of February 7, 1995
I hereby irrevocably surrender the options granted by
that Stock Option Agreement between Reading & Bates
Corporation and the undersigned dated October 7, 1993 and
(effective as of the 14th day of September, 1993), contingent
upon the 1995 Director Stock Option Plan being approved by the
Company's stockholders (in accordance with SEC Rule 16b-3) at
the Annual Meeting of Stockholders scheduled for May 2, 1995,
or any adjournment thereof. If that plan is not so approved
by stockholders, this surrender shall be deemed void ab initio
and of no further legal effect.
J.W. McLean
Exhibit 10.37
As of February 7, 1995
I hereby irrevocably surrender the options granted by
that Stock Option Agreement between Reading & Bates
Corporation and the undersigned dated October 7, 1993 and
(effective as of the 14th day of September, 1993), contingent
upon the 1995 Director Stock Option Plan being approved by the
Company's stockholders (in accordance with SEC Rule 16b-3) at
the Annual Meeting of Stockholders scheduled for May 2, 1995,
or any adjournment thereof. If that plan is not so approved
by stockholders, this surrender shall be deemed void ab initio
and of no further legal effect.
R. L. Sandmeyer
Exhibit 10.39
As of February 7, 1995
I hereby irrevocably surrender the options granted by
that Stock Option Agreement between Reading & Bates
Corporation and the undersigned dated October 7, 1993 and
(effective as of the 14th day of September, 1993), contingent
upon the 1995 Director Stock Option Plan being approved by the
Company's stockholders (in accordance with SEC Rule 16b-3) at
the Annual Meeting of Stockholders scheduled for May 2, 1995,
or any adjournment thereof. If that plan is not so approved
by stockholders, this surrender shall be deemed void ab initio
and of no further legal effect.
S.A. Webster
EXHIBIT 10.40
STOCK OPTION AGREEMENT
pursuant to the
READING & BATES CORPORATION
1995 DIRECTOR STOCK OPTION PLAN
Optionee: A.L. Chavkin
Grant Date: As of February 7, 1995
Per Share
Exercise Price: $7.375
Number of Option Shares
subject to this Option: 15,000
This Stock Option Agreement (this "Agreement"), dated as of the
Grant Date specified above, is entered into by and between Reading & Bates
Corporation, a Delaware corporation (the "Company"), and the Optionee
specified above, pursuant to the Company's Director Stock Option Plan, as
in effect and as amended from time to time (the "Plan"); and
WHEREAS, it has been determined under the Plan that it would be in
the best interests of the Company to grant automatically the non-qualified
stock option provided for herein to the Optionee;
NOW, THEREFORE, in consideration of the mutual covenants and
premises hereinafter set forth and for other good and valuable
consideration, the parties hereto hereby mutually covenant and agree as
follows:
1. Incorporation By Reference; Plan Document Receipt. This
Agreement is subject in all respects to the terms and provisions of the
Plan (including, without limitation, any amendments thereto adopted at any
time and from time to time if such amendments are expressly intended to
apply to the grant of. the option hereunder), all of which terms and
provisions are made a part of and incorporated in this Agreement as if
they were each expressly set forth herein. Any capitalized term not
defined in Agreement shall have the same meaning as is ascribed thereto
under the Plan. The optionee hereby acknowledges receipt of a true copy
of the Plan and that the Optionee has read the Plan carefully and fully
understands its content. In the event of any conflict between the terms
of this Agreement and the terms of the Plan, the terms of the Plan shall
control.
2. Grant of Option. The Company hereby grants, subject to
shareholder approval of the Plan in accordance with SEC Rule 16b-3, to the
Optionee, as of the Grant Date specified above, a non-qualified stock
option (this "Option") to acquire from the Company at the Per Share
Exercise Price specified above the aggregate number of shares of the
Common Stock specified above (the "Option Shares"). This Option is not to
be treated as (and is not intended to qualify as) an incentive stock
option within the meaning of section 422 of the Code.
3. Exercise of this Option.
3.1 This Option shall become exercisable in accordance with
and to the extent provided by the terms and provisions of Paragraph s 6
and 7 of the Plan.
3.2 Unless earlier terminated in accordance with the terms
and provisions of the Plan, this Option shall expire and shall no longer
be exercisable after the expiration of ten years from the Grant Date (the
"Option Period").
3.3 In no event shall this Option be exercisable for a
fractional share of Common Stock.
4. Method of Exercise and Payment. This Option shall be
exercised by the optionee by delivering to the Secretary of the company or
his designated agent on any business day (the "Exercise Date") a written
notice, in such manner and form an may be required by the Company,
specifying the number of the Option Shares the Optionee then desires to
acquire (the "Exercise Notice"). The Exercise Notice shall be accompanied
by payment of the aggregate Per Share Exercise Price for such number of
the Option Shares to be acquired upon such exercise. Such payment shall
be made in the manner set forth in Paragraph 7 of the Plan.
5. Termination. This Option shall terminate and be of no force
or effect in accordance with and to the extent provided by the terms and
provisions of Paragraph 10 of the Plan. In any event, this Option shall
terminate upon the expiration of the Option Period.
6. Non-transferability. This Option, and any rights or interests
therein, shall not be sold, exchanged, transferred, assigned or otherwise
disposed of in any way at any time by the Optionee (or any
beneficiary(ies) of the Optionee), other than by testamentary disposition
by the Optionee or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Internal Revenue
Code, as amended, or Title I of the Employment Retisrement Security Act of
1974, as amended, or the rules thereunder. This Option shall not be
pledged, encumbered or otherwise hypothecated in any way at any time by
the optionee (or any beneficiary(ies) of the Optionee) and shall not be
subject to execution, attachment or similar legal process. Any attempt to
sell, exchange, pledge, transfer, assign, encumber or otherwise dispose of
or hypothecate this Option, or the levy of any execution, attachment or
similar legal process upon this Option, contrary to the terms of this
Agreement and/or the Plan shall be null and void and without legal force
or effect. This Option shall be exercisable during the Optionee's
lifetime only by the Optionee.
7. Entire Agreement; Amendment. This Agreement contains the
entire agreement between the parties hereto with respect to the subject
matter contained herein, and supersedes all prior agreements or prior
understandings, whether written or oral, between the parties relating to
such subject matter. This Agreement may only be modified or amended by a
writing signed by both the Company and the Optionee.
8. Notices. Any Exercise Notice or other notice which may be
required or permitted under this Agreement shall be in writing, and hall
be delivered in person or via facsimile transmission, overnight courier
service or certified mail, return receipt requested, postage prepaid,
properly addressed as follows:
If to Company: Reading & Bates Corporation
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Secretary
Fax: (713) 496-0285
If to Grantee:
or at such other address as the Company or Grantee may, by notice to the
other party hereto, designate in writing from time to time.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without
reference to the principles of conflict of law thereof.
10. Compliance with Laws. The issuance of this Option (and the
Option Shares upon exercise of this Option) pursuant to this Agreement
shall be subject to, and shall comply with, any applicable requirements of
any federal and state securities laws, rules and regulations (including,
without limitation, the provisions of the Securities Act of 1933, the
Exchange Act and the respective rules and regulations promulgated
thereunder) and any other law or regulation applicable thereto. The
Company shall not be obligated to issue this Option or any of the Option
Shares pursuant to this Agreement if any such issuance would violate any
such requirements.
11. Binding Agreement; Assignment. This Agreement shall inure to
the benefit of, be binding upon, and be enforceable by the Company and its
successors and assigns. The Optionee shall not assign any part of this
Agreement without the prior express written consent of the Company.
12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same instrument.
13. Headings. The titles and headings of the various sections of
this Agreement have been inserted for convenience of reference only and
shall not be deemed to be a part of this Agreement.
14. Further Assurances. Each party hereto shall do and perform
(or shall cause to be done and performed) all such further acts and shall
execute and deliver all such other agreements, certificates, instruments
and documents as any party hereto reasonably may request in order to carry
out the intent and accomplish the purposes of this Agreement and the Plan
and the consummation of the transactions contemplated thereunder.
15. Severability. The invalidity or unenforceability of any
provisions of this Agreement in any jurisdiction shall not affect the
validity, legality or enforceability of the remainder of this Agreement in
such jurisdiction or the validity, legality or enforceability of any
provision of this Agreement in any other jurisdiction, it being intended
that all rights and obligations of the parties hereunder shall be
enforceable to the fullest extent permitted by law.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Optionee has hereunto set
his hand, all as of the Grant Date specified above.
READING & BATES CORPORATION
By:
Its: ___________________________
Optionee
EXHIBIT 10.41
STOCK OPTION AGREEMENT
pursuant to the
READING & BATES CORPORATION
1995 DIRECTOR STOCK OPTION PLAN
Optionee: Willem Cordia
Grant Date: As of February 7, 1995
Per Share
Exercise Price: $7.375
Number of Option Shares
subject to this Option: 15,000
This Stock Option Agreement (this "Agreement"), dated as of the
Grant Date specified above, is entered into by and between Reading & Bates
Corporation, a Delaware corporation (the "Company"), and the Optionee
specified above, pursuant to the Company's Director Stock Option Plan, as
in effect and as amended from time to time (the "Plan"); and
WHEREAS, it has been determined under the Plan that it would be in
the best interests of the Company to grant automatically the non-qualified
stock option provided for herein to the Optionee;
NOW, THEREFORE, in consideration of the mutual covenants and
premises hereinafter set forth and for other good and valuable
consideration, the parties hereto hereby mutually covenant and agree as
follows:
1. Incorporation By Reference; Plan Document Receipt. This
Agreement is subject in all respects to the terms and provisions of the
Plan (including, without limitation, any amendments thereto adopted at any
time and from time to time if such amendments are expressly intended to
apply to the grant of. the option hereunder), all of which terms and
provisions are made a part of and incorporated in this Agreement as if
they were each expressly set forth herein. Any capitalized term not
defined in Agreement shall have the same meaning as is ascribed thereto
under the Plan. The optionee hereby acknowledges receipt of a true copy
of the Plan and that the Optionee has read the Plan carefully and fully
understands its content. In the event of any conflict between the terms
of this Agreement and the terms of the Plan, the terms of the Plan shall
control.
2. Grant of Option. The Company hereby grants, subject to
shareholder approval of the Plan in accordance with SEC Rule 16b-3, to the
Optionee, as of the Grant Date specified above, a non-qualified stock
option (this "Option") to acquire from the Company at the Per Share
Exercise Price specified above the aggregate number of shares of the
Common Stock specified above (the "Option Shares"). This Option is not to
be treated as (and is not intended to qualify as) an incentive stock
option within the meaning of section 422 of the Code.
3. Exercise of this Option.
3.1 This Option shall become exercisable in accordance with
and to the extent provided by the terms and provisions of Paragraph s 6
and 7 of the Plan.
3.2 Unless earlier terminated in accordance with the terms
and provisions of the Plan, this Option shall expire and shall no longer
be exercisable after the expiration of ten years from the Grant Date (the
"Option Period").
3.3 In no event shall this Option be exercisable for a
fractional share of Common Stock.
4. Method of Exercise and Payment. This Option shall be
exercised by the optionee by delivering to the Secretary of the company or
his designated agent on any business day (the "Exercise Date") a written
notice, in such manner and form an may be required by the Company,
specifying the number of the Option Shares the Optionee then desires to
acquire (the "Exercise Notice"). The Exercise Notice shall be accompanied
by payment of the aggregate Per Share Exercise Price for such number of
the Option Shares to be acquired upon such exercise. Such payment shall
be made in the manner set forth in Paragraph 7 of the Plan.
5. Termination. This Option shall terminate and be of no force
or effect in accordance with and to the extent provided by the terms and
provisions of Paragraph 10 of the Plan. In any event, this Option shall
terminate upon the expiration of the Option Period.
6. Non-transferability. This Option, and any rights or interests
therein, shall not be sold, exchanged, transferred, assigned or otherwise
disposed of in any way at any time by the Optionee (or any
beneficiary(ies) of the Optionee), other than by testamentary disposition
by the Optionee or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Internal Revenue
Code, as amended, or Title I of the Employment Retisrement Security Act of
1974, as amended, or the rules thereunder. This Option shall not be
pledged, encumbered or otherwise hypothecated in any way at any time by
the optionee (or any beneficiary(ies) of the Optionee) and shall not be
subject to execution, attachment or similar legal process. Any attempt to
sell, exchange, pledge, transfer, assign, encumber or otherwise dispose of
or hypothecate this Option, or the levy of any execution, attachment or
similar legal process upon this Option, contrary to the terms of this
Agreement and/or the Plan shall be null and void and without legal force
or effect. This Option shall be exercisable during the Optionee's
lifetime only by the Optionee.
7. Entire Agreement; Amendment. This Agreement contains the
entire agreement between the parties hereto with respect to the subject
matter contained herein, and supersedes all prior agreements or prior
understandings, whether written or oral, between the parties relating to
such subject matter. This Agreement may only be modified or amended by a
writing signed by both the Company and the Optionee.
8. Notices. Any Exercise Notice or other notice which may be
required or permitted under this Agreement shall be in writing, and hall
be delivered in person or via facsimile transmission, overnight courier
service or certified mail, return receipt requested, postage prepaid,
properly addressed as follows:
If to Company: Reading & Bates Corporation
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Secretary
Fax: (713) 496-0285
If to Grantee:
or at such other address as the Company or Grantee may, by notice to the
other party hereto, designate in writing from time to time.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without
reference to the principles of conflict of law thereof.
10. Compliance with Laws. The issuance of this Option (and the
Option Shares upon exercise of this Option) pursuant to this Agreement
shall be subject to, and shall comply with, any applicable requirements of
any federal and state securities laws, rules and regulations (including,
without limitation, the provisions of the Securities Act of 1933, the
Exchange Act and the respective rules and regulations promulgated
thereunder) and any other law or regulation applicable thereto. The
Company shall not be obligated to issue this Option or any of the Option
Shares pursuant to this Agreement if any such issuance would violate any
such requirements.
11. Binding Agreement; Assignment. This Agreement shall inure to
the benefit of, be binding upon, and be enforceable by the Company and its
successors and assigns. The Optionee shall not assign any part of this
Agreement without the prior express written consent of the Company.
12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same instrument.
13. Headings. The titles and headings of the various sections of
this Agreement have been inserted for convenience of reference only and
shall not be deemed to be a part of this Agreement.
14. Further Assurances. Each party hereto shall do and perform
(or shall cause to be done and performed) all such further acts and shall
execute and deliver all such other agreements, certificates, instruments
and documents as any party hereto reasonably may request in order to carry
out the intent and accomplish the purposes of this Agreement and the Plan
and the consummation of the transactions contemplated thereunder.
15. Severability. The invalidity or unenforceability of any
provisions of this Agreement in any jurisdiction shall not affect the
validity, legality or enforceability of the remainder of this Agreement in
such jurisdiction or the validity, legality or enforceability of any
provision of this Agreement in any other jurisdiction, it being intended
that all rights and obligations of the parties hereunder shall be
enforceable to the fullest extent permitted by law.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Optionee has hereunto set
his hand, all as of the Grant Date specified above.
READING & BATES CORPORATION
By:
Its: ___________________________
Optionee
EXHIBIT 10.42
STOCK OPTION AGREEMENT
pursuant to the
READING & BATES CORPORATION
1995 DIRECTOR STOCK OPTION PLAN
Optionee: C.A. Donabedian
Grant Date: As of February 7, 1995
Per Share
Exercise Price: $7.375
Number of Option Shares
subject to this Option: 15,000
This Stock Option Agreement (this "Agreement"), dated as of the
Grant Date specified above, is entered into by and between Reading & Bates
Corporation, a Delaware corporation (the "Company"), and the Optionee
specified above, pursuant to the Company's Director Stock Option Plan, as
in effect and as amended from time to time (the "Plan"); and
WHEREAS, it has been determined under the Plan that it would be in
the best interests of the Company to grant automatically the non-qualified
stock option provided for herein to the Optionee;
NOW, THEREFORE, in consideration of the mutual covenants and
premises hereinafter set forth and for other good and valuable
consideration, the parties hereto hereby mutually covenant and agree as
follows:
1. Incorporation By Reference; Plan Document Receipt. This
Agreement is subject in all respects to the terms and provisions of the
Plan (including, without limitation, any amendments thereto adopted at any
time and from time to time if such amendments are expressly intended to
apply to the grant of. the option hereunder), all of which terms and
provisions are made a part of and incorporated in this Agreement as if
they were each expressly set forth herein. Any capitalized term not
defined in Agreement shall have the same meaning as is ascribed thereto
under the Plan. The optionee hereby acknowledges receipt of a true copy
of the Plan and that the Optionee has read the Plan carefully and fully
understands its content. In the event of any conflict between the terms
of this Agreement and the terms of the Plan, the terms of the Plan shall
control.
2. Grant of Option. The Company hereby grants, subject to
shareholder approval of the Plan in accordance with SEC Rule 16b-3, to the
Optionee, as of the Grant Date specified above, a non-qualified stock
option (this "Option") to acquire from the Company at the Per Share
Exercise Price specified above the aggregate number of shares of the
Common Stock specified above (the "Option Shares"). This Option is not to
be treated as (and is not intended to qualify as) an incentive stock
option within the meaning of section 422 of the Code.
3. Exercise of this Option.
3.1 This Option shall become exercisable in accordance with
and to the extent provided by the terms and provisions of Paragraph s 6
and 7 of the Plan.
3.2 Unless earlier terminated in accordance with the terms
and provisions of the Plan, this Option shall expire and shall no longer
be exercisable after the expiration of ten years from the Grant Date (the
"Option Period").
3.3 In no event shall this Option be exercisable for a
fractional share of Common Stock.
4. Method of Exercise and Payment. This Option shall be
exercised by the optionee by delivering to the Secretary of the company or
his designated agent on any business day (the "Exercise Date") a written
notice, in such manner and form an may be required by the Company,
specifying the number of the Option Shares the Optionee then desires to
acquire (the "Exercise Notice"). The Exercise Notice shall be accompanied
by payment of the aggregate Per Share Exercise Price for such number of
the Option Shares to be acquired upon such exercise. Such payment shall
be made in the manner set forth in Paragraph 7 of the Plan.
5. Termination. This Option shall terminate and be of no force
or effect in accordance with and to the extent provided by the terms and
provisions of Paragraph 10 of the Plan. In any event, this Option shall
terminate upon the expiration of the Option Period.
6. Non-transferability. This Option, and any rights or interests
therein, shall not be sold, exchanged, transferred, assigned or otherwise
disposed of in any way at any time by the Optionee (or any
beneficiary(ies) of the Optionee), other than by testamentary disposition
by the Optionee or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Internal Revenue
Code, as amended, or Title I of the Employment Retisrement Security Act of
1974, as amended, or the rules thereunder. This Option shall not be
pledged, encumbered or otherwise hypothecated in any way at any time by
the optionee (or any beneficiary(ies) of the Optionee) and shall not be
subject to execution, attachment or similar legal process. Any attempt to
sell, exchange, pledge, transfer, assign, encumber or otherwise dispose of
or hypothecate this Option, or the levy of any execution, attachment or
similar legal process upon this Option, contrary to the terms of this
Agreement and/or the Plan shall be null and void and without legal force
or effect. This Option shall be exercisable during the Optionee's
lifetime only by the Optionee.
7. Entire Agreement; Amendment. This Agreement contains the
entire agreement between the parties hereto with respect to the subject
matter contained herein, and supersedes all prior agreements or prior
understandings, whether written or oral, between the parties relating to
such subject matter. This Agreement may only be modified or amended by a
writing signed by both the Company and the Optionee.
8. Notices. Any Exercise Notice or other notice which may be
required or permitted under this Agreement shall be in writing, and hall
be delivered in person or via facsimile transmission, overnight courier
service or certified mail, return receipt requested, postage prepaid,
properly addressed as follows:
If to Company: Reading & Bates Corporation
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Secretary
Fax: (713) 496-0285
If to Grantee:
or at such other address as the Company or Grantee may, by notice to the
other party hereto, designate in writing from time to time.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without
reference to the principles of conflict of law thereof.
10. Compliance with Laws. The issuance of this Option (and the
Option Shares upon exercise of this Option) pursuant to this Agreement
shall be subject to, and shall comply with, any applicable requirements of
any federal and state securities laws, rules and regulations (including,
without limitation, the provisions of the Securities Act of 1933, the
Exchange Act and the respective rules and regulations promulgated
thereunder) and any other law or regulation applicable thereto. The
Company shall not be obligated to issue this Option or any of the Option
Shares pursuant to this Agreement if any such issuance would violate any
such requirements.
11. Binding Agreement; Assignment. This Agreement shall inure to
the benefit of, be binding upon, and be enforceable by the Company and its
successors and assigns. The Optionee shall not assign any part of this
Agreement without the prior express written consent of the Company.
12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same instrument.
13. Headings. The titles and headings of the various sections of
this Agreement have been inserted for convenience of reference only and
shall not be deemed to be a part of this Agreement.
14. Further Assurances. Each party hereto shall do and perform
(or shall cause to be done and performed) all such further acts and shall
execute and deliver all such other agreements, certificates, instruments
and documents as any party hereto reasonably may request in order to carry
out the intent and accomplish the purposes of this Agreement and the Plan
and the consummation of the transactions contemplated thereunder.
15. Severability. The invalidity or unenforceability of any
provisions of this Agreement in any jurisdiction shall not affect the
validity, legality or enforceability of the remainder of this Agreement in
such jurisdiction or the validity, legality or enforceability of any
provision of this Agreement in any other jurisdiction, it being intended
that all rights and obligations of the parties hereunder shall be
enforceable to the fullest extent permitted by law.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Optionee has hereunto set
his hand, all as of the Grant Date specified above.
READING & BATES CORPORATION
By:
Its: ___________________________
Optionee
EXHIBIT 10.43
STOCK OPTION AGREEMENT
pursuant to the
READING & BATES CORPORATION
1995 DIRECTOR STOCK OPTION PLAN
Optionee: Ted Kalborg
Grant Date: As of February 7, 1995
Per Share
Exercise Price: $7.375
Number of Option Shares
subject to this Option: 15,000
This Stock Option Agreement (this "Agreement"), dated as of the
Grant Date specified above, is entered into by and between Reading & Bates
Corporation, a Delaware corporation (the "Company"), and the Optionee
specified above, pursuant to the Company's Director Stock Option Plan, as
in effect and as amended from time to time (the "Plan"); and
WHEREAS, it has been determined under the Plan that it would be in
the best interests of the Company to grant automatically the non-qualified
stock option provided for herein to the Optionee;
NOW, THEREFORE, in consideration of the mutual covenants and
premises hereinafter set forth and for other good and valuable
consideration, the parties hereto hereby mutually covenant and agree as
follows:
1. Incorporation By Reference; Plan Document Receipt. This
Agreement is subject in all respects to the terms and provisions of the
Plan (including, without limitation, any amendments thereto adopted at any
time and from time to time if such amendments are expressly intended to
apply to the grant of. the option hereunder), all of which terms and
provisions are made a part of and incorporated in this Agreement as if
they were each expressly set forth herein. Any capitalized term not
defined in Agreement shall have the same meaning as is ascribed thereto
under the Plan. The optionee hereby acknowledges receipt of a true copy
of the Plan and that the Optionee has read the Plan carefully and fully
understands its content. In the event of any conflict between the terms
of this Agreement and the terms of the Plan, the terms of the Plan shall
control.
2. Grant of Option. The Company hereby grants, subject to
shareholder approval of the Plan in accordance with SEC Rule 16b-3, to the
Optionee, as of the Grant Date specified above, a non-qualified stock
option (this "Option") to acquire from the Company at the Per Share
Exercise Price specified above the aggregate number of shares of the
Common Stock specified above (the "Option Shares"). This Option is not to
be treated as (and is not intended to qualify as) an incentive stock
option within the meaning of section 422 of the Code.
3. Exercise of this Option.
3.1 This Option shall become exercisable in accordance with
and to the extent provided by the terms and provisions of Paragraph s 6
and 7 of the Plan.
3.2 Unless earlier terminated in accordance with the terms
and provisions of the Plan, this Option shall expire and shall no longer
be exercisable after the expiration of ten years from the Grant Date (the
"Option Period").
3.3 In no event shall this Option be exercisable for a
fractional share of Common Stock.
4. Method of Exercise and Payment. This Option shall be
exercised by the optionee by delivering to the Secretary of the company or
his designated agent on any business day (the "Exercise Date") a written
notice, in such manner and form an may be required by the Company,
specifying the number of the Option Shares the Optionee then desires to
acquire (the "Exercise Notice"). The Exercise Notice shall be accompanied
by payment of the aggregate Per Share Exercise Price for such number of
the Option Shares to be acquired upon such exercise. Such payment shall
be made in the manner set forth in Paragraph 7 of the Plan.
5. Termination. This Option shall terminate and be of no force
or effect in accordance with and to the extent provided by the terms and
provisions of Paragraph 10 of the Plan. In any event, this Option shall
terminate upon the expiration of the Option Period.
6. Non-transferability. This Option, and any rights or interests
therein, shall not be sold, exchanged, transferred, assigned or otherwise
disposed of in any way at any time by the Optionee (or any
beneficiary(ies) of the Optionee), other than by testamentary disposition
by the Optionee or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Internal Revenue
Code, as amended, or Title I of the Employment Retisrement Security Act of
1974, as amended, or the rules thereunder. This Option shall not be
pledged, encumbered or otherwise hypothecated in any way at any time by
the optionee (or any beneficiary(ies) of the Optionee) and shall not be
subject to execution, attachment or similar legal process. Any attempt to
sell, exchange, pledge, transfer, assign, encumber or otherwise dispose of
or hypothecate this Option, or the levy of any execution, attachment or
similar legal process upon this Option, contrary to the terms of this
Agreement and/or the Plan shall be null and void and without legal force
or effect. This Option shall be exercisable during the Optionee's
lifetime only by the Optionee.
7. Entire Agreement; Amendment. This Agreement contains the
entire agreement between the parties hereto with respect to the subject
matter contained herein, and supersedes all prior agreements or prior
understandings, whether written or oral, between the parties relating to
such subject matter. This Agreement may only be modified or amended by a
writing signed by both the Company and the Optionee.
8. Notices. Any Exercise Notice or other notice which may be
required or permitted under this Agreement shall be in writing, and hall
be delivered in person or via facsimile transmission, overnight courier
service or certified mail, return receipt requested, postage prepaid,
properly addressed as follows:
If to Company: Reading & Bates Corporation
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Secretary
Fax: (713) 496-0285
If to Grantee:
or at such other address as the Company or Grantee may, by notice to the
other party hereto, designate in writing from time to time.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without
reference to the principles of conflict of law thereof.
10. Compliance with Laws. The issuance of this Option (and the
Option Shares upon exercise of this Option) pursuant to this Agreement
shall be subject to, and shall comply with, any applicable requirements of
any federal and state securities laws, rules and regulations (including,
without limitation, the provisions of the Securities Act of 1933, the
Exchange Act and the respective rules and regulations promulgated
thereunder) and any other law or regulation applicable thereto. The
Company shall not be obligated to issue this Option or any of the Option
Shares pursuant to this Agreement if any such issuance would violate any
such requirements.
11. Binding Agreement; Assignment. This Agreement shall inure to
the benefit of, be binding upon, and be enforceable by the Company and its
successors and assigns. The Optionee shall not assign any part of this
Agreement without the prior express written consent of the Company.
12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same instrument.
13. Headings. The titles and headings of the various sections of
this Agreement have been inserted for convenience of reference only and
shall not be deemed to be a part of this Agreement.
14. Further Assurances. Each party hereto shall do and perform
(or shall cause to be done and performed) all such further acts and shall
execute and deliver all such other agreements, certificates, instruments
and documents as any party hereto reasonably may request in order to carry
out the intent and accomplish the purposes of this Agreement and the Plan
and the consummation of the transactions contemplated thereunder.
15. Severability. The invalidity or unenforceability of any
provisions of this Agreement in any jurisdiction shall not affect the
validity, legality or enforceability of the remainder of this Agreement in
such jurisdiction or the validity, legality or enforceability of any
provision of this Agreement in any other jurisdiction, it being intended
that all rights and obligations of the parties hereunder shall be
enforceable to the fullest extent permitted by law.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Optionee has hereunto set
his hand, all as of the Grant Date specified above.
READING & BATES CORPORATION
By:
Its: ___________________________
Optionee
EXHIBIT 10.44
STOCK OPTION AGREEMENT
pursuant to the
READING & BATES CORPORATION
1995 DIRECTOR STOCK OPTION PLAN
Optionee: J.W. McLean
Grant Date: As of February 7, 1995
Per Share
Exercise Price: $7.375
Number of Option Shares
subject to this Option: 15,000
This Stock Option Agreement (this "Agreement"), dated as of the
Grant Date specified above, is entered into by and between Reading & Bates
Corporation, a Delaware corporation (the "Company"), and the Optionee
specified above, pursuant to the Company's Director Stock Option Plan, as
in effect and as amended from time to time (the "Plan"); and
WHEREAS, it has been determined under the Plan that it would be in
the best interests of the Company to grant automatically the non-qualified
stock option provided for herein to the Optionee;
NOW, THEREFORE, in consideration of the mutual covenants and
premises hereinafter set forth and for other good and valuable
consideration, the parties hereto hereby mutually covenant and agree as
follows:
1. Incorporation By Reference; Plan Document Receipt. This
Agreement is subject in all respects to the terms and provisions of the
Plan (including, without limitation, any amendments thereto adopted at any
time and from time to time if such amendments are expressly intended to
apply to the grant of. the option hereunder), all of which terms and
provisions are made a part of and incorporated in this Agreement as if
they were each expressly set forth herein. Any capitalized term not
defined in Agreement shall have the same meaning as is ascribed thereto
under the Plan. The optionee hereby acknowledges receipt of a true copy
of the Plan and that the Optionee has read the Plan carefully and fully
understands its content. In the event of any conflict between the terms
of this Agreement and the terms of the Plan, the terms of the Plan shall
control.
2. Grant of Option. The Company hereby grants, subject to
shareholder approval of the Plan in accordance with SEC Rule 16b-3, to the
Optionee, as of the Grant Date specified above, a non-qualified stock
option (this "Option") to acquire from the Company at the Per Share
Exercise Price specified above the aggregate number of shares of the
Common Stock specified above (the "Option Shares"). This Option is not to
be treated as (and is not intended to qualify as) an incentive stock
option within the meaning of section 422 of the Code.
3. Exercise of this Option.
3.1 This Option shall become exercisable in accordance with
and to the extent provided by the terms and provisions of Paragraph s 6
and 7 of the Plan.
3.2 Unless earlier terminated in accordance with the terms
and provisions of the Plan, this Option shall expire and shall no longer
be exercisable after the expiration of ten years from the Grant Date (the
"Option Period").
3.3 In no event shall this Option be exercisable for a
fractional share of Common Stock.
4. Method of Exercise and Payment. This Option shall be
exercised by the optionee by delivering to the Secretary of the company or
his designated agent on any business day (the "Exercise Date") a written
notice, in such manner and form an may be required by the Company,
specifying the number of the Option Shares the Optionee then desires to
acquire (the "Exercise Notice"). The Exercise Notice shall be accompanied
by payment of the aggregate Per Share Exercise Price for such number of
the Option Shares to be acquired upon such exercise. Such payment shall
be made in the manner set forth in Paragraph 7 of the Plan.
5. Termination. This Option shall terminate and be of no force
or effect in accordance with and to the extent provided by the terms and
provisions of Paragraph 10 of the Plan. In any event, this Option shall
terminate upon the expiration of the Option Period.
6. Non-transferability. This Option, and any rights or interests
therein, shall not be sold, exchanged, transferred, assigned or otherwise
disposed of in any way at any time by the Optionee (or any
beneficiary(ies) of the Optionee), other than by testamentary disposition
by the Optionee or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Internal Revenue
Code, as amended, or Title I of the Employment Retisrement Security Act of
1974, as amended, or the rules thereunder. This Option shall not be
pledged, encumbered or otherwise hypothecated in any way at any time by
the optionee (or any beneficiary(ies) of the Optionee) and shall not be
subject to execution, attachment or similar legal process. Any attempt to
sell, exchange, pledge, transfer, assign, encumber or otherwise dispose of
or hypothecate this Option, or the levy of any execution, attachment or
similar legal process upon this Option, contrary to the terms of this
Agreement and/or the Plan shall be null and void and without legal force
or effect. This Option shall be exercisable during the Optionee's
lifetime only by the Optionee.
7. Entire Agreement; Amendment. This Agreement contains the
entire agreement between the parties hereto with respect to the subject
matter contained herein, and supersedes all prior agreements or prior
understandings, whether written or oral, between the parties relating to
such subject matter. This Agreement may only be modified or amended by a
writing signed by both the Company and the Optionee.
8. Notices. Any Exercise Notice or other notice which may be
required or permitted under this Agreement shall be in writing, and hall
be delivered in person or via facsimile transmission, overnight courier
service or certified mail, return receipt requested, postage prepaid,
properly addressed as follows:
If to Company: Reading & Bates Corporation
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Secretary
Fax: (713) 496-0285
If to Grantee:
or at such other address as the Company or Grantee may, by notice to the
other party hereto, designate in writing from time to time.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without
reference to the principles of conflict of law thereof.
10. Compliance with Laws. The issuance of this Option (and the
Option Shares upon exercise of this Option) pursuant to this Agreement
shall be subject to, and shall comply with, any applicable requirements of
any federal and state securities laws, rules and regulations (including,
without limitation, the provisions of the Securities Act of 1933, the
Exchange Act and the respective rules and regulations promulgated
thereunder) and any other law or regulation applicable thereto. The
Company shall not be obligated to issue this Option or any of the Option
Shares pursuant to this Agreement if any such issuance would violate any
such requirements.
11. Binding Agreement; Assignment. This Agreement shall inure to
the benefit of, be binding upon, and be enforceable by the Company and its
successors and assigns. The Optionee shall not assign any part of this
Agreement without the prior express written consent of the Company.
12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same instrument.
13. Headings. The titles and headings of the various sections of
this Agreement have been inserted for convenience of reference only and
shall not be deemed to be a part of this Agreement.
14. Further Assurances. Each party hereto shall do and perform
(or shall cause to be done and performed) all such further acts and shall
execute and deliver all such other agreements, certificates, instruments
and documents as any party hereto reasonably may request in order to carry
out the intent and accomplish the purposes of this Agreement and the Plan
and the consummation of the transactions contemplated thereunder.
15. Severability. The invalidity or unenforceability of any
provisions of this Agreement in any jurisdiction shall not affect the
validity, legality or enforceability of the remainder of this Agreement in
such jurisdiction or the validity, legality or enforceability of any
provision of this Agreement in any other jurisdiction, it being intended
that all rights and obligations of the parties hereunder shall be
enforceable to the fullest extent permitted by law.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Optionee has hereunto set
his hand, all as of the Grant Date specified above.
READING & BATES CORPORATION
By:
Its: ___________________________
Optionee
EXHIBIT 10.45
STOCK OPTION AGREEMENT
pursuant to the
READING & BATES CORPORATION
1995 DIRECTOR STOCK OPTION PLAN
Optionee: R.L. Sandmeyer
Grant Date: As of February 7, 1995
Per Share
Exercise Price: $7.375
Number of Option Shares
subject to this Option: 15,000
This Stock Option Agreement (this "Agreement"), dated as of the
Grant Date specified above, is entered into by and between Reading & Bates
Corporation, a Delaware corporation (the "Company"), and the Optionee
specified above, pursuant to the Company's Director Stock Option Plan, as
in effect and as amended from time to time (the "Plan"); and
WHEREAS, it has been determined under the Plan that it would be in
the best interests of the Company to grant automatically the non-qualified
stock option provided for herein to the Optionee;
NOW, THEREFORE, in consideration of the mutual covenants and
premises hereinafter set forth and for other good and valuable
consideration, the parties hereto hereby mutually covenant and agree as
follows:
1. Incorporation By Reference; Plan Document Receipt. This
Agreement is subject in all respects to the terms and provisions of the
Plan (including, without limitation, any amendments thereto adopted at any
time and from time to time if such amendments are expressly intended to
apply to the grant of. the option hereunder), all of which terms and
provisions are made a part of and incorporated in this Agreement as if
they were each expressly set forth herein. Any capitalized term not
defined in Agreement shall have the same meaning as is ascribed thereto
under the Plan. The optionee hereby acknowledges receipt of a true copy
of the Plan and that the Optionee has read the Plan carefully and fully
understands its content. In the event of any conflict between the terms
of this Agreement and the terms of the Plan, the terms of the Plan shall
control.
2. Grant of Option. The Company hereby grants, subject to
shareholder approval of the Plan in accordance with SEC Rule 16b-3, to the
Optionee, as of the Grant Date specified above, a non-qualified stock
option (this "Option") to acquire from the Company at the Per Share
Exercise Price specified above the aggregate number of shares of the
Common Stock specified above (the "Option Shares"). This Option is not to
be treated as (and is not intended to qualify as) an incentive stock
option within the meaning of section 422 of the Code.
3. Exercise of this Option.
3.1 This Option shall become exercisable in accordance with
and to the extent provided by the terms and provisions of Paragraph s 6
and 7 of the Plan.
3.2 Unless earlier terminated in accordance with the terms
and provisions of the Plan, this Option shall expire and shall no longer
be exercisable after the expiration of ten years from the Grant Date (the
"Option Period").
3.3 In no event shall this Option be exercisable for a
fractional share of Common Stock.
4. Method of Exercise and Payment. This Option shall be
exercised by the optionee by delivering to the Secretary of the company or
his designated agent on any business day (the "Exercise Date") a written
notice, in such manner and form an may be required by the Company,
specifying the number of the Option Shares the Optionee then desires to
acquire (the "Exercise Notice"). The Exercise Notice shall be accompanied
by payment of the aggregate Per Share Exercise Price for such number of
the Option Shares to be acquired upon such exercise. Such payment shall
be made in the manner set forth in Paragraph 7 of the Plan.
5. Termination. This Option shall terminate and be of no force
or effect in accordance with and to the extent provided by the terms and
provisions of Paragraph 10 of the Plan. In any event, this Option shall
terminate upon the expiration of the Option Period.
6. Non-transferability. This Option, and any rights or interests
therein, shall not be sold, exchanged, transferred, assigned or otherwise
disposed of in any way at any time by the Optionee (or any
beneficiary(ies) of the Optionee), other than by testamentary disposition
by the Optionee or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Internal Revenue
Code, as amended, or Title I of the Employment Retisrement Security Act of
1974, as amended, or the rules thereunder. This Option shall not be
pledged, encumbered or otherwise hypothecated in any way at any time by
the optionee (or any beneficiary(ies) of the Optionee) and shall not be
subject to execution, attachment or similar legal process. Any attempt to
sell, exchange, pledge, transfer, assign, encumber or otherwise dispose of
or hypothecate this Option, or the levy of any execution, attachment or
similar legal process upon this Option, contrary to the terms of this
Agreement and/or the Plan shall be null and void and without legal force
or effect. This Option shall be exercisable during the Optionee's
lifetime only by the Optionee.
7. Entire Agreement; Amendment. This Agreement contains the
entire agreement between the parties hereto with respect to the subject
matter contained herein, and supersedes all prior agreements or prior
understandings, whether written or oral, between the parties relating to
such subject matter. This Agreement may only be modified or amended by a
writing signed by both the Company and the Optionee.
8. Notices. Any Exercise Notice or other notice which may be
required or permitted under this Agreement shall be in writing, and hall
be delivered in person or via facsimile transmission, overnight courier
service or certified mail, return receipt requested, postage prepaid,
properly addressed as follows:
If to Company: Reading & Bates Corporation
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Secretary
Fax: (713) 496-0285
If to Grantee:
or at such other address as the Company or Grantee may, by notice to the
other party hereto, designate in writing from time to time.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without
reference to the principles of conflict of law thereof.
10. Compliance with Laws. The issuance of this Option (and the
Option Shares upon exercise of this Option) pursuant to this Agreement
shall be subject to, and shall comply with, any applicable requirements of
any federal and state securities laws, rules and regulations (including,
without limitation, the provisions of the Securities Act of 1933, the
Exchange Act and the respective rules and regulations promulgated
thereunder) and any other law or regulation applicable thereto. The
Company shall not be obligated to issue this Option or any of the Option
Shares pursuant to this Agreement if any such issuance would violate any
such requirements.
11. Binding Agreement; Assignment. This Agreement shall inure to
the benefit of, be binding upon, and be enforceable by the Company and its
successors and assigns. The Optionee shall not assign any part of this
Agreement without the prior express written consent of the Company.
12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same instrument.
13. Headings. The titles and headings of the various sections of
this Agreement have been inserted for convenience of reference only and
shall not be deemed to be a part of this Agreement.
14. Further Assurances. Each party hereto shall do and perform
(or shall cause to be done and performed) all such further acts and shall
execute and deliver all such other agreements, certificates, instruments
and documents as any party hereto reasonably may request in order to carry
out the intent and accomplish the purposes of this Agreement and the Plan
and the consummation of the transactions contemplated thereunder.
15. Severability. The invalidity or unenforceability of any
provisions of this Agreement in any jurisdiction shall not affect the
validity, legality or enforceability of the remainder of this Agreement in
such jurisdiction or the validity, legality or enforceability of any
provision of this Agreement in any other jurisdiction, it being intended
that all rights and obligations of the parties hereunder shall be
enforceable to the fullest extent permitted by law.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Optionee has hereunto set
his hand, all as of the Grant Date specified above.
READING & BATES CORPORATION
By:
Its: ___________________________
Optionee
EXHIBIT 10.46
STOCK OPTION AGREEMENT
pursuant to the
READING & BATES CORPORATION
1995 DIRECTOR STOCK OPTION PLAN
Optionee: S.A. Webster
Grant Date: As of February 7, 1995
Per Share
Exercise Price: $7.375
Number of Option Shares
subject to this Option: 15,000
This Stock Option Agreement (this "Agreement"), dated as of the
Grant Date specified above, is entered into by and between Reading & Bates
Corporation, a Delaware corporation (the "Company"), and the Optionee
specified above, pursuant to the Company's Director Stock Option Plan, as
in effect and as amended from time to time (the "Plan"); and
WHEREAS, it has been determined under the Plan that it would be in
the best interests of the Company to grant automatically the non-qualified
stock option provided for herein to the Optionee;
NOW, THEREFORE, in consideration of the mutual covenants and
premises hereinafter set forth and for other good and valuable
consideration, the parties hereto hereby mutually covenant and agree as
follows:
1. Incorporation By Reference; Plan Document Receipt. This
Agreement is subject in all respects to the terms and provisions of the
Plan (including, without limitation, any amendments thereto adopted at any
time and from time to time if such amendments are expressly intended to
apply to the grant of. the option hereunder), all of which terms and
provisions are made a part of and incorporated in this Agreement as if
they were each expressly set forth herein. Any capitalized term not
defined in Agreement shall have the same meaning as is ascribed thereto
under the Plan. The optionee hereby acknowledges receipt of a true copy
of the Plan and that the Optionee has read the Plan carefully and fully
understands its content. In the event of any conflict between the terms
of this Agreement and the terms of the Plan, the terms of the Plan shall
control.
2. Grant of Option. The Company hereby grants, subject to
shareholder approval of the Plan in accordance with SEC Rule 16b-3, to the
Optionee, as of the Grant Date specified above, a non-qualified stock
option (this "Option") to acquire from the Company at the Per Share
Exercise Price specified above the aggregate number of shares of the
Common Stock specified above (the "Option Shares"). This Option is not to
be treated as (and is not intended to qualify as) an incentive stock
option within the meaning of section 422 of the Code.
3. Exercise of this Option.
3.1 This Option shall become exercisable in accordance with
and to the extent provided by the terms and provisions of Paragraph s 6
and 7 of the Plan.
3.2 Unless earlier terminated in accordance with the terms
and provisions of the Plan, this Option shall expire and shall no longer
be exercisable after the expiration of ten years from the Grant Date (the
"Option Period").
3.3 In no event shall this Option be exercisable for a
fractional share of Common Stock.
4. Method of Exercise and Payment. This Option shall be
exercised by the optionee by delivering to the Secretary of the company or
his designated agent on any business day (the "Exercise Date") a written
notice, in such manner and form an may be required by the Company,
specifying the number of the Option Shares the Optionee then desires to
acquire (the "Exercise Notice"). The Exercise Notice shall be accompanied
by payment of the aggregate Per Share Exercise Price for such number of
the Option Shares to be acquired upon such exercise. Such payment shall
be made in the manner set forth in Paragraph 7 of the Plan.
5. Termination. This Option shall terminate and be of no force
or effect in accordance with and to the extent provided by the terms and
provisions of Paragraph 10 of the Plan. In any event, this Option shall
terminate upon the expiration of the Option Period.
6. Non-transferability. This Option, and any rights or interests
therein, shall not be sold, exchanged, transferred, assigned or otherwise
disposed of in any way at any time by the Optionee (or any
beneficiary(ies) of the Optionee), other than by testamentary disposition
by the Optionee or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Internal Revenue
Code, as amended, or Title I of the Employment Retisrement Security Act of
1974, as amended, or the rules thereunder. This Option shall not be
pledged, encumbered or otherwise hypothecated in any way at any time by
the optionee (or any beneficiary(ies) of the Optionee) and shall not be
subject to execution, attachment or similar legal process. Any attempt to
sell, exchange, pledge, transfer, assign, encumber or otherwise dispose of
or hypothecate this Option, or the levy of any execution, attachment or
similar legal process upon this Option, contrary to the terms of this
Agreement and/or the Plan shall be null and void and without legal force
or effect. This Option shall be exercisable during the Optionee's
lifetime only by the Optionee.
7. Entire Agreement; Amendment. This Agreement contains the
entire agreement between the parties hereto with respect to the subject
matter contained herein, and supersedes all prior agreements or prior
understandings, whether written or oral, between the parties relating to
such subject matter. This Agreement may only be modified or amended by a
writing signed by both the Company and the Optionee.
8. Notices. Any Exercise Notice or other notice which may be
required or permitted under this Agreement shall be in writing, and hall
be delivered in person or via facsimile transmission, overnight courier
service or certified mail, return receipt requested, postage prepaid,
properly addressed as follows:
If to Company: Reading & Bates Corporation
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Secretary
Fax: (713) 496-0285
If to Grantee:
or at such other address as the Company or Grantee may, by notice to the
other party hereto, designate in writing from time to time.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without
reference to the principles of conflict of law thereof.
10. Compliance with Laws. The issuance of this Option (and the
Option Shares upon exercise of this Option) pursuant to this Agreement
shall be subject to, and shall comply with, any applicable requirements of
any federal and state securities laws, rules and regulations (including,
without limitation, the provisions of the Securities Act of 1933, the
Exchange Act and the respective rules and regulations promulgated
thereunder) and any other law or regulation applicable thereto. The
Company shall not be obligated to issue this Option or any of the Option
Shares pursuant to this Agreement if any such issuance would violate any
such requirements.
11. Binding Agreement; Assignment. This Agreement shall inure to
the benefit of, be binding upon, and be enforceable by the Company and its
successors and assigns. The Optionee shall not assign any part of this
Agreement without the prior express written consent of the Company.
12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same instrument.
13. Headings. The titles and headings of the various sections of
this Agreement have been inserted for convenience of reference only and
shall not be deemed to be a part of this Agreement.
14. Further Assurances. Each party hereto shall do and perform
(or shall cause to be done and performed) all such further acts and shall
execute and deliver all such other agreements, certificates, instruments
and documents as any party hereto reasonably may request in order to carry
out the intent and accomplish the purposes of this Agreement and the Plan
and the consummation of the transactions contemplated thereunder.
15. Severability. The invalidity or unenforceability of any
provisions of this Agreement in any jurisdiction shall not affect the
validity, legality or enforceability of the remainder of this Agreement in
such jurisdiction or the validity, legality or enforceability of any
provision of this Agreement in any other jurisdiction, it being intended
that all rights and obligations of the parties hereunder shall be
enforceable to the fullest extent permitted by law.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Optionee has hereunto set
his hand, all as of the Grant Date specified above.
READING & BATES CORPORATION
By:
Its: ___________________________
Optionee
EXHIBIT 10.47
STOCK OPTION AGREEMENT
pursuant to the
READING & BATES CORPORATION
1995 DIRECTOR STOCK OPTION PLAN
Optionee: Macko A.E. Lacqueur
Grant Date: April 19, 1995
Per Share
Exercise Price: $7.375
Number of Option Shares
subject to this Option: 15,000
This Stock Option Agreement (this "Agreement"), dated as of the
Grant Date specified above, is entered into by and between Reading & Bates
Corporation, a Delaware corporation (the "Company"), and the Optionee
specified above, pursuant to the Company's Director Stock Option Plan, as
in effect and as amended from time to time (the "Plan"); and
WHEREAS, it has been determined under the Plan that it would be in
the best interests of the Company to grant automatically the non-qualified
stock option provided for herein to the Optionee;
NOW, THEREFORE, in consideration of the mutual covenants and
premises hereinafter set forth and for other good and valuable
consideration, the parties hereto hereby mutually covenant and agree as
follows:
1. Incorporation By Reference; Plan Document Receipt. This
Agreement is subject in all respects to the terms and provisions of the
Plan (including, without limitation, any amendments thereto adopted at any
time and from time to time if such amendments are expressly intended to
apply to the grant of. the option hereunder), all of which terms and
provisions are made a part of and incorporated in this Agreement as if
they were each expressly set forth herein. Any capitalized term not
defined in Agreement shall have the same meaning as is ascribed thereto
under the Plan. The optionee hereby acknowledges receipt of a true copy
of the Plan and that the Optionee has read the Plan carefully and fully
understands its content. In the event of any conflict between the terms
of this Agreement and the terms of the Plan, the terms of the Plan shall
control.
2. Grant of Option. The Company hereby grants, subject to
shareholder approval of the Plan in accordance with SEC Rule 16b-3, to the
Optionee, as of the Grant Date specified above, a non-qualified stock
option (this "Option") to acquire from the Company at the Per Share
Exercise Price specified above the aggregate number of shares of the
Common Stock specified above (the "Option Shares"). This Option is not to
be treated as (and is not intended to qualify as) an incentive stock
option within the meaning of section 422 of the Code.
3. Exercise of this Option.
3.1 This Option shall become exercisable in accordance with
and to the extent provided by the terms and provisions of Paragraph s 6
and 7 of the Plan.
3.2 Unless earlier terminated in accordance with the terms
and provisions of the Plan, this Option shall expire and shall no longer
be exercisable after the expiration of ten years from the Grant Date (the
"Option Period").
3.3 In no event shall this Option be exercisable for a
fractional share of Common Stock.
4. Method of Exercise and Payment. This Option shall be
exercised by the optionee by delivering to the Secretary of the company or
his designated agent on any business day (the "Exercise Date") a written
notice, in such manner and form an may be required by the Company,
specifying the number of the Option Shares the Optionee then desires to
acquire (the "Exercise Notice"). The Exercise Notice shall be accompanied
by payment of the aggregate Per Share Exercise Price for such number of
the Option Shares to be acquired upon such exercise. Such payment shall
be made in the manner set forth in Paragraph 7 of the Plan.
5. Termination. This Option shall terminate and be of no force
or effect in accordance with and to the extent provided by the terms and
provisions of Paragraph 10 of the Plan. In any event, this Option shall
terminate upon the expiration of the Option Period.
6. Non-transferability. This Option, and any rights or interests
therein, shall not be sold, exchanged, transferred, assigned or otherwise
disposed of in any way at any time by the Optionee (or any
beneficiary(ies) of the Optionee), other than by testamentary disposition
by the Optionee or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Internal Revenue
Code, as amended, or Title I of the Employment Retisrement Security Act of
1974, as amended, or the rules thereunder. This Option shall not be
pledged, encumbered or otherwise hypothecated in any way at any time by
the optionee (or any beneficiary(ies) of the Optionee) and shall not be
subject to execution, attachment or similar legal process. Any attempt to
sell, exchange, pledge, transfer, assign, encumber or otherwise dispose of
or hypothecate this Option, or the levy of any execution, attachment or
similar legal process upon this Option, contrary to the terms of this
Agreement and/or the Plan shall be null and void and without legal force
or effect. This Option shall be exercisable during the Optionee's
lifetime only by the Optionee.
7. Entire Agreement; Amendment. This Agreement contains the
entire agreement between the parties hereto with respect to the subject
matter contained herein, and supersedes all prior agreements or prior
understandings, whether written or oral, between the parties relating to
such subject matter. This Agreement may only be modified or amended by a
writing signed by both the Company and the Optionee.
8. Notices. Any Exercise Notice or other notice which may be
required or permitted under this Agreement shall be in writing, and hall
be delivered in person or via facsimile transmission, overnight courier
service or certified mail, return receipt requested, postage prepaid,
properly addressed as follows:
If to Company: Reading & Bates Corporation
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Secretary
Fax: (713) 496-0285
If to Grantee: Macko A. E. Laqueur
c/o Venture Capital Investors
Herengracht 468
1017 CA Amsterdam
The Netherlands
or at such other address as the Company or Grantee may, by notice to the
other party hereto, designate in writing from time to time.
9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without
reference to the principles of conflict of law thereof.
10. Compliance with Laws. The issuance of this Option (and the
Option Shares upon exercise of this Option) pursuant to this Agreement
shall be subject to, and shall comply with, any applicable requirements of
any federal and state securities laws, rules and regulations (including,
without limitation, the provisions of the Securities Act of 1933, the
Exchange Act and the respective rules and regulations promulgated
thereunder) and any other law or regulation applicable thereto. The
Company shall not be obligated to issue this Option or any of the Option
Shares pursuant to this Agreement if any such issuance would violate any
such requirements.
11. Binding Agreement; Assignment. This Agreement shall inure to
the benefit of, be binding upon, and be enforceable by the Company and its
successors and assigns. The Optionee shall not assign any part of this
Agreement without the prior express written consent of the Company.
12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same instrument.
13. Headings. The titles and headings of the various sections of
this Agreement have been inserted for convenience of reference only and
shall not be deemed to be a part of this Agreement.
14. Further Assurances. Each party hereto shall do and perform
(or shall cause to be done and performed) all such further acts and shall
execute and deliver all such other agreements, certificates, instruments
and documents as any party hereto reasonably may request in order to carry
out the intent and accomplish the purposes of this Agreement and the Plan
and the consummation of the transactions contemplated thereunder.
15. Severability. The invalidity or unenforceability of any
provisions of this Agreement in any jurisdiction shall not affect the
validity, legality or enforceability of the remainder of this Agreement in
such jurisdiction or the validity, legality or enforceability of any
provision of this Agreement in any other jurisdiction, it being intended
that all rights and obligations of the parties hereunder shall be
enforceable to the fullest extent permitted by law.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Optionee has hereunto set
his hand, all as of the Grant Date specified above.
READING & BATES CORPORATION
By:
Its:
Optionee
EXHIBIT 10.48
READING & BATES CORPORATION
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") between Reading &
Bates Corporation, a Delaware corporation ("Company") and Paul B. Loyd,
Jr. ("Optionee"),
WITNESSETH:
WHEREAS, the Committee that administers the Reading & Bates
Corporation 1995 Long-Term Incentive Plan ("Plan") has selected the
Optionee, the Chairman, President and Chief Executive Officer of the
Company, to receive a nonqualified stock option under the terms of the
Plan as an incentive to the Optionee to remain in the employ of the
Company and contribute to the performance of the Company, on the terms and
subject to the conditions provided herein;
NOW THEREFORE, for and in consideration of these premises, it
is hereby agreed as follows:
1. The Option is issued in accordance with and subject to
all of the terms, conditions and provisions of the Plan and administrative
interpretations thereunder, if any, which have been adopted by the
Committee and are in effect on the date hereof. Capitalized terms used
but not defined herein shall have the meanings assigned to such terms in
the Plan.
2. On the terms and subject to the conditions contained
herein, the Committee hereby grants to the Optionee an option for a term
of ten years ending on December 5, 2005 ("Option Period") to purchase from
the Company 600,000 shares ("Option Shares") of the Company's Common
Stock, at a price equal to $13.875 per share.
3. This Option shall not be exercisable, except upon the
death or disability of the Optionee, until after 6 months immediately
following the date this Option is granted, and thereafter shall be
exercisable for Common Stock as follows:
(a) After one year following the effective date of
grant, this Option shall be exercisable for any number of shares up to and
including, but not in excess of, 33-1/3% of the aggregate number of shares
subject to this Option; and
(b) After two years following the effective date of
grant, this Option shall be exercisable for any number of shares up to and
including, but not in excess of, 66-2/3% of the aggregate number of shares
subject to this Option; and
(c) After three years following the effective date of
grant, this Option shall be exercisable for any number of shares of Common
Stock up to and including, but not in excess of, 100% of the aggregate
number of shares subject to this Option;
provided the number of shares as to which this Option becomes exercisable
shall, in each case, be reduced by the number of shares theretofore
purchased pursuant to the terms hereof.
4. The option herein granted may be exercised by the
Optionee by giving written notice to the Secretary of the Company setting
forth the number of Option Shares with respect to which the option is to
be exercised, accompanied by payment for the shares to be purchased and
any appropriate withholding taxes, and specifying the address to which the
certificate for such shares is to be mailed. Payment shall be by means of
cash, certified check, bank draft or postal money order payable to the
order of the Company. As promptly as practicable after receipt of such
written notification and payment, the Company shall deliver to the
Optionee certificates for the number of Option Shares with respect to
which such option has been so exercised.
5. Subject to approval of the Committee, which shall not be
unreasonably withheld, the Optionee may pay for any Option Shares with
respect to which the option herein granted is exercised by tendering to
the Company other shares of Common Stock at the time of the exercise or
partial exercise hereof. The certificates representing such other shares
of Common Stock must be accompanied by a stock power duly executed with
signature guaranteed. The value of the Common Stock so tendered shall be
its Fair Market Value.
6. If the Optionee's employment with the Company is
terminated during the Option Period for any reason other than death or
disability or "Good Reason" or during a "Window Period" (in each case as
"Good Reason" and "Window Period" are defined in that certain Employment
Agreement between the Company and Optionee dated as of January 1, 1992, as
amended, ("Employment Agreement")) whether during or after the Employment
Period (as defined in the Employment Agreement), then (i) the options
herein granted to him that are not exercisable on the date of his
termination of employment shall thereupon terminate, and (ii) any options
herein granted to him that are exercisable on the date of his termination
of employment may be exercised by the Optionee during a three-month period
beginning on such date, unless the Option Period shall expire prior to
such date, and shall thereafter terminate.
7. If the Optionee's employment with the Company is
terminated (whether during or after the Employment Period, as defined
above) (i) by the Optionee for Good Reason or during a Window Period; (ii)
for any reason by the Company other than for "Cause" (as defined in the
Employment Agreement) or (iii) by reason of death or disability, then (a)
the Options granted to him that are not exercisable on the date of such
termination of employment shall be thereupon be fully exercisable, and (b)
all Options then held by the Optionee, whether theretofore exercisable or
exercisable by reason of the termination of employment may be exercised by
the Optionee during the full remaining term of this Option; provided,
however, that all Options granted hereunder shall expire and not be
exercisable on the first anniversary of the Optionee's death.
8. The option herein granted shall not be transferable by
the Optionee otherwise than as permitted by Section 13 of the Plan.
During the lifetime of the Optionee, such option shall be exercisable only
by him. No transfer of the option herein granted shall be effective to
bind the Company unless the Company shall have been furnished with written
notice thereof and a copy of such evidence as the Committee may deem
necessary to establish the validity of the transfer and the acceptance by
the transferee or transferees of the terms and conditions hereof.
9. The Optionee shall have no rights as a stockholder with
respect to any Option Shares until the date of issuance of a certificate
for Option Shares purchased pursuant to this Agreement. Until such time,
the Optionee shall not be entitled to dividends or to vote at meetings of
the stockholders of the Company.
10. The Company may make such provisions as it may deem
appropriate for the withholding of any taxes which it determines is
required in connection with the option herein granted. The Optionee may
pay all or any portion of the taxes required to be withheld by the Company
or paid by the Optionee in connection with the exercise of all or any
portion of the option herein granted by electing to have the Company
withhold shares of Common Stock, or by delivering previously owned shares
of Common Stock, having a Fair Market Value equal to the amount required
to be withheld or paid. The Optionee must make the foregoing election on
or before the date that the amount of tax to be withheld is determined
("Tax Date"). Any such election is irrevocable and subject to disapproval
by the Committee. If the Optionee is subject to the short-swing profits
recapture provisions of Section 16(b) of the Exchange Act, any such
election shall be subject to the following additional restrictions:
(a) Such election may not be made within six months of
the grant of this option, provided that this limitation shall not apply in
the event of death or disability.
(b) Such election must be made either in an Election
Window (as hereinafter defined) or at such other time as may be consistent
with Section 16(b)(3) of the Exchange Act. Where the Tax Date in respect
of the exercise of all or any portion of this Option is deferred until
after such exercise and the Optionee elects stock withholding, the full
amount of shares of Common Stock will be issued or transferred to the
Optionee upon exercise of this Option, but the Optionee shall be
unconditionally obligated to tender back to the Company on the Tax Date
the number of shares necessary to discharge with respect to such Option
exercise the greater of (i) the Company's withholding obligation and (ii)
all or any portion of the holder's federal and state tax obligation
attributable to the Option exercise. An Election Window is any period
commencing on the third business day following the Company's release of a
quarterly or annual summary statement of sales and earnings and ending on
the twelfth business day following such release.
11. Upon the acquisition of any shares pursuant to the
exercise of the option herein granted, the Optionee will enter into such
written representations, warranties and agreements as the Company may
reasonably request in order to comply with applicable securities laws or
with this Agreement.
12. The certificates representing the Option Shares
purchased by exercise of an option will be stamped or otherwise imprinted
with a legend in such form as the Company or its counsel may require with
respect to any applicable restrictions on sale or transfer, and the stock
transfer records of the Company will reflect stop-transfer instructions,
as appropriate, with respect to such shares.
13. Unless otherwise provided herein, every notice hereunder
shall be in writing and shall be given by registered or certified mail.
All notices of the exercise by the Optionee of any option hereunder shall
be directed to Reading & Bates Corporation, Attention: Secretary, at the
Company's current address. Any notice given by the Company to the
Optionee directed to him at his address on file with the Company shall be
effective to bind any other person who shall acquire rights hereunder.
The Company shall be under no obligation whatsoever to advise the Optionee
of the existence, maturity or termination of any of the Optionee's rights
hereunder and the Optionee shall be deemed to have familiarized himself
with all matters contained herein and in the Plan which may affect any of
the Optionee's rights or privileges hereunder.
14. Whenever the term "Optionee" is used herein under
circumstances applicable to any other person or persons to whom this
award, in accordance with the provisions of Paragraph 8, may be
transferred, the word "Optionee" shall be deemed to include such person or
persons. References to the masculine gender herein also include the
feminine gender for all purposes.
15. Notwithstanding any of the other provisions hereof, the
Optionee agrees that he will not exercise the option herein granted, and
that the Company will not be obligated to issue any shares pursuant to
this Agreement, if the exercise of the option or the issuance of such
shares of Common Stock would constitute a violation by the Optionee or by
the Company of any provision of any law or regulation of any governmental
authority or any national securities exchange.
16. The option to purchase Option Shares evidenced by this
Agreement shall be fully and immediately exercisable upon a Change of
Control of the Company as defined in the Employment Agreement.
17. This Agreement is subject to the Plan, a copy of which
has been provided the Optionee and for which the Optionee acknowledges
receipt. The terms and provisions of the Plan (including any subsequent
amendments thereto) are incorporated herein by reference. In the event of
a conflict between any term or provision contained herein and a term or
provision of the Plan, the applicable terms and provisions of the Plan
will govern and prevail. All definitions of words and terms contained in
the Plan shall be applicable to this Agreement.
18. In the event of a corporate merger or other business
combination in which the Company is not the surviving entity, the economic
equivalent number of the voting shares of common stock of, or
participating interests in, the surviving entity, based on the terms of
such merger or other business combination, shall be substituted for the
Option Shares hereunder, and the price per share set out in Section 2
hereof shall be adjusted to reflect substantially the same economic
equivalent value of the Option Shares to the Optionee immediately prior to
any such merger or other business combination.
IN WITNESS WHEREOF, this Agreement is executed this 6th day of
February, 1996, effective as of the 5th day of December, 1995.
READING & BATES CORPORATION
By:
Paul B. Loyd, Jr.
EXHIBIT 10.49
READING & BATES CORPORATION
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") between Reading &
Bates Corporation, a Delaware corporation ("Company") and Paul B. Loyd,
Jr. ("Optionee"),
WITNESSETH:
WHEREAS, the Committee that administers the Reading & Bates
Corporation 1992 Long-Term Incentive Plan ("Plan") has selected the
Optionee, the Chairman, President and Chief Executive Officer of the
Company, to receive a nonqualified stock option under the terms of the
Plan as an incentive to the Optionee to remain in the employ of the
Company and contribute to the performance of the Company, on the terms and
subject to the conditions provided herein;
NOW THEREFORE, for and in consideration of these premises, it
is hereby agreed as follows:
1. The Option is issued in accordance with and subject to
all of the terms, conditions and provisions of the Plan and administrative
interpretations thereunder, if any, which have been adopted by the
Committee and are in effect on the date hereof. Capitalized terms used
but not defined herein shall have the meanings assigned to such terms in
the Plan.
2. On the terms and subject to the conditions contained
herein, the Committee hereby grants to the Optionee an option for a term
of ten years ending on December 5, 2005 ("Option Period") to purchase from
the Company 300,000 shares ("Option Shares") of the Company's Common
Stock, at a price equal to $13.875 per share.
3. This Option shall not be exercisable, except upon the
death or disability of the Optionee, until after 6 months immediately
following the date this Option is granted, and thereafter shall be
exercisable for Common Stock as follows:
(a) After one year following the effective date of
grant, this Option shall be exercisable for any number of shares up to and
including, but not in excess of, 33-1/3% of the aggregate number of shares
subject to this Option; and
(b) After two years following the effective date of
grant, this Option shall be exercisable for any number of shares up to and
including, but not in excess of, 66-2/3% of the aggregate number of shares
subject to this Option; and
(c) After three years following the effective date of
grant, this Option shall be exercisable for any number of shares of Common
Stock up to and including, but not in excess of, 100% of the aggregate
number of shares subject to this Option;
provided the number of shares as to which this Option becomes exercisable
shall, in each case, be reduced by the number of shares theretofore
purchased pursuant to the terms hereof.
4. The option herein granted may be exercised by the
Optionee by giving written notice to the Secretary of the Company setting
forth the number of Option Shares with respect to which the option is to
be exercised, accompanied by payment for the shares to be purchased and
any appropriate withholding taxes, and specifying the address to which the
certificate for such shares is to be mailed. Payment shall be by means of
cash, certified check, bank draft or postal money order payable to the
order of the Company. As promptly as practicable after receipt of such
written notification and payment, the Company shall deliver to the
Optionee certificates for the number of Option Shares with respect to
which such option has been so exercised.
5. Subject to approval of the Committee, which shall not be
unreasonably withheld, the Optionee may pay for any Option Shares with
respect to which the option herein granted is exercised by tendering to
the Company other shares of Common Stock at the time of the exercise or
partial exercise hereof. The certificates representing such other shares
of Common Stock must be accompanied by a stock power duly executed with
signature guaranteed. The value of the Common Stock so tendered shall be
its Fair Market Value.
6. If the Optionee's employment with the Company is
terminated during the Option Period for any reason other than death or
disability or "Good Reason" or during a "Window Period" (in each case as
"Good Reason" and "Window Period" are defined in that certain Employment
Agreement between the Company and Optionee dated as of January 1, 1992, as
amended, ("Employment Agreement")) whether during or after the Employment
Period (as defined in the Employment Agreement), then (i) the options
herein granted to him that are not exercisable on the date of his
termination of employment shall thereupon terminate, and (ii) any options
herein granted to him that are exercisable on the date of his termination
of employment may be exercised by the Optionee during a three-month period
beginning on such date, unless the Option Period shall expire prior to
such date, and shall thereafter terminate.
7. If the Optionee's employment with the Company is
terminated (whether during or after the Employment Period, as defined
above) (i) by the Optionee for Good Reason or during a Window Period; (ii)
for any reason by the Company other than for "Cause" (as defined in the
Employment Agreement) or (iii) by reason of death or disability, then (a)
the Options granted to him that are not exercisable on the date of such
termination of employment shall be thereupon be fully exercisable, and (b)
all Options then held by the Optionee, whether theretofore exercisable or
exercisable by reason of the termination of employment may be exercised by
the Optionee during the full remaining term of this Option; provided,
however, that all Options granted hereunder shall expire and not be
exercisable on the first anniversary of the Optionee's death.
8. The option herein granted shall not be transferable by
the Optionee otherwise than as permitted by Section 13 of the Plan.
During the lifetime of the Optionee, such option shall be exercisable only
by him. No transfer of the option herein granted shall be effective to
bind the Company unless the Company shall have been furnished with written
notice thereof and a copy of such evidence as the Committee may deem
necessary to establish the validity of the transfer and the acceptance by
the transferee or transferees of the terms and conditions hereof.
9. The Optionee shall have no rights as a stockholder with
respect to any Option Shares until the date of issuance of a certificate
for Option Shares purchased pursuant to this Agreement. Until such time,
the Optionee shall not be entitled to dividends or to vote at meetings of
the stockholders of the Company.
10. The Company may make such provisions as it may deem
appropriate for the withholding of any taxes which it determines is
required in connection with the option herein granted. The Optionee may
pay all or any portion of the taxes required to be withheld by the Company
or paid by the Optionee in connection with the exercise of all or any
portion of the option herein granted by electing to have the Company
withhold shares of Common Stock, or by delivering previously owned shares
of Common Stock, having a Fair Market Value equal to the amount required
to be withheld or paid. The Optionee must make the foregoing election on
or before the date that the amount of tax to be withheld is determined
("Tax Date"). Any such election is irrevocable and subject to disapproval
by the Committee. If the Optionee is subject to the short-swing profits
recapture provisions of Section 16(b) of the Exchange Act, any such
election shall be subject to the following additional restrictions:
(a) Such election may not be made within six months of
the grant of this option, provided that this limitation shall not apply in
the event of death or disability.
(b) Such election must be made either in an Election
Window (as hereinafter defined) or at such other time as may be consistent
with Section 16(b)(3) of the Exchange Act. Where the Tax Date in respect
of the exercise of all or any portion of this Option is deferred until
after such exercise and the Optionee elects stock withholding, the full
amount of shares of Common Stock will be issued or transferred to the
Optionee upon exercise of this Option, but the Optionee shall be
unconditionally obligated to tender back to the Company on the Tax Date
the number of shares necessary to discharge with respect to such Option
exercise the greater of (i) the Company's withholding obligation and (ii)
all or any portion of the holder's federal and state tax obligation
attributable to the Option exercise. An Election Window is any period
commencing on the third business day following the Company's release of a
quarterly or annual summary statement of sales and earnings and ending on
the twelfth business day following such release.
11. Upon the acquisition of any shares pursuant to the
exercise of the option herein granted, the Optionee will enter into such
written representations, warranties and agreements as the Company may
reasonably request in order to comply with applicable securities laws or
with this Agreement.
12. The certificates representing the Option Shares
purchased by exercise of an option will be stamped or otherwise imprinted
with a legend in such form as the Company or its counsel may require with
respect to any applicable restrictions on sale or transfer, and the stock
transfer records of the Company will reflect stop-transfer instructions,
as appropriate, with respect to such shares.
13. Unless otherwise provided herein, every notice hereunder
shall be in writing and shall be given by registered or certified mail.
All notices of the exercise by the Optionee of any option hereunder shall
be directed to Reading & Bates Corporation, Attention: Secretary, at the
Company's current address. Any notice given by the Company to the
Optionee directed to him at his address on file with the Company shall be
effective to bind any other person who shall acquire rights hereunder.
The Company shall be under no obligation whatsoever to advise the Optionee
of the existence, maturity or termination of any of the Optionee's rights
hereunder and the Optionee shall be deemed to have familiarized himself
with all matters contained herein and in the Plan which may affect any of
the Optionee's rights or privileges hereunder.
14. Whenever the term "Optionee" is used herein under
circumstances applicable to any other person or persons to whom this
award, in accordance with the provisions of Paragraph 8, may be
transferred, the word "Optionee" shall be deemed to include such person or
persons. References to the masculine gender herein also include the
feminine gender for all purposes.
15. Notwithstanding any of the other provisions hereof, the
Optionee agrees that he will not exercise the option herein granted, and
that the Company will not be obligated to issue any shares pursuant to
this Agreement, if the exercise of the option or the issuance of such
shares of Common Stock would constitute a violation by the Optionee or by
the Company of any provision of any law or regulation of any governmental
authority or any national securities exchange.
16. The option to purchase Option Shares evidenced by this
Agreement shall be fully and immediately exercisable upon a Change of
Control of the Company as defined in the Employment Agreement.
17. This Agreement is subject to the Plan, a copy of which
has been provided the Optionee and for which the Optionee acknowledges
receipt. The terms and provisions of the Plan (including any subsequent
amendments thereto) are incorporated herein by reference. In the event of
a conflict between any term or provision contained herein and a term or
provision of the Plan, the applicable terms and provisions of the Plan
will govern and prevail. All definitions of words and terms contained in
the Plan shall be applicable to this Agreement.
18. In the event of a corporate merger or other business
combination in which the Company is not the surviving entity, the economic
equivalent number of the voting shares of common stock of, or
participating interests in, the surviving entity, based on the terms of
such merger or other business combination, shall be substituted for the
Option Shares hereunder, and the price per share set out in Section 2
hereof shall be adjusted to reflect substantially the same economic
equivalent value of the Option Shares to the Optionee immediately prior to
any such merger or other business combination.
IN WITNESS WHEREOF, this Agreement is executed this 6th day of
February, 1996, effective as of the 5th day of December, 1995.
READING & BATES CORPORATION
By:
Paul B. Loyd, Jr.
Exhibit 10.71
AMENDMENT AGREEMENT
relating to a
$90,000,000 Facility Agreement
between
ARCADE DRILLING AS
as Borrower
CHASE INVESTMENT BANK LIMITED
as Arranger
THE CHASE MANHATTAN BANK, N.A.
as Agent
and
OTHERS
- --------------------------------------------------------------------------
THIS AGREEMENT is made on 1995
BETWEEN
(1) ARCADE DRILLING AS (the "Borrower");
(2) CHASE INVESTMENT BANK LIMITED (the "Arranger");
(3) THE CHASE MANHATTAN BANK, N.A. (the "Agent"); AND
(4) THE FINANCIAL INSTITUTIONS named in the First Schedule (the
"Banks").
WHEREAS
(A) Pursuant to an agreement (the "Loan Agreement") dated 21 February
1991 between the parties hereto a $90,000,000 loan facility was made
available to the Borrower;
(B) A letter agreement was executed between the parties on 19 February
1993 which (inter alia) increased the Applicable Margin payable
under the Loan Agreement;
(C) The Borrower has requested the amendment of the Loan Agreement in
certain respects.
IT IS AGREED
1. Interpretation
1.1 Terms defined in the Loan Agreement bear the same meaning herein.
1.2 In this Agreement "Effective Date" shall bear the meaning given to
it in Clause 2.1.
2. Effective Date
2.1 The Effective Date shall be the first date upon which:
(i) the Agent shall have confirmed to the Borrower that it has
received all of the documents listed in the Second Schedule
and that each is in form and substance satisfactory to the
Agent;
(ii) the representations set out in Clause 4 are true; and
(iii) no event has occurred which is or may become (with the passage
of time, the giving of notice, the making of any determination
or any combination thereof) an Event of Default
or such earlier date as the Agent may agree.
2.2 The Agent shall, promptly after becoming aware of the same, notify
the other parties hereto of the occurrence of the Effective Date.
2.3 For the purposes of Clause 2.2 the Agent shall be entitled to
assume, unless it has actual notice or actual knowledge to the
contrary, that the conditions specified in Clause 2.1(ii) and (iii)
are satisfied.
2.4 The giving of notice by the Agent pursuant to Clause 2.2 shall be
conclusive evidence of the occurrence of the Effective Date.
3. Amendments to Loan Agreement
3.1 On the Effective Date the Loan Agreement shall stand amended as
set out in the Third Schedule and thereafter any reference in any
Finance Document to the Loan Agreement shall (unless the context
otherwise requires) be construed as a reference to the Loan
Agreement as amended pursuant hereto or from time to time.
3.2 Save as expressly proved herein each Finance Document shall continue
in full force and effect in accordance with its terms.
4. Representations
The Borrower hereby represents that:
(i) each of the representations set out in Clause 16 of the
Loan Agreement (other than in sub-clauses 16.2(viii) and
(ix)) is true and will remain true upon the Loan
Agreement being amended as herein provided, but as if
all reference to the Original Financial Statements were
references to the Borrower's audited financial
statements for the financial year ending 31 December
1994; and
(ii) each of the representations set out in Clause 16.l of
the Loan Agreement would be true if all references
therein to the Finance Documents included this
Agreement.
5. Benefit of Agreement
5.1 This Agreement shall be binding upon and enure to the benefit of
each party hereto and its successor and assigns.
5.2 The Borrower shall not be entitled to assign or transfer all or any
of its rights, benefits and obligations hereunder.
6. Miscellaneous
The provisions of Clauses 26, 27 and 34 to 38 inclusive of the Loan
Agreement shall be deemed incorporated herein mutatis mutandis but
as if references therein to the Loan Agreement or the Finance
Documents were references to this Agreement.
7. Counterparts
This Agreement may be executed in any number of counterparts and by
different parties hereto as separate counterparts each of which,
when executed and delivered, shall constitute an original, but all
the counterparts shall together constitute but one and the same
instrument.
IN WITNESS whereof this Agreement has been executed by the parties hereto
the day and year first before written.
THE FIRST SCHEDULE
Current Portion
The Banks of the Advance
THE CHASE MANHATTAN BANK, N.A. 17,000,000.00
DE NATIONALE INVESTERINGSBANK N.V. 7,083,333.33
NEDSHIP NORGE AS 4,722,222.23
ING BANK INTERNATIONAL 4,722,222.22
SPAREBANKEN ROGALAND 3,541,666.66
CHRISTIANIA BANK OG KREDITKASSE 2,361,111.12
INDUSTRI AND SKIPSBANKEN A/S 1,888,888.89
SPAREBANKEN SOR 1,180,555.55
THE SECOND SCHEDULE
Condition Precedent Documents
1. A copy certified as a true copy by a duly authorised officer of the
Borrower, of a board resolution of the Borrower approving the
execution, delivery and performance of this Agreement.
2. A copy certified a true copy by a duly authorised office of the
Borrower of any power of attorney issued pursuant to such Board
Resolutions.
3. A legal opinion of the Agent's Panamanian counsel.
4. (i) a copy of the original contract with BP for the
employment of the "Sonat Arcade Frontier" and the
extension thereof until 1 November 1996;
(ii) a copy of the extension of the contract with Shell for
the employment of the "Henry Goodrich" until 1 October
1996;
each in form and substance satisfactory to the Agent.
THE THIRD SCHEDULE
1. Reference in this Schedule to Clauses or Schedules shall, unless the
context otherwise requires, be construed as references to clauses of
the Loan Agreement.
2. The Loan Agreement shall be amended as follows:
(A) Margin
The Applicable Margin shall revert to 1.75 per cent. p.a.;
(B) Reporting Dates
(i) Clause 17.1(ii)(a) shall be amended by replacing "four"
in the third line with "six";
(ii) Clause 18.2 (v) shall be amended by replacing "1st May
1992" in the third line with "30 June 1995";
(iii) Clause 18.5(i) shall be amended by deleting the existing
words and replacing them with the following:
""Reporting Date" means 31 December and 30 June in
each calendar year"
(iv) Clause 18.5(ii)(a) and (b) shall be amended by deleting
the existing words and replacing them with the
following:
""Relevant Period" means, in respect of each
Reporting Date, both of the following:
(a) the six months preceding such
Reporting Date (each an "Actual
Calculation Period"); and
(b) the six months succeeding such
Reporting Date (each a "Projected
Calculation Period")"; and
(v) Clause 18.5(cc) shall be deleted.
For the avoidance of doubt, the amendments to the Reporting Dates
set out above shall take effect prospectively from the Effective
Date and shall not have any retrospective effect.
(C) Financial Covenants
(i) Clause 18.1(ii) shall be deleted and replaced with the
following:
"in respect of the Arcade Group: the portion of
Current Assets constituted by Liquid Assets shall
not be less than $10,000,000 Provided Always that
if an Instruction Group determines in its sole
discretion that (as at 1 November in each year)
satisfactory contractual commitments exist for the
employment of the Rigs for the twelve month period
following such date, then during such twelve month
period the portion of Current Assets constituted
by Liquid Assets may (notwithstanding the
foregoing) be less than $10,000,000 but shall any
event not be less than $2,000,000 and Provided
Further that the Borrower may, during the first
quarter of 1996 declare a dividend of up to
$15,000,000 if, after such payment, the portion of
Current Assets constituted by Liquid Assets is
not less than $2,000,000;."
(ii) Clause 18.6(iv) shall be amended by deleting the
existing proviso thereto and replacing it with the
following:
"Provided Always that (irrespective of the
foregoing) Current Liabilities shall not include
(i) to the extent consistent with then generally
accepted accounting principles in Norway, any
obligation to pay, as aforesaid, scheduled
charterhire or any analogous sums in relation to
any vessel or charter, lease or hire to any member
of the Arcade Group and (ii) any payments due
under this Agreement within twelve months from the
date of computation."
(iii) Clause 19.3(iii) shall be deleted and replaced by the
following:
"pay, make or declare any dividend or other
distribution, other than dividends or
distributions to members of the Arcade Group and
other than distributions of amounts represented by
Liquid Assets in excess of the amount of Liquid
Assets required to be maintained pursuant to
Clause 18.1(ii) and which an Instructing Group has
approved as being available for such dividend or
distribution (such approval not to be unreasonably
withheld)."
3. Without prejudice to Clause 20.1(xv) of the Loan Agreement, the
Agent and the Banks hereby consent to the management of "Sonat
Arcade Frontier" by Reading & Bates with effect from 4 December
1995.
The Borrower
ARCADE DRILLING A/S
By:
Address: Stortingsg 8
0161 Oslo 1
Norway
Attention:
Arranger
CHASE INVESTMENT BANK LIMITED
as Arranger and Lead Manager
By:
Address: Woolgate House
Coleman Street
London EC2P 2HD
Attention: Syndicated Loans
The Managers and Banks
THE CHASE MANHATTAN BANK, N.A.
as Bank
By:
Address: Woolgate House
Coleman Street
London EC2P 2HD
Attention:
Telex: 8954681 CMBG (tel: 0171 726 5574)
DE NATIONALE INVESTERINGSBANK N.V.
as Lead Manager and Bank
By:
Address: 4 Carnegieplein 4/P.O. Box 380
2517 KJ/2504 B.H. The Hague
The Netherlands
Address for notices: as above
Attention:
Telex: 31368 INVES NL
NEDSHIP NORGE A/S
as Manager and Bank
By:
Address: P. O. Box 1166
Sentrum
0107 Oslo
Norway
Address for notices: as above
Attention:
Telex: 71043 XIABK N
ING BANK INTERNATIONAL
as Bank
By:
Address: P. O. Box 1800
1000 BV Amsterdam
The Netherlands
Address for notices:
Attention:
Telex:
SPAREBANKEN ROGALAND
as Bank
By:
Address: P. O. Box 218
Bjerstad Terrasse 1
N-4001 Stavanger
Norway
Address for notices: as above
Attention:
Telex: 33016 SRBK N
CHRISTIANIA BANK OG KREDITKASSE
as Bank
By:
Address: P. O. Box Sentrum
0107 Oslo 1
Norway
INDUSTRI AND SKIPSBANKEN A/S
Address: Postboks 117 Universitetet
5027 Bergen
Norway
Address for notices: as above
Attention: Haakon Roska
Telex: 40320 ISBAN N
SPAREBANKEN SOR
as Bank
By:
Address: P. O. Box 310
N-4801 Arendal
Norway
Address for notices: as above
Attention:
Telex: 21164 SPSOR N
The Agent
THE CHASE MANHATTAN BANK, N.A.
By:
Address: 1 Chaseside
Bournemouth
Dorset BH7 7DB
Attention:
Telex: 8954681 CMB G
Exhibit 10.84
AMENDMENT NO. 1
TO
LOAN AGREEMENT
AMENDMENT NO. 1 dated as of December 20, 1995 ("Amendment No. 1") to
the Loan Agreement dated as of May 25, 1995 (the "Loan Agreement"), among
READING & BATES OFFSHORE, LIMITED, an Oklahoma corporation (the
"Borrower"), READING & BATES CORPORATION, a Delaware corporation (the
"Guarantor") and THE CIT GROUP/EQUIPMENT FINANCING, INC., a New York
corporation (the "Lender").
W I T N E S S E T H:
WHEREAS, pursuant to the Loan Agreement, the Lender made available
to the Borrower a loan of up to USD 25,000,000 (the "Loan"), as evidenced
by the secured promissory note of the Borrower dated May 25, 1995 (the
"Note"); and
WHEREAS, the Lender has agreed to make an additional USD 5,000,000
available to the Borrower subject to such additional amount being governed
by the terms and conditions of the Loan Agreement and evidenced by the
Note;
NOW THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree to amend the Loan Agreement as
follows:
1. The Definitions of the Loan Agreement are hereby amended as
follows:
(a) The definition of "Loan Documents" is hereby amended to read
as follows:
"Loan Documents" means this Agreement, the Mortgage, Guaranty,
the Note, and the Amendment Documents.
(b) The following new definitions are hereby added to the
Definitions of the Loan Agreement:
"Amendment Date" means the date on which the conditions
precedent contained in Section 4 of Amendment No. 1 are
fulfilled and the modifications to the Loan Agreement
contemplated by Amendment No. 1 become effective.
"Amendment Documents" means Amendment No. 1, Endorsement No.
1, the Guaranty Amendment, and the Mortgage Amendment.
"Endorsement No. 1" means the Endorsement No. 1 to the Note,
substantially in the form of Exhibit A attached hereto.
"Guaranty Amendment" means Amendment No. 1 to the Guaranty,
substantially in the form of Exhibit B attached hereto.
"Mortgage Amendment" means Amendment No. 2 to the First
Preferred Fleet Mortgage on the Vessels, in form and substance
satisfactory to the Lender.
2. Amount. Section 1.01 of the Loan Agreement is hereby amended by
deleting the figure "USD 25,000,000" in the last line of such section and
replacing it with the figure "USD 30,000,000."
3. Revolving Loan Availability Period. Section 1.02(b) of the Loan
Agreement is hereby amended to read as follows:
"(b) From and after the Amendment Date until the Term Loan
Conversion Date, the Borrower shall maintain an average daily
outstanding principal amount of the Loan of no less than USD
10,000,000 and there shall be no more than USD 25,000,000
outstanding principal amount of the Loan on the Term Loan
Conversion Date."
4. Conditions Precedent.
4.1 Documents Required as Conditions Precedent to Amendment No. 1.
The effectiveness of the modifications to the Loan Agreement contemplated
by this Amendment No. 1 are subject to the condition precedent that the
Lender shall have received at or prior to the Amendment Date all of the
following, each dated on or before the Amendment Date and each in form and
substance satisfactory to the Lender and its counsel:
(a) Each of the Amendment Documents shall have been duly
authorized and executed with original counterparts thereof delivered to
the Lender.
(b) The Borrower and the Guarantor shall have delivered to the
Lender evidence of good standing, certified copies of their Certificates
of Incorporation, certificates of incumbency and duly certified
resolutions of their respective Boards of Directors and all such other
corporate documentation authorizing each of them to enter into the
transactions contemplated by Amendment No. 1.
(c) The Lender shall have received opinions from counsel to the
Borrower and the Guarantor, as the case may be, and an opinion of its
special counsel, Gardere Wynne Sewell & Riggs, L.L.P., each in form and
substance satisfactory to the Lender.
(d) The representations and warranties contained in Section 5 of
this Amendment No. 1 and in each other Amendment Document shall be true on
the Amendment Date with the same effect as though such representations and
warranties had been made on and as of such date, and no Event of Default
specified in Article IV, of the Loan Agreement and no event which, with
the lapse of time or the notice and lapse of time specified in Article IV
of the Loan Agreement, would become such an Event of Default, shall have
occurred and be continuing.
(e) All orders, consents, approvals, licenses, authorizations and
validations of, and filings, recordings and registrations with and
exemptions by any Governmental Agency or any Person (other than any
routine filings which may be required after the date hereof with
appropriate governmental authorities in connection with the operation of
the Vessels) required to (i) authorize the execution, delivery and
performance by the Borrower and the Guarantor of the Amendment Documents
to which they are parties or (ii) prevent the execution, delivery and
performance by the Borrower and the Guarantor of the Amendment Documents
to which they are parties from resulting in a breach of any of the terms
or conditions of, or resulting in the imposition of any lien, charge or
encumbrance upon any properties of the Borrower and the Guarantor pursuant
to, or constituting a default (with due notice or lapse of time or both),
if such breach, imposition or default would result in a materially adverse
change in the financial position of the Borrower and the Guarantor, or
resulting in an occurrence of any event for which any holder or holders of
Indebtedness may declare the same due and payable under, any indenture,
agreement, order, judgment or instrument under which the Borrower and the
Guarantor are a party (other than the Mortgagee or the Assignments) or to
the Borrower's knowledge after due inquiry by which any of the Borrower or
the Guarantor or their property may be bound or affected, or under the
Certificates of Incorporation or Bylaws of the Borrower or the Guarantor,
shall have been obtained or made.
(f) Evidence of the payment of the Amendment Fee referred to in
Section 6(a) below.
(g) Evidence of the successful completion of the GATX sale and
leaseback and the CBK loan transactions.
4.2 Waiver of Conditions Precedent. All of the conditions
precedent contained in this Section 4 are for the sole benefit of the
Lender and the Lender may waive any of them in its absolute discretion,
and on such conditions as it deems proper.
5. Representations of the Borrower. The Borrower represents and
warrants that:
(a) The Borrower is a corporation, duly organized and validly
existing in good standing under the laws of the State of Oklahoma, and has
the requisite power and authority (i) to carry on its business as
presently conducted, (ii) to enter into and perform its obligations under
each Amendment Document to which it is a party, and (iii) to borrower
moneys.
(b) The execution, delivery and performance by the Borrower of
each Amendment Document to which it is a party, and any other instrument
or agreement provided for by this Amendment No. 1 to which the Borrower is
a party, have been duly authorized by all necessary corporate action, do
not require stockholder approval other than such as has been duly obtained
or given, do not or will not contravene any of the terms of its Articles
of Incorporation or Bylaws, and will not violate any provision of law or
of any order of any court or governmental agency or constitute (with or
without notice or lapse of time or both) a default under, or result
(except as contemplated by this Amendment No. 1) in the creation of any
security interests, lien, charge or encumbrance upon any of its properties
or assets pursuant to, any agreement, indenture or other instrument to
which it is a party or by which it may be bound; this Amendment No. 1 and
each Amendment Document to which it is a party has been duly executed and
delivered by the Borrower and constitutes its legal, valid and binding
agreement or instrument, enforceable in accordance with the respective
terms thereof. The enforceability of this Amendment No. 1, however, is
subject to all applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws affecting the rights of creditors and to
general equity principles.
(c) There are no suits or proceedings pending or to its knowledge
threatened against or affecting the Borrower which if adversely determined
would have a material adverse effect upon its financial condition,
operations or business.
(d) The registered office of the Borrower is c/o The Prentice-Hall
Corporation System, Oklahoma, Inc., 115 S.W. 89th Street, Oklahoma City,
Oklahoma 73139-8511. The principal place of business of the Borrower and
the place where all records relating to the transactions contemplated
hereby, including records relating to the chartering and operations of the
Vessels are kept is 901 Threadneedle, Suite 200, Houston, Texas 77079.
(e) Other than such as have been obtained, no license, consent or
approval of any Governmental Agency or other regulatory authority is
required for the execution, delivery or performance of this Amendment No.
1 or any other Amendment Document or any instrument contemplated herein or
therein. The Borrower is the holder of all certificates and
authorizations of governmental authorities required by law to enable it to
engage in the business transacted by it.
6. Fees and Expenses.
(a) Fees. The Borrower agrees to pay the Lender an
Amendment Fee of USD 25,000.00 payable on the Amendment Date.
(b) Expenses. The Borrower agrees to promptly, whether or
not the modifications to the Loan Agreement contemplated by this Amendment
No. 1 become effective, (x) reimburse the Lender for all fees and
disbursements of external counsel to the Lender and all reasonable out of
pocket fees and disbursements of the Lender incurred in connection with
the preparation, execution and delivery of this Amendment No. 1 and all
other documents referred to herein, and all amendments or waivers to or
termination of this Amendment No. 1 or any agreement referred to herein;
and (y) reimburse the Lender for all fees and disbursements of internal
and external counsel to the Lender and all reasonable out of pocket fees,
disbursements and travel-related expenses of the Lender incurred in
connection with the protection of the rights of the Lender under this
Amendment No. 1 and all other documents referred to herein, whether by
judicial proceedings or otherwise. The obligations of the Borrower under
this Section 6 shall survive payment of the Loan.
7. Wherever and in each such place the term "Loan Agreement") is
used throughout the Loan Agreement, such term shall be read to mean the
Loan Agreement as amended by this Amendment No. 1.
8. Except as specifically amended by this Amendment No. 1, all of
the terms and provisions of the Loan Agreement shall remain in full force
and effect.
9. All capitalized terms used herein but not defined herein shall
have the meaning given to them in the Loan Agreement.
10. THIS AMENDMENT NO. 1 TO LOAN AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment No. 1 on the date first written above.
READING & BATES CORPORATION
By:
Name:
Title:
READING & BATES OFFSHORE, LIMITED
By:
Name:
Title:
THE CIT GROUP/EQUIPMENT
FINANCING, INC.
By:
Name:
Title:
Exhibit 10.85
AMENDMENT NO. 1
TO
GUARANTY
Amendment No. 1 dated as of December 20, 1995 to the
Guaranty dated as of May 25, 1995 (the "Guaranty"), made by
READING & BATES CORPORATION, a corporation organized and
existing under the laws of the State of Delaware (the
"Guarantor"), in favor of THE CIT GROUP/EQUIPMENT FINANCING,
INC., (the "Lender").
WHEREAS, READING & BATES OFFSHORE, LIMITED, an Oklahoma
corporation (the "Borrower"), a wholly-owned subsidiary of the
Guarantor, entered into that certain Loan Agreement dated as
of May 25, 1995, (the "Loan Agreement") providing for a loan
of USD 25,000,000 by the Lender to the Borrower (the "Loan");
and
WHEREAS, the Borrower's obligation to repay the Loan and
interest thereon is evidenced by the Promissory Note of the
Borrower dated May 25, 1995, in favor of the Lender (the
"Note"); and
WHEREAS, the Lender has agreed to make available to the
Borrower an additional USD 5,000,000 subject to such
additional amount being governed by the terms and conditions
of the Loan Agreement, evidenced by the Note and guaranteed by
the Guarantor;
WHEREAS, the Borrower, the Lender and the Guarantor have
agreed to the terms of Amendment No. 1 to the Loan Agreement
dated as of December ___, 1995, ("Amendment No. 1") and the
Borrower and the Lender have agreed to the terms of
Endorsement No. 1 to the Note dated December __, 1995
("Endorsement No. 1") to, among other things, reflect the
changes described above; and
WHEREAS, it is to the corporate benefit of the Guarantor
that the Borrower enter into Amendment No. 1 and Endorsement
No. 1; and
WHEREAS, in order to induce the Lender to enter into
Amendment No. 1 and Endorsement No. 1, the Guarantor is
prepared to guaranty the performance by the Borrower of its
obligations under the Loan Agreement, as amended by Amendment
No. 1, and under the Note, as amended by Endorsement No. 1;
and
WHEREAS, the Lender is prepared to enter into Amendment
No. 1 and Endorsement No. 1 in consideration, among other
things, of the continuing guaranty by the Guarantor of the
obligations of the Borrower under the Loan Agreement, as
amended by Amendment No. 1, and under the Note, as amended by
Endorsement No. 1.
NOW THEREFORE, IN CONSIDERATION OF THE PREMISES, the
Guarantor and the Lender hereby agree as follows:
1. All references in the Guaranty to the Loan Agreement
shall mean the Loan Agreement as amended by Amendment No. 1.
2. All references in the Guaranty to the Note shall
mean the Note as amended by Endorsement No. 1.
3. The Guarantor hereby acknowledges receipt of
Amendment No. 1 and Endorsement No. 1 in execution form and
hereby consents and agrees to both of them and to all the
terms and provisions thereof.
4. Except as otherwise provided herein or as waived in
writing by the Lender, the Representations and Warranties
contained in Section 7 of the Guaranty made by the Guarantor
in favor of the Lender are correct on and as of the date of
this Amendment No. 1 to the Guaranty as though made on and as
of such date and the Guarantor is in compliance with all of
the Covenants contained in Section 3.03 of the Loan Agreement.
5. All capitalized terms used in this Amendment No. 1
to Guaranty which are not defined herein shall have the
meanings given to them in the Loan Agreement, as amended.
6. This Amendment No. 1 to Guaranty shall be governed
by, and construed in accordance with, the laws of the State of
New York, other than the conflict of laws rules thereof.
IN WITNESS WHEREOF, the undersigned has executed and
delivered this Amendment No. 1 to Guaranty, as of the date
first above written.
READING & BATES CORPORATION
By:______________________________
Name:____________________________
Title:___________________________
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By:______________________________
Name:____________________________
Title:___________________________
Exhibit 10.86
THIS FIRST PREFERRED FLEET MORTGAGE, dated the 25th day
of May, 1995, is made and given by READING & BATES OFFSHORE,
LIMITED, an Oklahoma corporation with its principal place of
business at 901 Threadneedle, Houston, Texas 77079 (the
"Mortgagor"), to THE CIT GROUP/EQUIPMENT FINANCING, INC., a
New York corporation with an office at 1211 Avenue of the
Americas, New York, NY 10036 (the "Mortgagee").
W I T N E S S E T H:
WHEREAS, the Mortgagor is the sole owner of the whole of
the following vessel:
Name Official No.
F.G. McCLINTOCK 562059
which vessel has been duly documented in the name of the
Mortgagor under the laws of the United States and having its
home port and port of documentation at Houston, Texas (the
"Vessel") and, in addition, is in the process of purchasing
the U.S. flag vessel, GEORGE H. GALLOWAY, Official No. 651646
(the "Other Vessel," the Vessel and the Other Vessel being
referred to herein collectively as the "Vessels");
WHEREAS, the Mortgagor, as borrower and the Mortgagee are
parties to a Loan Agreement dated as of May 25, 1995, a copy
of which is annexed hereto as Annex I and made a part hereof
(said Loan Agreement, as the same may be amended, supplemented
or otherwise modified from time to time, being herein called
"Loan Agreement"), pursuant to which the Mortgagee has agreed
to make a loan to the Mortgagor with respect to the Vessels in
an aggregate amount not to exceed Twenty Five Million United
States Dollars (USD 25,000,000) (the "Loan");
WHEREAS, the Loan will be evidenced by a secured
promissory note made by the Mortgagor in favor of the
Mortgagee (the "Note") in the aggregate principal amount not
to exceed Twenty Five Million United States Dollars (USD
25,000,000), dated the date of the Loan and in the form
annexed hereto as Exhibit A to the Loan Agreement, payable in
accordance with the provisions of Article I of the Loan
Agreement including provisions therein set forth for payment
of interest at rates set forth in the Loan Agreement;
WHEREAS, the Mortgagor has agreed to execute and deliver
to the Mortgagee this Mortgage (herein, as the same may from
time to time be amended, supplemented or otherwise modified,
called the "Mortgage"), in order to secure the payment in full
of its obligations as contained in the Loan Agreement and to
execute and deliver a supplement to this Mortgage
substantially in the form of Annex II hereto extending the
lien of this Mortgage to the Other Vessel upon the completion
of its purchase by the Mortgagor;
NOW, THEREFORE, in consideration of the foregoing
premises and of other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, and in
order to secure the payment and performance of (i) all
obligations, undertakings and liabilities of Mortgagor, now
existing or hereafter incurred, under, arising out of, or in
connection with the Loan Agreement and the Note; (ii) the
unpaid principal amount of, and accrued interest on, the Note;
(iii) all obligations, undertakings and liabilities of
Mortgagor now existing or hereafter incurred, under, arising
out of or in connection with this Mortgage; and (iv) any and
all other present and future indebtedness, obligations,
undertakings and liabilities of any kind whatsoever of
Mortgagor to Mortgagee arising out of the Loan Agreement,
whether direct or indirect, joint or several, absolute or
contingent, liquidated or unliquidated, secured or unsecured,
matured or unmatured and whether originally contracted with
Mortgagee or otherwise acquired by Mortgagee or from time to
time reduced and thereafter increased, the Mortgagor has
granted, conveyed, mortgaged, pledged, assigned, transferred,
set over and confirmed and by these presents does grant,
convey, mortgage, pledge, assign, transfer, set over and
confirm unto the Mortgagee, its successors and assigns, the
whole of the Vessel, together with all of the boilers,
engines, generators, air compressors, cranes, machinery,
masts, spars, rigging, boats, anchors, cables, chains, tackle,
tools, pumps and pumping equipment, apparel, furniture,
fittings and equipment, spare parts (excluding equipment not
owned by the Mortgagor), and all other appurtenances thereunto
appertaining or belonging, whether now owned or hereafter
acquired, whether on board or not, and all additions,
improvements, renewals and replacements hereafter made in or
to the Vessel, or any part thereof, or in or to said
appurtenances, all of which property shall be deemed to be
included in the term "Vessel" as used in this Mortgage.
Provided that, the Other Vessel and the appurtenances
thereto subject to the lien of this Mortgage pursuant to the
supplement to this Mortgage, and all additions, improvements
renewals and replacements, which may be made in or to the
Other Vessel or its appurtenances after the same shall have
become subject to the lien of the Mortgage, shall be deemed to
be encompassed within the term "Vessels", and the term
"Vessel", whenever used, shall apply with equal force to each
of the Vessels.
TO HAVE AND TO HOLD all and singular the above mortgaged
and described property unto the Mortgagee, its successors and
assigns forever upon the terms herein set forth;
PROVIDED, HOWEVER, and these presents are on the
conditions that, if the Mortgagor, its successor or assigns
shall pay and perform each and every one of the obligations,
in accordance with the terms of the Loan Agreement, the Note,
this Mortgage and any other instrument evidencing any
obligation of the Mortgagor to the Mortgagee then these
presents and the estate and rights hereunder shall cease,
terminate and be void, otherwise to be and remain in full
force and effect.
The Mortgagor hereby agrees with the Mortgagee that each
and every Vessel now or at any time subject to the lien of
this Mortgage is to be held by the Mortgagee subject to the
further agreements and conditions hereinafter set forth.
Capitalized terms used herein and not otherwise defined
herein shall have the meanings given to them in the Loan
Agreement.
ARTICLE 1. REPRESENTATIONS, WARRANTIES
AND COVENANTS OF THE MORTGAGOR
In order to induce the Mortgagee to make the Loan
provided for in the Loan Agreement and for Mortgagee to accept
this Mortgage as collateral security for the payment of its
obligations contained in the Loan Agreement, the Mortgagor
represents and warrants to the Mortgagee and covenants with
the Mortgagee that:
Section 1.1 Payment and Performance of Obligations. The
Mortgagor will pay, observe, perform and comply with each and
every one of the covenants, terms and conditions herein
expressed or implied, on its part to be observed, performed,
or complied with.
Section 1.2 Citizenship. The Mortgagor is a citizen of
the United States as defined in Section 2 of the Shipping Act,
1916, as amended, duly qualified to engage in the coastwise
trade and in foreign commerce of the United States, and shall
remain such a citizen during the life of this Mortgage.
Section 1.3 Ownership of Vessel Warranty and Defense of
Title. The Mortgagor lawfully owns and is lawfully possessed
of the whole of the Vessel free from any mortgage, security
interest, lien, charge or encumbrance whatsoever other than
the lien of this Mortgage and liens permitted, and to the
extent permitted, by the provisions of Section 1.7 hereof and,
upon acquisition of the Other Vessel by Mortgagor, Mortgagor
will lawfully own and be lawfully possessed of the whole of
the Vessels free from any mortgage, security interest, lien,
charge or encumbrance whatsoever other than the lien of this
Mortgage and liens permitted, and to the extent permitted, by
the provisions of Section 1.7 hereof and the Mortgagor will
warrant and defend the title to, and possession of each of the
Vessels and every part thereof for the benefit of the
Mortgagee against the claims and demands of all persons
whomsoever.
Section 1.4 Compliance with Laws.
(a) Documentation. The Mortgagor will comply with and
satisfy all provisions of the laws and regulations of the
United States now or hereafter from time to time in effect in
order that the Vessels shall continue to be documented vessels
pursuant to the laws of the United States as a vessel of the
United States under the United States flag with such
endorsements as shall qualify each of the Vessels for
participation in the trades and services to which it may be
dedicated from time to time.
(b) U.S. Code. Tit. 46. Ch. 313. The Mortgagor will, at
its expense and at no cost to the Mortgagee, cause this
Mortgage to be duly recorded at the U.S. Coast Guard Vessel
Documentation Office at the Port of Houston, Texas in
accordance with the provisions of 46 U.S.C. 31321, on the
date hereof, and will otherwise comply with and satisfy all
the applicable provisions of the U.S. Code, Tit. 46, Ch. 301
and Ch. 313, as amended, in order to establish, record and
maintain this Mortgage as a First Preferred Mortgage
thereunder upon the Vessels, and will do all such other acts
and execute all such instruments, deeds, conveyances,
mortgages and assurances as the Mortgagee shall reasonably
require in order to subject the Vessels to the lien of this
Mortgage as aforesaid.
(c) Laws Treaties and Conventions. The Vessels shall,
and the Mortgagor covenants that they will, at all times
comply with all applicable laws, treaties and conventions and
rules and regulations issued thereunder, and shall have on
board as and when required thereby valid certificates showing
compliance therewith.
Section 1.5 Operation of the Vessels. The Mortgagor
will not cause or permit the Vessels to be operated in any
manner contrary to applicable law or regulation, or in any
manner not permitted by the Loan Agreement or by any
insurances required thereby and hereby, will not engage in any
unlawful trade, violate any applicable law or carry any cargo
that will expose the Vessels to penalty, forfeiture or capture
and will not do, or suffer or permit to be done, anything
which can or may injuriously affect the documentation of the
Vessels under the laws and regulations of the United States of
America. Mortgagor shall keep the operation of the Vessels
within the permitted navigational limits set forth in the
trading warranties of the policies of insurance covering each
of the Vessels and in any case will not operate the Vessels,
or permit the Vessels to be operated, in any area where such
insurance would not be fully applicable and enforceable with
respect to each of the Vessels and its operation.
Section 1.6 Claims, Taxes, Fees, Etc. The Mortgagor will
pay and discharge or cause to be paid and discharged all
claims against, and fees, taxes, assessments, governmental
charges, fines and penalties imposed on each Vessel, its
cargoes or any income therefrom when due and payable, except
those claims, fees, taxes, assessments, governmental charges
and penalties being contested in good faith by appropriate
proceedings for which adequate reserves are being maintained.
Section 1.7 Liens. (a) Neither the Mortgagor, any
charterer, the master of any Vessel nor any other person has
or shall have any right, power or authority to create, incur
or permit to be placed or imposed or continued upon any
Vessel, its freights, profits or hires, any lien, security
interest, encumbrance or charge whatsoever other than the lien
of this Mortgage and Permitted Liens as defined below.
Mortgagor agrees to hold a certified copy of this Mortgage in
safekeeping with each Vessel's papers on board each Vessel and
on demand to exhibit the same to any person having business
with such Vessel, or to any representative of Mortgagee.
(b) Mortgagor shall also place and cause to be
displayed in a prominent place on board each Vessel and in a
durable manner a notice printed in plain type of such size
that the paragraph of reading matter shall cover a space not
less than six inches wide by nine inches high, reading as
follows:
"NOTICE OF FIRST PREFERRED FLEET MORTGAGE AND OWNERSHIP"
"This Vessel is owned by READING & BATES OFFSHORE,
LIMITED, and is covered by a First Preferred Fleet Mortgage in
favor of THE CIT GROUP/EQUIPMENT FINANCING, INC., as
Mortgagee, under Chapter 313 of Title 46 of the United States
Code. Under the terms of said First Preferred Fleet Mortgage
neither Owner, any charterer nor any subcharterer nor the
master of this Vessel nor any other person has the right,
power or authority to create, incur or permit to be placed or
imposed upon this Vessel, or upon title thereto or any
interest therein any lien whatsoever other than liens for
wages of the crew, for wages of stevedores when employed
directly by a person listed in Section 31341 of Title 46 of
the United States Code, or for general average or salvage."
(c) Such notice shall be amended at the sole cost
and expense of Mortgagor, upon request of Mortgagee, to
reflect the identity of any successor Mortgagee.
(d) "Permitted Liens" shall mean:
(i) liens for wages of the crew, including the
master of such Vessel, for wages of stevedores when
employed directly by a person listed in 46 U.S. Code
31341 or for general average or salvage;
(ii) liens for taxes, assessments or other
governmental charges or levies not at the time delinquent
or thereafter payable without penalty or being contested
in good faith, provided provision is made to the
reasonable satisfaction of the Mortgagee for the eventual
payment thereof in the event it is found that such is
payable by the Mortgagor;
(iii) liens of carriers, warehousemen,
mechanics, materialmen, landlords, operators of, and
participants in, any oil, gas or mineral properties of
the Mortgagor and maritime liens incurred in the ordinary
course of business for sums not overdue or being
contested in good faith, provided provision is made to
the reasonable satisfaction of the Mortgagee for the
eventual payment thereof in the event it is found that
such sums are payable by the Mortgagor;
(iv) liens incurred in the ordinary course of
business in connection with workmen's compensation,
unemployment insurance or other forms of governmental
insurance or benefits, or to secure performance of
tenders and statutory obligations entered into in the
ordinary course of business or to secure obligations on
surety or appeal bonds in an aggregate amount not
exceeding (1) USD 2,500,000 at any one time, (2) USD
5,000,000 in any calendar year and (3) USD 10,000,000
during the term of this Mortgage;
(v) judgment liens in existence less than 30
days after the entry thereof or with respect to which
execution has been stayed or the payment of which is
covered in full by insurance;
(vi) liens required by the terms of the Loan
Agreement; and
(vii) liens existing as of the date of this
Mortgage and disclosed in writing to the Mortgagor.
Section 1.8 Exhibit of Mortgage. The Mortgagor shall
exhibit and shall require that any other person having custody
or control of such Vessel to exhibit a copy of this Mortgage
to any person having business with the Vessel which might give
rise to a maritime lien upon such Vessel or otherwise be
deemed a sale, conveyance, mortgage or lease thereof and, on
demand, to any representative of the Mortgagee.
Section 1.9 Removal of Liens. The Mortgagor will not
suffer to be continued any lien (other than Permitted Liens
but only to the extent permitted under Section 1.7),
encumbrance or charge on any Vessel other than this Mortgage,
and in due course and in any event within thirty (30) days
after the same shall become due and payable, (except for those
claims or demands being contested in good faith by appropriate
proceedings for which adequate reserves are being maintained),
will pay or caused to be discharged or make adequate
provisions for the satisfaction or discharge of all claims or
demands secured by any lien, charge or encumbrance on such
Vessel and will cause the Vessel to be released or discharged
from any such lien, encumbrance or charge thereon.
Section 1.10 Libel or Attachment. If a libel is filed
against any Vessel or if any Vessel shall be attached, levied
upon or taken into custody by virtue of any proceeding in any
court or tribunal or by any government or other authority, the
Mortgagor shall promptly notify the Mortgagee thereof by
telecopier, confirmed by overnight letter addressed to the
Mortgagee, and within three (3) Business Days after any such
libel, levy, attachment or taking into custody will cause any
such Vessel to be released and will promptly notify the
Mortgagee of such release in the manner aforesaid.
Section 1.11 Maintenance and Classification of Vessel.
The Mortgagor will at all times and without cost or expense to
the Mortgagee (a) maintain each Vessel and its machinery in
such condition and repair as will keep the Vessel entitled to
the highest classification in the American Bureau of Shipping,
or other classification society of like standing approved in
writing by the Mortgagee for such vessels, (b) keep each
Vessel, its machinery, boilers, appurtenances and spare parts
in a good state of repair, wear and tear and depreciation
excepted, and in efficient operating condition in accordance
with good commercial maintenance practices employed in the
offshore oil and gas contract drilling industry, (c) keep each
Vessel tight, staunch, strong and in all respects seaworthy,
in so far as due diligence can make it, (d) maintain each
Vessel with full unexpired classification and other required
certificates and (e) furnish prior to May 25 of each year to
the Mortgagee, a written statement of the classification
society that the classification referred to in (a) above is in
effect. All maintenance and repairs will be made in a good
and workmanlike manner by persons of appropriate skill and
experience whose work will not adversely affect the service
life or marketability of each Vessel. All repairs, parts,
mechanisms, devices, replacements, improvements, changes,
additions and alterations to the Vessels shall immediately and
without further act, become part of the Vessels and subject to
this Mortgage. Mortgagor shall promptly furnish to the
Mortgagee copies of each damage survey with respect to damage
to any Vessel where the survey does not specifically quantify
the cost of total damages or where the survey states total
damage in excess of USD 100,000.00.
Section 1.12 Changes in Vessels. The Mortgagor will not
make, or permit to be made, any material change in the
structure or type of any Vessel or in its equipment which
would alter the essential character of such Vessel, or
materially impair its use for the purpose for which it was
designed, other than as necessary to meet regulatory or
classification society requirements, unless it shall have
received the prior written consent thereto of the Mortgagee,
which consent shall not be unreasonably withheld.
Section 1.13 Inspection. The Mortgagor at all times
shall afford the Mortgagee or its authorized representatives
full and complete access to the Vessels for the purpose of
inspecting or surveying the same and their papers and, at the
request of the Mortgagee, the Mortgagor shall deliver for
inspection copies of any and all contracts and documents
relating to each Vessel, whether on board or not and shall
cause any charterer to comply herewith during the term of any
charter to the maximum extent permitted thereunder; provided,
however, that any inspection of the Vessels shall be subject
to any consents required by operators under applicable
drilling contracts or by applicable Government Agencies, which
consents the Mortgagor shall use its best efforts to obtain.
Section 1.14 Change of Flag or Port of Documentation.
The Mortgagor will not change the flag or port of
documentation of either Vessel without the prior written
consent of the Mortgagee and the payment by the Mortgagor of
all expenses of registration or re-registration of this
Mortgage. Such consent may be denied or withheld for any
reason or for no reason, except that Mortgagee shall not
unreasonably withhold its consent to a change in the port of
documentation, although reasonable conditions may be attached
to such consent. Any such written consent to any one transfer
or change of flag or port of documentation shall not be
construed as a waiver of these provisions with respect to any
other or subsequent proposed transfer or change of flag or
port of documentation.
Section 1.15 Sale or Other Disposition of Vessels.
(a) Except as provided below, the Mortgagor will not
sell, charter, mortgage, transfer or in any other way dispose
of all or any part of or interest in any Vessel without the
prior written consent of the Mortgagee. Any sale, mortgage,
charter, transfer or other disposition of all or any part of
or interest in any Vessel shall be subject to the provisions
of this Mortgage and the lien hereof. The Mortgagor will not
charter any Vessel to, or permit any Vessel to serve under any
drilling contract with, a person included within the
definition of "designated foreign country" or a "national" of
a "designated foreign country" in the "Foreign Assets Control
Regulations" or "Cuban Assets Control Regulations" of the
United States Treasury Department, 31 C.F.R. Chapter V, as
amended, within the meaning of said regulations or of any
regulation, interpretation or ruling issued thereunder.
(b) Mortgagor shall not enter into any bareboat charter
for any Vessel in excess of twelve months (inclusive of all
extension and renewal opt-on periods) with an entity not an
affiliate of the Guarantor without the prior written consent
of the Mortgagee, and in the case where such consent is given,
not without providing Mortgagee a copy thereof and without
first obtaining the written agreement of such charterer in
each case to the collateral assignment by Mortgagor to
Mortgagee of a first priority lien and security interest in
the charter, charter hire and earnings of such charter, such
consent to be in form acceptable to Mortgagee. Mortgagor
undertakes and covenants that any such charter shall contain a
provision prohibiting the charterer and any other persons from
incurring or acquiring any lien on any Vessel.
Section 1.16 Requisition of Title or Use. In the event
that the title to or ownership of any Vessel, or the use of
any Vessel (whether on a bareboat, time or voyage charter
basis or any other basis), shall be requisitioned, purchased
or taken by, or any Vessel shall be seized by or forfeited to
any government of any country or any department, agency or
representative thereof, pursuant to any present or future law,
proclamation, decree, order or otherwise, or by any other
person or persons, whether or not acting under color of
governmental authority, the compensation, purchase price,
reimbursement or award for such requisition, purchase,
seizure, forfeiture or other taking of such title, ownership
or use shall forthwith be and become payable to the Mortgagee,
who shall be entitled to receive the same and shall apply it
as provided in Section 1.05(c) of the Loan Agreement.
Section 1.17 Notice of Loss, Requisition or Damage. In
the event of (a) the disappearance or actual or constructive
loss of any Vessel, (b) any event referred to in Section 1.16
hereof with respect to any Vessel, or (c) any casualty,
accident or damage to any Vessel established to be in excess
of USD 100,000.00, the Mortgagor will give written notice
thereof (containing full particulars), within three (3)
Business Days of the occurrence thereof, to the Mortgagee.
Section 1.18 Insurance.
I. Form and Amount.
I(A). Hull & Machinery Insurance. At its own expense,
Mortgagor shall maintain or cause to be maintained with
financially sound and reputable insurers reasonably
satisfactory to Mortgagee all risk equivalent marine hull and
machinery insurance (and, if necessary to satisfy the proviso
of this subparagraph, policies of increased value insurance)
and war risk hull and machinery insurance covering
confiscation, nationalization, expropriation and seizure on an
agreed value basis on each Vessel against loss, damage, fire
and such other perils and in such amounts as are usually
maintained on vessels engaged in the same or a similar
business under blanket fleet policies with respect to vessels
of like size, character and marine activity; provided,
however, that in no event shall the amount of such insurance,
subject to such deductible, if any, as permitted by Mortgagee,
at any time be less than the greater of (a) the Fair Market
Value (as defined in the Loan Agreement) or (b) the amount of
the outstanding principal, interest and all other obligations
secured by this Mortgage.
Such insurance shall name the Mortgagee, Mortgagor and
other interested persons as insureds as their respective
interests may appear, but (subject only to paragraph II of
Section 1.18) shall be payable solely to Mortgagee for further
disbursement by it to the other insureds as their interests
may appear and shall be applied as set forth in Subpart II of
this Section 1.18.
Unless a Default hereunder shall have occurred and is
continuing hereunder, Mortgagee consents to a deductible of
USD 250,000.00 per incident with respect to policies required
under this Subsection I(A).
I(B). Liability Insurance. At its own expense, Mortgagor
shall maintain entries with financially sound and reputable
insurers or protection and indemnity associations reasonably
satisfactory to the Mortgagee protection and indemnity,
collision, tower's liability including crew, cargo,
contractual liabilities, and removal of wreck insurance and
protection and indemnity war risk insurance protecting the
interests of Mortgagor and Mortgagee against liability for
property damage to third persons (including liability to any
governmental authority or other person with respect to
pollution liability) and personal injury or death to any
person arising out of the maintenance, use, operation and
ownership of the Vessels, cargo damage or loss, contractual
liability and wreck removal in such amounts as are usually
carried by persons engaged in the same or similar businesses;
provided, however, that in no event shall the amount of such
insurance per person and per occurrence (subject to such
deductible, if any, permitted by Mortgagee) be less than the
customary amount of coverage available on the market from time
to time with respect to vessels of the same type, age and
trade as the Vessels and reasonably acceptable to the
Mortgagee and in no event shall the total amount of such
liability insurance be less than USD 25,000,000. Such
liability insurance shall name each of the Mortgagee,
Mortgagor and other interested persons as additional insureds,
as their respective interests may appear, but the proceeds of
such policies shall be payable to the person actually
suffering the loss in respect of which such proceeds are
payable provided, however, that if Mortgagee shall have first
notified the underwriters or brokers that a Default hereunder
has occurred then all such proceeds to which the Mortgagor
would have otherwise been entitled shall be thereafter payable
to Mortgagee for distribution to itself and others as their
interests may appear as hereinafter set forth or otherwise
with the consent of Mortgagee in each case.
I(C). Other Insurance. At its own expense, the
Mortgagor shall, at all times during which the Vessels are
operating within the jurisdiction of the United States of
America, maintain
(i) insurance or post bond or maintain or cause to
be maintained approved evidence of financial
responsibility with respect to the Vessels to cover the
actual cost of removal of discharged oil for which the
Mortgagor or the Vessels may be held strictly liable (or
held liable due to negligence of the Mortgagor or any
other person) under the Clean Water Act of 1977, the Oil
Pollution Act of 1990 or the Outer Continental Shelf
Lands Act, or under any other federal or state law which,
in the future, may apply to the Vessels or to the
Mortgagor; and the Mortgagor shall maintain insurance or
post bond or maintain or cause to be maintained approved
evidence of financial responsibility covering similar
pollution risks or liabilities incident thereto under any
law, regulation or judicial decision of any foreign
jurisdiction or jurisdictions or political subdivision
thereof applicable to the Mortgagor, the Vessels or their
operations;
(ii) such workmen's compensation or longshoremen's
and harbor workers' insurance as shall be required by
applicable law, including endorsements for Outer
Continental Shelf operations, borrowed servant, voluntary
compensation and in rem claims;
(iii) insurance (with a limit of USD 5,000,000 per
occurrence) naming the Mortgagor and the Mortgagee
assureds and loss payees, as their interests may appear,
against contingent Energy, Exploration and Development
("E.E.D.") liabilities in connection with operations
conducted by the Vessels with respect to Vessels
operating under a drilling contract with a financially
responsible operator acceptable to the Mortgagee that
indemnifies against such E.E.D. arising out of blowout
occurring (above and below the seabed), cratering,
redrilling/recompletion, cost of control, clean-up,
containment seepage and pollution from blowouts above the
seabed, spillage or leakage in connection with operations
conducted by any Vessel to the extent available at
reasonable cost, in form and substance satisfactory to
the Mortgagee, and third party liabilities ("T.P.L.")
that may be assumed by a contract which is legally
enforceable and in form and substance reasonably
satisfactory to the Mortgagee. Deductibles or self-
insured retentions shall not exceed USD 250,000 (E.E.D.)/
(T.P.L.) and shall be for the account of the Mortgagor;
(iv) excess seepage, pollution, clean-up and
containment liability coverage in the amount of USD
50,000,000 in respect of offshore operations in excess of
and following the seepage, pollution, clean-up and
containment liability coverage recited in Subsection
(iii) above; and
(v) mortgagee's interest insurance or breach of
warranty endorsement in favor of the Mortgagee with such
underwriters and under forms of policies approved by the
Mortgagee, which approval shall not be unreasonably
withheld, in an amount equal to at least 125% of the
Loan.
II. Application of Proceeds. All policies of insurance
required under this Section 1.18 shall be placed through
first-class marine brokers reasonably acceptable to Mortgagee
and shall name the Mortgagor and Mortgagee as Additional
Insureds. All policies maintained under Subsection I above
shall also name the Mortgagee as a loss payee for all hull and
machinery policies, and, in the case of policies procured
under Subpart I(A) hereof, shall provide that all payments in
respect of loss or damage shall be made solely to the
Mortgagee for all amounts in excess of USD 1,000,000 and that
upon the occurrence and continuance of a Default hereunder,
all proceeds shall be payable solely to Mortgagee. Any
insurance recoveries under any policies to which the Mortgagee
shall be so entitled shall be applied as provided in Section
1.05(c) of the Loan Agreement. Until a Default has occurred,
the Mortgagee and the Mortgagor shall cooperate in adjusting
any claim with the underwriters of insurances for the Vessels
and underwriters may rely on any agreement reached with the
Mortgagor as binding both the Mortgagee and the Mortgagor.
Following the occurrence of a Default, the Mortgagee and the
Mortgagor shall continue to cooperate to adjust any claim but
only the Mortgagee shall have the power to agree any
adjustment with underwriters on behalf of the Vessels, the
Mortgagor and itself.
III. Constructive Total Loss. In the event of an
accident, occurrence or event resulting in a constructive
total loss of any Vessel, the Mortgagee shall have the right
to claim for a constructive total loss of the Vessel and to
require that Mortgagor declare such to be a constructive total
loss, and if both (1) such claim is accepted by all
underwriters under all policies then in force as to the Vessel
under which payment is due for total loss and (2) payment in
full is made in cash under such policies, then the Mortgagee
shall have the right at its election, to abandon the Vessel to
the underwriters under such policies, free from the lien of
this Mortgage and apply the proceeds of such insurance as
provided in Section 1.05(c) of the Loan Agreement.
IV. Agreed or Compromised Total Loss. In the event of an
accident, occurrence or event of damage to any Vessel, the
Mortgagee shall have the right in its discretion to enter into
an agreement or compromise with underwriters providing for an
agreed or compromised total loss of the Vessel.
V. Carriers; Approvals. All insurance required under
this Section shall be placed and kept with the United States
Government or with American, British, or other insurance
companies, underwriters' associations, clubs or underwriting
funds approved by the Mortgagee, which consent shall not be
unreasonably withheld. Any approval of a policy under this
Section 1.18 shall be effective until the end of the policy
period or until thirty (30) days after the Mortgagee shall
notify the Mortgagor of the desired change in the form and/or
amount thereof, whichever shall first occur. Notwithstanding
the foregoing, Mortgagee may require changes on shorter notice
if such changes are necessary or desirable to comply with
requirements of or insure against liabilities created or
increased by any change, modification, amendment in the law
(including judicial or administrative decisions), regulations,
rules, policies or practices of the United States government
or the government of any state, territory, possession thereof
or of any other place where the Vessel may be operating or
whose laws may apply.
VI. Taking, Requisition, etc. During the continuance of a
taking, requisition or charter of the use of any Vessel by the
United States Government, with the prior written consent of
the Mortgagee, the provisions of this Section shall be deemed
to have been complied with in all respects as to any Vessel if
the United States Government shall have agreed, pursuant to an
agreement in form and substance satisfactory to the Mortgagee,
to reimburse the Mortgagee and the Mortgagor for loss or
damage resulting from the risks indicated in subsection I of
this Section. In the event of any taking, requisition, charter
or loss of any Vessel contemplated by this paragraph the
Mortgagor shall promptly furnish to the Mortgagee a
certificate from a Responsible Officer stating that such
taking, requisition, charter or loss has occurred and, if such
is the case, that the United States Government has agreed to
reimburse the Mortgagee and the Mortgagor for loss or damage
resulting from the risks covered pursuant to the requirements
of Subpart I of this Section 1.18.
VII. Additional Provisions. All insurance required
under this Section 1.18 shall, unless otherwise first agreed
in writing by the Mortgagee, provide that (1) there shall be
no recourse against the Mortgagee for the payment of premiums,
supplemental or back calls or commissions or warranties or
representations to underwriters, (2) if such insurance
provides for the payment of club calls, assessments or
advances, there shall be no recourse against the Mortgagee for
the payment thereof, (3) at least thirty (30) days' (seven (7)
days in the case of war risk coverage) prior written notice of
any cancellation, reduction in amount or change in coverage or
other material change of such insurance shall be given to the
Mortgagee by the insurance underwriters, (4) the interests of
the Mortgagee shall be continued insured regardless of any
breach of or violation by Mortgagor or any other insured of
any warranties, declarations or conditions contained in such
insurances, (5) no insurance shall be excess over other
coverage but shall be primary insurance and shall not require
any contribution from any excess insurance on any Vessel which
may be carried by Mortgagee, (6) no insurance shall be
invalidated by any assignment of any charters of any Vessel,
and (7) the insurers agree to advise Mortgagee promptly in
writing of any default in the payment of any premium and of
any other act or omission of which such insurer has knowledge
which might invalidate or render unenforceable, in whole or in
part, any such policy. The policies shall provide for
severability of interest as though separate policies were
issued to each additional insured except with respect to the
limits of liability.
The Mortgagor shall not, without the prior written
consent of the Mortgagee, do any act, nor voluntarily suffer
nor permit any act to be done, whereby any insurance required
by this Section shall or may be suspended, impaired or
defeated, or suffer or permit any Vessel to engage in any
voyage or any activity not permitted under policies of
insurance satisfactory to the Mortgagee in all respects for
such voyage or the engaging in of such activity.
Section 1.19 Reimbursement of Mortgagee. In the event
that Mortgagor shall fail to obtain or maintain insurance in
accordance with the provisions of this Mortgage, Mortgagee
shall have the right to obtain, and pay the premiums on, such
insurance as Mortgagee reasonably deems necessary. The
Mortgagor shall reimburse the Mortgagee on demand, with
interest at the rate (described in Section 1.04(c) of the Loan
Agreement) for any and all expenditures which the Mortgagee
may from time to time make, lay out or expend in providing
protection in respect of insurance, discharge or purchase of
any liens, taxes, dues, assessments, governmental charges,
fines and penalties imposed, repairs, attorneys' fees and
other matters as the Mortgagor is obligated herein to provide,
but fails to provide. Such obligation of the Mortgagor to
reimburse the Mortgagee, together with interest as provided
above, shall be an additional indebtedness due from the
Mortgagor, secured by this Mortgage, and shall be payable by
the Mortgagor on demand. The Mortgagee, though privileged so
to do, shall be under no obligation to the Mortgagor or to any
other person to make any such expenditures, nor shall the
making thereof relieve the Mortgagor of any Default in that
respect.
Section 1.20 Reports. Prior to the date hereof and
concurrently with each renewal or replacement of each policy
or entry thereafter, Mortgagor shall furnish to the Mortgagee
an original certificate of insurance or a report by a first
class marine insurance broker reasonably acceptable to the
Mortgagee, describing in reasonable detail the insurance then
carried and maintained on and with respect to the Vessels and
certifying that such insurance complies with the terms hereof
and certifying that the insurances are in the form, cover the
risks and are in the amounts determined in accordance with
Section 1.18 of this Mortgage, and that, in the opinion of
such firm, the insurance then carried and maintained complies
with the terms of said Section 1.18. Mortgagor shall obtain
for the benefit of Mortgagee the undertaking of Mortgagor's
insurance agent or broker to promptly advise the Mortgagee in
writing of any act or omission of which such agent or broker
has knowledge which might invalidate or render unenforceable,
in whole or in part, any such policy.
ARTICLE 2. DEFAULTS
Section 2.1 Defaults. The occurrence and continuance of
any of the following events (each of which is herein called a
"Default") shall constitute a default hereunder:
(a) The occurrence of an Event of Default under
(and as defined in) the Loan Agreement; or
(b) The occurrence of a default under the Guaranty;
or
(c) Default by the Mortgagor in the due and
punctual observance or performance of any of the covenants or
agreements contained in Sections 1.4, 1.5, 1.9, 1.10, 1.11,
1.12, 1.13, 1.14, 1.15, 1.17, 1.18 or 1.19 hereof; or
(d) Breach by Mortgagor under any entry or policy
of insurance from time to time in effect with respect to the
Vessels.
(e) Default by the Mortgagor in the due and
punctual observance or performance of any other covenant or
agreement contained in this Mortgage and the continuance of
such default unremedied for a period of 30 days; or
(f) The arrest, attachment or detention of any
Vessel by a U.S. Marshal or other officer of any court of law,
equity or admiralty jurisdiction in any country or nation of
the world or by any government or other person; or
(g) The Mortgagor or any charterer shall remove or
attempt to remove any Vessel beyond the geographic limits of
the then current insurance coverage in place on the Vessel, or
shall abandon the Vessel in a foreign port or shall cease to
be a citizen of the United States of America within the
meaning of Section 2 of the Shipping Act, 1916, as amended.
ARTICLE 3. REMEDIES: APPLICATION OF PROCEEDS
Section 3.1 Sale. etc. If a Default specified in
Subsection 2.1(a) above shall occur as a result of an Event of
Default occurring under Article IV, subsections H or I of the
Loan Agreement, then, and in any such event, the principal
amount of the Note, together with accrued interest thereon and
all other obligations shall become immediately due and payable
without any notice or other action by the Mortgagee, or if any
other Default shall occur and be continuing, then, and in any
such event, the Mortgagee may, by notice of default given to
the Mortgagor, declare the principal amount of the Note,
together with accrued interest thereon and any other amounts
due in accordance therewith and all other obligations to be
forthwith due and payable, whereupon all such amounts shall
become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are
hereby expressly waived. During the continuance of any
Default, Mortgagee shall have the right to pursue and enforce
any of its rights and remedies under the Loan Agreement and
any other Loan Document and, in addition, Mortgagee may do any
one or more of the following as it may elect:
(a) Exercise all the rights and remedies in foreclosure
and otherwise given to mortgagees by the provisions of the
U.S. Code, Tit. 46, Ch. 313, as amended, or other applicable
law including the laws of any other applicable jurisdiction;
(b) Bring suit at law, in equity or in admiralty or
initiate and prosecute such other judicial, extra-judicial, or
administrative proceedings as it may consider appropriate to
recover any and all sums due, or declared due, on the Note,
and all other obligations due, with the right to enforce
payment of said sums against any assets of the Mortgagor,
whether they are covered by this Mortgage or otherwise;
(c) Take possession of the Vessels with or without legal
proceedings, at any place where it or they may be found; and
the Mortgagor or any person in possession of the Vessels,
forthwith upon request by the Mortgagee, as mortgage creditor,
shall deliver possession to the Mortgagee, and the Mortgagee
shall have the right, without being responsible for loss or
damage, to lay up, hold, charter, lease, operate or otherwise
use the Vessels for such period and under such conditions as
it may deem most expedient for its interest, and demand,
collect and retain all hire, freights, earnings, issues,
revenues, income, profits, returns, premiums, salvage awards
or recoveries, recoveries in general average, and all other
sums due or to become due in respect of the Vessels or in
respect of any insurance thereon from any person whomsoever,
accounting only for net profits, if any, arising from such use
and charging against all receipts from such use or from the
sale of the Vessels by court proceedings or pursuant to
subsection (d) below, all costs, expenses (including without
limitation attorneys' fees and disbursements), charges,
damages or losses by reason of such use; and if at any time
the Mortgagee shall avail itself of the right herein given to
it to take the Vessels and shall take them, the Mortgagee
shall have the right to dock the Vessels at any dock, pier or
other premises owned or leased by the Mortgagor without
charge, or at any other place at the cost and expense of the
Mortgagor;
(d) Take and enter into possession of the Vessels, at
any time, wherever the same may be, without legal process, and
if it seems desirable to the Mortgagee without being
responsible for loss or damage, sell it at any place or places
and at such time or times as the Mortgagee may specify, at
public or private sale, by sealed bids or otherwise, on such
terms and conditions as the Mortgagee deems best, free of any
claim, commitment or encumbrance, regardless of the nature
thereof, in favor of the Mortgagor and, except as provided by
law, in favor of any other person, upon advance notice of ten
(10) consecutive days published in any newspaper authorized to
publish legal notices of that kind in the port of
documentation and the places of sale of the Vessels and by
sending notice of each such sale at least fourteen (14) days
prior to the date fixed for such sale, by mail, to the
Mortgagor. In the event that the Vessels shall be offered for
sale by private sale, no newspaper publication of notice shall
be required, nor notice of adjournment of sale. Sale may be
held at such place and at such time as the Mortgagee by notice
may have specified, or may be adjourned by the Mortgagee from
time to time by announcement at the time and place appointed
for such sale or for such adjourned sale, and, without further
notice or publication the Mortgagee may make any such sale at
the time and place to which the same shall be so adjourned;
and any sale may be conducted without bringing the Vessels to
the place designated for such sale and in such manner as the
Mortgagee may deem to be for its best advantage, and the
Mortgagee may become the purchaser at any public sale, and
shall have the right to credit on the purchase price any and
all sums of money due to the Mortgagee under the Note, or
otherwise due to the Mortgagee hereunder or under the Loan
Agreement, the Guaranty or under any other instrument
evidencing any obligation.
Section 3.2 Finality of Sale. A sale of the Vessels
made in pursuance of this Mortgage, whether under the power of
sale hereby granted or any judicial proceedings, shall operate
to divest all right, title and interest of any nature
whatsoever of the Mortgagor therein and thereto, and shall bar
the Mortgagor, its successors and assigns, and all persons
claiming by, through or under them. No purchaser shall be
bound to inquire whether notice has been given or whether any
Default has occurred, or as to the propriety of the sale, or
as to application of the proceeds thereof. In case of any
such sale, any purchaser who is the holder of this Mortgage
shall be entitled, for the purpose of making settlement or
payment for the Vessels, to apply the balance due under this
Mortgage or a part thereof as part or all of the purchase
price to the extent of the amount remaining due and unpaid.
At any such sale, the holder of this Mortgage may bid for and
purchase the Vessels and upon compliance with the terms of
sale may hold, retain and dispose of the Vessels without
further accountability. At any such sale, the Mortgagee may
bid for the purchase of the Vessels and upon compliance with
the terms of sale may hold and retain and dispose of the
Vessels without further accountability therefor.
Section 3.3 Powers and Rights of Mortgagee upon
Occurrence of Default.
(a) Sale. For the purpose of Sections 3.1 and 3.2
the Mortgagor does hereby irrevocably appoint the Mortgagee
and its successors and assigns the true and lawful
attorneys-in-fact of the Mortgagor, in its name and stead, to
make the necessary transfers of the Vessels, and for that
purpose the Mortgagee may execute the necessary instruments of
assignment and transfer (including bills of sale), the
Mortgagor hereby ratifying and confirming all that its said
attorney shall lawfully do by virtue hereof. Nevertheless,
the Mortgagor, if so requested by the Mortgagee, shall ratify
and confirm any sale of the Vessels by executing and
delivering to the purchaser thereof such proper bills of sale,
conveyances, instruments of transfer and releases as may be
designated in such request.
(b) Revenues and Proceeds of the Vessels. The
Mortgagee is hereby irrevocably appointed attorney-in-fact of
the Mortgagor, upon the happening and during the continuation
of any Default, in the name of the Mortgagor to demand,
collect, receive, compromise and sue for, so far as may be
permitted by law, all drilling contract revenues, freights,
hire, earnings, issues, revenues, income and profits of the
Vessels, and all amounts due from underwriters under any
insurance thereon as payment or losses or as return premiums
or otherwise, salvage awards and recoveries, recoveries in
general average or otherwise, and all other sums due or to
become due in respect of the Vessels or in respect of any
insurance thereon from any person whomsoever, and to make,
give and execute in the name of the Mortgagor acquittances,
receipts, releases or other discharges for the same, whether
under seal or otherwise, and to endorse and accept in the name
of the Mortgagor all checks, notes, drafts, warrants,
agreements and all other instruments in writing with respect
to the foregoing, the Mortgagor hereby confirming and
ratifying the same.
(c) Additional Rights. The Mortgagor covenants and
agrees that in addition to any and all other rights, powers
and remedies elsewhere in this Mortgage granted to and
conferred upon the Mortgagee, and including, without
limitation, in any suit to enforce any of its rights, powers
or remedies, if a Default shall have occurred and be
continuing and shall not have been waived by the Mortgagee,
the Mortgagee shall be entitled as a matter of right and not
as a matter of discretion (i) to the appointment of a receiver
or receivers of the Vessels and collection of the freights,
hire, earnings, issues, revenues, income and profits due or to
become due arising from any operation of the Vessels, and any
receiver or receivers so appointed shall have full right and
power to use and operate the Vessels, and (ii) to a decree
ordering and directing the sale and disposal of the Vessels,
and the Mortgagee may become the purchaser at such sale and
shall have the right to credit on the purchase price any and
all sums of money due under the Note or otherwise due to the
Mortgagee hereunder or under the Loan Agreement, the Guaranty
or under any other Loan Document. The Mortgagee shall not be
required to have the Vessels marshalled (upon any sale of the
Vessels pursuant to this Mortgage or otherwise) or be required
to realize on any other collateral prior to realization on the
Vessels. Whenever any right to enter and take possession of
any Vessel accrues to the Mortgagee, it may require the
Mortgagor to deliver, and the Mortgagor shall on demand, at
its own cost and expense, deliver such Vessel to the Mortgagee
at the location designated by the Mortgagee.
Section 3.4 Restoration of Position. In case the
Mortgagee shall have proceeded to enforce any right, power or
remedy under this Mortgage by foreclosure, entry or otherwise,
and such proceedings shall have been discontinued or abandoned
for any reason or shall have been determined adversely to the
Mortgagee, then and in every such case the Mortgagor and the
Mortgagee shall be restored to their former positions and
rights hereunder with respect to the property subject or
intended to be subject to the Mortgage, and all rights,
remedies and powers of the Mortgagee shall continue as if no
such proceedings had been taken.
Section 3.5 Application of Proceeds. (a) The proceeds
of any sale and net earnings derived from the operation, use,
charter, or any other employment of the Vessels by the
Mortgagee, as mortgage creditor, and within any of the powers
and authority above given, as well as the proceeds of any
judgment which the Mortgagee may obtain by reason of the
breach or failure to perform any of the terms of this
Mortgage, as well as the proceeds of any claim for damage
received by the Mortgagee while exercising the powers and the
authorities above given, shall be applied by Mortgagee as
provided in the Loan Agreement.
(b) In the event the proceeds and the net earnings
referred to in this Section 3.5 should be insufficient to pay
the sum total of the Mortgagor's obligations to the Mortgagee,
then the Mortgagee, as mortgage creditor, shall have the right
to collect and to receive from the Mortgagor, or from any
other person or persons who may be chargeable in respect
thereof, such amount as will fully pay any remaining
deficiency with respect to the obligations. In any action to
enforce the Mortgage whether in rem or in personam, in
admiralty, in equity or at law Mortgagor hereby waives any
right to trial by jury.
Section 3.6 No Transfer in Violation of Shipping Act.
Notwithstanding any other provision herein to the contrary, no
sale, charter, transfer or other disposition of any Vessel or
any interest therein may be made to any entity not a citizen
of the United States within the meaning of Section 2 of the
Shipping Act of 1916, as amended, without the approval of the
Secretary of Transportation of the United States.
Section 3.7 Defeasance. If the Note shall have been
satisfied and discharged, then this Mortgage and the estate
and rights hereunder shall cease, determine, and become null
and void; and the Mortgagee, on the request of the Mortgagor
and at the Mortgagor's cost and expense, shall forthwith cause
satisfaction and discharge of this Mortgage to be entered upon
its and other appropriate records and shall execute and
deliver to the Mortgagor such instruments as may be necessary
in the Mortgagor's reasonable opinion to duly acknowledge the
satisfaction and discharge of this Mortgage.
Section 3.8 Right of Peaceful Enjoyment. During the
term of this Mortgage and so long as no Event of Default or
Default shall have occurred and be continuing, the Mortgagor
shall have full and peaceful enjoyment, use, right to
possession and control of the Vessels.
Section 3.9 Cure of Events of Default or Default. If at
any time after an Event of Default or Default and declaration
of acceleration pursuant to Section 3.1 of this Article III
and prior to any foreclosure action having been taken by the
Mortgagee under any of the Loan Documents to realize upon the
security provided by such documents, the Mortgagor offers
completely to cure all Events of Default or Default and to pay
all expenses, advances and damages to the Mortgagee consequent
to such Events of Default or Default, with interest at the
rate provided for in Section 1.04(c) of the Loan Agreement,
then and in the case of the first such Event of Default or
Default, the Mortgagee shall, and in the case of any
succeeding Events of Default or Default, the Mortgagee may
accept such offer and payment and restore the Mortgagor to its
former position. However, such action shall not affect any
subsequent Event of Default or Default or impair any rights
consequent thereon.
ARTICLE 4. GENERAL POWERS OF MORTGAGEE
(a) Arrest or Detention of a Vessel. In the event
that any Vessel shall be arrested or detained by a Marshal or
other
officer of any court of law, equity or admiralty jurisdiction
in any country or nation of the world or by any government or
other person, the Mortgagor does hereby authorize and empower
the Mortgagee, from the date of arrest or detention, in the
name of the Mortgagor, or its successors or assigns, to apply
for and receive possession of and to take possession of the
Vessel with all the rights and powers that the Mortgagor, or
its successors or assigns, might have, possess or exercise in
any such event; and this power of attorney shall be
irrevocable and may be exercised not only by the Mortgagee but
also by its appointee or appointees, with full power of
substitution, to the same extent as if the said appointee or
appointees had been named as one of the attorneys above named
by express designation.
(b) Suits. The Mortgagor also authorizes and
empowers the Mortgagee or its appointees or any of them to
appear in the name of the Mortgagor, its successors or
assigns, in any court of any country or nation of the world
where a suit is pending against any Vessel because of or on
account of any alleged lien against the Vessel from which the
Vessel has not been released and to take such proceedings as
to them may seem proper towards the defense of such suit and
the discharge of such lien, and all expenditures made or
incurred by them or any of them for the purpose of such
defense or discharge shall be a debt due from the Mortgagor,
its successors and assigns, to the Mortgagee, and shall be
secured by the lien of this Mortgage in like manner and extent
as if the amount and description thereof were written herein.
ARTICLE 5. INDEMNITY
The Mortgagor assumes liability for, and agrees to
indemnify and hold the Mortgagee harmless from, all claims,
costs, expenses (including legal expenses), damages and
liabilities arising from or pertaining to this Mortgage or the
ownership, use, possession or operation of the Vessels;
provided that Mortgagor shall have no obligation hereunder
with respect to amounts subject to indemnification between
such parties under any agreement of trust between such parties
or for indemnified liabilities arising from the gross
negligence or wilful misconduct of Mortgagee. The agreements
and indemnities contained in this Article shall survive the
maturity or earlier discharge of this Mortgage and payment in
full of the Note.
ARTICLE 6. SUNDRY PROVISIONS
Section 6.1 Cumulative Remedies; No Waiver. Each and
every power and remedy herein given to the Mortgagee shall be
cumulative and shall be in addition to every other power and
remedy herein or now or hereafter existing at law, in equity,
in admiralty or by statute, and each and every power and
remedy whether herein given or otherwise existing may be
exercised from time to time and as often and in such order as
may be deemed expedient by the Mortgagee, and the exercise or
the beginning of the exercise of any power or remedy shall not
be construed to be a waiver of the right to exercise at the
same time or thereafter any other power or remedy. No delay
or omission by the Mortgagee in the exercise of any right or
power in the pursuance of any remedy specified in Article 3
above accruing upon any Default hereof shall impair any such
right, power or remedy or be construed to be a waiver of any
such Default or an acquiescence therein; nor shall the
acceptance by the Mortgagee of any security or of any payment
of or on account of any part of the indebtedness secured by
this Mortgage or of any payment on account of any past Default
be construed to be a waiver of any right to take advantage of
any future Default or of any past Default not completely cured
thereby.
Section 6.2 Further Assurances. In the event that this
Mortgage, or any provisions hereof, shall be deemed invalid in
whole or in part by reason of any present or future law or any
decision of any court having jurisdiction, or if the documents
at any time held by the Mortgagee shall be deemed by the
Mortgagee for any reason insufficient to carry out the rights
and powers granted to the Mortgagee herein, then, from time to
time, the Mortgagor will do, execute, acknowledge and deliver,
or cause to be done, executed, acknowledged and delivered such
other and further assurances and documents as in the opinion
of the Mortgagee may reasonably be required in order to more
effectively subject the Vessels to the lien of this Mortgage
or more effectively subject the Vessels to the performance of
the terms and provisions of this Mortgage, or to enable this
Mortgage continuously to enjoy the status of a First
"Preferred" Mortgage.
Section 6.3 No Waiver of Preferred Status. No provision
of this Mortgage shall be deemed to constitute a waiver by the
Mortgagee of the preferred status hereof given by the U.S.
Code, Tit. 46, Ch. 313, as amended, and any provision of this
Mortgage which would otherwise constitute such a waiver shall
to such extent be of no force or effect.
Section 6.4 Survival of Agreements. All
representations, warranties, covenants and agreements herein
contained or made in writing in connection with this Mortgage
shall survive the execution of this Mortgage and shall
continue in full force and effect until all sums secured
hereby shall have been paid in full, and the same shall bind
and inure to the benefit of the respective successors and
assigns of the Mortgagor and the Mortgagee.
Section 6.5 Notices. All notices, requests and demands
shall be in writing (including telecopier) given to or made
upon the respective parties hereto as follows:
In the case of the Mortgagor or the Guarantor, at
Reading & Bates Corporation
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Chief Financial Officer
Telecopier: (713) 496-0285
In the case of Mortgagee, at
The CIT Group/Equipment Financing, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attention: (a) Senior Vice President-Credit
Telecopier: (212) 536-1385
(b) Legal Department
Telecopier: (212) 536-1388
or in such other manner as any party hereto shall designate by
written notice to the other parties hereto. All such notices
shall be effective upon delivery or 3 days after being
deposited in the United States mail with postage prepaid
certified, return receipt requested in a correctly addressed
wrapper, or upon receipt if delivered to Federal Express or
similar courier company or transmitted by telefax, except that
all notices, requests and demands to the Mortgagee shall not
be effective until received by the Mortgagee. All notices,
demands, requests, communications and other documents
delivered hereunder or under the Loan Documents, unless
submitted in the English language, shall be accompanied by
certified English translation thereof.
Section 6.6 Counterparts. This instrument may be
executed in any number of counterparts, and each of such
counterparts shall for all purposes be deemed to be an
original.
Section 6.7 Nature of Agreements Hereunder. The
agreements, terms, conditions, rights, remedies and
indemnities provided herein are in addition to, not in
limitation of, and shall not be limited by, each of the
agreements, terms, conditions, rights, remedies and
indemnities contained in the Loan Agreement.
Section 6.8 Recording. For purposes of this Mortgage
and for purposes of recording this Mortgage as required by 46
U.S. Code, Ch. 313, the total amount of this Mortgage is
Twenty Five Million United States Dollars (USD 25,000,000)
plus interest, costs, expenses and performance of Mortgage
covenants; the discharge amount is the same as the total
amount and there is no separate discharge amount.
Section 6.9 Construction. Any provision of this
Mortgage which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, any such
prohibition or unenforceability shall not invalidate or render
unenforceable such provision in any other jurisdiction. To
the extent permitted by law, the Mortgagor hereby waives any
provision of law which renders any provision hereof prohibited
or unenforceable in any respect.
Section 6.10 Consent to Forum. THE MORTGAGOR HEREBY
IRREVOCABLY CONSENTS AND AGREES THAT ANY LEGAL ACTION, SUIT,
OR PROCEEDING ARISING OUT OF OR IN ANY WAY IN CONNECTION WITH
THIS MORTGAGE MAY BE INSTITUTED OR BROUGHT IN THE COURTS OF
THE STATE OF NEW YORK, IN THE COUNTY OF NEW YORK, OR THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK, AS THE MORTGAGEE MAY ELECT, AND BY EXECUTION AND
DELIVERY OF THIS MORTGAGE, THE MORTGAGOR HEREBY IRREVOCABLY
ACCEPTS AND SUBMITS TO, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF ANY SUCH COURT, AND TO ALL PROCEEDINGS IN SUCH
COURTS. THE MORTGAGOR IRREVOCABLY CONSENTS TO SERVICE OF ANY
SUMMONS AND/OR LEGAL PROCESS BY REGISTERED OR CERTIFIED UNITED
STATES AIR MAIL, POSTAGE PREPAID, TO THE MORTGAGOR AT THE
ADDRESS SET FORTH IN SECTION 6.5 HEREOF, SUCH METHOD OF
SERVICE TO CONSTITUTE, IN EVERY RESPECT, SUFFICIENT AND
EFFECTIVE SERVICE OF PROCESS IN ANY SUCH LEGAL ACTION OR
PROCEEDING. NOTHING IN THIS MORTGAGE SHALL AFFECT THE RIGHT
OF THE MORTGAGEE TO EFFECT SERVICE OF PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR LIMIT THE RIGHT OF THE MORTGAGEE TO
BRING ACTIONS, SUITS OR PROCEEDINGS WHETHER IN REM, IN
PERSONAM, IN LAW, EQUITY, ADMIRALTY OR OTHERWISE IN THE COURTS
OF ANY OTHER JURISDICTION. THE MORTGAGOR FURTHER AGREES THAT
FINAL JUDGMENT AGAINST IT IN ANY SUCH LEGAL ACTION, SUIT OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY
OTHER JURISDICTION, WITHIN OR OUTSIDE THE UNITED STATES OF
AMERICA, BY SUIT ON THE JUDGMENT, A CERTIFIED OR EXEMPLIFIED
COPY OF WHICH Shall BE CONCLUSIVE EVIDENCE OF THE FACT AND THE
AMOUNT OF THE LIABILITY.
Section 6.11 Rights of Mortgagor. Until one or more of
the Events of Default herein above described shall happen, the
Mortgagor (a) shall be suffered and permitted to retain actual
possession and use of the Vessels; (b) may at any time alter,
repair, change or re-equip the Vessels, subject, however, to
the provisions of Section 1.12 hereof and (c) shall have the
right, from time to time in its discretion and without
application to the Mortgagee, and without obtaining a release
thereof by the Mortgagee, to dispose of, free from the lien
hereof, any boilers, engines, machinery, masts, spars, sails,
rigging, boats, anchors, chains, tackle, apparel, furniture,
fittings, drilling equipment, pumps, drill pipes, collars,
racking, housing spare parts and supporting inventory,
vehicles or living quarters or any other appurtenances of the
Vessels, first or simultaneously replacing the same by
boilers, engines, machinery, masts, spars, sails, rigging,
boats, anchors, chains, tackle, apparel, furniture, fittings,
drilling equipment, pumps, drill pipes, collars, racking,
housing, spare parts and supporting inventory, vehicles or
living quarters or other appurtenance of substantially equal
value to the Mortgagor, which shall forthwith become subject
to the lien of this Mortgage as a preferred mortgage thereon.
IN WITNESS WHEREOF, the Mortgagor has caused this
Mortgage to be duly executed and delivered as of the day and
year first above written.
READING & BATES OFFSHORE, LIMITED
By: _____________________________
Name: T. W. Nagle
Title: Vice President and
Treasurer
STATE OF TEXAS )
) ss.:
COUNTY OF HARRIS )
On this ____ day of May, 1995, before me personally came
T.W. Nagle, to me known, who, being by me duly sworn, did
depose and say that his address is 901 Threadneedle, Houston,
Texas 77079; that he is Vice President and Treasurer of
Reading & Bates Offshore, Limited the corporation described in
and which executed the foregoing instrument; and that he
signed his name thereto pursuant to authority granted to him
by the Board of Directors of said corporation.
_________________________________
(Notary Public)
Exhibit 10.87
Supplement No. 1
to
FIRST PREFERRED FLEET MORTGAGE
SUPPLEMENT NO. 1 dated July 13, 1995 ("Supplement No. 1"), by
READING & BATES OFFSHORE, LIMITED, an Oklahoma corporation
with its principal place of business at 901 Threadneedle,
Houston, Texas 77079 (the "Mortgagor") to THE CIT
GROUP/EQUIPMENT FINANCING, INC., a New York corporation with
an office at 1211 Avenue of the Americas, New York, N.Y.,
10036 (the "Mortgagee").
W I T N E S S E T H:
WHEREAS, the Mortgagor has executed and delivered to
the Mortgagee the First Preferred Fleet Mortgage dated May 25,
1995, (said First Preferred Fleet Mortgage being herein called
the "Mortgage" and the terms herein, unless otherwise defined,
being used as defined in the Mortgage); and
WHEREAS, by the Mortgage the Mortgagor mortgaged to
the Mortgagee the U.S. flag drilling rig F.G. McCLINTOCK,
Official No. 562059 (as more fully described in the Mortgage),
to secure, among other things, payment of all amounts due and
owing under the Loan Agreement dated as of May 25, 1995 and
the Note dated May 25, 1995; and
WHEREAS, the Mortgage was recorded on May 25, 1995
at 11:18 am at the United States Coast Guard Vessel
Documentation Office, at the Port of Houston, Texas, in Book
B-95/5, page 491; and
WHEREAS, the drilling rig described below in this
Supplement No. 1 is the Other Vessel described in the
Mortgage; and
WHEREAS, the execution and delivery of this
Supplement No. 1 have been duly authorized and all conditions
and requirements necessary to make this instrument a valid and
binding agreement and to effect the modifications of the
Mortgage provided herein and to continue the Mortgage, as
supplemented and amended by this Supplement No. 1, as a valid,
binding a legal first preferred fleet mortgage for the
security of all amounts due under the Loan Agreement and the
Note, have been duly performed and complied with;
NOW, THEREFORE, THIS SUPPLEMENT WITNESSETH:
That, in consideration of the premises and other
valuable consideration, the receipt whereof is hereby
acknowledged, and in order to secure the payment of all
amounts due under the Loan Agreement and the Note and all
other sums that may be secured by the Mortgage, the Mortgagor
has granted, conveyed, mortgaged, pledged, assigned,
transferred, set over and confirmed, and by these presents
does grant, convey, mortgage, pledge, assign, transfer, set
over and confirms, unto the Mortgagee:
The whole of the following vessel:
Name Official No.
GEORGE H. GALLOWAY 651646
which vessel has been duly documented in the name of
the Mortgagor under the laws of the United States
and having its home port and port of documentation
at the Port of Houston, Texas together with all of
the boilers, engines, generators, air compressors,
cranes, machinery, masts, spars, rigging, boats,
anchors, cables, chains, tackle, tools, pumps and
pumping equipment, apparel, furniture, fittings and
equipment (excluding equipment not owned by the
Mortgagor), and all other appurtenances thereunto
appertaining or belonging, whether now owned or
hereafter acquired, whether on board or not, and all
additions, improvements, renewals and replacements
hereafter made in or to such vessel, or any part
thereof, or in or to said appurtenances, all of
which property shall be deemed to be included in the
term "Vessel" as used in the Mortgage.
TO HAVE AND TO HOLD all and singular the above
mortgaged and described property unto the Mortgagee, to its
own use, benefit and behoof forever.
ARTICLE FIRST
SECTION 1. The Granting Clause of the Mortgage is
hereby amended by adding thereto an additional paragraph
reading as follows:
"The whole of the following vessel:
Name Official No.
GEORGE H. GALLOWAY 651646
which vessel has been duly documented in the name of
the Mortgagor under the laws of the United States
and having its home port and port of documentation
at the Port of Houston, Texas together with all of
the boilers, engines, generators, air compressors,
cranes, machinery, masts, spars, rigging, boats,
anchors, cables, chains, tackle, tools, pumps and
pumping equipment, apparel, furniture, fittings and
equipment (excluding equipment not owned by the
Mortgagor), and all other appurtenances thereunto
appertaining or belonging, whether now owned or
hereafter acquired, whether on board or not, and all
additions, improvements, renewals and replacements
hereafter made in or to such vessel, or any part
thereof, or in or to said appurtenances, all of
which property shall be deemed to be included in the
term "Vessel" as used in the Mortgage.
SECTION 2. For the purpose of recording the
Mortgage, as the same is hereby supplemented, as required by
46 U.S. Code Ch. 313, the total amount remains Twenty Five
Million United States Dollars (USD 25,000,000) plus interest,
costs, expenses and performance of mortgage covenants; the
discharge amount is the same as the total amount; and there is
no separate discharge amount.
ARTICLE SECOND
SECTION 1. All of the covenants and agreements on
the part of the Mortgagor which are set forth in, and all the
rights, privileges, powers and immunities of the Mortgagee
which are provided for in the Mortgage are incorporated herein
and shall apply to the Vessels hereby and heretofore subjected
to the lien of the Mortgage and otherwise with the same force
and effect as though set forth at length in this supplement.
SECTION 2. This instrument is executed as and shall
constitute an instrument supplemental to the Mortgage, and
shall be construed in connection with and as part of the
Mortgage.
SECTION 3. Except as modified and expressly amended
by this Supplement No. 1 and any other supplement, the
Mortgage is in all respects ratified and confirmed and all the
terms, provisions and conditions thereof shall be and remain
in full force and effect.
SECTION 4. This Supplement No. 1 may be executed in
any number of counterparts, and each of such counterparts
shall for all purposes be deemed to be an original.
IN WITNESS WHEREOF, this Supplement No. 1 has been
executed and delivered the day and year first above written.
READING AND BATES OFFSHORE, LIMITED
By: ________________________________
Name: __________________________
Title: _________________________
THE CIT GROUP/EQUIPMENT FINANCING,
INC.
By: ________________________________
Name: __________________________
Title: _________________________
STATE OF TEXAS )
) ss.:
COUNTY OF HARRIS )
On this ____ day of July, 1995, before me personally came
___________________________, to me known, who, being by me
duly sworn, did depose and say that his address is 901
Threadneedle, Houston, Texas 77079; that he is
____________________ of Reading & Bates Offshore, Limited the
corporation described in and which executed the foregoing
instrument; and that he signed his name thereto pursuant to
authority granted to him by the Board of Directors of said
corporation.
_________________________________
(Notary Public)
STATE OF TEXAS )
) ss.:
COUNTY OF DALLAS )
On this ____ day of July, 1995, before me personally came
Joseph M. Pitch, to me known, who, being by me duly sworn, did
depose and say that his address 2110 Walnut Hill Lane, Suite
230, Irving, Texas 75038; that he is Vice President of The
CIT Group/Equipment Financing, Inc., the corporation described
in and which executed the foregoing instrument; and that he
signed his name thereto pursuant to authority granted to him
by the Board of Directors of said corporation.
_________________________________
(Notary Public)
Exhibit 10.88
Supplement No. 2
to
FIRST PREFERRED FLEET MORTGAGE
SUPPLEMENT NO. 2 dated December 20, 1995 ("Supplement No. 2"), by READING
& BATES OFFSHORE, LIMITED, an Oklahoma corporation with its principal
place of business at 901 Threadneedle, Houston, Texas 77079 (the
"Mortgagor") to THE CIT GROUP/EQUIPMENT FINANCING, INC., a New York
corporation with an office at 1211 Avenue of the Americas, New York, N.Y.,
10036 (the "Mortgagee").
W I T N E S S E T H:
WHEREAS, the Mortgagor has executed and delivered to the Mortgagee
the First Preferred Fleet Mortgage dated May 25, 1995, as amended and
supplemented by Supplement No. 1 dated July 13, 1995, (said First
Preferred Fleet Mortgage, as amended and supplemented, being herein called
the "Mortgage" and the terms herein, unless otherwise defined, being used
as defined in the Mortgage); and
WHEREAS, by the Mortgage the Mortgagor mortgaged to the Mortgagee
the U.S. flag drilling rigs F.G. McCLINTOCK, Official No. 562059 and
GEORGE H. GALLOWAY, Official No. 651646 (as more fully described in the
Mortgage), to secure, among other things, payment of all amounts due and
owing under the Loan Agreement dated as of May 25, 1995 and the Note dated
May 25, 1995; and
WHEREAS, the Mortgage was recorded on May 25, 1995 at 11:18 a.m. at
the United States Coast Guard Vessel Documentation Office at the Port of
Houston, Texas, in Book B-95/5, page 491; and
WHEREAS, Supplement No. 1 was recorded on July 14, 1995 at 1:00 p.m.
at the United States Coast Guard Vessel Documentation Office at the Port
of Houston, Texas, in Book 95/7, page 136; and
WHEREAS, pursuant to Amendment No. 1 to Loan Agreement dated as of
December __, 1995 ("Amendment No. 1") the Mortgagee has agreed to lend an
additional USD 5,000,000 to the Mortgagee and such additional amount is to
be secured by the Mortgage and evidenced by the Note; and
WHEREAS, the Note has been amended by Endorsement No. 1 dated
December __, 1995 ("Endorsement No. 1"); and
WHEREAS, the execution and delivery of this Supplement No. 2 have
been duly authorized and all conditions and requirements necessary to make
this instrument a valid and binding agreement and to effect the
modifications of the Mortgage provided herein and to continue the
Mortgage, as supplemented and amended by this Supplement No. 2, as a
valid, binding and legal first preferred fleet mortgage for the security
of all amounts due under the Loan Agreement and the Note, have been duly
performed and complied with:
NOW, THEREFORE, THIS SUPPLEMENT WITNESSETH:
ARTICLE FIRST
SECTION 1. The form of Loan Agreement as Annex I to the Mortgage is
hereby amended by adding to it Amendment No. 1 in the form of Exhibit A to
this Supplement No. 2.
SECTION 2. The form of Note as Exhibit A to Annex I of the Mortgage
is hereby amended by adding to it Endorsement No. 1 in the form of Exhibit
B to this Supplement No. 2.
SECTION 3. For the purpose of recording the Mortgage, as the same
is hereby supplemented, as required by 46 U.S. Code Ch. 313, the total
amount is increased to Thirty Million United States Dollars (USD
30,000,000) plus interest, costs, expenses and performance of mortgage
covenants; the discharge amount is the same as the total amount; and there
is no separate discharge amount.
ARTICLE SECOND
SECTION 1. All of the covenants and agreements on the part of the
Mortgagor which are set forth in, and all the rights, privileges, powers
and immunities of the Mortgagee which are provided for in the Mortgage are
incorporated herein and shall apply to the Vessels hereby and heretofore
subjected to the lien of the Mortgage and otherwise with the same force
and effect as though set forth at length in this supplement.
SECTION 2. This instrument is executed as and shall constitute an
instrument supplemental to the Mortgage, and shall be construed in
connection with and as part of the Mortgage.
SECTION 3. Except as modified and expressly amended by this
Supplement No. 2 and any other supplement, the Mortgage is in all respects
ratified and confirmed and all the terms, provisions and conditions
thereof shall be and remain in full force and effect.
SECTION 4. This Supplement No. 2 may be executed in any number of
counterparts, and each of such counterparts shall for all purposes be
deemed to be an original.
IN WITNESS WHEREOF, this Supplement No. 2 has been executed and
delivered the day and year first above written.
READING AND BATES OFFSHORE, LIMITED
By:_________________________________
Name:____________________________
Title:___________________________
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By:_________________________________
Name:____________________________
Title:___________________________
STATE OF TEXAS )
) ss.:
COUNTY OF HARRIS )
On this ___ day of December, 1995, before me personally came
__________________, to me known, who, being by me duly sworn, did depose
and say that his address is 901 Threadneedle, Houston, Texas 77079; that
he is _______________ of Reading & Bates Offshore, Limited the corporation
described in and which executed the foregoing instrument; and that he
signed his name thereto pursuant to authority granted to him by the Board
of Directors of said corporation.
______________________________________
(Notary Public)
STATE OF TEXAS )
) ss.:
COUNTY OF DALLAS )
On this ___ day of December, 1995, before me personally came
__________________, to me known, who, being by me duly sworn, did depose
and say that his address is Two Lincoln Center, Suite 200, 5420 LBJ
Freeway, Dallas, Texas 75240; that he is _______________ of The CIT
Group/Equipment Financing, Inc., the corporation described in and which
executed the foregoing instrument; and that he signed his name thereto
pursuant to authority granted to him by the Board of Directors of said
corporation.
______________________________________
(Notary Public)
Exhibit 10.89
GENERAL ASSIGNMENT OF EARNINGS
1. READING & BATES OFFSHORE, LIMITED, a corporation organized and
existing under the laws of the State of Oklahoma, (hereinafter called the
"Assignor"), in consideration of One Dollar (USD 1.00) lawful money of the
United States of America, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, has sold,
assigned, transferred and set over and by this instrument does sell,
assign, transfer and set over unto THE CIT GROUP/EQUIPMENT FINANCING, INC.
(hereinafter called the "Assignee") and unto the Assignee's successors and
assigns, to its and its successors' and assigns' own proper use and
benefit, and, as collateral security for the obligations of the Assignor
to the Assignee pursuant to the terms and conditions of a Loan Agreement
dated May 25, 1995 among the Assignor, the Assignee, and READING & BATES
CORPORATION (the "Loan Agreement"), and does hereby grant the Assignee a
security interest in all of the Assignor's right, title and interest in
and to: (i) all day rate payments, charter hire, drilling contract
revenues, accounts and contract rights and all freights, hire and other
monies earned and to be earned, due or to become due, or paid or payable
to, or for the account of, the Assignor, of whatsoever nature arising out
of or as a result of the ownership and operation by the Assignor or its
respective agents of the United States flag drilling rig F.G. McCLINTOCK,
Official No. 562059 and when acquired by the Assignor, the United States
flag drilling rig GEORGE H. GALLOWAY, Official No. 651646 (collectively,
the "Vessels"), (ii) all monies and claims for moneys due and to become
due to the Assignor and all claims for damages arising out of the breach
of any and all present and future drilling contracts, charter parties,
bills of lading, contracts and other engagements of affreightment or for
the carriage or transportation of cargo, and operations of every kind
whatsoever of each of the Vessels and in and to any and all claims and
causes of action for money, loss or damages that may accrue or belong to
the Assignor, its respective successors or assigns, arising out of or in
any way connected with the present or future use, operation or management
of each of the Vessels or arising or in any way connected with any and all
present and future requisitions, drilling contracts, charter parties,
bills of lading, contracts and other engagements of affreightment or for
the carriage or transportation of cargo, and other operations of each of
the Vessels, (iii) all moneys and claims for moneys due and to become due
to the Assignor, and all claims for damages in respect of the actual or
constructive total loss of or requisition of use of or title to each of
the Vessels, and (iv) any proceeds of any of the foregoing.
2. Upon the occurrence and continuance of an Event of Default, the
Assignor shall cause all day rate payments, drilling contract revenues,
charter hire, freights and moneys hereby assigned to be paid over to the
Assignee at such account or accounts as designated in writing by the
Assignee.
3. The Assignor covenants that in the Event of Default or upon the
Assignee's request it will send letters to each of the agents and
representatives of the Assignor into whose hands or control may come any
earnings and moneys hereby assigned, informing each such addressee of this
Assignment and instructing such addressee to remit promptly to the
Assignee all earnings and moneys hereby assigned which may come into
addressee's hands or control and to continue to make such remittances
until such time as the addressee may receive written notice or
instructions to the contrary directly from the Assignee. The Assignor
further covenants that it will use its best efforts to insure that each
such addressee will acknowledge directly to the Assignee receipt of the
Assignor's letter of notification and instructions.
4. It is expressly agreed that anything herein contained to the
contrary notwithstanding, the Assignee shall have no obligation or
liability under any drilling contract, charter party or any contract of
affreightment by reason of or arising out of this Assignment nor shall the
Assignee be required or obligated in any manner to perform or fulfill any
obligations of any of the Assignor under or pursuant to any drilling
contract, charter party, or any contract of affreightment or to make any
payment or to make any inquiry as to the nature or sufficiency of any
payment received by it or to present or file any claim, or to take any
other action to collect or enforce the payment of any amounts which may
have been assigned to it or to which it may be entitled hereunder at any
time or times.
5. The Assignor does hereby constitute the Assignee, its successors
and assigns, the Assignor's true and lawful attorney, irrevocably, with
full power (in the name of the Assignor or otherwise) to ask, require,
demand, receive compound and give acquittance for any and all moneys,
claims, property and rights hereby assigned, to endorse any checks or
other instruments or orders in connection therewith and to file any claims
or to take any action or institute any proceedings which to the Assignee
may seem to be necessary or advisable in the premises.
6. The powers and authority granted to the Assignee in this
Assignment have been given for a valuable consideration and are hereby
declared to be irrevocable.
7. The Assignor agrees that at any time and from time to time, upon
the written request of the Assignee, the Assignor will promptly and duly
execute and deliver any and all such further instruments and documents as
the Assignee may deem reasonably necessary in obtaining the full benefits
of this Assignment and of the rights and powers herein granted.
8. The Assignor does hereby warrant and represent that it has not
assigned, pledged or in any way created or suffered to be created any
security interest in the whole or any part of the right, title and
interest hereby assigned, except for the assignment to the Assignee made
by this Assignment. The Assignor hereby covenants that, without the prior
written consent thereto of the Assignee, so long as this instrument of
assignment shall remain in effect, (A) it will not assign or pledge the
whole or any part of the right, title and interest hereby assigned to
anyone other than the Assignee, its successors or assigns, (B) it will not
take or omit to take any actions, the taking or omission of which might
result in an alteration or impairment of the said rights or this
Assignment and (C) it will not default under any drilling contract or
charter party.
9. The Assignor represents and warrants that (i) it has an office
at 901 Threadneedle, Houston, Texas 77079, and (ii) its principal place of
business and the location at which it keeps and will keep its records
concerning the Loan Agreement and the transactions contemplated thereby,
including records relating to this Assignment, any drilling contracts,
charter parties or contracts of affreightment for the operations of the
Vessels is 901 Threadneedle, Houston, Texas 77079. The Assignor agrees
that it will notify the Assignee of any change in the location of such
office and of the opening of any other place of business by or on behalf
of the Assignor.
10. This Assignment (including, but not limited to the validity and
enforceability hereof) shall in all respects be governed by, and construed
in accordance with, the laws of the State of New York, other than conflict
of laws rules thereof.
11. All notices or other communications which are required to be
made to the Assignee hereunder shall be made by telex or telecopier
transmission, confirmed by postage prepaid letter to:
(a) The CIT Group/Equipment Financing Inc.
1211 Avenue of the Americas
New York, New York 10036
Attention: Senior Vice President-Credit
Telecopier: (212) 536-1385
(b) Legal Department
Telecopier: (212) 536-1388
or at such other address as may have been furnished in writing by the
Assignee. Any consents, waivers, approvals or other actions to be given
or taken by the Assignee hereunder shall be effective if contained in a
writing signed by the Assignee or such other person or persons as the
Assignee may from time to time appoint, and forwarded to the Assignor at
its respective address as provided in Section 5.01 of the Loan Agreement.
12. The Assignor hereby appoints the Assignee its attorney-in-fact
to execute and file any financing statements or papers of similar purpose
or effect in connection with any filing or recording of this Assignment.
13. Capitalized terms used herein and not otherwise defined herein
shall have the meanings given to them in the Loan Agreement.
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be
duly executed this 25th day of May, 1995.
READING & BATES OFFSHORE, LIMITED
By: _____________________________
Name: T.W. Nagle
Title: Vice President and
Treasurer
Exhibit 10.90
ASSIGNMENT OF INSURANCE
1. READING & BATES OFFSHORE, LIMITED, a corporation organized and
existing under the laws of the State of Oklahoma (the "Assignor"), in
consideration of One Dollar (USD 1.00) lawful money of the United States
of America, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, pursuant to the Loan
Agreement dated as of May 25, 1995 (the "Loan Agreement") among (i) the
Assignor, as Borrower, (ii) READING & BATES CORPORATION, as Guarantor and
(iii) THE CIT GROUP/EQUIPMENT FINANCING, INC. ("the Assignee") and as
owner of the United States flag drilling rig, F. G. McCLINTOCK, Official
No. 562059, and prospective owner of the U.S. flag drilling rig GEORGE H.
GALLOWAY, Official No. 651646 (the "Vessels"), has sold, assigned,
transferred and set over and by this instrument, does sell, assign,
transfer and set over unto the Assignee, and unto the Assignee's
successors and assigns, to it and its successors' and assigns' own proper
use and benefit, all right, title and interest of the Assignor under, in
and to (i) all policies and contracts of insurance (which expression
includes all entries of the Vessels in Protection and Indemnity
Associations or War Risk Associations) in respect of the Vessels whether
now or hereafter to be effected, and all renewals of or replacements for
the same, (ii) when the context so admits, any reinsurance of such
insurances, (iii) all claims, returns of premium and other monies and
claims for monies due and to become due under said insurances or in
respect of said insurances, (iv) all other rights of the Assignor under or
in respect of said insurances, and (v) any proceeds of any of the
foregoing.
2. It is expressly agreed that anything herein contained to the
contrary notwithstanding, the Assignor shall remain liable under said
insurances to perform all of the obligations assumed by it thereunder, and
the Assignee shall have no obligation or liability under said insurances
by reason of or arising out of this instrument of assignment nor shall the
Assignee be required or obligated in any manner to perform or fulfill any
obligations of the Assignor under or pursuant to said insurances or to
make any payment or to make any inquiry as to the nature or sufficiency of
any payment received by it or to present or file any claim, or to take any
other action to collect or enforce the payment of any amounts which may
have been assigned to it or to which it may be entitled hereunder at any
time or times.
3. The Assignor does hereby constitute the Assignee, its successors
and assigns, the Assignor's true and lawful attorney, irrevocably, with
full power (in the name of the Assignor or otherwise), during the
continuation of an Event of Default, to ask, require, demand, receive,
compound and give acquittance for any and all monies and claims for monies
due and to become due under or arising out of said insurances, to endorse
any checks or other instruments or orders in connection therewith and to
file any claims or to take any action or institute any proceedings which
the Assignee may deem to be necessary or advisable in the premises.
4. The Assignor hereby covenants and agrees (A) to procure that
notice of this Assignment shall be duly given to all underwriters and
brokers, (B) that where the consent of any underwriter is required
pursuant to any of the insurances assigned hereby that it shall be
obtained and evidence thereof shall be given to the Assignee, or, in the
alternative, that in the case of protection and indemnity coverage, the
Assignor shall obtain a letter of undertaking by the underwriters duly
noting the interest of the Assignee, and (C) that there shall be duly
endorsed upon all slips, cover notes, policies, certificates of entry or
other instruments issued or to be issued in connection with the insurances
assigned hereby such clauses as to loss payees as the Assignee may
reasonably require or approve. In all cases, unless otherwise agreed in
writing by the Assignee, such slips, cover notes, notices, certificates of
entry or other instruments shall provide that there will be no recourse
against the Assignee for payment of premiums, calls or assessments.
5. The Assignor agrees that at any time and from time to time, upon
the written request of the Assignee, the Assignor will promptly and duly
execute and deliver any and all such further instruments and documents as
the Assignee may deem desirable in obtaining the full benefits of this
Assignment and of the rights and powers herein granted.
6. The Assignor does hereby warrant and represent that it has not
assigned or pledged, and hereby covenants that, without the prior written
consent thereto of the Assignee, so long as this instrument of assignment
shall remain in effect, it will not assign or pledge the whole or any part
of the right, title and interest hereby assigned to anyone other than the
Assignee, its successors or assigns, and it will not take or omit to take
any action, the taking or omission of which might result in an alteration
or impairment of said insurances, of this Assignment or of any of the
rights created by said insurances or this Assignment.
7. This Assignment shall take effect immediately upon the execution
hereof and the powers and authorities granted to the Assignee, its
successors and assigns, herein, having been given for valuable
consideration, are hereby declared to be irrevocable.
8. The Assignor agrees that the Assignee is hereby appointed its
attorney-in-fact and may execute on the Assignor's behalf and file any
financing statements under the Uniform Commercial Code, or papers of
similar purpose or effect in respect of this Assignment, which the
Assignee deems appropriate.
9. All notices or other communications which are required to be
made to the Assignee hereunder shall be made by telecopier transmission,
confirmed by postage prepaid letter to:
if to the Assignor, to:
901 Threadneedle
Houston, Texas 77079
Attention: Chief Financial Officer
Telecopier: (713) 496-0285
if to the Assignee, to:
The CIT GROUP/EQUIPMENT
FINANCING, INC.
1211 Avenue of the Americas
New York, New York 10036
Attention: (a) Senior Vice President-Credit
Telecopier: (212) 536-1385
Attention: (b) Legal Department
Telecopier: (212) 536-1388
or at such other address as may have been furnished in writing by the
Assignee. Any consents, waivers, approvals or other actions to be given
or taken by the Assignee hereunder shall be effective if contained in a
writing signed by the Assignee or such other person or persons as the
Assignee may from time to time appoint, and forwarded to the Assignor at
its address as provided herein.
10. Any payments made pursuant to the terms hereof shall be payable
to the Assignee to such account or accounts as may, from time to time, be
designated by the Assignee.
11. Upon payment in full to Assignee of all amounts due and owing
thereto under each of the Loan Documents, this Assignment shall terminate.
12. This Assignment (including, but not limited to, the validity
and enforceability hereof) shall be governed by and construed in
accordance with the laws of the State of New York, other than conflict of
laws rules thereof, and shall not be amended or altered nor shall any
provision hereto be waived except by an amendment or waiver in writing
signed by the Assignee.
13. Capitalized terms used herein and not otherwise herein defined
shall have the meaning given to them in the Loan Agreement.
IN WITNESS WHEREOF, the Assignor has caused this Assignment of
Insurance respecting the Vessels to be duly executed this 25th day of May,
1995.
READING & BATES OFFSHORE, LIMITED
By: _____________________________
Name: T. W. Nagle
Title: Vice President and
Treasurer
NOTICE OF ASSIGNMENT
OF INSURANCE
PLEASE TAKE NOTICE that the undersigned, owner of the U.S. flag
vessel F.G. McCLINTOCK, Official No. 562059 has assigned to THE CIT
GROUP/EQUIPMENT FINANCING, INC. as mortgagee under a certain U.S. First
Preferred Fleet Mortgage dated the date hereof covering said Vessel, all
of the undersigned's right, title and interest in and to any and all
insurances respecting said Vessel.
Dated: May , 1995
READING & BATES OFFSHORE, LIMITED
By: _______________________________
Name: T. W. Nagle
Title: Vice President and
Treasurer
EXHIBIT 10.101
CREDIT FACILITY AGREEMENT FOR
A
U.S.$45,000,000 REDUCING REVOLVING
CREDIT FACILITY
AND A
U.S.$10,000,000 STANDBY LETTER OF CREDIT FACILITY
BY AND AMONG
READING & BATES DRILLING CO.
AND
READING & BATES EXPLORATION CO.,
AS JOINT AND SEVERAL BORROWERS
AND
READING & BATES CORPORATION,
AS GUARANTOR
AND
THE LENDERS NAMED HEREIN
WITH
CHRISTIANIA BANK OG KREDITKASSE
acting through its New York branch,
AS AGENT
Dated as of November 16, 1995
- ------------------------------------------------------------------------------
INDEX
1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . .
1.2 Construction. . . . . . . . . . . . . . . . . . . . . . . .
1.3 Accounting Terms. . . . . . . . . . . . . . . . . . . . . .
2 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . .
3 ADVANCES UNDER THE REVOLVING CREDIT FACILITY . . . . . . . . . .
3.1 (a) Purpose. . . . . . . . . . . . . . . . . . . . . . .
3.2 Drawdown Notice. . . . . . . . . . . . . . . . . . . . . .
3.3 Effect of Drawdown Notices . . . . . . . . . . . . . . . .
3.4 Notation of Advances. . . . . . . . . . . . . . . . . . . .
3.5 Allocation of Funds to the
Standby Letter of Credit Facility. . . . . . . . . . . .
4 STANDBY LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . .
4.1. (a) Purpose . . . . . . . . . . . . . . . . . . . . . . .
4.2 Request for Issuance of Letter of Credit . . . . . . . . .
4.3 Effect of Letter of Credit Request . . . . . . . . . . . .
5 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . .
5.1 General Conditions Precedent. . . . . . . . . . . . . . . .
6 INTEREST RATE HEDGE TRANSACTIONS/FOREIGN EXCHANGE TRANSACTIONS .
7 REPAYMENT, REDUCTION AND PREPAYMENT . . . . . . . . . . . . . . .
7.1 Repayment. . . . . . . . . . . . . . . . . . . . . . . . .
7.2 Scheduled Reductions of the Credit Facility. . . . . . . .
7.3 Prepayment, Reborrowing. . . . . . . . . . . . . . . . . .
7.4 Pro-rata Reduction of Commitments. . . . . . . . . . . . .
7.5 Optional Permanent Reduction or Termination of the Credit
Facility . . . . . . . . . . . . . . . . . . . . . . . . .
8 INTEREST AND RATE . . . . . . . . . . . . . . . . . . . . . . . .
8.1 Interest Rate; Default Rate. . . . . . . . . . . . . . . .
8.2 Interest Periods. . . . . . . . . . . . . . . . . . . . . .
8.3 Interest Payments. . . . . . . . . . . . . . . . . . . . .
8.4 Calculation of Interest. . . . . . . . . . . . . . . . . .
9 PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9.1 Place of Payments, No Set Off. . . . . . . . . . . . . . .
10 REIMBURSEMENT OBLIGATIONS . . . . . . . . . . . . . . . . . . . .
10.01 Agreement to Repay Letter of Credit Payments. . . . . . . .
10.02 Standby Letter of Credit Participants. . . . . . . . . . .
10.03 Indemnities. . . . . . . . . . . . . . . . . . . . . . . .
11 EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . .
11.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11.2 Indemnification. . . . . . . . . . . . . . . . . . . . . .
11.3 Application of Moneys. . . . . . . . . . . . . . . . . . .
12 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12.2 Valuation of the Rigs . . . . . . . . . . . . . . . . . . .
12.3 Collateral Maintenance . . . . . . . . . . . . . . . . . .
12.4 Reduction of Collateral . . . . . . . . . . . . . . . . . .
12.5 Inspection and Survey Reports . . . . . . . . . . . . . . .
13 EARNINGS ACCOUNT . . . . . . . . . . . . . . . . . . . . . . . .
14 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . .
15 ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC. . . . . . . .
15.1. Illegality . . . . . . . . . . . . . . . . . . . . . . . .
15.2 Increased Cost . . . . . . . . . . . . . . . . . . . . . .
15.3 Determination of Losses . . . . . . . . . . . . . . . . . .
15.4 Compensation for Losses . . . . . . . . . . . . . . . . . .
16 CURRENCY INDEMNITY . . . . . . . . . . . . . . . . . . . . . . .
16.1 Currency Conversion . . . . . . . . . . . . . . . . . . . .
16.2 Change in Exchange Rate . . . . . . . . . . . . . . . . . .
16.3 Additional Debt Due . . . . . . . . . . . . . . . . . . . .
16.4. Rate of Exchange . . . . . . . . . . . . . . . . . . . . .
17 FEES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . .
17.1 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . .
17.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . .
18 APPLICABLE LAW, JURISDICTION AND WAIVER . . . . . . . . . . . . .
18.1 Applicable Law . . . . . . . . . . . . . . . . . . . . . .
18.2 Jurisdiction . . . . . . . . . . . . . . . . . . . . . . .
18.3 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . .
19 THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19.1 Appointment of Agent . . . . . . . . . . . . . . . . . . .
19.2 Distribution of Payments . . . . . . . . . . . . . . . . .
19.3 Holder of Interest in Note . . . . . . . . . . . . . . . .
19.4 No Duty to Examine, Etc. . . . . . . . . . . . . . . . . .
19.5 Agent as Lender . . . . . . . . . . . . . . . . . . . . . .
19.6 (a) Obligations of Agent. . . . . . . . . . . . . . . . .
(b) No Duty to Investigate . . . . . . . . . . . . . . .
19.7 Discretion of Agent . . . . . . . . . . . . . . . . . . . .
19.8 Assumption Regarding Event of Default . . . . . . . . . . .
19.9 No Liability of Agent or Lenders . . . . . . . . . . . . .
19.10 Indemnification of Agent . . . . . . . . . . . . . . . . .
19.11 Consultation with Counsel . . . . . . . . . . . . . . . . .
19.12 Resignation . . . . . . . . . . . . . . . . . . . . . . . .
19.13 Representations of Lenders . . . . . . . . . . . . . . . .
19.14 Notification of Event of Default . . . . . . . . . . . . .
20 NOTICES AND DEMANDS . . . . . . . . . . . . . . . . . . . . . . .
20.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . .
21 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . .
21.1 Time of Essence . . . . . . . . . . . . . . . . . . . . . .
21.2 Unenforceable, etc., Provisions - Effect . . . . . . . . .
21.3 References . . . . . . . . . . . . . . . . . . . . . . . .
21.4 Further Assurances . . . . . . . . . . . . . . . . . . . .
21.5 Prior Agreements, Merger . . . . . . . . . . . . . . . . .
21.7 Limitation of Liability . . . . . . . . . . . . . . . . . .
21.8 Entire Agreement; Amendments . . . . . . . . . . . . . . .
21.9 Headings . . . . . . . . . . . . . . . . . . . . . . . . .
SCHEDULE
1 The Lenders and the Commitments
EXHIBITS
A Promissory Note
B Form of Drawdown Notice
C Form of Letter of Credit Request
D Form of Compliance Certificate
E Form of Assignment and Assumption Agreement
- -----------------------------------------------------------------------------
CREDIT FACILITY AGREEMENT
THIS CREDIT FACILITY AGREEMENT is made as of the 16th day of November,
1995, and is by and among:
(1) Reading & Bates Drilling Co., a corporation incorporated under
the laws of the State of Oklahoma ("R & B Drilling"), and
Reading & Bates Exploration Co., a corporation incorporated
under the laws of the State of Oklahoma ("R & B Exploration" and
together with R & B Drilling, the "Borrowers");
(2) Reading & Bates Corporation, a corporation incorporated under
the laws of the State of Delaware (the "Guarantor");
(3) The banks and financial institutions whose names and addresses
are set out in Schedule 1 hereto (each a "Lender" and
collectively, the "Lenders"); and
(4) Christiania Bank og Kreditkasse, acting through its New York
branch, as agent (the "Agent") for the Lenders.
WITNESSETH THAT:
1 DEFINITIONS
1.1 Defined Terms. In this Agreement the words and expressions
specified below shall, except where the context otherwise requires, have
the meanings attributed to them below:
"Acceptable Accounting Firm" Arthur Anderson, L.L.P., or such
other recognized international
accounting firm as shall be
approved by the Agent, such
approval not to be unreasonably
withheld;
"Adjusted Percentage" shall have the meaning ascribed
thereto in Clause 10.02;
"Advance(s)" means any amount advanced to the
Borrowers with respect to the
Revolving Credit Facility or (as
the context may require) the
aggregate amount of all such
Advances for the time being
outstanding;
"Affiliate" means with respect to any Person,
any other Person directly or
indirectly controlled by or under
common control with such Person.
For the purposes of this
definition, "control" (including,
with correlative meanings, the <PAGE>
terms "controlled by" and "under
common control with") as applied
to any Person means the possession
directly or indirectly of the
power to direct or cause the
direction of the management and
policies of that Person whether
through ownership of voting
securities or by contract or
otherwise;
"Agreement" this Agreement as the same shall
be amended, modified or
supplemented from time to time;
"Applicable Rate" any rate of interest on the
Revolving Credit Facility from
time to time applicable pursuant
to Clause 8.1 hereof;
"Approved Shipbroker" means a first class,
internationally reputable,
independent, sale and purchase
shipbroker for offshore drilling
rigs as shall be reasonably
satisfactory to the Agent from
time to time;
"Arcade" means Arcade Drilling AS, a
Norwegian corporation and a
Subsidiary of the Guarantor;
"Assignment and
Assumption Agreement(s)" the Assignment and Assumption
Agreement(s) executed pursuant to
Clause 14 hereof substantially in
the form of Exhibit E hereto;
"Banking Day(s)" day(s) on which banks are open for
the transaction of business of
the nature required by this
Agreement in Oslo, Norway, London,
England and New York, New York;
"Base Rate" at any time means the higher of
(i) the rate which is 1/2 of 1% in
excess of the Federal Funds
Effective Rate and (ii) the Prime
Lending Rate;
"Beneficiary" of a Standby Letter of Credit,
means any Person to whom a Standby
Letter of Credit is issued by the
Letter of Credit Issuer;
"Cash Flow Coverage Ratio" means for the prior four fiscal
quarters, the sum of the
Guarantor's consolidated net
income, before interest expense,
income taxes, depreciation,
amortization and Lease Expense,
divided by the sum of interest
expense and Lease Expense;
"Closing Date" means the date on which the
conditions precedent set forth in
Clause 5 of this Agreement shall
have been satisfied or waived by
the Lenders;
"Code" the Internal Revenue Code of 1986,
as amended, any successor statute,
and regulations promulgated
thereunder;
"Commitment Reduction" the portion of the Revolving
Credit Facility which is to be
reduced on the Reduction Dates
pursuant to Clause 7.2;
"Commitment(s)" means the Revolving Credit
Facility Commitment(s) and the
Standby Letter of Credit Facility
Commitment(s), or the aggregate
thereof, as the context requires;
"Compliance Certificate" has the meaning ascribed thereto
in Clause 12.1(A)(iv)(a) hereof;
"Credit Facility" the aggregate of the Revolving
Credit Facility and the Standby
Letter of Credit Facility;
"Credit Facility Period" the period commencing on the date
of this Agreement to the date upon
which all amounts owing under the
Credit Facility and all other
amounts due to the Agent and the
Lenders pursuant to this
Agreement, the Note and the
Security Documents become
repayable and are repaid in full,
or are prepaid in full;
"Default Rate" the rate per annum equal to the
sum of the Applicable Rate plus
two percent (2%);
"Dollars" and the sign "$" the legal currency, at any
relevant time hereunder, of the
United States of America and, in
relation to all payments
hereunder, in same day funds
settled through the New York
Clearing House Interbank Payments
System (or such other Dollar funds
as may be determined by the
Lenders to be customary for the
settlement in New York City of
banking transactions of the type
herein involved);
"Drawdown Date(s)" the dates, each being a Banking
Day falling not later than one
month prior to the Maturity Date,
upon which the Borrowers have
requested that an Advance be made
available as provided by Clause 3
hereof;
"Drawdown Notice" shall have the meaning ascribed
thereto in Clause 3.2 hereof;
"Earnings Account" means the account specified in
Clause 13 opened or to be opened
with the Agent in the name of the
Borrowers in accordance with the
General Assignments for the Rigs;
"Environmental Approvals" shall have the meaning ascribed
thereto in Clause 2.1(n) hereof;
"Environmental Claim" shall have the meaning ascribed
thereto in Clause 2.1(n) hereof;
"Environmental Laws" shall have the meaning ascribed
thereto in Clause 2.1(n) hereof;
"ERISA" means the Employee Retirement
Income Security Act of 1974, as
amended, and all regulations
thereunder.
"ERISA Affiliate" means each trade or business
whether or not separately
incorporated which, together with
the Guarantor, would be deemed a
"single employer" within the
meaning of Section 4001 of ERISA;
"Event(s) of Default" any of the events set out in
Clause 11 hereof;
"FMV" has the meaning set forth in
Clause 12.1A(xvii);
"Federal Funds Effective Rate" means, for any period, a
fluctuating interest rate equal
for each day during such period to
the weighted average of the rates
on overnight Federal Funds
transactions with members of the
Federal Reserve System arranged by
Federal Funds brokers, as
published for such day (or, if
such day is not a Banking Day, for
the next preceding Banking Day) by
the Federal Reserve Bank of New
York, or, if such rate is not so
published for any day which is a
Banking Day, the average of
quotations for such day on such
transactions received by the Agent
from three Federal Funds Brokers
of recognized standing selected by
the Agent;
"GAAP" shall have the meaning ascribed
thereto in Clause 1.3 hereof;
"General Assignments" assignments in respect of the
earnings of each Rig from any and
all sources, to be executed by the
respective Borrowers in favor of
the Agent;
"Guarantor" Reading & Bates Corporation, a
corporation organized and existing
under the laws of the State of
Delaware;
"Guarantee" the unconditional guarantee in
respect of the obligations of the
Borrowers under this Agreement to
be executed by the Guarantor in
favor of the Agent;
"Indebtedness" means with respect to any Person
at any date of determination
(without duplication), (i) all
indebtedness of such Person for
borrowed money, (ii) all
obligations of such Person
evidenced by bonds, debentures,
notes or other similar
instruments, (iii) all obligations
of such Person in respect of
letters of credit or other similar
instruments (including
reimbursement obligations with
respect thereto), (iv) all
obligations of such Person to pay
the deferred and unpaid purchase
price of property or services,
other than trade payables, (v) all
obligations on account of
principal of such Person as lessee
under capitalized leases, (vi) all
indebtedness of other Persons
secured by a lien on any asset of
such Person, whether or not such
indebtedness is assumed by such
Person; provided that the amount
of such indebtedness shall be the
lesser of (a) the fair market
value of such asset at such date
of determination and (b) the
amount of such indebtedness, (vii)
all indebtedness of other Persons
guaranteed by such Person to the
extent such indebtedness is
guaranteed by such Person, and
(viii) to the extent not otherwise
included in this definition, the
net obligations under currency
agreements and interest rate
agreements. The amount of
Indebtedness of any Person at any
date shall be the outstanding
balance at such date of all
unconditional obligations as
described above and, with respect
to contingent obligations, the
maximum liability upon the
occurrence of the contingency
giving rise to the obligation,
provided that the amount
outstanding at any time of any
indebtedness issued with original
issue discount is the face amount
of such indebtedness less the
remaining unamortized portion of
the original issue discount of
such indebtedness at such time as
determined in conformity with
GAAP; and provided further that
Indebtedness shall not include any
liability for federal, state,
local or other taxes;
"Indenture of Trust" the indenture of trust to be
executed by the Indenture Trustee
and the Borrowers;
"Indenture Trustee" Wilmington Trust Company;
"Insurances Assignments" assignments in respect of the
insurances of each Rig, to be
executed by the respective
Borrowers in favor of the Agent;
"Interest Payment Date" the last day of each Interest
Period and, for Interest Periods
longer than three months, that day
falling every three months after
the commencement thereof until the
end of such Interest Period;
should any such day not be a
Banking Day the relevant Interest
Payment Date shall be the next
following Banking Day, unless such
next following Banking Day falls
in the following calendar month,
in which case the relevant
Interest Payment Date shall be the
immediately preceding Banking Day;
"Interest Period(s)" with respect to each Advance, any
period by reference to which an
interest rate is determined
pursuant to Clause 8.2 hereof;
"Lease Expense" means the sum of the Guarantor's
consolidated expense associated
with leases, which leases qualify
as operating leases in accordance
with GAAP;
"Letter of Credit Issuer" means Christiania Bank og
Kreditkasse, acting through its
New York branch;
"Letter of Credit Request" shall have the meaning ascribed
thereto in Clause 4.2;
"LIBOR" in relation to Interest Periods of
one (1), three (3) or six (6)
months, the offered rate (rounded
upward to the nearest 1/16th of
one percent) for deposits of
Dollars for a period equivalent to
such period at or about 11:00 a.m.
(London time) on the second London
Banking Day before the first day
of such period as is displayed on
Telerate page 3750 (British
Bankers' Association Interest
Settlement Rates) (or such other
page as may replace such page 3750
on such system or on any other
system of the information vendor
for the time being designated by
the British Bankers' Association
to calculate the BBA Interest
Settlement Rate (as defined in the
British Bankers' Association's
Recommended Terms and Conditions
("BBAIRS" terms) dated August
1985)), provided that if on such
date no such rate is so displayed,
LIBOR for such period shall be the
rate quoted to the Agent as the
offered rate for deposits of
Dollars in an amount approximately
equal to the amount in relation to
which LIBOR is to be determined
for a period equivalent to such
period by prime banks in the
London Interbank Market at or
about 11:00 a.m. (London time) on
the second Banking Day before the
first day of such period;
"Long Term Debt" means all long term obligations of
the Guarantor and its consolidated
subsidiaries (including the long
term debt of Arcade), excluding
the current portion of long term
debt and the obligations of any
direct or indirect subsidiary of
the Guarantor (other than either
of the Borrowers or Arcade) that
is non-recourse to the Guarantor
or either of the Borrowers, all
according to GAAP;
"Majority Lenders" Lenders whose Commitments exceed
fifty percent (50%) of total
Commitments;
"Margin" means one and three-fourths
percent (1.75%);
"Materials of Environmental Concern" shall have the meaning ascribed in
Clause 2.1(n) hereof;
"Maturity Date" means the date five (5) years
after the date of the Closing
Date; except that if such day is
not a Banking Day, the Maturity
Date will be the next following
Banking Day, unless such next
following Banking Day falls in the
following calendar month, in which
case the Maturity Date shall be
the immediately preceding Banking
Day;
"Mortgages" the first preferred mortgages with
respect to each Rig registered
under United States flag to be
executed by the respective
Borrowers in favor of Indenture
Trustee;
"New Debentures" means the 8% Senior Subordinated
Convertible Debentures of the
Guarantor due December 1998;
"Note" the joint and several promissory
note to be executed by the
Borrowers to the order of the
Agent to evidence the Revolving
Credit Facility substantially in
the form of Exhibit A hereto;
"Participant" shall have the meaning ascribed
thereto in Clause 10.02;
"Person" means any individual, sole
proprietorship, corporation,
partnership (general or limited),
business trust, bank, trust
company, joint venture,
association, joint stock company,
trust or other unincorporated
organization, whether or not a
legal entity, or any government or
agency or political subdivision
thereof;
"Plan" means any multi-employer plan or
single employer plan, as defined
in Section 4001 and subject to
Title IV of ERISA which is
maintained or at any time during
the five calendar years preceding
the effective date of this
Agreement was maintained for
employees of the Guarantor or an
ERISA Affiliate;
"Prime Lending Rate" means the rate which the Agent
announces from time to time as its
prime lending rate, the Prime
Lending Rate to change when and as
such prime lending rate changes.
(The Prime Lending Rate is a
reference rate and does not
necessarily represent the lowest
or best rate actually charged to
any customer. The Agent may make
commercial loans or other loans at
rates of interest at, above or
below the Prime Lending Rate);
"Reduction Date" means each of the dates falling at
intervals of six months after the
Closing Date; if such day is not a
Banking Day, the next following
Banking Day, unless such next
following Banking Day falls in the
following calendar month, in which
case the relevant Reduction Date
shall be the immediately preceding
Banking Day;
"Reimbursement Obligations" means the reimbursement
obligations of the Borrowers set
forth in Clause 10.01 hereof;
"Revolving Credit Facility" means the revolving credit
facility in the original principal
amount of $45,000,000 made
available to the Borrowers on a
joint and several basis pursuant
to Clause 3, as the same is
reduced pursuant to the terms of
this Agreement;
"Revolving Credit
Facility Commitments" means, in relation to a Lender,
the portion of the Revolving
Credit Facility set out opposite
its name in Schedule 1 or, as the
case may be, in any relevant
Assignment and Assumption
Agreement, as reduced from time to
time pursuant to this Agreement;
"Rigs" means, collectively, the semi-
submersible drilling unit "JACK
BATES", owned by R & B Drilling,
and the jack-up drilling unit
"D.R. STEWART", owned by R & B
Exploration, each duly documented
under the laws and flag of the
United States;
"Security Documents" the Guarantee, the Mortgages, the
Indenture of Trust, the General
Assignments, the Insurances
Assignments, and any other
documents that may be executed as
security for the Credit Facility
and the Borrowers' obligations in
connection therewith;
"Standby Letters of Credit" means the Standby Letters of
Credit to be issued by the Letter
of Credit Issuer to the
Beneficiaries named by the
Borrowers;
"Standby Letter of Credit Facility" means that portion of the Credit
Facility in an aggregate amount
not to exceed $10,000,000 to be
made available by the Letter of
Credit Issuer to the Borrowers and
the Guarantor for issuance of
Standby Letters of Credit to the
Beneficiaries designated by the
Borrowers pursuant to Clause 4;
"Standby Letter of
Credit Facility Commitment" means in relation to a Lender, the
portion of the Standby Letter of
Credit Facility set out opposite
its name in Schedule 1 or, as the
case may be, in any relevant
Assignment and Assumption
Agreement;
"Subsidiary" is defined to mean, with respect
to any Person, (i) any corporation
more than 50% of whose stock of
any class or classes having by the
terms thereof ordinary voting
power to elect a majority of the
directors of such corporation
(irrespective of whether at the
time stock of any class or classes
of such corporation shall have or
might have voting power by reason
of the happening of any
contingency) is at the time owned
by such Person directly or
indirectly and (ii) any
partnership, association, joint
venture or other entity in which
such Person, directly or
indirectly, has more than a 50%
equity interest at the time;
"Taxes" any present or future income tax
or other taxes, levies, duties,
charges, fees, deductions or
withholdings of any nature now or
hereafter imposed, levied,
collected, withheld or assessed by
any taxing authority whatsoever;
"Total Assets" means the value of all of the
assets of the Guarantor on a
consolidated basis using book
value except that the Rigs shall
be included in such valuation at
their FMVs as determined pursuant
to Clause 12.1A(xvii) of this
Agreement;
"Total Loss" means:
(a) the actual, constructive,
arranged, agreed, or
compromised total loss of a
Rig;
(b) the requisition for title or
other compulsory acquisition
or forfeiture of a Rig
otherwise than by
requisition for hire;
(c) the capture, seizure,
arrest, detention or
confiscation of a Rig by any
government or by persons
acting or purporting to act
on behalf of any government
unless such Rig be released
from such capture, seizure,
arrest or detention within
ninety (90) days after the
occurrence thereof;
"Transaction Documents" this Agreement, the Note and the
Security Documents;
"Unpaid Drawing" shall have the meaning ascribed
thereto in Clause 10.01;
"Wholly-Owned" means, with respect to any
Subsidiary of any Person, such
Subsidiary of such Person if all
of the outstanding common stock or
other similar equity ownership
interests in such Subsidiary
(other than any director's
qualifying share or investments by
foreign nationals mandated by
applicable law) is owned directly
or indirectly by such Person.
1.2 Construction. Words importing the singular number only shall
include the plural and vice versa. Words importing persons shall include
companies, firms, corporations, partnerships, unincorporated associations
and their respective successors and assigns.
1.3 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles as in effect from time to time in the United States of America
consistently applied ("GAAP") and all financial statements submitted
pursuant to this Agreement shall be prepared in accordance with, and all
financial data submitted pursuant hereto shall be derived from financial
statements prepared in accordance with, GAAP with such adjustments as
shall be necessary, and with which an Acceptable Accounting Firm concurs,
to reflect any differences between the stated assumptions made in
preparing such financial statements and actual events.
2 REPRESENTATIONS AND WARRANTIES
2.1 In order to induce the Lenders and the Agent to enter into this
Agreement and to make the Revolving Credit Facility and Standby Letter of
Credit Facility available, the Borrowers and the Guarantor hereby jointly
and severally represent and warrant that:
(a) Due Organization and Power. Each of the Borrowers and the
Guarantor is duly organized and validly existing in good standing under
the laws of its respective jurisdiction of incorporation, has duly
qualified and is authorized to do business as a foreign corporation in
each jurisdiction wherein the nature of the business transacted thereby
makes such qualification necessary, has full power to carry on its
business as now being conducted and to enter into and perform its
respective obligations under the Transaction Documents to which it is or
is to be a party, and has complied with all statutory, regulatory and
other requirements relative to such business and such agreements the
noncompliance with which could reasonably be expected to have a material
adverse effect on its business, assets or operations, financial or
otherwise;
(b) Authorization and Consents. All necessary corporate action has
been taken to authorize, and all necessary consents and authorities,
including any governmental approvals, have been obtained and remain in
full force and effect to permit the Borrowers and the Guarantor to enter
into and perform their respective obligations under the Transaction
Documents and, in the case of the Borrowers, to borrow, service and repay
the Advances and to reimburse amounts owed in respect of the Standby
Letters of Credit and, as of the date of this Agreement, no further
consents or authorities are necessary for the service and repayment of the
Advances or any part of any thereof or the reimbursement of amounts owed
in respect of the Standby Letters of Credit, or any part thereof;
(c) Binding Obligations. The Transaction Documents constitute or,
when executed and delivered, will constitute, legal, valid and binding
obligations of such of the Borrowers and the Guarantor as is a party
thereto enforceable against each thereof as is a party thereto in
accordance with their terms, except to the extent that such enforcement
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting generally the enforcement of
creditors' rights and general equitable principles;
(d) No Violation. The execution and delivery of, and the
performance of the provisions of, the Transaction Documents by each of the
Borrowers and the Guarantor as is a party thereto, do not, and will not
during the term of this Agreement, contravene any applicable law or
regulation existing at the date hereof or any contractual restriction
binding on any thereof or the articles of incorporation or by-laws (or
equivalent document) of any thereof;
(e) Litigation. Except as otherwise disclosed in writing to the
Agent on or before the date hereof, no action, suit or proceeding is
pending or threatened against either of the Borrowers or the Guarantor
before or by any court, board of arbitration or administrative agency
which if adversely determined would result in a material adverse change in
the business or condition (financial or otherwise) of the either of
Borrowers or the Guarantor or prevent either of the Borrowers or the
Guarantor from performing any of its obligations under the Transaction
Documents;
(f) No Default. Neither the Guarantor nor either of the Borrowers
is in default under any material agreement by which it is bound, nor is
any thereof in default in respect of any material financial commitment or
obligation;
(g) Rig Ownership, Classification, Seaworthiness and Insurance.
(i) "JACK BATES" is in the sole and absolute ownership of R &
B Drilling, unencumbered, save and except for, the respective
Mortgage, and duly registered in the name of R & B Drilling
under the laws and flag of the United States;
(ii) "D.R. STEWART" is in the sole and absolute ownership of R
& B Exploration, unencumbered, save and except for, the
respective Mortgage, and duly registered in the name of R & B
Exploration under the laws and flag of the United States;
(iii) each Rig is classed in the highest classification and
rating for vessels of the same age and type with American Bureau
of Shipping or such other classification society acceptable to
the Lenders without any outstanding recommendations deemed
material by the Lenders;
(iv) each Rig is operationally and in every way fit for
service;
(v) each Rig is insured in accordance with the provisions of
its respective Mortgage and the requirements thereof in respect
of such insurances will have been complied with; and
(vi) each Rig is under the technical and commercial management
of the Guarantor or one of its Affiliates;
(h) Financial Statements. The Guarantor has made available to the
Agent copies of the consolidated annual report on Form 10-K for the fiscal
year ended December 31, 1994 and quarterly reports on Form 10-Q for the
first and second quarters of 1995. The financial statements contained in
the annual report on Form 10-K, including the schedules and notes thereto,
and the condensed financial statements contained in the quarterly reports,
fairly present (in the case of quarterly reports on an unaudited basis),
in accordance with generally accepted accounting principles, the financial
condition and results of the Guarantor and its consolidated subsidiaries
as of the respective dates thereof and for the periods covered by such
financial statements. All such financial statements have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved, except as otherwise stated in the
preceding sentence or in the notes thereto. Since June 30, 1995 there has
been no material adverse change in the financial condition of the
Guarantor and its consolidated subsidiaries;
(i) Tax Returns and Payments. Each of the Borrowers and the
Guarantor has filed all tax returns required to be filed thereby and has
paid all taxes payable thereby which have become due, other than those not
yet delinquent or the nonpayment of which would not have a material
adverse effect on any such party, as the case may be, and except for those
taxes being contested in good faith and by appropriate proceedings or
other acts and for which adequate reserves have been set aside on its
books. The tax returns of the Guarantor have been audited by the U.S.
Internal Revenue Service through December 31, 1984, and all outstanding
issues (other than issues which, if adversely determined, would singly or
in the aggregate not have a materially adverse effect on the Guarantor)
have been settled;
(j) Insurance. Each of the Borrowers and the Guarantor has insured
its properties and assets against such risks and in such amounts as are
customary for companies engaged in similar businesses;
(k) Offices. Each of the chief executive office and chief place of
business of each of the Borrowers and the Guarantor and the office in
which the records relating to the earnings and insurances of the Rigs are
kept, is, and will continue to be, located at 901 Threadneedle, Houston,
Texas;
(l) Foreign Trade Control Regulations. None of the transactions
contemplated herein will violate any of the provisions of the Foreign
Assets Control Regulations of the United States of America (Title 31,
Code of Federal Regulations, Chapter V, Part 500, as amended), any of the
provisions of the Cuban Assets Control Regulations of the United States of
America (Title 31, Code of Federal Regulations, Chapter V, Part 515, as
amended), any of the provisions of the Libyan Assets Control Regulations
of the United States of America (Title 31, Code of Federal Regulations,
Chapter V, Part 550, as amended), any of the provisions of the Iraqi
Sanctions Regulations (Title 31, Code of Federal Regulations, Chapter V,
Part 575, as amended), any of the provisions of the Haitian Transactions
Regulations of the United States of America (Title 31, Code of Federal
Regulations, Chapter V, Part 580, as amended), any of the provisions of
the Federal Republic of Yugoslavia (Serbia and Montenegro) Assets Control
Regulations (Title 31, Code of Federal Regulations, Chapter V, Part 585 as
amended) or any of the provisions of the Regulations of the United States
of America Governing Transactions in Foreign Shipping of Merchandise
(Title 31, Code of Federal Regulations, Chapter V, Part 505, as amended);
(m) Equity Ownership; Citizenship. R & B Drilling is a Wholly-Owned
Subsidiary of the Guarantor. R & B Exploration is a Wholly-Owned
Subsidiary of R & B Drilling. During the Credit Facility Period, neither
Borrower will own any shares of capital stock, partnership interest or any
other direct or indirect equity interest in any corporation, partnership
or other entity (other than the Wholly-Owned Subsidiaries of the
Guarantor), except as heretofore disclosed to the Lenders. The Guarantor
and each of the Borrowers is a citizen of the United States within the
meaning of Section 2 of the Shipping Act 1916, as amended, qualified to
own and operate the Rigs as mobile offshore drilling units in U.S. waters;
(n) Environmental Matters. Except as heretofore disclosed in
writing to the Lenders (i) each of the Borrowers and the Guarantor is in
full compliance with all applicable United States federal and state,
local, foreign and international laws, regulations, conventions and
agreements relating to pollution prevention or protection of human health
or the environment (including, without limitation, ambient air, surface
water, ground water, navigable waters, waters of the contiguous zone,
ocean waters and international waters), including, without limitation,
laws, regulations, conventions and agreements relating to (1) emissions,
discharges, releases or threatened releases of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous materials, oil,
hazardous substances, petroleum and petroleum products and by-products
("Materials of Environmental Concern") or (2) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern ("Environmental Laws"); (ii) each of
the Borrowers and the Guarantor has all permits, licenses, approvals,
rulings, variances, exemptions, clearances, consents or other
authorizations required under applicable Environmental Laws
("Environmental Approvals") and is in full compliance with all
Environmental Approvals required to operate their business as then being
conducted; (iii) neither of the Borrowers nor the Guarantor has received
any notice of any claim, action, cause of action, investigation or demand
by any person, entity, enterprise or government, or any political
subdivision, intergovernmental body or agency, department or
instrumentality thereof, alleging potential liability for, or a
requirement to incur, investigatory costs, cleanup costs, response and/or
remedial costs (whether incurred by a governmental entity or otherwise),
natural resources damages, property damages, personal injuries, attorneys'
fees and expenses, or fines or penalties, in each case arising out of,
based on or resulting from (1) the presence, or release or threat of
release into the environment, of any Materials of Environmental Concern at
any location, whether or not owned by such person, or (2) circumstances
forming the basis of any violation, or alleged violation, of any
Environmental Law or Environmental Approval ("Environmental Claim") (other
than Environmental Claims that have been fully and finally adjudicated or
otherwise determined and all fines, penalties and other costs, if any,
payable by such Borrowers or the Guarantor in respect thereof have been
paid in full or which are fully covered by insurance (including permitted
deductibles)); and (iv) there are no circumstances that may prevent or
interfere with such full compliance in the future;
(o) Pending or Threatened Environmental Claims. Except as
heretofore disclosed in writing to the Lenders there is no Environmental
Claim pending or threatened against either of the Borrowers or the
Guarantor;
(p) Potential Environmental Claims. Except as heretofore disclosed
in writing to the Lenders there are no past or present actions,
activities, circumstances, conditions, events or incidents, known to
either of the Borrowers or the Guarantor, including, without limitation,
the release, emission, discharge or disposal of any Materials of
Environmental Concern, that could form the basis of any Environmental
Claim against either of the Borrowers or the Guarantor;
(q) Regulations G, U and X; Use of Proceeds. Neither the Guarantor
or any Subsidiary of the Guarantor owns or has any present intention of
acquiring any "margin stock" as defined in Regulations G, U or X of the
Board of Governors of the Federal Reserve System (herein called a "margin
stock"). Neither the Guarantor nor any agent acting on its behalf has
taken or will take any action which might cause the transactions
contemplated herein to violate Regulations G, U or X or any other
regulation of the Board of Governors of the Federal Reserve System or to
violate the Securities Exchange Act of 1934, in each case as now in effect
or as the same may hereafter be in effect;
(r) ERISA Compliance. Each Plan is in substantial compliance with
ERISA, no Plan has an accumulated or waived funding deficiency within the
meaning of Section 412 or 413(b) of the Code except as heretofore
disclosed in writing to the Lenders, no proceedings have been instituted
to terminate any Plan, neither the Guarantor nor any ERISA Affiliate has
incurred any material liability to or on account of a Plan under ERISA,
and no condition exists which presents a material risk to the Guarantor of
incurring such a liability;
(s) Investment Company. Neither the Guarantor nor either of the
Borrowers is an "investment company" or a company "controlled" by an
"investment company" (as each such terms is defined or used in the
Investment Company Act of 1940, as amended);
(t) Survival. All representations, covenants and warranties made
herein and in any certificate or other document delivered pursuant hereto
or in connection herewith shall be accurate when made or delivered, as the
case may be, and shall survive the making of the Advances and the issuance
of the Standby Letters of Credit by the Letter of Credit Issuer.
3 ADVANCES UNDER THE REVOLVING CREDIT FACILITY
3.1 (a) Purpose. The Lenders shall make the Advances under the
Revolving Credit Facility available to the Borrowers for general corporate
purposes of the Borrowers, the Guarantor and its and their Subsidiaries.
(b) Making of the Advances. The Lenders, relying upon each of the
representations and warranties set out in Clause 2, hereby agree with the
Borrowers that, subject to and upon the terms of this Agreement, they will
on the Drawdown Dates make the Advances available through the Agent to the
Borrowers. The maximum aggregate amount of all Advances which may be
outstanding at any time under the Agreement is the aggregate amount of the
Revolving Credit Facility, as reduced pursuant to the terms of this
Agreement.
(c) Maximum Number of Advances. The maximum number of Advances
outstanding at any time under this Agreement shall be eight (8), and the
minimum amount of each Advance shall be U.S.$1,000,000.00
3.2 Drawdown Notice. The Guarantor, on behalf of the Borrowers,
shall, at least three (3) Banking Days before a Drawdown Date, serve a
notice, such notice to be substantially in the form of Exhibit B hereto,
(a "Drawdown Notice") on the Agent which notice shall (a) be in writing
addressed to the Agent, (b) be effective on receipt by the Agent, (c)
specify the amount of the Advance to be drawn, (d) specify the Banking Day
on which the Advance is to be drawn, (e) specify the disbursement
instructions, (f) specify the initial Interest Period in respect of such
Advance and (g) be irrevocable.
3.3 Effect of Drawdown Notices. Each Drawdown Notice shall be
deemed to constitute a warranty by the Borrowers (a) that the
representations and warranties stated in Clause 2 (updated mutatis
mutandis) are true and correct on and as of the date of such Drawdown
Notice and will be true and correct on and as of the relevant Drawdown
Date as if made on and as of such date, and (b) that no Event of Default
and no event which with the giving of notice or lapse of time or both
would constitute an Event of Default has occurred and is continuing.
3.4 Notation of Advances. Each Advance made by the Lenders to the
Borrowers may be evidenced by a notation of the same made by the Agent on
the grid attached to the Note, which notation, absent manifest error,
shall be prima facie evidence of the amount of the relevant Advance.
3.5 Allocation of Funds to the Standby Letter of Credit Facility.
Any amounts available to the Borrowers under the Revolving Credit
Facility, but which are not drawn down, may at any time be utilized by the
Borrowers for the issuance of Standby Letters of Credit on the terms
described in Clauses 4 and 17 (subject to reductions in available amounts
pursuant to the terms herein).
4 STANDBY LETTERS OF CREDIT
4.1. (a) Purpose. The Letter of Credit Issuer on behalf of the
Lenders shall make the Standby Letter of Credit Facility available to the
Borrowers for issuance of Standby Letters of Credit in the ordinary course
of business of the Borrowers, the Guarantor and their Subsidiaries (other
than to support Indebtedness payable to third parties) and to support
standby letters of credit issued by ING Bank in the ordinary course of
business of the respective Borrowers outstanding on the Closing Date until
thirty (30) days beyond their maturity.
(b) Availability. (i) Subject to and upon the terms and conditions
herein set forth, the Guarantor on behalf of the Borrowers may request
that the Letter of Credit Issuer at any time and from time to time on or
after the Closing Date and prior to the Maturity Date issue Standby
Letters of Credit in favor of Beneficiaries specified by the Guarantor,
for the joint and several account of the Borrowers and in support of bid,
performance and other bonds needed by the Borrowers, the Guarantor and
their Subsidiaries in their ordinary course of business (other than for
the purpose of supporting Indebtedness payable to a third party), and
subject to and upon the terms and conditions herein set forth the Letter
of Credit Issuer agrees to issue from time to time, Standby Letters of
Credit denominated in Dollars and in such form as may be approved by the
Letter of Credit Issuer.
(ii) Notwithstanding the foregoing, no Standby Letter of Credit shall
be issued, the amount of which, when added to the aggregate amounts of all
other Standby Letters of Credit then outstanding at such time, would
exceed $10,000,000 (excluding, however, amounts available under the
Revolving Credit Facility utilized by the Borrowers for the issuance of
Standby Letters of Credit in accordance with Clause 3.5). For the
purposes of this Agreement, the amount of any Standby Letter of Credit
calculated by reference to a currency other than U.S. Dollars shall be
mutually agreed in writing between the Letter of Credit Issuer and the
Borrowers from time to time (in any event, not to be less than an amount
calculated at a rate of exchange from time to time quoted by the Letter of
Credit Issuer to be the current exchange rate). Each Standby Letter of
Credit shall have an expiry date occurring not later than the Maturity
Date.
4.2 Request for Issuance of Letter of Credit. The Guarantor on
behalf of the Borrowers shall give the Letter of Credit Issuer written
notice in the form of Exhibit C hereto, prior to 1:00 P.M. (New York time)
at least three business days (or such shorter period as may be acceptable
to the Letter of Credit Issuer) prior to the proposed date of issuance
(which shall be a business day) (each a "Letter of Credit Request"), which
Letter of Credit Request shall include an application for such Standby
Letter of Credit and any other documents that the Letter of Credit Issuer
customarily requires in connection therewith. The Agent shall promptly
notify each Lender of each Letter of Credit Request. The Letter of Credit
Issuer shall, on the date of each issuance of a Standby Letter of Credit
by it, give the Agent, each Lender and the Borrowers written notice of the
issuance of such Standby Letter of Credit, accompanied by a copy to the
Agent of the Standby Letter of Credit or Standby Letters of Credit issued
by it.
4.3 Effect of Letter of Credit Request. Each Letter of Credit
Request shall be deemed to constitute a warranty by the Borrowers (a) that
the representations and warranties stated in Clause 2 (updated mutatis
mutandis) are true and correct on and as of the date of such Letter of
Credit Request and will be true and correct on and as of the date the
relevant Standby Letter of Credit is issued as if made on and as of such
date and (b) that no Event of Default and no event which with the giving
of notice or lapse of time or both would constitute an Event of Default
has occurred and is continuing.
5 CONDITIONS PRECEDENT
5.1 General Conditions Precedent. The several obligations of the
Lenders under this Agreement shall be expressly subject to the following
conditions precedent:
(a) the Agent shall have received the following documents in form
and substance satisfactory to the Lenders and their legal advisers:
(i) copies, certified as true and complete by an officer of
each of the Borrowers and the Guarantor of the resolutions of
the board of directors (and, if any necessary under appropriate
law, shareholders) of such Person evidencing approval of the
Transaction Documents to which such Person is to be a party and
authorizing an appropriate officer or officers or
attorney-in-fact or attorneys-in-fact to execute the same on its
behalf;
(ii) copies, certified as true and complete by an officer of
each of the Borrowers and the Guarantor or other applicable
party, of all documents evidencing any other necessary action
(including actions by such parties thereto other than the
Borrowers or the Guarantor as may be required by the Agent),
approvals or consents with respect to this Agreement, the Note,
the Security Documents and the transactions contemplated hereby
and thereby;
(iii) copies, certified as true and complete by an officer of
each of the Borrowers and the Guarantor, of the articles or
certificate of incorporation and by-laws (or the equivalent
thereof) of each thereof;
(iv) good standing certificates or the equivalent thereof with
respect to each of the Borrowers and the Guarantor issued by the
appropriate authorities of the respective jurisdiction of
incorporation of such parties;
(v) copies, certified as true and complete by an officer of
each relevant Borrower, of all drilling contracts relating to
the Rigs;
(vi) valuations of each Rig from an independent appraiser
satisfactory to the Agent; and
(vii) a certificate signed by an officer of each of the
Borrowers and the Guarantor as to (a) the accuracy of the
representations and warranties of the Borrowers and the
Guarantor and (b) to the effect that no Event of Default or
event which with notice or passage of time or both shall become
an Event of Default has occurred and is continuing.
(b) the Agent shall have received evidence satisfactory to the
Lenders and their legal advisers that:
(i) "JACK BATES" is registered in the name of R & B Drilling
under the U.S. flag and is free and clear of all liens and
encumbrances of record except for the Mortgage thereon in favor
of the Indenture Trustee;
(ii) "D.R. STEWART" is registered in the name of R & B
Exploration under the U.S. flag and is free and clear of all
liens and encumbrances of record except for the Mortgage thereon
in favor of the Indenture Trustee;
(iii) each Rig is classed in the highest classification and
rating for vessels of the same age and type with American Bureau
of Shipping or such other classification society acceptable to
the Agent without any material outstanding recommendations;
(iv) each Rig is insured in accordance with the provisions of
its respective Mortgage (evidence of which shall include,
without limitation, cover notes, certificates of entry and
brokers' letters of undertaking and an opinion of an independent
insurance consultant retained by the Lenders or such other
evidence as shall be reasonably satisfactory to the Lenders) and
all requirements thereof in respect of such insurances have been
fulfilled;
(c) the Borrowers shall have duly executed and delivered:
(i) the Note,
(ii) the Mortgages,
(iii) the Insurances Assignments,
(iv) the General Assignments, and
the security interests created by the Mortgages, the Insurance
Assignments and the General Assignments shall have been duly
perfected in all relevant jurisdictions;
(d) the Guarantor shall have duly executed and delivered the
Guarantee;
(e) the Borrowers and the Indenture Trustee shall have duly executed
and delivered the Indenture of Trust, for the benefit of the Lenders;
(f) the Agent shall have received payment in full of all fees and
expenses due to the Agent and the Lenders on the date thereof
including, without limitation, all expenses due under Clause 17
hereof;
(g) the Lenders shall have received evidence satisfactory to it and
its legal advisers that, save for the liens created by the Mortgages,
General Assignments and Insurances Assignments, there are no liens,
charges or encumbrances of any kind whatsoever on either Rig or their
respective earnings or insurances except as permitted hereby or by any
of the Security Documents;
(h) the Lenders shall be satisfied that neither of the Borrowers nor
the Guarantor is subject to any Environmental Claim which could have a
material adverse effect on the business, assets or results of
operations of any thereof;
(i) the Lenders shall have received a complete copy of the
consolidated audited financial report of the Guarantor for the year
ending December 31, 1994, which shall include at least the balance
sheet of such corporation as of the end of such year and the related
statements of income, cash flow and retained earnings for such year
all in reasonable detail, certified by an Acceptable Accounting Firm,
together with their opinion (containing no qualifications which the
Lenders deem material);
(j) the Borrowers shall have provided such evidence as the Lenders
may require documenting the current legal and beneficial ownership of
the shares of the Borrowers; and
(k) the Lenders shall have received opinions from (i) Watson, Farley
& Williams, special counsel to the Lenders and the Agent on matters of
New York law and the Federal law of the United States and (ii) Wayne
K. Hillin, counsel to the Borrowers and General Counsel of the
Guarantor, in each case in such form as the Lenders may require.
6 INTEREST RATE HEDGE TRANSACTIONS/FOREIGN EXCHANGE TRANSACTIONS
The Lenders agree that the Guarantor, one or more of the Borrowers and
the Agent may from time to time enter into interest rate hedge
transactions and foreign exchange transactions and that in connection with
any such transaction, the Lenders will consent to the execution, delivery
and recording by the Borrowers of second priority mortgages on the Rigs to
secure the obligations of the Guarantor and such Borrower or Borrowers in
respect of such transactions.
7 REPAYMENT, REDUCTION AND PREPAYMENT
7.1 Repayment. The Borrowers, jointly and severally, agree to repay
all outstanding Advances (subject to such reduction and prepayments as
hereinafter set forth) on the Maturity Date and, to the extent required to
comply with the limitations set forth in Clause 7.2 below, on each
Reduction Date.
7.2 Scheduled Reductions of the Credit Facility. Subject to the
following provisions of this Clause 7, the Revolving Credit Facility shall
be reduced on each of the first nine (9) Reduction Dates by Three Million
Four Hundred Thousand Dollars ($3,400,000). The Revolving Credit Facility
shall be reduced on the tenth and final Reduction Date by Fourteen Million
Four Hundred Thousand Dollars ($14,400,000). Notwithstanding the
foregoing, in the event an initial Advance of U.S.$1,000,000.00 under the
Revolving Credit Facility is not made on or prior to November 30, 1995,
the Revolving Credit Facility and the Lenders' Commitments thereunder
shall be reduced to zero.
7.3 Prepayment, Reborrowing. The Borrowers may prepay, upon five
(5) business day's written notice, any outstanding Advance or any portion
thereof, without penalty, provided that such prepayment is made on the
last day of the Interest Period of such Advance. Subject to the limits
and upon the conditions herein provided (including the reduction of the
Revolving Credit Facility provided in Clause 7.2), the Borrowers may from
time to time prepay the Advances and thereafter re-borrow such Advances or
a portion thereof.
7.4 Pro-rata Reduction of Commitments. If the Commitments of the
Lenders are reduced pursuant to Clause 12.4 hereof or any other provision
of this Agreement, the Commitments shall be reduced on the Reduction Dates
falling on or after the date of such reduction by the same proportion as
that by which the amount of the aggregate of the Commitments of the
Lenders is so reduced and the remaining reductions pursuant to Clause 7.2
shall be adjusted proportionately to reflect such reduction.
7.5 Optional Permanent Reduction or Termination of the Credit
Facility. The Borrowers shall have the right, at any time and from time
to time, to request on thirty (30) days prior written notice, without
penalty, a permanent partial reduction in or termination of the Credit
Facility. If the Revolving Credit Facility is reduced, all outstanding
Advances in excess of the reduced Revolving Credit Facility Commitments
shall be repaid in full. Any reduction or termination of the Revolving
Credit Facility shall occur on the last day of the applicable Interest
Period(s) with respect to the outstanding Advances. If the Borrowers
request that the Standby Letter of Credit Facility is terminated, they
shall furnish to the Agent an irrevocable and unconditional letter of
credit from a first class international bank acceptable to the Agent (and
execute all all required documentation in connection therewith) for all
amounts payable under all Standby Letters of Credit then outstanding,
which shall be returned to the Borrowers only after such Standby Letters
of Credit have been terminated or have expired. Each partial permanent
reduction shall be equal to or shall exceed Five Million United States
Dollars (U.S.$5,000,000.00) and shall be an integral multiple of One
Million United States Dollars (U.S.$1,000,000.00).
8 INTEREST AND RATE
8.1 Interest Rate; Default Rate. Each Advance shall bear interest
at the Applicable Rate, which shall be the rate per annum equal to the
aggregate of (a) LIBOR for the applicable Interest Period and (b) the
Margin. Any amounts due under this Agreement, including but not limited
to, amounts payable at the time of a Commitment Reduction, not paid when
due, whether on a Reduction Date, by acceleration or otherwise, shall bear
interest thereafter at the Default Rate.
8.2 Interest Periods. With respect to each Advance, an Interest
Period shall be a period of one (1), three (3) or six (6) months, or such
other period as selected by the Guarantor on behalf of the Borrowers which
is available to, and accepted by, the Lenders upon at least three (3)
Banking Days written notice to the Agent prior to the drawdown thereof and
the expiration of any applicable Interest Period; provided, however, that
the Guarantor may select an Interest Period of one (1) month no more than
three (3) times per annum and, provided, further, that if the Agent fails
to receive the required notice as aforesaid, the duration of the
applicable Interest Period shall be three (3) months.
8.3 Interest Payments. The Borrowers agree jointly and severally to
pay interest accrued on the Advances, in arrears, on the Interest Payment
Dates.
8.4 Calculation of Interest. All interest shall accrue from day to
day and be calculated on the actual number of days elapsed and on the
basis of a three hundred sixty (360) day year.
9 PAYMENTS
9.1 Place of Payments, No Set Off. (a) All payments to be made
hereunder by the Borrowers shall be made on the due dates of such payments
to the Agent by wire transfer to The Bank of New York, New York, New York
(ABA No. 021000018) for credit to the account of Christiania Bank, New
York, New York (Account No. 8026120277) or to such other place as the
Agent may direct, for the account of the Lenders, without set-off or
counterclaim and free from, clear of and without deduction for any Taxes,
provided, however, that if the Borrowers shall at any time be required by
law to withhold or deduct any Taxes from any amounts payable to the
Lenders hereunder, then the Borrowers shall jointly and severally (1) pay
directly to the relevant taxing authority the full amount required to be
deducted or withheld, (2) pay to the Agent for the account of the Lenders
such additional amounts in Dollars as may be necessary to ensure that the
net amounts received by each Lender shall equal the full amounts such
Lender would have received if such withholding or deduction were not
required, and (3) promptly send to the Agent an official receipt or other
documentary evidence satisfactory to the Agent evidencing such payment to
such authority. Notwithstanding the preceding sentence, the Borrowers
shall not be required to pay additional amounts or otherwise indemnify the
Lenders for or on account of:
(i) Taxes based on or measured by the net income of any Lender or
Taxes in the nature of franchise taxes or taxes for the privilege of doing
business imposed by any jurisdiction or any political subdivision or
taxing authority therein unless such are imposed as a result of the
activities of the Borrowers within the relevant taxing jurisdiction or
which activities result in the enforcement of remedies hereunder;
(ii) Taxes imposed by any jurisdiction or any political subdivision
or taxing authority therein on any Lender that would not have been imposed
but for such Lender being organized in or conducting business in or
maintaining a place of business in the relevant taxing jurisdiction, or
engaging in activities or transactions in the relevant taxing jurisdiction
that are unrelated to the transactions contemplated by the Transaction
Documents, but only to the extent such Taxes are not imposed as a result
of the activities of the Borrowers within the relevant taxing jurisdiction
or the enforcement of remedies hereunder;
(iii) Taxes imposed on any Lender that would not have been imposed but
for any failure of such Lender to comply with any return filing
requirement or any certification, information, documentation, reporting or
other similar requirement known to such Lender or should have been known
in the exercise of due diligence, if such compliance is required to obtain
or establish relief or exemption from or reduction in such Taxes; or
(iv) any withholding of United States federal income tax that would
not have been required but for a failure by any Lender to comply with the
requirements of Clause 9.1(b).
(b) Prior to the first day of the first Interest Period (or, in the
case of a Lender that acquired its interest in an Advance or a Note
pursuant to an assignment described in Clause 14, on or prior to the date
of the Assignment and Assumption Agreement pursuant to which it became a
Lender), each Lender that is not incorporated under the laws of the United
States or a State thereof will deliver to the Borrowers and the Agent a
duly completed and executed IRS Form 1001 or 4224 or successor applicable
form, as the case may be, certifying in each case that such Lender is
entitled to receive payments under this Agreement, the Advances and the
Notes payable to it, without deduction or withholding of any United States
federal income taxes. Each Lender who undertakes to deliver to the
Borrowers and the Agent a Form 1001 or 4224 pursuant to the preceding
sentence further undertakes to deliver to the Agent and the Borrowers an
additional Form 1001 or 4224 (or successor applicable forms) on or before
the date that any such form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrowers and the Agent, and such
extensions or renewals thereof as may reasonably be requested by the
Borrower, certifying, in the case of a Form 1001 or 4224, that such Lender
is entitled to receive payments under this Agreement, the Advances and the
Notes without deduction or withholding of any United States federal income
taxes, unless in any such case, an event (including, without limitation,
any change in treaty, law or regulation) has occurred prior to the date on
which any such delivery would otherwise be required which renders all such
forms inapplicable or which would prevent such Lender from duly completing
and delivering any such form with respect to it, in which case the Lender
shall either (1) furnish to the Borrowers and the Agent such forms or
other certification as the Lender (in its reasonable opinion) is legally
entitled to furnish evidencing the Lender's eligibility for a complete
exemption from or a reduced rate of withholding of United States federal
income taxes, or (2) notify the Borrowers and the Agent that the Lender is
not capable of receiving payments without any deduction or withholding of
United States federal income tax.
(c) Without prejudice to the preceding provisions of Clause 9.1, if
any Lender or the Agent on its behalf is required to make any payment on
account of any Tax for which the Borrowers are responsible pursuant to
Clause 9.1(a), or any liability in respect of any such Tax is asserted,
imposed, levied or assessed against such Lender or the Agent on its
behalf, the Borrowers shall, upon demand of the Agent, promptly indemnify
such Lender against such payment or liability, together with any interest,
penalties or expenses payable or incurred in connection therewith.
(d) In the event that the Borrowers have actual knowledge that the
Borrowers are required to, or there arises in the Borrowers' reasonable
opinion a substantial likelihood that the Borrowers will be required to
pay an additional amount or otherwise indemnify any Lender for or on
account of any withholding of United States federal income tax pursuant to
Clause 9, the Borrowers will promptly notify the Agent and each relevant
Lender of the nature of such Tax, and shall furnish such information to
the Agent and such Lender with respect to such Tax, as the Agent or such
Lender may reasonably request. In the event of any knowledge or opinion of
the Borrowers described in the preceding sentence, the Borrowers, the
Agent and each relevant Lender shall consult in good faith to determine
what may be required to avoid or reduce such Tax, and shall each use
reasonable efforts to avoid or reduce such Tax (so long as such efforts do
not, in the reasonable opinion of the Lender, result in any cost to the
Lenders or any modification of the terms of repayment of any Note or
Advance).
(e) In addition, Borrowers agree to pay any present or future stamp
or documentary taxes, excise or property taxes, or any other charges or
similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, the
Transaction Documents.
10 REIMBURSEMENT OBLIGATIONS
10.01 Agreement to Repay Letter of Credit Payments. (a) The
Borrowers hereby jointly and severally agree to reimburse the Letter of
Credit Issuer by making payment to the Agent by wire transfer to The Bank
of New York, New York, New York (ABA No. 021000018) for credit to the
account of Christiania Bank, New York, New York (Account No. 8026120277)
or to such other place as the Agent may direct, for the account of the
Lenders, for any payment or disbursement made by the Letter of Credit
Issuer pursuant to a demand received in substantial compliance with any
Standby Letter of Credit (each such amount so paid or disbursed until
reimbursed, an "Unpaid Drawing" and the joint and several obligation of
the Borrowers to pay the Unpaid Drawings, the "Reimbursement Obligations")
immediately after, and in any event on the date on which the Borrowers are
notified by the Letter of Credit Issuer of such payment or disbursement,
with interest on the amount so paid or disbursed by the Letter of Credit
Issuer, to the extent not reimbursed prior to 1:00 P.M. (New York time) on
the date of such payment or disbursement, from and including the date paid
or disbursed to but not including the date the Letter of Credit Issuer is
reimbursed therefor, at a rate per annum which shall be one half of one
percent (1/2 of 1%) in excess of the Base Rate as in effect from time to
time (plus an additional 2% per annum if not reimbursed by the third
business day after the date of such notice of payment or disbursement),
such interest also to be payable on demand. The Reimbursement Obligations
of the Borrowers (and their obligations to pay interest thereon) shall be
absolute and unconditional under any and all circumstances and
irrespective of any setoff, counterclaim or defense to payment which the
Borrowers may have or have had against the Letter of Credit Issuer, the
Agent or any Lender, including, without limitation, any defense based upon
the failure of any drawing under a Standby Letter of Credit to conform to
the terms of the Standby Letter of Credit (except as provided in Clause
10.02(b)) or any non-application or misapplication by the Beneficiary of
the proceeds of such drawing. Upon the occurrence of an Event of Default,
the Borrowers agree, jointly and severally, to deliver to the Agent cash
collateral in an amount equal to the aggregate amount of the Standby
Letters of Credit then outstanding, which cash collateral shall be held in
a deposit in the name of the Agent for application to the reimbursement of
any Unpaid Drawing.
10.02 Standby Letter of Credit Participants. (a) Immediately upon the
issuance by the Letter of Credit Issuer of any Standby Letter of Credit,
the Letter of Credit Issuer shall be deemed to have sold and transferred
to each other Lender, and each such Lender (each a "Participant") shall be
deemed irrevocably and unconditionally to have purchased and received from
the Letter of Credit Issuer, without recourse or warranty, an undivided
interest and participation proportionate to the Standby Letter of Credit
Commitment of such Lender (hereinafter the "Adjusted Percentage") in such
Standby Letter of Credit, each substitute letter of credit, each drawing
made thereunder and the obligations of the Borrowers under this Agreement
with respect thereto.
(b) In determining whether to pay under any Standby Letter of
Credit, the Letter of Credit Issuer shall not have any obligation relative
to the Participants other than to determine that any documents required to
be delivered under such Standby Letter of Credit have been delivered and
that they substantially comply on their face with the requirements of such
Standby Letter of Credit. Any action taken or omitted to be taken by the
Letter of Credit Issuer under or in connection with any Standby Letter of
Credit, if taken or omitted in the absence of gross negligence or willful
misconduct, shall not create for the Letter of Credit Issuer any resulting
liability.
(c) In the event that the Letter of Credit Issuer makes any payment
under any Standby Letter of Credit and the Borrowers shall not have
reimbursed such amount in full to the Letter of Credit Issuer pursuant to
Clause 10.01, the Letter of Credit Issuer shall promptly notify the Agent
and the Agent shall promptly notify each Participant of such failure, and
each Participant shall promptly and unconditionally pay to the Agent for
the account of the Letter of Credit Issuer, the amount of such Lender's
Adjusted Percentage of such payment in Dollars and in same day funds. If
the Agent so notifies any Participant required to fund an Unpaid Drawing
under a Standby Letter of Credit prior to 11:00 A.M. (New York time) on
any business day, such Participant shall make available to the Agent for
the account of the Letter of Credit Issuer such Participant's Adjusted
Percentage of the amount of such payment on such business day in same day
funds. If and to the extent such Participant shall not have so made its
Adjusted Percentage of the amount of such Unpaid Drawing available to the
Agent for the account of the Letter of Credit Issuer, such Participant
agrees to pay to the Agent for the account of the Letter of Credit Issuer,
forthwith on demand such amount, together with interest thereon, for each
day from such date until the date such amount is paid to the Agent for the
account of the Letter of Credit Issuer at the overnight Federal Funds
Effective Rate. The failure of any Participant to make available to the
Agent for the account of the Letter of Credit Issuer its Adjusted
Percentage of any Unpaid Drawing under any Standby Letter of Credit shall
not relieve any other Participant of its obligation hereunder to make
available to the Agent for the account of the Letter of Credit Issuer its
Adjusted Percentage of any payment under any Standby Letter of Credit on
the date required, as specified above, but no Participant shall be
responsible for the failure of any other Participant to make available to
the Agent for the account of such Letter of Credit Issuer such other
Participant's Adjusted Percentage of any such payment.
(d) Whenever the Letter of Credit Issuer receives a payment of an
Unpaid Drawing as to which the Agent has received for the account of the
Letter of Credit Issuer any payments from the Participants pursuant to
clause (c) above, the Letter of Credit Issuer shall pay to the Agent, and
the Agent shall promptly pay to each Participant which has paid its
Adjusted Percentage thereof, in Dollars and in same day funds, an amount
equal to such Participant's Adjusted Percentage of the principal amount
thereof and accrued interest thereon.
(e) The obligations of the Participants to make payments to the
Agent for the account of the Letter of Credit Issuer with respect to
Standby Letters of Credit shall be irrevocable and not subject to
counterclaim, set-off or other defense or any other qualification or
exception whatsoever (provided that no Participant shall be required to
make payments resulting from the gross negligence or willful misconduct of
the Letter of Credit Issuer) and shall be made in accordance with the
terms and conditions of this Agreement under all circumstances, including,
without limitation, any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement
or any of the other Transaction Documents;
(ii) the existence of any claim, set-off, defense or other
right which the Borrowers may have at any time against a
Beneficiary, any transferee of any Standby Letter of Credit (or
any Person for whom any such transferee may be acting), the
Agent, the Letter of Credit Issuer, any Lender or other Person,
whether in connection with this Agreement, any Standby Letter of
Credit, the transactions contemplated herein or any unrelated
transactions (including any underlying transaction between the
Borrowers and the Beneficiary);
(iii) any draft, certificate or other document presented under
the Standby Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the
Transaction Documents.
10.03 Indemnities. The Borrowers hereby agree, jointly and severally,
to reimburse and indemnify the Letter of Credit Issuer for and against any
and all liabilities, obligations, losses, damages, penalties, claims,
actions, judgments, suits, costs, expenses or disbursements of whatsoever
kind or nature which may be imposed on, asserted against or incurred by
the Letter of Credit Issuer in performing its duties in any way relating
to or arising out of its issuance of Standby Letters of Credit; provided
that the Borrowers shall not be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the gross
negligence or willful misconduct of the Letter of Credit Issuer. To the
extent the Letter of Credit Issuer is not indemnified by the Borrowers,
the Participants, severally, will reimburse and indemnify the Letter of
Credit Issuer, in proportion to their respective Standby Letter of Credit
Commitments, for and against any and all liabilities, obligations, losses,
damages, penalties, claims, actions, judgments, suits, costs, expenses or
disbursements of whatsoever kind or nature which may be imposed on,
asserted against or incurred by the Letter of Credit Issuer in performing
its duties in any way relating to or arising out of its issuance of
Standby Letters of Credit; provided that no Participants shall be liable
for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the gross negligence or willful misconduct of the Letter of
Credit Issuer.
11 EVENTS OF DEFAULT
11.1 In the event that any of the following events shall occur and be
continuing:
(a) Commitment Reduction and Interest. Any payment due at the time
of a Commitment Reduction or any Interest Payment Date or otherwise
due hereunder, under the Note or under any of the Security Documents
is not paid when due, and the continuance of any of the same for two
(2) Banking Days; or
(b) Reimbursement Obligations. The Borrowers shall fail to pay the
Reimbursement Obligations in accordance with Clause 10, and the
continuance of any of the same for two (2) Banking Days; or
(c) Other Payments. Any fees or other amounts becoming payable to
the Agent or the Lenders under this Agreement, under the Note, under
the Security Documents or under any of them is not paid on the due
date or within three (3) Banking Days after the date of demand (as the
case may be), and the continuance of any of the same for two (2)
Banking Days; or
(d) Representations, etc. Any representation, warranty or other
statement made by the Borrowers or the Guarantor in this Agreement or
in any of the Security Documents to which it is a party or in any
other instrument, document or other agreement delivered in connection
herewith or therewith proves to have been untrue or misleading in any
material respect as at the date as of which made; or
(e) Impossibility, Illegality. It becomes impossible or unlawful
for the Borrowers or the Guarantor or either of them to fulfill any of
the covenants and obligations contained herein, in the Note or in any
of the Security Documents to which it is a party or for the Agent or
the Lenders to exercise any of the rights vested in them hereunder,
under the Note or under any of the Security Documents and such
impossibility or illegality, in the reasonable opinion of the Agent or
the Majority Lenders, will have a material adverse effect on their
rights hereunder, under the Note or under any of the Security
Documents or on their right to enforce any thereof; or
(f) Covenants. The Borrowers or the Guarantor or either of them
defaults in the performance of any term, covenant or agreement
contained in this Agreement, in the Note or in any of the Security
Documents to which they are a party or in any of them, or in any other
instrument, document or other agreement delivered in connection
herewith or therewith, or there occurs any other event which
constitutes a default under this Agreement, the Note or any of the
Security Documents, in each case other than an Event of Default
referred to elsewhere in this Clause 11.1, and such default, in the
reasonable opinion of the Majority Lenders, could have a material
adverse effect on their rights hereunder, under the Note or under any
of the Security Documents or on their right to enforce any thereof and
continues unremedied for a period of thirty (30) days; or
(g) Indebtedness. The Guarantor shall default in the payment when
due (subject to any applicable grace period), whether by acceleration
or otherwise, of any Indebtedness having an outstanding principal
amount of $1,000,000 or more or an event of default shall have
occurred and be continuing under any loan agreement, credit agreement,
security agreement, capital lease, operating lease, guaranty or other
similar agreement between the Guarantor or any of its subsidiaries and
any bank or other financial institution which results in acceleration
of any Indebtedness or the re-negotiation of the material payments
terms of such Indebtedness; or
(h) Stock Ownership; Citizenship. There is, without the prior
written consent of the Majority Lenders, any change in the legal or
beneficial stock ownership or the voting control of the Borrowers, or
the Guarantor or either of the Borrowers shall cease to be a citizen
of the United States within the meaning of Section 2 of the Shipping
Act 1916, as amended, qualified to own and operate the Rigs in U.S.
waters; or
(i) Default under the Security Documents. There is an event of
default under any of the Security Documents which shall have occurred
and be continuing beyond any applicable grace period; or
(j) Bankruptcy. Either of the Borrowers or the Guarantor is or
becomes insolvent, commences any proceeding relating to any
substantial portion of its property under any reorganization,
arrangement or readjustment of debt, dissolution, winding up,
adjustment, composition, bankruptcy or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect ("Proceeding"),
or there is commenced against either of the Borrowers or the Guarantor
any Proceeding and such Proceeding remains undismissed or unstayed for
a period of thirty (30) days; or any receiver, trustee, liquidator or,
sequestrator of, or for, the Borrowers or the Guarantor or any
substantial portion of the property of any thereof is appointed and is
not discharged within a period of thirty (30) days; or the Borrowers
or the Guarantor by any act indicates consent to or approval of or
acquiescence in any Proceeding or to the appointment of any receiver,
trustee, liquidator or sequestrator of, or for, itself or any
substantial portion of its property; or
(k) Sale of Assets. Either of the Borrowers or the Guarantor
ceases, or threatens to cease, its operations or sells or otherwise
disposes of, or threatens to sell or otherwise dispose of, all or
substantially all of its assets or all or substantially all of its
assets are seized or otherwise appropriated; or
(l) Judgments. Any judgment or order is entered for the payment
(not covered by insurance or indemnification) in excess of $1,000,000
against either of the Borrowers or in excess of $5,000,000 against the
Guarantor or any judgment is entered the effect whereof would be to
render ineffective or invalid this Agreement, the Note, the Security
Documents or any of them; or
(m) Inability to Pay Debts. Either of the Borrowers or the
Guarantor is unable to pay or admits its inability to pay its debts as
they fall due or if a moratorium shall be declared in respect of any
Indebtedness thereof; or
(n) Material Adverse Change. There is a material adverse change in
the business or condition financial or otherwise of the Borrowers or
the Guarantor,
then the obligation of the Lenders to make the Credit Facility available
shall cease and the Majority Lenders may, by notice to the Borrowers,
declare the then outstanding Advances, accrued interest and any other sums
payable by the Borrowers hereunder, under the Note, and under the Security
Documents and all outstanding Reimbursement Obligations, and accrued
interest thereon immediately due and payable whereupon the same shall
forthwith be due and payable without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived; provided
that upon the happening of an event specified in subclause (i) of this
Clause 11.1, the Note and all Reimbursement Obligations shall be
immediately due and payable without declaration or other notice to the
Borrowers. In such event, the Lenders may proceed to protect and enforce
their rights by action at law, suit in equity or in admiralty or other
appropriate proceeding, whether for specific performance of any covenant
contained in this Agreement, in the Note or in any of the Security
Documents, or in aid of the exercise of any power granted herein or
therein, or the Lenders may proceed to enforce the payment of the Note
when due or to enforce any other legal or equitable right of the Lenders,
or proceed to take any action authorized or permitted under the terms of
this Agreement, any of the Security Documents or by applicable laws for
the collection of all sums due, or so declared due, under this Agreement
or on the Note, including, without limitation, the right to appropriate
and hold or apply (directly, by way of set-off or otherwise) to the
payment of the obligations of the Borrowers to the Lenders hereunder,
under the Note and/or under any of the Security Documents (whether or not
then due) all moneys and other amounts of the Borrowers, then or
thereafter in possession of any of the Lenders, the balance of any deposit
account (demand or time, matured or unmatured) of either of the Borrowers,
then or thereafter with any of Lenders and every other claim of either of
the Borrowers, then or thereafter against any of the Lenders.
11.2 Indemnification. The Borrowers jointly and severally agree to,
and shall, indemnify and hold the Agent and the Lenders harmless against
any loss or costs or expenses (including legal fees and expenses) which
the Agent or any of the Lenders sustains or incurs as a consequence of any
default in repayment of the principal amount of any of the Advances or
interest accrued thereon, the repayment of the Reimbursement Obligations,
or any other amount payable hereunder, under the Note or under the
Security Documents including, but not limited to, all actual losses
incurred in liquidating or re-employing fixed deposits made by third
parties or funds acquired to effect or maintain the Credit Facility or any
part thereof. The certification by the Agent or any Lender of such costs
and expenses shall, absent any manifest error, be conclusive and binding
on the Borrowers.
11.3 Application of Moneys. Except as otherwise provided in any
Security Document, all moneys received by the Agent or any of the Lenders
under or pursuant to this Agreement, the Note or any of the Security
Documents after the happening of any Event of Default (unless cured) shall
be applied by the Agent in the following manner:
(i) first, in or towards the payment or reimbursement of any
expenses or liabilities incurred by the Agent or the Lenders in
connection with the ascertainment, protection or enforcement of their
rights and remedies hereunder, under the Note and under any of the
Security Documents;
(ii) secondly, in or towards payment of any interest owing in respect
of the Advances or Unpaid Drawings;
(iii) thirdly, in or towards repayment of principal owing in respect
of the Advances or Unpaid Drawings;
(iv) fourthly, in or towards payment of fees, commissions and other
amounts payable under this Agreement; and
(v) fifthly, the surplus (if any) shall be paid to the Borrowers or
to whomsoever else may be entitled thereto.
12 COVENANTS
12.1 The Borrowers and the Guarantor hereby covenant and undertake
with the Lenders that, from the date hereof and so long as any principal,
interest or other monies are owing in respect of this Agreement, the Note,
the Standby Letters of Credit, the Security Documents or any of them:
A. The Borrowers and the Guarantor will each:
(i) Performance of Agreements. Duly perform and observe, and
procure the observance and performance by all other parties
thereto (other than the Agent and the Lenders) of, the terms of
this Agreement, the Note, and the Security Documents;
(ii) Notice of Default; Change in Classification of Rig.
Promptly inform the Agent of the occurrence of (a) any Event of
Default or of any event which with the giving of notice or lapse
of time, or both, would constitute an Event of Default, (b) the
withdrawal of any Rig's rating by its classification society or
the issuance by the classification society of any recommendation
or notation affecting class, (c) any litigation or governmental
proceeding or environmental proceeding pending or threatened
against either of the Borrowers or the Guarantor which could
reasonably be expected to have a material adverse effect on the
business, assets, operations, property or financial condition of
any such party and (d) any other event or condition of which it
becomes aware which is reasonably likely to have a material
adverse effect on its ability, or the ability of any other party
thereto, to perform its obligations under this Agreement, the
Note and the Security Documents or any of them;
(iii) Obtain Consents. Without prejudice to Clause 2.1 and this
Clause 12.1, obtain every consent and do all other acts and
things which may from time to time be necessary or advisable for
the continued due performance of all its obligations under this
Agreement, the Note and the Security Documents;
(iv) Financial Statements. Deliver or cause to be delivered to
the Agent:
(a) as soon as available but not later than ninety (90)
days after the end of each fiscal year of the Guarantor
complete copies of the financial statements of the
Guarantor (together with a Compliance Certificate
substantially in the form of Exhibit D hereto, signed by
the Chief Financial Officer of the Guarantor), on a
consolidated basis, which shall include at least the
consolidated balance sheet of the Guarantor as of the end
of such year and the related consolidated statements of
income, cash flow and retained earnings for such year, all
in reasonable detail, certified by an Acceptable
Accounting Firm, together with their opinion (without
material qualifications) thereon;
(b) as soon as available but not later than forty-five
(45) days after the end of each of the first three
quarters of each fiscal year of the Guarantor, balance
sheets of the Guarantor, on a consolidated basis, as at
the end of such quarter and the related consolidated
statements of income, cash flow and retained earnings for
such quarter, all in reasonable detail, unaudited, but
certified by the chief financial officer of the Guarantor,
together, in each instance, with a Compliance Certificate
(substantially in the form of Exhibit D hereto) signed by
such chief financial officer of the Guarantor;
(c) as soon as available but not later than sixty (60)
days after the end of each of the first three fiscal
quarters of the Guarantor and not later than ninety (90)
days after the end of the fourth fiscal quarter, a report
(in form and substance reasonably satisfactory to the
Agent) on each drilling rig directly or indirectly owned,
controlled or managed by the Guarantor or its subsidiaries
stating the then current employment; operator contracted
with; the then current day rate; contract expiration date;
average utilization during the past quarter and the
average net day rate earned by such rig for the past
quarter for the days it was under contract;
(d) as soon as available, copies of all reports,
statements, proxy statements or other instruments filed
with the United States Securities and Exchange Commission
or distributed to the shareholders of the Guarantor;
(e) such other statement or statements, lists of
property and accounts, budgets, forecasts, reports and
financial information with respect to the operation and
management of the Rigs and any other rigs owned or
operated directly or indirectly by either of the Borrowers
or the Guarantor, as the Agent may from time to time
reasonably request;
(v) Corporate Existence. Do or cause to be done all things
necessary to preserve and keep in full force and effect its
corporate existence, and all licenses, franchises, permits and
assets necessary to the conduct of the business of such
corporation;
(vi) Books, Records, etc. Keep proper books of record and
account into which full and correct entries shall be made in
accordance with GAAP throughout the Credit Facility Period;
(vii) Inspection. Allow any representative or representatives
designated by the Lenders, subject to applicable laws and
regulations, to visit and inspect any of the properties of such
party, and, on request, to examine the books of account,
records, reports and other papers (and to make copies thereof
and to take extracts therefrom) of such corporation and to
discuss the affairs, finances and accounts of such corporation,
with the officers and executive employees of such corporation
all at such reasonable times and as often as such Lenders
reasonably request;
(viii) Taxes. Pay and discharge all Taxes, assessments and
governmental charges or levies imposed upon each said
corporation or upon said corporation's income or property prior
to the date upon which penalties attach thereto; provided,
however, that said corporation shall not be required to pay and
discharge, or cause to be paid and discharged, any such tax,
assessment, charge or levy so long as the legality or amount
thereof shall be contested in good faith and by appropriate
proceedings or other acts and it shall set aside on its books
adequate reserves with respect thereto, and so long as such
deferment in payment shall not subject either Rig to material
risk of forfeiture or loss;
(ix) Compliance with Statutes, etc. Do or cause to be done all
things necessary to comply with all material laws, and the rules
and regulations thereunder, applicable to the Borrowers and the
Guarantor and including, without limitation, those laws, rules
and regulations relating to employee benefit plans and
environmental matters;
(x) Environmental Matters. Promptly upon the occurrence of
any of the following conditions, provide to the Agent a
certificate of the chief executive officer thereof, specifying
in detail the nature of such condition and the proposed response
of the Borrower concerned or the Guarantor, as the case may be,
or the proposed response of any Environmental Affiliate (as such
term is hereinafter defined) of any thereof, as the case may be:
(a) the receipt by a Borrower or the Guarantor or the receipt by
any Environmental Affiliate of any thereof of any communication
whatsoever that alleges that such person is not in compliance
with any applicable environmental law or environmental approval,
if such noncompliance could reasonably be expected to have a
material adverse effect on the business, assets, operations,
property or financial condition of either of the Borrowers or
the Guarantor, (b) knowledge by either of the Borrowers or the
Guarantor or any Environmental Affiliate of any thereof that
there exists any Environmental Claim pending or threatened
against any such person which could reasonably be expected to
have a material adverse effect on the business, assets,
operations, property or financial condition of the Guarantor or
(c) any release, emission, discharge or disposal of any material
known to either of the Borrowers or the Guarantor that could
form the basis of any Environmental Claim against either of the
Borrowers, the Guarantor or any Environmental Affiliate of any
thereof if such Environmental Claim could reasonably be expected
to have a material adverse effect on the business, assets,
operations, property or financial condition of either of the
Borrowers or the Guarantor. Upon the written request by the
Agent, the Borrowers will submit, and procure that the Guarantor
shall submit, to the Agent at reasonable intervals, a report
providing an update of the status of any issue or claim
identified in any notice or certificate required pursuant to
this subclause. For the purposes of this subclause,
"Environmental Claim" shall mean any claim under federal, state
and local environmental, health and safety laws, statutes or
regulations. "Environmental Affiliate" shall mean any person or
entity the liability of which for Environmental Claims either of
the Borrowers or the Guarantor may have assumed by contract or
operation of law;
(xi) Accountants. Retain throughout the Credit Facility Period
an Acceptable Accounting Firm as its independent certified
accountants;
(xii) Class Certificate. Furnish, or cause to be furnished, to
the Agent, upon any change of the classification status of a Rig
or the issuance of a recommendation affecting class by the
classification society of a Rig or upon the reasonable request
of the Agent (to be made no more than twice in any calendar
year), a confirmation of class certificate covering each Rig and
evidencing compliance with the Mortgage;
(xiii) Maintenance of Properties. Maintain, or cause to be
maintained, and keep, or cause to be kept, and procure that the
Guarantor shall maintain, or cause to be maintained, and keep,
or cause to be kept, all properties used or useful in the
conduct of its business in good condition, repair and working
order and supplied with all necessary equipment and will cause
to be made necessary repairs, renewals and replacements thereof
so that the business carried on and in connection therewith and
every portion thereof may be properly and advantageously
conducted at all times. In addition, each Borrower shall cause
its Rig to be drydocked (or to undergo any underwater survey in
lieu of drydocking) as often as required by the classification
society of such Rig and as a prudent rig owner or operator would
require;
(xiv) Long Term Debt to Total Assets Ratio. The Guarantor shall
not allow its ratio of Long Term Debt to Total Assets to exceed
0.28 to 1.0 at the end of any fiscal quarter;
(xv) Restrictions on Working Capital. The Guarantor shall not
allow its working capital (defined as current assets less
current liabilities, exclusive of the New Debentures) to be
negative for more than one (1) consecutive fiscal quarter;
(xvi) Cash Flow Coverage Ratio. The Guarantor shall maintain a
Cash Flow Coverage Ratio of at least 2.0 to 1.0 at the end of
each fiscal year;
(xvii) Valuation Certificates. At any time as may be
requested by the Agent (but in no event less than annually) and
at the expense of the Borrowers not more than twice in any
fiscal year, such expense not to exceed more than U.S.$10,000.00
per year, without taking into account the right of the Borrowers
to retain a second Approved Shipbroker in accordance with the
immediately succeeding sentence, the Borrowers shall retain the
Approved Shipbroker requested by the Agent to supply a written
report setting forth the fair market value ("FMV") of each of
the Rigs (the "First Valuation"). If the Borrowers do not agree
with the valuation of FMV for each of the Rigs set out in such
report, the Borrowers may retain a second Approved Shipbroker at
such time and at their own expense to supply a second written
report setting forth the FMV of each of the Rigs (the "Second
Valuation"). Promptly upon receipt thereof the Borrowers shall
deliver copies of each such report to the Lenders. In such
event, the FMV of each Rig shall be the arithmetic average of
the First Valuation and the Second Valuation. If the Lenders do
not agree with this valuation, the Lenders may obtain a third
and final written valuation from an Approved Shipbroker setting
forth the FMV of each of the Rigs (the "Third Valuation"). In
such event, the arithmetic average of the First Valuation, the
Second Valuation and the Third Valuation shall be used to
determine the FMV of each Rig.
B. The Borrowers shall not without the prior written consent (such
consent not to be unreasonably withheld) of the Majority
Lenders:
(i) Liens. Create, assume or permit to exist any mortgage,
pledge, lien, charge, encumbrance or any security interest
whatsoever upon any of such party's property or other assets,
real or personal, tangible or intangible, whether now owned or
hereafter acquired except:
(a) liens for taxes not yet payable, or being contested
in good faith, for which adequate reserves have been
maintained;
(b) the Mortgages, the General Assignments, the
Insurances Assignments and other liens in favor of the
Agent or the Indenture Trustee or mortgages, assignments
or other security interests on or in respect of property
other than the Rigs in favor of other banks or financial
institutions or institutional investors securing
indebtedness or other obligations otherwise permitted
under this Agreement;
(c) liens, charges and encumbrances against the Rigs
permitted to exist under the terms of the Mortgages; and
(d) other liens, charges and encumbrances incidental to
the conduct of the business of each such party or the
ownership of any such party's property and assets and
which do not in the aggregate materially detract from the
value of each such party's property, or assets or
materially impair the use thereof in the operation of its
business;
(ii) Loans and Advances. Make any loans or advances to, or any
investments in any person, firm, corporation, joint venture or
other entity other than loans or advances to the Guarantor or
any of its Subsidiaries;
(iii) Guarantees, etc. Except in the ordinary course of
business, assume, guarantee or endorse or otherwise become or
remain liable, in connection with any obligation of any person,
firm, company or other entity other than in respect of the
obligations arising under this Agreement and other than
indebtedness to banks or other financial institutions otherwise
permitted by this Agreement;
(iv) Changes in Business. Change the nature of its business or
commence any other business;
(v) Use of Corporate Funds. Pay out any funds to any company
or person except (a) in the ordinary course of business in
connection with the management of the business of the Borrowers
and the Guarantor, including, without limitation, the operation
and/or repair of the Rigs and (b) the servicing of the
indebtedness to the Lenders or indebtedness otherwise permitted
by this Agreement;
(vi) Dissolution, Consolidation or Merger. Other than as part
of a transaction permitted by Clause 12.1.C(i), liquidate or
dissolve or consolidate or amalgamate with or merge into any
other entity;
(vii) Changes in Offices or Names. Change the location of the
chief executive office of either of the Borrowers, the office of
the chief place of business of either such party or the office
of the Borrowers in which the records relating to the earnings
or insurances of the Rigs are kept unless the Lenders shall have
received thirty (30) days prior written notice of such change;
(viii) Change of Flag, Management or Class. Change the
flag, the management or the class of any Rig;
(ix) Sale of Rig. Sell, transfer or otherwise dispose of a
Rig;
(x) Sale of Assets. Sell or otherwise dispose of all or
substantially all of its assets; or
C. The Guarantor shall not without the prior written consent of the
Majority Lenders:
(i) Dissolution, Consolidation or Merger. Liquidate or
dissolve or consolidate or amalgamate with or merge into any
other entity unless (a) the Guarantor is the successor or
survivor in respect of such merger and after giving effect
thereto the Guarantor will be in full compliance with the terms
of this Agreement and (b) Standard & Poor's shall have affirmed
in writing that such transaction will not impair the implied
senior debt rating of the Guarantor.
(ii) Sale of Business. Sell, transfer, lend, lease or
otherwise dispose of the whole or, in the opinion of the
Majority Lenders, any substantial part of its business, property
or assets, whether by a single transaction or by a series of
transactions, related or not or change the management of the
Guarantor, unless Standard & Poor's affirms in writing that such
sale, transfer or other disposition or such change in management
will not result in a downgrade of the implied senior debt rating
of the Guarantor or result in such debt being placed on credit
watch for negative implications.
12.2 Valuation of the Rigs. The Borrowers shall not permit the FMV
of the Rigs at any time during the Credit Facility Period to be less than
160% of the amount of the Credit Facility.
12.3 Collateral Maintenance. If the FMV of the Rigs falls below 160%
of the amount of the Credit Facility, within a period of ten (10) Banking
Days following receipt by the Borrowers of written notice from the Agent
notifying the Borrowers of such shortfall and specifying the amount
thereof (which amount shall, in the absence of manifest error, be deemed
to be conclusive and binding on the Borrowers) (a) the Borrowers shall
deliver to the Agent, upon its request, such additional collateral as may
be satisfactory to the Majority Lenders, in their sole discretion
(including the deposit of cash in a cash collateral account maintained
with the Agent), such that the sum of (i) the value of the Rigs, as
determined in accordance with the latest valuation delivered pursuant to
Clause 12.1 A (xvii), and (ii) such additional collateral shall be greater
than or equal to 160% of the amount of the Credit Facility, or (b) the
Lenders shall reduce their Commitments hereunder and the Borrowers shall,
if necessary, prepay such Advances or part thereof (together with interest
thereon) so that the FMV of the Rigs shall not be less than 160% of the
amount of the Credit Facility.
12.4 Reduction of Collateral. In the event of a Total Loss of JACK
BATES, upon such Total Loss the Credit Facility shall be terminated, all
amounts outstanding shall be immediately repaid and cash shall be provided
as collateral for the Standby Letter of Credit Facility. In the event of
a Total Loss of D.R. STEWART, upon such Total Loss the Credit Facility
shall be reduced by 160% of the FMV of the rig (unless the Borrowers shall
provide substitute cash or other collateral satisfactory to the Agent),
and to the extent the aggregate amount of the Advances and the Standby
Letters of Credit exceeds the reduced amount of the Credit Facility, the
Borrowers shall prepay Advances in respect of the Revolving Credit
Facility and furnish to the Agent cash collateral in respect of the
Standby Letter of Credit Facility.
12.5 Inspection and Survey Reports. If the Lenders shall so request,
the Borrowers shall provide the Lenders with copies of all internally
generated inspection or survey reports on the Rigs.
13 EARNINGS ACCOUNT
The Borrowers shall, throughout the Credit Facility Period, procure
and ensure that all charterhire and other revenue relating to the Rigs
(other than those amounts paid in the currency (other than Dollars) of the
country where the Rig is operating and used by the Borrowers to cover
local operating expenses) is paid into an account in the joint names of
the Borrowers with Christiania Bank og Kreditkasse, Grand Cayman Branch,
Account No. 4062660601 (the "Earnings Account"), and shall have
unrestricted access to the funds in such Earnings Account for general
corporate purposes, unless and until such time as the Agent, following the
occurrence of an Event of Default, requires that said monies be paid to
the Agent, for the benefit of itself and the Lenders, or as it may direct,
whereafter the Borrowers shall procure and ensure that such monies are
paid in accordance with the directions of the Agent.
14 ASSIGNMENT
This Agreement shall be binding upon, and inure to the benefit of, the
Borrowers, the Agent and the Lenders and their respective successors and
assigns, except that the Borrowers may not assign any of their rights or
obligations hereunder except as specifically provided herein. Upon
fifteen (15) days notice to the Borrowers, a Lender may assign a portion
of its rights and obligations under this Agreement to any one or more
commercial lenders (the expenses of such Lender in connection with any
such assignment shall be for its own account), provided, however, in the
event of any such assignment, such assignment is to be made pursuant to an
Assignment and Assumption Agreement substantially in the form of Exhibit E
hereto. The Borrowers will take all reasonable actions requested by the
Lenders to effect such assignment, including, without limitation, the
execution of a written consent to such Assignment and Assumption
Agreement.
15 ILLEGALITY, INCREASED COST, NON-AVAILABILITY, ETC.
15.1. Illegality. In the event that by reason of any change in any
applicable law, regulation or regulatory requirement or in the
interpretation thereof any of the Lenders reasonably concludes that it has
become unlawful for such Lender to maintain or give effect to its
obligations as contemplated by this Agreement, such Lender shall inform
the Agent and the Borrowers to that effect, whereafter the liability of
such Lender to make its Commitment available shall forthwith cease and the
Borrowers shall be required to prepay the then outstanding portion of such
Lender's Commitment, together with accrued interest, immediately in
accordance with and subject to the provisions of Clause 15.4. In any such
event, but without prejudice to the aforesaid obligations of the Borrowers
to prepay such amount, the Borrowers and such Lender shall negotiate in
good faith with a view to agreeing on terms for making its Commitment
available from another jurisdiction or otherwise restructuring the Credit
Facility on a basis which is not unlawful with respect to such Lender and
the Agent shall use reasonable efforts to replace such Lender with a
lender for which the making and performance of the Agreement would not be
illegal.
15.2 Increased Cost. If any change in applicable law, regulation or
regulatory requirement or in the interpretation or application thereof by
any governmental or other authority, shall:
(i) change the basis of taxation (excluding any change in the rate
of any Tax) to any of the Lenders of payments of principal or interest
or any other payment due or to become due pursuant to this Agreement
(other than a change in taxation of the net income of such Lender), or
(ii) impose, modify or deem applicable any reserve requirements or
require the making of any special deposits against or in respect of
any assets or liabilities of, deposits with or for the account of, or
loans by, any of the Lenders or the issuance of the Standby Letters of
Credit by the Letter of Credit Issuer, or
(iii) impose on any of the Lenders or the Letter of Credit Issuer any
other condition affecting the Credit Facility or any part thereof, and
the result of the foregoing is either to increase the cost to such
Lender or the Letter of Credit Issuer of making available or
maintaining the Credit Facility or any part thereof or to reduce the
amount of any payment received by such Lenders, then and in any such
case if such increase or reduction in the opinion of the Agent
materially affects the interests of any of the Lenders or the Letter
of Credit Issuer under or in connection with this Agreement, then:
(a) the Agent shall notify the Borrowers of the happening of
such event,
(b) the Borrowers agree forthwith upon demand to pay to the
Agent or the Lenders such amount as the Agent certifies to be
necessary to compensate the Agent or the Lenders for such
additional cost or such reduction, and
(c) any such demand as is referred to in sub-clause (b) of
this Clause 15.2 may be made by the Agent at any time before or
after any repayment of the Advances under the Revolving Credit
Facility and payment of the Unpaid Drawings under the Standby
Letter of Credit Facility.
15.3 Determination of Losses. A certificate or determination notice
of the Agent, as to any of the matters referred to in this Clause 15
shall, absent manifest error, be conclusive and binding on the Borrowers.
15.4 Compensation for Losses. The Borrowers, jointly and severally,
shall compensate each Lender, upon its written request (which request
shall set forth the basis for requesting such compensation), for all
reasonable losses, expenses and liabilities (including, without
limitation, any loss, expense or liability incurred by reason of the
liquidation or reemployment of deposits or other funds required by such
Lender to fund its Advance which such Lender may sustain: (i) if for any
reason (other than a default by such Lender or the Agent) an Advance does
not occur on a date specified therefor in a Drawdown Notice; (ii) if any
prepayment or repayment of any Advance occurs on a date which is not the
last day of an Interest Period applicable thereto; (iii) if any prepayment
of any Advance is not made on any date specified in a notice of prepayment
given by the Borrowers; or (iv) as a consequence of any other default by
the Borrowers to repay its Advance when required by the terms of this
Agreement.
16 CURRENCY INDEMNITY
16.1 Currency Conversion. If for the purpose of obtaining or
enforcing a judgment in any court in any country it becomes necessary to
convert into any other currency (the "judgment currency") an amount due in
Dollars under this Agreement, the Note or any of the Security Documents
then the conversion shall be made, in the discretion of the Lenders, at
the rate of exchange prevailing either on the date of default or on the
day before the day on which the judgment is given or the order for
enforcement is made, as the case may be (the "conversion date"), provided
that the Lenders shall not be entitled to recover under this clause any
amount in the judgment currency which exceeds at the conversion date the
amount in Dollars due under this Agreement, the Note and/or any of the
Security Documents.
16.2 Change in Exchange Rate. If there is a change in the rate of
exchange prevailing between the conversion date and the date of actual
payment of the amount due, the Borrowers shall, jointly and severally, pay
such additional amounts (if any, but in any event not a lesser amount) as
may be necessary to ensure that the amount paid in the judgment currency
when converted at the rate of exchange prevailing on the date of payment
will produce the amount when due under this Agreement, the Note and/or any
of the Security Documents in Dollars; any excess over the amount due
received or collected by the Lenders shall be remitted to the Borrowers.
16.3 Additional Debt Due. Any amount due from the Borrowers under
Clause 16.2 shall be due as a separate debt and shall not be affected by
judgment being obtained for any other sums due under or in respect of this
Agreement, the Note and/or any of the Security Documents.
16.4. Rate of Exchange. The term "rate of exchange" in this Clause 16
means the rate at which the Lenders in accordance with their normal
practices are able on the relevant date to purchase Dollars with the
judgment currency and includes any premium and costs of exchange payable
in connection with such purchase.
17 FEES AND EXPENSES
17.1 Fees. (a) The Borrowers agree, jointly and severally, to pay
to the Agent a commitment commission ("Commitment Fee") pro rata for the
account of each Lender for the period from and including the Closing Date
to, but not including, the date the Revolving Credit Facility has been
terminated, which Commitment Fee shall be equal to 0.75% per annum,
computed at such rate for each day, on the daily unutilized portion of the
Commitments of the Lenders. Such Commitment Fee shall be due and payable
in arrears on the last Banking Day of each March, June, September and
December and on the date upon which the Revolving Credit Facility is
terminated.
(b) The Borrowers agree, jointly and severally, to pay to the Agent
for the account of each Lender pro rata on the basis of their respective
Standby Letter of Credit Facility Commitment, a fee in respect of each
Standby Letter of Credit (the "Letter of Credit Fee") computed at the rate
of 1% per annum of the aggregate outstanding amount of the Standby Letters
of Credit computed on a daily basis. Accrued Letter of Credit Fees shall
be due and payable in arrears on the last Banking Day of each March, June,
September and December and on the date upon which the Standby Letter of
Credit Facility is terminated.
(c) The Borrowers agree, jointly and severally, to pay to the Agent
for the account of the Letter of Credit Issuer a fee in respect of each
Standby Letter of Credit issued by it (the "Facing Fee") computed at the
rate of .25 of 1% per annum on the daily outstanding amount of such Standby
Letter of Credit, provided that in no event shall the annual Facing Fee to
the Letter of Credit Issuer be less than $500. Accrued Facing Fees shall
be due and payable in arrears on the last Banking Day of each March, June,
September and December and on the date upon which the Standby Letter of
Credit Facility is terminated.
(d) The Borrowers shall pay to the Agent for its own account such
fees as agreed in separate letters from the Borrowers to the Agent dated
the date hereof.
(e) All computations of fees shall be made on the basis of actual
days elapsed over a year of 360 days.
17.2 Expenses. The Borrowers agree whether or not the transactions
hereby contemplated are consummated, on demand to pay, or reimburse the
Agent and the Lenders for their payment of, the reasonable expenses of the
Agent and the Lenders incident to said transactions (and in connection
with any supplements, amendments, waivers or consents relating thereto or
incurred in connection with the enforcement or defense of any of the
rights or remedies of the Agent and the Lenders with respect thereto or in
the preservation of the priorities of the Agent and the Lenders under the
documentation executed and delivered in connection therewith) including,
without limitation, all reasonable costs and expenses of preparation,
negotiation, execution and administration of this Agreement and the
documents referred to herein, the reasonable fees and disbursements of the
counsel for the Agent and the Lenders in connection therewith, including
Watson, Farley & Williams, as well as the reasonable fees and expenses of
any independent appraisers, surveyors, engineers and other consultants
retained by the Agent and the Lenders in connection with this transaction,
all reasonable costs and expenses, if any, in connection with the
enforcement of this Agreement, the Note and the Security Documents and
stamp and other similar taxes, if any, incident to the execution and
delivery of the documents (including, without limitation, the Note) herein
contemplated and to hold the Lenders free and harmless in connection with
any liability arising from the nonpayment of any such stamp or other
similar taxes. Such taxes and, if any, interest and penalties related
thereto as may become payable after the date hereof shall be paid
immediately by the Borrowers to the Agent or the Lenders, as the case may
be, when liability therefor is no longer contested by such party or
parties or reimbursed immediately by the Borrowers to such party or
parties after payment thereof (if the Agent or the Lenders, at their sole
discretion, chooses to make such payment).
18 APPLICABLE LAW, JURISDICTION AND WAIVER
18.1 Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
18.2 Jurisdiction. Each of the Borrowers hereby irrevocably submits
to the jurisdiction of the courts of the State of New York and of the
United States District Court for the Southern District of New York in any
action or proceeding brought against it by the Lenders under this
Agreement or under any document delivered hereunder and hereby irrevocably
agrees that service of summons or other legal process on it may be served
by registered mail addressed thereto, c/o Prentice Hall Corporation, 500
Central Avenue, Albany, New York 12206-2290. The service, as herein
provided, of such summons or other legal process in any such action or
proceeding shall be deemed personal service and accepted by the Borrowers
as such, and shall be legal and binding upon the Borrowers for all the
purposes of any such action or proceeding. Final judgment (a certified or
exemplified copy of which shall be conclusive evidence of the fact and of
the amount of any indebtedness of the Borrowers to the Lenders) against
the Borrowers in any such legal action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment. The
Borrowers will advise the Lenders promptly of any change of address for
the purpose of service of process. Notwithstanding anything herein to the
contrary, the Lenders may bring any legal action or proceeding in any
other appropriate jurisdiction.
18.3 WAIVER OF JURY TRIAL. IT IS MUTUALLY AGREED BY AND AMONG THE
BORROWERS, THE GUARANTOR, THE AGENT AND THE LENDERS THAT EACH OF THEM
HEREBY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY ANY PARTY HERETO AGAINST ANY OTHER PARTY HERETO ON ANY MATTER
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE
NOTE, OR THE SECURITY DOCUMENTS.
19 THE AGENT
19.1 Appointment of Agent. Each of the Lenders hereby irrevocably
appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement, the Note, the
Standby Letters of Credit and the Security Documents as are delegated to
the Agent by the terms hereof and thereof. Neither the Agent nor any of
its directors, officers, employees or agents shall be liable for any
action taken or omitted to be taken by it or them under this Agreement,
the Notes, the Standby Letters of Credit, or the Security Documents or in
connection therewith, except for its or their own gross negligence or
wilful misconduct.
19.2 Distribution of Payments. Whenever any payment is received by
the Agent from the Borrowers for the account of the Lenders, or any of
them, whether of principal or interest on the Notes, commissions, fees or
otherwise, it will thereafter cause to be distributed on the same day if
received before 11 a.m. New York time, or on the next day if received
thereafter, like funds relating to such payment ratably to the Lenders
according to their respective Commitments, in each case to be applied
according to the terms of this Agreement.
19.3 Holder of Interest in Note. The Agent may treat each Lender as
the holder of all of the interest of such Lender in the Note, as the case
may be, until written notice of transfer, in form and substance
satisfactory to the Agent, signed by such Lender shall have been filed
with the Agent.
19.4 No Duty to Examine, Etc. The Agent shall not be under a duty to
examine or pass upon the validity, effectiveness or genuineness of any of
the Security Documents or any instrument, document or communication
furnished pursuant to this Agreement or in connection therewith or in
connection with any Security Document, and the Agent shall be entitled to
assume that the same are valid, effective and genuine, have been signed or
sent by the proper parties and are what they purport to be.
19.5 Agent as Lender. With respect to that portion of the Credit
Facility made available by it, the Agent shall have the same rights and
powers hereunder as any other Lenders and may exercise the same as though
it were not the Agent, and the term "Lender" or "Lenders" shall include
the Agent in its capacity as a Lender. The Agent and its affiliates may
accept deposits from, lend money to and generally engage in any kind of
business with, the Borrowers and the Guarantor as if it were not the
Agent.
19.6 (a) Obligations of Agent. The obligations of the Agent under
this Agreement, under the Notes, and under the Security
Documents are only those expressly set forth herein and therein.
(b) No Duty to Investigate. The Agent shall not at any time be
under any duty to investigate whether an Event of Default, or an event
which with the giving of notice or lapse of time, or both, would
constitute an Event of Default, has occurred or to investigate the
performance of this Agreement or any of the Security Documents by the
Borrowers or the Guarantor.
19.7 Discretion of Agent. (a) The Agent shall be entitled to use
its discretion with respect to exercising or refraining from exercising
any rights which may be vested in it by, and with respect to taking or
refraining from taking any action or actions which it may be able to take
under or in respect of, this Agreement, the Note, and the Security
Documents, unless the Agent shall have been instructed by the Majority
Lenders to exercise such rights or to take or refrain from taking such
action; provided, however, that the Agent shall not be required to take
any action which exposes the Agent to personal liability or which is
contrary to this Agreement or applicable law.
(b) Instructions of Majority Lenders. The Agent shall in all cases
be fully protected in acting or refraining from acting under this
Agreement, under the Note, under the Guarantee or under any Security
Document in accordance with the instructions of the Majority Lenders, and
any action taken or failure to act pursuant to such instructions shall be
binding on all of the Lenders.
19.8 Assumption Regarding Event of Default. Except as otherwise
provided in Clause 19.14 hereof, the Agent shall be entitled to assume
that no Event of Default, or event which with the giving of notice or
lapse of time, or both, would constitute an Event of Default, has occurred
and is continuing, unless the Agent has been notified by the Borrowers or
the Guarantor of such fact, or has been notified by a Lender that such
Lender considers that an Event of Default or such an event (specifying in
detail the nature thereof) has occurred and is continuing. In the event
that the Agent shall have been notified by the Borrowers or any Lender in
the manner set forth in the preceding sentence of any Event of Default or
of an event which with the giving of notice or lapse of time, or both,
would constitute an Event of Default, the Agent shall notify the Lenders
and (to the extent they have not yet received notice) the Borrowers, and
shall take action and assert such rights under this Agreement, under the
Notes and under Security Documents as the Majority Lenders shall request
in writing.
19.9 No Liability of Agent or Lenders. Neither the Agent nor any of
the Lenders shall be under any liability or responsibility whatsoever:
(A) To the Borrowers or the Guarantor or any other person or entity
as a consequence of any failure or delay in performance by, or any
breach by, any other Lenders or any other person of any of its or
their obligations under this Agreement or under any Security Document;
(B) To any Lender or Lenders, as a consequence of any failure or
delay in performance by, or any breach by, the Borrowers or the
Guarantor of any of their respective obligations under this Agreement,
under the Notes, or under the Security Documents; or
(C) To any Lender or Lenders, for any statements, representations or
warranties contained in this Agreement, in any Security Document or
any document or instrument delivered in connection with the
transaction hereby contemplated, or for the validity, effectiveness,
enforceability or sufficiency of this Agreement, the Note, or any
Security Document or any document or instrument delivered in
connection with the transactions hereby contemplated.
19.10 Indemnification of Agent. The Lenders agree to indemnify the
Agent (to the extent not reimbursed by the Borrowers or the Guarantor),
pro rata according to the respective amounts of their Commitments, from
and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of
any kind or nature whatsoever (including legal fees and expenses incurred
in investigating claims and defending itself against such liabilities)
which may be imposed on, incurred by or asserted against, the Agent in any
way relating to or arising out of this Agreement, the Note, or any
Security Document, any action taken or omitted by the Agent thereunder or
the preparation, administration, amendment or enforcement of, or waiver of
any provision of, this Agreement, the Note, or any Security Document,
except that no Lenders shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Agent's gross
negligence or wilful misconduct.
19.11 Consultation with Counsel. The Agent may consult with legal
counsel selected by it and shall not be liable for any action taken,
permitted or omitted by it in good faith in accordance with the advice or
opinion of such counsel.
19.12 Resignation. The Agent may resign at any time by giving 60
days' written notice thereof to the Lenders and the Borrowers. Upon any
such resignation, the Lenders shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Lenders
and shall have accepted such appointment within 60 days after the retiring
Agent's giving notice of resignation, then the retiring Agent may, on
behalf of the Lenders, appoint a successor Agent which shall be a bank or
trust company of recognized standing. The appointment of any successor
Agent shall be subject to the prior written consent of the Borrowers, such
consent not be unreasonably withheld. After any retiring Agent's
resignation as Agent hereunder, the provisions of this Clause 19 shall
continue in effect for its benefit with respect to any actions taken or
omitted by it while acting as Agent.
19.13 Representations of Lenders. Each Lender represents and warrants
to each other Lender and the Agent that:
(i) In making its decision to enter into this Agreement and to make
its portion of the Credit Facility available hereunder, it has
independently taken whatever steps it considers necessary to evaluate
the financial condition and affairs of the Borrowers and the
Guarantor, that it has made an independent credit judgment and that it
has not relied upon any statement, representation or warranty by any
other Lender or the Agent; and
(ii) So long as any portion of its Commitment remains outstanding, it
will continue to make its own independent evaluation of the financial
condition and affairs of the Borrowers and the Guarantor.
19.14 Notification of Event of Default. The Agent hereby undertakes
to promptly notify the Lenders, and the Lenders hereby promptly undertake
to notify the Agent and the other Lenders, of the existence of any Event
of Default which shall have occurred and be continuing of which the Agent
or any Lender has actual knowledge.
20 NOTICES AND DEMANDS
20.1 Notices. All notices, requests, demands and other
communications to any party hereunder shall be in writing (including
prepaid overnight courier, facsimile transmission or similar writing) and
shall be given to the Borrowers at the address or telecopy number set
forth below and to the Lenders and the Agent at their address and telecopy
number set forth in Schedule 1 or at such other address or telecopy number
as such party may hereafter specify for the purpose by notice to each
other party hereto. Each such notice, request or other communication shall
be effective (1) if given by telecopy, when such telecopy is transmitted
to the telecopy number specified in this Clause and telephonic
confirmation of receipt thereof is obtained or (ii) if given by mail,
prepaid overnight courier or any other means, when received at the address
specified in this Clause or when delivery at such address is refused.
If to the Borrowers or the Guarantor:
901 Threadneedle, Suite 200
Houston, Texas 77079
Attn: Chief Financial Officer
Telecopier: 713 496 0285
21 MISCELLANEOUS
21.1 Time of Essence. Time is of the essence of this Agreement but
no failure or delay on the part of the Lenders to exercise any power or
right under this Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise by the Lenders of any power or right
hereunder preclude any other or further exercise thereof or the exercise
of any other power or right. The remedies provided herein are cumulative
and are not exclusive of any remedies provided by law.
21.2 Unenforceable, etc., Provisions - Effect. In case any one or
more of the provisions contained in this Agreement, in the Note or in any
of the Security Documents would, if given effect, be invalid, illegal or
unenforceable in any respect under any law applicable in any relevant
jurisdiction, said provision shall not be enforceable against the
Borrowers, but the validity, legality and enforceability of the remaining
provisions herein or therein contained shall not in any way be affected or
impaired thereby.
21.3 References. References herein to Clauses and Schedules are to
be construed as references to clauses of, and schedules to, this
Agreement.
21.4 Further Assurances. Each of the Borrowers agrees that if this
Agreement, the Note or any of the Security Documents shall, in the
reasonable opinion of the Lenders, at any time be deemed by the Lenders
for any reason insufficient in whole or in part to carry out the purposes
hereof or thereof, it will execute or cause to be executed such other and
further assurances and documents as in the reasonable opinion of the
Lenders may be required in order more effectively to accomplish the
purposes of this Agreement, the Note or any of the Security Documents.
21.5 Prior Agreements, Merger. Any and all prior understandings and
agreements heretofore entered into between the Borrowers and the Guarantor
on the one part, and the Agent or the Lenders, on the other part, whether
written or oral, are superseded by and merged into this Agreement and the
other agreements to be executed and delivered in connection herewith to
which the Borrowers, the Guarantor and/or Agent and/or the Lenders are
parties, which alone fully and completely express the agreements between
the Borrowers, the Guarantor, the Agent and the Lenders.
21.7 Limitation of Liability. Notwithstanding anything to the
contrary contained in this Agreement or any of the other Security
Documents, in the event that any court or other judicial body of competent
jurisdiction determines that legal principles of fraudulent conveyances,
fraudulent transfers or similar concepts are applicable in evaluating the
enforceability against any particular Borrower or its asset of this
Agreement or any Security Document granted by such Borrower as security
for its obligations hereunder and that under such principles, this
Agreement or such Security Documents would not be enforceable against such
Borrower or its asset unless the following provisions of this Clause 21.7
had effect, then, the maximum liability of each Borrower hereunder (the
"Maximum Liability Amount") shall be limited so that in no event shall
such amount exceed the lesser of (i) the Indebtedness and (ii) an amount
equal to the aggregate, without double counting, of (a) ninety-five
percent (95%) of such Borrower's Adjusted Net Worth (as hereinafter
defined) on the date hereof, or on the date enforcement of this Agreement
is sought (the "Determination Date"), whichever is greater, (b) the
aggregate fair value of the Borrower's Subrogation and Contribution Rights
(as hereinafter defined) and (c) the amount of any Valuable Transfer (as
hereinafter defined) to such Borrower, provided that such Borrower's
liability under this Agreement shall be further limited to the extent, if
any, required so that the obligations of such Borrower under this
Agreement shall not be subject to being set aside or annulled under any
applicable law relating to fraudulent transfers or fraudulent conveyances.
In determining the limitations, if any, on the amount of any of such
Borrower's obligations hereunder pursuant to the preceding sentence, any
rights of subrogation or contribution (collectively the "Subrogation and
Contribution Rights") which such Borrower may have on the Determination
Date with respect to any other guarantor of the Indebtedness under
applicable law shall be taken into account. As used in this Clause 21.7
only, "Indebtedness" of the Borrower shall mean, all of the Borrower's
present or future indebtedness whether for principal, interest, fees,
expenses or otherwise, to the Lenders under this Agreement and the
Security Documents. As used in this Clause 21.7 only, "Adjusted Net
Worth" of the respective Borrower shall mean, as of any date of
determination thereof, an amount equal to the lesser of (a) an amount
equal to the excess of (i) the amount of the present fair saleable value
of the assets of such Borrower over (ii) the amount that will be required
to pay such Borrower's probable liability on its then existing debts,
including contingent liabilities, as they become absolute and matured, and
(b) an amount equal to (i) the excess of the sum of such Borrower's
property at a fair valuation over (ii) the amount of all liabilities of
such Borrower, contingent or otherwise, as such terms are construed in
accordance with applicable laws governing determinations of the insolvency
of debtors. In determining the Adjusted Net Worth of such Borrower for
purposes of calculating the Maximum Liability Amount for such Borrower,
the liabilities of such Borrower to be used in such determination pursuant
to each clause (ii) of the preceding sentence shall in any event exclude
(a) the liability of such Borrower under this Agreement and the Security
Documents to which it is a party, (b) the liabilities of the Borrower
subordinated in right of payment to this Agreement and (c) any liabilities
of such Borrower for Subrogation and Contribution Rights to any of the
other guarantors. As used in this Clause 21.7 only "Valuable Transfer"
shall mean, in respect of such Borrower, (a) all loans, advances or
capital options made to such Borrower with proceeds of the Credit
Facility, (b) all debt securities or other obligations of such Borrower
acquired from such Borrower or retired by such Borrower with proceeds of
the Credit Facility, (c) the fair market value of all property acquired
with proceeds of the Credit Facility and transferred, absolutely and not
as collateral, to such Borrower, (d) all equity securities of such
Borrower acquired from such Borrower with proceeds of the Credit Facility,
and (e) the value of any other economic benefits in accordance with
applicable laws governing determinations of the insolvency of debtors, in
each such case accruing to such Borrower as a result of the Credit
Facility and this Agreement.
21.8 Entire Agreement; Amendments. This Agreement constitutes the
entire agreement of the parties hereto including all parties added hereto
pursuant to an Assignment and Assumption Agreement and cannot be amended
other than by written agreement signed by the Borrowers, the Guarantor and
the Majority Lenders except that the prior written consent of all of the
Lenders and the Letter of Credit Issuer shall be required in respect of
(a) any waiver or amendment of the Commitments, (b) any waiver or
amendment of the Maturity Date, (c) any waiver of an event of default
under Clause 11.1 (a) and Clause 11.1 (b) of this Agreement, (d) any
amendment of the Margin, the Letter of Credit Fee or the Commitment Fee,
or (e) the release of any security interest in favor of the Indenture
Trustee, the Lenders or the Agent.
21.9 Headings. In this Agreement, Clause headings are inserted for
convenience of reference only and shall not be taken into account in the
interpretation of this Agreement.
IN WITNESS whereof the parties hereto have caused this Agreement to he
duly executed by their duly authorized representatives as of the day and
year first above written.
READING & BATES DRILLING CO.
By _________________________
Name:
Title:
READING & BATES EXPLORATION CO.
By __________________________
Name:
Title:
READING & BATES CORPORATION
By ___________________________
Name:
Title:
CHRISTIANIA BANK OG KREDITKASSE,
acting through its New York branch,
as Lender
By ______________________________
Name:
Title:
By _____________________________
Name:
Title:
CHRISTIANIA BANK OG KREDITKASSE,
acting through its New York branch, as Agent
By ____________________________
Name:
Title:
By ____________________________
Name:
Title:
SCHEDULE 1
Lenders Revolving Credit Facility Commitment
Christiania Bank og Kreditkasse,
acting through its $45,000,000.00
New York branch
11 West 42nd Street, 7th Floor
New York, NY 10036
Telefax no.: 212 827 4888
Lenders Standby Letter of Credit Facility Commitment
Christiania Bank og Kreditkasse,
acting through its $10,000,000.00
New York branch
11 West 42nd Street, 7th Floor
New York, NY 10036
Telefax no.: 212 827 4888
- -----------------------------------------------------------------------------
EXHIBIT A
SECURED PROMISSORY NOTE
New York, New York
U.S.$45,000,000.00 November , 1995
FOR VALUE RECEIVED, the undersigned, READING & BATES DRILLING CO.
and READING & BATES EXPLORATION CO., each an Oklahoma corporation
(hereinafter collectively called the "Borrowers", hereby jointly and
severally promise to pay to the order of CHRISTIANIA BANK OG KREDITKASSE,
acting through its New York branch, as agent (the "Agent") for the
Lenders, the principal sum of Forty-Five Million United States Dollars
(U.S. $45,000,000.00), or, if less, the aggregate unpaid principal amount
of the Advances (as defined in the Credit Agreement hereinafter defined)
from time to time outstanding made by the Lenders to the Borrowers
pursuant to the Credit Facility. The Borrowers shall repay the Advances
as provided in Clause 7.2 of the Credit Agreement. This Note may be
prepaid on such terms as provided in the Credit Agreement.
Words and expressions used herein and defined in the Credit Agreement
shall have the same meanings herein as therein defined.
The Advances shall bear interest at the rate per annum which is equal to,
in respect to each applicable Interest Period, (a) LIBOR plus (b) the
Margin, as provided in Clause 8.1 of the Credit Agreement (the "Applicable
Rate"). Any payments made pursuant to a Commitment Reduction or any other
payments in respect of the Revolving Credit Facility not paid when due,
whether by acceleration or otherwise, shall bear interest hereafter at a
rate per annum equal to two percent (2%) over the Applicable Rate from
time to time. All interest shall accrue and be calculated on the actual
number of days elapsed on the basis of a 360 day year.
All payments of principal and interest hereunder are payable in lawful
money of the United States of America to Christiania Bank og Kreditkasse,
as Agent, by wire transfer to The Bank of New York, New York, New York
(A.B.A. No. 021000018) for credit to the account of Christiania Bank, New
York, New York (Account No. 8026120277).
The Agent may endorse the amount and the date of the making of each
Advance and any payment or prepayment thereof on the grid annexed hereto
and made a part hereof, which endorsement shall constitute prima facie
evidence of the accuracy of the information so endorsed; provided,
however, that any failure to endorse such information on such grid shall
not in any manner affect the obligation of any of the Borrowers to make
payment of principal and interest in accordance with the terms of this
Note.
If this Note or any payment required hereunder becomes due and payable on
the day which is not a Banking Day the due date thereof shall be extended
until the next following Banking Day unless such next following Banking
Day falls in the following calendar month, in which case this Note or any
payment required hereunder shall be due on the immediately preceding
Banking Day. Any interest shall be payable during any such extension at
the rate applicable immediately prior thereto.
This Promissory Note is the Note referred to in, is entitled to the
security and benefits of, and is subject to the terms of, the Credit
Facility Agreement dated as of November 16, 1995 (the "Credit Agreement")
and made by and among (i) the Borrowers, as borrowers, (ii) Reading &
Bates Corporation, as guarantor, (iii) the Lenders (as such term is
defined in the Credit Agreement) and (iv) the Agent, acting through its
New York branch, as agent for the Lenders pursuant to which, inter alia,
the Lenders have agreed to make a reducing revolving credit facility
available to the Borrowers upon the terms and condition therein described
in the maximum principal amount of Forty-Five Million United States
Dollars ($45,000,000). Upon the occurrence of any Event of Default under
the Credit Agreement, the principal hereof and accrued interest hereon may
be declared to be and shall thereupon become, forthwith, due and payable.
Presentment, demand, protest and notice of dishonor of this Note or any
other notice of any kind are hereby expressly waived.
EACH OF THE UNDERSIGNED HEREBY WAIVES TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO OR BENEFICIARY
HEREOF ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED
WITH THIS NOTE.
This Promissory Note shall be governed by, and construed in accordance
with, the laws of the State of New York.
IN WITNESS WHEREOF, the Borrowers have executed and delivered this
Promissory Note on the date and year first above written.
READING & BATES DRILLING CO. READING & BATES EXPLORATION CO.
By: By:
Name: Name:
Title: Title:
- -----------------------------------------------------------------------------
ADVANCES AND [PAYMENTS OF PRINCIPAL] [REDUCTION PAYMENTS]
Date Amount of Amount of Principal Outstanding Notation Made
Advance Balance By
- -----------------------------------------------------------------------------
EXHIBIT B
Christiania Bank og Kreditkasse, as Agent [Date]
11 West 42nd Street
7th Floor
New York, NY 10036
Attention: Loan Administration
Drawdown Notice
Pursuant to Clause 3.2 of the Credit Facility Agreement dated as of
November 16, 1995 (the "Credit Agreement") made among (1) the undersigned,
as Borrowers, (2) Reading & Bates Corporation, as Guarantor, (3) the
Lenders and (4) yourselves, as Agent, the undersigned hereby give you
notice of drawdown of an Advance. All terms used herein, unless otherwise
defined herein, shall have the meanings given thereto in the Credit
Agreement.
Amount:
Drawdown Date:
Disbursement instructions:
Initial Interest Period:
The undersigned hereby represent and warrant that (a) the representations
and warranties stated in Clause 2 of the Credit Agreement (updated mutatis
mutandis) are true and correct on the date hereof and will be true and
correct on the Drawdown Date specified above as if made on such date, and
(b) that no Event of Default nor any event which with the giving of notice
or lapse of time or both would constitute an Event of Default has occurred
and is continuing.
This Drawdown Notice is effective upon receipt by you and shall be
irrevocable.
READING & BATES DRILLING CO.
By:
Name:
Title:
READING & BATES EXPLORATION CO.
By:
Name:
Title:
- -----------------------------------------------------------------------------
EXHIBIT C
Christiania Bank og Kreditkasse
11 West 42nd Street
7th Floor
New York, NY 10036
Attention: Loan Administration
Letter of Credit Request
Pursuant to Clause 4.2 of the Credit Facility Agreement dated as of
November 16, 1995 (the "Credit Agreement") made among (1) the undersigned,
as Borrowers, (2) Reading & Bates Corporation, as guarantor, (3) the
Lenders and (4) yourselves, as agent for the Lenders, the undersigned
hereby request the issuance of a Standby Letter of Credit. All terms used
herein, unless otherwise defined herein, shall have the meanings given
thereto in the Credit Agreement.
Amount:
Issue Date:
Maturity Date:
Beneficiary:
Drawing Instructions:
The undersigned hereby represent and warrant that (a) the representations
and warranties stated in Clause 2 of the Credit Agreement (updated mutatis
mutandis) are true and correct on the date hereof and will be true and
correct on the Issue Date specified above as if made on such date, and (b)
that no Event of Default nor any event which with the giving of notice or
lapse of time or both would constitute an Event of Default has occurred
and is continuing.
This Notice is effective upon receipt by you and shall be irrevocable.
READING & BATES DRILLING CO.
By:
Name:
Title:
READING & BATES EXPLORATION CO.
By:
Name:
Title:
- -----------------------------------------------------------------------------
EXHIBIT D
Compliance Certificate
I, [ ], the Chief Financial Officer of READING & BATES
CORPORATION (the "Corporation") having reviewed the provisions of (i) the
Credit Facility Agreement dated as of November 16, 1995 (the "Credit
Agreement"), made among (1) Reading & Bates Drilling Co. and Reading &
Bates Exploration Co., as borrowers (collectively, the "Borrowers"), (2)
Reading & Bates Corporation, as guarantor, (3) the Lenders (as such term
is defined in the Credit Agreement), as lenders and (4) Christiania Bank
og Kreditkasse, acting through its New York branch, as agent, pursuant to
which the Lenders agreed to make available to the Borrowers a credit
facility in the maximum principal amount of Fifty Five Million United
States Dollars ($55,000,000) (the "Facility"), (ii) the promissory note
(the "Note") executed in connection therewith and (iii) each of the
Security Documents, as defined in the Credit Agreement, (the Credit
Agreement, the Note and the Security Documents hereinafter referred to as
the "Financing Documents"), hereby certify:
(1) The Corporation and the Borrowers (as defined in the Credit
Agreement) are performing and observing all of their obligations under and
in connection with the Financing Documents to which they are a party;
(2) To my knowledge, [no event has occurred and no condition exists
which constitutes or with the giving of notice or lapse of time, or both,
would constitute an Event of default under the Credit Agreement]/[an event
has occurred and a condition exists which constitutes or with the giving
of notice or lapse of time, or both, would constitute an Event of Default
under the Credit Agreement [specify the nature and period of existence of
such event or condition, what action the Borrower is taking or proposes to
take with respect thereto]].
Dated:
By
Name:
Title: Chief Financial Officer
- -----------------------------------------------------------------------------
EXHIBIT E
===================================
ASSIGNMENT AND ASSUMPTION AGREEMENT
between
[NAME OF ASSIGNOR]
and
[NAME OF ASSIGNEE]
=====================================
_____________ , 199_
- -----------------------------------------------------------------------------
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement"), dated as of
, 199 among [NAME OF ASSIGNOR], a [bank]/[corporation] organized
under the laws of [JURISDICTION OF ASSIGNOR] (the "Assignor"), and [NAME
OF ASSIGNEE], a [bank]/[corporation] organized under the laws of
[JURISDICTION OF ASSIGNEE], supplemental to:
(i) that certain credit facility agreement, dated as of November 16,
1995 (the "Credit Agreement"), made among (a) Reading & Bates Drilling Co.
and Reading & Bates Exploration Co., as borrowers (collectively, the
"Borrowers"), (b) Reading & Bates Corporation, as guarantor, (c) the
Lenders (as such term is defined in the Credit Agreement), including the
Assignor, as lenders and (d) Christiania Bank og Kreditkasse, acting
through its New York Branch, as agent (the "Agent"), pursuant to which the
Lenders agreed, severally and not jointly, to make available to the
Borrowers a reducing revolving credit facility in the maximum principal
amount of Forty-Five Million United States Dollars ($45,000,000)
outstanding at any time (the "Revolving Credit Facility") and a Standby
Letter of Credit Facility in the principal amount of Ten Million United
States Dollars ($10,000,000) (the "Standby Letter of Credit Facility");
(ii) the promissory note from the Borrowers dated
, 1995 (the "Note") evidencing the Revolving Credit Facility;
(iii) the Guarantee dated , 1995 (the "Guarantee") made
by Reading & Bates Corporation in favor of the Agent;
(iv) the other Security Documents (as such term is defined in the
Credit Agreement).
Except as otherwise defined herein, terms defined in the Credit Agreement
shall have the same meaning when used herein.
In consideration of the premises and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. The Assignor holds % of the Commitments under the Credit
Agreement. The Assignor hereby sells, transfers and assigns
% of its right, title and interest in, to and under the
Credit Agreement, under the Note (including, without
limitation, its interest in the indebtedness evidenced by the
Note), under the Guarantee and under the other Security
Documents to the Assignee. Simultaneously herewith, the
Assignee shall pay to the Assignor an amount equal to the
product derived by multiplying (a) US$ being the sum of the
present outstanding principal balance of all Advances and all
Unpaid Drawings by (b) the Assignor's percentage of interest
in the Credit Facility transferred pursuant hereto.
2. The Assignee hereby assumes all of the obligations of the
Assignor being transferred pursuant hereto in respect of (i)
the Revolving Credit Facility (including, but not limited to,
the obligation to advance its respective percentage of any
Advance as and when required), and (ii) the Standby Letter of
Credit Facility (including, but not limited to, the obligation
to pay to the Letter of Credit Issuer its respective
percentage of any Unpaid Drawings) and the Assignee shall
hereinafter be deemed a "Lender" for all purposes of the
Transaction Documents, the Assignee's Commitment thereunder
being % of the Credit Facility.
3. (a) The Assignor makes no representation or warranty and
assumes no responsibility with respect to:
(i) the due execution, legality, validity, sufficiency
or enforceability of the Credit Agreement or any
of the Security Documents; or
(ii) the financial condition of any of the parties to
the Credit Agreement or any of the Security
Documents; or
(iii) any failure or delay in performance of, or breach
by any party to the Credit Agreement or any of the
Security Documents of, its obligations under the
Credit Agreement or any of the Security Documents;
or
in particular, but without limitation, if any such party shall
fail to perform any of its obligations under the Credit
Agreement or any of the Security Documents, the Assignee shall
have no recourse to the Assignor in respect of such failure.
(b) Notwithstanding Clause 3(a) above the Assignor
represents and warrants that the assignment contained in
Clauses 1 and 2 above is made free of any rights of set-
off or counterclaim capable of being asserted by any
party to the Credit Agreement or any of the Security
Documents.
(c) The Assignor shall have no responsibility or liability
in respect of any failure or delay by the Assignee to
perform its obligations under the Credit Agreement.
(d) The Assignee confirms that:
(i) it has received a copy of the executed Credit
Agreement and Security Documents and accepts all
the terms of the Credit Agreement and each of the
Security Documents;
(ii) it has itself been, and will continue to be,
solely responsible for making its own independent
appraisal of, and investigations into, the
financial condition and affairs of the parties to
the Credit Agreement and the Security Documents in
connection with the entry by the Assignee into
this Assignment;
(iii) it has not relied on any information provided to
it by the Assignor in connection with this
Assignment; and
(iv) it will continue to make its own independent
appraisal of and investigations into the financial
condition and affairs of the parties to the Credit
Agreement and the Security Documents and will not
rely on any information provided to it by the
Assignor.
4. Nothing in this Assignment shall constitute or be construed as
a novation of the obligations owed by the Borrowers to the
Assignor under the Credit Agreement of any of the Security
Documents to which any of the Borrowers is a party.
5. All references in the Note, in the Guarantee and in each of
the other Security Documents to the Credit Agreement shall be
deemed to be references to the Credit Agreement as assigned
and assumed pursuant to the terms hereof.
6. The assignee irrevocably designates and appoints the Agent as
its agent and irrevocably authorizes the Agent to take such
action on its behalf and to exercise such powers on its behalf
under the Credit Agreement, under the Note, under the
Guarantee and under the other Security Documents, each as
supplemented hereby, as are delegated to the Agent by the
terms of each thereof, together with such powers as are
reasonably incidental thereto all as provided in Clause 19 of
the Credit Agreement.
7. Every notice or demand under this Agreement shall be in
writing and may be given by telefax and shall be sent as
follows:
If to the Assignor:
[NAME OF ASSIGNOR]
[ADDRESS]
Telefax No.:
Attention:
If to the Assignee:
[NAME OF ASSIGNEE]
[ADDRESS]
Telefax No.:
Attention:
Every notice or demand hereunder shall be deemed to have been received at
the time of receipt thereof.
8. Each party will bear its own costs and expenses in connection
with this Assignment.
9. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
10. This Agreement may be executed in several counterparts with
the same effect as, if the parties executing such counterparts
shall have all executed one agreement as of the date hereof,
each of which counterparts when executed and delivered shall
be deemed to be an original and all of such counterparts
together shall constitute this Agreement.
- ------------------------------------------------------------------------------
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be duly executed as of the day and year first above written.
[NAME OF ASSIGNOR]
By
Name:
Title:
[NAME OF ASSIGNEE]
By
Name:
Title:
Consented and Agreed this
_____ day of_______________, 199__:
[BORROWERS]
[GUARANTOR]
EXHIBIT 10.102
G U A R A N T E E
THIS GUARANTEE AGREEMENT (this "Guarantee") dated November 28th, 1995
made by READING & BATES CORPORATION, a Delaware corporation with offices
at 901 Threadneedle, Suite 200, Houston, Texas 77079 (hereinafter called
the "Guarantor"), in favor of CHRISTIANIA BANK OG KREDITKASSE, a Norwegian
banking corporation, acting through its New York branch, as agent for the
Lenders party to the Credit Agreement described below (hereinafter called
the "Agent"),
W I T N E S S E T H :
WHEREAS, (i) Reading & Bates Drilling Co. (hereinafter called "R & B
Drilling") and Reading & Bates Exploration Co. (hereinafter called "R & B
Exploration" and together with R&B Drilling collectively called the
"Borrowers"), each an Oklahoma corporation, as joint and several
borrowers, (ii) the Guarantor (hereinafter together with the Borrowers
collectively called the "Companies"), (iii) the Lenders (as such term is
defined in the Credit Agreement) and (iv) the Agent have entered into a
Credit Facility Agreement dated as of November 16, 1995 (hereinafter as at
any time amended called the "Credit Agreement"), whereby the Lenders have
agreed to make available to the Borrowers (i) a US$45,000,000 reducing
revolving credit facility (the "Revolving Credit Facility") for general
corporate purposes and (ii) a US$10,000,000 standby letter of credit
facility (the "Standby Letter of Credit Facility", and together with the
Revolving Credit Facility, the "Credit Facility") for issuance of standby
letters of credit in the ordinary course of business and to back up
standby letters of credit issued by ING Bank which are outstanding on the
date hereof.
WHEREAS, concurrently herewith the Borrowers and Wilmington Trust
Company, a Delaware banking corporation as indenture trustee (hereinafter
the "Indenture Trustee"), are entering into an Indenture of Trust dated as
of November 16, 1995, with respect to certain security held by the
Indenture Trustee for the benefit of the Lenders;
WHEREAS, R&B Drilling is a wholly-owned corporate subsidiary of the
Guarantor;
WHEREAS, R&B Exploration is a wholly-owned corporate subsidiary of R
& B Drilling;
WHEREAS, the Lenders require that the Guarantor execute and deliver
this Guarantee as a condition of their willingness to enter into the
Credit Agreement and to make the Credit Facility available thereunder;
NOW, THEREFORE, in consideration of the foregoing premises and in
order to induce the Lenders to enter into the Credit Agreement and to make
the Credit Facility available to the Borrowers, the Guarantor hereby
agrees as follows:
1. The Guarantor hereby irrevocably and unconditionally
guarantees to the Lenders, their successors and assigns, as primary
obligor and not as surety merely, the due and faithful payment of all
amounts due under the Credit Agreement, including, without limitation, the
due and punctual payment when due (whether at the stated maturity or by
acceleration or otherwise), of all indebtedness, obligations and
liabilities of each of the Borrowers and each of their respective
successors and assigns to the Agent or the Lenders now existing or
hereafter incurred, arising out of or in connection with the Credit
Agreement, the Note and the Security Documents (as such terms are defined
in the Credit Agreement) (all such agreements, covenants, conditions,
indebtedness, obligations and liabilities being hereinafter called the
"Obligations") together with any and all expenses which may be paid or
incurred by the Agent and the Lenders in collecting any or all of the
Obligations and/or in enforcing any rights hereunder, and the due and
faithful performance by the Borrowers and each of their respective
successors and assigns and their due and faithful observance of and
compliance with all of the agreements, covenants and conditions to be
performed by the Borrowers, as provided in the Credit Agreement, as the
same may hereafter be amended and supplemented.
2. Notwithstanding any payment or payments hereunder, the
Guarantor shall not be entitled to be subrogated to any of the rights of
the Agent or the Indenture Trustee or the Lenders against the Borrowers or
any collateral security held by the Agent for the payment of the
Obligations of the Borrowers until all amounts owing by the Borrowers to
the Lenders are paid in full.
3. The Guarantor consents that, without the necessity of any
reservation of rights against it and without notice to or further assent
by it: (i) the obligations and liabilities of the Borrowers and any other
party or parties for or upon any of the Obligations, or any collateral
security or guarantee therefor or right of off-set with respect thereto,
may, from time to time, in whole or in part, be renewed, extended,
modified, accelerated, compromised or released by the Agent at the
direction of the Agent; (ii) any and all collateral security at any time
held by the Agent for payment of the Obligations may be sold, exchanged or
released, all without notice to or further assent by the Guarantor, who
will remain bound hereunder, notwithstanding any such renewal, extension,
modification, acceleration, compromise, sale or exchange or release; and
(iii) the covenants and agreements of the Borrowers contained in the
Credit Agreement, the Note and the Security Documents may at any time be
amended, modified, supplemented or terminated in whole or in part, from
time to time without impairing, abridging, releasing or affecting the
obligations of the Guarantor hereunder.
4. The Guarantor waives any and all notice of the acceptance of
this Guarantee, and any and all notice of the creation, renewal, extension
or accrual of any of the Obligations and notice of or proof of the
reliance by the Agent or the Lenders upon this Guarantee. The Obligations
shall conclusively be deemed to have been created, contracted and incurred
in reliance upon this Guarantee, and all dealings between the Companies
and the Agent or the Lenders shall likewise be conclusively presumed to
have been had or consummated in reliance upon this Guarantee. The
Guarantor waives diligence, presentment, protest, demand for payment and
notice of default or nonpayment to or upon it with respect to the
Obligations or any of them.
5. This is a continuing, absolute and unconditional guarantee of
payment and performance without regard to the regularity or enforceability
of the Credit Agreement or any of the Obligations or any collateral
security or guarantee therefor or rights of off-set with respect thereto
and without regard to any defense, off-set or counterclaim which may at
any time be available to or be asserted by any of the Companies against
the Agent or the Lenders and which constitutes, or which might be
construed to constitute, an equitable or legal discharge of the Borrowers
for the Obligations, or the obligations of the Guarantor under this
Guarantee, in bankruptcy or in any other instance, and the provisions of
this Guarantee shall remain in full force and effect and be binding in
accordance with and to the extent of its terms upon the Guarantor, its
successors and assigns thereof and inure to the benefit of the Agent and
the Lenders, their successors, endorsees, transferees and assigns thereof,
until all of the Obligations and the obligations of the Guarantor under
this Guarantee shall have been satisfied by payment in full. This
Guarantee shall be joint and several with any guarantee given by any other
guarantor with respect to the Obligations or any of them. All rights and
remedies of the Agent or the Lenders hereunder and under the Credit
Agreement shall be cumulative and may be exercised singly or concurrently.
6. This Guarantee shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part
thereof, of any of the Obligations is rescinded or must be restored or
returned by the Agent or the Lenders upon the insolvency, bankruptcy or
reorganization of any of the Companies or otherwise, all as though payment
had not been made.
7. The Guarantor hereby represents, warrants and covenants that:
(a) This Guarantee constitutes the legal, valid and binding
obligation of the Guarantor enforceable in accordance with its terms
except to the extent that such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting generally the enforcement of creditors'
rights and general equitable principles.
(b) The Guarantor is and shall remain a corporation duly
organized and validly existing in good standing under the laws of
Delaware; the Guarantor has full power, authority and legal right to
execute, deliver and perform its obligations under this Guarantee
and it has taken all necessary corporate and legal action to
authorize the execution, delivery and performance of this Guarantee.
(c) The execution, delivery and performance of this
Guarantee and the other instruments and agreements herein and in the
Credit Agreement will not violate any provision of law or any rule,
regulation, order or decree of any court, tribunal or governmental
authority, bureau, or agency, or of the charter or by-laws or other
corporate rules of the Guarantor, or any indenture, contract or
other undertaking to which the Guarantor is a party or which
purports to be binding upon it or any of its assets, and will not
result in the creation or imposition of any security interest, lien,
charge or encumbrance on any of its assets pursuant to the
provisions of any of the foregoing.
(d) The Obligations of the Guarantor under this Guarantee
are unconditional and irrevocable and shall rank pari passu with all
other liabilities of the Guarantor for borrowed money or for
obligations that have become the direct obligations of the
Guarantor.
(e) All necessary consents, licenses, approvals,
authorizations of, and registrations or declarations with, any
governmental authority, bureau or agency required in connection with
the execution, delivery, performance, validity and enforceability of
this Guarantee have been obtained and are in full force and effect.
(f) No consent or approval of any creditor is required as a
condition to the validity of this Guarantee or any of the
transactions contemplated hereby, except as shall have been obtained
by the Guarantor.
(g) The Guarantor is not in default in the payment or
performance of any of its material obligations or any of the
material covenants or conditions to be performed pursuant to the
terms and provisions of any loan or credit agreement or mortgage,
indenture, or security agreement, to which it is a party or by which
it may be bound.
(h) There are no actions, suits or proceedings before any
court, tribunal or governmental body pending or threatened (i) with
respect to any of the transactions contemplated by this Guarantee or
(ii) against or affecting the Guarantor or any of its assets, which
could reasonably be expected to result in any material adverse
change in the business condition (financial or otherwise) of the
Guarantor. The Guarantor has not been charged with any material
violation of or material default under any statute, decree, rule,
regulation, writ or order of any court or any administrative order.
8. Any and all amounts required to be paid by the Guarantor
hereunder shall be paid in lawful money of the United States of America by
wire transfer to The Bank of New York, New York, New York (ABA No.
021000018) for credit to the account of Christiania Bank, New York, New
York (Account No. 8026120277) or to such other place as the Agent may from
time to time direct without set-off or counterclaim and free from, clear
of and without deduction for any Taxes which Borrowers are required to
pay, or indemnify the Lenders, under the terms of the Credit Agreement,
provided, however, that if the Guarantor shall at any time be required by
law to withhold or deduct any such Taxes from any amounts payable to the
Lenders hereunder, then the Guarantor shall (1) pay directly to the
relevant taxing authority the full amount required to be deducted or
withheld, (2) pay to the Agent for the account of the Lenders such
additional amounts in Dollars as may be necessary to ensure that the net
amounts received by each Lender shall equal the full amounts such Lender
would have received if such withholding or deduction were not required,
and (3) promptly send to the Agent an official receipt or other
documentary evidence satisfactory to the Agent evidencing such payment to
such authority. The Guarantor covenants and agrees that it will take all
action necessary or appropriate to obtain any license or consent which may
be or become necessary in order to assure the availability of United
States Dollars for all payments of the obligations of the Guarantor under
this Guarantee.
9. No failure to exercise and no delay in exercising on the part
of the Agent of any right, power or privilege hereunder shall operate as a
waiver thereof; nor shall 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. All
rights and remedies of the Agent hereunder and under the Credit Agreement
and any collateral security, document or guarantee therefor shall be
cumulative and may be exercised singly or concurrently and are not
exclusive of any rights or remedies permitted
by law.
10. None of the terms or provisions of this Guarantee may be
waived, altered, modified or amended except by an instrument in writing,
duly executed by the Agent, and this Guarantee and the rights, obligations
and liabilities of the parties hereunder shall be governed by, and shall
be construed and interpreted in accordance with, the internal laws of the
State of New York, without reference to principles of conflicts of law.
11. If for the purpose of obtaining judgment in any court in any
country it becomes necessary to convert into any other currency
(hereinafter called a "Judgment Currency") any amount payable under this
Guarantee, then such conversion shall be made at the Rate of Exchange (as
hereinafter defined) prevailing one Banking Day (as hereinafter defined)
before the day on which judgment is given. For this purpose "Rate of
Exchange" means the rate at which the Agent is able on the relevant date
of conversion to purchase the relevant amount payable under this Guarantee
with the Judgment Currency. "Banking Day" means a day on which commercial
banks are open for business in New York, New York, Oslo, Norway and
London, England. In the event that there is a change in the Rate of
Exchange prevailing between the Banking Day before the day on which the
judgment is given and the actual date of payment of the amount due, the
Guarantor shall pay such additional and/or lesser amounts as the case may
be (if any) as may be necessary to ensure that the amount thus paid on
such date is the amount in the Judgment Currency which when computed at
the Rate of Exchange prevailing on the date of payment is the amount then
due and payable under this Guarantee in United States Dollars before
conversion into the Judgment Currency was made. Any amount due from the
Guarantor under this paragraph shall be due and payable as a separate debt
and shall not be affected by judgment being obtained for any other sums
due under or in respect of this Guarantee.
12. The Guarantor hereby agrees that any legal action or
proceeding with respect to this Guarantee, or to enforce any judgment
obtained against the Guarantor may be brought by the Agent in the courts
of the State of New York located in New York, New York or in the United
States Federal courts sitting in the Southern District of New York, as the
Agent may elect; and by execution and delivery of this Guarantee, the
Guarantor irrevocably submits to each such jurisdiction and service of
process may be made as provided by law.
With respect to any such action or proceeding within the
jurisdictions of the courts of the State of New York located in New York,
New York and of the United States Federal courts sitting in the Southern
District of New York, the Guarantor hereby irrevocably consents to the
service of process out of said New York or United States courts in any
such action or proceeding by the mailing thereof by United States
registered mail to the Guarantor at c/o Prentice Hall Corporation, 500
Central Avenue, Albany, New York 12206-2290. Final judgment against the
Guarantor (a certified or exemplified copy of which shall be conclusive
evidence of the fact and of the amount of any indebtedness of the
Guarantor) in any such action or proceeding shall be conclusive and may be
enforced in any other jurisdiction by suit on such judgment.
Nothing herein shall be deemed to preclude or in any way limit the
right of the Agent to sue or take any action against the Guarantor in any
tribunal wherever located having jurisdiction over the Guarantor or any of
its assets.
IN WITNESS WHEREOF, the Guarantor has duly executed and delivered
this Guarantee this ___ day of November, 1995.
READING & BATES CORPORATION
By ______________________
Its:
The undersigned hereby accepts
the foregoing Guarantee.
CHRISTIANIA BANK OG KREDITKASSE
acting through its New York branch,
as Agent
By ______________________________________
Name:
Title:
By ______________________________________
Name:
Title:
- ----------------------------------------------------------------------------
ACKNOWLEDGEMENT OF GUARANTEE
STATE OF NEW YORK )
) s.s.
COUNTY OF NEW YORK )
On this 28 day of November, 1995, before me personally came Tim W.
Nagle to me known who being by me duly sworn did depose and say that he
resides at 13307 Tosca, Houston, Texas, that he is the Executive Vice
President, Finance and Administration for the corporation described in and
which executed the foregoing instrument; and that he signed his name
thereto by order of the Board of Directors of Reading & Bates Corporation.
_________________________
Notary Public
EXHIBIT 10.103
FIRST PREFERRED MORTGAGE
Dated November 28, 1995
READING & BATES DRILLING CO.
- in favor of -
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Indenture Trustee
JACK BATES
- ----------------------------------------------------------------------------
INDEX
CLAUSE SUBJECT MATTER PAGE
1. DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . .
2. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . .
3. MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . .
4. PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . .
5. PRESERVATION OF SECURITY . . . . . . . . . . . . . . . .
6. INSURANCE . . . . . . . . . . . . . . . . . . . . . . .
7. RIG COVENANTS . . . . . . . . . . . . . . . . . . . . .
8. PROTECTION OF SECURITY . . . . . . . . . . . . . . . . .
9. ENFORCEABILITY AND INDENTURE TRUSTEE'S POWERS . . . . .
10. APPLICATION OF MONEYS . . . . . . . . . . . . . . . . .
11. FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . .
12. POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . .
13. INDEMNITIES . . . . . . . . . . . . . . . . . . . . . .
14. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . .
15. COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . .
16. ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . .
17. TOTAL AMOUNT, ETC. . . . . . . . . . . . . . . . . . . .
18. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . .
19. JURISDICTION . . . . . . . . . . . . . . . . . . . . . .
ACKNOWLEDGEMENT OF MORTGAGE
EXHIBIT 1 FORM OF CREDIT AGREEMENT (FILED AS EXHIBIT 10.101 TO
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR 1995)
- -----------------------------------------------------------------------------
THIS FIRST PREFERRED MORTGAGE (this "Mortgage") is made on the 28th day of
November, 1995
BY
(1) READING & BATES DRILLING CO., an Oklahoma corporation having its
principal offices at 901 Threadneedle, Suite 200, Houston, Texas
77079 (the "Owner"),
IN FAVOR OF
(2) WILMINGTON TRUST COMPANY, a Delaware banking corporation having
offices at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, not in its individual capacity but
solely as indenture trustee for the Lenders (as hereinafter
defined) and as mortgagee (the "Indenture Trustee")
WHEREAS
(A) The Owner is the sole owner of the whole of the semi-submersible
drilling unit JACK BATES documented under the laws and flag of the
United States of America with Official Number D906283 of 19,928
gross registered tons and 14,948 net registered tons.
(B) By a Credit Facility Agreement dated as of November 16, 1995 (the
"Credit Agreement") and made by and among (i) the Owner and Reading
& Bates Exploration Co., an Oklahoma corporation ("R&B
Exploration"), as joint and several borrowers (collectively, the
"Borrowers"), (ii) Reading & Bates Corporation, a Delaware
corporation, as guarantor (hereinafter called the "Guarantor" and
together with the Borrowers collectively called the "Companies",
and individually called a "Company"), (iii) the Lenders (as
hereinafter defined), acting as lenders and (iv) Christiania Bank
og Kreditkasse, acting through its New York branch, as agent for
the Lenders (the "Agent") (the form of which Credit Agreement
together with Exhibit A thereto but without the remaining
attachments is attached hereto as Exhibit 1), it was agreed among
other things that the Lenders would make available to the Borrowers
upon the terms and conditions therein described (i) a reducing
revolving credit facility in the original principal amount of
Forty-Five Million United States Dollars (US$45,000,000) (the
"Revolving Credit Facility") and (ii) a standby letter of credit
facility in an aggregate amount not to exceed Ten Million United
States Dollars (US$10,000,000)(the "Standby Letter of Credit
Facility").
(C) Pursuant to the said Credit Agreement the Lenders have made the
Revolving Credit Facility available to the Borrowers upon the terms
and conditions described in the Credit Agreement in the original
principal amount of US$45,000,000. The Revolving Credit Facility
and interest, fees and commissions thereon is to be paid and
repaid, as the case may be, as provided in the Credit Agreement.
The Revolving Credit Facility is evidenced by a secured promissory
note (the "Note") (the form of which is attached as Exhibit A to
the Credit Agreement).
(D) Pursuant to the said Credit Agreement the Lenders have made the
Standby Letter of Credit Facility available to the Borrowers in an
aggregate amount not to exceed US$10,000,000. The Borrowers are
obligated, jointly and severally, to reimburse all amounts drawn
under the Standby Letters of Credit (as defined in the Credit
Agreement) issued by the Lenders pursuant to the Standby Letter of
Credit Facility, and to pay all interest and fees thereon as
provided in the Credit Agreement.
(E) The Owner, in order to secure the repayment of the Advances (as
defined in the Credit Agreement), the Unpaid Drawings (as defined
in the Credit Agreement), interest thereon and fees and commissions
payable under the Credit Agreement, the Note and the Security
Documents (as hereinafter defined) and the performance and
observance of and compliance with all of the covenants, terms and
conditions contained in this Mortgage, has duly authorized the
execution and delivery of this First Preferred Mortgage under and
pursuant to the United States Ship Mortgage Act, 1920, as amended,
recodified at 46 U.S.C. 31301, et. seq. (the "Ship Mortgage Act"),
which is entered into by the Owner in consideration of the Lenders
agreeing, at the request of the Owner, to make the Revolving Credit
Facility and the Standby Letter of Credit Facility available to the
Borrowers under the terms of the Credit Agreement and as a
condition thereto and for other good and valuable consideration
provided by the Lenders (the sufficiency of which the Owner hereby
acknowledges).
NOW THIS MORTGAGE WITNESSETH AND IT IS HEREBY AGREED
1. DEFINITIONS AND INTERPRETATION
1.01 In this Mortgage unless the context otherwise requires, the
following expressions shall have the following meanings:-
"Advance(s)" shall have the same meaning for such term as set forth
in the Credit Agreement;
"Agent" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Assignment of Insurances" means the Assignment of Insurances in
respect of the Rig executed or to be executed by the Owner in favor
of the Agent;
"Credit Agreement" means the agreement dated as of November 16,
1995 and made among the Borrowers, the Guarantor, the Lenders and
the Agent first referred to in Recital (B) hereto;
"Credit Facility Period" shall have the same meaning for such term
as set forth in the Credit Agreement;
"Default Rate" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claim" means (i) any claim by, or directive from,
any applicable governmental, judicial or other regulatory authority
alleging breach of, or non-compliance with, any Environmental Laws
or Environmental Approvals or otherwise howsoever relating to or
arising out of an Environmental Incident or (ii) any claim by any
other third party howsoever relating to or arising out of an
Environmental Incident (and, in each such case, "claim" shall mean
for damages, cleanup costs, compliance, remedial action or
otherwise);
"Environmental Incident" means (i) any release of Environmentally
Sensitive Material from the Rig, (ii) any incident in which
Environmentally Sensitive Material is released from a vessel other
than the Rig and which involves collision between the Rig and such
other vessel or some other incident of navigation or operation, in
either case, where the Rig or the Owner are actually or allegedly
at fault or otherwise liable (in whole or in part) or (iii) any
incident in which Environmentally Sensitive Material is released
from a vessel other than the Rig and where the Rig is actually or
potentially liable to be arrested as a result and/or where the
Owner is actually or allegedly at fault or otherwise liable (and,
in each such case, "release" shall mean disposing, discharging,
injecting, spilling, leaking, leaching, dumping, emitting,
escaping, emptying, seeping, placing and the like, into or upon any
land or water or air, or otherwise entering into the environment);
"Environmental Laws" means all applicable laws, regulations,
conventions and agreements whatsoever relating to pollution or
protection of the environment (including, without limitation, the
Oil Pollution Act of 1990 (33 U.S.C. 2701 et seq.), the
Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 (42 U.S.C. Sections 9601 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. Sections 1801 et seq.), the
Resource Conservation and Recovery Act of 1976 (42 U.S.C. Sections
6901 et seq.), the Clean Air Act (42 U.S.C. Sections 7401 et seq.),
the Federal Water Pollution Control Act (33 U.S.C. Sections 1251 et
seq.) and the Toxic Substances Control Act (15 U.S.C. Section 2601
et seq.) (all of the foregoing as amended), and any comparable laws
of the individual States of the United States of America or any
other state or nation);
"Environmentally Sensitive Material" shall include, but shall not
be limited to, any petroleum or petroleum products, natural gases,
explosives, radioactive materials, hazardous materials, hazardous
wastes, hazardous or toxic substances or related materials,
asbestos or any material containing asbestos or any substances
which are hazardous by virtue of the manner of their use, or any
activity involving any of the foregoing or any other substance or
material or activity defined as hazardous in words or substance by
any present or future Federal, state or local environmental law,
ordinance, rule, regulation or rule of common law including,
without limitation, the Environmental Laws;
"Insurances" includes all policies and contracts of insurance
(which expression includes all entries of the Rig in a protection
and indemnity association) which are from time to time taken out or
entered into in respect of the Rig or otherwise by the Owner
(whether in the sole name of the Owner or in the joint names of the
Owner and the Agent) and all benefits thereof (including claims of
whatsoever nature and return of premiums);
"Interest Period" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Lender" means any Lender listed in Schedule 1 to the Credit
Agreement as the same may be amended from time to time and each of
their successors and assigns (collectively, the "Lenders");
"Major Casualty" means any casualty to the Rig in respect whereof
the claim or the aggregate of the claims against all insurers,
before adjustment for any relevant franchise or deductible, exceeds
Five Hundred Thousand United States Dollars (US$500,000) or the
equivalent in any other currency;
"Note" means the promissory note of the Owner referred to in
Recital (C) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33
U.S.C. 2701 et seq.), as amended;
"Other Rig" means the jack-up drilling unit D.R. STEWART owned by
R&B Exploration documented under the laws and flag of the United
States with Official Number D626904 of 6494 gross registered tons
and 5834 net registered tons;
"Permitted Liens" means: (1) liens incident to expenses of current
operations, other than for master's and crew's wages, incurred in
the ordinary course of business of the Owner and due and payable
for not more than thirty (30) days (or being contested in good
faith, provided such liens are not in excess of U.S.$5,000,000.00,
and if in excess thereof, then the Owner shall, upon the Agent's
request, provide a bond or other security satisfactory to the
Agent); (2) liens for master's and crew's wages not yet due and
payable; (3) liens for taxes, assessments, governmental charges,
fines and penalties not at the time delinquent (unless being
contested in good faith, provided such liens are not in excess of
U.S.$5,000,000.00, and if in excess thereof, then the Owner shall,
upon the Agent's request, provide a bond or other security
satisfactory to the Agent); (4) liens for general average and
salvage (including contract salvage); (5) liens for claims covered
by valid policies of insurance meeting the requirements of Clause 6
hereof (except that no lien shall be deemed not covered by
insurance to the extent insurance in force would cover the amount
secured by the lien but for any applicable deductible amount
approved by the Agent); (6) liens arising pursuant to any judgment
or to an order of attachment, distraint or similar legal process
arising in connection with legal proceedings, but only if and so
long as the execution or other enforcement thereof is not unstayed
for more than 30 consecutive days; (7) any lien for the payment or
discharge of which provisions satisfactory to the Agent have been
made as evidenced by the Agent's written consent to such lien; (8)
any lien in favor of the Lenders; and provided that Permitted Liens
shall not include any liens described in subclauses (1) through (8)
above unless they: (i) are subordinate to the lien of this Mortgage
or (ii) constitute a maritime lien which would in any event be
entitled as such to priority over the Mortgage under the United
States shipping laws or other applicable laws relating to the Rig's
trading pattern. Nothing herein shall be deemed a waiver of the
priority preferred lien status of this Mortgage;
"protection and indemnity risks" means the usual risks covered by
protection and indemnity associations of international repute
including the proportion not recoverable in case of collision under
the ordinary running-down clause (unless such is recoverable under
the relevant hull and machinery coverage);
"Requisition Compensation" means all moneys or other compensation
payable during the Credit Facility Period by reason of requisition
for title or other compulsory acquisition of the Rig otherwise than
by requisition for hire;
"Rig" means the vessel described in Recital (A) hereto and includes
any share or interest therein and her engines, machinery, boats,
tackle, outfit, spare gear, fuel, consumable or other stores,
belongings and appurtenances whether on board or ashore and whether
now owned or hereafter acquired (but excluding therefrom any leased
equipment owned by third parties);
"Secured Indebtedness" means the aggregate of (a) the Advances, the
Unpaid Drawings and interest, fees and commissions thereon (and
interest on any unpaid interest thereon and on any other sums of
money on which interest is stated in the Credit Agreement to be
payable), (b) all such expenses, claims, liabilities, losses,
costs, duties, fees, charges or other moneys as are stated in this
Mortgage to be payable by the Owner to or recoverable from the
Owner by the Indenture Trustee (or in respect of which the Owner
agrees in this Mortgage to indemnify the Indenture Trustee) whether
actually or contingently, presently or in the future together with
interest thereon as provided in this Mortgage and (c) all other
sums of money from time to time owing to the Agent and the Lenders
under the Credit Agreement, the Security Documents or any of them
whether actually or contingently, presently or in the future;
"Security Documents" shall have the same meaning for such term as
set forth in the Credit Agreement;
"Security Interest" means a mortgage, charge (whether fixed or
floating), pledge, lien, hypothecation, assignment, trust
arrangement, title retention or other security interest or
arrangement of any kind whatsoever;
"Standby Letter of Credit" shall have the same meaning for such
term as set forth in the Credit Agreement;
"Taxes" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Total Loss" shall have the same meaning for such term as set forth
in the Credit Agreement;
"United States Dollars" and "US$" means the lawful currency of the
United States of America;
"Unpaid Drawing" shall have the same meaning for such term as set
forth in the Credit Agreement;
"war risks" includes the risk of mines and all risks excluded from
the standard form of English marine policy by the free of capture
and seizure clause.
1.02 Except where otherwise expressly provided or unless the context
otherwise requires, words and expressions defined in the Credit
Agreement shall have the same meanings when used in this Mortgage.
1.03 In this Mortgage:-
(a) Clause headings are inserted for convenience only and shall
not affect the construction of this Mortgage and, unless
otherwise specified, all references to Clauses are to clauses
of this Mortgage;
(b) unless the context otherwise requires, words denoting the
singular number shall include the plural and vice versa;
(c) references to persons include bodies corporate and
unincorporated;
(d) references to assets include property, rights and assets of
every description;
(e) references to any document are to be construed as references
to such document as amended or supplemented from time to
time; and
(f) references to any enactment include re-enactments, amendments
and extensions thereof.
2. REPRESENTATIONS AND WARRANTIES
2.01 The Owner hereby represents and warrants to the Indenture Trustee
that:-
(a) the Owner is the sole legal and beneficial owner of the whole
of the Rig and neither the whole nor any share in the Rig is
subject to any Security Interest (except for Permitted Liens
and save as constituted by this Mortgage);
(b) the Owner has not sold or transferred, or agreed to sell or
transfer, title to the Rig or any share therein;
(c) the Owner is a corporation duly organized and validly
existing and in good standing under the laws of the State of
Oklahoma;
(d) the Owner has full power and authority (i) to register the
Rig in its name under United States flag, (ii) to execute and
deliver this Mortgage, (iii) to mortgage the Rig as security
for the Secured Indebtedness and (iv) to comply with the
provisions of, and perform all its obligations under, this
Mortgage;
(e) the Owner has complied with all statutory and other material
requirements relative to the ownership, registration and
operation of the Rig;
(f) the Owner has taken all necessary action to authorize the
execution and delivery of this Mortgage and this Mortgage
constitutes, the legal, valid and binding obligation of the
Owner enforceable against the Owner in accordance with its
terms (except to the extent limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other laws of
general application relating to or affecting the enforcement
of creditors' rights as from time to time in effect and
general equitable principles) and when filed with the United
States Coast Guard's National Vessel Documentation Center in
Falling Waters, West Virginia will create a legal, valid and
enforceable first preferred mortgage lien on the Rig;
(g) the entry into and performance by the Owner of this Mortgage
does not and will not during the Credit Facility Period
violate in any respect (i) any law or regulation of any
governmental or official authority or body, or (ii) any of
the constitutive documents of the Owner including the
Certificate of Incorporation or By-laws, as amended from time
to time, or (iii) any material agreement, contract or other
undertaking to which the Owner is a party or which is binding
upon the Owner or any of its assets;
(h) all consents, licenses, approvals and authorizations required
in connection with the entry into, performance, validity and
enforceability of this Mortgage and the transactions
contemplated hereby and thereby have been obtained and are in
full force and effect and will be so maintained throughout
the Credit Facility Period;
(i) save for such registrations and filings as are referred to in
this Mortgage, it is not necessary for the legality,
validity, enforceability or admissibility in evidence of this
Mortgage that it or any document relating thereto be
registered, filed, recorded or enrolled with any court or
authority in any relevant jurisdiction or that any stamp,
registration or similar taxes be paid on or in relation to
this Mortgage;
(j) all applicable Environmental Laws and Environmental Approvals
relating to the Rig, its operation and management and the
business of the Owner (as now conducted and as reasonably
anticipated to be conducted in the future) have been obtained
or complied with;
(k) no Environmental Claim has been made or threatened against
the Owner, the Approved Manager or otherwise in connection
with the Rig; and
(l) no Environmental Incident which has resulted, or which could
reasonably be expected to result, in an Environmental Claim
in excess of US$200,000 has occurred.
2.02 The representations and warranties of the Owner set out in
Clause 2.01 shall survive the execution of this Mortgage and shall
be deemed to be repeated at the time of the making of each Advance
and at the time of the issuance of each Standby Letter of Credit,
with respect to the facts and circumstances existing at each such
time, as if made at each such time.
3. MORTGAGE
3.01 In order to secure the payment of the Secured Indebtedness and to
secure the performance and observance of and compliance with the
covenants, terms and conditions contained in this Mortgage, the
Credit Agreement, the Note and the Security Documents, the Owner
has granted, conveyed and mortgaged and does by these presents
grant, convey and mortgage unto the Indenture Trustee, its
successors and assigns, the whole of the Rig TO HAVE AND TO HOLD
the same unto the Indenture Trustee, its successors and assigns
forever upon the terms herein set forth for the enforcement of the
payment of the Secured Indebtedness and to secure the performance
and observance of, and compliance with, the covenants, terms and
conditions contained in this Mortgage, the Credit Agreement, the
Note and the Security Documents.
Provided only and the condition of these presents is such that if
the Owner or its successors and assigns shall pay or cause to be
repaid in full to the Indenture Trustee, the Lenders and their
respective successors or assigns the Secured Indebtedness as and
when the same shall become due and payable in accordance with the
terms of the Credit Agreement, the Note, the Security Documents and
this Mortgage and shall observe and comply with the covenants,
terms and conditions contained in the Credit Agreement, the Note,
the Security Documents and this Mortgage expressed or implied to be
performed, observed or complied with by and on the part of the
Owner and its successors and assigns, all without delay or fraud
and according to the true intent and meaning thereof, then these
presents and the rights hereunder shall cease, determine and be
void otherwise to be and remain in full force and effect and, in
such event, the Indenture Trustee agrees by accepting this Mortgage
to execute and record at the expense of the Owner, all such
documents as the Owner may reasonably require to discharge this
Mortgage.
Notwithstanding anything to the contrary herein it is not intended
that any provision of this Mortgage shall waive the preferred
status of this Mortgage and that if any provision or part thereof
herein shall be construed as waiving the preferred status of this
Mortgage then such provision shall to such extent be void and of no
effect.
3.02 The Owner shall remain liable to perform all the obligations
assumed by it in relation to the Rig and neither the Indenture
Trustee, nor the Agent, nor any of the Lenders shall be under any
obligation of any kind whatsoever in respect thereof or be under
any liability whatsoever in event of any failure by the Owner to
perform its obligations in respect thereof.
4. PAYMENT COVENANTS
4.01 The Owner hereby covenants with the Indenture Trustee, the Agent
and the Lenders:-
(a) to pay and indemnify the Indenture Trustee, the Agent and the
Lenders for all such expenses, claims, liabilities, losses,
costs, duties, fees, charges or other moneys as are stated in
this Mortgage to be payable by the Owner to or recoverable
from the Owner by the Indenture Trustee, the Agent or the
Lenders (or in respect of which the Owner agrees in this
Mortgage to indemnify the Indenture Trustee, the Agent or the
Lenders) at the times and in the manner specified in this
Mortgage;
(b) to pay interest on any such expenses, claims, liabilities,
losses, costs, duties, fees, charges or other moneys referred
to in Clause 4.01(a) from the date on which demand is made by
the Indenture Trustee, the Agent or the Lenders, as the case
may be, for payment by the Owner of the relevant expense,
claim, liability, loss, cost, duty, fee, charge or other
money incurred by the Indenture Trustee, the Agent or the
Lenders for which the Owner is responsible (both before and
after any relevant judgment) at the Default Rate; and
(c) to pay and perform its obligations which may be or become due
or owing to the Indenture Trustee, the Agent or the Lenders
as the case may be, under this Mortgage and the other
Security Documents to which the Owner is or is to be a party
at the times and in the manner specified herein or therein.
5. PRESERVATION OF SECURITY
5.01 It is declared and agreed that:-
(a) the security created by this Mortgage shall be held by the
Indenture Trustee as a continuing security for the payment of
the Secured Indebtedness and that the security so created
shall not be satisfied by any intermediate payment or
satisfaction of any part of the Secured Indebtedness;
(b) the security so created shall be in addition to and shall not
in any way be prejudiced or affected by any of the other
Security Documents;
(c) the Indenture Trustee shall not have to wait for the Agent or
the Lenders to enforce any of the other Security Documents
before enforcing the security created by this Mortgage;
(d) no delay or omission on the part of the Indenture Trustee in
exercising any right, power or remedy under this Mortgage
shall impair such right, power or remedy or be construed as a
waiver thereof nor shall any single or partial exercise of
any such right, power or remedy preclude any further exercise
thereof or the exercise of any other right, power or remedy.
The rights, powers and remedies provided in this Mortgage are
cumulative and not exclusive of any rights, powers and
remedies provided by law and may be exercised from time to
time and as often as the Indenture Trustee may deem
expedient; and
(e) any waiver by the Indenture Trustee of any terms of this
Mortgage or any consent given by the Indenture Trustee under
this Mortgage shall only be effective if given in writing and
then only for the purpose and upon the terms for which it is
given.
5.02 Any settlement or discharge under this Mortgage between the
Indenture Trustee and the Owner shall be conditional upon no
security or payment to the Indenture Trustee, the Agent, or the
Lenders or any of them by the Companies or any other person being
avoided or set-aside or ordered to be refunded or reduced by virtue
of any provision or enactment relating to bankruptcy, insolvency,
administration or liquidation for the time being in force and, if
such condition is not satisfied, the Indenture Trustee shall be
entitled to recover from the Owner on demand the value of such
security or the amount of any such payment as if such settlement or
discharge had not occurred.
5.03 The rights of the Indenture Trustee and the Lenders under this
Mortgage and the security hereby constituted shall not be affected
by any act, omission, matter or thing which, but for this
provision, might operate to impair, affect or discharge such rights
and security, in whole or in part, including without limitation,
and whether or not known to or discoverable by the Companies, the
Indenture Trustee, the Lenders or any other person:-
(a) any time or waiver granted to the Companies or any other
person; or
(b) the taking, variation, compromise, renewal or release of or
refusal or neglect to perfect or enforce any rights, remedies
or securities against any of the Companies or any other
persons; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Companies or any other person;
or
(d) any amendment or supplement to the Credit Agreement, any of
the other Security Documents (other than this Mortgage) or
any other document or security; or
(e) the dissolution, liquidation, amalgamation, reconstruction or
reorganization of any of the Companies or any other person;
or
(f) the unenforceability, invalidity or frustration of any
obligations of any of the Companies or any other person under
the Credit Agreement, any of the other Security Documents
(other than this Mortgage) or any other document or security.
5.04 Until the Secured Indebtedness has been unconditionally and
irrevocably paid and discharged in full to the satisfaction of the
Indenture Trustee, the Owner shall not by virtue of any payment
made hereunder on account of the Secured Indebtedness or by virtue
of any enforcement by the Indenture Trustee of its rights under, or
the security constituted by, this Mortgage or by virtue of any
relationship between, or transaction involving, the Owner and the
Guarantor (whether such relationship or transaction shall
constitute the Owner a creditor of the Guarantor, a guarantor of
the obligations of the Guarantor or a party subrogated to the
rights of others against the Guarantor or otherwise howsoever and
whether or not such relationship or transaction shall be related
to, or in connection with, the subject matter of this Mortgage):-
(a) exercise any rights of subrogation in relation to any rights,
security or moneys held or received or receivable by the
Indenture Trustee or the Lenders or any other person; or
(b) be entitled to exercise any right of contribution from any
co-surety liable in respect of such moneys and liabilities
under any other guarantee, security or agreement; or
(c) exercise any right of set-off or counterclaim against the
Guarantor or any such co-surety; or
(d) receive, claim or have the benefit of any payment,
distribution, security or indemnity from the Guarantor or any
such co-surety; or
(e) unless so directed by the Indenture Trustee (when the Owner
will prove in accordance with such directions), claim as a
creditor of the Guarantor or any such co-surety in
competition with the Indenture Trustee.
The Owner shall hold in trust for the Indenture Trustee and
forthwith pay or transfer (as appropriate) to the Indenture Trustee
any such payment (including an amount equal to any such set-off),
distribution or benefit of such security, indemnity or claim in
fact received by it.
5.05 The Owner unconditionally and irrevocably agrees that if any sums
hereby secured are not recoverable on the basis of a guarantee
(whether by reason of legal limitation, illegality, disability or
incapacity on or of the Guarantor or the Owner or any other person
or by reason of any other fact or circumstance, and whether or not
known to or discoverable by the Owner, the Guarantor, the Indenture
Trustee or any other person), then the Owner will, as a separate
and independent stipulation and as a primary obligor, pay to the
Indenture Trustee on demand an amount or amounts equal to the
amount or amounts which the Owner would have been liable to pay but
for such irrecoverability and will on demand indemnify the
Indenture Trustee against any loss or liability suffered or
incurred by the Indenture Trustee and the Lenders or any of them as
a result of such irrecoverability.
6. INSURANCE
6.01 The Owner covenants with the Indenture Trustee throughout the
Credit Facility Period that:-
(a) The Owner shall, at its own expense, when and so long as the
Secured Indebtedness shall be outstanding, insure the Rig and
keep her insured, or cause the Rig to be insured, in lawful
money of the United States, in such amounts, for such risks
(including without limitation, hull and machinery/increased
value, protection and indemnity risks, pollution liability,
and war risks), in such form (including without limitation,
the form of the loss payable clause and the designation of
named assureds) and with such first class insurance
companies, underwriters, funds, mutual insurance associations
or clubs, as shall be reasonably satisfactory to the Agent.
With respect to hull and machinery/increased value insurance,
including war risk, the Owner shall insure the Rig and keep
her insured, or cause the Rig to be insured, for an amount
which is at least the full commercial value of the Rig and
when such amount is aggregated with the amount of such
insurance coverage on the Other Rig such aggregate amount
shall be at least 110% of the aggregate amount of the Credit
Facility. The Rig shall in no event be insured for an amount
less than the agreed valuation as set forth in the applicable
marine and war risk policies. Such insurance shall cover
marine and war risk perils, on hull and machinery, with
deductibles not in excess of US$500,000 (such deductibles not
to apply in the case of total loss of the Rig), and shall be
maintained in the broadest forms available in the Norwegian,
American and British insurance markets or in such other major
international markets reasonably acceptable to the Agent.
The Owner shall maintain, or cause to be maintained,
protection and indemnity or equivalent insurance, including
war risk protection and indemnity coverage and coverage
against pollution liability, in an amount not less than
US$100,000,000 (or, with respect to pollution liability
coverage, such greater amount as may be required from time to
time by the Oil Pollution Act 1990, or other Environmental
Laws, as and when applicable to the Rig and its operations,
through underwriters or associations acceptable to the Agent.
In addition, the Owner shall, at its own expense, furnish to
the Agent a mortgagee's single interest policy providing
coverage which, when aggregated with the mortgagee's interest
insurance furnished to the Agent by the Owner in respect of
the Other Rig, shall be in an amount equal to at least 110%
of the aggregate amount of the Credit Facility (or in lieu of
such mortgagee's interest insurance Owner shall cause the
hull and machinery/increased value insurance to be endorsed
to afford breach of warranty coverage for the benefit of the
Agent). Such mortgagee's interest insurance and any
additional insurance policies for the benefit of the Agent
shall be maintained in the broadest form available in the
American, British and Scandinavian markets or other major
international markets acceptable to the Agent through
underwriters acceptable to the Agent. The Rig shall not
operate in or proceed into any area then excluded by trading
warranties under its marine or war risk policies (including
protection and indemnity) without obtaining any necessary
additional coverage, satisfactory in form and substance, and
evidence of which shall be furnished, to the Agent.
(b) The policy or policies of insurance shall be issued by
responsible underwriters reasonably acceptable to the Agent,
shall contain conditions, terms, stipulations and insuring
covenants satisfactory to the Agent, and shall be kept in
full force and effect by the Owner so long as the Security
Documents and the Secured Indebtedness shall be outstanding.
All such policies, binders and other interim insurance
contracts shall be executed and issued in the name of the
Owner and shall, to the extent required herein, provide that
loss be payable to the Agent for distribution by it to
itself, the Lenders and the Owner as their interests may
appear, and shall provide for at least ten days' prior notice
to be given to the Agent by the underwriters or association
in the event of cancellation or the failure of the Owner to
pay any premium or call which would suspend coverage under
the policy or the payment of a claim thereunder. The Agent
and the Indenture Trustee shall be named as co-assureds on
all such policies and insurance contracts, but without
liability of the Agent or the Indenture Trustee for premiums
or calls. Certified copies of all such policies, binders and
other interim insurance contracts shall be deposited with the
Agent. Originals shall also be provided upon the request of
the Agent. The Owner shall furnish to the Agent annually a
detailed report signed by a firm of marine insurance brokers
satisfactory to the Agent as to the insurance maintained in
respect of the Rig, as to their opinion as to the adequacy
thereof and as to compliance with the provisions of this
Clause 6.01.
Unless otherwise required by the Agent by notice to the
underwriters, although the following insurance is payable to
the Agent, (i) any loss under any insurance on the Rig with
respect to protection and indemnity risks may be paid
directly to the Owner to reimburse it for any loss, damage or
expense incurred by it and covered by such insurance or to
the person to whom any liability covered by such insurance
has been incurred and (ii) in the case of any loss (other
than a loss covered by (i) above or by the next following
paragraph of this Clause 6.01(b)) under any insurance with
respect to the Rig involving any damage to the Rig, the
underwriters may pay direct for the repair, salvage or other
charges involved or, if the Owner shall have first fully
repaired the damage or paid all of the salvage or other
charges, may pay the Owner as reimbursement therefor;
provided, however, that if such damage involves a before
deductible loss in excess of US$1,000,000, the underwriters
shall not make such payment without first obtaining the
written consent thereto of the Agent (which consent shall not
be unreasonably withheld). Any loss covered by this
paragraph which is paid to the Agent but which might have
been paid, in accordance with the provisions of this
paragraph, directly to the Owner or others, shall be paid by
the Agent to, or as directed by, the Owner and all other
payments to the Agent of losses covered by this paragraph
shall be applied by the Agent in accordance with Clause
10.01.
In the event of an actual or constructive total loss or a
compromised constructive total loss or requisition of title,
all insurance payments therefor shall be paid to the Agent.
The Owner shall not declare or agree with the underwriters
that the Rig is a constructive or compromised, agreed or
arranged constructive total loss without the prior written
consent of the Agent.
(c) In the event of an actual or constructive total loss of the
Rig, the Agent shall retain out of the insurance payments
received on account of such loss any sum or sums that shall
be or become owing to the Indenture Trustee, the Agent and
the Lenders under the Security Documents, whether or not the
same be then due and payable, together with accrued interest
and the cost, if any, of collecting the insurance, and pay
the balance as in Clause 10 provided.
(d) The Owner shall comply with and satisfy all of the provisions
of any applicable law, regulation, proclamation or order
concerning financial responsibility for liabilities imposed
on the Owner or the Rig with respect to the carriage of
passengers or pollution, and will maintain, or cause to be
maintained, all certificates or other evidence of financial
responsibility as may be required by any such law,
regulation, proclamation or order with respect to the trade
which the Rig from time to time is engaged in.
(e) The Owner shall renew all insurances as they expire and so as
to insure that there is no gap in coverage, keep the Agent
advised of the progress of such renewals, and procure that
the insurers shall promptly confirm in writing to the Agent
as and when each such renewal is effected.
(f) The Owner shall punctually pay all premiums, calls,
contributions or other sums payable in respect of all such
insurances and produce all relevant receipts when so required
by the Agent.
(g) The Owner shall arrange for the execution of such guarantees
as may from time to time be required by any protection and
indemnity or war risks association.
(h) The Owner shall not employ the Rig or suffer the Rig to be
employed otherwise than in conformity with the terms of the
instruments of insurance aforesaid relative to the Rig
(including any warranties, express or implied, therein)
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.
7. RIG COVENANTS
7.01 The Owner covenants with the Indenture Trustee that throughout the
Credit Facility Period the Owner will:-
(a) maintain its existence as a corporation in good standing duly
organized under the laws of the State of Oklahoma;
(b) keep the Rig documented in its name as a United States vessel
and to do or allow to be done nothing whereby such
documentation may be forfeited or imperilled;
(c) not without the previous consent in writing of the Indenture
Trustee, change the name of the Rig or make any modification
to the Rig which would or might materially alter the
structure or type or reduce the performance characteristics
of the Rig or materially reduce the value of the Rig;
(d) keep the Rig in a good and efficient state of repair
consistent with the ownership and operating practices of
first-class rig owners and operators so as to maintain her
present class (namely A1) at the American Bureau of Shipping
free of recommendations and qualifications and change of
class, save those notified to and approved in writing by the
Indenture Trustee and so as to comply with all laws,
regulations and requirements (statutory or otherwise) from
time to time applicable to vessels documented under the laws
and flag of the United States and applicable to vessels
trading to any jurisdiction to which the Rig may, subject to
the provisions of this Mortgage, trade from time to time;
(e) procure that all repairs to or replacement of any damaged,
worn or lost parts or equipment be effected in such manner
(both as regards workmanship and quality of materials) as to
not diminish the value of the Rig and not to remove any
material part of, or item of equipment installed on, the Rig
unless the part or item so removed is forthwith replaced by a
suitable part or item which is in the same condition as or
better condition than the part or item removed, is free from
any Security Interest (other than Permitted Liens) in favor
of any person other than the Indenture Trustee and becomes on
installation on the Rig the property of the Owner and subject
to the security constituted by this Mortgage;
(f) submit the Rig to such periodical or other surveys as may be
required for classification purposes and if so required to
supply to the Indenture Trustee copies of all survey reports
issued in respect thereof;
(g) permit the representatives of the Agent or independent
surveyors representing the Indenture Trustee to board the Rig
at all reasonable times and upon reasonable notice for the
purpose of inspecting her condition or for the purpose of
satisfying themselves in regard to proposed or executed
repairs and to afford all proper facilities for such
inspections;
(h) promptly pay and discharge all debts, damages and liabilities
whatsoever which have given or may give rise to maritime or
possessory liens (other than Permitted Liens) on or claims
enforceable against the Rig and all tolls, dues, taxes,
assessments, governmental charges, fines and penalties
lawfully charged on or in respect of the Rig and all other
outgoings whatsoever in respect of the Rig and in the event
of arrest of the Rig pursuant to legal process, or in the
event of her detention in exercise or purported exercise of
any such lien or claim as aforesaid, procure the release of
the Rig from such arrest or detention forthwith upon
receiving notice thereof by providing bail or otherwise as
the circumstances may require;
(i) not employ the Rig or allow her employment in any trade or
business which is unlawful under the laws of any relevant
jurisdiction or in carrying illicit or prohibited goods or in
any manner whatsoever which may render her liable to
destruction, seizure or confiscation and in the event of
hostilities in any part of the world (whether war be declared
or not) not employ the Rig or suffer her employment in
carrying any contraband goods or to enter or trade to any
zone which is declared a war zone by any government or by the
war risks insurers of the Rig unless there shall have been
effected by the Owner (at its expense) such special,
additional or modified insurance cover as the Agent may
require;
(j) promptly furnish to the Indenture Trustee all such
information as it may from time to time require regarding the
Rig, her employment, position and engagements, particulars of
all towages and salvages and, upon the Indenture Trustee's
request in writing, copies of all charters and other
contracts for her employment or otherwise howsoever
concerning her;
(k) notify both the Indenture Trustee and the Agent forthwith by
telex or telecopy thereafter confirmed by letter of:-
(i) any casualty to the Rig which is or is likely to be a
Major Casualty, and
(ii) any occurrence in consequence whereof the Rig has
become or is, by the passing of time or otherwise,
likely to become a Total Loss, and
(iii) any requirement or recommendation made by any insurer
or classification society or by any competent
authority which is not immediately complied with, and
(iv) any arrest of the Rig or the exercise or purported
exercise of any lien on the Rig or any requisition of
the Rig for hire, and
(v) any intended dry docking of the Rig, as to which the
Owner shall give the Indenture Trustee ten (10) days
prior notice, provided, that in the event of any
emergency dry docking of the Rig, the Owner shall
immediately notify the Indenture Trustee;
(l) keep proper books of account in respect of the Rig and as and
when the Indenture Trustee or the Agent may so reasonably
require make such books available for inspection on behalf of
the Indenture Trustee and furnish satisfactory evidence that
the wages and allotments and the insurance of the master and
crew are being regularly paid and that all deductions from
crew's wages in respect of tax and/or social security
liability are being properly accounted for and that the
master has no claim for disbursements other than those
incurred by him in the ordinary course of trading on the
voyage then in progress;
(m) (i) observe the obligations contained in Clause 12 of the
Credit Agreement which apply to the Rig and the Owner,
and in pursuance thereof such obligations shall be
incorporated in and deemed to form part of this Mortgage
mutatis mutandis; and
(ii) not without the previous written consent of the
Indenture Trustee de-activate or lay up the Rig
(other than for normal periods of inactivity between
contracts for the Rig during which periods the Rig
remains manned);
(n) not without the previous consent in writing of the Indenture
Trustee (such consent not to be unreasonably withheld), put
the Rig into the possession of any person for the purpose of
work being done upon her in an amount exceeding or likely to
exceed Two Million Five Hundred Thousand United States
Dollars (US$2,500,000) (or the equivalent in any other
currency) unless such person shall first have given to the
Indenture Trustee and in terms reasonably satisfactory to it
a written undertaking not to exercise any lien on the Rig for
the cost of such work or otherwise;
(o) comply with and satisfy all the requirements and formalities
established by the Ship Mortgage Act and any other pertinent
legislation of the United States to perfect this Mortgage as
a legal, valid and enforceable first and preferred lien upon
the Rig and promptly to furnish to the Indenture Trustee from
time to time such proof as the Indenture Trustee may request
for its satisfaction with respect to the Owner's compliance
with the provisions of this sub-clause;
(p) place, and use due diligence to retain, a properly certified
copy of this Mortgage on board the Rig with her papers and
cause such certified copy of this Mortgage to be exhibited to
any and all persons having business with the Rig which might
give rise to any lien thereon other than a lien for crew's
wages, general average and salvage and to any representative
of the Indenture Trustee on demand and to place and keep
prominently displayed in the chart room and in the master's
cabin of the Rig a framed printed notice in plain type in
English of such size that the paragraph of reading matter
shall cover a space not less than 6 inches wide and 9 inches
high reading as follows:-
NOTICE OF MORTGAGE
This Rig is covered by a First Preferred Mortgage to
WILMINGTON TRUST COMPANY not in its individual capacity but
solely as Indenture Trustee for the Lenders defined in the
said Mortgage under authority of the United States Ship
Mortgage Act, 1920, as amended, recodified as 46 U.S.C.
31301 et. seq. Under the terms of the said Mortgage neither
the Owner nor any charterer nor the master of this Rig nor
any other person has any right, power or authority to create,
incur or permit to be imposed upon this Rig any lien
whatsoever other than for crew's wages, general average and
salvage.
(q) comply, or procure compliance with, all Environmental Laws
and Environmental Approvals relating to the Rig, its
operation or management and the business of the Owner from
time to time;
(r) notify the Indenture Trustee forthwith upon:
(i) any Environmental Claim which could reasonably be
expected to result in damages in excess of US$200,000
being or made against the Owner, or otherwise in
connection with the Rig; or
(ii) any Environmental Incident occurring, and keep the
Indenture Trustee advised, in writing on such regular
basis and in such detail as the Indenture Trustee
shall require, of the Owner's response to such
Environmental Claim or Environmental Incident;
(s) not sell, mortgage, transfer or change the port of registry
of the Rig without the written consent of the Indenture
Trustee having first been obtained, and any such written
consent to any one such sale, mortgage, transfer, or change
shall not be construed to be a waiver of this provision with
respect to any subsequent proposed sale, mortgage, transfer
or change. Any such sale, mortgage, transfer, or change
shall be subject to the provisions of this Mortgage and the
lien it creates. The Owner shall not charter the Rig to, or
permit the Rig to serve under any contract with, a person
included within the definition of (i) "national" of a
"designated foreign country," or "specially designated
national" of a "designated foreign country," in the Foreign
Assets Control Regulations or the Cuban Assets Control
Regulations of the United States Treasury Department, 31
C.F.R. Parts 500 and 515, in each case as amended, (ii)
"Government of Libya", "entity of the Government of Libya" or
"Libyan entity" in the Libyan Sanctions Regulations of the
United States Treasury Department, 31 C.F.R. Part 550, as
amended, or (iii) "Government of Iraq", "entity of the
Government of Iraq" or "Iraqi Government entity" in the Iraqi
Sanctions Regulations, 56 Fed. Reg. 2112 (1991) to be
codified at 31 C.F.R. Part 575, as amended, all within the
meaning of said Regulations or of any regulations,
interpretations or rulings issued thereunder, or engage in
any transaction that violates any provision of said
Regulations or that violates any provision of the Iranian
Transactions Regulations, 31 C.F.R. Part 560, as amended, the
Foreign Funds Control Regulations, 31 C.F.R. Part 520, as
amended, the Transaction Control Regulations, 31 C.F.R. Part
505, as amended, the Haitian Transaction Regulations, 31
C.F.R. Part 580, as amended, the Foreign Assets Control
Regulations, 31 C.F.R. Part 500, as amended, or Executive
Orders 12810 and 12831, or call at a Cuban port to load or
discharge cargo or to effect repairs on the Rig;
(t) shall not cause or permit the Rig to be operated in any
manner contrary to law, shall not abandon the Rig in a
foreign port, shall not engage in any unlawful trade or
violate any law or carry any cargo that shall expose the Rig
to penalty, forfeiture or capture, and shall not do, or
suffer or permit to be done, anything which can or may
injuriously affect the registration or enrollment of the Rig
under the laws of the United States and will at all times
keep the Rig duly documented thereunder.
8. PROTECTION OF SECURITY
8.01 The Indenture Trustee shall without prejudice to its other rights
and powers under this Mortgage and the other Security Documents be
entitled (but not bound) at any time and as often as may be
necessary to take any such action as it may in the reasonable
exercise of its discretion think fit for the purpose of protecting
or maintaining the security created by this Mortgage and the other
Security Documents (including, without limitation, such action as
is referred to in Clause 8.02) and each and every expense,
liability, or loss (including, without limitation, legal fees) so
incurred by the Indenture Trustee, the Agent or the Lenders in or
about the protection or maintenance of the said security together
with interest payable thereon under Clause 4.01(b) shall be
repayable to it by the Owner on demand.
8.02 Without prejudice to the generality of Clause 8.01:-
(a) if the Owner does not comply with the provisions of Clause 6
or any of them the Agent shall be entitled (but not bound) to
effect or to replace and renew and thereafter to maintain the
Insurances in such manner as in its discretion it may think
fit and to require that all policies, contracts and other
records relating to the Insurances (including details of any
correspondence concerning outstanding claims) be forthwith
delivered to such brokers as the Agent may nominate and to
collect, recover, compromise and give a good discharge for
all claims then outstanding or thereafter arising under the
Insurances or any of them and to take over or institute (if
necessary using the name of the Owner) all such proceedings
in connection therewith as the Agent in its absolute
discretion may think fit and to permit the brokers through
whom the collection or recovery is effected to charge the
usual brokerage therefor; and
(b) if the Owner does not comply with the provisions of Clause
7.01(d) and/or 7.01(f) or any of them the Indenture Trustee
shall be entitled (but not bound) to arrange for the carrying
out of such repairs to and/or surveys of the Rig as it deems
expedient or necessary; and
(c) if the Owner does not comply with the provisions of Clause
7.01(h) or any of them the Indenture Trustee shall be
entitled (but not bound) to pay and discharge all such debts,
damages and liabilities and all such tolls, dues, taxes,
assessments, charges, fines, penalties and other outgoings as
are therein mentioned and/or to take any such measures as it
deems expedient or necessary for the purpose of securing the
release of the Rig.
9. ENFORCEABILITY AND INDENTURE TRUSTEE'S POWERS
9.01 Upon the happening of any of the Events of Default specified in the
Credit Agreement but without the necessity for any court order or
declaration in any jurisdiction to the effect that an Event of
Default has occurred (and whether prior to or after the Majority
Lenders having served on the Owner any such notice as is referred
to in Clause 11 of the Credit Agreement) the security constituted
by this Mortgage shall become immediately enforceable and the
Indenture Trustee shall be entitled, as and when it may see fit, to
put into force and exercise all or any of the powers possessed by
it as mortgagee of the Rig or otherwise and in particular:-
(a) to exercise all the rights and remedies in foreclosure and
otherwise given to mortgagees by applicable law including the
provisions of the Ship Mortgage Act;
(b) to take possession of the Rig whether actually or
constructively and/or otherwise to take control of the Rig
wherever the Rig may be and cause the Owner or any other
person in possession of the Rig forthwith upon demand to
surrender the same to the Indenture Trustee without legal
process and without liability of the Indenture Trustee for
any losses or damages incurred thereby and without having to
render accounts to the Owner in connection therewith;
(c) to require that all policies, contracts, certificates of
entry and other records relating to the Insurances (including
details of and correspondence concerning outstanding claims)
be forthwith delivered to or to the order of the Agent;
(d) to collect, recover, compromise and give a good discharge for
or procure that the Agent collect, recover, compromise and
give good discharge for any and all moneys or claims for
moneys then outstanding or thereafter arising under the
Insurances or any Requisition Compensation and to permit any
brokers through whom collection or recovery is effected to
charge the usual brokerage therefor;
(e) to take over or institute (if necessary using the name of the
Owner) or, to the extent lawful, procure that the Agent take
over or institute all such proceedings in connection with the
Rig, the Insurances, or any Requisition Compensation as the
Indenture Trustee in its absolute discretion thinks fit and
to discharge, compound, release or compromise claims against
the Owner in respect of the Rig which have given or may give
rise to any charge or lien on the Rig or which are or may be
enforceable by proceedings against the Rig;
(f) to sell the Rig or any share therein with or without prior
notice to the Owner free from any claim of or by the Owner of
any nature whatsoever, and with or without the benefit of any
charterparty or other contract for her employment, by public
auction or private contract at such place and upon such terms
(including, without limitation, on terms such that payment of
some or all of the purchase price be deferred) as the
Indenture Trustee in its absolute discretion may determine
with power to postpone any such sale, without being
answerable for any loss occasioned by such sale or resulting
from postponement thereof, and/or itself to purchase the Rig
at any such public auction and to set off the purchase price
against all or any part of the Secured Indebtedness;
(g) to manage, insure, maintain and repair the Rig and to
charter, employ, sail or lay up the Rig in such manner, upon
such terms and for such period as the Indenture Trustee in
its absolute discretion deems expedient and for the purposes
aforesaid the Indenture Trustee shall be entitled to do all
acts and things incidental or conducive thereto and in
particular to enter into such arrangements respecting the
Rig, and the insurance, management, maintenance, repair,
classification, chartering and employment of the Rig, in all
respects as if the Indenture Trustee were the owner of the
Rig and without being responsible for any loss thereby
incurred;
(h) to recover from the Owner on demand any expenses, liabilities
or losses as may be incurred by the Indenture Trustee in or
about the exercise of the power vested in the Indenture
Trustee under Clause 9.01(g);
(i) generally, to recover from the Owner on demand each and every
expense, liability or loss incurred by the Indenture Trustee
in or about or incidental to the exercise by it of any of the
powers aforesaid.
9.02 The Indenture Trustee shall not be obliged to make any enquiry as
to the nature or sufficiency of any payment received by it under
this Mortgage or to make any claim, take any action or enforce any
rights and benefits assigned to the Indenture Trustee by this
Mortgage or to which the Indenture Trustee may at any time be
entitled hereunder.
9.03 Neither the Indenture Trustee, the Agent, the Lenders nor their
agents, managers, officers, employees, delegates and advisers shall
be liable for any expense, claim, liability, loss, cost, damage or
expense incurred or arising in connection with the exercise or
purported exercise of any rights, powers and discretions under this
Mortgage in the absence of gross negligence or wilful misconduct.
9.04 The Indenture Trustee shall not by reason of the taking possession
of the Rig be liable to account as mortgagee-in-possession or for
anything except actual receipts or be liable for any loss upon
realization or for any default or omission for which a
mortgagee-in-possession might be liable.
9.05 Upon any sale of the Rig or any share therein by the Indenture
Trustee the purchaser shall not be bound to see or enquire whether
the Indenture Trustee's power of sale has arisen in the manner
provided in this Mortgage and the sale shall be deemed to be within
the power of the Indenture Trustee and the receipt of the Indenture
Trustee for the purchase money shall effectively discharge the
purchaser who shall not be concerned with the manner of application
of the proceeds of sale or be in any way answerable therefor.
10. APPLICATION OF MONEYS
10.01 All moneys received by the Indenture Trustee (or the Agent, as the
case may be):-
(a) in respect of sale of the Rig or any part thereof;
(b) in respect of recovery under the Insurances;
(c) in respect of Requisition Compensation,
shall be held and applied in the first place to pay or make good
all such expenses, liabilities, losses, costs, duties, fees,
charges or other moneys whatsoever (together with interest payable
thereon under Clause 4.01(b)) as may have been paid or incurred by
the Indenture Trustee or the Agent in or about or incidental to the
exercise by the Indenture Trustee or the Agent of the powers
specified or otherwise referred to in Clauses 8 and 9.01 (or any of
them) and in connection with the Indenture Trustee's duties as
Indenture Trustee and the balance shall be applied in the following
manner:-
FIRST: in or towards satisfaction of any amounts in respect of the
balance of the Secured Indebtedness as are then accrued, due and
payable or are then due and payable by virtue of payment demanded
under the Credit Agreement and the other Security Documents (or any
of them), in such order of application as the Indenture Trustee
shall think fit;
SECONDLY: at the option of the Indenture Trustee in retention of
an amount equal to any part or parts of the Secured Indebtedness as
is or are not then due and payable but which (in the sole and
absolute opinion of the Indenture Trustee) will or may become due
and payable in the future and, upon the same becoming due and
payable, in or towards satisfaction thereof in accordance with the
foregoing provisions of this Clause 10.01;
THIRDLY: the surplus (if any) shall be paid to the Owner or to
whomsoever else may be entitled thereto.
11. FURTHER ASSURANCES
11.01 The Owner shall execute and do all such assurances, acts and things
as the Indenture Trustee in its absolute discretion may require
for:-
(a) perfecting or protecting the security created (or intended to
be created) by this Mortgage; or
(b) preserving or protecting any of the rights of the Indenture
Trustee, the Agent, and the Lenders under this Mortgage; or
(c) ensuring that the security constituted by this Mortgage and
the covenants and obligations of the Owner under this
Mortgage shall enure to the benefit of any transferee,
successor or assignee of the Indenture Trustee; or
(d) enforcing the security constituted by this Mortgage on or at
any time after the same shall have become enforceable; or
(e) the exercise of any power, authority or discretion vested in
the Indenture Trustee under this Mortgage,
in any such case, forthwith upon demand by the Indenture Trustee
and at the expense of the Owner.
12. POWER OF ATTORNEY
12.01 The Owner, by way of security and in order more fully to secure the
performance of the Owner's obligations under this Mortgage, hereby
irrevocably appoints the Indenture Trustee as its attorney for the
duration of the Credit Facility Period for the purposes of:-
(a) doing in its name all acts and executing, signing and (if
required) registering in its name all documents which the
Owner itself could do, execute, sign or register in relation
to the Rig (including without limitation, transferring title
to the Rig to a third party), provided, however, that such
power shall not be exercisable by or on behalf of the
Indenture Trustee until this Mortgage shall have become
immediately enforceable pursuant to Clause 9.01; and
(b) executing, signing, perfecting, doing and (if required)
registering every such further assurance document, act or
thing as is referred to in Clause 11.
12.02 The exercise of such power as is referred to in Clause 12.01(a) by
or on behalf of the Indenture Trustee shall not put any person
dealing with the Indenture Trustee upon any enquiry as to whether
this Mortgage has become enforceable nor shall such person be in
any way affected by notice that this Mortgage has not become
enforceable and, in relation to both Clauses 12.01(a) and 12.01(b),
the exercise by the Indenture Trustee of such power shall be
conclusive evidence of its right to exercise the same.
13. INDEMNITIES
13.01 The Owner will indemnify and save harmless the Indenture Trustee,
the Agent, the Lenders and each agent or attorney appointed under
or pursuant to this Mortgage from and against any and all expenses,
claims, liabilities, losses, taxes, costs, duties, fees and charges
suffered, incurred or made by the Indenture Trustee, the Agent, the
Lenders or such agent or attorney in good faith:-
(a) in the exercise or purported exercise of any rights, powers
or discretions vested in them pursuant to this Mortgage; or
(b) in the preservation or enforcement of the Indenture Trustee's
rights under this Mortgage; or
(c) on the release of the Rig from the security created by this
Mortgage,
and the Indenture Trustee, the Agent, the Lenders and each such
agent or attorney may retain and pay all sums in respect of the
same out of money received under the powers conferred by this
Mortgage. All such amounts recoverable by the Indenture Trustee,
the Agent, the Lenders or such agent or attorney shall be
recoverable on a full indemnity basis.
13.02 Without limiting the foregoing Clause 13.01, the Owner hereby
further indemnifies and holds harmless each of the Indenture
Trustee, the Agent, the Lenders and their respective officers,
directors, employees, attorneys and agents from and against any and
all liabilities, losses, obligations, claims, damages, penalties,
causes of action, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses, consultant
fees, investigation and laboratory fees) imposed upon or incurred
by or asserted against them, or any of them, by reason of (a) an
actual, alleged or threatened Environmental Incident; (b) any
personal injury (including wrongful death) or property damage (real
or personal) or economic damage arising out of or related to such
Environmental Incident; (c) any Environmental Claim brought or
threatened, or settlement reached; or (d) any violation of laws,
orders, regulations, requirements or demands of government
authorities relating to Environmentally Sensitive Material at, or
discharged from the Rig.
13.03 If, under any applicable law or regulation, and whether pursuant to
a judgment being made or registered against the Owner or the
liquidation of the Owner or for any other reason, any payment under
or in connection with this Mortgage is made or fails to be
satisfied in a currency (the "payment currency") other than the
currency in which such payment is due under or in connection with
this Mortgage (the "contractual currency"), then to the extent that
the amount of such payment actually received by the Indenture
Trustee, when converted into the contractual currency at the rate
of exchange, falls short of the amount due under or in connection
with this Mortgage, the Owner, as a separate and independent
obligation, shall indemnify and hold harmless the Indenture Trustee
against the amount of such shortfall. For the purposes of this
Clause 13.03, "rate of exchange" means the rate at which the
Indenture Trustee is able on the date of such payment (or, if it is
not practicable for the Indenture Trustee to purchase the
contractual currency with the payment currency on the date of such
payment, at the rate of exchange as soon afterwards as is
practicable for the Indenture Trustee to do so) to purchase the
contractual currency with the payment currency and shall take into
account any premium and other costs of exchange with respect
thereto.
14. EXPENSES
14.01 The Owner shall pay to the Indenture Trustee and the Agent on
demand all costs, fees and expenses, including, but not limited to,
legal fees and expenses and valuation fees and Taxes thereon
incurred by the Indenture Trustee, the Agent and the Lenders or for
which the Indenture Trustee, the Agent and the Lenders may become
liable in connection with:-
(a) the negotiation, preparation and execution of the Credit
Agreement and the Security Documents (or any of them); and/or
(b) the preserving or enforcing of, or attempting to preserve or
enforce, any of its rights under the Credit Agreement and the
Security Documents (or any of them).
14.02 The Owner shall pay to the Indenture Trustee and the Agent on
demand all costs, fees and expenses (including, but not limited to,
legal fees and expenses) and Taxes thereon incurred by the
Indenture Trustee and the Lenders in connection with:-
(a) any variation of, or amendment or supplement to, any of the
terms of the Credit Agreement and the Security Documents (or
any of them) requested by the Owner, necessary or advisable
under applicable law or relating to the syndication of the
Credit Facility, or initiated during the occurrence and
continuation of an Event of Default; and/or
(b) any consent or waiver required from the Indenture Trustee in
relation to the Credit Agreement and the Security Documents
(or any of them),
and in each case, regardless of whether the same is actually
implemented, completed or granted, as the case may be.
14.03 The Owner shall pay promptly all stamp, documentary and other like
duties and Taxes to which the Credit Agreement and the Security
Documents (or any of them) may be subject or give rise and shall
indemnify the Indenture Trustee on demand against any and all
liabilities with respect to or resulting from any delay or omission
on the part of the Owner to pay any such duties or Taxes.
15. COMMUNICATIONS
15.01 All notices to the Indenture Trustee hereunder shall be in writing
and shall be made to the following address:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Telefax: (302) 651-8882
Attention: Corporate Trust Division
With a copy to:
Jennifer L. Janss, Esq.
Richards, Layton & Finger
P.O. Box 551
Wilmington, DE 19899
All other notices shall be made to the addresses given in Clause 20
of the Credit Agreement and Schedule 1 thereto.
16. ASSIGNMENTS
16.01 This Mortgage shall be binding upon and shall enure to the benefit
of the Owner, the Indenture Trustee and the Lenders and the Agent
and their respective transferees, successors and permitted assigns
and references in this Mortgage to any of them shall be construed
accordingly.
16.02 The Owner may not assign or transfer all or any part of its rights
and/or obligations under this Mortgage.
16.03 Pursuant to Clause 14 of the Credit Agreement, each Lender has the
right to assign or transfer all or any part of its rights and/or
obligations under the Credit Agreement on the terms therein
provided. The Indenture Trustee shall notify the Owner promptly
following any such assignment, transfer or change.
17. TOTAL AMOUNT, ETC.
17.01 The total amount of this Mortgage is US$55,000,000 of principal
plus interest, fees, commissions and performance of mortgage
covenants. The discharge amount is the same as the total amount.
18. MISCELLANEOUS
18.01 If at any time any one or more of the provisions in this Mortgage
is or becomes invalid, illegal or unenforceable in any respect
under any law or regulation, the validity, legality and
enforceability of the remaining provisions of this Mortgage shall
not be in any way affected or impaired thereby.
18.02 The Indenture Trustee, at any time and from time to time, may
delegate by power of attorney or in any other manner to any person
or persons all or any of the powers, authorities and discretions
which are for the time being exercisable by the Indenture Trustee
under this Mortgage in relation to the Rig. Any such delegation
may be made upon such terms and subject to such regulations as the
Indenture Trustee may think fit. The Indenture Trustee shall not
be in any way liable or responsible to the Owner for any loss or
damage arising from any act, default, omission or misconduct on the
part of any such delegate.
18.03 A certification or determination by the Indenture Trustee as to any
matter provided for in this Mortgage shall, in the absence of
manifest error, be conclusive and binding on the Owner.
19. JURISDICTION
19.01 The Owner agrees that the Indenture Trustee shall have the liberty
but shall not be obliged to take any proceedings in the courts of
any country to protect or enforce the security constituted by this
Mortgage and/or the Credit Agreement and the Security Documents or
to enforce any provisions of this Mortgage and/or the Credit
Agreement and the Security Documents or to recover payment of the
Secured Indebtedness and for the purpose of any proceedings for the
enforcement and execution of this Mortgage and/or the Credit
Agreement and the Security Documents the Owner hereby submits to
the jurisdiction of the courts of any country of the choice of the
Indenture Trustee.
19.02 Without prejudice to the generality of Clause 19.01, the Indenture
Trustee shall have the right to arrest and take action against the
Rig at whatever place the Rig shall be found lying and for the
purpose of any action which the Indenture Trustee may bring before
the courts of such jurisdiction or other judicial authority and for
the purpose of any action which the Indenture Trustee may bring
against the Rig, any writ, notice, judgment or other legal process
or documents may (without prejudice to any other method of service
under applicable law) be served upon the master of the Rig (or upon
anyone acting as the master) and such service shall be deemed good
service on the Owner for all purposes.
19.03 The Owner agrees that should the Indenture Trustee bring a legal
action or proceedings against it or its assets in relation to any
matters arising out of or in connection with this Mortgage, no
immunity from such legal action or proceedings (which shall be
deemed to include, without limitation, suit, attachment prior to
judgment, other attachment, the obtaining of judgment, execution or
other enforcement) shall be claimed by or on behalf of the Owner or
with respect of its assets, and the Owner hereby irrevocably waives
any such right of immunity which it or its assets now has or may
hereafter acquire and the Owner hereby consents generally in
respect of any legal action or proceedings arising out of or in
connection with this Mortgage to the giving out of any relief or
the issue of any process in connection with such action or
proceedings including, without limitation, the making, enforcement
or execution or attachment against any property whatsoever of any
order or judgment which may be made or given in such action or
proceedings.
IN WITNESS whereof the Owner has caused this Mortgage to be executed the
day and year first before written.
READING & BATES DRILLING CO.
By_____________________________________
Its:
- -----------------------------------------------------------------------------
ACKNOWLEDGEMENT OF MORTGAGE
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this _____ day of November, 1995 before me personally appeared Tim W. Nagle
to me known who being by me duly sworn did dispose and say that he resides at
13307 Tosca, Houston, Texas 77079, that he is Vice President and Treasurer for
READING & BATES DRILLING CO., the corporation described in and which executed
the foregoing instrument; and that he signed his name thereto by order of the
Board of Directors of READING & BATES DRILLING CO.
Notary Public
EXHIBIT 10.104
FIRST PREFERRED MORTGAGE
Dated November 28, 1995
READING & BATES EXPLORATION CO.
- in favor of -
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Indenture Trustee
D.R. STEWART
- -----------------------------------------------------------------------------
INDEX
CLAUSE SUBJECT MATTERPAGE
1. DEFINITIONS AND INTERPRETATION . . . . . . . . . . . . . . . .
2. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . .
3. MORTGAGE . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. PAYMENT COVENANTS . . . . . . . . . . . . . . . . . . . . . .
5. PRESERVATION OF SECURITY . . . . . . . . . . . . . . . . . . .
6. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . .
7. RIG COVENANTS . . . . . . . . . . . . . . . . . . . . . . . .
8. PROTECTION OF SECURITY . . . . . . . . . . . . . . . . . . . .
9. ENFORCEABILITY AND INDENTURE TRUSTEE'S POWERS . . . . . . . .
10. APPLICATION OF MONEYS . . . . . . . . . . . . . . . . . . . .
11. FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . .
12. POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . .
13. INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . . .
14. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . .
15. COMMUNICATIONS . . . . . . . . . . . . . . . . . . . . . . . .
16. ASSIGNMENTS . . . . . . . . . . . . . . . . . . . . . . . . .
17. TOTAL AMOUNT, ETC. . . . . . . . . . . . . . . . . . . . . . .
18. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . .
19. JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . .
ACKNOWLEDGEMENT OF MORTGAGE
EXHIBIT 1 FORM OF CREDIT AGREEMENT (FILED AS EXHIBIT 10.101 TO
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR 1995
- -----------------------------------------------------------------------------
THIS FIRST PREFERRED MORTGAGE (this "Mortgage") is made on the 28th day of
November, 1995
BY
(1) READING & BATES EXPLORATION CO., an Oklahoma corporation having its
principal offices at 901 Threadneedle, Suite 200, Houston, Texas
77079 (the "Owner"),
IN FAVOR OF
(2) WILMINGTON TRUST COMPANY, a Delaware banking corporation having
offices at Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, not in its individual capacity but
solely as indenture trustee for the Lenders (as hereinafter
defined) and as mortgagee (the "Indenture Trustee")
WHEREAS
(A) The Owner is the sole owner of the whole of the semi-submersible
drilling unit D.R. STEWART documented under the laws and flag of
the United States of America with Official Number D626904 of 6,494
gross registered tons and 5,834 net registered tons.
(B) By a Credit Facility Agreement dated as of November 16, 1995 (the
"Credit Agreement") and made by and among (i) the Owner and Reading
& Bates Drilling Co., an Oklahoma corporation ("R&B Drilling"), as
joint and several borrowers (collectively, the "Borrowers"), (ii)
Reading & Bates Corporation, a Delaware corporation, as guarantor
(hereinafter called the "Guarantor" and together with the Borrowers
collectively called the "Companies", and individually called a
"Company"), (iii) the Lenders (as hereinafter defined), acting as
lenders and (iv) Christiania Bank og Kreditkasse, acting through
its New York branch, as agent for the Lenders (the "Agent") (the
form of which Credit Agreement together with Exhibit A thereto but
without the remaining attachments is attached hereto as Exhibit 1),
it was agreed among other things that the Lenders would make
available to the Borrowers upon the terms and conditions therein
described (i) a reducing revolving credit facility in the original
principal amount of Forty-Five Million United States Dollars
(US$45,000,000) (the "Revolving Credit Facility") and (ii) a
standby letter of credit facility in an aggregate amount not to
exceed Ten Million United States Dollars (US$10,000,000)(the
"Standby Letter of Credit Facility").
(C) Pursuant to the said Credit Agreement the Lenders have made the
Revolving Credit Facility available to the Borrowers upon the terms
and conditions described in the Credit Agreement in the original
principal amount of US$45,000,000. The Revolving Credit Facility
and interest, fees and commissions thereon is to be paid and
repaid, as the case may be, as provided in the Credit Agreement.
The Revolving Credit Facility is evidenced by a secured promissory
note (the "Note") (the form of which is attached as Exhibit A to
the Credit Agreement).
(D) Pursuant to the said Credit Agreement the Lenders have made the
Standby Letter of Credit Facility available to the Borrowers in an
aggregate amount not to exceed US$10,000,000. The Borrowers are
obligated, jointly and severally, to reimburse all amounts drawn
under the Standby Letters of Credit (as defined in the Credit
Agreement) issued by the Lenders pursuant to the Standby Letter of
Credit Facility, and to pay all interest and fees thereon as
provided in the Credit Agreement.
(E) The Owner, in order to secure the repayment of the Advances (as
defined in the Credit Agreement), the Unpaid Drawings (as defined
in the Credit Agreement), interest thereon and fees and commissions
payable under the Credit Agreement, the Note and the Security
Documents (as hereinafter defined) and the performance and
observance of and compliance with all of the covenants, terms and
conditions contained in this Mortgage, has duly authorized the
execution and delivery of this First Preferred Mortgage under and
pursuant to the United States Ship Mortgage Act, 1920, as amended,
recodified at 46 U.S.C. 31301, et. seq. (the "Ship Mortgage Act"),
which is entered into by the Owner in consideration of the Lenders
agreeing, at the request of the Owner, to make the Revolving Credit
Facility and the Standby Letter of Credit Facility available to the
Borrowers under the terms of the Credit Agreement and as a
condition thereto and for other good and valuable consideration
provided by the Lenders (the sufficiency of which the Owner hereby
acknowledges).
NOW THIS MORTGAGE WITNESSETH AND IT IS HEREBY AGREED
1. DEFINITIONS AND INTERPRETATION
1.01 In this Mortgage unless the context otherwise requires, the
following expressions shall have the following meanings:-
"Advance(s)" shall have the same meaning for such term as set forth
in the Credit Agreement;
"Agent" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Assignment of Insurances" means the Assignment of Insurances in
respect of the Rig executed or to be executed by the Owner in favor
of the Agent;
"Credit Agreement" means the agreement dated as of November 16,
1995 and made among the Borrowers, the Guarantor, the Lenders and
the Agent first referred to in Recital (B) hereto;
"Credit Facility Period" shall have the same meaning for such term
as set forth in the Credit Agreement;
"Default Rate" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Environmental Approvals" means all approvals, licenses, permits,
exemptions or authorization required under applicable Environmental
Laws;
"Environmental Claim" means (i) any claim by, or directive from,
any applicable governmental, judicial or other regulatory authority
alleging breach of, or non-compliance with, any Environmental Laws
or Environmental Approvals or otherwise howsoever relating to or
arising out of an Environmental Incident or (ii) any claim by any
other third party howsoever relating to or arising out of an
Environmental Incident (and, in each such case, "claim" shall mean
for damages, cleanup costs, compliance, remedial action or
otherwise);
"Environmental Incident" means (i) any release of Environmentally
Sensitive Material from the Rig, (ii) any incident in which
Environmentally Sensitive Material is released from a vessel other
than the Rig and which involves collision between the Rig and such
other vessel or some other incident of navigation or operation, in
either case, where the Rig or the Owner are actually or allegedly
at fault or otherwise liable (in whole or in part) or (iii) any
incident in which Environmentally Sensitive Material is released
from a vessel other than the Rig and where the Rig is actually or
potentially liable to be arrested as a result and/or where the
Owner is actually or allegedly at fault or otherwise liable (and,
in each such case, "release" shall mean disposing, discharging,
injecting, spilling, leaking, leaching, dumping, emitting,
escaping, emptying, seeping, placing and the like, into or upon any
land or water or air, or otherwise entering into the environment);
"Environmental Laws" means all applicable laws, regulations,
conventions and agreements whatsoever relating to pollution or
protection of the environment (including, without limitation, the
Oil Pollution Act of 1990 (33 U.S.C. 2701 et seq.), the
Comprehensive Environmental Response, Compensation, and Liability
Act of 1980 (42 U.S.C. Sections 9601 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. Sections 1801 et seq.), the
Resource Conservation and Recovery Act of 1976 (42 U.S.C. Sections
6901 et seq.), the Clean Air Act (42 U.S.C. Sections 7401 et seq.),
the Federal Water Pollution Control Act (33 U.S.C. Sections 1251 et
seq.) and the Toxic Substances Control Act (15 U.S.C. Section 2601
et seq.) (all of the foregoing as amended), and any comparable laws
of the individual States of the United States of America or any
other state or nation);
"Environmentally Sensitive Material" shall include, but shall not
be limited to, any petroleum or petroleum products, natural gases,
explosives, radioactive materials, hazardous materials, hazardous
wastes, hazardous or toxic substances or related materials,
asbestos or any material containing asbestos or any substances
which are hazardous by virtue of the manner of their use, or any
activity involving any of the foregoing or any other substance or
material or activity defined as hazardous in words or substance by
any present or future Federal, state or local environmental law,
ordinance, rule, regulation or rule of common law including,
without limitation, the Environmental Laws;
"Insurances" includes all policies and contracts of insurance
(which expression includes all entries of the Rig in a protection
and indemnity association) which are from time to time taken out or
entered into in respect of the Rig or otherwise by the Owner
(whether in the sole name of the Owner or in the joint names of the
Owner and the Agent) and all benefits thereof (including claims of
whatsoever nature and return of premiums);
"Interest Period" shall have the same meaning for such term as set
forth in the Credit Agreement;
"Lender" means any Lender listed in Schedule 1 to the Credit
Agreement as the same may be amended from time to time and each of
their successors and assigns (collectively, the "Lenders");
"Major Casualty" means any casualty to the Rig in respect whereof
the claim or the aggregate of the claims against all insurers,
before adjustment for any relevant franchise or deductible, exceeds
[Five Hundred Thousand United States Dollars (US$500,000)] or the
equivalent in any other currency;
"Note" means the promissory note of the Owner referred to in
Recital (C) hereto;
"Oil Pollution Act 1990" means the Oil Pollution Act 1990 (33
U.S.C. 2701 et seq.), as amended;
"Other Rig" means the jack-up drilling unit JACK BATES owned by R&B
Drilling documented under the laws and flag of the United States
with Official Number D906283 of 19,928 gross registered tons and
14,948 net registered tons;
"Permitted Liens" means: (1) liens incident to expenses of current
operations, other than for master's and crew's wages, incurred in
the ordinary course of business of the Owner and due and payable
for not more than thirty (30) days (or being contested in good
faith, provided such liens are not in excess of U.S.$5,000,000.00,
and if in excess thereof, then the Owner shall, upon the Agent's
request, provide a bond or other security satisfactory to the
Agent); (2) liens for master's and crew's wages not yet due and
payable; (3) liens for taxes, assessments, governmental charges,
fines and penalties not at the time delinquent (unless being
contested in good faith, provided such liens are not in excess of
U.S.$5,000,000.00, and if in excess thereof, then the Owner shall,
upon the Agent's request, provide a bond or other security
satisfactory to the Agent); (4) liens for general average and
salvage (including contract salvage); (5) liens for claims covered
by valid policies of insurance meeting the requirements of Clause 6
hereof (except that no lien shall be deemed not covered by
insurance to the extent insurance in force would cover the amount
secured by the lien but for any applicable deductible amount
approved by the Agent); (6) liens arising pursuant to any judgment
or to an order of attachment, distraint or similar legal process
arising in connection with legal proceedings, but only if and so
long as the execution or other enforcement thereof is not unstayed
for more than 30 consecutive days; (7) any lien for the payment or
discharge of which provisions satisfactory to the Agent have been
made as evidenced by the Agent's written consent to such lien; (8)
any lien in favor of the Lenders; and provided that Permitted Liens
shall not include any liens described in subclauses (1) through (8)
above unless they: (i) are subordinate to the lien of this Mortgage
or (ii) constitute a maritime lien which would in any event be
entitled as such to priority over the Mortgage under the United
States shipping laws or other applicable laws relating to the Rig's
trading pattern. Nothing herein shall be deemed a waiver of the
priority preferred lien status of this Mortgage;
"protection and indemnity risks" means the usual risks covered by
protection and indemnity associations of international repute
including the proportion not recoverable in case of collision under
the ordinary running-down clause (unless such is recoverable under
the relevant hull and machinery coverage);
"Requisition Compensation" means all moneys or other compensation
payable during the Credit Facility Period by reason of requisition
for title or other compulsory acquisition of the Rig otherwise than
by requisition for hire;
"Rig" means the vessel described in Recital (A) hereto and includes
any share or interest therein and her engines, machinery, boats,
tackle, outfit, spare gear, fuel, consumable or other stores,
belongings and appurtenances whether on board or ashore and whether
now owned or hereafter acquired (but excluding therefrom any leased
equipment owned by third parties);
"Secured Indebtedness" means the aggregate of (a) the Advances, the
Unpaid Drawings and interest, fees and commissions thereon (and
interest on any unpaid interest thereon and on any other sums of
money on which interest is stated in the Credit Agreement to be
payable), (b) all such expenses, claims, liabilities, losses,
costs, duties, fees, charges or other moneys as are stated in this
Mortgage to be payable by the Owner to or recoverable from the
Owner by the Indenture Trustee (or in respect of which the Owner
agrees in this Mortgage to indemnify the Indenture Trustee) whether
actually or contingently, presently or in the future together with
interest thereon as provided in this Mortgage and (c) all other
sums of money from time to time owing to the Agent and the Lenders
under the Credit Agreement, the Security Documents or any of them
whether actually or contingently, presently or in the future;
"Security Documents" shall have the same meaning for such term as
set forth in the Credit Agreement;
"Security Interest" means a mortgage, charge (whether fixed or
floating), pledge, lien, hypothecation, assignment, trust
arrangement, title retention or other security interest or
arrangement of any kind whatsoever;
"Standby Letter of Credit" shall have the same meaning for such
term as set forth in the Credit Agreement;
"Taxes" shall have the same meaning for such term as set forth in
the Credit Agreement;
"Total Loss" shall have the same meaning for such term as set forth
in the Credit Agreement;
"United States Dollars" and "US$" means the lawful currency of the
United States of America;
"Unpaid Drawing" shall have the same meaning for such term as set
forth in the Credit Agreement;
"war risks" includes the risk of mines and all risks excluded from
the standard form of English marine policy by the free of capture
and seizure clause.
1.02 Except where otherwise expressly provided or unless the context
otherwise requires, words and expressions defined in the Credit
Agreement shall have the same meanings when used in this Mortgage.
1.03 In this Mortgage:-
(a) Clause headings are inserted for convenience only and shall
not affect the construction of this Mortgage and, unless
otherwise specified, all references to Clauses are to clauses
of this Mortgage;
(b) unless the context otherwise requires, words denoting the
singular number shall include the plural and vice versa;
(c) references to persons include bodies corporate and
unincorporated;
(d) references to assets include property, rights and assets of
every description;
(e) references to any document are to be construed as references
to such document as amended or supplemented from time to
time; and
(f) references to any enactment include re-enactments, amendments
and extensions thereof.
2. REPRESENTATIONS AND WARRANTIES
2.01 The Owner hereby represents and warrants to the Indenture Trustee
that:-
(a) the Owner is the sole legal and beneficial owner of the whole
of the Rig and neither the whole nor any share in the Rig is
subject to any Security Interest (except for Permitted Liens
and save as constituted by this Mortgage);
(b) the Owner has not sold or transferred, or agreed to sell or
transfer, title to the Rig or any share therein;
(c) the Owner is a corporation duly organized and validly
existing and in good standing under the laws of the State of
Oklahoma;
(d) the Owner has full power and authority (i) to register the
Rig in its name under United States flag, (ii) to execute and
deliver this Mortgage, (iii) to mortgage the Rig as security
for the Secured Indebtedness and (iv) to comply with the
provisions of, and perform all its obligations under, this
Mortgage;
(e) the Owner has complied with all statutory and other material
requirements relative to the ownership, registration and
operation of the Rig;
(f) the Owner has taken all necessary action to authorize the
execution and delivery of this Mortgage and this Mortgage
constitutes, the legal, valid and binding obligation of the
Owner enforceable against the Owner in accordance with its
terms (except to the extent limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other laws of
general application relating to or affecting the enforcement
of creditors' rights as from time to time in effect and
general equitable principles) and when filed with the United
States Coast Guard's National Vessel Documentation Center in
Falling Waters, West Virginia will create a legal, valid and
enforceable first preferred mortgage lien on the Rig;
(g) the entry into and performance by the Owner of this Mortgage
does not and will not during the Credit Facility Period
violate in any respect (i) any law or regulation of any
governmental or official authority or body, or (ii) any of
the constitutive documents of the Owner including the
Certificate of Incorporation or By-laws, as amended from time
to time, or (iii) any material agreement, contract or other
undertaking to which the Owner is a party or which is binding
upon the Owner or any of its assets;
(h) all consents, licenses, approvals and authorizations required
in connection with the entry into, performance, validity and
enforceability of this Mortgage and the transactions
contemplated hereby and thereby have been obtained and are in
full force and effect and will be so maintained throughout
the Credit Facility Period;
(i) save for such registrations and filings as are referred to in
this Mortgage, it is not necessary for the legality,
validity, enforceability or admissibility in evidence of this
Mortgage that it or any document relating thereto be
registered, filed, recorded or enrolled with any court or
authority in any relevant jurisdiction or that any stamp,
registration or similar taxes be paid on or in relation to
this Mortgage;
(j) all applicable Environmental Laws and Environmental Approvals
relating to the Rig, its operation and management and the
business of the Owner (as now conducted and as reasonably
anticipated to be conducted in the future) have been obtained
or complied with;
(k) no Environmental Claim has been made or threatened against
the Owner, the Approved Manager or otherwise in connection
with the Rig; and
(l) no Environmental Incident which has resulted, or which could
reasonably be expected to result, in an Environmental Claim
in excess of US$200,000 has occurred.
2.02 The representations and warranties of the Owner set out in
Clause 2.01 shall survive the execution of this Mortgage and shall
be deemed to be repeated at the time of the making of each Advance
and at the time of the issuance of each Standby Letter of Credit,
with respect to the facts and circumstances existing at each such
time, as if made at each such time.
3. MORTGAGE
3.01 In order to secure the payment of the Secured Indebtedness and to
secure the performance and observance of and compliance with the
covenants, terms and conditions contained in this Mortgage, the
Credit Agreement, the Note and the Security Documents, the Owner
has granted, conveyed and mortgaged and does by these presents
grant, convey and mortgage unto the Indenture Trustee, its
successors and assigns, the whole of the Rig TO HAVE AND TO HOLD
the same unto the Indenture Trustee, its successors and assigns
forever upon the terms herein set forth for the enforcement of the
payment of the Secured Indebtedness and to secure the performance
and observance of, and compliance with, the covenants, terms and
conditions contained in this Mortgage, the Credit Agreement, the
Note and the Security Documents.
Provided only and the condition of these presents is such that if
the Owner or its successors and assigns shall pay or cause to be
repaid in full to the Indenture Trustee, the Lenders and their
respective successors or assigns the Secured Indebtedness as and
when the same shall become due and payable in accordance with the
terms of the Credit Agreement, the Note, the Security Documents and
this Mortgage and shall observe and comply with the covenants,
terms and conditions contained in the Credit Agreement, the Note,
the Security Documents and this Mortgage expressed or implied to be
performed, observed or complied with by and on the part of the
Owner and its successors and assigns, all without delay or fraud
and according to the true intent and meaning thereof, then these
presents and the rights hereunder shall cease, determine and be
void otherwise to be and remain in full force and effect and, in
such event, the Indenture Trustee agrees by accepting this Mortgage
to execute and record at the expense of the Owner, all such
documents as the Owner may reasonably require to discharge this
Mortgage.
Notwithstanding anything to the contrary herein it is not intended
that any provision of this Mortgage shall waive the preferred
status of this Mortgage and that if any provision or part thereof
herein shall be construed as waiving the preferred status of this
Mortgage then such provision shall to such extent be void and of no
effect.
3.02 The Owner shall remain liable to perform all the obligations
assumed by it in relation to the Rig and neither the Indenture
Trustee, nor the Agent, nor any of the Lenders shall be under any
obligation of any kind whatsoever in respect thereof or be under
any liability whatsoever in event of any failure by the Owner to
perform its obligations in respect thereof.
4. PAYMENT COVENANTS
4.01 The Owner hereby covenants with the Indenture Trustee, the Agent
and the Lenders:-
(a) to pay and indemnify the Indenture Trustee, the Agent and the
Lenders for all such expenses, claims, liabilities, losses,
costs, duties, fees, charges or other moneys as are stated in
this Mortgage to be payable by the Owner to or recoverable
from the Owner by the Indenture Trustee, the Agent or the
Lenders (or in respect of which the Owner agrees in this
Mortgage to indemnify the Indenture Trustee, the Agent or the
Lenders) at the times and in the manner specified in this
Mortgage;
(b) to pay interest on any such expenses, claims, liabilities,
losses, costs, duties, fees, charges or other moneys referred
to in Clause 4.01(a) from the date on which demand is made by
the Indenture Trustee, the Agent or the Lenders, as the case
may be, for payment by the Owner of the relevant expense,
claim, liability, loss, cost, duty, fee, charge or other
money incurred by the Indenture Trustee, the Agent or the
Lenders for which the Owner is responsible (both before and
after any relevant judgment) at the Default Rate; and
(c) to pay and perform its obligations which may be or become due
or owing to the Indenture Trustee, the Agent or the Lenders
as the case may be, under this Mortgage and the other
Security Documents to which the Owner is or is to be a party
at the times and in the manner specified herein or therein.
5. PRESERVATION OF SECURITY
5.01 It is declared and agreed that:-
(a) the security created by this Mortgage shall be held by the
Indenture Trustee as a continuing security for the payment of
the Secured Indebtedness and that the security so created
shall not be satisfied by any intermediate payment or
satisfaction of any part of the Secured Indebtedness;
(b) the security so created shall be in addition to and shall not
in any way be prejudiced or affected by any of the other
Security Documents;
(c) the Indenture Trustee shall not have to wait for the Agent or
the Lenders to enforce any of the other Security Documents
before enforcing the security created by this Mortgage;
(d) no delay or omission on the part of the Indenture Trustee in
exercising any right, power or remedy under this Mortgage
shall impair such right, power or remedy or be construed as a
waiver thereof nor shall any single or partial exercise of
any such right, power or remedy preclude any further exercise
thereof or the exercise of any other right, power or remedy.
The rights, powers and remedies provided in this Mortgage are
cumulative and not exclusive of any rights, powers and
remedies provided by law and may be exercised from time to
time and as often as the Indenture Trustee may deem
expedient; and
(e) any waiver by the Indenture Trustee of any terms of this
Mortgage or any consent given by the Indenture Trustee under
this Mortgage shall only be effective if given in writing and
then only for the purpose and upon the terms for which it is
given.
5.02 Any settlement or discharge under this Mortgage between the
Indenture Trustee and the Owner shall be conditional upon no
security or payment to the Indenture Trustee, the Agent, or the
Lenders or any of them by the Companies or any other person being
avoided or set-aside or ordered to be refunded or reduced by virtue
of any provision or enactment relating to bankruptcy, insolvency,
administration or liquidation for the time being in force and, if
such condition is not satisfied, the Indenture Trustee shall be
entitled to recover from the Owner on demand the value of such
security or the amount of any such payment as if such settlement or
discharge had not occurred.
5.03 The rights of the Indenture Trustee and the Lenders under this
Mortgage and the security hereby constituted shall not be affected
by any act, omission, matter or thing which, but for this
provision, might operate to impair, affect or discharge such rights
and security, in whole or in part, including without limitation,
and whether or not known to or discoverable by the Companies, the
Indenture Trustee, the Lenders or any other person:-
(a) any time or waiver granted to the Companies or any other
person; or
(b) the taking, variation, compromise, renewal or release of or
refusal or neglect to perfect or enforce any rights, remedies
or securities against any of the Companies or any other
persons; or
(c) any legal limitation, disability, incapacity or other
circumstances relating to the Companies or any other person;
or
(d) any amendment or supplement to the Credit Agreement, any of
the other Security Documents (other than this Mortgage) or
any other document or security; or
(e) the dissolution, liquidation, amalgamation, reconstruction or
reorganization of any of the Companies or any other person;
or
(f) the unenforceability, invalidity or frustration of any
obligations of any of the Companies or any other person under
the Credit Agreement, any of the other Security Documents
(other than this Mortgage) or any other document or security.
5.04 Until the Secured Indebtedness has been unconditionally and
irrevocably paid and discharged in full to the satisfaction of the
Indenture Trustee, the Owner shall not by virtue of any payment
made hereunder on account of the Secured Indebtedness or by virtue
of any enforcement by the Indenture Trustee of its rights under, or
the security constituted by, this Mortgage or by virtue of any
relationship between, or transaction involving, the Owner and the
Guarantor (whether such relationship or transaction shall
constitute the Owner a creditor of the Guarantor, a guarantor of
the obligations of the Guarantor or a party subrogated to the
rights of others against the Guarantor or otherwise howsoever and
whether or not such relationship or transaction shall be related
to, or in connection with, the subject matter of this Mortgage):-
(a) exercise any rights of subrogation in relation to any rights,
security or moneys held or received or receivable by the
Indenture Trustee or the Lenders or any other person; or
(b) be entitled to exercise any right of contribution from any
co-surety liable in respect of such moneys and liabilities
under any other guarantee, security or agreement; or
(c) exercise any right of set-off or counterclaim against the
Guarantor or any such co-surety; or
(d) receive, claim or have the benefit of any payment,
distribution, security or indemnity from the Guarantor or any
such co-surety; or
(e) unless so directed by the Indenture Trustee (when the Owner
will prove in accordance with such directions), claim as a
creditor of the Guarantor or any such co-surety in
competition with the Indenture Trustee.
The Owner shall hold in trust for the Indenture Trustee and
forthwith pay or transfer (as appropriate) to the Indenture Trustee
any such payment (including an amount equal to any such set-off),
distribution or benefit of such security, indemnity or claim in
fact received by it.
5.05 The Owner unconditionally and irrevocably agrees that if any sums
hereby secured are not recoverable on the basis of a guarantee
(whether by reason of legal limitation, illegality, disability or
incapacity on or of the Guarantor or the Owner or any other person
or by reason of any other fact or circumstance, and whether or not
known to or discoverable by the Owner, the Guarantor, the Indenture
Trustee or any other person), then the Owner will, as a separate
and independent stipulation and as a primary obligor, pay to the
Indenture Trustee on demand an amount or amounts equal to the
amount or amounts which the Owner would have been liable to pay but
for such irrecoverability and will on demand indemnify the
Indenture Trustee against any loss or liability suffered or
incurred by the Indenture Trustee and the Lenders or any of them as
a result of such irrecoverability.
6. INSURANCE
6.01 The Owner covenants with the Indenture Trustee throughout the
Credit Facility Period that:-
(a) The Owner shall, at its own expense, when and so long as the
Secured Indebtedness shall be outstanding, insure the Rig and
keep her insured, or cause the Rig to be insured, in lawful
money of the United States, in such amounts, for such risks
(including without limitation, hull and machinery/increased
value, protection and indemnity risks, pollution liability,
and war risks), in such form (including without limitation,
the form of the loss payable clause and the designation of
named assureds) and with such first class insurance
companies, underwriters, funds, mutual insurance associations
or clubs, as shall be reasonably satisfactory to the Agent.
With respect to hull and machinery/increased value insurance,
including war risk, the Owner shall insure the Rig and keep
her insured, or cause the Rig to be insured, for an amount
which is at least the full commercial value of the Rig and
when such amount is aggregated with the amount of such
insurance coverage on the Other Rig such aggregate amount
shall be at least 110% of the aggregate amount of the Credit
Facility. The Rig shall in no event be insured for an amount
less than the agreed valuation as set forth in the applicable
marine and war risk policies. Such insurance shall cover
marine and war risk perils, on hull and machinery, with
deductibles not in excess of US$500,000 (such deductibles not
to apply in the case of total loss of the Rig), and shall be
maintained in the broadest forms available in the Norwegian,
American and British insurance markets or in such other major
international markets reasonably acceptable to the Agent.
The Owner shall maintain, or cause to be maintained,
protection and indemnity or equivalent insurance, including
war risk protection and indemnity coverage and coverage
against pollution liability, in an amount not less than
US$100,000,000 (or, with respect to pollution liability
coverage, such greater amount as may be required from time to
time by the Oil Pollution Act 1990, or other Environmental
Laws, as and when applicable to the Rig and its operations,
through underwriters or associations acceptable to the Agent.
In addition, the Owner shall, at its own expense, furnish to
the Agent a mortgagee's single interest policy providing
coverage which, when aggregated with the mortgagee's interest
insurance furnished to the Agent by the Owner in respect of
the Other Rig, shall be in an amount equal to at least 110%
of the aggregate amount of the Credit Facility (or in lieu of
such mortgagee's interest insurance Owner shall cause the
hull and machinery/increased value insurance to be endorsed
to afford breach of warranty coverage for the benefit of the
Agent). Such mortgagee's interest insurance and any
additional insurance policies for the benefit of the Agent
shall be maintained in the broadest form available in the
American, British and Scandinavian markets or other major
international markets acceptable to the Agent through
underwriters acceptable to the Agent. The Rig shall not
operate in or proceed into any area then excluded by trading
warranties under its marine or war risk policies (including
protection and indemnity) without obtaining any necessary
additional coverage, satisfactory in form and substance, and
evidence of which shall be furnished, to the Agent.
(b) The policy or policies of insurance shall be issued by
responsible underwriters reasonably acceptable to the Agent,
shall contain conditions, terms, stipulations and insuring
covenants satisfactory to the Agent, and shall be kept in
full force and effect by the Owner so long as the Security
Documents and the Secured Indebtedness shall be outstanding.
All such policies, binders and other interim insurance
contracts shall be executed and issued in the name of the
Owner and shall, to the extent required herein, provide that
loss be payable to the Agent for distribution by it to
itself, the Lenders and the Owner as their interests may
appear, and shall provide for at least ten days' prior notice
to be given to the Agent by the underwriters or association
in the event of cancellation or the failure of the Owner to
pay any premium or call which would suspend coverage under
the policy or the payment of a claim thereunder. The Agent
and the Indenture Trustee shall be named as co-assureds on
all such policies and insurance contracts, but without
liability of the Agent or the Indenture Trustee for premiums
or calls. Certified copies of all such policies, binders and
other interim insurance contracts shall be deposited with the
Agent. Originals shall also be provided upon the request of
the Agent. The Owner shall furnish to the Agent annually a
detailed report signed by a firm of marine insurance brokers
satisfactory to the Agent as to the insurance maintained in
respect of the Rig, as to their opinion as to the adequacy
thereof and as to compliance with the provisions of this
Clause 6.01.
Unless otherwise required by the Agent by notice to the
underwriters, although the following insurance is payable to
the Agent, (i) any loss under any insurance on the Rig with
respect to protection and indemnity risks may be paid
directly to the Owner to reimburse it for any loss, damage or
expense incurred by it and covered by such insurance or to
the person to whom any liability covered by such insurance
has been incurred and (ii) in the case of any loss (other
than a loss covered by (i) above or by the next following
paragraph of this Clause 6.01(b)) under any insurance with
respect to the Rig involving any damage to the Rig, the
underwriters may pay direct for the repair, salvage or other
charges involved or, if the Owner shall have first fully
repaired the damage or paid all of the salvage or other
charges, may pay the Owner as reimbursement therefor;
provided, however, that if such damage involves a before
deductible loss in excess of US$1,000,000, the underwriters
shall not make such payment without first obtaining the
written consent thereto of the Agent (which consent shall not
be unreasonably withheld). Any loss covered by this
paragraph which is paid to the Agent but which might have
been paid, in accordance with the provisions of this
paragraph, directly to the Owner or others, shall be paid by
the Agent to, or as directed by, the Owner and all other
payments to the Agent of losses covered by this paragraph
shall be applied by the Agent in accordance with Clause
10.01.
In the event of an actual or constructive total loss or a
compromised constructive total loss or requisition of title,
all insurance payments therefor shall be paid to the Agent.
The Owner shall not declare or agree with the underwriters
that the Rig is a constructive or compromised, agreed or
arranged constructive total loss without the prior written
consent of the Agent.
(c) In the event of an actual or constructive total loss of the
Rig, the Agent shall retain out of the insurance payments
received on account of such loss any sum or sums that shall
be or become owing to the Indenture Trustee, the Agent and
the Lenders under the Security Documents, whether or not the
same be then due and payable, together with accrued interest
and the cost, if any, of collecting the insurance, and pay
the balance as in Clause 10 provided.
(d) The Owner shall comply with and satisfy all of the provisions
of any applicable law, regulation, proclamation or order
concerning financial responsibility for liabilities imposed
on the Owner or the Rig with respect to the carriage of
passengers or pollution, and will maintain, or cause to be
maintained, all certificates or other evidence of financial
responsibility as may be required by any such law,
regulation, proclamation or order with respect to the trade
which the Rig from time to time is engaged in.
(e) The Owner shall renew all insurances as they expire and so as
to insure that there is no gap in coverage, keep the Agent
advised of the progress of such renewals, and procure that
the insurers shall promptly confirm in writing to the Agent
as and when each such renewal is effected.
(f) The Owner shall punctually pay all premiums, calls,
contributions or other sums payable in respect of all such
insurances and produce all relevant receipts when so required
by the Agent.
(g) The Owner shall arrange for the execution of such guarantees
as may from time to time be required by any protection and
indemnity or war risks association.
(h) The Owner shall not employ the Rig or suffer the Rig to be
employed otherwise than in conformity with the terms of the
instruments of insurance aforesaid relative to the Rig
(including any warranties, express or implied, therein)
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.
7. RIG COVENANTS
7.01 The Owner covenants with the Indenture Trustee that throughout the
Credit Facility Period the Owner will:-
(a) maintain its existence as a corporation in good standing duly
organized under the laws of the State of Oklahoma;
(b) keep the Rig documented in its name as a United States vessel
and to do or allow to be done nothing whereby such
documentation may be forfeited or imperilled;
(c) not without the previous consent in writing of the Indenture
Trustee, change the name of the Rig or make any modification
to the Rig which would or might materially alter the
structure or type or reduce the performance characteristics
of the Rig or materially reduce the value of the Rig;
(d) keep the Rig in a good and efficient state of repair
consistent with the ownership and operating practices of
first-class rig owners and operators so as to maintain her
present class (namely A1) at the American Bureau of Shipping
free of recommendations and qualifications and change of
class, save those notified to and approved in writing by the
Indenture Trustee and so as to comply with all laws,
regulations and requirements (statutory or otherwise) from
time to time applicable to vessels documented under the laws
and flag of the United States and applicable to vessels
trading to any jurisdiction to which the Rig may, subject to
the provisions of this Mortgage, trade from time to time;
(e) procure that all repairs to or replacement of any damaged,
worn or lost parts or equipment be effected in such manner
(both as regards workmanship and quality of materials) as to
not diminish the value of the Rig and not to remove any
material part of, or item of equipment installed on, the Rig
unless the part or item so removed is forthwith replaced by a
suitable part or item which is in the same condition as or
better condition than the part or item removed, is free from
any Security Interest (other than Permitted Liens) in favor
of any person other than the Indenture Trustee and becomes on
installation on the Rig the property of the Owner and subject
to the security constituted by this Mortgage;
(f) submit the Rig to such periodical or other surveys as may be
required for classification purposes and if so required to
supply to the Indenture Trustee copies of all survey reports
issued in respect thereof;
(g) permit the representatives of the Agent or independent
surveyors representing the Indenture Trustee to board the Rig
at all reasonable times and upon reasonable notice for the
purpose of inspecting her condition or for the purpose of
satisfying themselves in regard to proposed or executed
repairs and to afford all proper facilities for such
inspections;
(h) promptly pay and discharge all debts, damages and liabilities
whatsoever which have given or may give rise to maritime or
possessory liens (other than Permitted Liens) on or claims
enforceable against the Rig and all tolls, dues, taxes,
assessments, governmental charges, fines and penalties
lawfully charged on or in respect of the Rig and all other
outgoings whatsoever in respect of the Rig and in the event
of arrest of the Rig pursuant to legal process, or in the
event of her detention in exercise or purported exercise of
any such lien or claim as aforesaid, procure the release of
the Rig from such arrest or detention forthwith upon
receiving notice thereof by providing bail or otherwise as
the circumstances may require;
(i) not employ the Rig or allow her employment in any trade or
business which is unlawful under the laws of any relevant
jurisdiction or in carrying illicit or prohibited goods or in
any manner whatsoever which may render her liable to
destruction, seizure or confiscation and in the event of
hostilities in any part of the world (whether war be declared
or not) not employ the Rig or suffer her employment in
carrying any contraband goods or to enter or trade to any
zone which is declared a war zone by any government or by the
war risks insurers of the Rig unless there shall have been
effected by the Owner (at its expense) such special,
additional or modified insurance cover as the Agent may
require;
(j) promptly furnish to the Indenture Trustee all such
information as it may from time to time require regarding the
Rig, her employment, position and engagements, particulars of
all towages and salvages and, upon the Indenture Trustee's
request in writing, copies of all charters and other
contracts for her employment or otherwise howsoever
concerning her;
(k) notify both the Indenture Trustee and the Agent forthwith by
telex or telecopy thereafter confirmed by letter of:-
(i) any casualty to the Rig which is or is likely to be a
Major Casualty, and
(ii) any occurrence in consequence whereof the Rig has
become or is, by the passing of time or otherwise,
likely to become a Total Loss, and
(iii) any requirement or recommendation made by any insurer
or classification society or by any competent
authority which is not immediately complied with, and
(iv) any arrest of the Rig or the exercise or purported
exercise of any lien on the Rig or any requisition of
the Rig for hire, and
(v) any intended dry docking of the Rig, as to which the
Owner shall give the Indenture Trustee ten (10) days
prior notice, provided, that in the event of any
emergency dry docking of the Rig, the Owner shall
immediately notify the Indenture Trustee;
(l) keep proper books of account in respect of the Rig and as and
when the Indenture Trustee or the Agent may so reasonably
require make such books available for inspection on behalf of
the Indenture Trustee and furnish satisfactory evidence that
the wages and allotments and the insurance of the master and
crew are being regularly paid and that all deductions from
crew's wages in respect of tax and/or social security
liability are being properly accounted for and that the
master has no claim for disbursements other than those
incurred by him in the ordinary course of trading on the
voyage then in progress;
(m) (i) observe the obligations contained in Clause 12 of the
Credit Agreement which apply to the Rig and the Owner,
and in pursuance thereof such obligations shall be
incorporated in and deemed to form part of this Mortgage
mutatis mutandis; and
(ii) not without the previous written consent of the
Indenture Trustee de-activate or lay up the Rig
(other than for normal periods of inactivity between
contracts for the Rig during which periods the Rig
remains manned);
(n) not without the previous consent in writing of the Indenture
Trustee (such consent not to be unreasonably withheld), put
the Rig into the possession of any person for the purpose of
work being done upon her in an amount exceeding or likely to
exceed One Million Five Hundred Thousand United States
Dollars (US$1,500,000) (or the equivalent in any other
currency) unless such person shall first have given to the
Indenture Trustee and in terms reasonably satisfactory to it
a written undertaking not to exercise any lien on the Rig for
the cost of such work or otherwise;
(o) comply with and satisfy all the requirements and formalities
established by the Ship Mortgage Act and any other pertinent
legislation of the United States to perfect this Mortgage as
a legal, valid and enforceable first and preferred lien upon
the Rig and promptly to furnish to the Indenture Trustee from
time to time such proof as the Indenture Trustee may request
for its satisfaction with respect to the Owner's compliance
with the provisions of this sub-clause;
(p) place, and use due diligence to retain, a properly certified
copy of this Mortgage on board the Rig with her papers and
cause such certified copy of this Mortgage to be exhibited to
any and all persons having business with the Rig which might
give rise to any lien thereon other than a lien for crew's
wages, general average and salvage and to any representative
of the Indenture Trustee on demand and to place and keep
prominently displayed in the chart room and in the master's
cabin of the Rig a framed printed notice in plain type in
English of such size that the paragraph of reading matter
shall cover a space not less than 6 inches wide and 9 inches
high reading as follows:-
NOTICE OF MORTGAGE
This Rig is covered by a First Preferred Mortgage to
WILMINGTON TRUST COMPANY not in its individual capacity but
solely as Indenture Trustee for the Lenders defined in the
said Mortgage under authority of the United States Ship
Mortgage Act, 1920, as amended, recodified as 46 U.S.C.
31301 et. seq. Under the terms of the said Mortgage neither
the Owner nor any charterer nor the master of this Rig nor
any other person has any right, power or authority to create,
incur or permit to be imposed upon this Rig any lien
whatsoever other than for crew's wages, general average and
salvage.
(q) comply, or procure compliance with, all Environmental Laws
and Environmental Approvals relating to the Rig, its
operation or management and the business of the Owner from
time to time;
(r) notify the Indenture Trustee forthwith upon:
(i) any Environmental Claim which could reasonably be
expected to result in damages in excess of US$200,000
being or made against the Owner, or otherwise in
connection with the Rig; or
(ii) any Environmental Incident occurring, and keep the
Indenture Trustee advised, in writing on such regular
basis and in such detail as the Indenture Trustee
shall require, of the Owner's response to such
Environmental Claim or Environmental Incident;
(s) not sell, mortgage, transfer or change the port of registry
of the Rig without the written consent of the Indenture
Trustee having first been obtained, and any such written
consent to any one such sale, mortgage, transfer, or change
shall not be construed to be a waiver of this provision with
respect to any subsequent proposed sale, mortgage, transfer
or change. Any such sale, mortgage, transfer, or change
shall be subject to the provisions of this Mortgage and the
lien it creates. The Owner shall not charter the Rig to, or
permit the Rig to serve under any contract with, a person
included within the definition of (i) "national" of a
"designated foreign country," or "specially designated
national" of a "designated foreign country," in the Foreign
Assets Control Regulations or the Cuban Assets Control
Regulations of the United States Treasury Department, 31
C.F.R. Parts 500 and 515, in each case as amended, (ii)
"Government of Libya", "entity of the Government of Libya" or
"Libyan entity" in the Libyan Sanctions Regulations of the
United States Treasury Department, 31 C.F.R. Part 550, as
amended, or (iii) "Government of Iraq", "entity of the
Government of Iraq" or "Iraqi Government entity" in the Iraqi
Sanctions Regulations, 56 Fed. Reg. 2112 (1991) to be
codified at 31 C.F.R. Part 575, as amended, all within the
meaning of said Regulations or of any regulations,
interpretations or rulings issued thereunder, or engage in
any transaction that violates any provision of said
Regulations or that violates any provision of the Iranian
Transactions Regulations, 31 C.F.R. Part 560, as amended, the
Foreign Funds Control Regulations, 31 C.F.R. Part 520, as
amended, the Transaction Control Regulations, 31 C.F.R. Part
505, as amended, the Haitian Transaction Regulations, 31
C.F.R. Part 580, as amended, the Foreign Assets Control
Regulations, 31 C.F.R. Part 500, as amended, or Executive
Orders 12810 and 12831, or call at a Cuban port to load or
discharge cargo or to effect repairs on the Rig;
(t) shall not cause or permit the Rig to be operated in any
manner contrary to law, shall not abandon the Rig in a
foreign port, shall not engage in any unlawful trade or
violate any law or carry any cargo that shall expose the Rig
to penalty, forfeiture or capture, and shall not do, or
suffer or permit to be done, anything which can or may
injuriously affect the registration or enrollment of the Rig
under the laws of the United States and will at all times
keep the Rig duly documented thereunder.
8. PROTECTION OF SECURITY
8.01 The Indenture Trustee shall without prejudice to its other rights
and powers under this Mortgage and the other Security Documents be
entitled (but not bound) at any time and as often as may be
necessary to take any such action as it may in the reasonable
exercise of its discretion think fit for the purpose of protecting
or maintaining the security created by this Mortgage and the other
Security Documents (including, without limitation, such action as
is referred to in Clause 8.02) and each and every expense,
liability, or loss (including, without limitation, legal fees) so
incurred by the Indenture Trustee, the Agent or the Lenders in or
about the protection or maintenance of the said security together
with interest payable thereon under Clause 4.01(b) shall be
repayable to it by the Owner on demand.
8.02 Without prejudice to the generality of Clause 8.01:-
(a) if the Owner does not comply with the provisions of Clause 6
or any of them the Agent shall be entitled (but not bound) to
effect or to replace and renew and thereafter to maintain the
Insurances in such manner as in its discretion it may think
fit and to require that all policies, contracts and other
records relating to the Insurances (including details of any
correspondence concerning outstanding claims) be forthwith
delivered to such brokers as the Agent may nominate and to
collect, recover, compromise and give a good discharge for
all claims then outstanding or thereafter arising under the
Insurances or any of them and to take over or institute (if
necessary using the name of the Owner) all such proceedings
in connection therewith as the Agent in its absolute
discretion may think fit and to permit the brokers through
whom the collection or recovery is effected to charge the
usual brokerage therefor; and
(b) if the Owner does not comply with the provisions of Clause
7.01(d) and/or 7.01(f) or any of them the Indenture Trustee
shall be entitled (but not bound) to arrange for the carrying
out of such repairs to and/or surveys of the Rig as it deems
expedient or necessary; and
(c) if the Owner does not comply with the provisions of Clause
7.01(h) or any of them the Indenture Trustee shall be
entitled (but not bound) to pay and discharge all such debts,
damages and liabilities and all such tolls, dues, taxes,
assessments, charges, fines, penalties and other outgoings as
are therein mentioned and/or to take any such measures as it
deems expedient or necessary for the purpose of securing the
release of the Rig.
9. ENFORCEABILITY AND INDENTURE TRUSTEE'S POWERS
9.01 Upon the happening of any of the Events of Default specified in the
Credit Agreement but without the necessity for any court order or
declaration in any jurisdiction to the effect that an Event of
Default has occurred (and whether prior to or after the Majority
Lenders having served on the Owner any such notice as is referred
to in Clause 11 of the Credit Agreement) the security constituted
by this Mortgage shall become immediately enforceable and the
Indenture Trustee shall be entitled, as and when it may see fit, to
put into force and exercise all or any of the powers possessed by
it as mortgagee of the Rig or otherwise and in particular:-
(a) to exercise all the rights and remedies in foreclosure and
otherwise given to mortgagees by applicable law including the
provisions of the Ship Mortgage Act;
(b) to take possession of the Rig whether actually or
constructively and/or otherwise to take control of the Rig
wherever the Rig may be and cause the Owner or any other
person in possession of the Rig forthwith upon demand to
surrender the same to the Indenture Trustee without legal
process and without liability of the Indenture Trustee for
any losses or damages incurred thereby and without having to
render accounts to the Owner in connection therewith;
(c) to require that all policies, contracts, certificates of
entry and other records relating to the Insurances (including
details of and correspondence concerning outstanding claims)
be forthwith delivered to or to the order of the Agent;
(d) to collect, recover, compromise and give a good discharge for
or procure that the Agent collect, recover, compromise and
give good discharge for any and all moneys or claims for
moneys then outstanding or thereafter arising under the
Insurances or any Requisition Compensation and to permit any
brokers through whom collection or recovery is effected to
charge the usual brokerage therefor;
(e) to take over or institute (if necessary using the name of the
Owner) or, to the extent lawful, procure that the Agent take
over or institute all such proceedings in connection with the
Rig, the Insurances, or any Requisition Compensation as the
Indenture Trustee in its absolute discretion thinks fit and
to discharge, compound, release or compromise claims against
the Owner in respect of the Rig which have given or may give
rise to any charge or lien on the Rig or which are or may be
enforceable by proceedings against the Rig;
(f) to sell the Rig or any share therein with or without prior
notice to the Owner free from any claim of or by the Owner of
any nature whatsoever, and with or without the benefit of any
charterparty or other contract for her employment, by public
auction or private contract at such place and upon such terms
(including, without limitation, on terms such that payment of
some or all of the purchase price be deferred) as the
Indenture Trustee in its absolute discretion may determine
with power to postpone any such sale, without being
answerable for any loss occasioned by such sale or resulting
from postponement thereof, and/or itself to purchase the Rig
at any such public auction and to set off the purchase price
against all or any part of the Secured Indebtedness;
(g) to manage, insure, maintain and repair the Rig and to
charter, employ, sail or lay up the Rig in such manner, upon
such terms and for such period as the Indenture Trustee in
its absolute discretion deems expedient and for the purposes
aforesaid the Indenture Trustee shall be entitled to do all
acts and things incidental or conducive thereto and in
particular to enter into such arrangements respecting the
Rig, and the insurance, management, maintenance, repair,
classification, chartering and employment of the Rig, in all
respects as if the Indenture Trustee were the owner of the
Rig and without being responsible for any loss thereby
incurred;
(h) to recover from the Owner on demand any expenses, liabilities
or losses as may be incurred by the Indenture Trustee in or
about the exercise of the power vested in the Indenture
Trustee under Clause 9.01(g);
(i) generally, to recover from the Owner on demand each and every
expense, liability or loss incurred by the Indenture Trustee
in or about or incidental to the exercise by it of any of the
powers aforesaid.
9.02 The Indenture Trustee shall not be obliged to make any enquiry as
to the nature or sufficiency of any payment received by it under
this Mortgage or to make any claim, take any action or enforce any
rights and benefits assigned to the Indenture Trustee by this
Mortgage or to which the Indenture Trustee may at any time be
entitled hereunder.
9.03 Neither the Indenture Trustee, the Agent, the Lenders nor their
agents, managers, officers, employees, delegates and advisers shall
be liable for any expense, claim, liability, loss, cost, damage or
expense incurred or arising in connection with the exercise or
purported exercise of any rights, powers and discretions under this
Mortgage in the absence of gross negligence or wilful misconduct.
9.04 The Indenture Trustee shall not by reason of the taking possession
of the Rig be liable to account as mortgagee-in-possession or for
anything except actual receipts or be liable for any loss upon
realization or for any default or omission for which a
mortgagee-in-possession might be liable.
9.05 Upon any sale of the Rig or any share therein by the Indenture
Trustee the purchaser shall not be bound to see or enquire whether
the Indenture Trustee's power of sale has arisen in the manner
provided in this Mortgage and the sale shall be deemed to be within
the power of the Indenture Trustee and the receipt of the Indenture
Trustee for the purchase money shall effectively discharge the
purchaser who shall not be concerned with the manner of application
of the proceeds of sale or be in any way answerable therefor.
10. APPLICATION OF MONEYS
10.01 All moneys received by the Indenture Trustee (or the Agent, as the
case may be):-
(a) in respect of sale of the Rig or any part thereof;
(b) in respect of recovery under the Insurances;
(c) in respect of Requisition Compensation,
shall be held and applied in the first place to pay or make good
all such expenses, liabilities, losses, costs, duties, fees,
charges or other moneys whatsoever (together with interest payable
thereon under Clause 4.01(b)) as may have been paid or incurred by
the Indenture Trustee or the Agent in or about or incidental to the
exercise by the Indenture Trustee or the Agent of the powers
specified or otherwise referred to in Clauses 8 and 9.01 (or any of
them) and in connection with the Indenture Trustee's duties as
Indenture Trustee and the balance shall be applied in the following
manner:-
FIRST: in or towards satisfaction of any amounts in respect of the
balance of the Secured Indebtedness as are then accrued, due and
payable or are then due and payable by virtue of payment demanded
under the Credit Agreement and the other Security Documents (or any
of them), in such order of application as the Indenture Trustee
shall think fit;
SECONDLY: at the option of the Indenture Trustee in retention of
an amount equal to any part or parts of the Secured Indebtedness as
is or are not then due and payable but which (in the sole and
absolute opinion of the Indenture Trustee) will or may become due
and payable in the future and, upon the same becoming due and
payable, in or towards satisfaction thereof in accordance with the
foregoing provisions of this Clause 10.01;
THIRDLY: the surplus (if any) shall be paid to the Owner or to
whomsoever else may be entitled thereto.
11. FURTHER ASSURANCES
11.01 The Owner shall execute and do all such assurances, acts and things
as the Indenture Trustee in its absolute discretion may require
for:-
(a) perfecting or protecting the security created (or intended to
be created) by this Mortgage; or
(b) preserving or protecting any of the rights of the Indenture
Trustee, the Agent, and the Lenders under this Mortgage; or
(c) ensuring that the security constituted by this Mortgage and
the covenants and obligations of the Owner under this
Mortgage shall enure to the benefit of any transferee,
successor or assignee of the Indenture Trustee; or
(d) enforcing the security constituted by this Mortgage on or at
any time after the same shall have become enforceable; or
(e) the exercise of any power, authority or discretion vested in
the Indenture Trustee under this Mortgage,
in any such case, forthwith upon demand by the Indenture Trustee
and at the expense of the Owner.
12. POWER OF ATTORNEY
12.01 The Owner, by way of security and in order more fully to secure the
performance of the Owner's obligations under this Mortgage, hereby
irrevocably appoints the Indenture Trustee as its attorney for the
duration of the Credit Facility Period for the purposes of:-
(a) doing in its name all acts and executing, signing and (if
required) registering in its name all documents which the
Owner itself could do, execute, sign or register in relation
to the Rig (including without limitation, transferring title
to the Rig to a third party), provided, however, that such
power shall not be exercisable by or on behalf of the
Indenture Trustee until this Mortgage shall have become
immediately enforceable pursuant to Clause 9.01; and
(b) executing, signing, perfecting, doing and (if required)
registering every such further assurance document, act or
thing as is referred to in Clause 11.
12.02 The exercise of such power as is referred to in Clause 12.01(a) by
or on behalf of the Indenture Trustee shall not put any person
dealing with the Indenture Trustee upon any enquiry as to whether
this Mortgage has become enforceable nor shall such person be in
any way affected by notice that this Mortgage has not become
enforceable and, in relation to both Clauses 12.01(a) and 12.01(b),
the exercise by the Indenture Trustee of such power shall be
conclusive evidence of its right to exercise the same.
13. INDEMNITIES
13.01 The Owner will indemnify and save harmless the Indenture Trustee,
the Agent, the Lenders and each agent or attorney appointed under
or pursuant to this Mortgage from and against any and all expenses,
claims, liabilities, losses, taxes, costs, duties, fees and charges
suffered, incurred or made by the Indenture Trustee, the Agent, the
Lenders or such agent or attorney in good faith:-
(a) in the exercise or purported exercise of any rights, powers
or discretions vested in them pursuant to this Mortgage; or
(b) in the preservation or enforcement of the Indenture Trustee's
rights under this Mortgage; or
(c) on the release of the Rig from the security created by this
Mortgage,
and the Indenture Trustee, the Agent, the Lenders and each such
agent or attorney may retain and pay all sums in respect of the
same out of money received under the powers conferred by this
Mortgage. All such amounts recoverable by the Indenture Trustee,
the Agent, the Lenders or such agent or attorney shall be
recoverable on a full indemnity basis.
13.02 Without limiting the foregoing Clause 13.01, the Owner hereby
further indemnifies and holds harmless each of the Indenture
Trustee, the Agent, the Lenders and their respective officers,
directors, employees, attorneys and agents from and against any and
all liabilities, losses, obligations, claims, damages, penalties,
causes of action, costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses, consultant
fees, investigation and laboratory fees) imposed upon or incurred
by or asserted against them, or any of them, by reason of (a) an
actual, alleged or threatened Environmental Incident; (b) any
personal injury (including wrongful death) or property damage (real
or personal) or economic damage arising out of or related to such
Environmental Incident; (c) any Environmental Claim brought or
threatened, or settlement reached; or (d) any violation of laws,
orders, regulations, requirements or demands of government
authorities relating to Environmentally Sensitive Material at, or
discharged from the Rig.
13.03 If, under any applicable law or regulation, and whether pursuant to
a judgment being made or registered against the Owner or the
liquidation of the Owner or for any other reason, any payment under
or in connection with this Mortgage is made or fails to be
satisfied in a currency (the "payment currency") other than the
currency in which such payment is due under or in connection with
this Mortgage (the "contractual currency"), then to the extent that
the amount of such payment actually received by the Indenture
Trustee, when converted into the contractual currency at the rate
of exchange, falls short of the amount due under or in connection
with this Mortgage, the Owner, as a separate and independent
obligation, shall indemnify and hold harmless the Indenture Trustee
against the amount of such shortfall. For the purposes of this
Clause 13.03, "rate of exchange" means the rate at which the
Indenture Trustee is able on the date of such payment (or, if it is
not practicable for the Indenture Trustee to purchase the
contractual currency with the payment currency on the date of such
payment, at the rate of exchange as soon afterwards as is
practicable for the Indenture Trustee to do so) to purchase the
contractual currency with the payment currency and shall take into
account any premium and other costs of exchange with respect
thereto.
14. EXPENSES
14.01 The Owner shall pay to the Indenture Trustee and the Agent on
demand all costs, fees and expenses, including, but not limited to,
legal fees and expenses and valuation fees and Taxes thereon
incurred by the Indenture Trustee, the Agent and the Lenders or for
which the Indenture Trustee, the Agent and the Lenders may become
liable in connection with:-
(a) the negotiation, preparation and execution of the Credit
Agreement and the Security Documents (or any of them); and/or
(b) the preserving or enforcing of, or attempting to preserve or
enforce, any of its rights under the Credit Agreement and the
Security Documents (or any of them).
14.02 The Owner shall pay to the Indenture Trustee and the Agent on
demand all costs, fees and expenses (including, but not limited to,
legal fees and expenses) and Taxes thereon incurred by the
Indenture Trustee and the Lenders in connection with:-
(a) any variation of, or amendment or supplement to, any of the
terms of the Credit Agreement and the Security Documents (or
any of them) requested by the Owner, necessary or advisable
under applicable law or relating to the syndication of the
Credit Facility, or initiated during the occurrence and
continuation of an Event of Default; and/or
(b) any consent or waiver required from the Indenture Trustee in
relation to the Credit Agreement and the Security Documents
(or any of them),
and in each case, regardless of whether the same is actually
implemented, completed or granted, as the case may be.
14.03 The Owner shall pay promptly all stamp, documentary and other like
duties and Taxes to which the Credit Agreement and the Security
Documents (or any of them) may be subject or give rise and shall
indemnify the Indenture Trustee on demand against any and all
liabilities with respect to or resulting from any delay or omission
on the part of the Owner to pay any such duties or Taxes.
15. COMMUNICATIONS
15.01 All notices to the Indenture Trustee hereunder shall be in writing
and shall be made to the following address:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Telefax: (302) 651-8882
Attention: Corporate Trust Division
With a copy to:
Jennifer L. Janss, Esq.
Richards, Layton & Finger
P.O. Box 551
Wilmington, DE 19899
All other notices shall be made to the addresses given in Clause 20
of the Credit Agreement and Schedule 1 thereto.
16. ASSIGNMENTS
16.01 This Mortgage shall be binding upon and shall enure to the benefit
of the Owner, the Indenture Trustee and the Lenders and the Agent
and their respective transferees, successors and permitted assigns
and references in this Mortgage to any of them shall be construed
accordingly.
16.02 The Owner may not assign or transfer all or any part of its rights
and/or obligations under this Mortgage.
16.03 Pursuant to Clause 14 of the Credit Agreement, each Lender has the
right to assign or transfer all or any part of its rights and/or
obligations under the Credit Agreement on the terms therein
provided. The Indenture Trustee shall notify the Owner promptly
following any such assignment, transfer or change.
17. TOTAL AMOUNT, ETC.
17.01 The total amount of this Mortgage is US$55,000,000 of principal
plus interest, fees, commissions and performance of mortgage
covenants. The discharge amount is the same as the total amount.
18. MISCELLANEOUS
18.01 If at any time any one or more of the provisions in this Mortgage
is or becomes invalid, illegal or unenforceable in any respect
under any law or regulation, the validity, legality and
enforceability of the remaining provisions of this Mortgage shall
not be in any way affected or impaired thereby.
18.02 The Indenture Trustee, at any time and from time to time, may
delegate by power of attorney or in any other manner to any person
or persons all or any of the powers, authorities and discretions
which are for the time being exercisable by the Indenture Trustee
under this Mortgage in relation to the Rig. Any such delegation
may be made upon such terms and subject to such regulations as the
Indenture Trustee may think fit. The Indenture Trustee shall not
be in any way liable or responsible to the Owner for any loss or
damage arising from any act, default, omission or misconduct on the
part of any such delegate.
18.03 A certification or determination by the Indenture Trustee as to any
matter provided for in this Mortgage shall, in the absence of
manifest error, be conclusive and binding on the Owner.
19. JURISDICTION
19.01 The Owner agrees that the Indenture Trustee shall have the liberty
but shall not be obliged to take any proceedings in the courts of
any country to protect or enforce the security constituted by this
Mortgage and/or the Credit Agreement and the Security Documents or
to enforce any provisions of this Mortgage and/or the Credit
Agreement and the Security Documents or to recover payment of the
Secured Indebtedness and for the purpose of any proceedings for the
enforcement and execution of this Mortgage and/or the Credit
Agreement and the Security Documents the Owner hereby submits to
the jurisdiction of the courts of any country of the choice of the
Indenture Trustee.
19.02 Without prejudice to the generality of Clause 19.01, the Indenture
Trustee shall have the right to arrest and take action against the
Rig at whatever place the Rig shall be found lying and for the
purpose of any action which the Indenture Trustee may bring before
the courts of such jurisdiction or other judicial authority and for
the purpose of any action which the Indenture Trustee may bring
against the Rig, any writ, notice, judgment or other legal process
or documents may (without prejudice to any other method of service
under applicable law) be served upon the master of the Rig (or upon
anyone acting as the master) and such service shall be deemed good
service on the Owner for all purposes.
19.03 The Owner agrees that should the Indenture Trustee bring a legal
action or proceedings against it or its assets in relation to any
matters arising out of or in connection with this Mortgage, no
immunity from such legal action or proceedings (which shall be
deemed to include, without limitation, suit, attachment prior to
judgment, other attachment, the obtaining of judgment, execution or
other enforcement) shall be claimed by or on behalf of the Owner or
with respect of its assets, and the Owner hereby irrevocably waives
any such right of immunity which it or its assets now has or may
hereafter acquire and the Owner hereby consents generally in
respect of any legal action or proceedings arising out of or in
connection with this Mortgage to the giving out of any relief or
the issue of any process in connection with such action or
proceedings including, without limitation, the making, enforcement
or execution or attachment against any property whatsoever of any
order or judgment which may be made or given in such action or
proceedings.
IN WITNESS whereof the Owner has caused this Mortgage to be executed the
day and year first before written.
READING & BATES EXPLORATION CO.
By_____________________________________
Its:
- -----------------------------------------------------------------------------
ACKNOWLEDGEMENT OF MORTGAGE
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this _____ day of November, 1995 before me personally appeared Tim W. Nagle
to me known who being by me duly sworn did dispose and say that he resides at
13307 Tosca, Houston, Texas 77079, that he is Vice President and Treasurer for
READING & BATES EXPLORATION CO., the corporation described in and which
executed the foregoing instrument; and that he signed his name thereto by order
of the Board of Directors of READING & BATES EXPLORATION CO.
Notary Public
EXHIBIT 10.105
INDENTURE OF TRUST
Dated as of November 16, 1995
READING & BATES DRILLING CO.
- and -
READING & BATES EXPLORATION CO.,
as Joint and Several Borrowers
- and -
WILMINGTON TRUST COMPANY,
as Indenture Trustee
- ----------------------------------------------------------------------------
TABLE OF CONTENTS
Page
INDENTURE OF TRUST . . . . . . . . . . . . . . . . . . . . . . . . . . .
RECITALS OF THE BORROWER . . . . . . . . . . . . . . . . . . . . . . . .
GRANTING CLAUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION . . . . . .
Section 101 Definitions . . . . . . . . . . . . . . . . . . . . . . . . .
Section 102 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 103 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . .
Section 104 Effect of Headings; Table of Contents . . . . . . . . . . . .
Section 105 Severability Clause; Further Assurances . . . . . . . . . . .
Section 106 Governing Law; Jurisdiction . . . . . . . . . . . . . . . . .
Section 107 Appointment of Process Agent . . . . . . . . . . . . . . . .
Section 108 Counterparts . . . . . . . . . . . . . . . . . . . . . . . .
Section 109 Survival . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 110 No Transfer in Violation of Shipping Act . . . . . . . . . .
Section 111 Monies of Indenture Trustee
Received by Borrower . . . . . . . . . . . . . . . . . . . . . . . . .
Section 112 Binding Effect . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER . . . . .
Section 201 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(a) Organization and Existence . . . . . . . . . . . . . . . . . . . .
(b) Power and Authority . . . . . . . . . . . . . . . . . . . . . . .
(c) Due Authorization, Execution and Enforceability . . . . . . . . .
(d) No Violations . . . . . . . . . . . . . . . . . . . . . . . . . .
(e) Liens and Security Interests . . . . . . . . . . . . . . . . . .
(f) Notices of Defaults . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 3
REMEDIES UPON AN EVENT OF DEFAULT . . . . . . . . . . . . . . . .
Section 301 Remedies . . . . . . . . . . . . . . . . . . . . . . . . .
Section 302 Suits for Enforcement by Indenture Trustee . . . . . . . .
Section 303 Indenture Trustee's Enforcement of Claims . . . . . . . . .
Section 304 Application of Monies Collected After Default . . . . . . .
Section 305 Rights and Remedies Cumulative . . . . . . . . . . . . . .
Section 306 Delay or Omission Not Waiver . . . . . . . . . . . . . . .
Section 307 Discontinuance of Enforcement Proceedings . . . . . . . . .
Section 308 Control by the Majority Lenders . . . . . . . . . . . . . .
Section 309 Undertaking for Costs . . . . . . . . . . . . . . . . . . .
Section 310 Waiver of Demand, etc . . . . . . . . . . . . . . . . . . .
ARTICLE 4
THE INDENTURE TRUSTEE . . . . . . . . . . . . . . . . . . . . . .
Section 401 Certain Duties and Liabilities . . . . . . . . . . . . . .
Section 402 Certain Rights of Indenture Trustee . . . . . . . . . . . .
Section 403 Not Responsible for Recitals . . . . . . . . . . . . . . .
Section 404 Money Held in Trust . . . . . . . . . . . . . . . . . . . .
Section 405 Compensation, Reimbursement and Indemnification . . . . . .
Section 406 Corporate Indenture Trustee Required; Eligibility . . . . .
Section 407 Disqualification, Removal or
Resignation of the Indenture Trustee;
Successor Indenture Trustees . . . . . . . . . . . . . . . . . . . .
Section 408 Co-trustees and Separate Indenture Trustees . . . . . . . .
ARTICLE 5
SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . .
Section 501 General . . . . . . . . . . . . . . . . . . . . . . . . . .
Section 502 Survival of Certain Obligations . . . . . . . . . . . . . .
ARTICLE 6
SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . . .
Section 601 Waivers and Supplemental Indentures With
Consent of Lenders . . . . . . . . . . . . . . . . . . . . . . . . .
Section 602 Execution of Supplemental Indentures . . . . . . . . . . .
Section 603 Effect of Supplemental Indentures . . . . . . . . . . . . .
ARTICLE 7
INSTRUCTIONS OF THE AGENT OR MAJORITY LENDERS . . . . . . . . . .
Section 701 Instructions of the Agent or Majority Lenders. . . . . . .
ARTICLE 8
LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . .
Section 801 Limitation of Liability of Wilmington Trust Company. . . .
INDENTURE OF TRUST
THIS INDENTURE OF TRUST (this "Indenture") dated as of November 16,
1995, among (i) READING & BATES DRILLING CO. ("R&B Drilling") and READING
& BATES EXPLORATION CO. ("R&B Exploration"), each an Oklahoma corporation,
as joint and several borrowers (collectively, the "Borrowers"), and (ii)
WILMINGTON TRUST COMPANY, a Delaware banking corporation, not in its
individual capacity but solely as indenture trustee (the "Indenture
Trustee").
RECITALS OF THE BORROWERS
A. The Borrowers have entered into a Credit Facility Agreement,
dated as of November 16, 1995 (the "Credit Agreement"), with the Lenders
(as defined in the Credit Agreement), Christiania Bank og Kreditkasse,
acting through its New York branch, as agent for the Lenders (the "Agent")
and Reading & Bates Corporation, as guarantor, pursuant to which the
Lenders have agreed to make available to the Borrowers (i) a reducing
revolving credit facility (the "Revolving Credit Facility") in the
original principal amount of Forty-Five Million United States Dollars
(US$45,000,000.00) evidenced by a secured promissory note of the Borrowers
(the "Note") and (ii) a Standby Letter of Credit Facility (the "Standby
Letter of Credit Facility and together with the Revolving Credit Facility,
the "Credit Facility") in an amount not to exceed Ten Million Dollars
(U.S. $10,000,000.00).
B. Pursuant to the Credit Agreement, (i) R&B Drilling is required
to execute and deliver a first preferred mortgage on the U.S. documented
semi-submersible drilling unit, JACK BATES and (ii) R&B Exploration is
required to execute and deliver a first preferred mortgage (together with
the first preferred mortgage on the JACK BATES, collectively the
"Mortgages") on the U.S. documented jack-up drilling unit, D.R. STEWART
(together with the JACK BATES, collectively, the "Vessels"). Certain of
the Lenders are not citizens of the United States of America within the
meaning of Section 2 of the Shipping Act, 1916, as amended, and are
therefore ineligible to be mortgagees of the Vessels, and the Lenders have
requested the Indenture Trustee to hold, pursuant to the terms of this
Indenture, the Mortgages.
C. To secure their obligations under the Credit Agreement and the
Note, the Borrowers have duly authorized the execution and delivery of
this Indenture.
D. All things have been done which are necessary to constitute this
Indenture a valid security agreement and contract for the security of the
obligations of the Borrowers under the Credit Facility and the Note, in
accordance with the terms of the Credit Agreement, the Note and this
Indenture.
GRANTING CLAUSE
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that,
To secure the payment of the Advances (as defined in the Credit
Agreement), the Unpaid Drawings (as defined in the Credit Agreement), and
interest thereon and all other Indebtedness (as defined below) and the
performance of the covenants therein and herein contained, and in
consideration of the premises and of the Lenders' making the Credit
Facility available to the Borrowers, the Borrowers by these presents do
grant, sell, convey, assign, transfer, pledge, set over and confirm unto
the Indenture Trustee for the benefit of the Lenders, continuing security
interests in all of their right, title and interest in and all benefits
in, under and to all of the following, but as security only for the
payment of the Indebtedness:
1. The U.S. documented vessel JACK BATES, as granted by a first
preferred mortgage on the JACK BATES by R&B Drilling;
2. The U.S. documented vessel D.R. STEWART, as granted by a first
preferred mortgage on the D.R. STEWART by R&B Exploration; and
3. Proceeds of the foregoing.
The Indenture Trustee shall hold the Mortgages as collateral security
for the Indebtedness, subject to the terms of this Indenture.
AND IT IS HEREBY COVENANTED AND DECLARED that the security interests
granted above are to be held and applied by the Indenture Trustee, subject
to the further covenants, conditions and trusts herein set forth, and the
Borrowers do hereby covenant and agree to and with the Indenture Trustee,
for the benefit of the Lenders as follows:
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions.
(a) For all purposes of this Indenture, except as otherwise
expressly provided herein or unless the context otherwise requires, in
addition to the words and expressions defined in the recitals hereto, the
following terms shall have the following meanings:
"Actual Knowledge" has the meaning specified in Section 401(h).
"Business Day" shall have the meaning ascribed thereto in the Credit
Agreement.
"Dollars", "dollars" or "$" means lawful and freely transferable
currency of the United States.
"Default Rate" shall have the meaning ascribed thereto in the Credit
Agreement.
"Event of Default" has the meaning ascribed thereto in the Credit
Agreement.
"Indebtedness" means the Advances, the Unpaid Drawings and all
interest thereon (and interest on any unpaid interest thereon) and on any
other sums of money on which interest is stated in the Credit Agreement to
be payable), all expenses, claims, liabilities, losses, costs, duties,
fees and all other sums of money from time to time owing under the Credit
Agreement and the Security Documents.
"Instructions" has the meaning set forth in Section 701.
"MARAD" means the United States Department of Transportation, Maritime
Administration.
"Officer's Certificate" means (i) when used with respect to a
Borrower, a certificate signed by the president, the chief executive
officer, any vice president, the secretary, any assistant secretary, the
treasurer or any assistant treasurer of such Borrower and (ii) when used
with respect to the Indenture Trustee, a certificate signed by a
Responsible Officer of the Indenture Trustee.
"Person" means any individual, corporation, partnership, joint
venture, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Responsible Officer", when used with respect to the Indenture
Trustee, means any officer with direct responsibility for the
administration of this Indenture and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter
is referred because of his knowledge of and familiarity with the
particular subject. "Responsible Officer", when used with respect to a
Borrower, means the president, any vice president, the secretary, any
assistant secretary, the treasurer or any assistant treasurer of such
Borrower or any other officer or assistant officer of such Borrower
customarily performing functions similar to those performed by any of the
above-designated officers.
"Security Documents" shall have the meaning ascribed thereto in the
Credit Agreement.
"Supplemental Indenture" means any indenture supplemental to this
Indenture entered into pursuant to Article 6.
"United States" means the United States of America.
(b) For purposes of this Indenture, unless otherwise expressly
provided or unless the context otherwise, requires, all references herein
to Articles, Sections or other subdivisions, unless otherwise specified,
refer to the corresponding Articles, Sections and other subdivisions of
this Indenture, and the terms "hereof, "herein", hereby" hereafter" and
"herewith" refer to this Indenture.
(c) The terms defined in this Article include the plural as well as
the singular.
(d) All other terms used in this Indenture and not defined in this
Indenture which are defined by reference herein to the Credit Agreement or
other instruments, have the meanings assigned to them in the Credit
Agreement or such other instruments.
(e) All agreements referred to in this Article I and in the Recitals
of this Indenture mean such agreements as originally executed or, if duly
amended or supplemented, as so amended or supplemented.
Section 102. Notices.
(a) All notices or other communications required or permitted
to be made hereunder to the Borrowers, the Indenture Trustee, the Agent or
the Lenders shall be sufficiently given if in writing and made or
delivered by hand or by certified or registered mail, postage prepaid, by
telex or telecopy, addressed to the particular parties as provided below,
or to such other addresses as such parties may hereafter specify by a
written notice to such other parties (and with respect to any notice or
communication to the Indenture Trustee, with a copy to the Agent):
Borrowers: READING & BATES CORPORATION
901 Threadneedle, Suite 200
Houston, TX 77079
Telefax: (713) 496-0285
Attention: Chief Financial Officer
Indenture Trustee: WILMINGTON TRUST COMPANY
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Telefax: (302) 651-8882
Attention: Corporate Trust Division
With a copy to:
Jennifer L. Janss, Esq.
Richards, Layton & Finger
P.O. Box 551
Wilmington, DE 19899
Notices to the Agent shall be addressed to:
CHRISTIANIA BANK OG KREDITKASSE,
New York Branch
11 West 42nd Street, 7th Floor
New York, NY 10036
Telefax: (212) 827-4888
Attention: Loan Administration
Notices to the Lenders shall be addressed as provided on Schedule 1 to the
Credit Agreement.
Section 103. Waiver of Notice.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by the person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent
of such notice.
Section 104. Effect of Headings; Table of Contents.
The table of contents, the titles of the Articles and the headings of
the Sections and paragraphs are not a part of this Indenture and shall not
be deemed to affect the meaning or construction of any of its provisions.
Section 105. Severability Clause; Further Assurances.
In case any provision of this Indenture or any other Security Document
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions of this Indenture or any other
Security Document shall not in any way be affected or impaired thereby. In
case this Indenture or any other Security Document, or any provision
hereof or thereof, shall be deemed invalid, illegal or unenforceable, in
whole or in part, by reason of any present or future law or any decision
of any court having jurisdiction, or if the documents at any time held by
the Indenture Trustee shall be deemed by the Indenture Trustee in the
reasonable exercise of its duties to be insufficient for any reason to
implement the rights and powers granted to the Indenture Trustee herein or
any other Security Document, then, from time to time on demand of the
Indenture Trustee, the Borrowers will do, execute, acknowledge and
deliver, or cause to be done, executed, acknowledged and delivered, such
other and further assurances and documents as in the opinion of the
Indenture Trustee may reasonably be required to create or confirm the
security interests purported to be created by the Granting Clause hereof
or to perfect the Indenture Trustee's security interest therein, or
otherwise to obtain or maintain the full benefits of this Indenture and
the Mortgages.
Section 106. Governing Law; Jurisdiction.
This Indenture shall be deemed to be a contract made under the
substantive laws of the State of New York and for all purposes shall be
construed in accordance with the internal laws of said State, without
reference to principles of conflicts of law. This Indenture may be
enforced in the federal or state courts in the State of New York or any
other court having jurisdiction. Each of the Borrowers hereby irrevocably
submits itself to the nonexclusive jurisdiction of the United States
District Court for the Southern District of New York and the courts of the
State of New York located in the City and County of New York for such
purpose. In addition thereto, each of the Borrowers irrevocably waives, to
the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such proceeding brought
in any such court or any claim that any such proceeding brought in any
such court has been brought in an inconvenient forum.
Section 107. Appointment of Process Agent.
Each of the Borrowers hereby appoints Prentice Hall Corporation, 500
Central Avenue, Albany, New York 12206-2290 as its agent to accept service
of process in any proceeding on its behalf in the State of New York and
acknowledges that the purpose of this provision is to provide that service
upon such firm at its offices in Albany, New York shall have the same
effect as if the respective Borrower had been personally served in the
State of New York.
Section 108. Counterparts.
This Indenture may be executed in any number of counterparts, each of
which shall be an original; but such counterparts shall together
constitute but one and the same instrument.
Section 109. Survival.
All representations, warranties, covenants and agreements herein
contained or made in writing in connection with any Security Documents
shall survive the execution of this Indenture and shall continue in full
force and effect until the Indebtedness secured hereby or thereby shall
have been paid in full, and the same shall bind and inure to the benefit
of the respective successors and assigns of the Borrowers and the
Indenture Trustee.
Section 110. No Transfer in Violation of Shipping Act.
Notwithstanding any other provision herein to the contrary, except to
the extent permitted by law, no sale, transfer or other disposition of
either of the Vessels, or any interest therein, may be made to any person
not a citizen of the United States within the meaning of Section 2 of the
Shipping Act, 1916, as amended, without the approval of the Secretary of
Transportation of the United States or pursuant to an exemption therefrom.
Section 111. Monies of Indenture Trustee Received by Borrowers.
Any monies which may from time to time be received by either Borrower
which should have been paid to the Indenture Trustee hereunder shall be so
received in trust for the Indenture Trustee, shall not be commingled with
other funds of such Borrower and shall promptly be remitted to the
Indenture Trustee.
Section 112. Binding Effect.
All the covenants, promises, stipulations and agreements of each of
the Borrowers in this Indenture shall bind each of the Borrowers and their
respective successors and assigns, and shall inure to the benefit of the
Indenture Trustee and its successors and assigns, whether so expressed or
not. This Indenture is for the sole benefit of the Borrowers, the
Indenture Trustee and the Lenders and their respective successors and
assigns, and no other party shall have any right hereunder.
ARTICLE 2
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWERS
Each of the Borrowers represents and warrants to the Indenture Trustee
as of the date hereof and covenants with the Indenture Trustee that:
Section 201.
(a) Organization and Existence. Each of the Borrowers was duly
organized and is now validly existing as a corporation under the laws of
the State of Oklahoma with power and authority to conduct its business as
the same is presently being conducted. Each of the Borrowers shall
maintain such existence so long as this Indenture remains in effect.
(b) Power and Authority. Each of the Borrowers had and has legal
power and authority to enter into and carry out the terms of this
Indenture.
(c) Due Authorization, Execution and Enforceability. This Indenture
has been duly authorized by all necessary corporate action on the part of
each of the Borrowers, has been duly executed and delivered by each of the
Borrowers and constitutes, in accordance with its terms, the legal, valid
and binding agreements enforceable against each of the respective
Borrowers, except to the extent limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other laws of general
application relating to or affecting the enforcement of creditors' rights
as from time to time in effect and general equitable principles.
(d) No Violations. The consummation of the transactions contemplated
by, and compliance by each of the Borrowers with all the terms and
provisions of, this Indenture do not and will not violate any provisions
of the Certificate of Incorporation or Bylaws of either of the Borrowers,
and will not result in a breach of the terms and provisions of, or
constitute a default under, any agreement or undertaking by either of the
Borrowers, or of which it or any of its property is bound, or any order of
any court or administrative agency entered in any proceedings to which
either of the Borrowers is or has been a party or violate any applicable
statute, rule or regulation.
(e) Liens and Security Interests.
(1) The security interest granted by this Indenture
constitutes, a valid perfected assignment of and security interest in the
properties assigned hereby having a priority over any other security
interests in such property.
(2) Except pursuant to this Indenture (or as permitted by this
Indenture) or the Mortgages (or as permitted by the Mortgages), neither
Borrower has assigned, pledged or otherwise granted a security interest in
or lien on, and shall not assign, pledge or otherwise grant a security
interest in or lien on, the whole or any part of, any rights assigned by
the Indenture or the Mortgages.
(f) Notices of Defaults. Upon the occurrence of any Event of
Default, the Borrowers shall promptly notify the Indenture Trustee, the
Agent and the Lenders by telecopy, confirmed by letter, unless such Event
of Default shall have been cured.
ARTICLE 3
REMEDIES UPON AN EVENT OF DEFAULT
Section 301. Remedies.
If an Event of Default shall have occurred and be continuing, the
Indenture Trustee shall be entitled to, and shall upon receipt of written
Instructions of the Agent, without further notice or demand, enforce and
exercise all or any of its rights and powers as a mortgagee under the
respective Mortgages at law, in equity or in admiralty.
Section 302. Suits for Enforcement by Indenture Trustee.
Subject to the provisions of Section 308, if an Event of Default shall
occur and be continuing and the Indenture Trustee has Actual Knowledge,
the Indenture Trustee may in its discretion proceed to protect its rights
and the rights of the Lenders by such appropriate judicial proceedings as
the Indenture Trustee shall deem most effectual to protect any such
rights, or to protect any other proper right, power or remedy then
available to the Indenture Trustee under the Mortgages, provided that the
Indenture Trustee shall immediately thereafter notify the Agent and the
Lenders by telecopier of any action taken or proposed to be taken
hereunder and shall thereafter act only in accordance with the written
Instructions of the Agent or the Majority Lenders or either thereof.
Section 303. Indenture Trustee's Enforcement of Claims.
All rights of action and claims under this Indenture may be prosecuted
and enforced by the Indenture Trustee in a proceeding brought in its own
name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Indenture Trustee, its agents or
counsel, be for the benefit of the Lenders.
Section 304. Application of Monies Collected After Default.
Any monies collected by the Indenture Trustee pursuant to any
enforcement of any of its rights hereunder or under any other Security
Document on account of the occurrence of an Event of Default shall be
applied as follows:
First: to the payment or reimbursement of all the
reasonable costs incurred or made in the exercise,
protection or pursuance by the Indenture Trustee of
its rights or remedies including, but not limited
to, the expenses of any sale or of any taking,
attorneys' fees and court costs, together with
interest thereon at the Default Rate and to provide
adequate indemnity to the Indenture Trustee against
security interests, liens, charges, encumbrances or
rights claiming priority over or equal to the
security interest or liens held under this
Indenture;
Second: to the payment of interest and fees owing in respect
of the Credit Facility, including all fees owing
pursuant to Clause 17 thereof;
Third: to the repayment of principal owing in respect of
the Advances or Unpaid Drawings;
Fourth: to other amounts due under the Credit Agreement;
Fifth: the surplus (if any) shall be paid to the Borrowers
or to whomsoever else may be entitled thereto.
Section 305. Rights and Remedies Cumulative.
No right or remedy herein conferred upon or reserved to the Indenture
Trustee, the Agent or any of the Lenders is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and
remedy given hereunder, or under the other Security Documents or now or
hereafter existing at law, in equity, in admiralty, by statute or
otherwise. The assertion or employment of any right or remedy hereunder or
otherwise shall not prevent the concurrent or subsequent assertion or
employment of another right or remedy hereunder or otherwise.
Section 306. Delay or Omission Not Waiver.
No delay or omission of the Indenture Trustee, the Agent or of any of
the Lenders to exercise any right or remedy accruing upon any Event of
Default nor any course of dealings among the Indenture Trustee, the Agent,
the Lenders and the Borrowers shall impair any such right or remedy or
constitute a waiver of any Event of Default or an acquiescence therein nor
shall any single exercise or partial exercise of any such right or remedy
preclude any other exercise thereof or any exercise of any other or
further right or remedy; nor shall the acceptance by the Indenture Trustee
of any security or any payment of any part of the Credit Facility maturing
after any Event of Default or of any payment on account of any past
default be construed to be a waiver of any right to take advantage of any
future Event of Default or of any past Event of Default not completely
cured thereby. To the extent permitted by law, every right or remedy
given by this Indenture or any other Security Document or by law to the
Indenture Trustee, the Agent or any of the Lenders may be exercised from
time to time, and as often and in such order as may be deemed expedient,
by the Indenture Trustee, the Agent or the Lenders, as the case may be.
Section 307. Discontinuance of Enforcement Proceedings.
In case the Indenture Trustee shall have proceeded to enforce any
right, power or remedy under this Indenture or under either Mortgage and
such proceeding shall have been discontinued or abandoned for any reason
or shall have been adversely determined to the Indenture Trustee, then,
and in every such case, the Borrowers and the Indenture Trustee shall be
restored to their former positions and rights hereunder with respect to
the property subject or intended to be subject to this Indenture or either
Mortgage, as the case may be, and all rights, remedies and powers of the
Indenture Trustee shall continue as if no such proceedings had been taken.
Section 308. Control by the Majority Lenders.
Subject to (i) the provisions of Section 309 and (ii) the requirements
of Sections 9 and 37 of the Shipping Act, 1916, as amended, the Agent or
the Majority Lenders shall have the right by written Instructions to the
Indenture Trustee, to direct the time, method and place of conducting any
proceeding for any remedy available to the Indenture Trustee under this
Indenture or either Mortgage or exercising any trust or power conferred on
the Indenture Trustee herein or therein, and upon receipt of such written
Instructions, the Indenture Trustee, subject to the provisions of Article
4, shall take the actions specified in such written Instructions, provided
that such written instructions shall not be in conflict with any rule of
law or with this Indenture or expose the Indenture Trustee to personal
liability.
Section 309. Undertaking for Costs.
The parties to this Indenture agree, and the Lenders by making the
Credit Facility available shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Indenture
Trustee for any action taken or omitted by it as Indenture Trustee, the
filing by any party litigant in such suit of an undertaking to pay the
costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of
the claims or defenses made by such party litigant; but the provisions of
this Section shall not apply to any suit instituted by the Indenture
Trustee, or to any suit instituted by the Lenders, unless otherwise
required by law.
Section 310. Waiver of Demand, etc.
Each Borrower hereby expressly waives demand and presentment for
payment, notice of nonpayment, protest, notice of protest, notice of
dishonor, bringing of suit, and diligence in taking any action to collect
amounts called for under this Indenture, the other Security Documents or
the Credit Agreement at any time in connection herewith and therewith.
ARTICLE 4
THE INDENTURE TRUSTEE
Section 401. Certain Duties and Liabilities.
(a) The Indenture Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture against
the Indenture Trustee.
(b) Without limiting the provisions of paragraph (a) of this Section
401 or the provisions of Section 308, in any case where the terms of this
Indenture or either Mortgage vest in the Indenture Trustee non-mandatory,
discretionary authority to take any action or give any consent or approval
upon the request of either of the Borrowers, the Agent, any of the Lenders
or otherwise, the Indenture Trustee shall be required, first to give
notice of such proposed action, approval or consent to the Agent, and upon
receipt of written Instructions of the Agent, the Indenture Trustee shall
act with respect to such action, approval or consent only in accordance
with such written Instructions.
(c) In case an Event of Default shall have occurred and be
continuing, the Indenture Trustee shall (except as otherwise provided in
Section 308) exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as
a prudent man would exercise or use under the circumstances in the conduct
of his own affairs.
(d) No provision of this Indenture shall be construed to relieve the
Indenture Trustee from liability for its own gross negligence or its own
willful misconduct or that of its employees, agents, officers and
attorneys.
(e) Save for the provisions of paragraph (d) hereof, the Indenture
Trustee shall not be liable with respect to any action taken or omitted to
be taken by it in accordance with Instructions of the Agent or the
Majority Lenders relating to the exercise of any trust, right, remedy or
power conferred upon the Indenture Trustee under this Indenture or either
Mortgage, or exercisable by it hereunder or thereunder.
(f) None of the provisions of this Indenture shall require the
Indenture Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in
the exercise of any of its rights or powers, if there is reasonable ground
for believing that the repayment of such funds or liability is not
reasonably assured to it under the terms of this Indenture or by special
agreement of the Agent or the Majority Lenders.
(g) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Indenture Trustee shall be subject to the
provisions of this Section.
(h) The Indenture Trustee shall not be deemed to have knowledge
("Actual Knowledge") of the existence of an Event of Default unless the
Indenture Trustee shall have received telecopied or other written notice
of such Event of Default from the Agent or Majority Lenders, or a
Responsible Officer in the Corporate Trust Office of the Indenture Trustee
shall have actual knowledge of such Event of Default.
(i) The Indenture Trustee shall promptly, upon receiving Actual
Knowledge of an Event of Default, inform the Agent and the Lenders by
telex or telecopy of such Event of Default.
(j) None of the provisions of this Indenture shall require the
Indenture Trustee to review or hold policies of insurance or to make any
claims or take any other action with respect to such insurance unless
specifically instructed to do so by the Agent.
Section 402. Certain Rights of Indenture Trustee.
Except as otherwise provided in Section 401:
(a) The Indenture Trustee may rely and shall be protected in acting
or refraining from acting upon any written statement, instrument, notice,
request, instruction, direction or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) The Indenture Trustee may consult with counsel and the written
advice of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in reliance thereon and in compliance therewith, absent bad
faith, negligence or willful misconduct on the part of the Indenture
Trustee;
(c) The Indenture Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request
or direction of the Agent or the Majority Lenders pursuant to this
Indenture, unless the Agent or the Majority Lenders shall have offered to
the Indenture Trustee reasonable security or indemnity against the costs
and expenses which might be incurred by it in compliance with such request
or direction;
(d) The Indenture Trustee shall not be bound to make any
investigation into the facts or matters stated in any statement,
instrument, notice, request, direction or other paper or document referred
to in paragraph (a) of this Section;
(e) The Indenture Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Indenture Trustee shall not be responsible for
the negligence of any attorney or agent appointed by the Indenture Trustee
with due care; and
(f) Should the Indenture Trustee receive written Instructions from
the Agent or the Majority Lenders which the Indenture Trustee, in its sole
opinion, believes to be conflicting Instructions, the Indenture Trustee
shall have no duty to act thereon, but if indemnified to its satisfaction
for any costs, expenses or liabilities it may incur, it shall seek
instructions concerning its responsibilities under this Indenture with
respect to such conflicting Instructions from any court of competent
jurisdiction.
Section 403. Not Responsible for Recitals.
The recitals contained herein shall be taken as the statements of the
Borrowers, and the Indenture Trustee assumes no responsibility for their
correctness. The Indenture Trustee makes no representations as to the
validity or sufficiency of this Indenture or either Mortgage.
Section 404. Money Held in Trust.
Any money held by the Indenture Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The
Indenture Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed with the Borrowers.
Any payments made by the Indenture Trustee under this Indenture shall be
made only from monies held by it in trust hereunder.
Section 405. Compensation, Reimbursement and Indemnification.
The Borrowers jointly and severally agree, subject to the provisions
of Article 5:
(a) To pay to the Indenture Trustee from time to time reasonable
compensation for all services rendered by it hereunder (which compensation
shall not be limited to any provision of law in regard to the compensation
of a trustee of an express trust);
(b) To reimburse the Indenture Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the
Indenture Trustee in accordance with any provision of this Indenture
(including, without limitation, reasonable compensation and expenses and
disbursements of its agents and counsel and expenses incurred in enforcing
its rights or remedies under any Security Document), except any such
expense, disbursement or advance as may be attributable to its gross
negligence or willful misconduct; and
(c) To indemnify the Indenture Trustee, its directors, officers,
employees and agents for, and to hold it and them harmless against, any
and all claims, losses, liabilities or expenses of any kind (including
attorneys' fees) incurred without gross negligence or willful misconduct
on its or their part and arising out of or in connection with the
acceptance or administration of this trust, including the costs and
expenses of defending itself or themselves against any claim of liability
in the premises.
(d) That to secure the obligations of the Borrowers under this
Section 405, the Indenture Trustee shall have a lien prior to the rights
of the Lenders on all money or property held or collected by the Indenture
Trustee pursuant to this Indenture.
Section 406. Corporate Indenture Trustee Required; Eligibility.
There shall at all times be a Indenture Trustee hereunder which shall
be a bank or trust company which (i) is organized as a corporation or
banking association, and is doing business under the laws of the United
States or any State thereof, (ii) is authorized under such laws to
exercise corporate trust powers, (iii) is a citizen of the United States
within the meaning of Section 2 of the Shipping Act, 1916, as amended,
(iv) is subject to supervision or examination by federal or state
authority, (v) has a combined capital and surplus (as set forth in its
most recent published report of condition) of at least $50,000,000 and
(vi) is a trustee approved by the Secretary of Transportation pursuant to
Section 9 and, if applicable, Section 37 of the Shipping Act, 1916, as
amended, and Chapter 313 of Title 46 of the United States Code. The
Indenture Trustee hereby represents and warrants that on the date hereof
it complies with the requirements of the foregoing sentence. If at any
time the Indenture Trustee shall cease to be eligible in accordance with
the provisions of this Section, it shall resign immediately in the manner
and with the effect hereinafter specified in this Article.
Section 407. Disqualification, Removal or Resignation of the Indenture
Trustee; Successor Indenture Trustees.
(a) If the Indenture Trustee ceases at any time to be a Indenture
Trustee approved by MARAD, it promptly will so notify the Agent and resign
hereunder and cooperate in all reasonable respects in the appointment of
its successor, but shall have no other liability hereunder for loss of its
status as an approved trustee. The Agent shall immediately appoint a
qualified successor trustee or shall take the actions provided for below
in the event a qualified successor trustee cannot be found by it. In
addition, the Agent may in its discretion remove the Indenture Trustee at
any time, without cause, by causing a written notice of such removal to be
delivered to the Indenture Trustee, the Borrowers and the Lenders which
notice shall state the effective date and the name of the qualified
successor trustee selected by the Agent. No removal shall be effective
unless a qualified successor trustee is available and willing to act for
the Lenders or unless the actions provided for below in the event a
qualified successor trustee is not available to the Agent have been
initiated. In the event of discharge or removal, the Indenture Trustee
shall execute all documents and take such other actions as necessary or
desirable to the Agent or the Majority Lenders to transfer the Indenture
Trustee's function of trustee to the successor trustee. The Indenture
Trustee's compensation shall cease as of the effective date of discharge
or removal, except those rights of indemnification which shall survive its
removal. Upon discharge or removal, the Indenture Trustee shall, within
thirty days, furnish the Agent, the Majority Lenders, the successor
trustee and the Borrowers a complete accounting of the trust estate, its
compensation, costs and expenses as of the date of discharge or removal.
Such amount shall be promptly paid by the Borrowers.
(b) (i) The Indenture Trustee or any successor thereto may resign
at any time without cause by giving at least ninety days prior written
notice to the Agent, the Majority Lenders and to the Borrowers, such
resignation to be effective on the date specified in such notice. The
Agent shall, prior to the date specified in such notice, appoint a
successor trustee meeting the requirements of Section 406. If the Agent
shall not have appointed such a qualified successor trustee within sixty
days after such notice, the Indenture Trustee may apply to any court of
competent jurisdiction to appoint a qualified successor trustee to act
until such time, if any, as a successor shall have been appointed by the
Agent as herein provided. Any qualified successor trustee so appointed by
such court shall immediately and without further act be superseded by any
qualified successor trustee appointed by the Agent. Any banking
institution or trust company becoming a successor trustee hereunder shall
be deemed the Indenture Trustee for all purposes hereof, and each
reference herein to the Indenture Trustee shall thereafter be deemed a
reference to such banking institution or trust company.
(ii) Any successor trustee, whether appointed by a court or by
the Agent as provided in subparagraph (b) (i), shall execute and deliver
to the predecessor trustee an instrument accepting such appointment, and
thereupon such successor trustee, without further act, shall become vested
with all the estates, properties, rights, powers, duties and trusts of the
predecessor trustee in the trust hereunder with like effect as if
originally named as the Indenture Trustee herein; and such predecessor
trustee shall execute and deliver an instrument transferring to such
successor trustee, upon the trusts herein expressed, all the estates,
properties, rights, powers, duties and trusts of such predecessor trustee,
and such predecessor trustee shall duly assign, transfer, deliver and pay
over to such successor trustee any property or monies or other things of
value then held by such predecessor trustee upon the trusts herein
expressed.
(iii) Any successor trustee, however appointed, shall be a
trustee approved by MARAD in accordance with the provisions of Chapter 313
of Title 46 of the United States Code.
(iv) Any bank into which the Indenture Trustee may be merged or
converted or with which it may be consolidated, or any bank resulting from
any merger, conversion on consolidation to which the Indenture Trustee
shall be a party, or any bank to which substantially all the business of
the Indenture Trustee may be transferred, shall, subject to the terms of
this Section 407(b), be the Indenture Trustee under this Indenture without
any further act, provided the successor bank remains qualified.
(v) Within sixty days of the effective date of its
resignation, the Indenture Trustee shall provide the Agent a statement and
accounting as though it had been removed in accordance with Section 407(a)
hereof.
(c) A successor trustee shall be appointed by an instrument in
writing which shall state the effective date on which said successor
trustee shall become the Indenture Trustee hereunder and the holder of
this instrument and the trust estate, which document shall contain the
executed acknowledgement of acceptance by the successor trustee of the
trust, the trust estate and the duties of the Indenture Trustee as herein
provided.
The Indenture Trustee or any predecessor trustee shall duly assign,
transfer, deliver and pay over to any successor trustee any property and
monies or things of value subject to the trust hereunder and held by the
Indenture Trustee or any predecessor trustee, as the case may be. Should
any act or further instrument from the Indenture Trustee, any predecessor
trustee, or the Lenders be required by any successor trustee for more
fully and certainly vesting in and confirming to such successor trustee
such estates, properties, rights, remedies and trusts, then on request by
such successor trustee any and all such acts and instruments shall be
done, made, executed, acknowledged and delivered by the Indenture Trustee,
any predecessor trustee, or the Lenders, as the case may be.
(d) Should for any reason the Agent be unable to locate a qualified
successor trustee, then prior to ceasing to act as trustee or becoming
disqualified to do so the Indenture Trustee shall cooperate with the Agent
and the Lenders in the following:
(i) First, petition MARAD for approval of a presently
unqualified bank or trust company satisfactory to the Agent or the
Majority Lenders and willing to act as trustee;
(ii) If MARAD approval cannot be obtained for such available
unqualified trustee then the Agent or the Majority Lenders and the
Indenture Trustee shall petition the United States District Court for the
Southern District of New York for instructions to the Indenture Trustee in
order that the trust estate may be preserved and to prevent the Agent, the
Majority Lenders or the Indenture Trustee from falling in violation of
law. To the extent that such may be required or necessary, the parties
hereto agree that said Court has jurisdiction for this purpose; however,
if, in the interest of justice, the said Court determines to transfer the
matter to any other United States court, the parties hereby agree to the
jurisdiction of such transferee court. Any such petition shall be served
upon the parties hereto and MARAD, with a copy mailed to the chief counsel
of MARAD and the Borrowers. The Indenture Trustee, the Agent, the Majority
Lenders and any successor trustee hereby agree to abide by the
instructions of the court issuing same and to all acts, execute such
documents and instructions as may be required in connection therewith and
all other instruments and documents necessary to preserve the trust estate
for the benefit of the Lenders, as beneficiaries, under the terms hereof
as well as preserving the adequacy and enforceability of any interest held
in the trust estate.
Section 408. Co-trustees and Separate Indenture Trustees.
At any time or times, for the purpose of meeting the legal
requirements of any jurisdiction in which any security may at the time be
located, the Borrowers and the Indenture Trustee shall have power to
appoint, and upon the written request of the Indenture Trustee, the Agent
or of the Majority Lenders, the Borrowers shall for such purpose join with
the Indenture Trustee in execution, delivery and performance of all
instruments and agreements necessary or proper to appoint, one or more
persons approved by the Indenture Trustee either to act as co-trustee,
jointly with the Indenture Trustee, and, if deemed necessary by the
appointing party, as secured party with respect to all or any part of the
security, or to act as separate trustee and, if deemed necessary as
aforesaid, as secured party with respect to any such property, in either
case with such powers as may be provided in the instrument of appointment,
and to vest in such person or persons in the capacity aforesaid, any
property, title, right or power deemed necessary or desirable, subject to
the other provisions of this Section. If the Borrowers do not join in such
appointment within fifteen days after the receipt by them of a request so
to do, or in case an Event of Default has occurred and is continuing, the
Indenture Trustee acting alone shall have power to make such appointment.
Any person appointed as co-trustee or separate trustee hereunder shall
satisfy the qualifications prescribed in clauses (i), (iii), (iv) and (vi)
of Section 406.
Should any written instrument from the Borrowers be required by any
co-trustee or separate trustee so appointed for more fully confirming to
such co-trustee or separate trustee such property, title, right or power,
any and all such instruments shall, on request, be executed, acknowledged
and delivered by the Borrowers.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms,
namely:
(a) All rights, powers, duties and obligations hereunder in respect
of the custody of the Security Documents held by the Indenture Trustee
hereunder, shall be exercised solely by the Indenture Trustee.
(b) The rights, powers, duties and obligations hereby conferred or
imposed upon the Indenture Trustee in respect of any property covered by
such appointment shall be conferred or imposed upon and exercised or
performed by the Indenture Trustee or by the Indenture Trustee and such
co-trustee or separate trustee jointly, as shall be provided in the
instrument appointing such co-trustee or separate trustee, except to the
extent that under any law or any jurisdiction in which any particular act
is to be performed, the Indenture Trustee shall be incompetent or
unqualified to perform such act, in which event such rights, powers,
duties and obligations shall be exercised and performed by such co-trustee
or separate trustee.
(c) The Indenture Trustee at any time, by an instrument in writing
executed by it, with the concurrence of the Borrowers evidenced by
separate resolutions of the board of directors of each Borrower, may
accept the resignation of or remove any co-trustee or separate trustee
appointed under this Section, and, in case an Event of Default shall have
occurred and be continuing, the Indenture Trustee may act alone in the
execution, delivery and performance of all instruments and agreements
necessary or proper to effectuate such resignation or removal. A successor
to any co-trustee or separate trustee so resigned or removed may be
appointed in the manner provided in this Section.
(d) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Indenture Trustee or any
other such trustee hereunder.
(e) Any notice of instruction delivered to the Indenture Trustee by
the Agent or the Majority Lenders shall be deemed to have been delivered
to each such co-trustee and separate trustee.
ARTICLE 5
SATISFACTION AND DISCHARGE
Section 501. General.
If the Borrowers shall pay or cause to be paid all of the
Indebtedness, then this Indenture and the liens, estate and rights and
interest hereby and thereby created shall cease, determine and become null
and void, and the Indenture Trustee, upon written request of the
Borrowers, accompanied by an opinion of counsel acceptable to the
Indenture Trustee, and at the cost and expense of the Borrowers, shall
forthwith cause satisfaction and discharge of this Indenture and shall
execute and deliver to the Borrowers such instruments as may be necessary,
duly acknowledging the satisfaction and discharge of this Indenture and
forthwith the estate, right, title and interest of the Indenture Trustee
in and to any property held by it under this Indenture or under either
Mortgage shall thereupon cease, determine and become null and void, and
the Indenture Trustee shall transfer the same to the Borrowers.
Section 502. Survival of Certain Obligations.
Notwithstanding the satisfaction and discharge of this Indenture, (a)
the liabilities and obligations of the Borrowers to the Indenture Trustee
under Section 405 shall survive, and (b) if a Borrower's trustee in
bankruptcy or any Person under any applicable bankruptcy law shall recover
all or part of the Indebtedness payable hereunder from the Indenture
Trustee or from any of the Lenders, this Indenture and all other Security
Documents shall be deemed not to have been satisfied and discharged but
shall continue to be in full force and effect to the extent of the amount
so recovered.
ARTICLE 6
SUPPLEMENTAL INDENTURES
Section 601. Waivers and Supplemental Indentures With Consent of
Lenders.
This Indenture may not be waived, modified, amended or supplemented
without the prior written consent of the Agent or the Majority Lenders.
Section 602. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by any
indenture supplemental hereto or the modifications thereby of the trusts
created by this Indenture, the Indenture Trustee shall be entitled to
receive, and (subject to Sections 401 and 601) shall be fully protected in
relying upon, an opinion of counsel of the Borrowers stating that the
execution of such Supplemental Indenture is authorized or permitted by
this Indenture. The Indenture Trustee may, but shall not be obligated to,
enter into any such Supplemental Indenture which affects the Indenture
Trustee's own rights, duties or immunities under this Indenture or
otherwise.
Section 603. Effect of Supplemental Indentures.
Upon the execution of any indenture supplemental hereto, this
Indenture shall be modified in accordance therewith, and such Supplemental
Indenture shall form a part of this Indenture for all purposes.
ARTICLE 7
INSTRUCTIONS OF THE AGENT OR MAJORITY LENDERS
Section 701. Instructions of the Agent or Majority Lenders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver of or other action required or permitted by this Indenture to be
given by the Agent or the Majority Lenders (sometimes referred to herein
as "Instructions") shall be given in accordance with Section 102. The
Indenture Trustee and the Borrowers shall be entitled to assume that any
Instructions so given have been duly authorized. No instructions shall be
given which are in violation of this Indenture (or the Credit Agreement or
any of the Security Documents, as defined in the Credit Agreement) or in
violation of any applicable laws.
(b) Unless and until the Indenture Trustee shall have received
conflicting Instructions from the Agent or the Majority Lenders, any
request, demand, authorization, direction, notice, consent, waiver or
other action by the Agent or the Majority Lenders shall bind the other
Lenders in respect of anything done or suffered to be done by the
Indenture Trustee or either Borrower in reliance thereon.
ARTICLE 8
LIMITATION OF LIABILITY
Section 801. Limitation of Liability of Wilmington Trust Company.
It is expressly understood and agreed by the parties hereto that this
Indenture is executed and delivered by Wilmington Trust Company not
individually but solely as Indenture Trustee and nothing contained herein
shall be construed as creating any liability on Wilmington Trust Company
individually, including any covenant either express or implied herein, all
such liability, if any, being expressly waived by all parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed on the day and year first above written.
READING & BATES DRILLING CO.
By: ______________________________
Title:
READING & BATES EXPLORATION CO.
By: ________________________________
Title:
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Indenture
Trustee
By: ______________________________
Title:
- -----------------------------------------------------------------------------
ACKNOWLEDGEMENT
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this ______ day of November, 1995 before me personally appeared
_________________ to me known who being by me duly sworn did depose and
say that he resides at ___________________________, that he is
__________________ for READING & BATES DRILLING CO., the corporation
described in and which executed the foregoing instrument; and that he
signed his name thereto by order of the Board of Directors of READING &
BATES DRILLING CO.
__________________________
Notary Public
- -----------------------------------------------------------------------------
ACKNOWLEDGEMENT
STATE OF NEW YORK )
) S.S.
COUNTY OF NEW YORK )
On this ______ day of November, 1995 before me personally appeared
_________________ to me known who being by me duly sworn did depose and
say that he resides at ___________________________, that he is
__________________ for READING & BATES EXPLORATION CO., the corporation
described in and which executed the foregoing instrument; and that he
signed his name thereto by order of the Board of Directors of READING &
BATES EXPLORATION CO.
__________________________
Notary Public
- -----------------------------------------------------------------------------
ACKNOWLEDGEMENT
STATE OF DELAWARE )
) S.S.
COUNTY OF NEW CASTLE )
On this ______ day of November, 1995 before me personally appeared
_________________ to me known who being by me duly sworn did depose and
say that he resides at ___________________________, that he is
__________________ for WILMINGTON TRUST COMPANY, the corporation described
in and which executed the foregoing instrument; and that he signed his
name thereto by order of the Board of Directors of WILMINGTON TRUST
COMPANY.
__________________________
Notary Public
EXHIBIT 10.106
GENERAL ASSIGNMENT
JACK BATES
THIS GENERAL ASSIGNMENT (this "Assignment") is made the 28th day of
November, 1995 by READING & BATES DRILLING CO., a corporation incorporated
in and under the laws of the State of Oklahoma, with its office at 901
Threadneedle, Suite 200, Houston, Texas 77079 (the "Assignor"), in favor
of CHRISTIANIA BANK OG KREDITKASSE, a Norwegian banking corporation,
acting through its New York branch at 11 West 42nd Street, 7th Floor, New
York, New York 10036 as Agent for the Lenders referred to below (the
"Assignee");
Recitals
(A) The Assignor is the sole owner of the whole of the semi-
submersible drilling unit JACK BATES (the "Rig"), Official No. D906283, of
approximately 19928 gross registered tons, documented in the name of the
Assignor under the laws and flag of the United States at the port of
Houston, Texas;
(B) By a Credit Facility Agreement dated as of November 16, 1995, as
the same may be amended or supplemented from time to time (the "Credit
Agreement"), among (i) the Assignor and Reading & Bates Exploration Co.,
an Oklahoma corporation, as joint and several borrowers (collectively, the
"Borrowers"), (ii) Reading & Bates Corporation, as guarantor, (iii) the
lenders referred to therein (the "Lenders") and (iv) the Assignee, as
agent for the Lenders, the Lenders have agreed to make available to the
Borrowers (i) a reducing revolving credit facility in the principal amount
of Forty-Five Million United States Dollars (U.S.$45,000,000) (the
"Revolving Credit Facility") and (ii) a Standby Letter of Credit Facility
in an aggregate amount not to exceed Ten Million United States Dollars
(U.S. $10,000,000) (the "Standby Letter of Credit Facility", and together
with the Revolving Credit Facility, collectively the "Credit Facility").
(C) It is a condition precedent, among others, to making the Credit
Facility available to the Borrowers under the Credit Agreement that the
Assignor execute and deliver this Assignment to the Assignee as partial
security for amounts advanced under the Credit Facility and all other sums
payable or to become payable by the Assignor under or arising from the
Credit Agreement, the Note and the Security Documents (as such terms are
defined in the Credit Agreement).
In consideration of the recitals prescribed above, the premises
contained herein and such other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by the Assignor,
and in order to induce the Lenders to make the Credit Facility available
to the Borrowers:
1. The Assignor, as legal and beneficial owner, hereby assigns,
transfers and sets over unto the Assignee for the benefit of the Assignee
and its successors and assigns, and hereby grants the Assignee a security
interest in, all of the Assignor's right, title and interest in and to:
(i) the earnings of the Rig from any source; (ii) all moneys or other
compensation payable by reason of requisition of title or for hire or
other compulsory acquisition of the Rig; and (iii) all proceeds of the
foregoing. As used herein, "earnings" in (i) means:
(a) all charterhire and other moneys and rights and claims to
moneys;
(b) all the Assignor's right, title and interest to and in any
moneys whatsoever payable to the Assignor under any
bareboat or time charter, drilling contract, or other
contract for the use or employment of the Rig, and all
other rights and benefits whatsoever accruing to the
Assignor thereunder, including (but without prejudice to
the generality of the foregoing) all claims for damages
for any breach by any charterer or other party thereto of
any such bareboat or time charter, contract of
affreightment, or other contract for the use or employment
of the Rig; and
(c) all freights (if any), passage moneys (if any), hire
moneys (if any), compensation (if any) payable to the
Assignor in the event of the requisition of the Rig for
hire, remuneration for salvage and towage services (if
any), demurrage and detention moneys (if any), and any
other earnings whatsoever due or to become due to the
Assignor.
2. The Assignor hereby represents, warrants and undertakes that:
(a) notice of this Assignment in the form attached hereto as
Exhibit 1 will be promptly delivered upon the occurrence
of an Event of Default as defined in Clause 11 of the
Credit Agreement to any charterer of the Rig; and
(b) upon the occurrence of an Event of Default as defined in
Clause 11 of the Credit Agreement, it will use its good
faith efforts to cause any charterer to execute a Consent
and Agreement to this Assignment in the form attached
hereto as Exhibit 2 and deliver such Consent and Agreement
to the Assignee.
3. All earnings of the Rig assigned hereby shall be payable to the
Earnings Account (as defined in the Credit Agreement) in accordance with
and subject to Clause 13 of the Credit Agreement.
4. The Assignor hereby undertakes that, notwithstanding this
Assignment, it shall punctually perform all its obligations under all
charters and contracts pertaining to the Rig.
5. It is hereby expressly agreed that, anything contained herein to
the contrary notwithstanding, the Assignor shall remain liable under all
charters and contracts pertaining to the Rig to perform the obligations
assumed by it thereunder, and the Assignee shall have no obligation or
liability of any nature whatsoever under any such charter or contract by
reason of, or arising out of, this Assignment, nor shall the Assignee be
required to assume or be obligated in any manner to perform or fulfill any
obligation of the Assignor under or pursuant to any such charter or
contract or to make any payment or make any inquiry as to the nature or
sufficiency of any payment received by the Assignee, or, unless and until
indemnified to its satisfaction, to present or file any claim or to take
any other action to collect or enforce the payment of any amounts which
may have been assigned to it or to which it may be entitled hereunder or
pursuant hereto at any time or times.
6. The Assignor shall promptly notify the Assignee in writing of
the commencement and termination of any period during which the Rig may be
requisitioned.
7. The Assignor hereby further covenants and undertakes promptly to
furnish the Assignee with all such information as it may from time to time
reasonably require regarding the employment, position and engagements of
the Rig.
8. The Assignor hereby warrants and represents that it has not
assigned or pledged, and hereby covenants that it will not assign or
pledge so long as this Assignment shall remain in effect, any of its
right, title or interest in the whole or any part of the moneys and claims
hereby assigned, to anyone other than the Assignee, and it will not take
or omit to take any action, the taking or omission of which might result
in a material alteration or impairment of the rights hereby assigned or
any of the rights created in this Assignment.
9. The Assignor does hereby appoint and constitute the Assignee as
the Assignor's true and lawful attorney-in-fact with full power (in the
name of the Assignor or otherwise), to ask, require, demand, receive,
compound and give acquittance for any and all moneys and claims for moneys
assigned hereby, to endorse any checks or other instruments or orders in
connection therewith, to file any claims or take any action or institute
any proceedings which the Assignee may deem to be necessary or advisable
in the premises and to file, without the signature of the Assignor, any
and all Uniform Commercial Code financing statements or renewals thereof
arising from this Assignment which the Assignee may deem to be necessary
or advisable in order to perfect or maintain the security interest granted
hereby. Such appointment of the Assignee as attorney-in-fact is
irrevocable and coupled with an interest.
10. The Assignee shall not be required to make any inquiry as to the
nature or sufficiency of any payment received by the Assignee, or, unless
and until indemnified to its satisfaction, to present or file any claim,
or to take any other action to collect or enforce the payment of any
amounts which may have been assigned to it or to which it may be entitled
hereunder or pursuant hereto at any time or times.
11. All moneys collected or received by the Assignee pursuant to
this Assignment shall be dealt with as provided in the Credit Agreement
and the Mortgage (as defined in the Credit Agreement) relating to the Rig.
12. Each and every right, power and remedy given herein or in the
Credit Agreement or in the Security Documents to the Assignee shall be
cumulative and shall be in addition to every other right, power and remedy
of the Assignee now or hereafter existing at law, in equity or by statute,
and each and every right, power and remedy, whether herein given or
otherwise existing, may be exercised from time to time, in whole or in
part, and as often and in such order as may be deemed expedient by the
Assignee, and the exercise or the commencement of the exercise of any
right, power or remedy shall not be construed to be a waiver of the right
to exercise at the same time or thereafter any other right, power or
remedy. No delay or omission by the Assignee in the exercise of any right
or power in the pursuance of any remedy accruing upon any breach or
default by the Assignor shall impair any such right, power or remedy or be
construed to be a waiver of any such right, power or remedy or to be an
acquiescence therein; nor shall the acceptance by the Assignee of any
security or of any payment of or on account of any of the amounts due from
the Assignor to the Assignee and maturing after any breach or default or
of any payment on account of any past breach or default be construed to be
a waiver of any right to take advantage of any future breach or default or
of any past breach or default not completely cured thereby.
13. If any provision of this Assignment shall at any time for any
reason be declared or decided to be invalid, void or otherwise inoperative
by a court of competent jurisdiction, such declaration or decision shall
not affect the validity of any other provision or provisions of this
Assignment, or the validity of this Assignment as a whole. In the event
that by reason of any law or regulation in force or to become in force, or
by reason of a ruling of any court of competent jurisdiction, or by any
other reason whatsoever, this Assignment is rendered either wholly or
partly defective, the Assignor shall furnish the Assignee with an
alternative assignment or security and do all such other acts as are
reasonably required in order to ensure and give effect to the full intent
of this Assignment.
14. It is declared and agreed that the security created by this
Assignment shall be held by the Assignee as a continuing security for the
payment of all moneys which may at any time and from time to time be or
become payable by the Assignor under the Credit Agreement, the Note and
the Security Documents and that the security so created shall not be
satisfied by an intermediate payment or satisfaction of any part of the
amount hereby secured and that the security so created shall be in
addition to and shall not in any way be prejudiced or affected by any
collateral or other security now or hereafter held by the Assignee for all
or any part of the moneys hereby secured.
15. If the Assignor shall pay and discharge, or shall cause to be
paid and discharged, the principal of and interest on the Credit Facility
and shall pay or cause to be paid all other sums payable by it under or
arising from the Credit Agreement, the Note and the Security Documents,
all the rights, title and interests herein assigned shall revert to the
Assignor, without further act on the part of the Assignor, the Assignee or
the Agent (except such execution and filing of termination statements,
releases, or like instruments as may be reasonably required to terminate
this Assignment as a mater of public record), and this Assignment shall
terminate.
16. Whenever in this Assignment reference is made to any person,
such reference shall be deemed to include the successors and assigns of
such person.
17. Notices and other communications hereunder shall be sent by
telex or telecopy and confirmed by certified mail (by airmail, if
international) as follows:
If to the Assignor - c/o Reading & Bates Corporation
901 Threadneedle
Suite 200
Houston, Texas 77079
Telefacsimile No.: (713) 496-0285
Attention: Chief Financial Officer
If to the Assignee - Christiania Bank og Kreditkasse,
acting through its New York branch
11 West 42nd Street, 7th Floor
New York, New York 10036
Telex No.: 824277 CBNY UF
Telefacsimile No.: (212) 827-4888
Attention: Loan Administration
With a copy to:
Watson, Farley & Williams
380 Madison Avenue
New York, New York 10017
Telex No.: 6790626 WFW NY
Telefacsimile No.: (212) 922-1512
Attention: John S. Osborne, Jr., Esq.
Every notice or demand shall, except so far as otherwise expressly
provided by this Agreement, be deemed to have been received in the case of
a telex or telefacsimile with confirmed answerback at the time of dispatch
thereof (provided that if the date of dispatch is not a business day in
the locality of the party to whom such notice or demand is sent it shall
be deemed to have been received on the next following business day in such
locality), in the case of a letter delivered by hand at the time of
delivery, and in the case of a letter delivered by mail on the expiration
of the fifth (5th) business day after the same is put into the mail.
18. This Assignment shall be deemed to be a contract under the
substantive laws of the State of New York and for all purposes shall be
construed in accordance with the internal laws of said state, without
reference to principles of conflicts of law.
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be
executed as of the day and year first above written.
READING & BATES DRILLING CO.
By ________________________
Its:
- -----------------------------------------------------------------------------
Exhibit 1
to
General Assignment
NOTICE OF ASSIGNMENT
TO:
TAKE NOTICE THAT:
By a General Assignment dated the ____ day of November, 1995 made by
us to Christiania Bank og Kreditkasse, acting through its New York
Branch, as agent (the "Assignee"), and relating to the United States
flag vessel JACK BATES (the "Rig"), we have assigned to the Assignee
as from the date thereof all our right, title and interest in and to
any moneys whatsoever payable to us under that certain [Charter
Contract] dated as of ____________, 199__ (the "Contract") between
yourselves and the undersigned concerning the Rig, as the Contract may
at any time be amended or supplemented, and all other rights and
benefits whatsoever accruing to us which arise or may arise from the
operation of the Rig under the Contract including (but without
prejudice to the generality of the foregoing) all claims for damages
for any breach of the Contract by you, provided that you shall pay all
proceeds due us under the Contract to the account in the joint names
of the undersigned and Reading & Bates Exploration Co. with
Christiania Bank og Kreditkasse, Grand Cayman Branch, Account No.
4062660601, until you are otherwise notified by the Assignee. Upon
receipt of such notice in writing, you are authorized and instructed
to pay to the Assignee as from the date thereof all such moneys as you
may be or become liable to pay under the Contract to such account as
the Assignee may direct.
DATED THIS day of , 199__.
READING & BATES DRILLING CO.
By ________________________
Its:
- -----------------------------------------------------------------------------
Exhibit 2
to
General Assignment
CONSENT AND AGREEMENT
The undersigned, [ ], a party to the Contract
to which the Notice of Assignment delivered pursuant to the foregoing
Assignment refers (terms defined in the Assignment are used herein with
the same meaning), in consideration of the sum of one dollar ($1.00)
lawful money of the United States of America and other good and valuable
consideration, paid by Christiania Bank og Kreditkasse, acting through its
New York Branch, as agent (the "Assignee"), the receipt of which is hereby
acknowledged, hereby acknowledges notice of and consents and agrees to the
foregoing Assignment and to all of the terms thereof and agrees that: (1)
upon receipt of written notice from the Assignee it will make payment
directly to such account as the Assignee may direct, of all moneys due and
to become due from it under the Contract until receipt of written notice
from the Assignee that all obligations to the Lenders secured by said
Assignment have been paid in full; and (2) any such payment shall be final
and the undersigned will not seek to recover from the Assignee for any
reason whatsoever any moneys paid by the undersigned to the Assignee by
virtue of the foregoing Assignment and this Consent and Agreement but this
shall not prevent the set off or credit against or deduction from any
moneys payable to the Assignee by virtue of said Assignment of amounts
owing to the undersigned by Reading & Bates Drilling Co. under the
Contract.
[ ], as charterer, confirms and agrees that
the Contract is in full force and effect and is enforceable in accordance
with its terms and the Assignor is not in default thereunder.
This Consent and Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without
reference to principles of conflicts of law.
Dated: ______________, 199__
[ ]
By
Its:
EXHIBIT 10.107
GENERAL ASSIGNMENT
D.R. STEWART
THIS GENERAL ASSIGNMENT (this "Assignment") is made the 28th day of
November, 1995 by READING & BATES EXPLORATION CO., a corporation
incorporated in and under the laws of the State of Oklahoma, with its
office at 901 Threadneedle, Suite 200, Houston, Texas 77079 (the
"Assignor"), in favor of CHRISTIANIA BANK OG KREDITKASSE, a Norwegian
banking corporation, acting through its New York branch at 11 West 42nd
Street, 7th Floor, New York, New York 10036 as Agent for the Lenders
referred to below (the "Assignee");
Recitals
(A) The Assignor is the sole owner of the whole of the semi-
submersible drilling unit D.R. STEWART (the "Rig"), Official No. D626904,
of approximately 6,494 gross registered tons, documented in the name of
the Assignor under the laws and flag of the United States at the port of
Houston, Texas;
(B) By a Credit Facility Agreement dated as of November 16, 1995, as
the same may be amended or supplemented from time to time (the "Credit
Agreement"), among (i) the Assignor and Reading & Bates Drilling Co., an
Oklahoma corporation, as joint and several borrowers (collectively, the
"Borrowers"), (ii) Reading & Bates Corporation, as guarantor, (iii) the
lenders referred to therein (the "Lenders") and (iv) the Assignee, as
agent for the Lenders, the Lenders have agreed to make available to the
Borrowers (i) a reducing revolving credit facility in the principal amount
of Forty-Five Million United States Dollars (U.S.$45,000,000) (the
"Revolving Credit Facility") and (ii) a Standby Letter of Credit Facility
in an aggregate amount not to exceed Ten Million United States Dollars
(U.S. $10,000,000) (the "Standby Letter of Credit Facility", and together
with the Revolving Credit Facility, collectively the "Credit Facility").
(C) It is a condition precedent, among others, to making the Credit
Facility available to the Borrowers under the Credit Agreement that the
Assignor execute and deliver this Assignment to the Assignee as partial
security for amounts advanced under the Credit Facility and all other sums
payable or to become payable by the Assignor under or arising from the
Credit Agreement, the Note and the Security Documents (as such terms are
defined in the Credit Agreement).
In consideration of the recitals prescribed above, the premises
contained herein and such other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by the Assignor,
and in order to induce the Lenders to make the Credit Facility available
to the Borrowers:
1. The Assignor, as legal and beneficial owner, hereby assigns,
transfers and sets over unto the Assignee for the benefit of the Assignee
and its successors and assigns, and hereby grants the Assignee a security
interest in, all of the Assignor's right, title and interest in and to:
(i) the earnings of the Rig from any source; (ii) all moneys or other
compensation payable by reason of requisition of title or for hire or
other compulsory acquisition of the Rig; and (iii) all proceeds of the
foregoing. As used herein, "earnings" in (i) means:
(a) all charterhire and other moneys and rights and claims to
moneys;
(b) all the Assignor's right, title and interest to and in any
moneys whatsoever payable to the Assignor under any
bareboat or time charter, drilling contract, or other
contract for the use or employment of the Rig, and all
other rights and benefits whatsoever accruing to the
Assignor thereunder, including (but without prejudice to
the generality of the foregoing) all claims for damages
for any breach by any charterer or other party thereto of
any such bareboat or time charter, contract of
affreightment, or other contract for the use or employment
of the Rig; and
(c) all freights (if any), passage moneys (if any), hire
moneys (if any), compensation (if any) payable to the
Assignor in the event of the requisition of the Rig for
hire, remuneration for salvage and towage services (if
any), demurrage and detention moneys (if any), and any
other earnings whatsoever due or to become due to the
Assignor.
2. The Assignor hereby represents, warrants and undertakes that:
(a) notice of this Assignment in the form attached hereto as
Exhibit 1 will be promptly delivered upon the occurrence
of an Event of Default as defined in Clause 11 of the
Credit Agreement to any charterer of the Rig; and
(b) upon the occurrence of an Event of Default as defined in
Clause 11 of the Credit Agreement, it will use its good
faith efforts to cause any charterer to execute a Consent
and Agreement to this Assignment in the form attached
hereto as Exhibit 2 and deliver such Consent and Agreement
to the Assignee.
3. All earnings of the Rig assigned hereby shall be payable to the
Earnings Account (as defined in the Credit Agreement) in accordance with
and subject to Clause 13 of the Credit Agreement.
4. The Assignor hereby undertakes that, notwithstanding this
Assignment, it shall punctually perform all its obligations under all
charters and contracts pertaining to the Rig.
5. It is hereby expressly agreed that, anything contained herein to
the contrary notwithstanding, the Assignor shall remain liable under all
charters and contracts pertaining to the Rig to perform the obligations
assumed by it thereunder, and the Assignee shall have no obligation or
liability of any nature whatsoever under any such charter or contract by
reason of, or arising out of, this Assignment, nor shall the Assignee be
required to assume or be obligated in any manner to perform or fulfill any
obligation of the Assignor under or pursuant to any such charter or
contract or to make any payment or make any inquiry as to the nature or
sufficiency of any payment received by the Assignee, or, unless and until
indemnified to its satisfaction, to present or file any claim or to take
any other action to collect or enforce the payment of any amounts which
may have been assigned to it or to which it may be entitled hereunder or
pursuant hereto at any time or times.
6. The Assignor shall promptly notify the Assignee in writing of
the commencement and termination of any period during which the Rig may be
requisitioned.
7. The Assignor hereby further covenants and undertakes promptly to
furnish the Assignee with all such information as it may from time to time
reasonably require regarding the employment, position and engagements of
the Rig.
8. The Assignor hereby warrants and represents that it has not
assigned or pledged, and hereby covenants that it will not assign or
pledge so long as this Assignment shall remain in effect, any of its
right, title or interest in the whole or any part of the moneys and claims
hereby assigned, to anyone other than the Assignee, and it will not take
or omit to take any action, the taking or omission of which might result
in a material alteration or impairment of the rights hereby assigned or
any of the rights created in this Assignment.
9. The Assignor does hereby appoint and constitute the Assignee as
the Assignor's true and lawful attorney-in-fact with full power (in the
name of the Assignor or otherwise), to ask, require, demand, receive,
compound and give acquittance for any and all moneys and claims for moneys
assigned hereby, to endorse any checks or other instruments or orders in
connection therewith, to file any claims or take any action or institute
any proceedings which the Assignee may deem to be necessary or advisable
in the premises and to file, without the signature of the Assignor, any
and all Uniform Commercial Code financing statements or renewals thereof
arising from this Assignment which the Assignee may deem to be necessary
or advisable in order to perfect or maintain the security interest granted
hereby. Such appointment of the Assignee as attorney-in-fact is
irrevocable and coupled with an interest.
10. The Assignee shall not be required to make any inquiry as to the
nature or sufficiency of any payment received by the Assignee, or, unless
and until indemnified to its satisfaction, to present or file any claim,
or to take any other action to collect or enforce the payment of any
amounts which may have been assigned to it or to which it may be entitled
hereunder or pursuant hereto at any time or times.
11. All moneys collected or received by the Assignee pursuant to
this Assignment shall be dealt with as provided in the Credit Agreement
and the Mortgage (as defined in the Credit Agreement) relating to the Rig.
12. Each and every right, power and remedy given herein or in the
Credit Agreement or in the Security Documents to the Assignee shall be
cumulative and shall be in addition to every other right, power and remedy
of the Assignee now or hereafter existing at law, in equity or by statute,
and each and every right, power and remedy, whether herein given or
otherwise existing, may be exercised from time to time, in whole or in
part, and as often and in such order as may be deemed expedient by the
Assignee, and the exercise or the commencement of the exercise of any
right, power or remedy shall not be construed to be a waiver of the right
to exercise at the same time or thereafter any other right, power or
remedy. No delay or omission by the Assignee in the exercise of any right
or power in the pursuance of any remedy accruing upon any breach or
default by the Assignor shall impair any such right, power or remedy or be
construed to be a waiver of any such right, power or remedy or to be an
acquiescence therein; nor shall the acceptance by the Assignee of any
security or of any payment of or on account of any of the amounts due from
the Assignor to the Assignee and maturing after any breach or default or
of any payment on account of any past breach or default be construed to be
a waiver of any right to take advantage of any future breach or default or
of any past breach or default not completely cured thereby.
13. If any provision of this Assignment shall at any time for any
reason be declared or decided to be invalid, void or otherwise inoperative
by a court of competent jurisdiction, such declaration or decision shall
not affect the validity of any other provision or provisions of this
Assignment, or the validity of this Assignment as a whole. In the event
that by reason of any law or regulation in force or to become in force, or
by reason of a ruling of any court of competent jurisdiction, or by any
other reason whatsoever, this Assignment is rendered either wholly or
partly defective, the Assignor shall furnish the Assignee with an
alternative assignment or security and do all such other acts as are
reasonably required in order to ensure and give effect to the full intent
of this Assignment.
14. It is declared and agreed that the security created by this
Assignment shall be held by the Assignee as a continuing security for the
payment of all moneys which may at any time and from time to time be or
become payable by the Assignor under the Credit Agreement, the Note and
the Security Documents and that the security so created shall not be
satisfied by an intermediate payment or satisfaction of any part of the
amount hereby secured and that the security so created shall be in
addition to and shall not in any way be prejudiced or affected by any
collateral or other security now or hereafter held by the Assignee for all
or any part of the moneys hereby secured.
15. If the Assignor shall pay and discharge, or shall cause to be
paid and discharged, the principal of and interest on the Credit Facility
and shall pay or cause to be paid all other sums payable by it under or
arising from the Credit Agreement, the Note and the Security Documents,
all the rights, title and interests herein assigned shall revert to the
Assignor, without further act on the part of the Assignor, the Assignee or
the Agent (except such execution and filing of termination statements,
releases, or like instruments as may be reasonably required to terminate
this Assignment as a mater of public record), and this Assignment shall
terminate.
16. Whenever in this Assignment reference is made to any person,
such reference shall be deemed to include the successors and assigns of
such person.
17. Notices and other communications hereunder shall be sent by
telex or telecopy and confirmed by certified mail (by airmail, if
international) as follows:
If to the Assignor - c/o Reading & Bates Corporation
901 Threadneedle
Suite 200
Houston, Texas 77079
Telefacsimile No.: (713) 496-0285
Attention: Chief Financial Officer
If to the Assignee - Christiania Bank og Kreditkasse,
acting through its New York branch
11 West 42nd Street, 7th Floor
New York, New York 10036
Telex No.: 824277 CBNY UF
Telefacsimile No.: (212) 827-4888
Attention: Loan Administration
With a copy to: Watson, Farley & Williams
380 Madison Avenue
New York, New York 10017
Telex No.: 6790626 WFW NY
Telefacsimile No.: (212) 922-1512
Attention: John S. Osborne, Jr., Esq.
Every notice or demand shall, except so far as otherwise expressly
provided by this Agreement, be deemed to have been received in the case of
a telex or telefacsimile with confirmed answerback at the time of dispatch
thereof (provided that if the date of dispatch is not a business day in
the locality of the party to whom such notice or demand is sent it shall
be deemed to have been received on the next following business day in such
locality), in the case of a letter delivered by hand at the time of
delivery, and in the case of a letter delivered by mail on the expiration
of the fifth (5th) business day after the same is put into the mail.
18. This Assignment shall be deemed to be a contract under the
substantive laws of the State of New York and for all purposes shall be
construed in accordance with the internal laws of said state, without
reference to principles of conflicts of law.
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be
executed as of the day and year first above written.
READING & BATES EXPLORATION CO.
By _____________________________
Its:
- -----------------------------------------------------------------------------
Exhibit 1
to
General Assignment
NOTICE OF ASSIGNMENT
TO:
TAKE NOTICE THAT:
By a General Assignment dated the ____ day of November, 1995 made by
us to Christiania Bank og Kreditkasse, acting through its New York
Branch, as agent (the "Assignee"), and relating to the United States
flag vessel D.R. STEWART (the "Rig"), we have assigned to the Assignee
as from the date thereof all our right, title and interest in and to
any moneys whatsoever payable to us under that certain [Charter
Contract] dated as of ____________, 199__ (the "Contract") between
yourselves and the undersigned concerning the Rig, as the Contract may
at any time be amended or supplemented, and all other rights and
benefits whatsoever accruing to us which arise or may arise from the
operation of the Rig under the Contract including (but without
prejudice to the generality of the foregoing) all claims for damages
for any breach of the Contract by you, provided that you shall pay all
proceeds due us under the Contract to the account in the joint names
of the undersigned and Reading & Bates Drilling Co. with Christiania
Bank og Kreditkasse, Grand Cayman Branch, Account No. 4062660601,
until you are otherwise notified by the Assignee. Upon receipt of
such notice in writing, you are authorized and instructed to pay to
the Assignee as from the date thereof all such moneys as you may be or
become liable to pay under the Contract to such account as the
Assignee may direct.
DATED THIS day of , 199__.
READING & BATES EXPLORATION CO.
By ________________________
Its:
- ----------------------------------------------------------------------------
Exhibit 2
to
General Assignment
CONSENT AND AGREEMENT
The undersigned, [ ], a party to the Contract
to which the Notice of Assignment delivered pursuant to the foregoing
Assignment refers (terms defined in the Assignment are used herein with
the same meaning), in consideration of the sum of one dollar ($1.00)
lawful money of the United States of America and other good and valuable
consideration, paid by Christiania Bank og Kreditkasse, acting through its
New York Branch, as agent (the "Assignee"), the receipt of which is hereby
acknowledged, hereby acknowledges notice of and consents and agrees to the
foregoing Assignment and to all of the terms thereof and agrees that: (1)
upon receipt of written notice from the Assignee it will make payment
directly to such account as the Assignee may direct, of all moneys due and
to become due from it under the Contract until receipt of written notice
from the Assignee that all obligations to the Lenders secured by said
Assignment have been paid in full; and (2) any such payment shall be final
and the undersigned will not seek to recover from the Assignee for any
reason whatsoever any moneys paid by the undersigned to the Assignee by
virtue of the foregoing Assignment and this Consent and Agreement but this
shall not prevent the set off or credit against or deduction from any
moneys payable to the Assignee by virtue of said Assignment of amounts
owing to the undersigned by Reading & Bates Exploration Co. under the
Contract.
[ ], as charterer, confirms and agrees that
the Contract is in full force and effect and is enforceable in accordance
with its terms and the Assignor is not in default thereunder.
This Consent and Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without
reference to principles of conflicts of law.
Dated: ______________, 199__
[ ]
By
Its:
EXHIBIT 10.108
ASSIGNMENT OF INSURANCES
JACK BATES
Reading & Bates Drilling Co., an Oklahoma corporation (hereinafter
called the "Assignor"), the owner of the United States registered semi-
submersible drilling unit JACK BATES (the "Rig"), in consideration of One
Dollar ($1) lawful money of the United States of America and other good
and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, has sold, assigned, transferred, set over, and
granted a security interest, and by this instrument does sell, assign,
transfer set over and grant a security interest unto Christiania Bank og
Kreditkasse, a Norwegian banking corporation, acting through its New York
Branch, as agent for the Lenders (as that term is defined in the Credit
Agreement, as defined below) (hereinafter called the "Assignee") and unto
the Assignee's successors and assigns, to it and its successors and
assigns own proper use and benefit, and as collateral security for the
indebtedness of the Assignor to the Lenders now or hereafter existing,
all right, title and interest of the Assignor under, in and to (i) all
insurances (including, without limitation, all certificates of entry in
protection and indemnity and war risks associations or clubs) in respect
of the Rig,whether heretofore, now or hereafter effected, and all renewals
of or replacements for the same, (ii) except as hereinafter provided, all
claims, returns of premium and other moneys and claims for moneys due and
to become due under or in respect of said insurances, (iii) all other
rights of the Assignor under or in respect of said insurances and (iv) any
proceeds of any of the foregoing. It is expressly agreed that anything
herein contained to the contrary notwithstanding, the Assignor shall
remain liable under said insurances to perform all of the obligations
assumed by it thereunder and the Assignee shall have no obligation or
liability (including, without limitation, any obligation or liability with
respect to the payment of premiums, calls or assessments) under said
insurances by reason of or arising out of this instrument of assignment
nor shall the Assignee be required or obligated in any manner to perform
or fulfill any obligations of the Assignor under or pursuant to said
insurances or to make any payment or to make any inquiry as to the nature
or sufficiency of any payment received by it or to present or file any
claim, or to take any other action to collect or enforce the payment of
any amounts which or may have been assigned to it or to which it may be
entitled hereunder at any time or times.
This Assignment is made pursuant to the Credit Facility Agreement
dated as of November 16, 1995 (the "Credit Agreement") by and among (i)
the Assignor and Reading & Bates Exploration Co., as joint and several
borrowers, (ii) Reading & Bates Corporation, as guarantor, (iii) the
Lenders (as defined therein) and (iv) the Assignee.
The Assignor hereby constitutes the Assignee, its successors and
assigns, the Assignor's true and lawful attorney, with full power (in the
name of the Assignor or otherwise) to ask, require, demand, receive,
compound and give acquittance for any and all moneys and claims for moneys
due and to become due under or arising out of said insurances, to endorse
any checks or other instruments or orders in connection therewith and to
file any claims or to take any action or institute any proceedings which
the Assignee may deem to be necessary or advisable in the premises. Such
appointment of the Assignee as attorney is irrevocable and coupled with an
interest.
The Assignor hereby covenants and agrees to procure that notice of
this Assignment, in the form of Annex 1 hereto, shall be duly given to all
underwriters and that where the consent of any underwriter is required
pursuant to any of the insurances assigned hereby, that it shall be
obtained and evidence thereof shall be given to the Assignee, and that
there shall be duly endorsed upon all slips, cover notes, policies,
certificates of entry or other instruments issued or to be issued in
connection with the insurances assigned hereby such clauses as to named
assured or loss payees as the Assignee may require or approve including,
but not limited to, those clauses set forth in Annex 1 hereto. In all
cases, unless otherwise agreed in writing by the Assignee, such slips,
cover notes, notices, certificates of entry or other instruments shall
show the Assignee as named assured and shall provide that there will be no
recourse against the Assignee for payment of premiums, calls or
assessments.
The powers and authority to the Assignee herein have been given for
a valuable consideration and are hereby declared to be irrevocable.
The Assignor agrees that at any time and from time to time, upon the
written, reasonable request of the Assignee, the Assignor will promptly
and duly execute and deliver any and all such further instruments and
documents as the Assignee may reasonably require in obtaining the full
benefits of this Assignment and of the rights and powers herein granted.
The Assignor hereby warrants and represents that it has not assigned
or pledged, and hereby covenants that, without the prior written consent
thereof of the Assignee, so long as this instrument of assignment shall
remain in effect, it will not assign or pledge the whole or any part of
the right, title and interest hereby assigned to anyone other than the
Assignee, its successors or assigns, and it will not take or omit to take
any action, the taking or omission of which might result in an alteration
or impairment of said insurances or this Assignment, or of any of the
rights created by said insurances or this Assignment.
All notices or other communications which are required to be made
hereunder shall be made by airmail postage prepaid letter, telefax or by
telex, confirmed by letter as follows:
If to the Assignee:
Christiania Bank og Kreditkasse, acting through its New
York Branch
11 West 42nd Street, 7th Floor
New York, New York 10036
Telex No.: 824277 CBNY UF
Telefacsimile No.: (212) 827-4888
With a copy to:
Watson, Farley & Williams
380 Madison Avenue
New York, New York 10017
Attn: John S. Osborne, Jr., Esq.
Telefacsimile No: (212) 922-1512
If to the Assignor:
c/o Reading & Bates Corporation
901 Threadneedle
Suite 200
Houston, Texas 77079
Telefacsimile No.: (713) 496-0285
or at such other address as any such party may designate by notice to the
others.
Any payments made pursuant to the terms hereof shall be made to such
account as may, from time to time, be designated by the Assignee for
distribution in accordance with the Credit Agreement.
This Assignment shall be governed by the internal laws of the State
of New York, with reference to principles of conflicts of law, and may not
be amended or changed except by an instrument in writing.
Upon the occurrence and continuance of an Event of Default under the
Credit Agreement, the Assignor hereby authorizes the Assignee to execute
and file Financing Statements (Form UCC-1) and amendments thereto as
provided in Article 9 of the Uniform Commercial Code.
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be
duly executed the 28th day of November, 1995.
READING & BATES DRILLING CO.
By:
Its:
- -----------------------------------------------------------------------------
Annex 1
to
Assignment of Insurances
NOTICE OF ASSIGNMENT
Reading & Bates Drilling Co. (the "Owner"), the owner of the United
States flag semi-submersible drilling unit JACK BATES (the "Rig"), HEREBY
GIVES NOTICE that by an Assignment dated November __, 1995 and made
between the Owner and Christiania Bank og Kreditkasse, acting through its
New York Branch, as agent for itself and certain other Lenders (the
"Assignee"), the Owner assigned to the Assignee all of the Owner's right,
title and interest in and to all insurances and the benefit of all
insurances now or hereafter taken out in respect of the Rig. This Notice
of Assignment and the Loss Payable Clauses attached hereto are to be
endorsed on all policies and certificates of entry evidencing such
insurance.
READING & BATES DRILLING CO.
By __________________________
Its:
- -----------------------------------------------------------------------------
LOSS PAYABLE CLAUSES
Hull and War Risks
Loss, if any, payable to Christiania Bank og Kreditkasse, acting
through its New York Branch, as Agent for itself and certain other
Lenders, for distribution by it to itself, to said Lenders and to Reading
& Bates Drilling Co., Owner, as their respective interests may appear, or
order, except that, unless Underwriters have been otherwise instructed by
notice in writing from the Agent, in the case of any loss involving any
damage to the Rig or liability of the Rig, the Underwriters may pay
directly for the repair, salvage, liability or other charges involved or,
if the Owner of the Rig shall have first fully repaired the damage and
paid the cost thereof, or discharged the liability or paid all of the
salvage or other charges, then the Underwriters may pay the Owner as
reimbursement therefor, provided, however, that if such damage involves a
loss in excess of U.S.$1,000,000 or its equivalent, then the Underwriters
shall not make such payment without first obtaining the written consent
thereto of the Agent.
In the event of an actual or constructive total loss or a
compromised or arranged total loss or requisition of title, all insurance
payment therefor shall be paid to the Agent, for distribution by it in
accordance with the terms of the first preferred United States mortgage
relating to the Rig.
- ----------------------------------------------------------------------------
PROTECTION AND INDEMNITY
Loss, if any, payable to Christiania Bank og Kreditkasse, acting
through its New York Branch, as Agent for itself and other Lenders, for
distribution by it to itself and to Reading & Bates Drilling Co., Owner,
as their respective interests may appear, or order, except that, unless
and until Underwriters have been otherwise instructed by notice in writing
from the Agent, any loss may be paid directly to the person to whom the
liability covered by this insurance has been incurred, or to the Owner of
the Rig to reimburse it for any loss, damage or expenses incurred by it
and covered by this insurance, provided that the Underwriters shall have
first received evidence that the liability insured against has been
discharged or will be discharged upon such payment.
EXHIBIT 10.109
ASSIGNMENT OF INSURANCES
D.R. STEWART
Reading & Bates Exploration Co., an Oklahoma corporation (hereinafter
called the "Assignor"), the owner of the United States registered semi-
submersible drilling unit D.R. STEWART (the "Rig"), in consideration of
One Dollar ($1) lawful money of the United States of America and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, has sold, assigned, transferred, set over, and
granted a security interest, and by this instrument does sell, assign,
transfer set over and grant a security interest unto Christiania Bank og
Kreditkasse, a Norwegian banking corporation, acting through its New York
Branch, as agent for the Lenders (as that term is defined in the Credit
Agreement, as defined below) (hereinafter called the "Assignee") and unto
the Assignee's successors and assigns, to it and its successors and
assigns own proper use and benefit, and as collateral security for the
indebtedness of the Assignor to the Lenders now or hereafter existing,
all right, title and interest of the Assignor under, in and to (i) all
insurances (including, without limitation, all certificates of entry in
protection and indemnity and war risks associations or clubs) in respect
of the Rig,whether heretofore, now or hereafter effected, and all renewals
of or replacements for the same, (ii) except as hereinafter provided, all
claims, returns of premium and other moneys and claims for moneys due and
to become due under or in respect of said insurances, (iii) all other
rights of the Assignor under or in respect of said insurances and (iv) any
proceeds of any of the foregoing. It is expressly agreed that anything
herein contained to the contrary notwithstanding, the Assignor shall
remain liable under said insurances to perform all of the obligations
assumed by it thereunder and the Assignee shall have no obligation or
liability (including, without limitation, any obligation or liability with
respect to the payment of premiums, calls or assessments) under said
insurances by reason of or arising out of this instrument of assignment
nor shall the Assignee be required or obligated in any manner to perform
or fulfill any obligations of the Assignor under or pursuant to said
insurances or to make any payment or to make any inquiry as to the nature
or sufficiency of any payment received by it or to present or file any
claim, or to take any other action to collect or enforce the payment of
any amounts which or may have been assigned to it or to which it may be
entitled hereunder at any time or times.
This Assignment is made pursuant to the Credit Facility Agreement
dated as of November 16, 1995 (the "Credit Agreement") by and among (i)
the Assignor and Reading & Bates Drilling Co., as joint and several
borrowers, (ii) Reading & Bates Corporation, as guarantor, (iii) the
Lenders (as defined therein) and (iv) the Assignee.
The Assignor hereby constitutes the Assignee, its successors and
assigns, the Assignor's true and lawful attorney, with full power (in the
name of the Assignor or otherwise) to ask, require, demand, receive,
compound and give acquittance for any and all moneys and claims for moneys
due and to become due under or arising out of said insurances, to endorse
any checks or other instruments or orders in connection therewith and to
file any claims or to take any action or institute any proceedings which
the Assignee may deem to be necessary or advisable in the premises. Such
appointment of the Assignee as attorney is irrevocable and coupled with an
interest.
The Assignor hereby covenants and agrees to procure that notice of
this Assignment, in the form of Annex 1 hereto, shall be duly given to all
underwriters and that where the consent of any underwriter is required
pursuant to any of the insurances assigned hereby, that it shall be
obtained and evidence thereof shall be given to the Assignee, and that
there shall be duly endorsed upon all slips, cover notes, policies,
certificates of entry or other instruments issued or to be issued in
connection with the insurances assigned hereby such clauses as to named
assured or loss payees as the Assignee may require or approve including,
but not limited to, those clauses set forth in Annex 1 hereto. In all
cases, unless otherwise agreed in writing by the Assignee, such slips,
cover notes, notices, certificates of entry or other instruments shall
show the Assignee as named assured and shall provide that there will be no
recourse against the Assignee for payment of premiums, calls or
assessments.
The powers and authority to the Assignee herein have been given for
a valuable consideration and are hereby declared to be irrevocable.
The Assignor agrees that at any time and from time to time, upon the
written, reasonable request of the Assignee, the Assignor will promptly
and duly execute and deliver any and all such further instruments and
documents as the Assignee may reasonably require in obtaining the full
benefits of this Assignment and of the rights and powers herein granted.
The Assignor hereby warrants and represents that it has not assigned
or pledged, and hereby covenants that, without the prior written consent
thereof of the Assignee, so long as this instrument of assignment shall
remain in effect, it will not assign or pledge the whole or any part of
the right, title and interest hereby assigned to anyone other than the
Assignee, its successors or assigns, and it will not take or omit to take
any action, the taking or omission of which might result in an alteration
or impairment of said insurances or this Assignment, or of any of the
rights created by said insurances or this Assignment.
All notices or other communications which are required to be made
hereunder shall be made by airmail postage prepaid letter, telefax or by
telex, confirmed by letter as follows:
If to the Assignee:
Christiania Bank og Kreditkasse, acting through its New
York Branch
11 West 42nd Street, 7th Floor
New York, New York 10036
Telex No.: 824277 CBNY UF
Telefacsimile No.: (212) 827-4888
With a copy to:
Watson, Farley & Williams
380 Madison Avenue
New York, New York 10017
Attn: John S. Osborne, Jr., Esq.
Telefacsimile No: (212) 922-1512
If to the Assignor:
c/o Reading & Bates Corporation
901 Threadneedle
Suite 200
Houston, Texas 77079
Telefacsimile No.: (713) 496-0285
or at such other address as any such party may designate by notice to the
others.
Any payments made pursuant to the terms hereof shall be made to such
account as may, from time to time, be designated by the Assignee for
distribution in accordance with the Credit Agreement.
This Assignment shall be governed by the internal laws of the State
of New York, with reference to principles of conflicts of law, and may not
be amended or changed except by an instrument in writing.
Upon the occurrence and continuance of an Event of Default under the
Credit Agreement, the Assignor hereby authorizes the Assignee to execute
and file Financing Statements (Form UCC-1) and amendments thereto as
provided in Article 9 of the Uniform Commercial Code.
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be
duly executed the 28th day of November, 1995.
READING & BATES EXPLORATION CO.
By:
Its:
Annex 1
to
Assignment of Insurances
NOTICE OF ASSIGNMENT
Reading & Bates Exploration Co. (the "Owner"), the owner of the
United States flag semi-submersible drilling unit D.R. STEWART (the
"Rig"), HEREBY GIVES NOTICE that by an Assignment dated November __, 1995
and made between the Owner and Christiania Bank og Kreditkasse, acting
through its New York Branch, as agent for itself and certain other Lenders
(the "Assignee"), the Owner assigned to the Assignee all of the Owner's
right, title and interest in and to all insurances and the benefit of all
insurances now or hereafter taken out in respect of the Rig. This Notice
of Assignment and the Loss Payable Clauses attached hereto are to be
endorsed on all policies and certificates of entry evidencing such
insurance.
READING & BATES EXPLORATION CO.
By __________________________
Its:
- ----------------------------------------------------------------------------
LOSS PAYABLE CLAUSES
Hull and War Risks
Loss, if any, payable to Christiania Bank og Kreditkasse, acting
through its New York Branch, as Agent for itself and certain other
Lenders, for distribution by it to itself, to said Lenders and to Reading
& Bates Exploration Co., Owner, as their respective interests may appear,
or order, except that, unless Underwriters have been otherwise instructed
by notice in writing from the Agent, in the case of any loss involving any
damage to the Rig or liability of the Rig, the Underwriters may pay
directly for the repair, salvage, liability or other charges involved or,
if the Owner of the Rig shall have first fully repaired the damage and
paid the cost thereof, or discharged the liability or paid all of the
salvage or other charges, then the Underwriters may pay the Owner as
reimbursement therefor, provided, however, that if such damage involves a
loss in excess of U.S.$1,000,000 or its equivalent, then the Underwriters
shall not make such payment without first obtaining the written consent
thereto of the Agent.
In the event of an actual or constructive total loss or a
compromised or arranged total loss or requisition of title, all insurance
payment therefor shall be paid to the Agent, for distribution by it in
accordance with the terms of the first preferred United States mortgage
relating to the Rig.
- ----------------------------------------------------------------------------
PROTECTION AND INDEMNITY
Loss, if any, payable to Christiania Bank og Kreditkasse, acting
through its New York Branch, as Agent for itself and other Lenders, for
distribution by it to itself and to Reading & Bates Exploration Co.,
Owner, as their respective interests may appear, or order, except that,
unless and until Underwriters have been otherwise instructed by notice in
writing from the Agent, any loss may be paid directly to the person to
whom the liability covered by this insurance has been incurred, or to the
Owner of the Rig to reimburse it for any loss, damage or expenses incurred
by it and covered by this insurance, provided that the Underwriters shall
have first received evidence that the liability insured against has been
discharged or will be discharged upon such payment.
EXHIBIT 10.110
MEMORANDUM OF AGREEMENT
THIS MEMORANDUM OF AGREEMENT (this "MOA") is entered into to
be effective as of November 28, 1995, by and between READING AND BATES,
INC., an Oklahoma corporation ("Seller"), and DEEP SEA INVESTORS, L.L.C.,
a Delaware limited liability company ("Buyer"), with reference to the
following facts:
A. Seller is the sole owner of the whole of the offshore
drilling unit "M.G. HULME, JR.," Official No. 651644,
together with all related equipment (but excluding leased
equipment owned by third parties), machinery, spare parts and
other property and each part thereof, whether onboard or
ashore, including, without limitation, any and all
attachments, accessories and additions thereto, and all
substitutions, replacements, products and proceeds thereof
(the "Vessel"), as more particularly described herein.
B. Seller wishes to sell the Vessel to Buyer, and Buyer wishes
to purchase the Vessel from Seller, upon the terms and
subject to the conditions set forth herein.
C. Immediately upon the transfer of title to the Vessel from
Seller to Buyer, Reading & Bates Drilling Co., an Oklahoma
corporation ("Charterer") wishes to charter the Vessel from
Buyer, and Buyer wishes to charter the Vessel to Charterer,
upon the terms and subject to the conditions set forth in the
Bareboat Charter to be entered into by and between Buyer and
Charterer.
NOW, THEREFORE, for and in consideration of the mutual
benefits accruing and expected to accrue hereunder, Seller hereby agrees
to sell, and Buyer hereby agrees to purchase, the Vessel, subject to the
following terms and conditions:
1. Vessel. The Vessel is a semi-submersible drilling unit built
in 1983 by Daewoo Shipbuilding at Koje Island, South Korea, and is
documented under the laws and flag of the United States of America. The
Vessel is classed by the American Bureau of Shipping ("ABS") as a Maltese
Cross A-1 AMS column stabilized drilling unit. The Vessel currently is
located at Garden Banks Block 387, Outer Continental Shelf, Gulf of
Mexico, and will remain at that location at least through the Closing
Date (as defined below).
2. Price. The total purchase price for the sale of the Vessel
shall be FIFTY MILLION U.S. Dollars ($50,000,000) (the "Purchase Price").
3. Closing. Closing for the sale of the Vessel from Seller to
Buyer ("Closing") shall occur on a date mutually agreed upon by Buyer and
Seller promptly after the satisfaction of all of the conditions required
to be satisfied under Section 6 below (the "Closing Date"). The Closing
shall be held at a location to be mutually agreed upon by Buyer and
Seller. Upon Closing, Seller shall have provided for the deletion from
the Registry of Vessels of Seller s name as designated owner of the
Vessel.
4. Payment. Buyer agrees to pay Seller the total Purchase Price
at Closing, net of all costs, fees and expenses payable or reimbursable
by Seller pursuant to Section 10 below, by wire transfer in immediately
available, same-day funds to such accounts as Seller shall notify Buyer
in writing at or prior to Closing.
5. Equipment; Spares. The Purchase Price includes, and Seller
shall convey the Vessel to Buyer with, all spare parts, equipment and
other items belonging to her (but excluding all leased equipment owned by
third parties). All spare parts and equipment, including, without
limitation, all items set forth in Schedule A attached hereto and all
broached and unbroached stores and provisions belonging to the Vessel at
the time of Closing, used or unused, whether onboard or ashore, shall
become Buyer's property.
6. Conditions Precedent. The obligation of Buyer to consummate
the purchase of the Vessel is subject to (i) receipt by Buyer of each of
the documents described in subsections a. through z. below, in form and
substance satisfactory to Buyer and each Investor (as defined in the
Bareboat Charter), and (ii) satisfaction of each of the other conditions
set forth in subsections aa. through gg. below in a manner satisfactory
to Buyer and each Investor (as defined in the Charter) in all respects.
a. A Bareboat Charter, substantially in the form of
Exhibit A (the "Charter"), duly executed by Charterer.
b. A Guaranty, substantially in the form of Exhibit B,
duly executed by Reading & Bates Corporation, a
Delaware corporation ("Parent"), the parent of Seller
and Charterer, guaranteeing the respective obligations
of Seller and Charterer under this MOA, the Charter,
the Mortgages, the Security Agreement (each as defined
herein) and all other documents related thereto,
together with any and all amendments, supplements,
renewals or substitutions of all or any of such
documents (collectively, the Charter Documents ).
c. A Preferred Mortgage, substantially in the form of
Exhibit C-1 (the "Cunningham Mortgage"), duly executed
by Charterer, mortgaging to Wilmington Trust Company,
Trustee for the benefit of Buyer (in such capacity, the
"Trustee"), a second drilling unit, the Jim
Cunningham (the "Cunningham"), and a First Preferred
Mortgage, substantially in the form of Exhibit C-2 (the
"Yost Mortgage"), duly executed by Charterer,
mortgaging to the Trustee a third drilling unit, the
Randolph Yost (the "Yost"), to secure Charterer's
obligations under the Charter Documents (the Cunningham
and the Yost, together, the "Collateral Vessels" and
the Cunningham Mortgage and the Yost Mortgage,
together, the "Mortgages").
d. A Security Agreement substantially in the form of
Exhibit D (the "Security Agreement"), duly executed by
Charterer.
e. Duly executed Officers Certificates, dated as of the
Closing Date, in the form of Exhibit E, from an
executive officer and the Secretary or Assistant
Secretary of each of Seller, Charterer and Parent
(collectively, the "R&B Companies").
f. A Consent to Preferred Mortgage, substantially in the
form of Exhibit F, duly executed by ABC Equipment
Leasing, Inc., the mortgagee under the First Preferred
Mortgage encumbering the Cunningham.
g. Certified copies of resolutions of each of the R&B
Companies approving this MOA, the Charter, the Guaranty
and the other Charter Documents to which each is a
party and authorizing the transactions contemplated
herein and therein, duly adopted at a meeting of, or by
the unanimous written consent of, the Board of
Directors of each corporation.
h. An original executed opinion dated the Closing Date
from Wayne K. Hillin, General Counsel to the R&B
Companies, setting forth customary opinions regarding
(i) the R&B Companies due organization, valid
existence, good standing, corporate power and
authority, (ii) the legal, valid and binding nature of
this MOA, the Charter, the Guaranty and the other
Charter Documents, (iii) the absence of violations of,
or conflicts with, laws, corporate organizational and
governance documents or other agreements, (iv) the
absence of any required consents, and (v) such other
matters as Buyer may reasonably require be addressed.
In addition, such opinion shall also opine that no
consent or approval of the U.S. Department of
Transportation Maritime Administration, the United
States Coast Guard ("USCG") or any other entity having
jurisdiction over the Vessel, the Collateral Vessels or
any of the R&B Companies is required in order to
consummate the transactions contemplated hereby or by
any of the other Charter Documents.
i. An original executed opinion from Baker & Botts,
L.L.P., counsel to Buyer, regarding (i) the legal,
valid and binding nature of this MOA, the Charter, the
Guaranty and certain other Charter Documents and (ii)
certain tax matters.
j. UCC financing statements, duly executed by Charterer,
as required by Buyer to perfect the security interest
granted under the Security Agreement, to be filed with
the appropriate filing offices.
k. An appraisal report for each of the Vessel and the
Cunningham, indicating the fair market value of each to
be no less than $50,000,000, and satisfactory
completion of the environmental assessment with respect
to the Vessel, as more fully described in the Letter
Agreement dated October 10, 1995, among Pilko &
Associates, Inc., AT&T Capital Corporation and GATX
Capital Corporation.
l. A certificate of insurance for the Vessel and a
detailed written report signed by an independent marine
insurance broker, evidencing compliance with the
insurance requirements set forth in the Charter.
m. A certificate of insurance for each of the Collateral
Vessels and a detailed written report signed by an
independent marine insurance broker, evidencing
compliance with the insurance requirements set forth in
the Mortgages.
n. A certificate of insurance evidencing that Parent
maintains commercial general liability insurance
coverage for liability arising from all operations of
the Parent. Such insurance shall include coverage for
premises and operations, independent contractors,
completed operations and contractual liability (or
their equivalents) and shall name Buyer and each member
of the Owner Group (as defined in the Charter) as
additional insureds (except with respect to workers'
compensation and employer's liability coverage). The
minimum policy limit shall be U.S. $1,000,000 single
limit per occurrence.
o. Duly executed Officers Certificates from (i) Seller,
certifying that all representations and warranties of
Seller herein and in any other Charter Documents are
true and correct as of the Closing Date; (ii)
Charterer, certifying that all representations and
warranties of Charterer contained in the Charter and
any other Charter Documents are true and correct as of
the Closing Date; and (iii) Parent, certifying that, as
of the Closing Date, all representations and warranties
in the Guaranty are true and correct and all
information provided (including, but not limited to,
the Reading & Bates Corporation/GATX Due Diligence
Confidential Binder, dated July 20, 1995, as previously
provided to the Investors (as defined in the Charter),
and all budgets, financial statements, descriptions of
contracts, debt schedules, projections and other
information therein) were true, correct and fairly
presented in all respects when made.
p. A Bill of Sale (USCG Form CG-1340) in duplicate, duly
executed by Seller, transferring title to the Vessel
from Seller to Buyer with warranties of good and
marketable title and freedom from all liens and
encumbrances; the warranties in such Bill of Sale shall
survive the Closing.
q. A Certificate of Ownership (USCG Form CG-1330) for each
of the Vessel and the Collateral Vessels, showing
Seller as the owner of the Vessel and Charterer as the
owner of each of the Collateral Vessels, free and clear
of all liens and encumbrances of record, other than (i)
the First Preferred Mortgage encumbering the Cunningham
and (ii) mortgages which will be released or satisfied
at or prior to Closing.
r. An ABS Certificate of Classification for each of the
Vessel and the Collateral Vessels, dated no earlier
than fifteen (15) days prior to the Closing Date,
indicating that each vessel is in class free of
outstanding recommendations.
s. The most recent Certificate of Inspection (USCG Form
CG-841) for each of the Vessel and the Collateral
Vessels.
t. A Certificate of Documentation (USCG Form CG-1270) for
each of the Vessel and the Collateral Vessels, showing
Seller as the owner of the Vessel and Charterer as the
owner of the Collateral Vessels, and evidencing that
all three vessels are duly documented under the laws
and flag of the United States of America, and are
qualified solely in foreign trade.
u. A Certificate of Admeasurement (USCG Form CG-1414) for
each of the Vessel and the Collateral Vessels.
v. The most recent ABS Summary Report of Class Survey for
each of the Vessel and the Collateral Vessels.
w. A Certificate of Marking (USCG Form CG-1322) for each
of the Vessel and the Collateral Vessels.
x. A Declaration of Citizenship for Vessel Recordation
Purposes (Maritime Administration Form MA-899) for each
of the Vessel and the Collateral Vessels, evidencing
that both Seller and Charterer are U.S. citizens within
the meaning of the Documentation of Vessels Act, 46
U.S.C. 12102 et seq., as amended.
y. A copy of the fully executed Ship Repair Agreement by
and between Charterer and Amfels, Inc., providing for
certain installations, repairs and modifications to the
Vessel, together with a Consent to Assignment of Ship
Repair Agreement duly executed by Amfels, Inc.
z. Satisfactions or releases of mortgage, UCC-3
termination statements and such other instruments as
may be required by Buyer in order to extinguish all
liens on or security interests in the Vessel, the
Collateral Vessels or the Collateral (as defined both
in the Mortgages and in the Security Agreement), other
than the lien of the First Preferred Mortgage (as
defined in the Cunningham Mortgage) encumbering the
Cunningham.
aa. No loss, constructive loss or requisitioning for use by
any governmental authority of the Vessel or the
Collateral Vessels shall have occurred.
bb. No change shall have occurred in applicable law or
regulations thereunder or in interpretations thereof by
any regulatory authority which would make it illegal
for Seller, Buyer or any Investor (as defined in the
Charter) to enter into any of the transactions
contemplated in the Charter Documents or which would
subject Seller, Buyer or any Investor (as defined in
the Charter) to any penalty or other liability as a
result of any transaction contemplated in any of the
Charter Documents.
cc. No material adverse change shall have occurred in the
physical condition of either the Vessel or the
Collateral Vessels.
dd. All governmental and regulatory approvals, licenses and
authorizations necessary or, in the opinion of Buyer,
the Investors (as defined in the Charter) or their
respective counsel, advisable in connection with the
transactions contemplated in the Charter Documents
shall have been duly received or obtained.
ee. Buyer shall have received evidence that, upon filing of
the Bill of Sale and related documents with the USCG
National Vessel Documentation Center, title to the
Vessel will be transferred to Buyer, that Buyer will be
the owner of the Vessel free and clear of all recorded
liens, charges or other encumbrances of record and that
no other action is necessary or advisable in order to
establish and perfect Buyer s title to and interest in
the Vessel as against Seller or any third parties in
any jurisdiction.
ff. Buyer shall have received evidence that (i) upon filing
of the Mortgages with the USCG National Vessel
Documentation Center, the Trustee will possess a valid
and perfected lien on and security interest in both the
Collateral Vessels for the benefit of Buyer, subject
and subordinate to no other lien, charge or encumbrance
other than the lien in favor of the First Mortgagee (as
defined in the Cunningham Mortgage) encumbering the
Cunningham and (ii) that upon filing of such UCC
financing statements as may be necessary to perfect the
security interest granted under the Security Agreement
with the appropriate filing offices, the Trustee will
possess a valid and perfected first priority security
interest in the Collateral (as defined in the Security
Agreement) for the benefit of Buyer.
gg. Buyer's determination that, since December 31, 1994, no
material adverse charge has occurred with respect to
the financial or other condition of Seller, Charterer
or Parent.
7. Representations, Warranties, and Covenants of Seller. Seller
represents and warrants to Buyer as follows:
a. Corporate Existence and Authority. Seller and each of
the other R&B Companies (i) is a corporation duly organized, validly
existing and in good standing under the law of its jurisdiction of
incorporation and is in good standing in all jurisdictions in which
failure to be or remain in good standing would have a material adverse
effect upon the Vessel or upon its ability to pay, observe or perform its
liabilities, duties or obligations under this MOA, the Charter, the
Guaranty and the other Charter Documents to which it is a party, and (ii)
has all requisite corporate power to conduct its business and to execute
and deliver and perform its obligations under this MOA, the Charter, the
Guaranty and the other Charter Documents to which it is a party.
b. Authorization; Binding Obligations. The execution,
delivery and performance by Seller and each of the other R&B Companies of
this MOA and/or each of the other Charter Documents to which each is or
will be a party, and the transactions contemplated hereby and thereby,
have been duly authorized and approved by all necessary corporate action
on the part of each. This MOA constitutes the legal, valid and binding
obligation of Seller, each of the other Charter Documents to which any of
the R&B Companies is or will be a party will be, when executed and
delivered, the legal, valid and binding obligation of such company and
each of this MOA and the other Charter Documents to which any of the R&B
Companies has or will become a party will be enforceable against such
company in accordance with its terms, except insofar as enforceability
may be limited by applicable debtor relief laws or subject to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
c. Compliance with Laws and Documents; No Default. None
of the R&B Companies is in breach or violation of or in default under (i)
any contractual obligation or any applicable law other than such
breaches, violations or defaults that individually or in the aggregate
could not be reasonably expected to have a material adverse effect on the
obligation of each under the Charter Documents, or (ii) its corporate
organizational or governance documents. The execution, delivery,
performance, or compliance with the terms of this MOA or any of the other
Charter Documents by any of the R&B Companies does not, and consummation
of the transactions contemplated by this MOA and the Charter Documents
does not and will not: (i) conflict with, breach, violate or constitute
a default under (A) any applicable law, (B) the corporate organizational
or governance documents of any of the R&B Companies, or (C) any other
contractual obligation of any of the R&B Companies; (ii) result in the
mandatory acceleration or prepayment of any debt owed by any of the R&B
Companies or afford any holder of any such debt the right to require any
of the R&B Companies to purchase, redeem or otherwise acquire, reacquire
or repay any such debt; or (iii) result in the imposition of any lien or
encumbrance upon the assets, properties, revenues or rights of any of the
R&B Companies (other than liens or encumbrances imposed or created or to
be imposed or created under or pursuant to the Mortgages or the Security
Agreement).
d. No Consents. No order, consent, approval, license,
permit, franchise, waiver, exemption, authorization of or validation of,
or filing, recording or registration with (except those that have been
heretofore obtained or made) or exemption by, any person or tribunal is
required to authorize, or is required in connection with, the execution,
delivery, performance, legality, validity, binding effect or
enforceability of this MOA and the other Charter Documents or the
transactions contemplated hereby or thereby except for the filing of the
UCC financing statements, the Bill of Sale and the Mortgages described
herein and other actions expressly required to be taken pursuant to this
MOA and the other Charter Documents.
e. Disclosure. All information that has been (or is
hereafter) made available to Buyer or any Investor (as defined in the
Charter) by or on behalf of any of the R&B Companies in connection with
this MOA, any of the other Charter Documents or the transactions
contemplated hereby or thereby was (and will be) complete and correct in
all material respects and did not (and will not) contain any untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not materially
misleading in light of the circumstances under which such statements were
(or will be) made. Without limiting the generality of the foregoing, the
Buyer and the Investors have been provided with the financial statements
(including balance sheet and related statements of income and cash flows)
for the year ended December 31, 1994 and for the nine (9) month period
ended September 30, 1995 for the Seller, Charterer and Parent. Such
financial statements are complete, true and correct in all respects and
fairly present the financial condition of the Seller, Charterer or Parent
(as the case may be) as of the dates thereof and their respective results
of operations for the periods then ended. Since December 31, 1994, there
has been no material adverse change with respect to the financial or
other condition of the Seller, Charterer or Parent.
f. No Encumbrances. The Vessel and each of the Collateral
Vessels shall, on the Closing Date, be free from all encumbrances and
liens, maritime or otherwise, or any other debts whatsoever, other than
(i) the liens and security interests in favor of the Trustee under the
Mortgages and the Security Agreement and (ii) the lien created under the
existing First Preferred Mortgage encumbering the Cunningham.
g. Taxes. The R&B Companies have caused to be duly filed
in a timely manner with the appropriate federal, foreign, state, local
and other governmental authorities all tax returns, statements and
reports required to be filed on or before the Closing Date by or with
respect to the Vessel or either of the Collateral Vessels or the
ownership or operation thereof, and have caused to be paid or deposited
all taxes, including estimated taxes, required to be shown on such
returns, statements or reports. No extension of time is in effect with
respect to the date on which any tax return, statement or report is to be
filed with respect to the Vessel or either of the Collateral Vessels or
the ownership or operation thereof. No tax liens exist or will arise, on
or with respect to the Vessel or either of the Collateral Vessels, except
for liens imposed by law and incurred in the ordinary course of business
for obligations not yet due. There are no outstanding agreements or
waivers extending the period for assessment or collection of any taxes
relating to the Vessel or either of the Collateral Vessels or the
ownership or operation thereof and the R&B Companies have neither
received nor have knowledge or notice of any notice of deficiency or
assessment or proposed deficiency or assessment from any taxing authority
relating to the Vessel or either of the Collateral Vessels or the
ownership or operation thereof nor is there any basis for any such notice
of deficiency or assessment.
h. Litigation. No litigation, investigation or proceeding
of or before any governmental authority or arbitrator is pending or
threatened by or against any of the R&B Companies with respect to the
Vessel, either of the Collateral Vessels or the Charter Documents or any
of the transactions contemplated thereby, nor is any litigation,
investigation or proceeding of or before any governmental authority or
arbitrator pending or threatened by or against any of the R&B Companies
or any of their respective properties or revenues which could reasonably
be expected to have a material adverse effect on the financial or other
condition of any of the R&B Companies.
i. ERISA. None of the R&B Companies has received any
notice or otherwise acquired any notice or knowledge that it is not in
full compliance with any of the requirements of the Employee Retirement
Income Security Act of 1974, as amended ( ERISA ). No Reportable Event
(as defined in Title IV of ERISA) or other fact or circumstance exists
which may have an adverse effect on the tax qualified status of any
employee benefit plan maintained by any of the R&B Companies. None of
the R&B Companies has any accumulated funding deficiency within the
meaning of ERISA or has any liability or knows of or has notice of any
fact or circumstances which could result in any liability to the Pension
Benefit Guaranty Corporation, the Internal Revenue Service, the
Department of Labor or any participant in connection with any employee
benefit plan (other than accrued benefits which are or which may become
payable to participants or beneficiaries in the ordinary course of any
such plan).
j. Patents. The R&B Companies own or possess (or are
licensed or otherwise have the full right to use) all United States or
foreign patents or patent applications ( Patents ) necessary for the
ownership or operation of the Vessel and the Collateral Vessels as of the
Closing Date, without any conflict with the rights of other persons. The
consummation of the transactions contemplated by the Charter Documents
will not alter or impair the validity of any of such Patents or any of
such rights of such persons.
k. Valid Title. Upon filing of the Bill of Sale and
related documents with the USCG National Vessel Documentation Center, (i)
title to the Vessel will have been transferred to Buyer, (ii) Buyer will
be the owner of the Vessel free and clear of all recorded liens, charges
or other encumbrances of record, (iii) the Vessel will have been duly
documented in the name of Buyer under the laws and regulations and the
flag of the United States and (iv) no other action will be necessary or
advisable in order to establish and perfect Buyer s title to and interest
in the Vessel as against Seller or any third parties in any jurisdiction.
l. Validity of Security Documents. The Mortgages and the
Security Agreement are effective to create in favor of the Trustee for
the benefit of Buyer a legal, valid and enforceable security interest in
the collateral described therein, and proceeds thereof (subject to debtor
relief laws and general equitable principles), and, after the filing of
the Mortgages and UCC financing statements in the appropriate
governmental offices, the Mortgages and Security Agreement shall
constitute fully perfected liens on and security interests in, all right,
title and interest of Charterer in such collateral and the proceeds
thereof, as security for the Secured Obligations (as defined in the
Mortgages and the Security Agreement), in each case prior and superior in
right to any person other than, in the case of the Cunningham Mortgage,
the First Mortgagee (as defined in the Cunningham Mortgage).
m. Validity of Contracts. All contracts previously
presented to Buyer and the Investors (as defined in the Charter), remain
in full force and effect as of the Closing Date, have not been altered,
modified or amended in any manner and are valid and enforceable against
all parties thereto, and no event has occurred which is an event of
default, or with the passing of time or the giving of notice or both
would be an event of default, under any of such contracts. There is no
drilling contract on the Vessel other than the Offshore Drilling Contract
dated July 25, 1995 between the Charterer and Enserch Exploration, Inc.
(The "Old Enserch Contract").
n. Environmental, Health and Safety Requirements. The
operations of Parent, Seller and Charterer, the Vessel and the Collateral
Vessels comply in all material respects with all applicable laws
(including all environmental, health and safety requirements of law);
neither the Vessel nor either of the Collateral Vessels is the subject of
any environmental property transfer act; neither Parent, Seller,
Charterer, the Vessel, nor either of the Collateral Vessels are the
subject of any actual or threatened investigation by, order from or
agreement with any governmental or private entity respecting any laws
(including all environmental, health or safety requirements of law), any
remedial action or any claims or liabilities and costs arising from the
release or threatened release of a contaminant, including petroleum and
fractions thereof, into the environment; none of the present or past
operations undertaken on the Vessel or either of the Collateral Vessels
are the subject of any actual or threatened judicial or administrative
proceeding, order, judgment, decree or settlement alleging or addressing
a violation of or a liability under any law (including all environmental,
health or safety requirement of law); neither Parent, Seller nor
Charterer has filed any notice under any applicable requirement of law
reporting a release of a contaminant from the Vessel or either of the
Collateral Vessels, including petroleum and fractions thereof, into the
environment or reporting a violation of any applicable law (including
environmental, health or safety requirements of law); and no liens
arising under any environmental laws have attached to the Vessel or
either of the Collateral Vessels.
o. Other Matters. (i) No loss, constructive loss, or
requisitioning for use by any governmental authority of the Vessel or
either of the Collateral Vessels has occurred; (ii) no change has
occurred in applicable law or regulations thereunder or in
interpretations thereof by any regulatory authority which would make it
illegal for Seller, Buyer or any Investor (as defined in the Charter) to
enter into any of the transactions contemplated in or by any of the
Charter Documents or which would subject Seller, Buyer or any Investor
(as defined in the Charter) to any penalty or other liability as a result
of any of the transactions contemplated in or by any of the Charter
Documents; and (iii) no material adverse change has occurred in the
physical condition of the Vessel or either of the Collateral Vessels and
each of the Vessel and the Collateral Vessels is tight, staunch, strong
and well and sufficiently tackled, appareled, furnished and equipped and
in every respect seaworthy, in accordance with specifications, in good
working order, condition and repair (normal wear and tear excepted) and
without defect in condition, design, operation or fitness for use.
p. Enserch Contract. No earlier than the first day after
the Closing Date but not later than 30 days thereafter, Charterer shall
deliver to Buyer a copy of the fully executed Offshore Drilling Contract
by and between Charterer and Enserch Exploration, Inc. with respect to
the Vessel (the "New Enserch Contract") with no material changes to the
New Enserch Contract draft dated August 17, 1995, other than such changes
previously requested by Buyer.
8. Representation and Warranty of Buyer. Buyer represents and
warrants to Seller that the Trustee is and will be at Closing a citizen
of the United States within the meaning of the Documentation of Vessels
Act, 46 U.S.C. Section 12102 et seq., as amended, or otherwise authorized
to be a mortgagee with respect to the Collateral Vessels, and will
deliver to Seller at such Closing a Declaration of Citizenship for Vessel
Recordation Purposes (Maritime Administration Form MA-899) for each of
the Collateral Vessels, evidencing same.
9. Indemnity. Whether or not any of the transactions
contemplated hereby are consummated, Seller hereby indemnifies Buyer and
each member of the Owner Group (as defined in the Charter) (each, an
"Indemnitee" and, collectively, the "Indemnitees") and each Indemnitee s
successors, assigns, employees, servants and agents against, and agrees
to protect, save and keep harmless each thereof from, any and all
liabilities, obligations, losses, damages (including, without limitation,
obligations based on strict liability in tort), penalties, claims,
actions, suits, costs, expenses and disbursements, including legal fees
and expenses, of whatsoever kind and nature, imposed on, incurred by or
asserted against any Indemnitee or any successors, assigns, employees,
servants or agents thereof, even if such liability or loss may have been
caused or contributed to by the negligence of the Indemnitee, in any way
relating to or arising out of (i) this MOA or any of the other Charter
Documents, (ii) the purchase of the Vessel or mortgaging of the
Collateral Vessels pursuant to this MOA and the other Charter Documents,
(iii) the ownership, mortgaging, delivery, nondelivery, charter,
subcharter, possession, registration, re-registration, use, operation,
condition, sale, return or other disposition of the Vessel or the
Collateral Vessels (as the case may be) (including, in each case and
without limitation, (x) latent or other defects, whether or not
discoverable and any claim for patent, trademark or copyright
infringement and (y) all liabilities, obligations, losses, damages and
claims in any way relating to or arising out of injury to persons,
property or the environment, or strict liability in tort) or (iv) the
making of the investment of each member of the Owner Group (as defined in
the Charter) in the Vessel in the manner contemplated hereby, provided
that the foregoing indemnity with regard to any particular Indemnitee
shall not extend to any liability, obligation, loss, damage, penalty,
claim, action, suit, cost, expense or disbursement (A) resulting from the
willful misconduct or gross negligence of such Indemnitee, or any
successors, assigns, employees, servants, or agents thereof or (B) so
long as no Event of Default (as defined in the Charter) shall have
occurred, (i) to the extent attributable to acts or events which occur
after the Vessel is no longer owned by Buyer or chartered under the
Charter or, (ii) if the Vessel remains owned by Buyer after the
expiration of the term of the Charter, from acts or events which occur
after possession of the Vessel has been delivered to the Buyer in
accordance with the applicable provisions of the Charter. If any
Indemnitee has knowledge of any liability hereby indemnified against, it
shall give prompt written notice thereof to Seller, or, if Seller has
knowledge of any liability hereby indemnified against, it shall give
prompt written notice thereof to the Indemnitee, provided, however, that
any failure to give such notice shall not in any manner discharge, waive,
diminish, limit or otherwise affect any of Seller s obligations under
this Section 9 or otherwise hereunder. Without limitation of the
foregoing, and whether or not any of the transactions contemplated hereby
are consummated, the Seller agrees to pay the fees and expenses of each
Indemnitee, all fees and expenses of such Indemnitees counsel other than
as otherwise provided in Section 10 and (iii) all liability and loss with
respect to or resulting from any and all claims for or on account of
brokers or finders fees or commissions (other than with respect to any
broker or finder employed by Buyer or any Investor). So long as no Event
of Default (as defined in the Charter) shall have occurred, Seller, at
its sole cost and expense, may contest in good faith by appropriate
proceedings and by appropriate persons (in the judgment of the
Indemnitees in question) any liability indemnified against under this
Section 9, provided that such contest will not (i) involve any danger of
the sale, forfeiture or loss of, or the creation of any lien, charge or
encumbrance on, the Vessel, either of the Collateral Vessels or any part
thereof or any interest therein, or (ii) cause any impairment of the
timely payment of hire by the Charterer under the Charter or (iii)
adversely affect the Vessel, either of the Collateral Vessels or any
other property, assets or rights of an Indemnitee, or (iv) involve any
other claim against the Indemnitee in question which is not severable and
for which Seller is not obligated to indemnify under this Section 9.
10. Transaction Expenses. Any taxes (including, but not limited
to, sales, use, value-added, gross receipt, excise, stamp, transfer,
documentary, recording and similar taxes), fees and expenses connected
with the registration of the Vessel in Buyer s name or sale of the Vessel
to Buyer, the creation, filing or perfection of the Mortgages and other
security interests contemplated by the Charter Documents, as well as
similar charges connected with the closing of Seller s register, shall be
for Seller s account. Whether or not the transactions contemplated by
this MOA and the other Charter Documents shall be consummated, Seller
shall, subject to the last sentence of this Section 10, pay or reimburse
Buyer and the Trustee for all reasonable costs, fees and expenses paid or
incurred by Buyer, the Trustee, any Investor (as defined in the Charter)
or its legal counsel in connection with this MOA or any of the other
Charter Documents (excluding, however, the cost of any environmental
survey performed by or on behalf of Buyer or any Investor), including,
without limitation, all costs, fees and expenses relating to the
preparation, negotiation and execution of the Charter Documents,
recording and filing fees and appraisal fees. All such costs, fees and
expenses which have been paid or incurred by Buyer, the Trustee or any
Investor (as defined in the Charter) as of the Closing Date shall be paid
or withheld by Buyer from the Purchase Price payment to be made pursuant
to Section 4 above. All other reimbursements and payments required by
this Section 10 shall be made by Seller within 10 days of demand by
Buyer, the Trustee or any Investor (as defined in the Charter) therefor.
Seller shall be solely responsible for the first $75,000 of such legal
fees and expenses paid or incurred by Buyer and shall be responsible for
50% of all such legal fees and expenses paid or incurred by Buyer in
excess of $75,000.
11. Title; Condition at Closing. The Vessel, with everything
belonging to her, shall be at Seller s risk and expense until title
passes to Buyer at the time of the Closing. Seller hereby warrants to
Buyer that there are no defects in the Vessel s hull or machinery which
would materially and adversely affect the Vessel s ABS Certificate of
Class or USCG certification. Notwithstanding the foregoing, at the time
title is transferred to Buyer, the Vessel shall be in class free of
recommendations with classification and USCG certificates clear and valid
in accordance with the terms of the most recently issued certificates.
Seller shall notify the ABS of any matters coming to its notice or
knowledge prior to Closing which, upon being reported to the ABS, would
lead to the withdrawal of the Vessel s class or to the imposition of a
recommendation relating to her class. All of the Vessel s continuous
survey cycles shall be clear and up-to-date at Closing.
12. Seller s Default. If Seller fails to execute a legal
transfer of title to the Vessel, together with everything belonging to
her, in accordance with the terms and conditions of this MOA, for reasons
within Seller s control, Buyer shall have the right to cancel this MOA
and Buyer shall be entitled to claim compensation for its losses and for
all expenses incurred together with interest at the Overdue Rate (as
defined in the Charter).
13. GOVERNING LAW. THIS MOA SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS.
14. VENUE; SERVICE OF PROCESS. SELLER, FOR ITSELF, ITS SUCCESSORS
AND ASSIGNS, HEREBY KNOWINGLY AND INTENTIONALLY AND IRREVOCABLY AND
UNCONDITIONALLY a) SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW YORK
AND THE FEDERAL COURTS SITTING IN THE STATE OF NEW YORK AND AGREES AND
CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL
PROCEEDING ARISING OUT OF OR IN CONNECTION WITH THIS MOA OR THE OTHER
CHARTER DOCUMENTS BY SERVICE OF PROCESS AS PROVIDED BY NEW YORK LAW, b)
WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY LITIGATION ARISING OUT OF OR
IN CONNECTION WITH THIS MOA OR THE OTHER CHARTER DOCUMENTS BROUGHT IN ANY
NEW YORK STATE COURT OR FEDERAL COURT SITTING IN THE STATE OF NEW YORK,
c) WAIVES ANY CLAIMS THAT ANY LITIGATION BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM, d) CONSENTS TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH LITIGATION BY
THE MAILING OF COPIES THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED,
POSTAGE PREPAID, TO SELLER AT THE ADDRESS SET FORTH HEREIN AND e) AGREES
THAT ANY LEGAL PROCEEDING AGAINST SELLER ARISING OUT OF, RELATED TO OR IN
CONNECTION WITH THIS MOA OR THE OTHER CHARTER DOCUMENTS OR THE
OBLIGATIONS HEREUNDER OR THEREUNDER MAY BE BROUGHT IN ANY COURT OF
COMPETENT JURISDICTION IN THE STATE OF NEW YORK. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF BUYER TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST SELLER OR ANY OF THE OTHER R&B COMPANIES IN ANY OTHER
JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY APPLICABLE
LAW.
15. WAIVER OF JURY TRIAL. SELLER, FOR ITSELF AND ITS SUCCESSORS
AND ASSIGNS, HEREBY KNOWINGLY AND INTENTIONALLY AND IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ITS
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS MOA OR ANY OF THE OTHER CHARTER DOCUMENTS OR ANY
DEALINGS WITH BUYER RELATING TO THE SUBJECT MATTER OF THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY AND THE RELATIONSHIP THAT IS BEING
ESTABLISHED. THE FOREGOING WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, MODIFICATIONS, RENEWALS, SUPPLEMENTS OR SUBSTITUTIONS TO THIS
MOA OR ANY OF THE OTHER CHARTER DOCUMENTS WHETHER OR NOT EXPRESSLY SET
FORTH HEREIN OR THEREIN.
16. Notice. All notices hereunder shall be in writing and shall
be delivered in person, given by registered or certified mail, postage
prepaid, return receipt requested, or given by facsimile transmission, as
follows:
If to Seller:
Reading and Bates, Inc. Telecopier No. (713) 496-0285
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Chief Financial Officer
If to Buyer:
Deep Sea Investors, L.L.C. Telecopier No. (212) 880-7158
c/o Heller Financial, Inc.
101 Park Avenue
New York, New York 10178
Attention: Legal Department
with a copy to:
Baker & Botts, L.L.P. Telecopier No. (713) 229-1522
One Shell Plaza
910 Louisiana
Houston, Texas 77002-4995
Attention: Stephen Krebs
Each notice to be given or delivered pursuant to this MOA shall be deemed
so given or delivered (i) if sent by registered or certified mail,
postage prepaid, return receipt requested, on the third business day
after such notice, communication or material, addressed as above
provided, is delivered to a United States post office and a receipt
therefor is issued thereby, (ii) if sent by any other means of physical
delivery, when such notice, communication or material is delivered to the
appropriate address as provided and (iii) if sent by telecopier, when
such notice, communication or material is transmitted to the appropriate
telecopier number as above provided and is received at such number.
17. Survival. All covenants, representations and warranties of
the parties contained in this MOA shall survive the Closing and transfer
of title to the Vessel.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Buyer and Seller have executed this MOA
by their respective representatives thereunto duly authorized to be
effective as of the date first set forth above.
DEEP SEA INVESTORS, L.L.C. READING AND BATES, INC.
By: GATX MARINE INVESTORS By:
CORPORATION, Member Name:
Title:
By:
Name:
Title:
By: HELLER FINANCIAL LEASING, INC.,
Member
By:
Name:
Title:
By: MDFC EQUIPMENT LEASING CORPORATION,
Member
By:
Name:
Title:
- ------------------------------------------------------------------------------
Schedule A
Equipment Inventory
SEE ATTACHED
- ------------------------------------------------------------------------------
EXHIBIT A
BAREBOAT CHARTER
SEE ATTACHED
- ------------------------------------------------------------------------------
EXHIBIT B
GUARANTY
THIS GUARANTY (the "Guaranty") dated as of November 28, 1995,
is made by READING & BATES CORPORATION, a Delaware corporation
("Guarantor"), in favor of DEEP SEA INVESTORS, L.L.C., a Delaware
limited liability company ("Owner"), the Owner under the Bareboat Charter
described below.
WHEREAS, Reading and Bates, Inc., an Oklahoma corporation
("Seller ), and Owner have entered into that certain Memorandum of
Agreement (the "MOA") dated of even date herewith;
WHEREAS, pursuant to the terms of the MOA, Seller has agreed
to sell to Owner the Vessel described therein and immediately thereafter
Reading & Bates Drilling Co., an Oklahoma corporation ( Charterer ), has
agreed to charter the Vessel from Owner, upon the terms and subject to
the conditions set forth in the Bareboat Charter of even date herewith
(the Charter ) (capitalized terms used herein and not otherwise defined
herein have the meanings assigned to such terms in the Charter);
WHEREAS, such transactions between Owner and Seller and Owner
and Charterer are sometimes referred to collectively herein as the Sale
and Lease ;
WHEREAS, Guarantor directly owns all of the capital stock of
Charterer and indirectly owns all of the capital stock of Seller and
shall derive substantial benefit, whether directly or indirectly, from
the Sale and Lease and from the making of this Guaranty; and
WHEREAS, as a condition precedent to the consummation of the
Sale and Lease, Owner has required that the Guarantor execute and deliver
this Guaranty;
NOW, THEREFORE, in consideration of the premises and in order
to induce Owner to enter into the Sale and Lease, Guarantor hereby agrees
as follows:
SECTION 1. Guaranty. Guarantor hereby absolutely,
unconditionally, irrevocably, jointly and severally guarantees the full
and punctual payment, observance and performance when due of all
obligations of Seller now or hereafter existing under the MOA and all
other documents executed in connection therewith and all obligations of
Charterer now or hereafter existing under the Charter and all other
documents executed in connection therewith, together with any and all
amendments, supplements, renewals or substitutions of all or any of such
foregoing documents (collectively, the "Charter Documents"), whether for
rent, interest, fees, expenses, taxes, costs, indemnities, losses,
compensation, reimbursements or any other amount payable under the terms
of any such agreement (all of the above being hereinafter called the
"Obligations").
SECTION 2. Guaranty Absolute. The Guarantor guarantees that
the Obligations will be paid, observed and performed strictly in
accordance with the terms of the MOA, the Charter and the other Charter
Documents, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of
Owner with respect thereto. If any of the Obligations shall not be paid,
observed or performed in accordance with their terms, the Guarantor shall
immediately pay, observe or perform the same, this Guaranty being a
guaranty of full payment, observance and performance and not of
collectability, and is in no way conditional or contingent. The
liability of Guarantor under this Guaranty shall be absolute, independent
and unconditional, and shall not be diminished, discharged, waived,
limited or otherwise affected for any reason whatsoever, including,
without limitation, the following:
(a) any lack of validity or enforceability of or
irregularity, defect or deficiency in the MOA, the Charter or
any of the other Charter Documents;
(b) any change in the time, manner, terms or place of
payment of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any
restructuring of, or consent to departure from, the MOA, the
Charter or any of the other Charter Documents;
(c) any sale, exchange, release or non-perfection or
impairment of any collateral, including, without limitation,
the offshore drilling units "Jim Cunningham" and "Randolph
Yost" (together, the "Collateral Vessels"), or release of any
guarantor or any release or amendment or waiver of or consent
to departure from any other guaranty, for all or any of the
Obligations;
(d) any change in the existence, structure or
ownership of Seller or Charterer or any other Person
(including any guarantor) or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting Seller
or Charterer or any other Person (including any guarantor) or
any of their assets;
(e) the existence of any claim, set-off or other
rights which Guarantor may have at any time against Seller or
Charterer, the obligees of the Obligations or any other
Person, whether or not arising in connection with this
Guaranty, the MOA, the Charter or any of the other Charter
Documents;
(f) any other circumstance which might otherwise
constitute a defense available to, or a release or discharge
of, Seller or Charterer or any other Person (including any
guarantor) in respect of the Obligations, whether at law, in
admiralty or equity or otherwise, other than payment in full
by Seller or Charterer of the Obligations.
Without limiting the generality of the foregoing, this Guaranty is in no
way conditioned upon any requirement that Owner first attempt to collect
payment from, or enforce observance or performance of, any of the
Obligations by Seller, Charterer or any other Guarantor or obligor of or
for any of the Obligations, or resort to any collateral or security,
including, without limitation, the Collateral Vessels, or any other means
of obtaining or collecting payment or seeking observance or performance
of any of the Obligations or upon any other contingency whatsoever. This
Guaranty shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Obligations is annulled, set
aside, invalidated, declared to be fraudulent or preferential, rescinded
or must otherwise be returned, refunded or repaid by Owner or the
proceeds of any collateral are required to be returned by Owner upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of
Seller or Charterer, or any other guarantor or surety, or upon or as a
result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, Seller or Charterer or any other
guarantor or surety or any substantial part of its property or otherwise
for any other reason whatsoever, all as though such payment or payments
had not been made. The obligations of the Guarantor under this Guaranty
shall not be subject to reduction, termination or other impairment by
reason of any setoff, recoupment, counterclaim or defense or for any
other reason.
SECTION 3. Continuing Guaranty. This is a continuing
guaranty, and all extensions of credit and financial accommodations
concurrently herewith or hereafter made by Owner to Seller or Charterer
in connection with the Sale and Lease shall be conclusively presumed to
have been made or acquired in acceptance hereof and in reliance hereon.
SECTION 4. Waiver. Guarantor hereby waives receipt of a
copy of the MOA, the Charter and the other Charter Documents and any
amendment, supplement, modification or restatement of any of the
foregoing, promptness, diligence, presentment, notice of acceptance,
demand for payment, protest, notice of dishonor or non-payment, non-
observance or non-performance of any of the terms or conditions of the
MOA, the Charter or any of the other Charter Documents, or notice of any
default or event of default under any of the foregoing, or notice of any
suit or other action against Seller, Charterer or any other Person and,
except as expressly set forth herein and to the fullest extent permitted
by applicable law, any other notice with respect to any of the
Obligations or this Guaranty; and any requirement that Owner protect,
secure, perfect or insure any security interest or lien on any property
subject thereto or exhaust any right or take any action against Seller,
Charterer or any other Person or any collateral (it being the intention
of the parties hereto that this Guaranty is to be a guaranty of payment
and not of collection) or that Seller, Charterer or any other Person be
joined in any action hereunder. Should Owner seek to enforce the
obligations of the Guarantor hereunder by action in any court, the
Guarantor waives any necessity, substantive or procedural, that a
judgment previously be rendered against Seller, Charterer or any other
Person, or that any action be brought against Seller, Charterer or any
other Person, or that Seller, Charterer or any other Person should be
joined in such cause. Such waiver shall be without prejudice to Owner at
its option to proceed against Seller, Charterer or any other Person,
whether by separate action or by joinder. The Guarantor hereby waives
marshaling of assets and liabilities, sale in inverse order of
alienation, notice by Owner of any indebtedness or liability to which
Owner applies or may apply any amounts received by Owner, and of the
creation, advancement, increase, existence, extension, renewal,
restructuring, rearrangement and/or modification of any of the
Obligations.
SECTION 5. Several Obligations. The obligations of
Guarantor hereunder are several from the obligations of Seller, Charterer
or any other Person, and are primary obligations concerning which
Guarantor is the principal obligor. Guarantor agrees that this Guaranty
shall not be discharged except by the complete and irrevocable payment,
observance and performance of all Obligations and the obligations of
Guarantor hereunder. The obligations of Guarantor hereunder shall not be
affected in any way by any receivership, insolvency, bankruptcy or other
proceedings affecting Seller, Charterer or any other Person or any of the
assets of Seller, Charterer or any other Person, or the release or
discharge (other than by the complete and irrevocable performance of all
Obligations) of Seller, Charterer or any other Person from the
performance of any obligation contained in any promissory note or other
instrument issued in connection with, evidencing or securing any
indebtedness guaranteed by this instrument, whether occurring by reason
of law, admiralty, equity or any other cause, whether similar or
dissimilar to the foregoing.
SECTION 6. No Subrogation. Notwithstanding anything to the
contrary in this Guaranty, Guarantor hereby irrevocably waives any rights
which may have arisen in connection with this Guaranty or the other
Charter Documents to be subrogated to any of the rights (whether
contractual, under the United States Bankruptcy Code, as amended,
including Section 509 thereof, under common law or otherwise) of Owner
against Seller, Charterer or any other Person or against any collateral
security or guaranty or right of offset held by Seller or Charterer or
any other Person for the payment of the Obligations. Guarantor hereby
further irrevocably waives all contractual, common law, statutory or
other rights of reimbursement, contribution, exoneration or indemnity (or
other similar right) from or against Seller, Charterer or any other
Person which may have arisen in connection with this Guaranty or the
other Charter Documents. So long as the Obligations remain outstanding,
if any amount shall be paid by or on behalf of Seller or Charterer or any
other Person to Guarantor on account of any of the rights waived in this
paragraph, such amount shall be held by Guarantor in trust, segregated
from other funds of such Guarantor, and shall, forthwith upon receipt by
such Guarantor, be turned over to Owner in the exact form received by
Guarantor (duly endorsed by Guarantor to Owner, if required), to be
applied against the Obligations, whether matured or unmatured, in such
order as Owner may in its sole discretion determine.
SECTION 7. Stay of Acceleration. If acceleration of the
time for payment of any amount payable by Seller or Charterer under the
Charter Documents is stayed upon the insolvency, bankruptcy or
reorganization of Seller or Charterer all such amounts otherwise subject
to acceleration under the terms of the Charter Documents shall
nonetheless be payable by Guarantor hereunder forthwith on demand.
SECTION 8. Representations and Warranties. Guarantor
represents and warrants to Owner as follows:
(a) Guarantor has received, or will receive, substantial
direct or indirect benefit from the making of this Guaranty.
(b) Guarantor (i) is a corporation duly organized, validly
existing and in good standing under the law of its jurisdiction of
incorporation and is in good standing in all jurisdictions in which
failure to be or remain in good standing would have a material
adverse effect upon its ability to pay, observe or perform its
duties, obligations or liabilities hereunder and (ii) has all
requisite corporate power to conduct its business and to execute
and deliver and perform its obligations under this Guaranty.
(c) The execution, delivery and performance by Guarantor of
this Guaranty has been duly authorized and approved by all
necessary corporate action on the part of Guarantor. This Guaranty
constitutes the legal, valid and binding obligation of Guarantor
and is enforceable against Guarantor in accordance with its terms,
except insofar as enforceability may be limited by applicable
debtor relief laws or subject to general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(d) No order, consent, approval, license, permit,
franchise, waiver, exemption, authorization of or validation of, or
filing, recording or registration with (except those that have been
heretofore obtained or made and of which the Owner has heretofore
been given written notice) or exemption by, any Person or tribunal
is required to authorize, or is required in connection with, the
execution, delivery, performance, legality, validity, binding
effect or enforceability of this Guaranty.
(e) All information that has been or is hereafter made
available to Owner by or on behalf of Guarantor in connection with
this Guaranty or the Sale and Lease was (and will be) complete and
correct in all material respects and did not (and will not) contain
any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained therein
not materially misleading in light of the circumstances under which
such statements were (or will be) made. Without limiting the
generality of the foregoing, the Owner and the Investors have been
provided with the financial statements (including balance sheet and
related statements of income and cash flows) of Guarantor and its
consolidated subsidiaries for the year ended December 31, 1994 and
for the nine (9) month period ended September 30, 1995. Such
financial statements are true, complete and correct in all respects
and fairly present the financial condition of Guarantor and its
consolidated subsidiaries as of the dates thereof and the results
of operations of Guarantor and its consolidated subsidiaries for
the periods then ended.
(f) Guarantor has a direct and substantial economic
interest in Seller and Charterer, and expects to derive substantial
benefits therefrom and from the transactions contemplated by the
MOA, the Charter and the other Charter Documents. Owner shall have
no duty to inquire into or confirm the receipt of any such
benefits, and this Guaranty shall be effective and enforceable by
Owner without regard to the receipt, nature or value of any such
benefits.
(g) No bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation or similar
proceeding with respect to Guarantor or any of its Subsidiaries (as
defined in the Charter) has been commenced in any jurisdiction.
(h) Guarantor and its Subsidiaries (as defined in the
Charter) are not in default under or with respect to any of their
contractual obligations in any respect which could reasonably be
expected to have a material adverse effect on the business, assets,
operations or condition, financial or otherwise, of Guarantor or
its Subsidiaries (as defined in the Charter) or the ability of
Guarantor to perform its obligations under this Guaranty.
(i) No litigation, investigation or proceeding of or before
any governmental authority or arbitrator is pending or threatened
by or against Guarantor or its Subsidiaries (as defined in the
Charter) with respect to the Vessel, the Collateral Vessels or the
Charter Documents or any of the transactions contemplated thereby,
nor is any litigation, investigation or proceeding of or before any
governmental authority or arbitrator pending or threatened by or
against Guarantor or its Subsidiaries (as defined in the Charter)
or any of their respective properties or revenues which could
reasonably be expected to have a material adverse effect on the
financial or other condition of any of Guarantor or its
Subsidiaries (as defined in the Charter).
(j) Guarantor and its Subsidiaries (as defined in the
Charter) have not received any notice nor otherwise acquired any
knowledge that it is or they are not in full compliance with any of
the requirements of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). No Reportable Event (as defined in
Title IV of ERISA) or other fact or circumstance exists which may
have an adverse effect on the tax qualified status of any employee
benefit plan maintained by Guarantor or its Subsidiaries (as
defined in the Charter). Guarantor and its Subsidiaries (as
defined in the Charter) have no accumulated funding deficiency
within the meaning of ERISA and have no liability or know or have
notice of no fact or circumstances which could result in any
liability to the Pension Benefit Guaranty Corporation, the Internal
Revenue Service, the Department of Labor or any participant in
connection with any employee benefit plan (other than accrued
benefits which are or which may become payable to participants or
beneficiaries in the ordinary course of any such plan).
(k) The operations of Guarantor and its Subsidiaries (as
defined in the Charter) comply in all material respects with all
applicable laws (including any environmental, health and safety
requirements of law); Guarantor and its Subsidiaries (as defined in
the Charter) are not the subject of any actual or threatened
investigation by, order from or agreement with any governmental or
private entity respecting any laws (including any environmental,
health or safety requirements of law), any remedial action or any
claims or liabilities and costs arising from the release or
threatened release of a contaminant, including petroleum and
fractions thereof, into the environment; none of the present or
past operations undertaken on the Vessel or either of the
Collateral Vessels are the subject of any actual or threatened
judicial or administrative proceeding, order, judgment, decree or
settlement alleging or addressing a violation of or a liability
under any laws (including any environmental, health or safety
requirement of law); neither Guarantor nor any of its Subsidiaries
(as defined in the Charter) has filed any notice under any
applicable requirement of law reporting a release of a contaminant
from the Vessel or either of the Collateral Vessels, including
petroleum and fractions thereof, into the environment or reporting
a violation of any applicable laws (including any environmental,
health or safety requirements of law); and no liens arising under
any environmental laws have attached to the Vessel or either of the
Collateral Vessels.
(l) Since December 31, 1994, no material adverse change has
occurred with respect to the financial or other condition of
Guarantor or its Subsidiaries (as defined in the Charter).
(m) None of Guarantor or its Subsidiaries (as defined in
the Charter) is in breach or violation of or in default under (i)
any contractual obligation or any applicable law, other than such
breaches, violations or defaults that individually or in the
aggregate could not reasonably be expected to have a material
adverse effect on the obligation of each under the Charter
Documents, or (ii) its corporate organizational or governance
documents. The execution, delivery, performance, or compliance
with the terms of this Guaranty or any of the other Charter
Documents by any of Guarantor or its Subsidiaries (as defined in
the Charter) does not, and consummation of the transactions
contemplated by this Guaranty and the Charter Documents does not
and will not: (i) conflict with, breach, violate or constitute a
default under (A) any applicable law, (B) the corporate
organizational or governance documents of any of Guarantor or its
Subsidiaries (as defined in the Charter) or (C) any other
contractual obligation of any of the Guarantor or its Subsidiaries
(as defined in the Charter) (ii) result in the mandatory
acceleration or prepayment of any debt owed by any of the Guarantor
or its Subsidiaries (as defined in the Charter) or afford any
holder of any such debt the right to require any of the Guarantor
or its Subsidiaries (as defined in the Charter) to purchase, redeem
or otherwise acquire, reacquire or repay any such debt; or
(iii) result in the imposition of any lien or encumbrance upon the
assets, properties, revenues or rights of any of the Guarantor or
its Subsidiaries (as defined in the Charter) (other than liens or
encumbrances imposed or created or to be imposed or created under
or pursuant to the Mortgages or the Security Agreement).
(n) Guarantor presently maintains commercial general
liability insurance coverage for liability arising from all
operations of the Guarantor. Such insurance includes coverage for
premises and operations, independent contractors, completed
operations and contractual liability (or their equivalents) and
names Owners and each member of the Owner Group (as defined in the
Charter) as additional insureds (except with respect to workers
compensation and employer s liability coverage). The minimum
policy limit is U.S. $1,000,000 single limit per occurrence.
(o) Guarantor is not insolvent within the meaning of any
applicable law and the execution and delivery of this Guaranty and
the performance of Guarantor s obligations hereunder (i) shall not
cause Guarantor to be, or otherwise render Guarantor, insolvent
within the meaning of any applicable law; (ii) shall not result in
Guarantor being unable to pay its debts as they mature and
Guarantor will be able to make all scheduled payments on its
indebtedness due in the next twelve (12) months; (iii) shall not
leave Guarantor with property remaining in its hands constituting
unreasonably small capital with which to conduct its business or
any business in which Guarantor is currently planning to engage;
and (iv) results in material and substantial benefit to Guarantor
and such benefit constitutes reasonably equivalent value and fair
consideration for the execution and delivery of this Guaranty and
the performance by Guarantor of its obligations hereunder within
the meaning of any applicable law. Guarantor has not taken any
actions with respect to this Guaranty, the execution or delivery
hereof or the performance of Guarantor s obligations hereunder with
actual intent to hinder, delay or defraud either present or future
creditors.
SECTION 9. Certain Covenants of Guarantor. Guarantor agrees
that, so long as any of the Obligations shall be outstanding, Guarantor
shall:
(a) Furnish and deliver, or cause to be furnished and
delivered, to Owner and each Investor (as defined in the Charter):
(i) within 45 days after the end of each of the first
three fiscal quarters during each fiscal year of Guarantor, a
consolidated balance sheet of Guarantor and its consolidated
subsidiaries as of the close of each such fiscal quarter,
together with a consolidated income statement and
consolidated statement of cash flows of Guarantor and such
subsidiaries for such fiscal quarter, in each case setting
forth in comparative form the corresponding consolidated
figures for the same period of the next preceding fiscal
year, all in reasonable detail and certified by the chief
financial officer of Guarantor as being true, complete and
correct and as fairly presenting the financial condition and
the results of operations of the respective corporations
covered thereby, subject to year end adjustment;
(ii) within 90 days after the close of each fiscal
year of Guarantor (A) consolidated balance sheets of
Guarantor and its consolidated subsidiaries as of the close
of such fiscal year, together with consolidated profit and
loss statements and consolidated statements of cash flows of
Guarantor and such subsidiaries for such fiscal year
certified by Arthur Andersen & Co. or by independent public
accountants of comparable national standing and reputation as
being true, complete and correct and as fairly presenting the
consolidated financial position of Guarantor and such
subsidiaries as of the end of such fiscal year and the
consolidated results of their operations for such fiscal year
in conformity with generally accepted accounting principles
applied on a basis consistent with prior fiscal years with
such adjustments or changes as to which such independent
public accountants concur; and (B) an update of the Contract
Data Sheet previously submitted to the Investors (as defined
in the Charter) (including, but not limited to, rig and
contract status and updated annual budget), in each case
true, complete and correct and fairly presenting the
information contained therein as of the date of its
submission to Owner and the Investors (as defined in the
Charter); and
(iii) within 30 days after the filing thereof with the
Securities and Exchange Commission, a copy of each report,
form or prospectus filed by Guarantor or any of its
subsidiaries with the Securities and Exchange Commission, and
within 5 days of their issuance, any press releases or
similar materials issued by Guarantor or any of its
subsidiaries; and
(iv) such other financial or other information
relating to the affairs of Guarantor and its subsidiaries or
affiliates as the Owner or any Investor (as defined in the
Charter) may from time to time reasonably request.
(b) Immediately after the commencement thereof, notify
Owner in writing of all litigation and of all proceedings before
any governmental or regulatory agency which, if determined
adversely to Guarantor or any of its Subsidiaries (as defined in
the Charter), could have a material adverse effect on the assets,
operations or condition (financial or otherwise) of Guarantor or
any of its Subsidiaries (as defined in the Charter).
(c) (i) Immediately upon receiving notice or knowledge of
the same, Guarantor shall notify Owner in writing of any breach or
violation of or default by Guarantor or its Subsidiaries (as
defined in the Charter) under (A) any contractual obligation or any
applicable law other than such breaches, violations or defaults
that individually or in the aggregate could not be reasonably
expected to have a material adverse effect on the obligation of
each under the Charter Documents, or (B) its corporate
organizational or governance documents; and (ii) immediately upon
receiving notice or knowledge of the occurrence of any default
(which has not been remedied or waived) in the payment, observance
or performance of any of the terms or provisions of this Guaranty
or any of the other Charter Documents or any Event of Default under
the Charter, Guarantor shall deliver to Owner a certificate of
either the Chairman, the President or a Vice President and the
Chief Financial Officer of Guarantor describing the default or
Event of Default and stating the date of commencement thereof, what
action is proposed to be taken with respect thereto and the
estimated date when it will be remedied.
(d) Guarantor will at all times maintain commercial general
liability insurance coverage for liability arising from all
operations of the Guarantor. Such insurance shall include coverage
for premises and operations, independent contractors, completed
operations and contractual liability (or their equivalents) and
shall name Owner and each member of the Owner Group (as defined in
the Charter) as additional insureds (except with respect to
workers' compensation and employer's liability coverage). The
minimum policy limit shall be U.S. $1,000,000 single limit per
occurrence.
SECTION 10. INTENTIONALLY DELETED.
SECTION 11. Amendments, Etc. No amendment or waiver of any
provision of this Guaranty nor consent to any departure by Guarantor
therefrom shall in any event be effective unless the same shall be in
writing and signed by Owner, and each such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given.
SECTION 12. Notices, Etc. All notices and other
communications provided for herein shall be given or made in the manner
and with the effect described in Section 19.1 of the Charter and
addressed, if to Owner, as stipulated therein or, if to Guarantor, to its
address set forth under its signature below.
SECTION 13. No Waiver; Remedies. No failure on the part of
Owner to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. No course of dealing between Seller and
Owner or Charterer and Owner or any other Person and Owner shall operate
as a waiver of any right of Owner. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law, admiralty,
equity or otherwise.
SECTION 14. Separability. Should any clause, sentence,
paragraph, sub-section or Section of this Guaranty be judicially declared
to be invalid, unenforceable or void, such decision will not have the
effect of invalidating or voiding the remainder of this Guaranty, and
Guarantor agrees that the part or parts of this Guaranty so held to be
invalid, unenforceable or void will be deemed to have been stricken
herefrom and the remainder will have the same force and effectiveness as
if such part or parts had never been included herein.
SECTION 15. Captions. The captions in this Guaranty have
been inserted for convenience only and shall be given no substantive
meaning or significance whatever in construing the terms and provisions
of this Guaranty.
SECTION 16. Successors and Assigns; Assignment. This
Guaranty shall (a) remain in full force and effect until final and
irrevocable payment, observance and performance in full of the
Obligations and all other amounts payable under the Charter Documents;
(b) be binding upon Guarantor, its successors and assigns; provided that
Guarantor's rights and obligations hereunder may not be assigned without
the prior written consent of Owner; and (c) inure to the benefit of and
be enforceable by Owner and its successors and assigns. This Guaranty
may be assigned by Owner at any time without the prior written consent of
or notice to Guarantor or any other Person.
SECTION 17. Conditions of Consolidation or Merger.
Guarantor shall not consolidate with or merge into any other corporation
to the extent that (a) Guarantor is not the surviving entity or (b)
Guarantor is the surviving entity and will not have, after giving effect
to such consolidation or merger, and maintain, for a period of six months
thereafter, a rating for its long term unsecured senior debt of at least
B1 or higher by Moody's Investor Service, Inc. or at least B+ or higher
by Standard & Poor's Ratings Group or (c) the successor corporation
formed by such consolidation or into which Guarantor is merged (i) will
not have, after giving effect to such consolidation or merger, and
maintain, for a period of six months thereafter, a rating for its long
term unsecured senior debt of at least B1 or higher by Moody's Investor
Service, Inc. or at least B+ or higher by Standard & Poor's Ratings Group
or (ii) shall not succeed to, and be substituted for, Guarantor with
respect to all obligations and liabilities of Guarantor under this
Guaranty with the same effect as if such successor corporation had been
named as Guarantor herein or (d) any Event of Default (as defined in the
Charter) shall have occurred and be continuing.
SECTION 18. Limitation by Law. All rights, remedies and
powers provided in this Guaranty may be exercised only to the extent that
the exercise thereof does not violate any applicable provision of law,
and all the provisions of this Guaranty are intended to be subject to all
applicable mandatory provisions of law which may be controlling and to be
limited to the extent necessary so that they will not render the Guaranty
invalid, unenforceable, in whole or in part, or not entitled to be
recorded, registered or filed under the provisions of any applicable law.
SECTION 19. Survival of Covenants, Representations and
Warranties. All covenants, representations and warranties contained in
this Guaranty shall survive the execution and delivery of this Guaranty
and shall continue until final and irrevocable payment and satisfaction
of all obligations and the termination of the Charter Documents. Any
investigation by Owner shall not diminish in any respect whatsoever its
right to rely on such covenants, representations and warranties.
SECTION 20. Fees and Expenses. Guarantor shall pay all
costs, fees and expenses (including, but not limited to, reasonable
attorneys fees and disbursements) incurred by Owner or the Trustee (as
defined in the MOA) in collecting or enforcing Guarantor s obligations or
Owner s or Trustee's rights or remedies under this Guaranty and all such
amounts shall be part of the Obligations guaranteed hereby.
SECTION 21. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
SECTION 22. VENUE; SERVICE OF PROCESS. GUARANTOR, FOR
ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY KNOWINGLY AND INTENTIONALLY
AND IRREVOCABLY AND UNCONDITIONALLY a) SUBMITS, FOR ITSELF AND ITS
PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE STATE COURTS OF THE
STATE OF NEW YORK AND THE FEDERAL COURTS SITTING IN THE STATE OF NEW YORK
AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN
ANY LEGAL PROCEEDING ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTY,
THE MOA, THE CHARTER, THE OTHER CHARTER DOCUMENTS OR THE OBLIGATIONS BY
SERVICE OF PROCESS AS PROVIDED BY NEW YORK LAW, b) WAIVES, TO THE EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY LITIGATION ARISING OUT OF OR IN CONNECTION WITH
THIS GUARANTY, THE OTHER CHARTER DOCUMENTS OR THE OBLIGATIONS BROUGHT IN
ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN THE STATE OF NEW
YORK, c) WAIVES ANY CLAIMS THAT ANY LITIGATION BROUGHT IN ANY SUCH COURT
HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, d) CONSENTS TO THE SERVICE
OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH LITIGATION
BY THE MAILING OF COPIES THEREOF BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, POSTAGE PREPAID, TO GUARANTOR AT THE ADDRESS SPECIFIED HEREIN
AND e) AGREES THAT ANY LEGAL PROCEEDING ARISING OUT OF, RELATED TO OR IN
CONNECTION WITH THIS GUARANTY, THE MOA, THE CHARTER, THE OTHER CHARTER
DOCUMENTS OR THE OBLIGATIONS MAY BE BROUGHT IN ANY COURT OF COMPETENT
JURISDICTION IN THE STATE OF NEW YORK. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF OWNER TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
GUARANTOR IN ANY OTHER JURISDICTION OR TO SERVE PROCESS IN ANY MANNER
PERMITTED BY APPLICABLE LAW.
SECTION 23. WAIVER OF JURY TRIAL. GUARANTOR, FOR ITSELF AND
ITS SUCCESSORS AND ASSIGNS, HEREBY KNOWINGLY AND INTENTIONALLY AND
IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY
LAW ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF THIS GUARANTY, THE MOA, THE CHARTER, OR ANY OF THE
OTHER CHARTER DOCUMENTS OR ANY DEALINGS WITH OWNER RELATING TO THE
SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY AND
THE RELATIONSHIP THAT IS BEING ESTABLISHED. THE FOREGOING WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, MODIFICATIONS, RENEWALS, SUPPLEMENTS
OR SUBSTITUTIONS TO THIS GUARANTY, THE MOA, THE CHARTER, OR ANY OF THE
OTHER CHARTER DOCUMENTS WHETHER OR NOT EXPRESSLY SET FORTH HEREIN OR
THEREIN.
SECTION 24. Final Agreement. This Guaranty, together with
the other written documents, instruments, agreements and papers executed
in connection herewith, represents the final agreement between Owner and
Guarantor with respect to the subject matter hereof. This Guaranty and
such writings supersede all prior proposals, negotiations, agreements and
understandings related to such subject matter. Each of Guarantor and
Owner hereby represents and warrants that it is not relying on any
statement, representation, warranty, covenant or agreement of any kind
except for those set forth in this Guaranty and such other documents,
instruments, agreements and papers.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be
duly executed by its officer thereunto duly authorized, as of the date
first above written.
READING & BATES CORPORATION
By:
Name:
Title:
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Chief Financial Officer
Telecopier No. (713) 496-0285
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EXHIBIT C-1
PREFERRED MORTGAGE
PREFERRED MORTGAGE ("Mortgage"), made the 28th day of
November, 1995, by READING & BATES DRILLING CO., an Oklahoma corporation
("Mortgagor"), to WILMINGTON TRUST COMPANY, a Delaware banking
corporation, not in its individual capacity, but solely as Trustee (in
such capacity, "Mortgagee") for the benefit of DEEP SEA INVESTORS,
L.L.C., a Delaware limited liability company ("Beneficiary").
WHEREAS:
A. Mortgagor is the sole owner of the whole of that certain
vessel known as the "JIM CUNNINGHAM , official number 651643, gross
tonnage 7977, net tonnage 5866, built at Okpo Island, South Korea, in
1982, duly documented in the name of Mortgagor under the laws and flag of
the United States of America (the "Collateral Vessel").
B. This Mortgage is being executed and delivered by Mortgagor
pursuant to that certain Memorandum of Agreement (the "MOA") dated of
even date herewith by and between Beneficiary and Reading and Bates,
Inc., an Oklahoma corporation ("R&B, Inc."), a subsidiary of Mortgagor s
parent corporation, Reading & Bates Corporation, a Delaware corporation
(the "Parent"). Under the MOA, R&B, Inc. agreed to sell a certain other
vessel to Beneficiary and Beneficiary agreed to lease that vessel to
Mortgagor under the terms and subject to the conditions set forth in the
Bareboat Charter (the "Charter") dated of even date herewith by and
between Mortgagor and Beneficiary (the MOA, the Charter, this Mortgage
and all other documents executed in connection therewith, together with
any and all amendments, supplements, renewals or substitutions of all or
any of such documents, are sometimes referred to collectively herein as
the "Charter Documents").
C. Beneficiary requires that Mortgagor execute and deliver this
Mortgage to secure the prompt and complete payment, observance and
performance of all representations, warranties, covenants, duties,
liabilities and obligations of Mortgagor under the Charter Documents (the
"Secured Obligations").
D. The Board of Directors of Mortgagor having determined that
Mortgagor will derive substantial benefit, directly or indirectly, from
the sale and lease transaction among R&B, Inc., Mortgagor and
Beneficiary, Mortgagor wishes to execute and deliver this Mortgage as
required by Beneficiary.
NOW, THEREFORE, THIS MORTGAGE WITNESSETH:
That in consideration of the premises and of other good and
valuable consideration, the receipt whereof is hereby acknowledged, and
in order to secure the payment, observance and performance of the
Secured Obligations according to the terms thereof, and the payment of
all such other sums as may hereafter become secured by this Mortgage in
accordance with the terms hereof, and to secure the performance and ob-
servance of and compliance with the representations, warranties,
covenants, terms and conditions herein and in the Charter Documents
contained, Mortgagor does by these presents GRANT, CONVEY, MORTGAGE,
PLEDGE, ASSIGN, TRANSFER, SET OVER and CONFIRM unto the Mortgagee, its
successors and assigns, for the benefit of Beneficiary, the whole of the
Collateral Vessel, together with all of the boilers, engines, machinery,
masts, spars, rigging, boats, anchors, chains, cables, tackle, apparel,
furniture, fittings and equipment (but excluding leased equipment owned
by third parties) and all other appurtenances to the Collateral Vessel
appertaining or belonging, whether now owned or hereafter acquired,
whether on board or not and all additions, substitutions, improvements
and replacements hereafter made in or to the Collateral Vessel, or any
part thereof, or in or to the equipment and appurtenances aforesaid and
all products, rentals and proceeds (including, but not limited to,
insurance proceeds) of any of the foregoing (collectively, the
Collateral ).
TO HAVE AND TO HOLD the same unto the Mortgagee, its
successors and assigns, forever, upon the terms herein set forth for the
enforcement of the payment and performance of the Secured Obligations and
to secure the performance and observance of and compliance with the
covenants, terms and conditions in this Mortgage and in the Charter
Documents.
PROVIDED, ONLY, and the conditions of these presents are
such, that if the Secured Obligations shall be paid, performed and
discharged as and when the same shall become payable or are to be
performed in accordance with the terms of this Mortgage and of the
Charter Documents, and if all other such sums as may hereafter become
secured by this Mortgage are paid in accordance with the terms hereof,
and if Mortgagor shall perform, observe and comply with all the
covenants, terms and conditions in the Charter Documents and in this
Mortgage, expressed or implied, to be performed, observed or complied
with by and on the part of Mortgagor, and the Charter Documents shall
have terminated pursuant to the terms thereof, then these presents and
the rights hereunder shall cease, determine and be void, otherwise to be
and remain in full force and effect.
A copy of the Charter is annexed hereto and made a part
hereof as Exhibit A.
IT IS HEREBY COVENANTED, DECLARED AND AGREED that the
property above described is to be held subject to the further covenants,
conditions, provisions, terms and uses hereinafter set forth.
ARTICLE I.
COVENANTS OF MORTGAGOR
Mortgagor covenants and agrees with Mortgagee as follows:
1. Mortgagor will observe, perform and comply with each
and every one of the covenants, terms and conditions herein, expressed or
implied, on its part to be observed, performed or complied with.
2. Mortgagor was duly organized and is now existing as a
corporation under the laws of the State of Oklahoma and shall so remain
during the life of this Mortgage; it is now, and shall remain during the
life of this Mortgage, a citizen of the United States as defined in
Section 2 of the Shipping Act, 1916, as at any time amended; it is duly
authorized to mortgage the Collateral Vessel and the Collateral; all
corporate action necessary and required by law for the execution and
delivery of this Mortgage, and the good faith affidavit filed herewith,
has been duly and effectively taken; and the Secured Obligations will be
the valid and enforceable obligations of Mortgagor in accordance with
their terms.
3. Mortgagor lawfully owns and is lawfully possessed of,
and has good title to, the Collateral Vessel and the Collateral free from
(i) any security interest, lien, charge or encumbrance whatsoever, other
than, with respect to the Collateral Vessel (a) for current crew s wages,
general average and salvage, in each case, incurred in the ordinary
course of business and that are not yet overdue and (b) that certain
First Preferred Mortgage dated January 28, 1987, securing a principal
amount of not more than $11,000,000 which is payable in accordance with
the amortization schedule annexed hereto and made a part hereof as
Exhibit B (the "First Preferred Mortgage"), in favor of ABC Equipment
Leasing, Inc. (the "First Mortgagee"), recorded March 4, 1987, as
Instrument No. 1, Book No. PM149, in the records of the Eighth Coast
Guard District, Port of Houston, Texas, or (ii) any commitment to make
the Collateral Vessel available for charter, other than drilling
contracts that comply with the terms of this Mortgage and the other
Charter Documents and charters or subcharters (whether demise or
otherwise) to the Parent and its Subsidiaries (as defined in the
Charter), or (iii) sale or use by any governmental authority, and it will
warrant and defend the title and possession thereto and to every part
thereof for the benefit of the Mortgagee against the claims and demands
of all persons whomsoever. This Mortgage constitutes the legal, valid
and binding obligation of Mortgagor, is enforceable against Mortgagor in
accordance with its terms, and when filed of record with the U.S. Coast
Guard National Vessel Documentation Center, will create a valid and
perfected preferred mortgage upon, security interest in and lien on the
Collateral Vessel and the Collateral, subject and subordinate (with
respect to the Collateral Vessel) only to the lien of the First Preferred
Mortgage (to the extent that such remains in effect). Upon payment of
the obligations secured by the First Mortgage, Mortgagor shall promptly
cause the First Mortgagee to execute and deliver to the Beneficiary for
filing, at Mortgagor s sole cost and expense, with each filing officer
with which the First Mortgage, any financing statement or other
instrument covering the Collateral Vessel or any other Collateral was
filed, all satisfactions of mortgage, satisfaction pieces, termination
statements and similar instruments, and take or cause to be taken such
other or further action, as Beneficiary may deem necessary or appropriate
to terminate the First Mortgagee's mortgage, lien and security interest
in the Collateral Vessel or any other Collateral.
4. Mortgagor will comply with and satisfy all the
provisions of Chapter 313 of Title 46, United States Code, as at any time
amended (the "Ship Mortgage Act"), and shall execute, deliver, file
and/or record, or cause the execution and delivery and the filing and/or
recordation of, such documents or instruments, and shall take or cause to
be taken such actions as may be necessary or desirable in the opinion of
the Beneficiary or the Mortgagee, in order to establish and maintain this
Mortgage as a valid and perfected preferred mortgage upon the Collateral
Vessel and upon all renewals, improvements and replacements made in or to
the same, subject and subordinate only to the lien of the First Preferred
Mortgage (to the extent that such remains in effect).
5. Mortgagor will not cause or permit the Collateral
Vessel to be operated in any manner contrary to law, will not abandon the
Collateral Vessel in a foreign port, will not engage in any unlawful
trade or violate any law or carry any cargo that will expose the
Collateral Vessel or the Collateral to penalty, forfeiture or capture,
and will not do, or suffer or permit to be done, anything which can or
may injuriously or adversely affect the registration or enrollment of the
Collateral Vessel under the laws and regulations of the United States of
America and will at all times keep the Collateral Vessel duly documented
thereunder. Neither Mortgagor nor the Collateral Vessel is the subject
of any pending or threatened environmental enforcement proceedings or
investigations, nor any other pending or threatened proceedings or
investigations with respect to any other environmental, health or safety
matters. Mortgagor is in compliance with all applicable laws and
regulations with respect to the Collateral Vessel or otherwise relating
to pollution control and other environmental, health or safety matters in
all jurisdictions in which Mortgagor is doing business. Mortgagor shall
assume all responsibility for the control and removal of, and hold
Mortgagee, Beneficiary and every member of the Owner Group (as defined in
the Charter) harmless from loss or damage, liabilities or claims arising
from, directly or indirectly, pollution or contamination by any liquid or
non-liquid waste material whatsoever found that is discharged, spilled or
leaked from the Collateral Vessel, and for noncompliance with
environmental, health and safety laws. To the extent that any law,
regulation or governmental entity acting within its jurisdiction imposes
on Mortgagee, Beneficiary or any member of the Owner Group (as defined in
the Charter) liability for any such pollution, notwithstanding such
imposition of direct liability, Mortgagor shall have designated Mortgagee
(both in its individual capacity and as Trustee), Beneficiary and each
member of the Owner Group (as defined in the Charter) as an additional
insured under its insurance policies and Mortgagor shall hold Mortgagee
(both in its individual capacity and as Trustee), Beneficiary and each
member of the Owner Group (as defined in the Charter) harmless from such
loss, damage or claims and reimburse any of Mortgagee (both in its
individual capacity and as Trustee), Beneficiary or any member of the
Owner Group (as defined in the Charter) for any amounts it may be
required to pay. This indemnity is valid irrespective of the negligence
or fault, whether sole, joint, active or passive of the indemnified party
and whether predicated on strict liability, statutory duty, contractual
indemnity or any other theory of liability of the indemnified party.
6. Mortgagor will pay and discharge when due and payable,
from time to time, all taxes, assessments, governmental charges, fines
and penalties lawfully imposed on the Collateral Vessel or the Collateral
or any income therefrom.
7. Neither Mortgagor, any charterer, the Master of the
Collateral Vessel or any other person has or shall have any right, power
or authority to create, incur or permit to be placed or imposed or
continued upon the Collateral Vessel or the Collateral, any lien
whatsoever other than this Mortgage, the First Preferred Mortgage and
liens for current crew's wages, general average, and salvage, in each
case, incurred in the ordinary course of business and that are not yet
overdue.
8. Mortgagor will place, and at all times and places will
retain, a properly certified copy of this Mortgage on board the
Collateral Vessel with her papers and will cause such certified copy and
such papers to be exhibited to any and all persons having business
therewith which might give rise to any lien thereon other than liens for
current crew's wages, general average and salvage, in each case, incurred
in the ordinary course of business and that are not yet overdue, and to
any representative of Mortgagee or Beneficiary; and will place and keep
prominently displayed in the chart room and in the Master's cabin of the
Collateral Vessel a framed printed notice in plain type of such size that
the paragraph of reading matter shall cover a space not less than 6
inches wide by 9 inches high, reading as follows:
"NOTICE OF MORTGAGE
This vessel is covered by a Preferred Mortgage to
Wilmington Trust Company, Trustee, under authority of
Chapter 313 of Title 46, United States Code, as at any
time amended. Under the terms of said Mortgage,
neither the owner, any charterer, nor the Master of
this vessel has any right, power or authority to
create, incur or permit to be imposed upon this vessel
any lien whatsoever other than for current crew's
wages, general average and salvage, in each case,
incurred in the ordinary course of business and that
are not yet overdue."
9. Except for the lien of this Mortgage and of the First
Preferred Mortgage, Mortgagor will not create or suffer to be continued
any security interest, lien, encumbrance or charge on the Collateral
Vessel or the Collateral and in due course and in any event within 30
days after the same becomes due and payable will pay or cause to be
discharged or make adequate provision for the payment or discharge of all
claims or demands which, if not paid or discharged, might result in the
creation of such a security interest, lien, encumbrance or charge and
will cause the Collateral Vessel or the Collateral to be released or
discharged from each such security interest, lien, encumbrance or charge
therefor; provided, however, that the undertaking of such corrective
action shall in no event be deemed a cure of any breach of this Mortgage
or be deemed a waiver by Mortgagee or Beneficiary of any of their rights
or remedies hereunder with respect thereto.
10. If a libel is filed against the Collateral Vessel or if
the Collateral Vessel is otherwise attached, levied upon, or taken into
custody or detained by any proceeding in any court or tribunal or by any
Government or other authority, Mortgagor will promptly notify (i)
Mortgagee thereof by telecopier, confirmed by letter, at its office at
1100 North Market Street, Rodney Square North, Wilmington, Delaware
19890, Attention: Corporate Trust Administration, Telecopier No. (302)
651-8882 and (ii) notify Beneficiary thereof by telecopier, confirmed by
letter, at its office c/o Heller Financial, Inc., Attention: Legal
Department, 101 Park Avenue, New York, New York 10178, Telecopier No.
(212) 880-7158, and within 15 days will cause such Collateral Vessel to
be released and all valid liens thereon other than this Mortgage and the
First Mortgage to be discharged, and will promptly notify Mortgagee and
Beneficiary thereof in the manner aforesaid; provided, however, that the
undertaking of such corrective action shall in no event be deemed a cure
of any breach of this Mortgage or be deemed a waiver by Mortgagee or
Beneficiary of any of their rights or remedies hereunder with respect
thereto.
11. Mortgagor hereby acknowledges and confirms as of the
Closing Date (as defined in the MOA) that (a) no loss, constructive loss
or requisitioning for use by any governmental authority of the Collateral
Vessel (and, where applicable, the Collateral) has occurred; and (b) the
Collateral Vessel (and, where applicable, the Collateral) is tight,
staunch, strong and well and sufficiently tackled, appareled, furnished
and equipped and in every respect seaworthy, in accordance with
specifications, in good working order, condition and repair (normal wear
and tear excepted) and without defect in condition, design, operation or
fitness for use. Mortgagor will at all times and without cost or expense
to Mortgagee or Beneficiary maintain and preserve, or cause to be
maintained and preserved, the Collateral Vessel (and, where applicable,
the Collateral) in good running order and repair, so that the Collateral
Vessel shall be, at all times, tight, staunch, strong and well and
sufficiently tackled, appareled, furnished, equipped and in every respect
seaworthy and in good operating condition and in accordance with
specifications; and will keep the Collateral Vessel (and, where
applicable, the Collateral) in such condition as will entitle the
Collateral Vessel to the highest classification and rating for vessels of
the same age and type by the American Bureau of Shipping or other
classification society of like standing, and annually will furnish to
Mortgagee and Beneficiary a certificate by such Bureau or classification
society (if applicable) that such classification is maintained. The
Collateral Vessel shall, and Mortgagor covenants that it will, at all
times comply with all applicable laws, treaties and conventions of the
United States of America, and rules and regulations issued thereunder,
and shall have on board as and when required thereby valid certificates
showing compliance therewith. Mortgagor will not make, or permit to be
made, any change in the structure, character or type of, or any
modifications or improvements to, the Collateral Vessel which diminish
the value, utility, useful life or seaworthiness of the Collateral Vessel
without first receiving the written approval thereof by Mortgagee and
Beneficiary (such approval not to be unreasonably withheld) and, upon
request, shall promptly provide Mortgagee and Beneficiary with all
designs, drawings, plans and specifications relating to any such changes,
modifications or improvements. Mortgagor will notify Mortgagee and
Beneficiary of (i) any damage to the Collateral Vessel requiring repairs
reasonably expected to cost $1,000,000 or more promptly following the
occurrence thereof and (ii) any changes, modifications or improvements to
the Collateral Vessel reasonably expected to cost $5,000,000 or more
prior to commencing such changes, modifications or improvements.
Mortgagor agrees to give Mortgagee and Beneficiary at least
10 days notice of the actual date and place of any survey or drydocking
in order that Mortgagee and Beneficiary may have representatives present
if desired. Mortgagor agrees that at Mortgagee's or Beneficiary's
request it will satisfy the Mortgagee and the Beneficiary that the
expense of such survey or drydocking or work to be done thereat is within
Mortgagor's financial ability and will not result in a claim or lien
against the Collateral Vessel or the Collateral in violation of the
provisions of this Mortgage.
12. Mortgagor at all times will afford Mortgagee and
Beneficiary or their authorized representatives full and complete access
to the Collateral Vessel for the purpose of inspecting the same and the
Collateral Vessel's cargo and papers and, at the request of Mortgagee or
Beneficiary, Mortgagor will deliver for inspection copies of any and all
contracts and documents relating to the Collateral Vessel, whether on
board or not.
13. Mortgagor will not transfer or change the flag or port
of documentation of the Collateral Vessel without the written consent of
Mortgagee and Beneficiary first had and obtained, and any such written
consent to any one transfer or change of flag or port of documentation
shall not be construed to be a waiver of this provision with respect to
any subsequent proposed transfer or change of flag or port of
documentation.
14. Mortgagor will not sell, mortgage, transfer, demise or
other charter or change the management of the Collateral Vessel or the
Collateral, except, with respect to the Collateral Vessel, drilling
contracts that comply with the terms of this Mortgage and the other
Charter Documents and charters or subcharters (whether demise or
otherwise) to the Parent and its Subsidiaries (as defined in the
Charter), without the written consent of Mortgagee and Beneficiary first
had and obtained, and any such written consent to any one sale, mortgage,
transfer, demise or other charter or change shall not be construed to be
a waiver of this provision with respect to any subsequent proposed sale,
mortgage, transfer, demise or other charter or change. Any such sale,
mortgage, transfer or charter of the Collateral Vessel or the Collateral
(including any sale or transfer to the Parent or any Subsidiary (as
defined in the Charter) of the Parent) shall be subject to the provisions
of this Mortgage and the lien it creates. Mortgagor will not charter the
Collateral Vessel to, or permit the Collateral Vessel to serve under any
contract with, a person included within the definition of " designated
foreign country" or "national" of a "designated foreign country" in the
Foreign Assets Control Regulations or Cuban Assets Control Regulations of
the United States Treasury Department, 31 C.F.R., Chapter V, as amended,
or any person included within the definition of "Government of Libya,"
"entity of the Government of Libya" or "Libyan entity" in the Libyan
Sanctions Regulations of the United States Treasury Department, 31 C.F.R.
Part 550, as amended, within the meaning of said Regulations or of any
regulation, interpretation or ruling issued thereunder.
15. (a) Mortgagor will, at its own expense, when and so
long as this Mortgage or any Secured Obligations shall be outstanding,
insure the Collateral Vessel and keep her insured, in lawful money of the
United States, for not less than the full fair market value thereof (as
determined by the appraisal of the Collateral Vessel prepared by Barnett
& Casbarian, Inc. and dated November 1995 (the "Appraisal"). The
Collateral Vessel shall in no event be insured for an amount less than
the agreed valuation as set forth in the applicable marine and war risk
policies. Such insurance shall cover marine and war risk perils, on hull
and machinery, and shall be maintained in the broadest forms available in
the American or British insurance markets for vessels of the same type as
the Collateral Vessel. In addition, Mortgagor shall, at its own expense,
furnish to Beneficiary a mortgagee's single interest policy (or shall
cause the hull and machine insurance on the Collateral Vessel to be
endorsed to afford breach of warranty coverage for the benefit of
Beneficiary and the members of the Owner Group (as defined in the
Charter)) providing coverage in an amount equal to at least the full fair
market value of the Collateral Vessel, as determined by the Appraisal.
Such mortgagee's interest insurance shall be maintained in the broadest
form available in the American or British markets for vessels of the same
type as the Collateral Vessel through underwriters acceptable to
Beneficiary. In addition, Mortgagor shall maintain protection and
indemnity or equivalent insurance, through underwriters or associations
reasonably acceptable to Beneficiary in an amount not less than the fair
market value of the Collateral Vessel, as determined by the Appraisal,
provided, however, that war risk protection and indemnity insurance shall
be in an amount not less than the amount of insurance against total loss.
The Collateral Vessel shall not carry any cargoes or proceed into an area
then excluded by trading warranties under its marine or war risk policies
(including expropriation, protection and indemnity) without obtaining all
necessary additional coverage, satisfactory in form and substance, and
satisfactory evidence of which shall be promptly furnished, to
Beneficiary.
(b) The policy or policies of insurance described in this
Section 15 shall be issued by responsible underwriters reasonably
acceptable to Beneficiary in all respects, shall contain conditions,
terms, stipulations and insuring covenants reasonably satisfactory to
Beneficiary in all respects (including, but not limited to, waivers of
subrogation rights of the insurers against the insureds and waivers of
any rights of the insurers to any set off, counterclaim or deduction,
whether by attachment or otherwise) and shall be kept in full force and
effect by Mortgagor so long as this Mortgage or any Secured Obligations
shall be outstanding. All such policies, binders and other interim
insurance contracts shall be executed and issued in the name of Mortgagor
and shall provide that loss be payable (i) for so long as the Collateral
Vessel is encumbered by the First Preferred Mortgage, to the First
Mortgagee for distribution by it to itself, Beneficiary and Mortgagor, as
their interests may appear, and (ii) thereafter, to Beneficiary for
distribution by it to itself and Mortgagor, as their interests may
appear. Copies of all such policies, binders and other interim insurance
contracts shall be deposited with Beneficiary. Such insurance policies
shall provide for at least 30 days' prior written notice to be given to
Beneficiary by the underwriters or association in the event of (i)
cancellation (or at least 7 days prior written notice, with respect to
war risk coverage) or (ii) the failure of Mortgagor to pay any premium or
call which would suspend coverage under the policy or the payment of a
claim thereunder. Mortgagor shall furnish to Beneficiary annually, not
later than thirty days prior to expiration, a detailed report signed by a
firm of marine insurance brokers satisfactory to Beneficiary as to the
insurance maintained in respect of the Collateral Vessel, as to their
opinion as to the adequacy thereof and as to compliance with the
provisions of this Section 15.
Unless otherwise required by Beneficiary by notice to the
underwriters, although the following insurance is payable to Beneficiary,
(i) any loss under any insurance on the Collateral Vessel with respect to
protection and indemnity risks may be paid directly to Mortgagor to
reimburse it for any loss, damage or expense actually incurred by it and
covered by such insurance or to the person to whom any liability covered
by such insurance has been actually incurred, and (ii) in the case of any
loss (other than a loss covered by clause (i) above or by the next
paragraph of this Section) under any insurance with respect to the
Collateral Vessel involving any damage to such Collateral Vessel, the
underwriters may pay directly for the repair, salvage or other charges
involved or, if Mortgagor shall have first fully repaired the damage or
paid all of the salvage or other charges, may pay Mortgagor as
reimbursement therefor; provided, however, that if such damage involves a
loss in excess of $1,000,000, the underwriters shall not make such
payment without first obtaining the written consent thereto of
Beneficiary. Any loss covered by this paragraph which is paid to
Beneficiary but which might have been paid, in accordance with the
provisions of this paragraph, directly to Mortgagor or others, shall be
paid by Beneficiary to, or as directed by, Mortgagor and all other
payments to Beneficiary of losses covered by this paragraph shall be
applied by Beneficiary in accordance with the Charter Documents.
In the event of an actual or constructive total loss or a
compromised constructive total loss or requisition, all insurance
payments therefor shall be paid toBeneficiary (subject to the prior
rights of the First Mortgagee). Mortgagor shall not declare or agree
with underwriters that the Collateral Vessel is a constructive or
compromised, agreed or arranged constructive total loss without the prior
written consent of Beneficiary.
(c) In the event of an actual or constructive total loss of
the Collateral Vessel, Beneficiary shall (subject to the prior rights of
the First Mortgagee) retain out of the insurance payments received on
account of such loss, which shall become the sole property of Beneficiary
(subject to the prior rights of the First Mortgagee), any sum or sums
that shall be or become owing under the Charter Documents or this
Mortgage, whether or not the same be then due and payable, together with
accrued interest and the cost, if any, of collecting the insurance, and
pay the balance as in Section 26 hereinafter provided.
(d) Mortgagor will comply with and satisfy all of the
provisions of any applicable environmental, health and safety or other
law, regulation, proclamation or order including, without limitation,
those concerning financial responsibility for liabilities imposed on
Mortgagor or the Collateral Vessel with respect to pollution including,
without limitation, the U.S. Water Pollution Control Act, as amended, and
the U.S. Oil Pollution Act, as amended, and will maintain or cause to be
maintained all certificates or other evidence of financial responsibility
as may be required by any such law, regulation, proclamation or order
with respect to the trade which the Collateral Vessel from time to time
is engaged in and the cargoes carried by it.
(e) In addition to, and except as otherwise expressly
provided in, this Section 15, Mortgagor shall maintain insurance with
respect to the Collateral Vessel in the amounts and types specified in
the Charter with respect to the vessel being leased by Mortgagor
thereunder.
(f) Mortgagor will reimburse Mortgagee and Beneficiary
within 3 business days after receipt of a demand therefor accompanied by
a reasonable description of the related expenditures, with interest at a
rate per annum equal to the Overdue Rate (as defined in the Charter) for
any and all expenditures which Mortgagee or Beneficiary may from time to
time make, lay out or expend in providing such protection in respect of
insurance, discharge of liens, taxes, dues, assessments, governmental
charges, fines and penalties lawfully imposed, repairs, attorneys' fees
and other matters as Mortgagor is obligated herein to provide, but fails
to provide. Such obligation of Mortgagor to reimburse Mortgagee and
Beneficiary shall be an additional indebtedness due from Mortgagor,
secured by this Mortgage, and shall be payable by Mortgagor on demand.
Mortgagee or Beneficiary, though privileged so to do, shall be under no
obligation to Mortgagor to make any such expenditures, nor shall the
making thereof relieve Mortgagor of any default in that respect.
16. INTENTIONALLY DELETED.
ARTICLE II
EVENTS OF DEFAULT AND REMEDIES
17. In case any Event of Default (as defined in the
Charter) shall occur and be continuing, then and in each and every such
case Mortgagee, for the benefit of Beneficiary, shall have the right to:
(a) Exercise all the rights and remedies in foreclosure and
otherwise given to mortgagees by the provisions of the Ship
Mortgage Act or any other jurisdiction where the Collateral Vessel
may be found;
(b) Bring suit at law, in equity or in admiralty, as it may
determine or be advised, to recover judgment for any and all
amounts due under the Charter Documents or otherwise hereunder, and
collect the same out of any and all property of Mortgagor whether
covered by this Mortgage or otherwise;
(c) Take the Collateral Vessel and any Collateral, wherever
it may be, without legal process and without being responsible for
loss or damage; and Mortgagor or any other person in possession
forthwith upon demand of Mortgagee shall surrender to Mortgagee
possession of the Collateral Vessel and any Collateral, as demanded
by Mortgagee, and Mortgagee may, without being responsible for loss
or damage, hold, lay up, lease, charter, operate or otherwise use
the Collateral Vessel and any Collateral for such time and upon
such terms as it may deem to be for its best advantage, accounting
only for the net profits, if any, arising from such use and
charging upon all receipts from such use or from the sale of the
Collateral Vessel and any Collateral by court proceedings or
pursuant to Subsection (d) next following, all costs, expenses,
charges, damages or losses by reason of such use; and if at any
time Mortgagee shall avail itself of the right herein given it to
take the Collateral Vessel and shall take it, Mortgagee shall have
the right to dock the Collateral Vessel for a reasonable time (not
to be less than 150 days) at any dock, pier or other premises of
Mortgagor without charge, or to dock it at any other place at the
cost and expense of Mortgagor;
(d) Without being responsible for loss or damage, sell the
Collateral Vessel and any Collateral at any place and at such time
as Mortgagee may specify and in such manner as Mortgagee or
Beneficiary may deem advisable free from any claim by Mortgagor in
admiralty, in equity, at law or by statute, after first giving
notice of the time and place of sale with a general description of
the property in the following manner (which Mortgagor acknowledges
and agrees is commercially reasonable in all respects):
(i) By publishing such notice for 10 consecutive days
in a daily newspaper of general circulation published in New
York City;
(ii) If the place of sale should not be New York City,
then also by publication of a similar notice in a daily
newspaper, if any, published at the place of sale; and
(iii) By sending a similar notice by registered mail to
Mortgagor on the day of first publication.
18. A sale of the Collateral Vessel or any Collateral made
in pursuance of this Mortgage, whether under the power of sale hereby
granted or any judicial proceedings, shall operate to divest all right,
title and interest of any nature whatsoever of Mortgagor therein and
thereto, and shall bar Mortgagor, its successors and assigns, and all
persons claiming by, through or under them. No purchaser shall be bound
to inquire whether notice has been given, or whether any Event of Default
(as defined in the Charter) has occurred, or as to the propriety of the
sale, or as to the application of the proceeds thereof. In case of such
sale, any purchaser who is the obligee of any Secured Obligations shall
be entitled, for the purpose of making settlement or payment for the
property purchased, to use and apply the amount of the Secured
Obligations owing to such purchaser in order that there may be credited
against the amount remaining due and unpaid thereon the sums payable out
of the net proceeds of such sale to the obligee of the Secured
Obligations after allowing for the costs and expense of sale and other
charges; and thereupon such purchaser shall be credited, on account of
such purchase price, with the net proceeds that shall have been so
credited upon the Secured Obligations. At such sale, the obligee of the
Secured Obligations may bid for and purchase such property, and upon
compliance with the terms of sale may hold, retain and dispose of such
property without further accountability therefor.
19. Mortgagee is hereby irrevocably appointed attorney-in-
fact of Mortgagor to execute and deliver to any purchaser aforesaid, and
is hereby vested with full power and authority to make, in the name and
in behalf of Mortgagor, a good conveyance of the title to the Collateral
Vessel or the Collateral. In the event of a sale of the Collateral
Vessel or any Collateral, under any power herein contained, Mortgagor
will, if and when required by Mortgagee, execute such form of conveyance
of the Collateral Vessel or any Collateral or similar document as
Mortgagee may direct or approve.
20. Mortgagee is hereby irrevocably appointed attorney-in-
fact of Mortgagor, in the name, place and stead of Mortgagor, to demand,
collect, receive, compromise and sue for, so far as may be permitted by
law, admiralty, equity or otherwise, all freights, hire, earnings,
issues, revenues, income and profits of the Collateral Vessel or any
Collateral, and all amounts due from underwriters under any insurance
thereon as payment of losses or as return premiums or otherwise, salvage
awards and recoveries, recoveries in general average or otherwise, and
all other sums due or to become due in respect of the Collateral Vessel
or any Collateral, or in respect of any insurance thereon from any person
whomsoever, and to make, give and execute in the name, place and stead of
Mortgagor acquittances, receipts, releases or other discharges for the
same, whether under seal or otherwise, and to endorse and accept in the
name, place and stead of Mortgagor all checks, notes, drafts, warrants,
agreements and all other instruments in writing with respect to the
foregoing.
21. Whenever any right to enter and take possession of the
Collateral Vessel or any Collateral accrues to Mortgagee, it may require
Mortgagor to deliver, and Mortgagor shall on demand, at its own cost and
expense, deliver, to Mortgagee the Collateral Vessel or such Collateral
as demanded. If any legal proceedings shall be taken to enforce any
right under this Mortgage, Mortgagee shall be entitled as a matter of
right to the appointment of a receiver of the Collateral Vessel or such
Collateral and the freights, hire, earnings, issues, revenues, income and
profits due or to become due and arising from the possession, use or
operation thereof.
22. Mortgagor authorizes and empowers Mortgagee or its
appointees or any of them to appear in the name, place and stead of
Mortgagor, its successors and assigns, in any court of any country or
nation of the world where a suit is pending against the Collateral Vessel
or any Collateral because of or on account of any alleged lien against
the Collateral Vessel or any Collateral from which the Collateral Vessel
or any Collateral has not been released and to take such proceedings as
to it as they or any of them may deem proper towards the defense of such
suit and the purchase or discharge of such lien, and all expenditures
made or incurred by them or any of them for the purpose of such defense,
purchase or discharge shall be a debt due from Mortgagor, its successors
and assigns, to Mortgagee, and shall be secured by the lien of this
Mortgage in like manner and extent as if the amount and description
thereof were written herein and shall be payable on demand. Mortgagee
shall notify Mortgagor of any circumstances permitting Mortgagee to take
action under this Section 22 promptly after becoming aware of such
circumstances.
23. Each and every power and remedy herein given to
Mortgagee shall be cumulative and shall be in addition to every other
power and remedy herein given or now or hereafter existing at law, in
equity, in admiralty, or by statute, and each and every power and remedy
whether herein given or otherwise existing may be exercised from time to
time and as often and in such order as may be deemed expedient by
Mortgagee, and the exercise or the beginning of the exercise of any power
or remedy shall not be construed to be a waiver of the right to exercise
at the same time or thereafter any other power or remedy. Unless
otherwise agreed to in writing by Mortgagee, no delay or omission by
Mortgagee or by the obligee of any Secured Obligations in the exercise of
any right or power or in the pursuance of any remedy accruing upon any
Event of Default (as defined in the Charter) shall impair any such right,
power or remedy or be construed to be a waiver of any such Event of
Default (as defined in the Charter) or to be an acquiescence therein; nor
shall the acceptance by Mortgagee of any security or of any payment of or
on account of any part of any Secured Obligations maturing after any
Event of Default (as defined in the Charter) or of any payment on account
of any past default be construed to be a waiver of any right to take
advantage of any future Event of Default (as defined in the Charter) or
of any past Event of Default (as defined in the Charter) not completely
cured thereby.
To the fullest extent that it may lawfully so agree,
Mortgagor covenants and agrees it shall not at any time insist upon,
claim, plead, or take the benefit or advantage of any appraisement,
valuation, stay, extension, moratorium, or redemption law now or
hereafter in force in order to prevent, delay or hinder the enforcement
of this Mortgage or the exercise by Mortgagee of any of the remedies set
forth in Section 17 hereof or the taking of possession of the Collateral
Vessel or any Collateral by any purchaser at any sale held pursuant to
this Mortgage; and Mortgagor, for itself and all who may claim by,
through or under it, as far as it or they now or hereafter lawfully may
do so, hereby waives the benefit of all such laws.
Nothing in this Article II and none of the actions or
omissions to act by Mortgagee contemplated by this Article II shall be
deemed a waiver by Mortgagee of the preferred status of the Mortgage nor
of any of the benefits, privileges or provisions given by the Ship
Mortgage Act, no provision hereof shall constitute a waiver of such
preferred status or of any of such benefits, privileges or provisions,
and in the event that any provision of this Mortgage should be, or should
be held by a court of competent jurisdiction to be, a waiver of or
otherwise prejudicial to such preferred status, then in such event such
provisions of this Mortgage should be and shall be deemed to be of no
force and effect.
24. If at any time after an Event of Default (as defined in
the Charter) and prior to the actual sale of the Collateral Vessel by
Mortgagee or prior to any foreclosure proceedings, Mortgagor offers to
cure completely all Events of Default (as defined in the Charter) and to
pay all expenses, advances and damages to Mortgagee consequent on such
Events of Default (as defined in the Charter), with interest at a rate
per annum equal to the Overdue Rate (as defined in the Charter), then
Mortgagee may accept such offer, but such action shall not affect any
subsequent Event of Default (as defined in the Charter) or impair any
rights consequent thereon.
25. In case Mortgagee shall have proceeded to enforce any
right, power or remedy under this Mortgage by foreclosure, entry or
otherwise, and such proceeding shall have been discontinued or abandoned
for any reason or shall have been determined adversely to Mortgagee, then
and in every such case Mortgagor and Mortgagee shall be restored to their
former positions and rights hereunder with respect to the property
subject or intended to be subject to this Mortgage, and all rights,
remedies and powers of Mortgagee shall continue as if no such proceedings
had been taken.
26. The proceeds of sale of the Collateral Vessel or any
Collateral and the net earnings of any charter operation or other use
thereof by Mortgagee under any of the powers herein specified and any and
all other moneys received by Mortgagee pursuant to or under the terms of
this Mortgage or in any proceedings hereunder, the application of which
has not elsewhere herein been specifically provided for, shall be applied
as provided in the Charter and in such order as set forth therein.
27. Until one or more Events of Default shall happen,
Mortgagor (a) shall be suffered and permitted to retain actual possession
and use of the Collateral Vessel and (b) shall have the right, from time
to time, in its discretion, and without application to Mortgagee or
Beneficiary, and without obtaining a release thereof by Mortgagee or
Beneficiary, to dispose of, free from the lien hereof, any boilers,
engines, machinery, bowsprits, masts, spars, rigging, boats, anchors,
cables, chains, tackle, apparel, furniture, fittings or equipment or any
other appurtenances to the Collateral Vessel that are no longer useful,
necessary, profitable or advantageous in the operation of such Collateral
Vessel and that have an aggregate replacement cost not exceeding
$10,000,000, first or simultaneously replacing the same by new boilers,
engines, machinery, bowsprits, masts, spars, rigging, boats, anchors,
chains, cables, tackle, apparel, furniture, fittings, equipment or other
appurtenances of substantially equal value, utility and useful life
(assuming such replaced items were in the working order, condition and
state of repair required under the terms of this Mortgage) which shall
forthwith become subject to the lien and other terms and conditions of
this Mortgage as a preferred mortgage thereon.
ARTICLE III
SECOND LIEN PROVISIONS
28. Notwithstanding anything contained herein to the
contrary, this Mortgage is and shall remain secondary and subordinate to
the First Preferred Mortgage (to the extent that such remains in effect).
By its acceptance of the benefits hereof, so long as the First Preferred
Mortgage remains a valid lien against the Collateral Vessel, Mortgagee
acknowledges, stipulates and agrees as follows:
(a) all the terms and provisions of this Mortgage are
unconditionally subordinate to the terms and conditions of the
First Preferred Mortgage (to the extent that such remains in
effect) including, without limitation, the provisions regarding the
application and use of insurance proceeds;
(b) only so long as the First Preferred Mortgage
remains in effect, proceeds from the sale of the Collateral
Vessel, rents and profits and any other sums attributable to or
arising from the use, sale, charter, refinancing or taking of the
Collateral Vessel, if collected by or for the holder of this
Mortgage, shall be applied first to the payment of any amounts
secured by the First Preferred Mortgage (if and only to the extent
that such First Preferred Mortgage extends to such proceeds), in
such order as is prescribed in the First Mortgage, prior to being
applied to any sums secured by this Mortgage; and
(c) only so long as the First Preferred Mortgage
remains in effect, written notice of default under this Mortgage
and written notice of the commencement of any action (whether
judicial or pursuant to a power of sale) to foreclose or otherwise
enforce this Mortgage shall be given to the First Mortgagee at the
address indicated in the First Preferred Mortgage, unless Mortgagee
is otherwise notified by the First Mortgagee of a change in its
address, upon the later to occur of Mortgagee s delivery of such
notice to Mortgagor or immediately after the occurrence of any such
default or commencement.
ARTICLE IV
SUNDRY PROVISIONS
29. For the purpose of this Mortgage and the endorsement of
this Mortgage on the documents of the Collateral Vessel, the total amount
of the Secured Obligations is $60,000,000.00 plus interest, fees and
other expenses and performance of mortgage covenants. The date of
maturity is February 28, 2006 and the discharge amount is the same as the
total amount.
30. All the covenants, representations, warranties,
promises, stipulations and agreements of Mortgagor in this Mortgage
contained shall bind Mortgagor and its successors and assigns and shall
inure to the benefit of Mortgagee, Beneficiary and their respective
successors and assigns and shall survive termination of this Mortgage.
Notwithstanding the foregoing, Mortgagor s rights and obligations
hereunder may not be assigned without the prior written consent of
Mortgagee and Beneficiary. This Mortgage may be assigned by Mortgagee
without the consent of Mortgagor or any person or entity other than
Beneficiary (whose consent shall be required for any such assignment).
Mortgagee agrees to provide Mortgagor with notice of any such assignment
by Mortgagee; provided, however, that failure to provide such notice
shall in no way affect the validity or effectiveness of such assignment.
31. Wherever and whenever herein any right, power or
authority is granted or given to Mortgagee, such right, power or
authority may be exercised in all cases by Mortgagee or such agent or
agents as it may appoint, and the act or acts of such agent or agents
when taken shall constitute the act of Mortgagee hereunder.
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage by
its officer thereunto duly authorized the day and year first above
written.
READING & BATES DRILLING CO.
By:
Name:
Title:
- ------------------------------------------------------------------------------
ACKNOWLEDGMENT
STATE OF )
) ss.
COUNTY OF )
On this the _____ day of November, 1995, before me came
_________________________ to me known, who, being by me duly sworn, did
d e p o s e a n d s a y t h a t h e r e s i d e s a t
________________________________________________________; that he is the
___________________ of Reading & Bates Drilling Co., the corporation
described in and which executed the foregoing mortgage; that he knows the
seal of said corporation; that the seal affixed to said mortgage is such
corporate seal; that it was so affixed by order of the Board of Directors
of said corporation; and that he signed his name to said mortgage by like
order and he acknowledged to me that he executed said mortgage as
_____________________of said corporation, and that the same is the free
and voluntary act and deed of said corporation, and of himself as such
officer for the uses and purposes therein expressed.
My Commission Expires: Notary Public
- -----------------------------------------------------------------------------
Exhibit A
Copy of Bareboat Charter
SEE ATTACHED
- -----------------------------------------------------------------------------
Exhibit B
Amortization Schedule
SEE ATTACHED
- -----------------------------------------------------------------------------
EXHIBIT C-2
FIRST PREFERRED MORTGAGE
FIRST PREFERRED MORTGAGE ("Mortgage"), made the 28th day of
November, 1995, by READING & BATES DRILLING CO., an Oklahoma corporation
("Mortgagor"), to WILMINGTON TRUST COMPANY, a Delaware banking
corporation, not in its individual capacity, but solely as Trustee (in
such capacity, "Mortgagee") for the benefit of DEEP SEA INVESTORS,
L.L.C., a Delaware limited liability company ("Beneficiary").
WHEREAS:
A. Mortgagor is the sole owner of the whole of that certain
vessel known as the "RANDOLPH YOST", official number 601699, duly
documented in the name of Mortgagor under the laws and flag of the United
States of America (the "Collateral Vessel").
B. This Mortgage is being executed and delivered by Mortgagor
pursuant to that certain Memorandum of Agreement (the "MOA") dated of
even date herewith by and between Beneficiary and Reading and Bates,
Inc., an Oklahoma corporation ("R&B, Inc."), a subsidiary of Mortgagor s
parent corporation, Reading & Bates Corporation, a Delaware corporation
(the "Parent"). Under the MOA, R&B, Inc. agreed to sell a certain other
vessel to Beneficiary and Beneficiary agreed to lease that vessel to
Mortgagor under the terms and subject to the conditions set forth in the
Bareboat Charter (the "Charter") dated of even date herewith by and
between Mortgagor and Beneficiary (the MOA, the Charter, this Mortgage
and all other documents executed in connection therewith, together with
any and all amendments, supplements, renewals or substitutions of all or
any of such documents, are sometimes referred to collectively herein as
the "Charter Documents").
C. Beneficiary requires that Mortgagor execute and deliver this
Mortgage to secure the prompt and complete payment, observance and
performance of all representations, warranties, covenants, duties,
liabilities and obligations of Mortgagor under the Charter Documents (the
"Secured Obligations").
D. The Board of Directors of Mortgagor having determined that
Mortgagor will derive substantial benefit, directly or indirectly, from
the sale and lease transaction among R&B, Inc., Mortgagor and
Beneficiary, Mortgagor wishes to execute and deliver this Mortgage as
required by Beneficiary.
NOW, THEREFORE, THIS MORTGAGE WITNESSETH:
That in consideration of the premises and of other good and
valuable consideration, the receipt whereof is hereby acknowledged, and
in order to secure the payment, observance and performance of the
Secured Obligations according to the terms thereof, and the payment of
all such other sums as may hereafter become secured by this Mortgage in
accordance with the terms hereof, and to secure the performance and ob-
servance of and compliance with the representations, warranties,
covenants, terms and conditions herein and in the Charter Documents
contained, Mortgagor does by these presents GRANT, CONVEY, MORTGAGE,
PLEDGE, ASSIGN, TRANSFER, SET OVER and CONFIRM unto the Mortgagee, its
successors and assigns, for the benefit of Beneficiary, the whole of the
Collateral Vessel, together with all of the boilers, engines, machinery,
masts, spars, rigging, boats, anchors, chains, cables, tackle, apparel,
furniture, fittings and equipment (but excluding leased equipment owned
by third parties) and all other appurtenances to the Collateral Vessel
appertaining or belonging, whether now owned or hereafter acquired,
whether on board or not and all additions, substitutions, improvements
and replacements hereafter made in or to the Collateral Vessel, or any
part thereof, or in or to the equipment and appurtenances aforesaid and
all products, rentals and proceeds (including, but not limited to,
insurance proceeds) of any of the foregoing (collectively, the
"Collateral").
TO HAVE AND TO HOLD the same unto the Mortgagee, its
successors and assigns, forever, upon the terms herein set forth for the
enforcement of the payment and performance of the Secured Obligations and
to secure the performance and observance of and compliance with the
covenants, terms and conditions in this Mortgage and in the Charter
Documents.
PROVIDED, ONLY, and the conditions of these presents are
such, that if the Secured Obligations shall be paid, performed and
discharged as and when the same shall become payable or are to be
performed in accordance with the terms of this Mortgage and of the
Charter Documents, and if all other such sums as may hereafter become
secured by this Mortgage are paid in accordance with the terms hereof,
and if Mortgagor shall perform, observe and comply with all the
covenants, terms and conditions in the Charter Documents and in this
Mortgage, expressed or implied, to be performed, observed or complied
with by and on the part of Mortgagor, and the Charter Documents shall
have terminated pursuant to the terms thereof, then these presents and
the rights hereunder shall cease, determine and be void, otherwise to be
and remain in full force and effect.
A copy of the Charter is annexed hereto and made a part
hereof as Exhibit A.
IT IS HEREBY COVENANTED, DECLARED AND AGREED that the
property above described is to be held subject to the further covenants,
conditions, provisions, terms and uses hereinafter set forth.
ARTICLE I.
COVENANTS OF MORTGAGOR
Mortgagor covenants and agrees with Mortgagee as follows:
1. Mortgagor will observe, perform and comply with each
and every one of the covenants, terms and conditions herein, expressed or
implied, on its part to be observed, performed or complied with.
2. Mortgagor was duly organized and is now existing as a
corporation under the laws of the State of Oklahoma and shall so remain
during the life of this Mortgage; it is now, and shall remain during the
life of this Mortgage, a citizen of the United States as defined in
Section 2 of the Shipping Act, 1916, as at any time amended; it is duly
authorized to mortgage the Collateral Vessel and the Collateral; all
corporate action necessary and required by law for the execution and
delivery of this Mortgage, and the good faith affidavit filed herewith,
has been duly and effectively taken; and the Secured Obligations will be
the valid and enforceable obligations of Mortgagor in accordance with
their terms.
3. Mortgagor lawfully owns and is lawfully possessed of,
and has good title to, the Collateral Vessel and the Collateral free from
(i) any security interest, lien, charge or encumbrance whatsoever, other
than, with respect to the Collateral Vessel, for current crew s wages,
general average and salvage, in each case, incurred in the ordinary
course of business and that are not yet overdue or (ii) any commitment to
make the Collateral Vessel available for charter, other than drilling
contracts that comply with the terms of this Mortgage and the other
Charter Documents and charters or subcharters (whether demise or
otherwise) to the Parent and its Subsidiaries (as defined in the
Charter), or (iii) sale or use by any governmental authority, and it will
warrant and defend the title and possession thereto and to every part
thereof for the benefit of the Mortgagee against the claims and demands
of all persons whomsoever. This Mortgage constitutes the legal, valid
and binding obligation of Mortgagor, is enforceable against Mortgagor in
accordance with its terms, and when filed of record with the U.S. Coast
Guard National Vessel Documentation Center, will create a valid and
perfected first preferred mortgage upon, security interest in and lien on
the Collateral Vessel and the Collateral.
4. Mortgagor will comply with and satisfy all the
provisions of Chapter 313 of Title 46, United States Code, as at any time
amended (the "Ship Mortgage Act"), and shall execute, deliver, file
and/or record, or cause the execution and delivery and the filing and/or
recordation of, such documents or instruments, and shall take or cause to
be taken such actions as may be necessary or desirable in the opinion of
the Beneficiary or the Mortgagee, in order to establish and maintain this
Mortgage as a valid and perfected first preferred mortgage upon the
Collateral Vessel and upon all renewals, improvements and replacements
made in or to the same.
5. Mortgagor will not cause or permit the Collateral
Vessel to be operated in any manner contrary to law, will not abandon the
Collateral Vessel in a foreign port, will not engage in any unlawful
trade or violate any law or carry any cargo that will expose the
Collateral Vessel or the Collateral to penalty, forfeiture or capture,
and will not do, or suffer or permit to be done, anything which can or
may injuriously or adversely affect the registration or enrollment of the
Collateral Vessel under the laws and regulations of the United States of
America and will at all times keep the Collateral Vessel duly documented
thereunder. Neither Mortgagor nor the Collateral Vessel is the subject
of any pending or threatened environmental enforcement proceedings or
investigations, nor any other pending or threatened proceedings or
investigations with respect to any other environmental, health or safety
matters. Mortgagor is in compliance with all applicable laws and
regulations with respect to the Collateral Vessel or otherwise relating
to pollution control and other environmental, health or safety matters in
all jurisdictions in which Mortgagor is doing business. Mortgagor shall
assume all responsibility for the control and removal of, and hold
Mortgagee, Beneficiary and every member of the Owner Group (as defined in
the Charter) harmless from loss or damage, liabilities or claims arising
from, directly or indirectly, pollution or contamination by any liquid or
non-liquid waste material whatsoever found that is discharged, spilled or
leaked from the Collateral Vessel, and for noncompliance with
environmental, health and safety laws. To the extent that any law,
regulation or governmental entity acting within its jurisdiction imposes
on Mortgagee, Beneficiary or any member of the Owner Group (as defined in
the Charter) liability for any such pollution, notwithstanding such
imposition of direct liability, Mortgagor shall have designated Mortgagee
(both in its individual capacity and as Trustee), Beneficiary and each
member of the Owner Group (as defined in the Charter) as an additional
insured under its insurance policies and Mortgagor shall hold Mortgagee
(both in its individual capacity and as Trustee), Beneficiary and each
member of the Owner Group (as defined in the Charter) harmless from such
loss, damage or claims and reimburse any of Mortgagee (both in its
individual capacity and as Trustee), Beneficiary or any member of the
Owner Group (as defined in the Charter) for any amounts it may be
required to pay. This indemnity is valid irrespective of the negligence
or fault, whether sole, joint, active or passive of the indemnified party
and whether predicated on strict liability, statutory duty, contractual
indemnity or any other theory of liability of the indemnified party.
6. Mortgagor will pay and discharge when due and payable,
from time to time, all taxes, assessments, governmental charges, fines
and penalties lawfully imposed on the Collateral Vessel or the Collateral
or any income therefrom.
7. Neither Mortgagor, any charterer, the Master of the
Collateral Vessel or any other person has or shall have any right, power
or authority to create, incur or permit to be placed or imposed or
continued upon the Collateral Vessel or the Collateral, any lien
whatsoever other than this Mortgage and liens for current crew's wages,
general average, and salvage, in each case, incurred in the ordinary
course of business and that are not yet overdue.
8. Mortgagor will place, and at all times and places will
retain, a properly certified copy of this Mortgage on board the
Collateral Vessel with her papers and will cause such certified copy and
such papers to be exhibited to any and all persons having business
therewith which might give rise to any lien thereon other than liens for
current crew's wages, general average and salvage, in each case, incurred
in the ordinary course of business and that are not yet overdue, and to
any representative of Mortgagee or Beneficiary; and will place and keep
prominently displayed in the chart room and in the Master's cabin of the
Collateral Vessel a framed printed notice in plain type of such size that
the paragraph of reading matter shall cover a space not less than 6
inches wide by 9 inches high, reading as follows:
"NOTICE OF MORTGAGE"
This vessel is covered by a First Preferred
Mortgage to Wilmington Trust Company, Trustee, under
authority of Chapter 313 of Title 46, United States
Code, as at any time amended. Under the terms of said
Mortgage, neither the owner, any charterer, nor the
Master of this vessel has any right, power or authority
to create, incur or permit to be imposed upon this
vessel any lien whatsoever other than for current
crew's wages, general average and salvage, in each
case, incurred in the ordinary course of business and
that are not yet overdue."
9. Except for the lien of this Mortgage and of the First
Preferred Mortgage, Mortgagor will not create or suffer to be continued
any security interest, lien, encumbrance or charge on the Collateral
Vessel or the Collateral and in due course and in any event within 30
days after the same becomes due and payable will pay or cause to be
discharged or make adequate provision for the payment or discharge of all
claims or demands which, if not paid or discharged, might result in the
creation of such a security interest, lien, encumbrance or charge and
will cause the Collateral Vessel or the Collateral to be released or
discharged from each such security interest, lien, encumbrance or charge
therefor; provided, however, that the undertaking of such corrective
action shall in no event be deemed a cure of any breach of this Mortgage
or be deemed a waiver by Mortgagee of any of its rights or remedies
hereunder with respect thereto.
10. If a libel is filed against the Collateral Vessel or if
the Collateral Vessel is otherwise attached, levied upon, or taken into
custody or detained by any proceeding in any court or tribunal or by any
Government or other authority, Mortgagor will promptly (i) notify
Mortgagee thereof by telecopier, confirmed by letter, at its office at
1100 North Market Street, Rodney Square North, Wilmington, Delaware
19890, Attention: Corporate Trust Administration, Telecopier No. (302)
651-8882 and (ii) notify Beneficiary thereof by telecopier, confirmed by
letter, at its office c/o Heller Financial, Inc., Attention: Legal
Department, 101 Park Avenue, New York, New York 10178, Telecopier No.
(212) 880-7158, and within 15 days will cause such Collateral Vessel to
be released and all valid liens thereon other than this Mortgage to be
discharged, and will promptly notify Mortgagee and Beneficiary thereof in
the manner aforesaid; provided, however, that the undertaking of such
corrective action shall in no event be deemed a cure of any breach of
this Mortgage or be deemed a waiver by Mortgagee or Beneficiary of any of
their rights or remedies hereunder with respect thereto.
11. Mortgagor hereby acknowledges and confirms as of the
Closing Date (as defined in the MOA) that (a) no loss, constructive loss
or requisitioning for use by any governmental authority of the Collateral
Vessel (and, where applicable, the Collateral) has occurred; and (b) the
Collateral Vessel (and, where applicable, the Collateral) is tight,
staunch, strong and well and sufficiently tackled, appareled, furnished
and equipped and in every respect seaworthy, in accordance with
specifications, in good working order, condition and repair (normal wear
and tear excepted) and without defect in condition, design, operation or
fitness for use. Mortgagor will at all times and without cost or expense
to Mortgagee or Beneficiary maintain and preserve, or cause to be
maintained and preserved, the Collateral Vessel (and, where applicable,
the Collateral) in good running order and repair, so that the Collateral
Vessel shall be, at all times, tight, staunch, strong and well and
sufficiently tackled, appareled, furnished, equipped and in every respect
seaworthy and in good operating condition and in accordance with
specifications; and will keep the Collateral Vessel (and, where
applicable, the Collateral) in such condition as will entitle the
Collateral Vessel to the highest classification and rating for vessels of
the same age and type by the American Bureau of Shipping or other
classification society of like standing, and annually will furnish to
Mortgagee and Beneficiary a certificate by such Bureau or classification
society (if applicable) that such classification is maintained. The
Collateral Vessel shall, and Mortgagor covenants that it will, at all
times comply with all applicable laws, treaties and conventions of the
United States of America, and rules and regulations issued thereunder,
and shall have on board as and when required thereby valid certificates
showing compliance therewith. Mortgagor will not make, or permit to be
made, any change in the structure, character or type of, or any
modifications or improvements to, the Collateral Vessel which diminish
the value, utility, useful life or seaworthiness of the Collateral Vessel
without first receiving the written approval thereof by Mortgagee and
Beneficiary (such approval not to be unreasonably withheld) and, upon
request, shall promptly provide Mortgagee and Beneficiary with all
designs, drawings, plans and specifications relating to any such changes,
modifications or improvements. Mortgagor will notify Mortgagee and
Beneficiary of (i) any damage to the Collateral Vessel requiring repairs
reasonably expected to cost $1,000,000 or more promptly following the
occurrence thereof and (ii) any changes, modifications or improvements to
the Collateral Vessel reasonably expected to cost $5,000,000 or more
prior to commencing such changes, modifications or improvements.
Mortgagor agrees to give Mortgagee and Beneficiary at least
10 days notice of the actual date and place of any survey or drydocking
in order that Mortgagee and Beneficiary may have representatives present
if desired. Mortgagor agrees that at Mortgagee's or Beneficiary's
request it will satisfy the Mortgagee and the Beneficiary that the
expense of such survey or drydocking or work to be done thereat is within
Mortgagor's financial ability and will not result in a claim or lien
against the Collateral Vessel or the Collateral in violation of the
provisions of this Mortgage.
12. Mortgagor at all times will afford Mortgagee and
Beneficiary or their authorized representatives full and complete access
to the Collateral Vessel for the purpose of inspecting the same and the
Collateral Vessel s cargo and papers and, at the request of Mortgagee or
Beneficiary, Mortgagor will deliver for inspection copies of any and all
contracts and documents relating to the Collateral Vessel, whether on
board or not.
13. Mortgagor will not transfer or change the flag or port
of documentation of the Collateral Vessel without the written consent of
Mortgagee and Beneficiary first had and obtained, and any such written
consent to any one transfer or change of flag or port of documentation
shall not be construed to be a waiver of this provision with respect to
any subsequent proposed transfer or change of flag or port of
documentation.
14. Mortgagor will not sell, mortgage, transfer, demise or
other charter or change the management of the Collateral Vessel or the
Collateral, except, with respect to the Collateral Vessel, drilling
contracts that comply with the terms of this Mortgage and the other
Charter Documents and charters or subcharters (whether demise or
otherwise) to the Parent and its Subsidiaries (as defined in the
Charter), without the written consent of Mortgagee and Beneficiary first
had and obtained, and any such written consent to any one sale, mortgage,
transfer, demise or other charter or change shall not be construed to be
a waiver of this provision with respect to any subsequent proposed sale,
mortgage, transfer, demise or other charter or change. Any such sale,
mortgage, transfer or charter of the Collateral Vessel or the Collateral
(including any sale or transfer to the Parent or any Subsidiary (as
defined in the Charter) of the Parent) shall be subject to the provisions
of this Mortgage and the lien it creates. Mortgagor will not charter the
Collateral Vessel to, or permit the Collateral Vessel to serve under any
contract with, a person included within the definition of " designated
foreign country" or "national" of a "designated foreign country" in the
Foreign Assets Control Regulations or Cuban Assets Control Regulations of
the United States Treasury Department, 31 C.F.R., Chapter V, as amended,
or any person included within the definition of "Government of Libya,"
"entity of the Government of Libya" or "Libyan entity" in the Libyan
Sanctions Regulations of the United States Treasury Department, 31 C.F.R.
Part 550, as amended, within the meaning of said Regulations or of any
regulation, interpretation or ruling issued thereunder.
15. (a) Mortgagor will, at its own expense, when and so
long as this Mortgage or any Secured Obligations shall be outstanding,
insure the Collateral Vessel and keep her insured, in lawful money of the
United States, for not less than the full fair market value thereof. The
Collateral Vessel shall in no event be insured for an amount less than
the agreed valuation as set forth in the applicable marine and war risk
policies. Such insurance shall cover marine and war risk perils, on hull
and machinery, and shall be maintained in the broadest forms available in
the American or British insurance markets for vessels of the same type as
the Collateral Vessel. In addition, Mortgagor shall, at its own expense,
furnish to Beneficiary a mortgagee's single interest policy (or shall
cause the hull and machine insurance on the Collateral Vessel to be
endorsed to afford breach of warranty coverage for the benefit of
Beneficiary and the members of the Owner Group (as defined in the
Charter)) providing coverage in an amount equal to at least the full fair
market value of the Collateral Vessel. Such mortgagee's interest
insurance shall be maintained in the broadest form available in the
American or British markets for vessels of the same type as the
Collateral Vessel through underwriters acceptable to Beneficiary. In
addition, Mortgagor shall maintain protection and indemnity or equivalent
insurance, through underwriters or associations reasonably acceptable to
Beneficiary in an amount not less than the fair market value of the
Collateral Vessel, provided, however, that war risk protection and
indemnity insurance shall be in an amount not less than the amount of
insurance against total loss. The Collateral Vessel shall not carry any
cargoes or proceed into an area then excluded by trading warranties under
its marine or war risk policies (including expropriation, protection and
indemnity) without obtaining all necessary additional coverage,
satisfactory in form and substance, and satisfactory evidence of which
shall be promptly furnished, to Beneficiary.
(b) The policy or policies of insurance described in this
Section 15 shall be issued by responsible underwriters reasonably
acceptable to Beneficiary in all respects, shall contain conditions,
terms, stipulations and insuring covenants reasonably satisfactory to
Beneficiary in all respects (including, but not limited to, waivers of
subrogation rights of the insurers against the insureds and waivers of
any rights of the insurers to any set off, counterclaim or deduction,
whether by attachment or otherwise) and shall be kept in full force and
effect by Mortgagor so long as this Mortgage or any Secured Obligations
shall be outstanding. All such policies, binders and other interim
insurance contracts shall be executed and issued in the name of Mortgagor
and shall provide that loss be payable to Beneficiary for distribution by
it to itself and Mortgagor, as their interests may appear. Copies of all
such policies, binders and other interim insurance contracts shall be
deposited with Beneficiary. Such insurance policies shall provide for at
least 30 days' prior written notice to be given to Beneficiary by the
underwriters or association in the event of (i) cancellation (or at least
7 days prior written notice, with respect to war risk coverage) or (ii)
the failure of Mortgagor to pay any premium or call which would suspend
coverage under the policy or the payment of a claim thereunder.
Mortgagor shall furnish to Beneficiary annually, not later than thirty
days prior to expiration, a detailed report signed by a firm of marine
insurance brokers satisfactory to Beneficiary as to the insurance
maintained in respect of the Collateral Vessel, as to their opinion as to
the adequacy thereof and as to compliance with the provisions of this
Section 15.
Unless otherwise required by Beneficiary by notice to the
underwriters, although the following insurance is payable to Beneficiary,
(i) any loss under any insurance on the Collateral Vessel with respect to
protection and indemnity risks may be paid directly to Mortgagor to
reimburse it for any loss, damage or expense actually incurred by it and
covered by such insurance or to the person to whom any liability covered
by such insurance has been actually incurred, and (ii) in the case of any
loss (other than a loss covered by clause (i) above or by the next
paragraph of this Section) under any insurance with respect to the
Collateral Vessel involving any damage to such Collateral Vessel, the
underwriters may pay directly for the repair, salvage or other charges
involved or, if Mortgagor shall have first fully repaired the damage or
paid all of the salvage or other charges, may pay Mortgagor as
reimbursement therefor; provided, however, that if such damage involves a
loss in excess of $1,000,000, the underwriters shall not make such
payment without first obtaining the written consent thereto of
Beneficiary. Any loss covered by this paragraph which is paid to
Beneficiary but which might have been paid, in accordance with the
provisions of this paragraph, directly to Mortgagor or others, shall be
paid by Beneficiary to, or as directed by, Mortgagor and all other
payments to Beneficiary of losses covered by this paragraph shall be
applied by Beneficiary in accordance with the Charter Documents.
In the event of an actual or constructive total loss or a
compromised constructive total loss or requisition, all insurance
payments therefor shall be paid to Beneficiary. Mortgagor shall not
declare or agree with underwriters that the Collateral Vessel is a
constructive or compromised, agreed or arranged constructive total loss
without the prior written consent of Beneficiary.
(c) In the event of an actual or constructive total loss of
the Collateral Vessel, shall retain out of the insurance payments
received on account of such loss, which shall become the sole property of
Beneficiary, any sum or sums that shall be or become owing under the
Charter Documents or this Mortgage, whether or not the same be then due
and payable, together with accrued interest and the cost, if any, of
collecting the insurance, and pay the balance as in Section 26
hereinafter provided.
(d) Mortgagor will comply with and satisfy all of the
provisions of any applicable environmental, health and safety or other
law, regulation, proclamation or order including, without limitation,
those concerning financial responsibility for liabilities imposed on
Mortgagor or the Collateral Vessel with respect to pollution including,
without limitation, the U.S. Water Pollution Control Act, as amended, and
the U.S. Oil Pollution Act, as amended, and will maintain or cause to be
maintained all certificates or other evidence of financial responsibility
as may be required by any such law, regulation, proclamation or order
with respect to the trade which the Collateral Vessel from time to time
is engaged in and the cargoes carried by it.
(e) In addition to, and except as otherwise expressly
provided in, this Section 15, Mortgagor shall maintain insurance with
respect to the Collateral Vessel in the amounts and types specified in
the Charter with respect to the vessel being leased by Mortgagor
thereunder.
(f) Mortgagor will reimburse Mortgagee and Beneficiary
within 3 business days after receipt of a demand therefor accompanied by
a reasonable description of the related expenditures, with interest at a
rate per annum equal to the Overdue Rate (as defined in the Charter) for
any and all expenditures which Mortgagee or Beneficiary may from time to
time make, lay out or expend in providing such protection in respect of
insurance, discharge of liens, taxes, dues, assessments, governmental
charges, fines and penalties lawfully imposed, repairs, attorneys' fees
and other matters as Mortgagor is obligated herein to provide, but fails
to provide. Such obligation of Mortgagor to reimburse Mortgagee and
Beneficiary shall be an additional indebtedness due from Mortgagor,
secured by this Mortgage, and shall be payable by Mortgagor on demand.
Mortgagee or Beneficiary, though privileged so to do, shall be under no
obligation to Mortgagor to make any such expenditures, nor shall the
making thereof relieve Mortgagor of any default in that respect.
16. INTENTIONALLY DELETED.
ARTICLE II
EVENTS OF DEFAULT AND REMEDIES
17. In case any Event of Default (as defined in the
Charter) shall occur and be continuing, then and in each and every such
case Mortgagee, for the benefit of Beneficiary, shall have the right to:
(a) Exercise all the rights and remedies in foreclosure and
otherwise given to mortgagees by the provisions of the Ship
Mortgage Act or any other jurisdiction where the Collateral Vessel
may be found;
(b) Bring suit at law, in equity or in admiralty, as it may
determine or be advised, to recover judgment for any and all
amounts due under the Charter Documents or otherwise hereunder, and
collect the same out of any and all property of Mortgagor whether
covered by this Mortgage or otherwise;
(c) Take the Collateral Vessel and any Collateral, wherever
it may be, without legal process and without being responsible for
loss or damage; and Mortgagor or any other person in possession
forthwith upon demand of Mortgagee shall surrender to Mortgagee
possession of the Collateral Vessel and any Collateral, as demanded
by Mortgagee, and Mortgagee may, without being responsible for loss
or damage, hold, lay up, lease, charter, operate or otherwise use
the Collateral Vessel and any Collateral for such time and upon
such terms as it may deem to be for its best advantage, accounting
only for the net profits, if any, arising from such use and
charging upon all receipts from such use or from the sale of the
Collateral Vessel and any Collateral by court proceedings or
pursuant to Subsection (d) next following, all costs, expenses,
charges, damages or losses by reason of such use; and if at any
time Mortgagee shall avail itself of the right herein given it to
take the Collateral Vessel and shall take it, Mortgagee shall have
the right to dock the Collateral Vessel for a reasonable time (not
to be less than 150 days) at any dock, pier or other premises of
Mortgagor without charge, or to dock it at any other place at the
cost and expense of Mortgagor;
(d) Without being responsible for loss or damage, sell the
Collateral Vessel and any Collateral at any place and at such time
as Mortgagee may specify and in such manner as Mortgagee or
Beneficiary may deem advisable free from any claim by Mortgagor in
admiralty, in equity, at law or by statute, after first giving
notice of the time and place of sale with a general description of
the property in the following manner (which Mortgagor acknowledges
and agrees is commercially reasonable in all respects):
(i) By publishing such notice for 10 consecutive days
in a daily newspaper of general circulation published in New
York City;
(ii) If the place of sale should not be New York City,
then also by publication of a similar notice in a daily
newspaper, if any, published at the place of sale; and
(iii) By sending a similar notice by registered mail to
Mortgagor on the day of first publication.
18. A sale of the Collateral Vessel or any Collateral made
in pursuance of this Mortgage, whether under the power of sale hereby
granted or any judicial proceedings, shall operate to divest all right,
title and interest of any nature whatsoever of Mortgagor therein and
thereto, and shall bar Mortgagor, its successors and assigns, and all
persons claiming by, through or under them. No purchaser shall be bound
to inquire whether notice has been given, or whether any Event of Default
(as defined in the Charter) has occurred, or as to the propriety of the
sale, or as to the application of the proceeds thereof. In case of such
sale, any purchaser who is the obligee of any Secured Obligations shall
be entitled, for the purpose of making settlement or payment for the
property purchased, to use and apply the amount of the Secured
Obligations owing to such purchaser in order that there may be credited
against the amount remaining due and unpaid thereon the sums payable out
of the net proceeds of such sale to the obligee of the Secured
Obligations after allowing for the costs and expense of sale and other
charges; and thereupon such purchaser shall be credited, on account of
such purchase price, with the net proceeds that shall have been so
credited upon the Secured Obligations. At such sale, the obligee of the
Secured Obligations may bid for and purchase such property, and upon
compliance with the terms of sale may hold, retain and dispose of such
property without further accountability therefor.
19. Mortgagee is hereby irrevocably appointed attorney-in-
fact of Mortgagor to execute and deliver to any purchaser aforesaid, and
is hereby vested with full power and authority to make, in the name and
in behalf of Mortgagor, a good conveyance of the title to the Collateral
Vessel or the Collateral. In the event of a sale of the Collateral
Vessel or any Collateral, under any power herein contained, Mortgagor
will, if and when required by Mortgagee, execute such form of conveyance
of the Collateral Vessel or any Collateral or similar document as
Mortgagee may direct or approve.
20. Mortgagee is hereby irrevocably appointed attorney-in-
fact of Mortgagor, in the name, place and stead of Mortgagor, to demand,
collect, receive, compromise and sue for, so far as may be permitted by
law, admiralty, equity or otherwise, all freights, hire, earnings,
issues, revenues, income and profits of the Collateral Vessel or any
Collateral, and all amounts due from underwriters under any insurance
thereon as payment of losses or as return premiums or otherwise, salvage
awards and recoveries, recoveries in general average or otherwise, and
all other sums due or to become due in respect of the Collateral Vessel
or any Collateral, or in respect of any insurance thereon from any person
whomsoever, and to make, give and execute in the name, place and stead of
Mortgagor acquittances, receipts, releases or other discharges for the
same, whether under seal or otherwise, and to endorse and accept in the
name, place and stead of Mortgagor all checks, notes, drafts, warrants,
agreements and all other instruments in writing with respect to the
foregoing.
21. Whenever any right to enter and take possession of the
Collateral Vessel or any Collateral accrues to Mortgagee, it may require
Mortgagor to deliver, and Mortgagor shall on demand, at its own cost and
expense, deliver, to Mortgagee the Collateral Vessel or such Collateral
as demanded. If any legal proceedings shall be taken to enforce any
right under this Mortgage, Mortgagee shall be entitled as a matter of
right to the appointment of a receiver of the Collateral Vessel or such
Collateral and the freights, hire, earnings, issues, revenues, income and
profits due or to become due and arising from the possession, use or
operation thereof.
22. Mortgagor authorizes and empowers Mortgagee or its
appointees or any of them to appear in the name, place and stead of
Mortgagor, its successors and assigns, in any court of any country or
nation of the world where a suit is pending against the Collateral Vessel
or any Collateral because of or on account of any alleged lien against
the Collateral Vessel or any Collateral from which the Collateral Vessel
or any Collateral has not been released and to take such proceedings as
to it as they or any of them may deem proper towards the defense of such
suit and the purchase or discharge of such lien, and all expenditures
made or incurred by them or any of them for the purpose of such defense,
purchase or discharge shall be a debt due from Mortgagor, its successors
and assigns, to Mortgagee, and shall be secured by the lien of this
Mortgage in like manner and extent as if the amount and description
thereof were written herein and shall be payable on demand. Mortgagee
shall notify Mortgagor of any circumstances permitting Mortgagee to take
action under this Section 22 promptly after becoming aware of such
circumstances.
23. Each and every power and remedy herein given to
Mortgagee shall be cumulative and shall be in addition to every other
power and remedy herein given or now or hereafter existing at law, in
equity, in admiralty, or by statute, and each and every power and remedy
whether herein given or otherwise existing may be exercised from time to
time and as often and in such order as may be deemed expedient by
Mortgagee, and the exercise or the beginning of the exercise of any power
or remedy shall not be construed to be a waiver of the right to exercise
at the same time or thereafter any other power or remedy. Unless
otherwise agreed to in writing by Mortgagee, no delay or omission by
Mortgagee or by the obligee of any Secured Obligations in the exercise of
any right or power or in the pursuance of any remedy accruing upon any
Event of Default (as defined in the Charter) shall impair any such right,
power or remedy or be construed to be a waiver of any such Event of
Default (as defined in the Charter) or to be an acquiescence therein; nor
shall the acceptance by Mortgagee of any security or of any payment of or
on account of any part of any Secured Obligations maturing after any
Event of Default (as defined in the Charter) or of any payment on account
of any past default be construed to be a waiver of any right to take
advantage of any future Event of Default (as defined in the Charter) or
of any past Event of Default (as defined in the Charter) not completely
cured thereby.
To the fullest extent that it may lawfully so agree,
Mortgagor covenants and agrees it shall not at any time insist upon,
claim, plead, or take the benefit or advantage of any appraisement,
valuation, stay, extension, moratorium, or redemption law now or
hereafter in force in order to prevent, delay or hinder the enforcement
of this Mortgage or the exercise by Mortgagee of any of the remedies set
forth in Section 17 hereof or the taking of possession of the Collateral
Vessel or any Collateral by any purchaser at any sale held pursuant to
this Mortgage; and Mortgagor, for itself and all who may claim by,
through or under it, as far as it or they now or hereafter lawfully may
do so, hereby waives the benefit of all such laws.
Nothing in this Article II and none of the actions or
omissions to act by Mortgagee contemplated by this Article II shall be
deemed a waiver by Mortgagee of the preferred status of the Mortgage nor
of any of the benefits, privileges or provisions given by the Ship
Mortgage Act, no provision hereof shall constitute a waiver of such
preferred status or of any of such benefits, privileges or provisions,
and in the event that any provision of this Mortgage should be, or should
be held by a court of competent jurisdiction to be, a waiver of or
otherwise prejudicial to such preferred status, then in such event such
provisions of this Mortgage should be and shall be deemed to be of no
force and effect.
24. If at any time after an Event of Default (as defined in
the Charter) and prior to the actual sale of the Collateral Vessel by
Mortgagee or prior to any foreclosure proceedings, Mortgagor offers to
cure completely all Events of Default (as defined in the Charter) and to
pay all expenses, advances and damages to Mortgagee consequent on such
Events of Default (as defined in the Charter), with interest at a rate
per annum equal to the Overdue Rate (as defined in the Charter), then
Mortgagee may accept such offer, but such action shall not affect any
subsequent Event of Default (as defined in the Charter) or impair any
rights consequent thereon.
25. In case Mortgagee shall have proceeded to enforce any
right, power or remedy under this Mortgage by foreclosure, entry or
otherwise, and such proceeding shall have been discontinued or abandoned
for any reason or shall have been determined adversely to Mortgagee, then
and in every such case Mortgagor and Mortgagee shall be restored to their
former positions and rights hereunder with respect to the property
subject or intended to be subject to this Mortgage, and all rights,
remedies and powers of Mortgagee shall continue as if no such proceedings
had been taken.
26. The proceeds of sale of the Collateral Vessel or any
Collateral and the net earnings of any charter operation or other use
thereof by Mortgagee under any of the powers herein specified and any and
all other moneys received by Mortgagee pursuant to or under the terms of
this Mortgage or in any proceedings hereunder, the application of which
has not elsewhere herein been specifically provided for, shall be applied
as provided in the Charter and in such order as set forth therein.
27. Until one or more Events of Default shall happen,
Mortgagor (a) shall be suffered and permitted to retain actual possession
and use of the Collateral Vessel and (b) shall have the right, from time
to time, in its discretion, and without application to Mortgagee or
Beneficiary, and without obtaining a release thereof by Mortgagee or
Beneficiary, to dispose of, free from the lien hereof, any boilers,
engines, machinery, bowsprits, masts, spars, rigging, boats, anchors,
cables, chains, tackle, apparel, furniture, fittings or equipment or any
other appurtenances to the Collateral Vessel that are no longer useful,
necessary, profitable or advantageous in the operation of such Collateral
Vessel and that have an aggregate replacement cost not exceeding
$10,000,000, first or simultaneously replacing the same by new boilers,
engines, machinery, bowsprits, masts, spars, rigging, boats, anchors,
chains, cables, tackle, apparel, furniture, fittings, equipment or other
appurtenances of substantially equal value, utility and useful life
(assuming such replaced items were in the working order, condition and
state of repair required under the terms of this Mortgage) which shall
forthwith become subject to the lien and other terms and conditions of
this Mortgage as a preferred mortgage thereon.
ARTICLE III
INTENTIONALLY DELETED
ARTICLE IV
SUNDRY PROVISIONS
29. For the purpose of this Mortgage and the endorsement of
this Mortgage on the documents of the Collateral Vessel, the total amount
of the Secured Obligations is $60,000,000.00 plus interest, fees and
other expenses and performance of mortgage covenants. The date of
maturity is February 28, 2006 and the discharge amount is the same as the
total amount.
30. All the covenants, representations, warranties,
promises, stipulations and agreements of Mortgagor in this Mortgage
contained shall bind Mortgagor and its successors and assigns and shall
inure to the benefit of Mortgagee, Beneficiary and their respective
successors and assigns and shall survive termination of this Mortgage.
Notwithstanding the foregoing, Mortgagor s rights and obligations
hereunder may not be assigned without the prior written consent of
Mortgagee and Beneficiary. This Mortgage may be assigned by Mortgagee
without the consent of Mortgagor or any person or entity other than
Beneficiary (whose consent shall be required for any such assignment).
Mortgagee agrees to provide Mortgagor with notice of any such assignment
by Mortgagee; provided, however, that failure to provide such notice
shall in no way affect the validity or effectiveness of such assignment.
31. Wherever and whenever herein any right, power or
authority is granted or given to Mortgagee, such right, power or
authority may be exercised in all cases by Mortgagee or such agent or
agents as it may appoint, and the act or acts of such agent or agents
when taken shall constitute the act of Mortgagee hereunder.
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage by
its officer thereunto duly authorized the day and year first above
written.
READING & BATES DRILLING CO.
By:
Name:
Title:
- -----------------------------------------------------------------------------
ACKNOWLEDGMENT
STATE OF )
) ss.
COUNTY OF )
On this the _____ day of November, 1995, before me came
_________________________ to me known, who, being by me duly sworn, did
d e p o s e a n d s a y t h a t h e r e s i d e s a t
________________________________________________________; that he is the
___________________ of Reading & Bates Drilling Co., the corporation
described in and which executed the foregoing mortgage; that he knows the
seal of said corporation; that the seal affixed to said mortgage is such
corporate seal; that it was so affixed by order of the Board of Directors
of said corporation; and that he signed his name to said mortgage by like
order and he acknowledged to me that he executed said mortgage as
_____________________of said corporation, and that the same is the free
and voluntary act and deed of said corporation, and of himself as such
officer for the uses and purposes therein expressed.
My Commission Expires: Notary Public
- -----------------------------------------------------------------------------
Exhibit A
Copy of Bareboat Charter
SEE ATTACHED
- -----------------------------------------------------------------------------
EXHIBIT D
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Security Agreement") is given as of
this 28th day of November, 1995, by READING & BATES DRILLING CO., an
Oklahoma corporation ("Grantor"), having an office at 901 Threadneedle,
Suite 200, Houston, Texas 77079, in favor of WILMINGTON TRUST COMPANY, a
Delaware banking corporation, not in its individual capacity, but solely
as Trustee (in such capacity, "Secured Party") for the benefit of DEEP
SEA INVESTORS, L.L.C., a Delaware limited liability company
("Beneficiary").
WHEREAS:
A. Grantor is the sole owner of the whole of (i) that certain
vessel known as the "JIM CUNNINGHAM , official number 651643 (the
"Cunningham"), and (ii) that certain vessel known as the "RANDOLPH YOST",
official number 601699 (the "Yost"), both duly documented in the name of
Grantor under the laws and flag of the United States of America (the
Cunningham and the Yost, together, the "Collateral Vessels").
B. This Security Agreement is being executed and delivered by
Grantor pursuant to that certain Memorandum of Agreement (the "MOA")
dated of even date herewith by and between Beneficiary and Reading and
Bates, Inc., an Oklahoma corporation ("R&B, Inc."), a subsidiary of
Grantor s parent corporation, Reading & Bates Corporation. Under the
MOA, R&B, Inc. agreed to sell a certain other vessel to Beneficiary and
Beneficiary agreed to lease that vessel to Grantor under the terms and
subject to the conditions set forth in the Bareboat Charter (the
"Charter") dated of even date herewith by and between Grantor and
Beneficiary (the MOA, the Charter and all other documents executed in
connection therewith, together with any and all amendments, supplements,
renewals or substitutions of all or any of such documents, are sometimes
referred to collectively herein as the "Charter Documents").
C. The Board of Directors of Grantor having determined that
Grantor will derive substantial benefit, directly or indirectly, from the
sale and lease transaction among Grantor, R&B, Inc. and Beneficiary,
Grantor, as required by Beneficiary, is executing and delivering (i) that
certain Preferred Mortgage dated of even date herewith encumbering the
Cunningham (the "Cunningham Mortgage") and (ii) that certain First
Preferred Mortgage dated of even date herewith encumbering the Yost (the
"Yost Mortgage") (the Cunningham Mortgage and the Yost Mortgage,
together, the "Mortgages"), to secure the prompt and complete payment,
performance and observance of all representations, warranties, covenants,
duties, liabilities and obligations of Grantor under the Charter
Documents (the "Secured Obligations").
D. Beneficiary requires that Grantor execute and deliver this
Security Agreement in order to further secure the Secured Obligations.
NOW, THEREFORE, in consideration of the foregoing recitals
and the mutual covenants and obligations contained herein, and intending
to be legally bound, the parties hereby agree as follows:
1. Security Interest.
As security for the Secured Obligations and Grantor's other
obligations under the Charter Documents, Grantor hereby grants to Secured
Party for the benefit of Beneficiary a security interest in and lien upon
(hereinafter referred to as the "Security Interest") the following
described personal property (whether now owned by Grantor or existing or
hereafter arising or acquired by Grantor) and in all proceeds (including
cash proceeds, insurance proceeds and proceeds of proceeds) of such
property in any form (hereinafter collectively referred to as the
"Collateral"):
a. All engines, boilers, machinery, masts, anchors,
cables, spars, rigging, tackle, apparel, furniture, fittings, boats,
chains, equipment, fixtures and all other appurtenances of Grantor
appertaining and belonging to either of the Collateral Vessels or to the
"M.G. Hulme, Jr.", the vessel leased by Grantor under the Charter (the
"Charter Vessel"), whether aboard or removed from the Collateral Vessels
or the Charter Vessel, together with all additions, improvements, and/or
replacements thereto or thereof, and not otherwise subject to the
Mortgages (collectively, the "Appurtenances").
b. Grantor's interest in all casualty, liability,
property, indemnity, hull, war risk, pollution and marine insurance
policies, and Grantor's interest in all proceeds thereof and payments
thereunder, relating to either of the Collateral Vessels or to the
Charter Vessel.
c. All of Grantor's accounts, general intangibles and
contract rights consisting of or relating to all present and future
drilling contracts, charters, subcharters and other agreements providing
for the possession, use or employment of the Charter Vessel or of either
of the Collateral Vessels (any agreements relating to the foregoing are
referred to hereinafter collectively as "Contracts") and all rights to
payment under any of the foregoing, whether for hire, indemnity, damages
or otherwise.
d. Grantor's interest in all sums otherwise earned or to
be earned of or from either of the Collateral Vessels or the Charter
Vessel.
2. Representations and Warranties of Grantor.
Grantor represents and warrants and, so long as the Secured
Obligations remain outstanding, shall be deemed continuously to represent
and warrant that (a) Grantor is the owner of the Collateral Vessels free
and clear of all security interests, liens or other encumbrances except
the Security Interest, the Mortgages, liens for current crew s wages,
general average and salvage, in each case, incurred in the ordinary
course of business and that are not yet overdue and, with respect to the
Cunningham only, the liens and security interests in favor of ABC
Equipment Leasing, Inc. (the "First Mortgagee") created by that certain
First Preferred Mortgage dated January 28, 1987, securing a principal
amount of not more than $11,000,000, which is payable in accordance with
the amortization schedule annexed hereto and made a part hereof as
Exhibit A (the "First Preferred Mortgage"), recorded March 4, 1987, as
Instrument No. 1, Book No. PM149, in the records of the Eighth Coast
Guard District, Port of Houston, Texas; (b) no obligor with respect to
any of the Contracts has any defense, setoff, claim or counterclaim which
can be asserted against Secured Party or Beneficiary, whether in any
proceeding to enforce the Collateral or otherwise (hereinafter, with
respect to the related Contract, each such obligor referred to as an
"Account Debtor"), nor have any amounts payable under such Contracts been
prepaid, pledged, hypothecated or assigned; (c) Grantor is authorized to
enter into this Security Agreement and into the transactions contemplated
hereby and evidenced by the Collateral; (d) Grantor is engaged in
business operations which are carried on at the address specified above,
and Grantor s records concerning the Collateral are kept at the address
specified above; and (e) Grantor is the sole owner of the whole of both
Collateral Vessels and all Appurtenances and other Collateral.
3. Covenants of Grantor.
Grantor (a) will defend the Collateral against the claims and
demands of all other parties, including, without limitation, defenses,
set-offs, claims and counterclaims asserted by any Account Debtor against
Grantor and/or Secured Party and/or Beneficiary; (b) will keep the
Collateral free of all security interests or other liens, mortgages,
chattel mortgages and encumbrances, except (i) the Security Interest and
the Mortgages or any other lien favoring Secured Party, (ii) the First
Preferred Mortgage encumbering the Cunningham and (iii) liens for current
crew's wages, general average and salvage, in each case, incurred in the
ordinary course of business and that are not yet overdue, and will not
sell, transfer, assign, deliver or otherwise dispose of any Collateral or
any interest therein without the prior written consent of Secured Party
and Beneficiary; (c) will keep, in accordance with generally accepted
accounting principles consistently applied, accurate and complete records
concerning the Collateral, and at Secured Party s or Beneficiary's
request, will mark all or any such records and all or any Collateral to
indicate the Security Interest and will permit Secured Party, Beneficiary
or their respective agents to inspect during Grantor s normal business
hours the Collateral and to audit and make extracts from such records or
any of Grantor s books, ledgers, reports, correspondence and other
records; (d) will deliver to Secured Party and Beneficiary on demand
originals of any and all Contracts, bills of lading, invoices, due bills,
amendments or replacements to any of the foregoing, and other documents
evidencing, representing or relating to the Collateral, or any part
thereof; (e) will notify Secured Party and Beneficiary promptly in
writing, of any change in the address specified above, at which records
concerning the Collateral are kept; (f) will notify Secured Party and
Beneficiary immediately of any default by any Account Debtor in payment
or other performance of its obligations with respect to any Contract;
(g) all Contracts that are or will be charters or subcharters are subject
to Secured Party s consent to the extent required by the Mortgages, all
Contracts that are or will be drilling contracts do and will contain
terms and conditions satisfactory to Secured Party and Beneficiary,
including, but not limited to, coverage of Secured Party and the Owner
Group (as defined in the Charter) by all indemnities and required
insurance from the operator thereunder and do or shall expressly disclaim
any property interest in the Cunningham, the Yost or the Charter Vessel,
as applicable, and, without Secured Party s and Beneficiary's prior
written consent, will not make or agree to make any material alteration,
modification or cancellation of, or substitution for, or credits,
discounts, adjustments, offsets or allowances on any of the Contracts or
any Collateral; (h) will keep all tangible property in good maintenance,
condition and repair, and fully insured at all times against fire and
other casualty and extended coverage risks, and shall maintain adequate
public liability insurance with respect to the operation of the
Collateral, in each case all as more fully provided in the other Charter
Documents (including, without limitation, the Mortgages); (i) will not
pledge, hypothecate, encumber or assign or permit any prepayment of any
of the Contracts; and (j) in connection herewith, will execute and
deliver to Secured Party and Beneficiary such financing statements,
assignments and other documents, pay all costs of title searches and
filing financing statements, assignments and other documents in all
public offices requested by Secured Party or Beneficiary, and do such
other things as Secured Party or Beneficiary may request.
4. Verification of Collateral.
Secured Party and Beneficiary shall have the right to verify
the existence, location or condition of all or any Collateral in any
manner and through any medium Secured Party or Beneficiary may consider
appropriate, including by way of audit verifications or estoppel requests
from Account Debtors, and Grantor agrees to furnish all assistance and
information and perform any acts which Secured Party or Beneficiary may
require in connection therewith.
5. Notification and Payments.
On or after the occurrence of any Event of Default (as
hereinafter defined), Secured Party or Beneficiary may notify all or any
Account Debtors of the Security Interest and may also direct such Account
Debtors to make all payments on or in respect to the Collateral to
Secured Party for the benefit of Beneficiary. All payments on, and other
proceeds from Collateral (including cash proceeds, insurance proceeds and
proceeds of proceeds) received by Secured Party directly or from Grantor
shall be applied as provided in the Charter and the Mortgages.
6. Default.
a. Any of the events or conditions constituting an Event
of Default under the Charter shall constitute an event of default
hereunder (herein referred to as an "Event of Default").
b. Upon the happening of any Event of Default, Secured
Party, at its sole election, may declare all or any part of the Secured
Obligations to be immediately due and payable without demand or notice of
any kind.
c. Upon the happening of any Event of Default, Secured
Party shall have and may exercise all rights and remedies which may be
available to it hereunder or under any of the Charter Documents or
otherwise under applicable law, in admiralty or in equity.
d. Without in any way requiring notice to be given in the
following manner, Grantor agrees that any notice by Secured Party of
sale, disposition or other intended action hereunder or in connection
herewith, whether required by the Uniform Commercial Code as presently in
effect in the State of New York or otherwise, shall constitute
commercially reasonable notice to Grantor if such notice is mailed by
regular or certified mail, postage prepaid, at least five (5) days prior
to such action, to Grantor at Grantor s address specified above or to any
other address to which notices hereunder shall be given to Grantor under
the Charter.
e. Grantor agrees to pay on demand all costs and expenses
incurred by Secured Party or Beneficiary in enforcing this Security
Agreement, in realizing upon any Collateral and in enforcing and
collecting any of the Secured Obligations, including, without limitation,
if Secured Party or Beneficiary retains counsel for any such purpose,
reasonable counsel fees and disbursements. Any accounts not paid when
due shall bear interest at the Overdue Rate provided therefor in the
Charter.
7. Miscellaneous.
a. Grantor agrees, from time to time and at the expense of
Grantor, to promptly execute and deliver all further instruments and
documents, and take all further action that may be reasonably necessary
or desirable, or that the Secured Party or Beneficiary may reasonably
request, in order to perfect and protect any security interests granted
or purported to be granted hereby or to enable Secured Party to exercise
and enforce its rights hereunder. Without limiting the generality of the
foregoing, Grantor hereby authorizes Secured Party, at Grantor s expense,
in order to re-perfect or to prevent a lapsing of perfection of any
security interest, to file this Security Agreement and such financing
statement or statements or other instruments, documents or affidavits, or
copies thereof, relating to the Collateral, without Grantor s signature
thereon as Secured Party at its option may deem appropriate, and appoints
Secured Party as Grantor's attorney-in-fact to execute any such copy of
this Security Agreement and/or any such financing statement or statements
or other instruments, documents or affidavits in Grantor s name and to
perform all other acts which Secured Party or Beneficiary deems
appropriate to perfect and continue the Security Interest and to protect
and preserve the Collateral.
b. Upon and after an Event of Default, Secured Party may
demand, collect and sue on the Collateral (in either Grantor s or Secured
Party s name at the latter s option) with the right to enforce,
compromise, settle or discharge the Collateral, and may indorse Grantors
name on any and all checks, commercial paper and any other instruments
pertaining to the Collateral.
c. Upon Grantor's failure to perform any of its duties
under the Collateral, and if an Event of Default shall have occurred,
Secured Party may, but shall not be obligated to, perform any or all such
duties. The amount of Secured Party's expense in connection with any
such performance shall be an additional obligation of Grantor under the
Charter and the other Charter Documents and secured by this Security
Agreement, and Grantor shall pay such amount to Secured Party forthwith
upon written demand by Secured Party or Beneficiary.
d. No delay or omission by Secured Party in exercising any
right or remedy hereunder or with respect to any of the Secured
Obligations or any Contract or Collateral shall operate as a waiver
thereof or of any other right or remedy, and no single or partial
exercise thereof shall preclude any other or further exercise of any
other right or remedy. Secured Party may remedy any default by Grantor
hereunder or with respect to any of the Secured Obligations in any
reasonable manner without waiving the default by Grantor. All rights and
remedies of Secured Party hereunder are cumulative.
e. Secured Party shall have no obligation to take, and
Grantor shall have the sole responsibility for taking, any and all steps
to preserve rights against any and all prior parties to any instrument
constituting Collateral whether or not in Secured Party's possession.
Secured Party shall not be responsible to Grantor for loss or damage
resulting from Secured Party's failure to enforce any Collateral or to
collect any monies due or to become due thereunder, or other proceeds
(including cash proceeds, insurance proceeds and proceeds of proceeds)
constituting Collateral hereunder. Grantor waives protest of any
instrument constituting Collateral at any time held by Secured Party on
which Grantor is in any way liable.
f. The rights and benefits of Secured Party hereunder
shall, if Secured Party so agrees, inure to any party lawfully (under the
laws applying to vessels, the financing of vessels, or otherwise)
acquiring any interest in the Charter or any other Charter Documents or
any part thereof. This Security Agreement may not be assigned by Grantor
without the prior written consent of Secured Party, but Secured Party may
assign at any time this Security Agreement or any rights or interests
hereunder to any person or entity without the consent of or notice to
Grantor or any person or entity other than Beneficiary (whose consent
shall be required for any such assignment).
g. Secured Party, Beneficiary and Grantor as used herein
shall include the successors and permitted assigns of those parties.
h. Notices and other communications required or permitted
hereunder shall be in writing and shall be deemed sufficient for all
purposes if sent by registered or certified letter, nationally recognized
overnight courier service specifying one-day delivery, facsimile or telex
to the recipient's address stipulated below and shall be effective from
the date of receipt thereof.
Other addresses may be substituted for those below upon
giving notice thereof in the manner provided above:
if to the Secured Party: Wilmington Trust Company
1100 North Market Street
Rodney Square North
Wilmington, Delaware 19890
Attn: Financial Services
Fax: (302) 651-1576
with a copy to: Deep Sea Investors, L.L.C.
c/o Heller Financial, Inc.
101 Park Avenue
New York, New York 10178
Attn: Legal Department
Fax: (212) 880-7158
if to the Grantor: Reading & Bates Drilling Co.
901 Threadneedle, Suite 200
Houston, Texas 77079
Attn: Chief Financial Officer
Fax: (713) 496-0285
i. No modification, rescission, waiver, release or
amendment of any provision of this Security Agreement shall be made
except by a written agreement signed by the party to be bound.
j. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
k. GRANTOR, FOR ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY
KNOWINGLY AND INTENTIONALLY AND IRREVOCABLY AND UNCONDITIONALLY
a) SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION
OF THE STATE COURTS OF THE STATE OF NEW YORK AND THE FEDERAL COURTS
SITTING IN THE STATE OF NEW YORK AND AGREES AND CONSENTS THAT SERVICE OF
PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING ARISING OUT OF OR IN
CONNECTION WITH THIS SECURITY AGREEMENT, THE OTHER CHARTER DOCUMENTS OR
THE SECURED OBLIGATIONS BY SERVICE OF PROCESS AS PROVIDED BY NEW YORK
LAW, b) WAIVES TO THE EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY LITIGATION ARISING
OUT OF OR IN CONNECTION WITH THIS SECURITY AGREEMENT, THE OTHER CHARTER
DOCUMENTS OR THE SECURED OBLIGATIONS BROUGHT IN ANY NEW YORK STATE COURT
OR FEDERAL COURT SITTING IN THE STATE OF NEW YORK, c) WAIVES ANY CLAIMS
THAT ANY LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM, d) CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH LITIGATION BY THE MAILING OF COPIES
THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, TO
GRANTOR AT THE ADDRESS SPECIFIED HEREIN AND e) AGREES THAT ANY LEGAL
PROCEEDING ARISING OUT OF, RELATED TO OR IN CONNECTION WITH THIS SECURITY
AGREEMENT, THE OTHER CHARTER DOCUMENTS OR THE SECURED OBLIGATIONS MAY BE
BROUGHT IN ANY COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF SECURED PARTY TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST GRANTOR IN ANY OTHER
JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY APPLICABLE
LAW.
l. GRANTOR, FOR ITSELF AND ITS SUCCESSORS AND ASSIGNS,
HEREBY KNOWINGLY AND INTENTIONALLY AND IRREVOCABLY AND UNCONDITIONALLY
WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ITS RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
SECURITY AGREEMENT OR ANY OF THE OTHER CHARTER DOCUMENTS OR ANY DEALINGS
WITH SECURED PARTY RELATING TO THE SUBJECT MATTER OF THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY AND THE RELATIONSHIP THAT IS BEING
ESTABLISHED. THE FOREGOING WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, MODIFICATIONS, RENEWALS, SUPPLEMENTS OR SUBSTITUTIONS TO THIS
SECURITY AGREEMENT OR ANY OF THE OTHER CHARTER DOCUMENTS WHETHER OR NOT
EXPRESSLY SET FORTH HEREIN OR THEREIN.
IN WITNESS WHEREOF, the undersigned has caused these presents
to be duly executed and delivered by its officer thereunto duly
authorized as of the day and year first above written.
READING & BATES DRILLING CO.
By:
Name:
Title:
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Exhibit A
Amortization Schedule
SEE ATTACHED
- ------------------------------------------------------------------------------
EXHIBIT E
OFFICERS CERTIFICATE
The undersigned, the [Assistant] Secretary and the
[__________] President, respectively, of [Reading & Bates
Corporation][Reading and Bates, Inc.][Reading & Bates
Drilling Co.] (the "Company") hereby certify to DEEP SEA
INVESTORS, L.L.C., a Delaware limited liability company,
Buyer under the Memorandum of Agreement (the "MOA"), dated as
of November ___, 1995, by and between [Reading and Bates,
Inc.][the Company] (it being understood that capitalized
terms used and not otherwise defined herein shall have the
respective meanings ascribed thereto in the MOA):
1. _______________________ is the duly elected and
qualified [________] President of the Company;
2. _______________________ is the duly elected and
qualified [Assistant] Secretary of the Company;
3. The resolutions of the Company's board of
directors, a true, correct and complete copy of
which are attached hereto as Exhibit "A" and made a
part hereof, (i) were duly adopted [at a meeting of
the directors of the Company held on ____________,
1995 at which the required quorum was present and
voting throughout] [by the unanimous written
consent of the directors of the Company in
accordance with applicable law on __________, 1995]
(the date when such resolutions were duly adopted
being referred to herein as the "Resolution Date")
in accordance with applicable law and the articles
or certificates of incorporation and bylaws of the
Company, (ii) are in full force and effect, (iii)
have not been repealed, amended or modified, and
(iv) authorize the Company to execute and deliver,
and perform the Company's obligations under, the
Charter Documents to which the Company is a party;
4. The individuals listed below (the "Current
Officers") have been duly elected to and qualified
for, and validly hold the offices of the Company
set forth opposite their respective names, and the
signatures set forth opposite their respective
names are their true and authentic signatures:
Name Title_________________________
Signature
Chief Executive Officer
Chief Financial Officer
President
Vice President
5. Each of the Current Officers has the authority to
execute and deliver, on behalf of the Company, the
Charter Documents to which the Company is a party.
6. The Certificate of Incorporation of the Company,
and all amendments thereto, as certified by the
appropriate authority where the Company is
incorporated, a true, correct and complete copy of
which is attached hereto as Exhibit "B" and made a
part hereof, (i) was in full force and effect
(without further modification or amendment) on the
Resolution Date, and (ii) is in full force and
effect as of the date hereof (without further
modification or amendment).
7. The Bylaws of the Company, and all amendments
thereto, a true, correct and complete copy of which
are attached hereto as Exhibit "C" and made a part
hereof, (i) were in full force and effect (without
further modification or amendment) on the
Resolution Date, and (ii) are in full force and
effect as of the date hereof (without further
modification or amendment).
8. Certificates of Existence and Good Standing.
Attached hereto as Exhibit D are recent
Certificates issued by appropriate governmental
authorities which evidence the existence and good
standing of the Company in the jurisdiction in
which the Company is incorporated.
The undersigned acknowledge that (i) this
Certificate constitutes the Officers' Certificate described
in Section 6(e) of the MOA, and (ii) [Investment Entity] is
relying on this Certificate, without performing an
independent investigation, in entering into the transactions
contemplated by the Charter Documents.
IN WITNESS WHEREOF, the undersigned has duly
executed and delivered this Officers' Certificate as of the
____ day of November, 1995.
___________________,
[Assistant] Secretary
I, ___________________, hereby certify that I am
now the duly elected, qualified, and acting [_________]
President of the Company; that ____________________ is the
duly elected, qualified and acting [Assistant] Secretary of
the Company and the signature set forth above his name is his
correct signature; and that the certifications set forth
above are true and correct as of the date hereof.
IN WITNESS WHEREOF, I have duly executed this
Certificate as of November ___, 1995.
_______________, [__________] President
- -----------------------------------------------------------------------------
EXHIBIT F
CONSENT TO PREFERRED MORTGAGE
THIS CONSENT TO PREFERRED MORTGAGE ("Consent") given as
of the ______ day of November, 1995, by ABC EQUIPMENT
LEASING, INC., a New York corporation ("First Mortgagee"),
with principal offices at 77 West 66th Street, New York, New
York 10023, in favor of WILMINGTON TRUST COMPANY, a Delaware
banking corporation, Trustee (in such capacity, "Second
Mortgagee") for the benefit of DEEP SEA INVESTORS, L.L.C., a
Delaware limited liability company ("Beneficiary"), both with
offices at c/o Heller Financial, Inc., Attention: Legal
Department, 101 Park Avenue, New York, New York 10178.
A. Reading & Bates Drilling Co., an Oklahoma
corporation ("Mortgagor"), is the sole owner of the whole of
those certain vessels known as the "JIM CUNNINGHAM," official
number 651643, gross tonnage 7977, net tonnage 5866, built at
Okpo Island, South Korea, in 1982, duly documented in the
name of Mortgagor under the laws and flag of the United
States (the "Collateral Vessel").
B. Reading and Bates, Inc., an Oklahoma corporation
("R&B, Inc."), and American Broadcasting Companies, Inc., a
New York corporation ("ABC, Inc.") entered into two
agreements dated as of March 22, 1982 (as amended, the "TBT
Agreements"). R&B, Inc. and ABC, Inc. subsequently assigned
their respective rights and obligations under the TBT
Agreements to Mortgagor and First Mortgagee, respectively.
C. To secure its obligations under the TBT Agreements,
Mortgagor granted to First Mortgagee a first priority
mortgage on the Collateral Vessel pursuant to that certain
First Preferred Mortgage dated January 28, 1987 (the "First
Preferred Mortgage"), recorded March 4, 1987, as Instrument
No. 1, Book No. PM149, in the records of the Eighth Coast
Guard District, Port of Houston, Texas.
D. Pursuant to that certain Memorandum of Agreement
(the "MOA") dated as of November 28, 1995, by and between
Beneficiary and R&B, Inc., a subsidiary of Mortgagor's parent
corporation, Reading & Bates Corporation, R&B, Inc. agreed to
sell a certain other vessel to Beneficiary and Beneficiary
agreed to lease that vessel to Mortgagor under the terms and
subject to the conditions set forth in the Bareboat Charter
(the "Charter") dated November 28, 1995, by and between
Mortgagor and Beneficiary (the MOA, the Charter and all other
documents executed in connection therewith together with any
and all amendments, supplements, renewals or substitutions of
all or any of such documents, are sometimes referred to
collectively herein as the "Charter Documents").
E. The Board of Directors of Mortgagor having
determined that Mortgagor will derive substantial benefit,
directly or indirectly, from the sale and lease transaction
among R&B, Inc., Mortgagor and Beneficiary, Mortgagor, as
required by Beneficiary, has agreed to execute and deliver a
Preferred Mortgage, granting to Second Mortgagee a second
priority mortgage on the Collateral Vessel (the "Second
Mortgage"), secondary and subordinate only to the First
Mortgage, to secure the prompt and complete payment,
observance and performance of all representations,
warranties, covenants, liabilities and obligations of
Mortgagor under the Charter Documents (the "Secured
Obligations").
F. First Mortgagee wishes to execute and deliver this
Consent in order to evidence its consent to the Second
Mortgage as an additional lien and encumbrance on the
Collateral Vessel.
NOW, THEREFORE, with intent to be legally bound, in
consideration of the foregoing, and for other good and
valuable consideration, receipt of which is hereby
acknowledged, First Mortgage hereby agrees as follows:
1. First Mortgagee, on behalf of itself and its
successors and assigns, acknowledges receipt of notice of
Mortgagor's intent to execute, deliver and file of record the
Second Mortgage, and hereby consents to such execution,
delivery and recording, and to the placing of the Second
Mortgage as an additional lien and encumbrance on the
Collateral Vessel.
2. First Mortgagee represents and warrants to Second
Mortgagee and Beneficiary that the First Mortgagee has not
sold, transferred, assigned, encumbered or otherwise disposed
of the First Mortgage or any of the rights thereunder or the
obligations secured thereby and is the sole holder of such
First Mortgage, each of the rights thereunder and all
obligations secured thereby.
3. First Mortgagee agrees that it shall give Second
Mortgagee and Beneficiary written notice of any default under
the First Mortgage simultaneously with delivery of such
notice to Mortgagor. First Mortgagee shall not exercise any
of its rights and remedies under the First Mortgage or at law
or in equity unless Second Mortgagee or Beneficiary have
failed to cure the default described in any such notice
within 10 days after receipt by Second Mortgagee and
Beneficiary of notice of monetary defaults and 30 days after
receipt by Second Mortgagee and Beneficiary of notice of non-
monetary defaults; provided, however, that if any non-
monetary default by its nature cannot be cured within such
30-day period, Second Mortgagee and Beneficiary shall have
such additional period of time (not to exceed 60 days from
the delivery of such notice to Second Mortgagee and
Beneficiary) as may be necessary to cure the default,
provided that Second Mortgagee or Beneficiary have commenced
curative measures within such 30-day period and are
proceeding diligently thereafter to complete such curative
measures; provided, further, that First Mortgagee may
immediately enforce its rights and remedies under the First
Mortgage if Second Mortgagee or Beneficiary take any action
(whether judicial or pursuant to a power of sale) to
foreclose or otherwise enforce the Second Mortgage. Upon
payment of the obligations secured by the First Mortgage,
First Mortgagee shall promptly execute and deliver to Second
Mortgagee and Beneficiary for filing, at Mortgagor's sole
cost and expense, with each filing officer with which the
First Mortgage, any financing statement or other instrument
covering the Collateral Vessel or any other collateral was
filed, all satisfactions of mortgage, satisfaction pieces,
termination statements and similar instruments, and take or
cause to be taken such other or further action, as Second
Mortgagee or Beneficiary may deem necessary or appropriate to
terminate the First Mortgagee's mortgage, lien and security
interest in the Collateral Vessel or any other collateral.
4. This Consent (together with the Charter Documents)
sets forth the entire agreement of the parties with respect
to its subject matter. Any previous or contemporaneous oral
agreements or understandings with regard to the subject
matter of this Consent shall be of no force or effect. First
Mortgagee, and each person signing therefor, represents and
warrants that it, he or she, respectively, has full power and
authority to execute and deliver this Consent on behalf of
First Mortgagee.
IN WITNESS WHEREOF, First Mortgagee has caused the due
execution hereof by its officer thereunto duly authorized as
of the date first set forth above.
ABC EQUIPMENT LEASING, INC.
By:
__________________________________
Name:
__________________________________
Title:
__________________________________
EXHIBIT 10.111
BAREBOAT CHARTER
M. G. HULME, JR.
BETWEEN
DEEP SEA INVESTORS, L.L.C., as OWNER
AND
READING & BATES DRILLING CO., as CHARTERER
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TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 2 SCHEDULES AND OBJECTIVES . . . . . . . . . . . . . . . . . . .
2.1 Schedules and Exhibits . . . . . . . . . . . . . . . . . .
2.2 Objectives . . . . . . . . . . . . . . . . . . . . . . . .
2.3 CONDITION OF THE PROPERTY . . . . . . . . . . . . . . . .
ARTICLE 3 TERM, DELIVERY DATE AND PURCHASE OPTION . . . . . . . . . . . .
3.1 Duration . . . . . . . . . . . . . . . . . . . . . . . . .
3.2 Delivery of the Vessel to the Charterer . . . . . . . . .
3.3 Early Termination . . . . . . . . . . . . . . . . . . . .
3.4 Remedies . . . . . . . . . . . . . . . . . . . . . . . . .
3.5 Redelivery of the Vessel . . . . . . . . . . . . . . . . .
3.6 Survey of the Vessel at End of Charter Period . . . . . .
3.7 Purchase Option . . . . . . . . . . . . . . . . . . . . .
3.8 Determination of Purchase Option Price . . . . . . . . . .
ARTICLE 4 NATURE OF COMPENSATION . . . . . . . . . . . . . . . . . . . .
4.1 Absolute Obligation . . . . . . . . . . . . . . . . . . .
4.2 Net Charter . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 5 UPGRADE PROGRAM . . . . . . . . . . . . . . . . . . . . . . . .
5.1 Scope of Upgrade; Title to Upgrade . . . . . . . . . . . .
5.2 Assignment of Rights Under Upgrade Program . . . . . . . .
5.3 Appointment of Upgrade Agent . . . . . . . . . . . . . . .
5.4 Upgrade Agent's Warranties . . . . . . . . . . . . . . . .
5.5 Upgrade Agent's Duties . . . . . . . . . . . . . . . . . .
5.6 Change Orders . . . . . . . . . . . . . . . . . . . . . .
5.7 Independent Engineer . . . . . . . . . . . . . . . . . . .
5.8 Completion . . . . . . . . . . . . . . . . . . . . . . . .
5.9 Payment . . . . . . . . . . . . . . . . . . . . . . . . .
5.10 Reimbursement Conditions . . . . . . . . . . . . . . . . .
ARTICLE 6 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . .
6.1 Representations and Warranties of the Owner . . . . . . .
6.2 Representations and
Warranties of the Charterer . . . . . . . . . . . . . .
ARTICLE 7 USE AND OPERATION OF THE VESSEL . . . . . . . . . . . . . . . .
7.1 Use of the Vessel . . . . . . . . . . . . . . . . . . . .
7.2 Manning, etc., of the Vessel . . . . . . . . . . . . . . .
7.3 Documentation of the Vessel . . . . . . . . . . . . . . .
7.4 General and Particular Average . . . . . . . . . . . . . .
7.5 Site and Access . . . . . . . . . . . . . . . . . . . . .
7.6 Owner Liability for Materials
Furnished by the Charterer . . . . . . . . . . . . . .
7.7 Environmental and Related
Reporting and Inspection . . . . . . . . . . . . . . .
7.8 Notice of Entry . . . . . . . . . . . . . . . . . . . . .
ARTICLE 8 MAINTENANCE OF CONDITION AND CLASSIFICATION; REPAIRS . . . . .
8.1 Maintenance of Classification . . . . . . . . . . . . . .
8.2 Repair . . . . . . . . . . . . . . . . . . . . . . . . . .
8.3 Drydocking or Underwater
Survey in Lieu of Drydocking . . . . . . . . . . . . .
8.4 Required Survey . . . . . . . . . . . . . . . . . . . . .
ARTICLE 9 EQUIPMENT AND STORES . . . . . . . . . . . . . . . . . . . . .
9.1 Fuel, etc. . . . . . . . . . . . . . . . . . . . . . . . .
9.2 Equipment, etc. . . . . . . . . . . . . . . . . . . . . .
9.3 The Charterer's Additional Equipment, etc. . . . . . . . .
9.4 Title to Improvements; Option to Purchase . . . . . . . .
9.5 No Lease of Essential Severables . . . . . . . . . . . . .
ARTICLE 10 THE CHARTERER'S CHANGES, ADDITIONS AND REPLACEMENTS . . . . .
10.1 Structural Changes or Alterations;
Installation of Equipment, etc. . . . . . . . . . . . .
10.2 Replacement of Parts . . . . . . . . . . . . . . . . . . .
10.3 Vessel Markings . . . . . . . . . . . . . . . . . . . . .
ARTICLE 11ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . . .
11.1 General Covenants . . . . . . . . . . . . . . . . . . . .
11.2 No Impairment . . . . . . . . . . . . . . . . . . . . . .
11.3 Financial Information . . . . . . . . . . . . . . . . . .
11.4 Compliance Certificates . . . . . . . . . . . . . . . . .
11.5 Further Assurances, etc. . . . . . . . . . . . . . . . . .
11.6 Maintenance of Corporate Existence, etc. . . . . . . . . .
11.7 Conditions of Consolidation, Merger, etc. . . . . . . . .
11.8 Indemnity of the Owner by Customers for Oil
Pollution and Related Environmental Claims . . . . . .
ARTICLE 12 PAYMENTS, INVOICES AND SECURITY . . . . . . . . . . . . . . .
12.1 Basic Hire . . . . . . . . . . . . . . . . . . . . . . . .
12.2 Supplemental Hire . . . . . . . . . . . . . . . . . . . .
12.3 Payment Terms . . . . . . . . . . . . . . . . . . . . . .
12.4 Invoices . . . . . . . . . . . . . . . . . . . . . . . . .
12.5 Security for Obligations . . . . . . . . . . . . . . . . .
ARTICLE 13 GENERAL OBLIGATIONS AND PERFORMANCE . . . . . . . . . . . . .
13.1 Independent Owner Relationships . . . . . . . . . . . . .
13.2 Inspection . . . . . . . . . . . . . . . . . . . . . . . .
13.3 Performance of the Charterer . . . . . . . . . . . . . . .
13.4 Operations Outside of U.S. Waters . . . . . . . . . . . .
ARTICLE 14 LIABILITY AND INDEMNITY . . . . . . . . . . . . . . . . . . .
14.1 Survival of Indemnities . . . . . . . . . . . . . . . . .
14.2 Pollution . . . . . . . . . . . . . . . . . . . . . . . .
14.3 The Charterer's Indemnity . . . . . . . . . . . . . . . .
14.4 Patent Infringement . . . . . . . . . . . . . . . . . . .
14.5 Both-to-Blame Collision Clause . . . . . . . . . . . . . .
14.6 Liens, Attachments and Encumbrances . . . . . . . . . . .
14.7 Indemnification by the Charterer . . . . . . . . . . . . .
14.8 The Charterer's Duties to Remove Liens, etc. . . . . . . .
ARTICLE 15 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . .
15.1 The Charterer's Insurance . . . . . . . . . . . . . . . .
15.2 Nonperformance of Insurance Companies . . . . . . . . . .
15.3 Subrogation . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 16 ASSIGNMENT OF CHARTER . . . . . . . . . . . . . . . . . . . .
16.1 Assignment and Subcontract by the Owner . . . . . . . . .
16.2 Assignment by the Charterer . . . . . . . . . . . . . . .
16.3 Assignment of Subcharter Hire . . . . . . . . . . . . . .
ARTICLE 17 LOSS, TAKING OR SEIZURE. . . . . . . . . . . . . . . . . . . .
17.1 Taking by the U.S. Government . . . . . . . . . . . . . .
17.2 Event of Loss not a Total Loss . . . . . . . . . . . . . .
17.3 Payment of Stipulated Loss Value . . . . . . . . . . . . .
17.4 Application of Payments . . . . . . . . . . . . . . . . .
17.5 Date of Loss . . . . . . . . . . . . . . . . . . . . . . .
17.6 Effect of Payment of Stipulated Loss Value . . . . . . . .
ARTICLE 18 TAX . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18.1 Characterization as a Lease . . . . . . . . . . . . . . .
18.2 Representations . . . . . . . . . . . . . . . . . . . . .
18.3 Tax Indemnity . . . . . . . . . . . . . . . . . . . . . .
18.4 Payments . . . . . . . . . . . . . . . . . . . . . . . . .
18.5 Records . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 19 GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . .
19.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . .
19.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . .
19.3 The Owner's Right to Perform for the Charterer . . . . . .
19.4 Waivers . . . . . . . . . . . . . . . . . . . . . . . . .
19.5 Entire Agreement . . . . . . . . . . . . . . . . . . . . .
19.6 Successors and Assigns . . . . . . . . . . . . . . . . . .
19.7 Law . . . . . . . . . . . . . . . . . . . . . . . . . . .
19.8 Parties' Intention . . . . . . . . . . . . . . . . . . . .
19.9 Counterparts; Uniform Commercial Code . . . . . . . . . .
19.10 Warranty of Authority . . . . . . . . . . . . . . . . . .
19.11 Usage; Headings . . . . . . . . . . . . . . . . . . . . .
19.12 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . .
19.13 VENUE; SERVICE OF PROCESS . . . . . . . . . . . . . . . .
19.14 Agent for Service of Process . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . [fill in]
Schedule A Description of Vessel M. G. Hulme, Jr.,
Including Specifications
Schedule B Upgrade Program
Schedule C Charterer's Insurance
Schedule D Stipulated Loss Value
Schedule E Pending Litigation
Schedule F Computation of Basic Hire Upgrade Adjustment
Exhibit A Form of Certificate of Completion
Exhibit B Form of Certificate of Delivery
Exhibit C Form of Certificate for Reimbursement
Exhibit D Form of Completion Certificate of Independent Engineer
Exhibit E Form of Reimbursement Certificate of
Independent Engineer
- ------------------------------------------------------------------------------
BAREBOAT CHARTER
"M.G. HULME, JR."
This Bareboat Charter dated as of November 28, 1995 is between Deep
Sea Investors, L.L.C., a Delaware limited liability company (the "Owner"),
and Reading & Bates Drilling Co., an Oklahoma corporation, as the Charterer
(the "Charterer");
W I T N E S S E T H:
WHEREAS, the Charterer desires to conduct drilling activities; and
WHEREAS, the Owner is the owner of the Vessel M.G. HULME, JR. (as
described hereunder at Schedule A (the "Vessel")) and, upon the terms and
subject to the conditions hereof, is willing to charter such Vessel to the
Charterer on a bareboat basis to conduct such drilling activities;
NOW, THEREFORE, the parties hereto, each in consideration of the
promises and agreements of the other, hereby agree as follows:
ARTICLE 1
DEFINITIONS
When used in this Charter (in addition to the terms defined elsewhere in
this Charter), the following terms shall have the following meanings:
"Additional Collateral" has the meaning assigned to such term in
Section 12.5(a).
"Adequate Provision" means, with respect to any Lien, claim, liability
or other obligation, the posting with or for the benefit of the Owner
Group, of a bond or letter of credit issued by a bank, surety or other
similar institution acceptable to the Owner or other collateral
acceptable to the Owner, in each case, pursuant to documentation in
form and substance acceptable to the Owner, having a face amount or
fair market value no less than the amount owed under such Lien, claim,
liability or other obligation.
"Affiliate(s)" in relation to a party hereto, means any person
controlling, controlled by or under common control with such party,
with the concept of control in such context meaning the possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of another, whether through the
ownership of voting securities, by contract or otherwise.
"Appraisal Procedure" means the procedure specified in the succeeding
sentences for determining an amount or value. If either the Owner or
the Charterer shall give written notice to the other requesting
determination of such amount or value by appraisal, the Owner and the
Charterer shall consult for the purpose of appointing a mutually
acceptable qualified independent appraiser. If such parties shall be
unable to agree on an appraiser within 20 days of the giving of such
notice, such amount or value shall be determined by a panel of three
independent appraisers, one of whom shall be selected by the
Charterer, another of whom shall be selected by the Owner and the
third of whom shall be selected by the American Arbitration
Association (or its successor) if such other two appraisers shall be
unable to agree upon a third appraiser within 10 days of the selection
date of the second of such two appraisers; provided, that if
(a) either party shall not select its appraiser within 35 days after
giving of such notice, such amount or value shall be determined solely
by the appraiser selected by the other party, and (b) if both parties
shall not select their respective appraisers within such period, such
amount or value shall be determined solely by an appraiser selected by
the American Arbitration Association (or its successor). The
appraiser or appraisers appointed pursuant to the foregoing procedure
shall be instructed to determine such amount or value within the
lesser of: (i) 45 days after such appointment and (ii) the applicable
period remaining until delivery of such appraisal is required under
this Charter and the Charter Documents; and such determination shall
be final and binding upon the parties. If three appraisers shall be
appointed, the determination of the appraiser that shall differ most
from the other two appraisers shall be excluded, the remaining two
determinations shall be averaged and such average shall constitute the
determination of the appraisers. The Charterer shall pay all fees and
expenses relating to an appraisal for any purpose under this Charter.
"Basic Hire" means the charter hire amount payable on the Payment
Dates as set forth in Section 12.1.
"Business Day" means any day on which commercial banks are open for
business in New York City, New York.
"Certificate of Completion" means the Certificate of Completion
substantially in the form of Exhibit A duly executed by the Charterer
for the purpose of evidencing the Upgrade Completion.
"Certificate of Delivery" means the Certificate of Delivery
substantially in the form of Exhibit B hereto duly executed by the
Charterer for the purpose of evidencing the Charterer's acceptance of
delivery of the Vessel under this Charter.
"Certificate for Reimbursement" means the Certificate for
Reimbursement substantially in the form of Exhibit C duly executed by
the Charterer evidencing the Charterer's request for reimbursement on
any Upgrade Payment Date.
"Change Order" means a written order to Contractor signed by the
Charterer and if required by Section 5.6, the Owner, issued after
execution of the Upgrade Contract, authorizing a change in the Upgrade
Program or an adjustment in the Upgrade Nonseverable Cost.
"Charter" means this Bareboat Charter as it may from time to time be
supplemented, amended, waived or modified in accordance with the terms
hereof.
"Charter Documents" means this Charter, the Guaranty, the Security
Documents and any other document, instrument or agreement executed in
connection herewith or therewith.
"Charter Period" means, collectively, the Primary Term and, if any,
the Extended Term.
"Charterer" means Reading & Bates Drilling Co., an Oklahoma
corporation, and its successors and assigns to the extent permitted by
the terms hereof.
"Charterer Group" means, individually and collectively, the Charterer
and its subsidiaries, its and their co-venturers, contractors and
subcontractors and its and their Affiliates, and the employees,
invitees and insurers of all of those entities, but shall expressly
exclude the Owner Group.
"Code" means the United States Internal Revenue Code of 1986, as
amended, and any amending or superseding tax laws of the United States
of America.
"Completion Certificate of Independent Engineer" means the Completion
Certificate of Independent Engineer substantially in the form of
Exhibit D hereto duly executed by the Independent Engineer for the
purpose of evidencing the Upgrade Completion.
"Contractor" means Amfels, Inc., a Texas corporation, and any other
Person performing all or any part of the Upgrade Program.
"Cunningham Mortgage" means the Preferred Ship Mortgage dated as of
November 28_, 1995 made by the Charterer in favor of the Trustee
covering the Jim Cunningham.
"Crude Oil" means any hydrocarbon product that is in liquid form at
surface temperature and pressure, including condensate.
"Debt" means, for any Person (without duplication), whether recourse
is to all or a portion of the assets of such Person and whether or not
contingent, (a) every obligation of such Person for money borrowed,
(b) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, (c) every reimbursement obligation
of such Person with respect to letters of credit, bankers' acceptances
or similar facilities issued for the account of such Person, (d) every
obligation of such Person issued or assumed as the deferred purchase
price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business),
(e) every obligation of such Person under a lease, that under
generally accepted accounting principles is required to be capitalized
on the balance sheet of such Person, (f) every obligation under any
charter, operating lease or title retention arrangement with an
original term in excess of one year or which is renewable at the
option of the tenant for a total term of one year or more, (g) the
maximum fixed redemption or repurchase price of redeemable stock of
such Person that by its terms or otherwise is required to be redeemed,
if any, at the time of determination plus accrued but unpaid
dividends, and (h) every obligation of the type referred to in clauses
(a) through (g) of another Person and all dividends of another Person
the payment of which, in either case, such Person has guaranteed or is
responsible or liable for, directly or indirectly, as obligor,
guarantor or otherwise.
"Default" means any event or condition which after notice or lapse of
time or both would become an Event of Default.
"Delivery Date" means the date on which the Vessel is simultaneously
(a) sold by Reading and Bates, Inc. to and accepted by the Owner
pursuant to the terms of the MOA and (b) chartered by the Owner to the
Charterer hereunder as provided in Article 2.
"Drilling Contracts" means any contractual arrangement with respect to
the Vessel providing for the use or employment of the Vessel for the
locating of, drilling for, development of, extraction of or processing
of Crude Oil, Natural Gas or mineral deposits found in underwater
locations, and activities ancillary thereto.
"Escalated" means, with respect to any amount and as at any date of
determination, such amount as multiplied by a fraction (a) the
numerator of which is the Consumer Price Index - U.S. Average as
published by the Bureau of Statistics of the Department of Labor (or
if the publication of the Consumer Price Index is discontinued, a
comparable index similar in nature to the discontinued index which
clearly reflects the change in the real value of the purchasing power
of the Dollar as reasonably selected by the Owner (hereafter in this
definition referred to as the "index")) reported for the calendar year
immediately preceding such date and (b) the denominator of which is
equal to the index reported for 1995.
"Event of Default" means any of the events defined as such in Section
3.3(b).
"Event of Loss" means any of the following events: (a) the actual or
constructive loss of the Vessel for the lesser of (i) six (6) months
(or such longer period of up to 12 months from the date of such loss
so long as the Charterer shall have made arrangements within such six
(6) month period for the repair and restoration of the Vessel
satisfactory to the Owner and the Independent Engineer and is
diligently proceeding with such repair and restoration) or (ii) the
remainder of the Charter Period, (b) the loss, theft or destruction of
the Vessel, (c) damage or destruction of the Vessel or damage to the
Vessel to such extent as shall make repair thereof uneconomical or
other event resulting in the Vessel's being permanently rendered unfit
for normal use for any reason whatsoever, other than obsolescence, or
(d) the condemnation, confiscation, requisition, seizure, forfeiture
or other taking of title to or use of the Vessel (except that, in the
case of a taking of title, or taking of use by the United States
Government, a period equal to the lesser of (i) six (6) months and
(ii) the then remaining term of the Charter Period shall have elapsed
from the date of such taking), in each case as determined by the
Owner.
"Expiration Date" means the last day of the Primary Term.
"Extended Term" has the meaning assigned to such term in Section
3.1(b).
"Fair Market Sale Value" means, for any property, the cash sale value
of such property that would be obtained in an arm's-length transaction
between an informed and willing seller under no compulsion to sell and
an informed and willing buyer-user (other than a person currently in
possession or a used equipment dealer), which determination shall be
made (a), in the case of the Vessel, without deduction for any costs
of removal of the Vessel from the location of current use and (b) on
the assumption that such property is free and clear of all liens,
charges and encumbrances and, in the case of the Vessel, is in the
condition and repair in which it is required to be returned pursuant
to Section 3.5 hereof (but otherwise on an "as-is" basis).
"Guarantor" means Reading & Bates Corporation, a Delaware corporation,
or any other Person that guarantees or provides collateral or other
credit support for the obligations of the Charterer hereunder.
"Guaranty" shall mean the Guaranty entered into by any Guarantor for
the benefit of the Owner, as the same may from time to time be
supplemented, amended, waived or modified in accordance with the terms
thereof.
"Highest Lawful Rate" means the maximum nonusurious contract rate of
interest permitted by applicable law.
"Hire" means Basic Hire and Supplemental Hire, collectively.
"Income Taxes" means all income, franchise or similar Taxes which are
based on, or measured by or with respect to, net income.
"Indemnitee" has the meaning assigned to such term in Section 14.3.
"Independent Engineer" means Barnett & Casbarian, or any other Person
selected by the Owner and approved by the Charterer, which approval
shall not be unreasonably withheld or delayed.
"Investor" means each of GATX Marine Investors Corporation, MDFC
Equipment Leasing Corporation, Heller Financial Leasing, Inc. and
their respective successors and assigns.
"Jim Cunningham" means the drilling rig Jim Cunningham, official
number 651643.
"Lien" means any mortgage, pledge, lien, charge, encumbrance, lease,
right, security interest or claim of any nature.
"Limited Liability Company Agreement" means the Limited Liability
Company Agreement dated as of November 28, 1995 among GATX Marine
Investors Corporation, MDFC Equipment Leasing Corporation, and Heller
Financial Leasing, Inc. creating the Owner.
"MOA" means the Memorandum of Agreement dated as of November 28, 1995
between Reading and Bates, Inc. and the Owner.
"Moody's" means Moody's Investor Service, Inc., a New York
corporation, and its successors and assigns.
"Mortgages" means the Cunningham Mortgage and the Yost Mortgage.
"Natural Gas" means any mixture of hydrocarbons or of hydrocarbons and
noncombustible gases, in a gaseous form at surface temperature and
pressure, which consists essentially of methane, but includes ethane,
propane, butanes, and other liquefiable hydrocarbons.
"1954 Code" means the United States Internal Revenue Code of 1954, as
amended and in effect prior to the enactment of the Tax Reform Act of
1986 (Pub. L. No. 99-514).
"Nonseverables" means improvements, modifications and additions to the
Vessel that are not readily removable without causing damage to the
Vessel or that in accordance with applicable statutes, orders, cases,
rules, regulations and other laws may not be removed from the Vessel.
"Obligations" means the obligations of the Obligors under the Charter
Documents.
"Obligors" means, collectively, the Charterer and each Guarantor.
"Operating Area" means any area in which the Charterer shall operate
the Vessel with notice to the Owner pursuant to Section 13.4.
"Overdue Rate" means an interest rate per annum equal to the lesser of
(a) the Prime Rate plus four percent (4%) per annum and (b) the
Highest Lawful Rate.
"Owner" means Deep Sea Investors, L.L.C., a limited liability company
organized under the laws of the State of Delaware.
"Owner Group" means, individually and collectively, the Owner and its
subsidiaries, its and their co-venturers and contractors and
subcontractors and the Investors, its and their respective Affiliates
(other than the Charterer), and its and their shareholders, directors,
officers, attorneys, accountants, consultants and representatives, the
employees, insurers and invitees of all of those entities, the Trustee
and the M. G. Hulme, Jr., but shall expressly exclude Charterer Group.
"Owner Liens" means Liens described in clause (b) of the definition of
Permitted Liens.
"Owner's Cost" means, as of any date, the sum of the purchase price of
the Vessel and Upgrade Nonseverable Cost.
"Payment Date" means each date that is a monthly anniversary date of
the calendar day immediately before the Delivery Date (such monthly
date being deemed for this purpose to be the day of each succeeding
month corresponding to such date immediately before the Delivery Date
or, if such month does not have a corresponding day, the last day of
such month), up to and including the end of the Charter Period.
"Permitted Liens" means, as of any date, (a) any lien arising out of a
claim for crew's wages, supplies or the like, or salvage not covered
by insurance, or for taxes, assessments or other governmental charges,
in each case, incurred in the ordinary course of business, and in
existence as of the date of determination for not more than 30 days
and, as of the date of determination, neither overdue nor in the
aggregate in excess of $1,000,000 unless such are being contested in
good faith and by appropriate Persons and proceedings, in each case,
in the Owner's judgment and unless Adequate Provision has been
provided by the Charterer for payment of such amounts that may become
due and payable and such Lien attaches only to such Adequate Provision
and not to the Vessel, any part thereof or any Drilling Contract and,
in the Owner's judgment, no risk of forfeiture or other loss of the
Vessel, any part thereof, or any right of the Charterer or the Owner
under any Drilling Contract, exists, or is threatened or imminent;
(b) any lien created by, through or under the Owner as a result of
claims against the Owner for which the Owner is not entitled to
indemnification from the Charterer or any Guarantor, or discharge of
which is not the obligation of the Charterer or any Guarantor, whether
at law, by contract, in equity or under admiralty principles; and
(c) Drilling Contracts complying with the provisions of this Charter
and the other Charter Documents and the rights of the Charterer under
this Charter, including subcharters of the Vessel in accordance with
the terms of this Charter, provided that no such contracts, rights or
subcharters shall suffer or permit to be continued any Lien or
encumbrance incurred by Charterer or any subcharterer or any of their
agents which might have priority over the title and interest of the
Owner in the Vessel or any part thereof or equipment or other property
used in connection with the Vessel.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust or
unincorporated organization or any government or any agency or any
political subdivision thereof.
"Primary Term" has the meaning assigned to such term in Section
3.1(a).
"Prime Rate" means the per annum rate of interest published from time
to time in the Eastern edition of The Wall Street Journal, which rate
shall change with each published change in such rate, effective as of
the date of such publication.
"Purchase Option Price" means the Fair Market Sale Value of the Vessel
determined in accordance with Section 3.8, not to exceed 40% of
Owner's Cost.
"Randolph Yost" means the Randolph Yost, Official Number 601699, and
all fixtures, equipment and improvements of any kind whatsoever
installed or located thereon and owned by the Charterer.
"Rated Securities" means the implied long-term senior unsecured debt
of Reading & Bates.
"Reading & Bates" means Reading & Bates Corporation, a Delaware
corporation.
"Reimbursement Certificate of Independent Engineer" means the
Reimbursement Certificate of Independent Engineer substantially in the
form of Exhibit E duly executed by the Independent Engineer for the
purpose of evidencing the Charterer's entitlement to reimbursement
under Section 5.9 on any Upgrade Payment Date.
"Rights Assignment" has the meaning assigned to such term in Section
16.3.
"Safe Harbor Lease Documents" means, collectively, the Agreement dated
as of March 22, 1982 between American Broadcasting Companies, Inc.
("ABC"), as Lessor, and the Charterer, as Lessee, covering the
Cunningham, the Agreement dated as of March 22, 1982 between ABC, as
lessor, and the Charterer, covering the jack-up rigs, J.T. Angel and
R.W. Mowell, the related Preferred Ship Mortgages and the documents
executed in connection therewith, including, without limitation, the
tax indemnification agreements.
"Sale Date" means the date, if any, on which the Charterer acquires
the Vessel by exercise of its purchase option granted pursuant to
Section 3.7.
"Security Agreement" means the Security Agreement between the Owner
and the Trustee.
"Security Documents" means the Mortgages, the Security Agreement, and
any other agreement, instrument or document executed and delivered for
the purpose of supporting or securing the Obligations.
"Severables" means improvements, modifications or additions to the
Vessel that are readily removable without causing damage to the Vessel
and may, in accordance with all applicable statutes, orders, cases,
rules, regulations and other laws, be removed from the Vessel.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill
Companies, Inc., a New York corporation, and its successors and
assigns.
"Shipping Act, 1916" shall mean the United States Shipping Act, 1916,
as amended.
"Shipyard" means Amfel's shipyard in Brownsville, Texas.
"Stipulated Loss Value" as of any Payment Date listed by number in
Schedule D hereto means an amount determined by multiplying Owner's
Cost by the percentage set forth in Schedule D opposite such Payment
Date number.
"Subsidiary" means for any Person, any other corporation, partnership,
joint venture, limited liability company or other entity at least a
majority of the voting stock of which is beneficially owned, directly
or indirectly by such Person or its Subsidiaries.
"Substitute Collateral" has the meaning assigned to such term in
Section 12.5(d).
"Supplemental Hire" shall mean any and all amounts, liabilities and
obligations other than Basic Hire that the Charterer assumes or agrees
to pay hereunder to the Owner, including, without limitation,
Stipulated Loss Value and indemnity payments.
"Taxes" means all federal, foreign, state, local or other net or gross
income, gross receipts, sales, use, stamp, documentary, transfer,
general consumption, ad valorem, property, value added, franchise,
production, import, export, withholding, payroll, employment, excise
or similar taxes, assessments, duties, fees, levies or other
governmental charges, including without limitation, license,
recording, documentation and registration fees, together with any
interest thereon, any penalties, additions to tax or additional
amounts with respect thereto and any interest in respect of such
penalties, additions or additional amounts.
"Third Parties" means all persons and entities that are not Charterer
Group or Owner Group.
"Timely Liquidation Value" means, for any property, the cash sale
value of such property that would be obtained in an arm's-length
transaction between a seller that must sell such property in no more
than 90 days and an informed and willing buyer-user, which
determination shall be made with a deduction for the removal of the
property from its location and on the assumption that such property is
in its current actual condition, which condition shall reflect its
current physical condition and location and any applicable legal,
governmental, physical, contractual and other impediments to sale or
use.
"Trustee" means Wilmington Trust Company not in its individual
capacity but solely as trustee for the benefit of the Owner under the
Mortgages and any of its successors or assigns in such capacity.
"UCC" means the Uniform Commercial Code as enacted in the State of New
York.
"Upgrade Agreements" has the meaning assigned to such term in
Section 5.2.
"Upgrade Completion" means the delivery to the Owner of the
Certificate of Completion and the Certificate of Independent Engineer
and the Owner's acknowledgment in writing to the Charterer that it
accepts such Certificates; provided, however, that the Owner's
acceptance of such certificates shall not constitute any waiver of its
rights or remedies in respect of any failure of the Upgrade Program to
be completed in accordance with the terms hereof or any other right or
remedy.
"Upgrade Contract" means the Ship Repair Agreement dated as of
October 31, 1995 between Amfels, Inc., a Texas corporation, and the
Charterer.
"Upgrade Default" means the Owner shall determine that the work of the
Upgrade Program is not being conducted in all material respects in
accordance with the plans, schedules or specifications therefor or
that the Charterer has failed to perform its obligations under the
Upgrade Program in accordance with Article 5.
"Upgrade Maintenance" means that portion of the improvements
contemplated by the Upgrade Program that constitutes ordinary and
usual maintenance as more fully described on Schedule B.
"Upgrade Nonseverables" means that portion of the improvements
contemplated by the Upgrade Program that is not readily removable
without causing material damage to the Vessel as more fully described
on Schedule B.
"Upgrade Nonseverable Cost" means an amount not to exceed (i)
$10,000,000 to be paid under the Upgrade Agreements plus (ii) any
amounts authorized by the Owner to be paid to construct the Upgrade
Program.
"Upgrade Payment Date" means each of the Delivery Date, the Payment
Date falling in March 1996 and the date of the Upgrade Completion.
"Upgrade Program" means the upgrade of the Vessel from its current 850
meter water capacity to 1000, meters as more fully described in the
Upgrade Contract, any other Upgrade Agreements and the plans,
specifications and schedules set forth on Schedule B.
"Upgrade Severables" means that portion of the improvements
contemplated by the Upgrade Program that is readily removable from the
Vessel without causing material damage to the Vessel as more fully
described on Schedule B.
"Vessel" means the M. G. HULME, JR., as described on Schedule A and
all fixtures, equipment and improvements of any kind whatsoever
installed or located thereon pursuant to this Charter or as otherwise
agreed to by the Charterer and the Owner.
"Yost Mortgage" means the Preferred Ship Mortgage dated as of November
28, 1995 made by the Charterer in favor of the Trustee covering the
Randolph Yost.
ARTICLE 2
SCHEDULES AND OBJECTIVES
2.1 Schedules and Exhibits
The following schedules and exhibits are attached hereto and made a
part hereof for all purposes. In the event there are any conflicts
between the body of this Charter and the schedules and exhibits
attached hereto, the provisions in the body of this Charter will
prevail.
(a) Schedules
Schedule A - Description of the Vessel, including
specifications.
Schedule B - Upgrade Program
Schedule C - Charterer's Insurance
Schedule D - Stipulated Loss Value
Schedule E - Pending Litigation
Schedule F - Computation of Basic Hire Upgrade Adjustment
(b) Exhibits
Exhibit A - Form of Certificate of Completion
Exhibit B - Form of Certificate of Delivery
Exhibit C - Form of Certificate for Reimbursement
Exhibit D - Form of Completion Certificate of Independent
Engineer
Exhibit E - Form of Reimbursement Certificate of Independent
Engineer
Exhibit F - Form of Notice to Account Debtor
2.2 Objectives
The Owner shall provide the Vessel to the Charterer on a bareboat or
demise charter basis. The Owner shall not be responsible for any
other service, manning, operations or equipment whatsoever. By the
Owner providing the Vessel to the Charterer in accordance with this
Charter, upon the terms and subject to the conditions hereof, the
Charterer shall take and have command, possession and control of the
Vessel during the term of this Charter; as a part hereof, and without
limit to the foregoing, the Charterer's command, possession and
control of the Vessel shall specifically include the obligation to
have the Vessel under the command of an Offshore Installation Manager
certified by and for the area in which the Vessel is operating from
time to time.
2.3 CONDITION OF THE PROPERTY. THE CHARTERER ACKNOWLEDGES AND AGREES THAT
IT IS CHARTERING THE VESSEL AND OTHER PROPERTY HEREUNDER "AS IS,"
"WHERE IS," AND "WITH ALL FAULTS, WHETHER LATENT OR DISCERNIBLE,"
WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY
THE OWNER, OWNER GROUP OR ANY INVESTOR AND IN EACH CASE SUBJECT TO
(A) THE EXISTING STATE OF TITLE, (B) THE RIGHTS OF ANY PARTIES IN
POSSESSION THEREOF, (C) ALL APPLICABLE LEGAL REQUIREMENTS AND
(D) VIOLATIONS OF LEGAL REQUIREMENTS WHICH MAY EXIST ON THE DATE
HEREOF. NONE OF OWNER, ANY MEMBER, OWNER GROUP, OR ANY INVESTOR HAS
MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR
COVENANT (EXPRESS OR IMPLIED) OR SHALL BE DEEMED TO HAVE ANY LIABILITY
WHATSOEVER AS TO THE TITLE, VALUE, HABITABILITY, USE, SEAWORTHINESS,
CONDITION, STABILITY, SUITABILITY, DESIGN, OPERATION, CLASS,
COMPLIANCE WITH LAWS, CONFORMANCE TO SPECIFICATIONS, MERCHANTABILITY
OR FITNESS FOR USE OF ANY PROPERTY (OR ANY PART THEREOF FOR A
PARTICULAR PURPOSE OR WITH RESPECT TO PATENT INFRINGEMENT), OR ANY
OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO ANY PROPERTY (OR ANY PART THEREOF), AND NONE
OF OWNER, OWNER GROUP OR ANY INVESTOR SHALL BE LIABLE FOR ANY LATENT,
HIDDEN OR PATENT DEFECT THEREIN, ANY REPRESENTATION, WARRANTY OR
PROMISE, EXPRESS OR IMPLIED, WHICH ANY MANUFACTURER OR BUILDER OF THE
VESSEL OR ANY PROPERTY (OR ANY PART THEREOF) MAY HAVE MADE OR MAY BE
DEEMED TO HAVE MADE OR THE FAILURE OF ANY PROPERTY, OR ANY PART
THEREOF, TO COMPLY WITH ANY LEGAL REQUIREMENT OR ANY DAMAGES, WHETHER
ACTUAL, SPECIAL, CONSEQUENTIAL OR INCIDENTAL, ARISING HEREFROM OR
THEREFROM. THE CHARTERER HAS BEEN AFFORDED FULL OPPORTUNITY TO
INSPECT THE VESSEL, IS (INSOFAR AS THE OWNER IS CONCERNED) SATISFIED
WITH THE RESULTS OF ITS INSPECTIONS AND IS ENTERING INTO THIS CHARTER
SOLELY ON THE BASIS OF THE RESULTS OF ITS OWN INSPECTIONS, AND ALL
RISKS INCIDENT TO THE MATTERS DESCRIBED IN THE PRECEDING SENTENCE, AS
BETWEEN OWNER, THE OWNER GROUP AND THE INVESTORS, ON THE ONE HAND, AND
THE CHARTERER, ON THE OTHER HAND, ARE TO BE BORNE BY THE CHARTERER.
NOTHING IN THIS SECTION 2.3 OR THE CHARTER SHALL OPERATE TO NEGATE OR
DIMINISH ANY CLAIM FOR BREACH OF ANY REPRESENTATION, WARRANTY OR
COVENANT THAT THE OWNER MAY NOW OR HEREAFTER HAVE UNDER ANY CHARTER
DOCUMENT OR ARISING OUT OF THE TRANSACTIONS CONTEMPLATED THEREBY.
ARTICLE 3
TERM, DELIVERY DATE AND PURCHASE OPTION
3.1 Duration
(a) Subject to the terms and conditions of this Charter, the Owner
bareboat (demise) charters to the Charterer, and the Charterer
bareboat (demise) charters from the Owner, the Vessel for a
period beginning on the Delivery Date and ending on the 10th
anniversary of the Delivery Date (the "Primary Term"), with the
option to extend this Charter pursuant to Section 3.1(b).
(b) At the end of the Primary Term, and subject to the terms and
conditions of this Charter, the term of this Charter may be
extended for a period of 90 days (the "Extended Term") by the
Charterer providing 180 days' written notice to the Owner prior
to the end of the Primary Term if, and only if, such extension
is necessary to complete a Drilling Contract in progress that is
in full force and effect on the date such extension notice is
delivered and no Default or Event of Default has occurred and is
continuing. The Charterer, at its sole cost and expense, shall
provide the Owner with independent verification of the necessity
of any such extension in form and substance satisfactory to the
Owner. During such Extended Term, if any, all of the
obligations of the Charterer under this Charter during the
Charter Period shall continue for the Extended Term, including,
without limitation, the obligation to pay Basic Hire under
Section 12.1. Prior to any extension of the Primary Period for
the Vessel, the Charterer shall give the Owner its good faith
estimate of the date on which the existing Drilling Contract
will be completed.
(c) The Charterer shall, at all reasonable times during the last 180
days of the Charter Period, permit access to the Vessel to the
Owner and to Persons designated by the Owner in connection with
any prospective sale or prospective rechartering of the Vessel
by the Owner, and shall permit the inspection of the Vessel by
such Persons; provided, however, that the exercise of such
rights shall in no way unreasonably interfere with the use of
the Vessel by the Charterer.
3.2 Delivery of the Vessel to the Charterer
Delivery of the Vessel by the Owner to the Charterer shall take place
at Garden Banks Block 387, Outer Continental Shelf, Gulf of Mexico
simultaneously with delivery of the Vessel to the Owner pursuant to
the MOA. Upon such delivery, the Vessel shall be deemed to have been
delivered and accepted by the Charterer and shall be subject
thereafter to all the terms and conditions of this Charter.
Delivery of the Vessel by the Owner to the Charterer shall, without
further action, irrevocably constitute acceptance by the Charterer of
the Vessel for all purposes of this Charter, which shall be further
evidenced by the Charterer's execution and delivery of the Certificate
of Delivery simultaneously with the execution and delivery of this
Charter, and shall be conclusive proof that the Vessel is in
compliance with all requirements of this Charter and that the Vessel
is seaworthy, in accordance with specifications, in good working
order, condition and repair and without defect or inherent vice in
title, condition, design, operation or fitness for use, whether or not
discoverable by the Charterer as of the date hereof, and free and
clear of all Liens, other than Permitted Liens; provided, however,
that nothing contained herein shall in any way diminish or otherwise
affect any right the Charterer, the Owner or any of their respective
Affiliates may have against any shipyard, manufacturer, supplier,
vendor or any other Person in respect of the Vessel. FROM AND AFTER
THE DELIVERY DATE, THE CHARTERER SHALL NOT BE ENTITLED TO MAKE OR
ASSERT ANY CLAIM AGAINST OWNER, THE OWNER GROUP OR ANY INVESTOR ON
ACCOUNT OF ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE VESSEL,
THE CONSUMABLE STORES ON BOARD OR WITH RESPECT TO ITS TITLE,
SEAWORTHINESS, MERCHANTABILITY, FITNESS, HABITABILITY, VALUE, USE,
CONDITION, SUITABILITY, CLASS, COMPLIANCE WITH LAWS, DESIGN,
OPERATION, CONFORMANCE TO SPECIFICATIONS NOR ABSENCE OF DEFECTS,
LATENT, HIDDEN, PATENT OR OTHER, NOR WITH RESPECT TO PATENT
INFRINGEMENT. FROM AND AFTER THE DELIVERY DATE, THE CHARTERER WAIVES
ANY CLAIM IT MIGHT HAVE AGAINST OWNER, THE OWNER GROUP OR ANY INVESTOR
FOR ANY LIABILITY, CLAIM, LOSS, DAMAGE OR EXPENSE OF ANY KIND OR
NATURE BY OR WITH RESPECT TO THE VESSEL OR ANY DEFICIENCY OR DEFECT
THEREIN OR INADEQUACY THEREOF, THE USE OR MAINTENANCE THEREOF, ANY
INTERRUPTION OR LOSS OF SERVICE OR USE THEREOF, WHETHER IN CONTRACT,
TORT OR ANY THEORY OF PRODUCT OR STRICT LIABILITY.
3.3 Early Termination
This Charter shall terminate in accordance with any notice of
termination given in accordance with this Section 3.3. This Charter
shall also terminate at the time stipulated below for any of the
following reasons:
(a) At the option of the Owner, this Charter shall terminate
immediately and upon written notice to the Charterer if any
Event of Loss occurs and upon such termination the Charterer
shall pay the Owner on the earlier of (i) the receipt of any
insurance payable in respect of such Event of Loss and (ii) 60
days thereafter, the Stipulated Loss Value of the Vessel set
forth on Schedule D as of the Payment Date preceding the
occurrence of such Event of Loss plus any past due Hire, plus
the sum of the per diem of the Basic Hire due on the next
Payment Date, for each day during the period from the next
preceding Payment Date to the date of such Event of Loss (unless
the Event of Loss shall occur on a Payment Date, in which case,
such payment shall be equal to the Stipulated Loss Value on such
Payment Date plus any Hire due on such Payment Date), in each
case, together with interest thereon computed from the date of
such Event of Loss to the date of actual payment at a rate per
annum equal to the Overdue Rate. If the time of such loss be
uncertain, the loss shall be deemed to have occurred as of the
time at which communication from the Vessel was last heard. It
is expressly understood that the Charterer shall bear all risk
of any such loss.
(b) Each of the following events shall be an "Event of Default":
(i) the Charterer shall fail to pay the Owner any amounts due
and payable hereunder when due; or
(ii) the Charterer shall fail to perform any of its obligations
under Article 5, Sections 7.3, 10.1, 11.1(a), 11.6, 11.7,
11.8, 12.5, 13.4, or 14.6, Article 15, Section 17.3 or
Article 18 hereof or any other obligation as to which the
Charterer is specifically accorded elsewhere herein or
otherwise any notice and/or grace period in which to
perform such obligation or to cure such breach thereof or
default therein and such notice shall have been given
and/or such grace period shall have expired without cure
of such failure; or
(iii) any Obligor shall fail to perform any of its obligations
hereunder or under any Charter Document (other than those
specified in Section 3.3(a) or (b)(i)) which is not cured
within the lesser of (A) 10 days or (B) the then remaining
term of the Charter Period of the occurrence thereof; or
(iv) any representation, warranty or statement made or deemed
made by any Obligor in any Charter Document or information
furnished by or on behalf of any Obligor in any
instrument, certificate or other document delivered by or
on behalf of any Obligor shall be untrue in any material
respect on the date made or deemed made; or
(v) (i) any Obligor shall fail to pay any principal of or
premium or interest on any Debt (excluding Debt under this
Charter) of such Obligor under which any aggregate amount
of at least $1,000,000 is outstanding or committed, when
the same becomes due and payable, and such failure shall
continue after any applicable grace period; or (ii) any
other event shall occur or condition shall exist under any
agreement or instrument relating to any such Debt and
shall continue after any applicable grace period, if the
effect of such event or condition results in the
acceleration of, the maturity of such Debt; or any such
Debt shall be declared to be due and payable, or required
to be prepaid (other than by a regularly scheduled
required prepayment), redeemed, purchased or defeased, or
an offer to prepay, redeem, purchase or defease such Debt
shall be required to be made, in each case, prior to the
stated maturity thereof; or legal action shall be taken
with respect to such other event (including, but not
limited to, the commencement of proceedings seeking
specific performance or injunctive or other equitable
relief); or
(vi) any Obligor shall generally not pay its debts as such
debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or voluntarily or
involuntarily dissolves or is dissolved, or terminates or
is terminated; or any proceeding shall be instituted by or
against such Person or any of its subsidiaries seeking to
adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or
its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a
receiver, trustee, custodian or other similar official for
it or for any substantial part of its property and, in the
case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain
undismissed or unstayed for a period of 30 days, or any of
the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or
the appointment of a receiver, trustee, custodian or other
similar official for, it or for any substantial part of
its property) shall occur; or any such Person or any of
its subsidiaries shall take any corporate or other
organizational action to authorize any of the actions set
forth above in this subsection (vi); provided, however,
that nothing contained in this Section 3.3(b)(vi) or
otherwise shall be deemed to limit, restrict or prohibit
Owner in any manner from intervening in any such
proceeding described above and enforcing any of its rights
and remedies whether under this Charter or any of the
Charter Documents, at law, in admiralty or equity or
otherwise; or
(vii) a judgment or order for the payment of money in the amount
of at least $1,000,000 or more shall be rendered against
any Obligor and either (i) enforcement proceedings shall
have been commenced by any creditor upon such judgment or
order or (ii) there shall be any period of 10 consecutive
days during which a stay of enforcement of such judgment
or order, by reason of a pending appeal or otherwise,
shall not be in effect; or
(viii) any provision of this Charter or any Charter Document shall
at any time for any reason cease to be valid and binding
on any Obligor, or shall be declared to be null and void,
or the validity or enforceability thereof shall be
contested by any Obligor, or any Obligor shall deny that
it has any or further liability or obligation under
this Charter or any Charter Document; or
(ix) failure of any Obligor to comply with, or to incur any
liability, whether fixed or contingent, under or pursuant
to, any statute, law, regulation or other governmental
requirement to which such Obligor is subject, including
but not limited to ERISA, the Oil Pollution Act of 1990
("OPA") and any other environmental, health or safety law
or regulation, in each case, which might reasonably be
expected to have a material adverse effect on the
condition (financial and otherwise), business prospects or
the ability of such Obligor to perform its obligations
under the Charter Documents; or
(x) any Lien securing the Obligations shall fail to be
perfected, valid or enforceable, or any material adverse
effect shall occur respecting the value or suitability as
collateral of any property encumbered by such Lien (unless
the Charterer shall have provided Substitute Collateral in
accordance with Section 12.5(c)), including, without
limitation, any levy, attachment or seizure thereof or,
subject to Section 12.5, the Lien securing the Obligations
under the Mortgage shall fail to be (A) at least a second
priority preferred ship mortgage (subject only to the
First Mortgage (as defined in the Mortgage) at any time on
or before December 31, 1997 or (B) a first priority
preferred ship mortgage at any time after December 31,
1997; or
(xi) the Upgrade Completion shall not occur on or before the
date that is 150 calendar days after the date the Vessel
shall have been delivered to the Shipyard in connection
with the Upgrade Program; or
(xii) an Upgrade Default shall occur and be continuing; or
(xiii) existing Drilling Contracts on the property subject to the
Mortgage or the Additional Collateral, as applicable, fail
to terminate on or before the earlier of (A) June 30,
1996 or (B) the occurrence of an Event of Loss; or
(xiv) an Event of Default under any of the Safe Harbor Lease
Documents shall occur or the Charterer or any member of
the Charterer Group shall fail to pay any tax
indemnification payment under the Safe Harbor Lease
Documents when due.
3.4 Remedies
Upon the occurrence of any Event of Default and at any time thereafter
so long as the same shall be continuing, the Owner may, at its option,
declare this Charter to be in default; and at any time thereafter, the
Owner may do, and the Charterer shall comply with, one or more of the
following, as the Owner in its sole discretion shall elect:
(a) Upon written demand (which demand shall have the effect of
terminating all of the Charterer's rights to use or possess the
Vessel or act as agent under the Upgrade Program), the Owner may
cause the Charterer to, and the Charterer hereby agrees that it
will, at the Charterer's sole cost and expense, promptly
redeliver the Vessel, or cause the Vessel to be redelivered, to
the Owner with all reasonable dispatch and in the same manner
and in the same condition as if the Vessel were being
redelivered at the expiration of the Charter Period in
accordance with all of the provisions of Section 3.5, and all
obligations of the Charterer under said Section shall apply to
such redelivery; or the Owner or its agent, at the Owner's
option, without further notice, may, but shall be under no
obligation to, retake the Vessel wherever found, whether upon
the high seas or at any port, harbor or other place and
irrespective of whether the Charterer, any subcharterer or any
other person may be in possession of the Vessel, all without
prior demand and without legal process, and for that purpose the
Owner or its agent may enter upon any dock, pier or other
premises where the Vessel may be and may take possession
thereof, without the Owner or its agent incurring any liability
by reason of such retaking, whether for the restoration of
damage to property caused by such retaking or for damages of any
kind to any Person for or with respect to any cargo carried or
to be carried by the Vessel or for any other reason.
Henceforth, the Owner shall hold, possess and enjoy the Vessel,
free and clear of any right of the Charterer or its successors
or assigns to possess or use the Vessel for any reason
whatsoever. The exercise by the Owner of its remedies under
this paragraph (a) shall be without prejudice, and in addition,
to any of the Owner's other remedies referred to in this Charter
or any of the other Charter Documents or at law, in admiralty or
equity.
(b) The Owner, by written notice to the Charterer specifying a
payment date not less than 10 days, nor more than 30 days, after
the date of such notice, may require the Charterer to pay to the
Owner, and the Charterer hereby agrees that it will pay to the
Owner, on the payment date specified in such notice, as
liquidated damages for loss of a bargain and not as a penalty
and in lieu of any further Basic Hire payments hereunder, an
amount equal to all unpaid Basic Hire payable on each Payment
Date occurring on or before the payment date specified in such
notice, plus the Stipulated Loss Value computed as of the
Payment Date preceding the payment date specified in such notice
plus the sum of the per diem of the Basic Hire due on the next
Payment Date for each day during the period from the next
preceding Payment Date to the date of such Event of Loss (or as
of such payment date specified in such notice if such payment
date specified in such notice is a Payment Date), together with
interest on such amounts at the Overdue Rate for the period, if
any, from the Payment Date as of which such Stipulated Loss
Value is calculated to and including the date of actual payment.
Upon such payment of liquidated damages, the Owner shall pay
over to the Charterer the net proceeds of any sale, charter or
other disposition of the Vessel as and when received but only
after deducting all costs and expenses whatsoever incurred by
the Owner in connection therewith, to the extent such net
proceeds do not exceed the amount of such Stipulated Loss Value
actually so paid. Nothing contained in the preceding sentence
or otherwise shall require the Owner to sell, charter or
otherwise dispose of the Vessel at any time.
(c) The Owner may exercise any other right or remedy that may be
available to it under applicable law, in equity or admiralty or
proceed by appropriate court action to enforce the terms of this
Charter or to recover damages for the breach hereof or to
terminate this Charter.
(d) The Owner or its agent may sell the Vessel at public or private
sale, with or without notice to the Charterer, advertisement or
publication, as the Owner may determine, or otherwise may
dispose of, hold, possess, use, operate, charter (whether for a
period greater or less than the balance of what would have been
the Charter Period in the absence of the termination of the
Charterer's rights to the Vessel) to others or keep idle the
Vessel, all on such terms and conditions and at such place or
places as the Owner may determine and all free and clear of any
rights of the Charterer and of any claim of the Charterer in
admiralty, in equity, at law or by statute, whether for loss or
damage or otherwise, and without any duty to the Charterer
except to the extent provided in paragraph (b) above. The
Charterer and the Owner agree that 10 days' written notice of
the sale to be made by the Owner or its designee or after the
time in which a private sale shall occur is commercially
reasonable notice for all purposes.
In addition, the Charterer shall be liable for any and all
Supplemental Hire payable hereunder before, during or after the
exercise of any of the foregoing remedies and for all insurance
premiums and all demurrage, docking and anchorage charges and all
legal fees and any other costs and expenses whatsoever incurred by the
Owner or any Investor by reason of the occurrence of any Event of
Default or by reason of the exercise by the Owner of any right or
remedy hereunder, including, without limitation, any costs and
expenses incurred by the Owner in connection with any retaking of the
Vessel or, upon the redelivery or retaking of the Vessel in accordance
with this Section 3.4, the placing of the Vessel in the condition
required by and otherwise complying with the terms of Section 3.5
hereof. No right or remedy referred to in this Section 3.4 is
intended to be exclusive, but each shall be cumulative and is in
addition to, and may be exercised concurrently with, any other right
or remedy which is referred to in this Section 3.4 or which may
otherwise be available to the Owner at law, in equity or in admiralty,
including without limitation the right to terminate this Charter.
There shall be deducted from the aggregate amount so recoverable by
the Owner, the net balance, if any, remaining of any monies held by
the Owner which would have been required by the terms hereof to have
been paid to the Charterer but for the occurrence of an Event of
Default. The rights of the Owner and the obligations of the Charterer
under this Section 3.4 shall be effective and enforceable regardless
of the pendency of any proceeding which has or might have the effect
of preventing the Owner or the Charterer from complying with the terms
of this Charter. No express or implied waiver by the Owner of any
Event of Default shall in any way be, or be construed to be, a waiver
of any further or subsequent Event of Default. To the extent
permitted by applicable law, the Charterer hereby waives any rights
now or hereafter conferred by statute or otherwise which may require
the Owner to sell, charter or otherwise use the Vessel in mitigation
of the Owner's damages.
3.5 Redelivery of the Vessel
Upon termination of this Charter, the Charterer shall, at its sole
cost and expense not to exceed $2,500,000 as Escalated, redeliver the
Vessel to the Owner at an anchorage of the Owner's choice. The
Charterer shall notify the Owner in writing at least 360 days prior to
the expiration of the Charter Period of the location in which the
Vessel will be operating at the expiration of the Charter Period. The
Charterer agrees that at the time of such redelivery the Vessel shall
be free and clear of all Liens (other than Owner Liens), shall be
entitled to and shall have the classification and rating required by
Section 8.1, with no requirements, specifications or recommendations
of the American Bureau of Shipping or of any governmental agency or
department unfulfilled and with all required certificates in effect,
shall be in compliance with all laws, conventions, treaties and
customs and rules and regulations issued thereunder or applicable in
any way to the Vessel or any use or operation thereof, shall be free
of any insignia of the Charterer or others, shall be charter free,
cargo free, safely afloat, securely moored, free of charge and be in
the same good order and condition as described in the third sentence
of Section 3.2, but with the Upgrade Program completed and as required
by Section 8.1, ordinary wear and tear excepted; provided however,
that in the event that the Owner elects not to exercise its option to
purchase Severables acquired after the Delivery Date pursuant to
Section 9.4, the Charterer shall redeliver the Vessel to the Owner
with Severables comparable to the Severables aboard the Vessel when
the Vessel was delivered to the Charterer pursuant to Section 3.2.
Any Coast Guard certificates required to be issued annually with
respect to the Vessel shall have been issued within 12 months of the
date of redelivery of the Vessel. At the time and place of redelivery
of the Vessel, the Charterer shall also deliver to the Owner all
documentation, plans, drawings, specifications, logbooks,
classification and inspection, records, operating manuals, records of
modification, overhaul, use and/or maintenance and other warranties
and documents then in its possession or control which were furnished
by the manufacturers or builders of the Vessel or the Upgrade Program
or any supplier of equipment on the Vessel or otherwise maintained by
the Charterer. Upon redelivery of the Vessel hereunder, the
Charterer, if requested in writing by the Owner, will arrange for, at
the Charterer's cost and expense, docking or appropriate anchorage or
storage facilities for the Vessel for a period not exceeding 150 days,
including, but not limited to, any crew, staffing, materials, fuel or
other costs or expenses incurred to stack the Vessel with full marine
and maintenance crews.
3.6 Survey of the Vessel at End of Charter Period
At least 120 days before redelivery of the Vessel pursuant to Section
3.5, but sufficiently in advance of such redelivery date to permit any
needed repairs to be completed by such redelivery date, a joint survey
shall be made by the Charterer and the Owner (with drydocking or
underwater survey in lieu of drydocking and bottom painting, unless
the Owner shall otherwise agree in writing) to determine the condition
and fitness of the Vessel, during which survey the Vessel's tanks
shall be gas-freed and the Vessel's engines and boilers opened for
inspection; the redelivery survey shall meet all requirements of the
next special survey of the Vessel, provided that if a special survey
of the Vessel has been made, pursuant to the provisions of Article 8,
within 30 months prior to such redelivery, the records of such special
survey shall be taken into account in determining the scope of the
joint survey required pursuant to this Section 3.6. If requested by
the Owner, a surveyor from the American Bureau of Shipping shall be
present and the Charterer shall permit such surveyor to examine all
areas of hull and items of machinery and other parts of the Vessel.
The Charterer will pay for the costs of such survey, drydocking or
underwater survey in lieu of drydocking and bottom painting and the
Charterer shall notify the Owner at least 10 days in advance of the
time and place of such drydocking or underwater survey in lieu of
drydocking, bottom painting and survey. The Charterer, at its sole
cost and expense, will fully correct and repair any condition
disclosed by such survey to the extent necessary to cause the Vessel,
on or before the date specified for redelivery, to comply with all of
the terms of Section 8.1. The term of the Charter Period shall be
extended for any period necessary (a) so as to permit the survey
described in this Section 3.6 to occur at least 120 days before
redelivery of the Vessel pursuant to Section 3.5 whether as a result
of this Vessel's use in completing a Drilling Contract in progress
under Section 3.1(b) or otherwise; and (b) to make such repairs.
During such extension period, if any, all of the obligations of the
Charterer under this Charter applicable during the Charter Period
shall continue in respect of such extension period. Upon redelivery
of the Vessel under this or the preceding paragraph, the Charterer, if
requested in writing by the Owner, will provide docking or appropriate
anchorage or storage facilities for the Vessel (if available at the
designated port) for a period not exceeding 150 days at the
Charterer's cost and expense, including, but not limited to, any crew,
staffing, materials, fuels or other cost or expense to stack the
Vessel with full marine and maintenance crews.
3.7 Purchase Option.
No more than 540, but no less than 360 days prior to the Expiration
Date, the Charterer may, so long as no Default or Event of Default has
occurred and is continuing, give the Owner irrevocable written notice
(the "Expiration Date Election Notice") that the Charterer elects to
exercise its option to purchase the Vessel. If the Charterer elects
to exercise such option, then the Charterer shall pay to the Owner on
the Expiration Date an amount in immediately available funds equal to
the Purchase Option Price and, upon receipt of such amount plus all
other amounts payable under this Charter and the other Charter
Documents, the Owner shall transfer all of the Owner's right, title
and interest in the Vessel, such transfer shall be "AS IS," "WHERE
IS," without recourse and without any representation or warranty of
any kind or nature whatsoever, either express or implied (except for
the absence of Liens arising as a result of claims against the Owner
for which the Owner is not entitled to indemnification from the
Charterer or any Guarantor or the payment or discharge of which is not
the obligation of the Charterer or any Guarantor), in the Vessel's
then-current physical condition and without any other representation
or warranty on the part of, or recourse to, the Owner.
3.8 Determination of Purchase Option Price
During the period from the delivery of the Expiration Date Election
Notice to the Owner until 210 days prior to the Sale Date, the
Charterer and the Owner may mutually agree on the Fair Market Sale
Value of the Vessel as of the Sale Date, and if the Charterer and the
Owner fail to so agree, such Fair Market Sale Value shall be
determined not less than 90 days before the Sale Date by application
of the Appraisal Procedure.
ARTICLE 4
NATURE OF COMPENSATION
4.1 Absolute Obligation
The obligation of the Charterer to pay to the Owner the fees, rates,
hires, indemnities and reimbursements specified in this Charter shall
be absolute and unconditional and shall not be affected by any
circumstance whatsoever, and the Charterer waives (and agrees not to
allege or pursue) any right to any such defense, including without
limitation, (a) any setoff, counterclaim, abatement, reduction,
recoupment, defense, or other right that the Charterer may have
against the Owner or any other Person, firm, company, or entity for
any reason whatsoever; (b) any unavailability of the Vessel after its
delivery to the Charterer for any reason; (c) any damage, loss or
destruction of or damage to the Vessel or interruption, restriction,
interference, or cessation in the use or possession thereof by the
Charterer for any reason whatsoever, at whatever time and of whatever
duration; (d) any confiscation, expropriation, nationalization,
requisition, seizure, inability to export, deprivation, or other
taking of title to or possession or use of the Vessel or any part
thereof by any government or governmental authority or otherwise; (e)
any restriction on possession or use of the Vessel; (f) the
interference with or prohibition of the Charterer's possession or use
of the Vessel; (g) any invalidity or unenforceability or lack of due
authorization or other infirmity of this Charter or the lack of right,
power or authority of any Obligor or the Owner to enter into this
Charter or any Charter Document; (h) any default by the Owner; (i) any
defect in the title, condition, quality or fitness for a particular
purpose of the Vessel or other property or service provided hereunder;
(j) any amendment or modification of or supplement to the Charter
Documents, any agreements relating to any thereof or any other
instrument or agreement applicable to the Vessel or any part thereof,
or any assignment or transfer of any thereof, or any furnishing or
acceptance of additional security, or any release of any security, or
any failure or inability to perfect any security; (k) any failure on
the part of the Owner, the Owner Group or any Investor or any other
Person to perform or comply with any term of any instrument or
agreement; (l) any waiver, consent, change, extension, indulgence or
other action or inaction under or in respect of any such instrument or
agreement or any exercise or nonexercise of any right, remedy, power
or privilege under or in respect of any such instrument or agreement
or this Charter; (m) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation, or similar
proceeding with respect to any Obligor, the Owner, the Owner Group or
any Investor, or their respective properties or creditors, or any
action taken by any trustee or receiver or by any court in any such
proceeding, including, without limitation, any termination or
rejection of this Charter by any court or any trustee, receiver or
liquidating agent of any Obligor, the Owner Group, any Investor, or
the Owner or of any of their respective properties in connection with
any such proceeding; (n) any assignment or other transfer of this
Charter by the Charterer or the Owner or any lien, charge or
encumbrance on or affecting the Charterer's estate in, or any
subchartering of, all or any part of the Vessel; (o) any libel,
attachment, levy, detention, sequestration or taking into custody of
the Vessel, or any interruption or prevention of or restriction on or
interference with the use or possession of the Vessel; (p) any act,
omission or breach on the part of the Owner under this Charter or
under any other agreement at any time existing among the Owner or any
Obligor or under any other law, governmental regulation or other
agreement applicable to such Persons or the Vessel; (q) any claim as a
result of any other dealing between the Owner and any Obligor; (r) any
ineligibility of the Vessel, or any denial of the Vessel's right, to
engage in any trade or activity; (s) any failure to obtain any
required governmental consent for any transfer of rights or title
required to be made by the Owner under this Charter; (t) any
ineligibility of the Vessel for documentation under the laws of any
jurisdiction; (u) the recovery of any judgment against any Person or
any action to enforce the same; (v) any defect in the seaworthiness,
condition, design, operation or fitness for use or other
characteristics of the Vessel; (w) any change in the ownership, direct
or indirect, of the capital stock of the Owner or any of the Obligors;
or (x) any other cause, circumstance, or happening, whether similar or
dissimilar to the foregoing, any present or future law to the contrary
notwithstanding and whether or not any Obligor could have foreseen or
shall have notice or knowledge of any of the foregoing. Except as
specifically provided herein, the Charterer hereby waives any and all
rights that it may now have or which at any time hereafter may be
conferred upon it, by statute, at law, in admiralty or equity or
otherwise, to terminate, cancel, quit or surrender this Charter.
All payments hereunder shall be final and, once paid, be fully and
finally earned and nonrefundable, and the Charterer shall not seek to
recover all or any part of such payment from the Owner for any reason
whatsoever.
The Charterer shall remain obligated under this Charter in accordance
with its terms and shall not take any action to terminate, rescind or
avoid this Charter, notwithstanding any action for bankruptcy,
insolvency, reorganization, liquidation, dissolution, or other
proceeding affecting the Owner, any governmental authority or any
other Person, or any action with respect to this Charter or any
Charter Document which may be taken by any trustee, receiver or
liquidator of the Owner, any governmental authority or any other
Person or by any court with respect to the Owner or any governmental
authority. The Charterer hereby waives all right (i) to terminate or
surrender this Charter or (ii) to avail itself of any abatement,
suspension, deferment, reduction, setoff, counterclaim or defense with
respect to any amount payable hereunder. The Charterer shall remain
obligated under this Charter in accordance with its terms and the
Charterer hereby waives any and all rights now or hereafter conferred
by statute, at law, in admiralty or equity or otherwise to limit or
modify any of the Owner's rights or remedies or any of the Charterer's
rights, remedies, obligations or liabilities as described in this
Charter or any Charter Document (such waiver to include, without
limitation, any and all rights and remedies against a lessor under
Article 2A of the UCC or to avoid strict compliance with its
obligations under this Charter).
4.2 Net Charter
This Charter is a net Charter and it is intended that the Charterer
shall pay all costs, charges, fees, assessments, expenses, duties and
taxes of every character incurred in connection with the delivery,
storage, use, possession, operation, maintenance, repair, chartering,
recovery, retaking, and return of the Vessel, including without
limitation those described elsewhere in this Charter. The parties
intend that the obligations of the Charterer hereunder shall be
covenants and agreements that are separate and independent of the
Owner's obligations hereunder or hereafter arising or existing and
shall continue unaffected.
ARTICLE 5
UPGRADE PROGRAM
5.1 Scope of Upgrade; Title to Upgrade
The Owner recognizes and agrees that the Charterer has entered into
the Upgrade Contract to provide for the upgrade of the Vessel in
accordance with the terms thereof and the other plans, schedules, and
specifications for the Upgrade Program set forth on Schedule B. The
Charterer shall implement the Upgrade Program as agent on behalf of
the Owner, subject to the terms and conditions of this Article 5 and
the Upgrade Program. The Charterer and the Owner agree that (a) the
Charterer will, in accordance with Section 5.9, pay for that portion
of the Upgrade Program that constitutes Upgrade Maintenance and shall
in accordance with Section 5.9 pay for and be reimbursed for that
portion of the Upgrade Program that constitutes Upgrade
Nonserverables. and shall pay for, own and have title to, that portion
of the Upgrade Program that constitutes Upgrade Severables, in each
case, subject to the Owner's rights under Sections 5.2 and 9.4 and (b)
the Owner will, in accordance with Sections 5.6 and 5.9, pay for, own,
and have title to, that portion of the Upgrade Program that
constitutes Upgrade Nonseverables and such Upgrade Nonseverables shall
be chartered to the Charterer in accordance with the terms and subject
to the conditions and requirements hereof and subject to the
Charterer's rights under Section 3.7.
5.2 Assignment of Rights Under Upgrade Program
The Charterer hereby assigns, transfers and sets over unto the Owner
(a) all of the Charterer's right, title and interest in and to all
agreements, including, without limitation, the Upgrade Contract,
entered into prior to the Delivery Date with any shipyard, contractor,
manufacturer, supplier or vendor relating to the Upgrade Program,
including, without limitation, any and all plans, specifications,
diagrams, designs or similar matters relating thereto (collectively,
the "Upgrade Agreements") and (b) all claims for damages in respect of
the Vessel arising as a result of any default by any such shipyard,
contractor, manufacturer, supplier or vendor under any such Upgrade
Agreements, including, without limitation, all claims arising under
any warranty and indemnity provisions contained therein, as well as
all claims arising thereunder. The Charterer shall at its sole cost
and expense grant a lien to the Owner upon its rights in any property
acquired under the Upgrade Program as security for its obligations
hereunder pursuant to documentation in form and substance satisfactory
to the Owner.
5.3 Appointment of Upgrade Agent
The Owner hereby appoints the Charterer to act as the Owner's agent
for the implementation of the Upgrade Program in accordance with, and
subject to, the terms and conditions of this Article 5. If an Event
of Default or an Upgrade Default shall occur and be continuing, the
Owner may, by a written order, terminate such agency, direct the
Charterer to stop acting as such agent and, unless the Owner
determines otherwise, complete the Upgrade, without prejudice to any
other right or remedy the Owner may have against the Charterer or any
Person.
5.4 Upgrade Agent's Warranties
The Charterer acknowledges that the terms of the Upgrade Contract are
sufficient to have enabled it to determine the Upgrade Nonseverable
Cost, that the amount described in clause (i) of the definition of
Upgrade Nonseverable Cost is just and reasonable compensation for that
portion of the Upgrade that constitutes Upgrade Nonseverables, and
that the Upgrade Agreements are sufficient to enable the Contractor to
implement the Upgrade Program as described in Schedule B.
5.5 Upgrade Agent's Duties
Until the Charterer's agency is terminated pursuant to Section 5.3:
(a) The Charterer will administer the Upgrade Program as described
herein. The Charterer will be the Owner's representative until
final payment under the Upgrade Agreements is made.
(b) The Charterer will cause the Upgrade Program to be performed in
accordance with the plans, schedules and specifications of the
Upgrade Agreements and those described in Schedule B.
(c) The Charterer will visit the Shipyard at intervals appropriate
to the stage of construction to monitor the progress,
workmanship and quality of the Upgrade Program and to determine
whether the Upgrade Program is proceeding in accordance with the
terms of the Upgrade Agreements and the plans, specifications
and schedules set forth on Schedule B.
(d) The Charterer and the Owner will review and approve or take
other appropriate action upon the Contractor's submission of
shop drawings, product data and samples pursuant to the Upgrade
Contract, but only for conformance with the design concept of
the Upgrade Program and the information given in the Upgrade
Contract. The progress of the Upgrade Program shall not be
considered as having been delayed if such review occurs in a
timely fashion.
(e) The Charterer may make Change Orders to the extent provided in
Section 5.6.
(f) When the Charterer considers the Upgrade Program to be
substantially complete, it shall notify the Owner and the
Independent Engineer thereof and deliver to such Persons a list
of incomplete or unsatisfactory items with a schedule for their
completion. The Independent Engineer and/or the Owner will
conduct inspections to determine the accurateness and
completeness of the list and the projected date of Upgrade
Completion, and will receive and forward to the Owner for the
Owner's review written warranties and related documents required
by the Upgrade Contract and assembled by the Contractor.
(g) The Charterer may provide one or more representatives to assist,
at the Charterer's sole cost and expense, in carrying out the
Charterer's responsibilities at the Shipyard.
(h) The Charterer shall respond to all of the Contractor's requests
for interpretations of the plans and specifications, and other
inquiries regarding the Upgrade Program. The Charterer will
render in writing interpretations necessary for the proper
execution or progress of the Upgrade, within ten (10) business
days after receipt of the Contractor's requests and inquiries
and shall deliver a copy thereof to the Owner.
(i) The Charterer shall not enter into any Upgrade Agreement for the
supply of materials or services to the Vessel or Shipyard which
purports to grant a security interest or right of repossession
to any person or entity respecting the Upgrade or the Vessel or
Shipyard, or any portions thereof or chattels placed thereon.
5.6 Change Orders
(a) The Upgrade Contract, the Upgrade Program and the Upgrade
Nonseverable Cost may be changed only by Change Order. A Change
Order signed by the Owner shall indicate the Owner's agreement
therewith, including increases in the Upgrade Nonseverable Cost
in excess of $10,000,000.
(b) The Charterer may order or propose a Change Order within the
general scope of the Upgrade Program consisting of additions,
deletions or other revisions and the Upgrade Nonseverable Cost
shall be adjusted accordingly; provided, however, no Change
Order may increase the Upgrade Nonseverable Cost payable under
the Upgrade Agreements in respect of Upgrade Nonseverables in
excess of the aggregate amount of $10,000,000 without the prior
written approval of the Owner. The Charterer cannot authorize
payment for any extra work performed by the Contractor in
connection with the Upgrade Nonseverables unless such work is
expressly authorized in writing by the Charterer and, if
necessary, the Owner, and all other conditions contained herein
are fulfilled. All Change Orders shall be performed under the
applicable conditions of the Upgrade Agreements. The Charterer
shall deliver to the Owner and the Independent Engineer copies
of all Change Orders and amendments to the Upgrade Contract or
Upgrade Agreements.
(c) If the Charterer enters into a Change Order that allows the
Contractor to perform any such authorized extra work on an
actual cost plus basis, the Charterer shall require the
Contractor to furnish each week to the Charterer, duplicate
payroll sheets, material tickets, and a statement of slips for
all other charges, retaining a copy of each thereof, and
securing on each thereof the signature of the Charterer.
5.7 Independent Engineer
The Owner shall employ the Independent Engineer to advise the Owner
with respect to the design, workmanship and quality of the Upgrade
Program, the performance of work of the Charterer and the Contractor
under the Upgrade Program and this Charter, the review of Change
Orders, the delivery of the Reimbursement Certificate of Independent
Engineer and the Completion Certificate of Independent Engineer and
any other matters relating to the Vessel as the Owner may in its sole
discretion determine. The Charterer shall provide to the Independent
Engineer copies of all correspondence respecting the Upgrade Program
received from the Contractor or its subcontractors and shall permit
the Independent Engineer, the Owner and their representatives to have
access and inspect the Shipyard, the Vessel and the Charterer's
properties and to discuss its affairs, finances and accounts and other
matters respecting the Upgrade Program with any of the Charterer, the
Contractor or any of their respective employees, officers and other
representatives. The Charterer will cause the Independent Engineer to
have access to the Vessel at all times until the Upgrade Program is
complete.
5.8 Completion
The Upgrade Program shall be complete at the Upgrade Completion.
5.9 Payment
The Charterer shall pay directly to the Contractor all expenses of the
Upgrade Program and, upon fulfillment of the conditions set forth in
Section 5.10, the Owner shall reimburse the Charterer on each Upgrade
Payment Date in the maximum amounts and on the dates set forth below:
Date Amount
Delivery Date $2,500,000
March Payment Date $4,500,000
Upgrade Completion Date balance of Upgrade
Nonseverable Cost
5.10 Reimbursement Conditions
The Charterer shall have delivered to the Owner an appropriately
completed and duly executed Certificate for Reimbursement to which is
attached a bills paid affidavit and release of liens from the
Contractor and invoices, instruments and other documentation in form
and substance satisfactory to the Owner that the Charterer has paid
such costs and expenses under the Upgrade Agreements and, except on
the first Upgrade Payment Date, the Independent Engineer shall have
delivered to the Owner an appropriately completed and duly executed
Reimbursement Certificate of Independent Engineer.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of the Owner.
To induce the Charterer to enter into this Charter and to consummate
the transactions contemplated hereby, the Owner represents and
warrants to the Charterer that as of the date of execution of this
Charter:
(a) Organization and Good Standing. The Owner is a limited
liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(b) Title. The Owner has received whatever title to the Vessel that
was conveyed to the Owner pursuant to the MOA.
(c) Authority. The Owner has taken all action required by Delaware
law, and by the Limited Liability Company Agreement to authorize
the execution and delivery of this Charter. This Charter
constitutes the legal, valid and binding obligation of the
Owner, enforceable against the Owner in accordance with its
terms, subject to bankruptcy, insolvency or similar laws of
general application relating to the enforcement of creditors'
rights and by general principles of equity. Neither the
execution and delivery of this Charter nor, on the Commencement
Date, will the consummation of the transactions by it in
accordance with the terms hereof: (i) violate or conflict with
any provision of the Limited Liability Company Agreement of the
Owner, or (ii) violate or conflict with any provision of any
law, rule, regulation, order, permit, certificate, writ,
judgment, injunction, decree, determination, award or other
decision of any court, government, government agency or
instrumentality, domestic or foreign, or arbitrator binding upon
the Owner, which violation or conflict is reasonably likely to
prevent the Owner's performance of its obligations hereunder.
Neither the execution and delivery of this Charter nor the
consummation of the transactions contemplated hereby will result
in a breach of, or constitute a default (or with notice or lapse
of time or both result in a breach of or constitute a default)
under or otherwise give any person the right to terminate any
mortgage, indenture, loan or credit agreement, lease, license,
contract or any other agreement or instrument to which the Owner
is a party or by which it or any of its properties is bound or
affected.
(d) EXCEPT AS EXPRESSLY SET OUT IN THIS SECTION 6.1, OWNER EXPRESSLY
DISCLAIMS ANY EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES,
INCLUDING WITHOUT LIMITATION, SEAWORTHINESS, MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, OR WITH RESPECT TO PATENT
INFRINGEMENT, VALUE, USE, CONDITION, SUITABILITY, CLASS,
OPERATION, COMPLIANCE WITH LAWS, DESIGN, CONFORMANCE WITH
SPECIFICATIONS, OR ABSENCE OF DEFECTS, HIDDEN, PATENT, LATENT OR
OTHER.
6.2 Representations and Warranties of the Charterer.
To induce the Owner to enter into this Charter and to consummate the
transactions contemplated hereby, the Charterer represents and
warrants to the Owner that as of the date of execution of this
Charter:
(a) Organization and Good Standing. The Charterer is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Oklahoma and is duly qualified or licensed and
in good standing as a foreign corporation in each other
jurisdiction in which it owns or leases any facility or property or
has any office, or in which the character of its business or
operations requires such qualification or licensing, in each case
related to the subject matter of this Charter or any of the Charter
Documents.
(b) Authority. The Charterer has taken all action required by law, its
Certificate of Incorporation, as amended, and its By-Laws to
authorize the execution and delivery of this Charter and each of
the Charter Documents to which it is a party. This Charter and
each of the Charter Documents to which it is a party constitute the
legal, valid and binding obligations of the Charterer, enforceable
against the Charterer in accordance with their respective terms,
subject to bankruptcy, insolvency or similar laws of general
application relating to the enforcement of creditors' rights and by
general principles of equity. Neither the execution and delivery
of this Charter or any of the Charter Documents, nor on the
Delivery Date, will the consummation of the transactions by it in
accordance with the terms hereof or thereof: (i) violate or
conflict with any provision of its Certificate of Incorporation or
By-Laws, (ii) violate or conflict with any provision of any law,
rule, regulation, order, permit, certificate, writ, judgment,
injunction, decree, determination, award or other decision of any
court, government, government agency or instrumentality, domestic
or foreign, or arbitrator binding upon it, or (iii) create any
conflicts or resulting liens or require any consents that the
Charterer has not obtained.
Neither the execution and delivery of this Charter and each of the
Charter Documents to which it is a party nor the consummation of
the transactions contemplated hereby or thereby will result in a
breach of, or constitute a default (or with notice or lapse of time
or both result in a breach of or constitute a default) under or
otherwise give any person the right to terminate any mortgage,
indenture, loan or credit agreement, lease, license, contract or
any agreement or instrument to which the Charterer is a party or by
which it or any of its properties is bound or affected.
(c) Litigation. There is no action, suit, proceeding, claim or
investigation pending or, to the best of the Charterer's knowledge
after due and reasonable inquiry, threatened against or affecting
the Charterer or any of its properties or related to the subject
matter of this Charter or any of the Charter Documents before any
court, government agency or regulatory authority (federal, state,
local or foreign) that questions the validity or enforceability of
this Charter or any Charter Document or is reasonably likely to
impair its ability to perform its obligations under this Charter or
any of the Charter Documents or to cause a material adverse effect
on the business, financial condition or prospects of the Charterer.
There are no orders, writs, judgments, stipulations, injunctions,
decrees, determinations, awards or other decisions of any court,
government or governmental agency or instrumentality, domestic or
foreign, or any arbitrator outstanding against the Charterer having
or likely to have any such effect.
(d) No Defaults. No event or condition has occurred and is continuing
that constitutes, or with the lapse of time or the giving of notice
or both, would constitute, an Event of Default by the Charterer or
any other Member of the Charterer Group, as the case may be, under
this Charter or any of the Charter Documents or a default or by the
Charterer or any other Member of the Charterer Group under any
indenture, trust, deed, loan agreement, lease other instrument or
contract, agreement, instrument or obligation (i) under which any
such Person pays, receives, borrows, lends, or is obligated or
entitled to pay, receive, borrow or lend, consideration in excess
of $1,000,000 to which it is a party or by which it is bound or
affected, or (ii) which is reasonably likely to have a material
adverse effect on the business, financial condition or prospects of
the Charterer or its ability to perform its obligations under the
Charter.
(e) Obligations and Liens. Except as disclosed in writing to, and
specifically consented to in writing by, the Owner, the Charterer
has no outstanding obligations, or Liens on its properties, for
unpaid Taxes other than Taxes incurred in the ordinary course of
business, and in existence for not more than 30 days and which are
not overdue unless such Taxes are, in the Owner's reasonable
judgment, being contested in good faith and by appropriate Persons
and proceedings.
(f) Government Regulations. The Charterer is not in violation of and
is not alleged to be in violation of any law, rule, regulation,
order, permit, certificate, writ, judgment, stipulation, injunction
decree, determination, award or decision of any court, government,
or governmental agency or instrumentality, domestic or foreign, or
arbitrator binding upon it, which violation or alleged violation is
reasonably likely to have a material adverse effect on the business,
financial condition or prospects of the Charterer or its ability to
perform its obligations under this Charter or any of the Charter
Documents.
(g) No Labor Unrest. There are no strikes or other significant labor
disputes in progress or pending or, to the best of the Charterer's
knowledge after due and reasonable inquiry, threatened against or
affecting the Charterer.
(h) Pollution Regulations. Neither the Charterer nor any member of the
Charterer Group is the subject of any actual or threatened
environmental, health or safety investigation or enforcement
proceeding related to its operations or business or the subject
matter of this Charter or any of the Charter Documents. To the
best of the Charterer's knowledge after due and reasonable inquiry,
the Charterer is in compliance with all applicable laws and
regulations relating to pollution control and environmental, health
and safety matters in all jurisdictions in which the Charterer is
doing business.
(i) Providing of Information. All information that the Charterer at any
time furnishes the Owner for use in any statement, application or
other filing provided for in this Charter or any of the Charter
Documents, does or shall (as the case may be) meet all
requirements of applicable laws, rules and regulations and does
not or shall not (as the case may be) as of the date prepared or
delivered to the Owner contain any statement which is false or
misleading with respect to any material fact and does not or shall
not (as the case may be) as of the date prepared or delivered to
the Owner omit any material fact required to be stated therein or
necessary in order to make such information not false or misleading
for the purpose for which such information was furnished and no
correction of any information or omission that is no longer true
and correct in all material respects that has not been made need be
made or updated in order to make such information, taken as a
whole, not false or misleading in any material respect. For
purposes of this Section 6.2(i), "information" includes, without
limitation, all information contained in the data sheets,
projections, pro forma sources and uses, the Drilling Contracts,
the "M.G. Hulme, Jr." 1,000 Meter Water Depth Upgrade Shipyard
Specification, Rev. 5, dated October 21, 1995 by D.N. Edelson,
Project Engineer, the Enserch-Green Canyon Analysis, dated
September 11, 1995 and the Reading & Bates Corporation/GATX Due
Diligence Confidential Binder, dated July 20, 1995, in each case as
provided to the Investors prior to the date hereof.
Each audited income statement, balance sheet and statement of
operation and cash flows dated as of December 31, 1994 and for the
fiscal year then ended and the unaudited income statement, balance
sheet and statement of operation and cash flows dated as of
September 30, 1995 and for the nine months then ended were prepared
in accordance with generally accepted accounting principles,
consistently applied, are true, complete and correct, and fairly
present the financial condition, the results of operations and
cash flows for Reading & Bates and its consolidated subsidiaries,
including the Charterer, for the dates and periods stated; and
there is no outstanding Debt, lien or liability, whether direct or
contingent, that is material to the Charterer and not shown in such
financial statements.
(j) Insurance. The Charterer maintains insurance listed on Schedule
C and other insurance in a manner consistent with persons engaged
in the same or similar business and in compliance with this Charter.
(k) Certain Federal Laws and Requirements.
(i) The Charterer and its affiliates are exempt from the
Public Utility Holding Company Act of 1935.
(ii) None of the Charterer and its subsidiaries, whether
separately or together, is an investment company
under the Investment Company Act of 1940.
(iii) Except as expressly identified in this Charter,
neither the Charterer nor any affiliate of the
Charterer, as that term is defined in the Employee
Retirement Income Security Act of 1974, as amended,
and the rules and regulations thereunder ("ERISA"),
has any material unfunded ERISA liabilities.
(l) Permits and Authorizations. The Charterer has obtained all
governmental permits, authorizations, certificates and
approvals and given or made all notices and filings required
under applicable law for the execution, delivery and
performance of this Charter and the other Charter Documents and
its possession, use and operation of the Vessel. Without
limiting the generality of the foregoing, and more
specifically, the Charterer has and maintains all
environmental, health and safety permits necessary or
appropriate for its operations and all such permits are in good
standing and the Charterer is in compliance with all terms and
conditions of such permits and all applicable environmental,
health or safety requirements of law.
ARTICLE 7
USE AND OPERATION OF THE VESSEL
7.1 Use of the Vessel
The Charterer shall have the full use of the Vessel and may, subject to
the terms and conditions of this Charter, employ the Vessel as a
semisubmersible drilling unit throughout the world consistent with its
design capability, except that the Vessel shall not be used contrary to
and shall comply with (a) all applicable laws or regulations of any
governmental authority, treaties or conventions (including, but not
limited to, all environmental, health and safety laws) and (b) the terms
or policies of any insurance then required hereunder; and provided that,
with respect to the use or possession of the Vessel outside of the
territorial waters and/or the Outer Continental Shelf of the United
States, the Charterer shall give such indemnities suitable to the Owner
in an amount and form, and obtain and continue such additional insurance
coverage, in such amounts, having such terms and conditions and with such
carriers, as the Owner may reasonably require at any time or from time to
time in connection with the use or possession of the Vessel in any given
area outside the territorial waters and/or the Outer Continental Shelf of
the United States. The Charterer, in respect of the Vessel, shall at all
times comply with all applicable laws and regulations (including, but not
limited to, all environmental, health and safety laws), and with the
applicable provisions and conditions of all licenses, permits, consents
and approvals of any governmental authority.
7.2 Manning, etc., of the Vessel
During the Charter Period, the Charterer shall have the exclusive
possession and control of the Vessel and shall man, victual, navigate and
operate, supply, fuel, maintain and repair the Vessel at its own expense
or by its own measurement and shall pay all other charges and expenses of
every kind and nature whatsoever incidental to the possession, use and
operation of the Vessel. During the Charter Period, the possession, use,
operation and maintenance of the Vessel shall be at the sole risk, cost
and expense of the Charterer until redelivery pursuant to the terms
hereof upon the termination or expiration of this Charter. As between
the Owner and the Charterer, the Offshore Installation Manager, officers
and crew of the Vessel and all other persons at any time on board the
Vessel shall be deemed to be engaged and employed exclusively by the
Charterer and shall be deemed to be and remain the Charterer's servants,
navigating and working the Vessel solely on behalf of and at the risk of
the Charterer and the Charterer shall hold each Indemnitee harmless from
any and all claims against it by, or as the result of any act or omission
of, any such Offshore Installation Manager, officer, member of the crew
or other person. The Charterer assumes and shall satisfy all costs and
liabilities incurred in connection with all salvage services received by
the Vessel.
7.3 Documentation of the Vessel
At or before the time of delivery of the Vessel to the Charterer
hereunder on the Delivery Date, the Charterer shall cause the Vessel to
be documented for foreign trade in the name of the Owner at the
Charterer's sole cost and expense under the laws and the flag of the
United States of America. Neither the Owner nor the Charterer (without
the prior written consent of the other) will do or suffer or permit to be
done anything which can or might change or injuriously affect the
documentation of the Vessel for foreign trade under the laws and flag of
the United States of America. The Charterer covenants and agrees that it
will not (a) cause or permit the Vessel to be operated in any manner
which could subject the Owner to any criminal penalty, or (b) operate or
locate the Vessel, or permit the Vessel to be operated or located, in any
area excluded from coverage from any insurance required by the provisions
of Article 15 or (c) unless there shall have been an actual or total loss
or agreed or compromised total loss of the Vessel, abandon the Vessel in
any foreign port. The Owner and the Charterer hereby respectively
represent that they are as of the date of execution of this Charter, and
covenant that they shall remain during the Charter Period, "citizens of
the United States" within the meaning of Section 2 of the Shipping Act,
1916, as amended. The Charterer agrees that the Vessel will be operated
solely in the domestic or foreign commerce of the United States. The
Charterer shall throughout the Charter Period maintain to the
satisfaction of the Owner at the Charterer's sole cost and expense such
documentation of the Vessel, and shall not do or suffer or permit to be
done anything which can or might change or injuriously affect the
documentation of the Vessel for foreign trade under the laws and the flag
of the United States or which would result in a violation of any law or
regulation of the United States applicable to a vessel owned by a citizen
of the United States, as defined in the Shipping Act, 1916.
7.4 General and Particular Average
Whenever necessary, average adjusters shall be appointed by the
Charterer, who shall, at the Charterer's sole cost and expense, attend to
the settlement and collection of both general and particular average
losses.
7.5 Site and Access
The Charterer will be responsible for selecting and mooring the Vessel in
a safe and prudent manner at a location in the Operating Area. The
Charterer will conduct sea bottom condition surveys acceptable to the
Owner where required by the Vessel's hull underwater surveyor at the
Charterer's sole cost and expense and will be responsible for
identifying, marking and clearing the location of all major impediments
or hazards to operations or causing same to be done. Removal of all
impediments or hazards shall be, as between Owner and the Charterer, at
the Charterer's sole cost and expense.
7.6 Owner Liability for Materials Furnished by the Charterer
Without limiting any indemnity provided by the Charterer, the Owner shall
not be liable for any loss or damage resulting from the use or possession
of equipment, materials, supplies or other items furnished by the
Charterer.
7.7 Environmental and Related Reporting and Inspection
The Charterer shall notify the Owner in writing within five days of the
Charterer's obtaining notice or knowledge thereof of any (a) notice of
claim that there has been a release or threatened release of any
contaminant into the environment from the Vessel or any equipment,
machinery or property related thereto; (b) notice of any investigation by
any governmental authority evaluating whether any remedial action is
necessary or appropriate to respond to any release or threatened release
of any contaminant into the environment from the Vessel or any equipment,
machinery or property related thereto; (c) notice that the Vessel or any
equipment, machinery or property related thereto is subject to an
environmental Lien; (d) the commencement or threat of any judicial,
administrative or other proceeding alleging a violation of any
environmental, health or safety requirements of law; or (e) any new or
proposed changes to any existing environmental, health or safety
requirement of law that could have a material adverse effect upon the use
or operations of the Vessel or the Charterer. The Charterer shall
provide from time to time documentation deemed adequate by the Owner
showing the Charterer's compliance with financial responsibility
requirements of all applicable environmental, health and safety laws.
7.8 Notice of Entry
The Charterer will provide written notice within ten (10) days of entry
of the Vessel into the jurisdictional waters of any foreign country or of
any state or territory of the United States other than Louisiana, Texas
and any other state in which the Owner has filed financing statements or
taken other action to perfect its Lien upon the equipment owned by the
Charterer and its Affiliates and used in connection with the Vessel.
ARTICLE 8
MAINTENANCE OF CONDITION AND CLASSIFICATION; REPAIRS
8.1 Maintenance of Classification
The Charterer shall at all times and, at its sole cost and expense,
procurement and risk (a) have exclusive control of the Vessel, (b)
maintain and preserve the Vessel in accordance with good commercial
maintenance practices, and keep the Vessel and her drilling and other
equipment in good running order, condition and repair, so that the Vessel
shall be tight, staunch, strong and well and sufficiently tackled,
appareled, furnished, equipped and in every respect seaworthy and in good
operating condition, and (to the extent that such prescribes a standard
of maintenance that exceeds the foregoing standard in any respect) in the
condition, running order and repair which equals or exceeds industry
standards and the condition, running order and repair of vessels and
their equipment owned by the Charterer of like kind and age, and, in
addition, shall
(i) cause the Vessel to be a semi-submersible drilling unit capable of
operating in water depths of up to 850 meters, before completion of
the Upgrade Program and 1,000 meters after completion of the
Upgrade Program and to have technical specifications,
characteristics and capabilities at least the substantial
equivalent of those set forth in Schedule A hereto and after
completion of the Upgrade Program as set forth in Schedule B; and
(ii) keep the Vessel in such condition as will entitle her, during the
Charter Period and at the date of redelivery to the Owner, to the
highest applicable classification and rating to which an existing
vessel of the same age and type can qualify under the then existing
rules and standards of the American Bureau of Shipping and shall
furnish to the Owner within 90 days after each anniversary of the
Delivery Date and at any other time upon the request of the Owner
true and correct photostatic copies of all certificates issued by
the American Bureau of Shipping evidencing the maintenance of such
classification.
(iii) The Vessel shall, and the Charterer covenants that it will, at all
times comply with all applicable safety, operational and
maintenance requirements of the United States Coast Guard and any
other United States, international or other authority and all laws,
treaties and conventions, and rules and regulations (including, but
not limited to, all environmental, health and safety laws) issued
thereby or applicable in any way to the Vessel or any use,
possession or operation thereof and shall have on board, when
required thereby, valid certificates and appropriate environmental,
health and safety permits showing compliance therewith. The
Charterer shall, at its expense, make all modifications and
alterations to the Vessel which may be necessary to comply with the
provisions of this Section 8.1.
8.2 Repair
The Vessel shall be repaired and overhauled by the Charterer and the
Charterer shall install, affix and attach replacement parts thereon, at
its sole cost and expense, in each case, whenever necessary to keep the
same in good condition, repair and working order in accordance with
Section 8.1 or as a result of any requirement hereof. The Vessel shall
likewise be drydocked or undergo an underwater survey in lieu of
drydocking, cleaned and bottom painted by the Charterer, at its expense,
whenever necessary, but in any event at least as often as necessary in
order to maintain the classification referred to in Section 8.1. The
Charterer shall, at its expense, promptly and duly comply with all
requirements of the applicable classification society including those
resulting from each special survey of the Vessel. The Charterer shall,
at its expense, promptly furnish the Owner with written information as to
any casualty involving any loss or damage to the Vessel in excess of
$500,000 and, upon request, all survey reports in connection therewith.
8.3 Drydocking or Underwater Survey in Lieu of Drydocking
The Charterer shall give the Owner notice of each proposed drydocking or
underwater survey in lieu of drydocking 20 days in advance if
practicable, otherwise as long in advance as may be practicable under the
circumstances. The Owner, any Investor or any authorized representative
of any thereof may at any time, upon reasonable notice at its own expense
(but after the occurrence of an Event of Default, at the Charterer's sole
cost and expense), inspect the Vessel at drydocking or underwater survey
in lieu of drydocking or otherwise, at any time or from time to time, and
inspect the Vessel's logs, but neither the Owner nor any Investor shall
have any duty to do so.
8.4 Required Survey
At the request of the Owner following any explosion, release accident,
storm, act of God or other event or incident that gives the Owner
reasonable concern for the physical condition and operating ability of
the Vessel and at the Charterer's expense, a qualified independent marine
surveyor or surveyors of recognized standing, acceptable to the Owner,
shall conduct a survey of the Vessel. For purpose of such surveys, the
Vessel need not be drydocked (or subjected to an underwater survey in
lieu of drydocking) unless required by customary survey practices for
drilling vessels of similar age, type and service. The Charterer shall
submit a detailed report of the independent marine surveyor to the Owner
promptly upon the completion of such survey, containing:
(a) the location of the Vessel at the time of inspection;
(b) the findings and recommendations of the independent marine surveyor
with respect to the condition of the Vessel; and
(c) the opinion of the independent marine surveyor as to whether the
Vessel has been maintained in accordance with the terms of this
Article 8.
ARTICLE 9
EQUIPMENT AND STORES
9.1 Fuel, etc.
The Owner acknowledges that such fuel, lubricating oil and unbroached
consumable stores as may be aboard the Vessel at the time of its delivery
to the Charterer will be the property of the Charterer.
9.2 Equipment, etc.
The Charterer shall have the use, without additional payment to the
Owner, of such equipment, outfit, furniture, furnishings, appliances,
spare or replacement parts and nonconsumable stores as shall have been on
board the Vessel on the Delivery Date. The same or their substantial
equivalent shall be returned to the Owner on redelivery or retaking of
the Vessel in the same good order and condition as received by the
Charterer on the Delivery Date, ordinary wear and tear excepted, and any
such items damaged or so worn in service as to be unfit for use, or used
as a spare part for replacement purposes, or lost or destroyed shall be
replaced by the Charterer with an identical or substantially equivalent
replacement item in at least as good working order and condition as those
of the replaced item when received by the Charterer on the Delivery Date
at or before redelivery of the Vessel. Such replacement, whenever made,
shall be deemed part of the "Vessel" for all purposes of, and its use or
possession shall be subject to the terms and conditions of, this Charter.
9.3 The Charterer's Additional Equipment, etc.
The Charterer shall at its own expense provide such additional equipment,
outfit, tools, replacement parts, crockery, linen, and other items not
included in inventories as provided in this Article 9 as may be required
in the operation of the Vessel, and such equipment, and other items,
shall become, on being placed on board the Vessel and without further
act, part of the Vessel and the property of the Owner for all purposes of
this Charter, provided that so long as no Default or Event of Default
shall have occurred and be continuing, any such equipment and other
items, so provided by the Charterer (and not required to be provided or
to have been provided by Section 9.2 or any other provision of this
Charter other than this Section 9.3) and capable of being removed without
causing damage to the Vessel may be removed by the Charterer at the
expiration of the Charter Period, and such equipment, and other items,
shall become, without further act, the property of the Charterer. At
least 90 days prior to delivery or retaking of the Vessel (or such lesser
time as may be available in connection with any retaking), the Charterer
shall give notice to the Owner of any such equipment or other items
leased from third parties, which the Charterer has elected not to remove,
and will furnish the Owner with copies of all leases and contracts
relating thereto, and the Owner may, within 30 days thereafter (or such
lesser time as may be applicable in connection with any retaking), elect
to retain all or any part of such equipment on board the Vessel subject
to any required approval of the lessors of such equipment. Upon
redelivery or retaking the Owner shall assume the rights, obligations and
liabilities of the lessee under such leases arising subsequent to
delivery or retaking in connection with any equipment that the Owner
elects to so retain. The Charterer shall at its sole cost and expense
remove from the Vessel any such leased equipment which the Owner does not
so elect to retain and shall cause to be repaired at its sole cost and
expense any damage to the Vessel or any part or property thereof
resulting in any manner from the Charterer's removal of any equipment.
By its acceptance of the Vessel upon delivery, the Charterer represents
and warrants to the Owner that there is on board the Vessel an inventory
of equipment, outfit, appliances, tools, replacement parts, nonconsumable
stores, crockery, linen, and other items, as in the reasonable judgment
and experience of the Charterer are necessary or appropriate to the
possession, use and operation of the Vessel and the Charterer hereby
covenants that, subject to Section 9.3, upon redelivery or retaking of
the Vessel by the Owner, such inventory, which may include replacement
items of equivalent value, shall be on board the Vessel.
9.4 Title to Improvements; Option to Purchase
Title to Nonseverables of the Vessel acquired after the Delivery Date
shall without further act vest in the Owner and shall be deemed to
constitute a part of the Vessel and be subject to this Charter. Title to
all Severables of the Vessel acquired after the Delivery Date (other than
Severables that replace or substitute for Severables that have been
provided by the Owner, the title to which shall vest in the Owner) shall
vest in the Charterer; provided, however, that the Charterer may not
remove any thereof from the Vessel (except to the extent subsequently
replaced or worn out) prior to the end of the Charter Period except that
the Charterer may, so long as no Default or Event of Default shall have
occurred and be continuing, remove at the Charterer's expense and risk
any such Severables, provided, further, that the Owner may elect to
purchase for cash any such Severables at the time of redelivery of the
Vessel to the Owner in accordance with any of the provisions of this
Charter. Contemporaneously with its delivery of the Expiration Date
Election Notice, the Charterer shall notify the Owner of the Severables
described above that it intends to remove. To exercise the election
referred to in the second proviso to the second preceding sentence of
this Section 9.4, the Owner shall give to the Charterer written notice of
its election to purchase on or prior to such redelivery. The purchase
price of such Severables shall be equal to the Fair Market Sale Value
thereof, as of the date of purchase as determined by mutual agreement or,
in the absence of such agreement, by the Appraisal Procedure. The
Charterer shall repair any damage caused by the removal of any Severables
to the Owner's reasonable satisfaction.
9.5 No Lease of Essential Severables
The Charterer shall not lease any Severables that are necessary or
appropriate for the use, possession or operation of the Vessel in
accordance with the terms and conditions of this Charter and the Charter
Documents but shall hold good and marketable title to all such Severables
that are, in accordance with industry practice, customarily owned by
drilling contractors engaged in businesses similar to the Charterer's
business, free and clear of all Liens other than Permitted Liens.
ARTICLE 10
THE CHARTERER'S CHANGES, ADDITIONS AND REPLACEMENTS
10.1 Structural Changes or Alterations; Installation of Equipment, etc.
Except as may be required by Article 8 or 9 or the Upgrade Program, the
Charterer shall not make any structural changes or alterations in the
Vessel, or any change, alteration, addition or improvement to the Vessel
that is Nonseverable (except for changes, alterations, additions or
improvements required to be made pursuant to applicable law), and shall
make no material changes or alterations in the Vessel's machinery or
boilers, unless and to the extent that, in each instance, (a) it first
secures written approval of the Owner (which may be withheld in the
Owner's sole discretion if such change or alteration would materially
change the type or character of the Vessel or would adversely affect
Owner's status as a lessor for federal income tax purposes, but otherwise
such approval shall not be unreasonably withheld) and (b) any such change
or alteration is made at the Charterer's expense and risk and does not
diminish the value, utility, useful life or seaworthiness of the Vessel
below the value, utility, useful life and seaworthiness of the Vessel
immediately prior to such change if the Vessel were then in the condition
and state of seaworthiness required to be maintained by the terms of this
Charter. Subject to the foregoing provision, the Charterer may install
any pumps, gear or equipment it may require in addition to that on board
the Vessel on delivery, provided that such installations are accomplished
at the Charterer's sole cost, expense and risk. Pumps, gear and
equipment so installed shall, without necessity of further act, become
part of the Vessel and the property of the Owner; provided that so long
as no Default or Event of Default shall have occurred and be continuing,
any such pumps, gear or equipment not required to be installed in order
to meet the requirements of Articles 8 and 9 and not installed as
replacements for property included in the Vessel on the date hereof are
subject to the Owner's option to purchase set forth in Section 9.4, and,
if not purchased by the Owner, may be removed (so long as such removal
can be accomplished without damage to the Vessel) by the Charterer, at
its own expense and risk, at any time during, or at the expiration of,
the Charter Period, whereupon such pumps, gear or equipment shall,
without necessity of further act, become the property of the Charterer.
10.2 Replacement of Parts
In addition to the permitted structural changes or alterations and the
addition of pumps, gear and equipment referred to in Section 10.1, the
Charterer may, in the ordinary course of maintenance, repair or overhaul
of the Vessel, remove any item of property (including any item referred
to in Section 9.2 or 9.3 constituting a part of the Vessel), provided
such item is replaced as promptly as possible by an item of property
which is free and clear of all Liens and is in as good operating
condition, working order and repair, and is as seaworthy as, and has a
value, useful life and utility at least equal to that of, the item of
property being replaced (including each item of equipment) and assuming
the Vessel is in the working order, condition and repair and state of
seaworthiness required by the terms of this Charter. Any item of
property so removed from the Vessel shall remain the property of the
Owner until replaced in accordance with the terms of the preceding
sentence, but shall then, without further act, become the property of the
Charterer but shall remain subject to the Owner's option to purchase set
forth in Section 9.4. Any such replacement item of property shall,
without further act, become the property of the Owner, deemed part of the
"Vessel" as defined herein for all purposes, and its use and possession
shall be subject to the terms and conditions hereof.
10.3 Vessel Markings
The Charterer shall not allow the name of any person, association or
corporation, other than as required hereby, to be placed on the Vessel
(other than the current name of "M. G. Hulme, Jr.") as a designation
which might be interpreted as indicating a claim of ownership thereof by
any person, association or corporation other than the Owner, but, for
purposes of identification, the Charterer shall have the right at its
sole cost and expense to paint the Vessel in its own colors, to install
and display its stack insignia or name, and to fly its own house flag, or
to utilize the colors, insignia, name or flag of any Affiliate of the
Charterer. The Charterer shall notify the Owner of each such choice of
colors, name, insignia or flag before making any such change.
ARTICLE 11
ADDITIONAL COVENANTS
11.1 General Covenants
From and after the date of execution of this Charter and until the
termination or expiration of this Charter, the Charterer shall:
(a) continue its business as presently conducted and maintain its
existence, rights and privileges;
(b) comply with its obligations set forth in this Charter and all
applicable laws (including, without limitation, all environmental,
health and safety laws); and
(c) maintain its books and records in compliance with generally
accepted accounting principles, consistently applied with such
adjustments or changes as to which the independent public
accountants referred to in Section 11.3 concur.
11.2 No Impairment
Notwithstanding any other contract or other claim of right, from and
after the date of execution of this Charter and until the termination or
expiration of this Charter, the Charterer Group shall not enter any
contract or agreement or perform or omit any act that in any way
materially limits or impairs, or the effect of which would be to
materially limit or impair, the ability of any member of the Charterer
Group to comply with and fulfill its obligations set forth in the Charter
Documents.
11.3 Financial Information
The Charterer will furnish, or cause to be furnished, to the Owner and
each Investor:
(a) within 45 days after the end of each of the first three fiscal
quarters during each fiscal year of Reading & Bates, a consolidated
balance sheet of Reading & Bates and its consolidated Subsidiaries
as of the close of each such fiscal quarter, together with a
consolidated income statement and consolidated statement of cash
flows of Reading & Bates and such Subsidiaries for such fiscal
quarter, in each case setting forth in comparative form the
corresponding consolidated figures for the same period of the next
preceding fiscal year, all in reasonable detail and certified by
the chief financial officer of Reading & Bates as being true,
complete and correct and as fairly presenting the financial
condition and the results of operations of the respective
corporations covered thereby, subject to year-end adjustments;
(b) within 90 days after the close of each fiscal year of Reading &
Bates, (i) audited consolidated balance sheets of Reading & Bates
and its consolidated Subsidiaries as of the close of such fiscal
year, together with consolidated profit and loss statements and
consolidated statements of cash flows of Reading & Bates and such
Subsidiaries for such fiscal year, certified as being true,
complete and correct by Arthur Andersen & Co. or independent public
accountants of comparable national standing and reputation as
fairly presenting the consolidated financial position, results of
operations and cash flow of Reading & Bates and such Subsidiaries
as of the end of such fiscal year and the consolidated results of
their operations for such fiscal year, and as fairly presenting in
all material respects in conformity with generally accepted
accounting principles applied on a basis consistent with prior
fiscal years with such adjustments or changes as to which such
independent public accountants concur; and (ii) an update of the
Contract Data Sheet previously submitted to the Investors
(including, but not limited to, rig and contract status and updated
annual budget) true, complete and correct and fairly presenting the
information contained therein as of the date and of its submission
to the Owner and the Investors);
(c) within 30 days after the filing thereof with the Securities and
Exchange Commission, a copy of each report, form or prospectus
filed by Reading & Bates or any of its Subsidiaries with the
Securities and Exchange Commission, within three days of the
issuance of any press release or similar materials issued by
Reading & Bates or any of its Subsidiaries; and
(d) such other financial or other information relating to the affairs
of Reading & Bates and its consolidated Subsidiaries as the Owner
or any Investor may from time to time reasonably request.
11.4 Compliance Certificates
The Charterer shall furnish or cause to be furnished, to the Owner and
the Investors:
(a) within 45 days after the end of the first, second and third
quarterly accounting period in each fiscal year of Reading & Bates,
and within 90 days after the end of each fiscal year of Reading &
Bates, a certificate of the Chairman, the President or a Vice
President and the Chief Financial Officer of Reading &
Bates stating that the Charterer and each Guarantor has performed
and complied with all the terms and provisions of this Charter or
the Guaranty and/or the other Charter Documents, as the case may
be, or, if there shall have been an Event of Default hereunder or
if any Guarantor shall be in default under the Guaranty, specifying
all such defaults and the nature thereof of which the signer of
such certificate may have notice or knowledge;
(b) within 90 days after the end of each fiscal year of Reading &
Bates, a certificate of the independent public accountants
reporting on the financial statements for such year (i) stating
that their examination in connection with such financial statements
has been made in accordance with generally accepted auditing
standards and has included a review of the relevant terms of the
Guaranty, the Charter and the other Charter Documents, (ii) stating
whether or not such examination has disclosed the existence, during
or at the end of such year, of any default by the Charterer or any
Guarantor in the observance of any of the terms of the Guaranty,
this Charter or the other Charter Documents, insofar as they relate
to accounting matters, and, if such examination has disclosed any
such default, specifying all such defaults and the nature thereof
(it being understood that such accountants shall not be liable for
any failure to obtain knowledge of any such default which would not
be disclosed in the course of such examination), and (iii) stating
that they have reviewed the certificate of the officers of
Reading & Bates, delivered with respect to such year pursuant to
paragraph (a) of this Section 11.4, and confirming the matters set
forth in such certificate;
(c) promptly after Reading & Bates' receipt thereof, any audit
management letter or similar document submitted after the date
hereof by independent accountants in connection with each annual or
interim audit made by such accountants with respect to the
financial condition or affairs of Readings and Bates or any
Guarantor; and
(d) as promptly as practicable (but in any event not later than 15
days) after any officer of the Charterer or any Guarantor obtains
notice or knowledge of the occurrence of any default (which has not
been remedied or waived) in the performance or observance of any of
the terms or provisions of the Guaranty or any of the other Charter
Documents or any Event of Default under the Charter, a certificate
of either the Chairman, the President or a Vice President and the
Chief Financial Officer of the Charterer or Guarantor (as the case
may be) describing the default or Event of Default and stating the
date of commencement thereof, what action the Charterer proposes to
take with respect thereto and the estimated date when it will be
remedied.
11.5 Further Assurances, etc.
The Charterer shall, at its sole cost and expense, promptly and duly
execute, acknowledge and deliver to the Owner such further documents,
instruments, financing and similar statements and assurances and take
such further action as the Owner may from time to time reasonably request
in order more effectively to carry out the intent and purpose of this
Charter or the Charter Documents, to establish and protect the rights and
remedies created or intended to be created in favor of the Owner
hereunder or under the Charter Documents, and to protect the title of the
Owner in and to the Vessel. The Charterer shall also promptly furnish to
the Owner such information as may be required to enable the Owner timely
to file any reports required to be filed by it as the owner under the
Charter or as the owner of the Vessel with any governmental authority.
11.6 Maintenance of Corporate Existence, etc.
The Charterer shall at all times maintain its corporate existence except
as permitted by Section 11.7 and will do or cause to be done all things
necessary to preserve and keep in full force and effect its rights
(charter and statutory) and franchises; provided that (a) it shall not be
required to preserve any right or franchise if its Board of Directors
shall determine that the preservation thereof is no longer desirable in
the conduct of its business and (b) the loss thereof does not materially
adversely affect or diminish the rights of the Owner or any Investor.
11.7 Conditions of Consolidation, Merger, etc.
The Charterer shall not consolidate with or merge into any other
corporation or convey, transfer, or lease, all or substantially all of
its assets as an entirety to any Person, unless each of the following
conditions is satisfied:
(a) The Person formed by such consolidation, merger or acquisition by
conveyance, transfer or lease all or substantially all the assets
of the Charterer as an entirety (the "Resulting Entity"), shall, at
the same time, by consolidation, merger, conveyance, transfer or
lease, acquire all or substantially all of the assets of the
Guarantor as entireties, shall be a citizen of the United States
within the meaning of the Shipping Act, 1916 or shall have obtained
the approval of the U.S. Maritime Administration for any such
consolidation, merger (and the Owner and the Investors, without any
expense to any of the foregoing, shall have received an opinion of
counsel selected by the Owner as to such citizenship of the United
States of such Person, in form and substance satisfactory in all
respects to the Owner), and shall be a corporation organized and
existing under the laws of one of the several states of the United
States of America or the District of Columbia. Such Person, prior
to or upon the occurrence of any such transaction, shall execute
and deliver to the Owner an agreement in form and substance
satisfactory to the Owner, containing an assumption by such Person
of the due and punctual performance and observance of each covenant
and condition of the Charter and the Charter Documents to be
performed or observed by the Charterer.
(b) Before and immediately after giving effect to such transaction, no
Default, or Event of Default shall have occurred and be continuing.
(c) After giving effect to such transaction, the rating of the long-
term unsecured senior debt or implied long-term unsecured senior
debt rating of the Resulting Entity shall be and shall be
maintained for six months thereafter at least "B+" by S&P and, if
rated by Moody's, at least "B1".
(d) The Charterer shall have delivered to the Owner and each Investor,
prior to or upon the occurrence of such transaction, a Certificate
of either the Chairman or the President and the Chief Financial
Officer of the Charterer, and an opinion of counsel satisfactory to
the Owner, each stating that such consolidation, merger,
conveyance, transfer or lease and the assumption agreement
described in Section 11.7(a) comply with this Section 11.7 and that
all conditions precedent relating to such transaction herein
provided for have been fully complied with.
Upon any consolidation or merger, or any conveyance, transfer or lease of
all or substantially all of the assets of the Charterer as an entirety in
accordance with this Section 11.7, the Resulting Entity shall succeed to,
and be substituted for, and any exercise of every right and power,
obligation and liability of, the Charterer under this Charter and the
Charter Documents with the same effect as if such Resulting Entity had
been named as the Charterer herein and therein. No such conveyance,
transfer or lease of all or substantially all of the assets of the
Charterer, as an entirety shall have the effect of releasing the
Charterer or any Guarantor, as the case may be, or any Resulting Entity
which shall theretofore have become such in the manner prescribed in this
Section 11.7 from its liability under this Charter, the Guaranty or the
Charter Documents. Nothing contained herein shall permit any charter,
subcharter or other arrangement for the use, operation or possession of
the Vessel except in compliance with the applicable provisions of this
Charter.
11.8 Indemnity of the Owner by Customers for Oil Pollution and Related
Environmental Claims
The Charterer shall cause each of its customers or operators under any
Drilling Contract to (a) indemnify, defend and hold harmless the Owner,
the Investors and their Affiliates from any and all claims, demands,
liabilities, losses, damages, lawsuits and expenses respecting pollution
claims resulting from the release of Crude Oil as a consequence of a
blowout, crater or other cause arising out of or in connection with
operations under such Drilling Contract, in accordance with normal
industry practice, and any and all related environmental, health or
safety matters (including, but not limited to, all cost and expense of
controlling clean-up of pollution and all penalties imposed by any
Person) irrespective of whether the Charterer, the Owner or any of their
Affiliates may have been or may be alleged to have been negligent or
otherwise legally at fault; and (b) if any customer under such Drilling
Contract does not maintain (i) a consolidated tangible net worth as
determined in accordance with generally accepted accounting principles of
at least $500,000,000 (or be a consolidated Subsidiary of a parent entity
having such consolidated tangible net worth) or (ii) a senior unsecured
debt rating by S&P of "BBB-" or by Moody's of "Baa3" (or be a
consolidated direct or indirect Subsidiary of a parent entity having a
senior unsecured debt rating meeting such criteria), such customer shall
provide (or the Charterer shall provide) operators extra expense or
energy exploration and development insurance coverage in an amount of at
least the difference between $150,000,000 (or such greater amount, as may
be necessary to meet the applicable financial responsibility requirements
under the Oil Pollution Act of 1990, or any other applicable laws, as
amended from time to time) and the amount of the Charterer's contingent
operators extra expense or energy exploration and development insurance
or other coverage in effect at such time, with such underwriters or
carriers and containing such terms and conditions as the Owner may
require, in the form normally and customarily carried by oil and gas
operators engaged in offshore drilling operations, for oil pollution
liability and expense, with the Owner, Investors, the Owner Group and the
Charterer named as additional insureds and having the benefit of waivers
of subrogation.
ARTICLE 12
PAYMENTS, INVOICES AND SECURITY
12.1 Basic Hire
The Charterer shall pay to the Owner, in arrears on each Payment Date
through the Primary Term, an amount equal to 1.16848% of Owner's Cost
(the "Primary Term Basic Hire") as adjusted on each Upgrade Payment Date
after the Delivery Date for amounts disbursed by the Owner to the
Charterer pursuant to Section 5.9 according to the methodology outlined
on Schedule F attached hereto, and during any Extended Term, 125% of the
Primary Term Basic Hire payable on each Payment Date during such Extended
Term. The payment each month of the Basic Hire shall be a continuing
obligation for each month during which this Charter is in effect, and no
invoice for such amount need be issued to the Charterer by the Owner.
The Charterer's obligation to make such payment is unconditional and
absolute during the term hereof and shall not be affected by any event of
force majeure or otherwise.
12.2 Supplemental Hire
In addition to its obligation to pay Basic Hire hereunder, the Charterer
shall pay to the Owner any and all Supplemental Hire as and when the same
shall become due and owing, and in the event of any failure on the part
of the Charterer to pay any Supplemental Hire, the Owner shall have all
rights, powers and remedies provided for herein or at law or in equity or
admiralty or otherwise in the case of nonpayment of Basic Hire.
The Charterer shall pay to the Owner, as Supplemental Hire, all costs
incurred by the Owner in performing or complying with the Charter
Documents if the Charterer fails to perform or comply with any of its
agreements contained in this Charter, or any Charter Document including,
but not limited to:
(a) Direct and indirect cost of permits, licenses and the like required
of the Owner as owner of the Vessel. Owner shall use reasonable
efforts, without filing suit or incurring out-of-pocket or other
additional cost or expense, to avail itself of applicable
exemptions and/or reductions of such costs.
(b) All premiums and other costs to the Owner for insurance as
specified in Articles 11.8 and 15.
(c) Unless otherwise expressly set forth herein in Section 19.2, the
Charterer shall bear directly or reimburse the Owner, upon proof of
payment by the Owner, all fees and expenses (including fees and
expenses of the Owner's counsel) incurred by the Owner in the
performance of or related to this Charter or any Charter Documents.
12.3 Payment Terms
The Charterer shall pay all amounts for Supplemental Hire invoiced by the
Owner within 10 days after receipt of such invoice. Any Basic Hire not
paid when due and any invoices not paid in immediately available funds
within 10 days after receipt by the Charterer shall accrue interest from
the due date until paid at a per annum rate of interest equal to the
Overdue Rate, computed on a basis of 360 days, for actual days elapsed.
Payments shall be made by wire transfer in immediately available funds
prior to 12:00 noon, New York City time, on the day when each such
payment shall be due to the Owner's account at a financial institution
located in the State of New York or at such other office as the Owner may
from time to time designate in writing to the Charterer. All payments to
the Owner hereunder shall be without any offset, counterclaim, discount
or deduction and shall be made in United States Dollars. All payments to
the Owner stated in this Charter are exclusive of any Taxes, including,
without limitation, sales, excise, value added, stamp, documentary,
transfer, ad valorem, general consumption, property, use, export, import,
employment, payroll, withholding or other similar Taxes, which may be
imposed on or incurred by the Owner, its employees or the Investors
(other than, except as otherwise provided herein, Taxes on the net income
or franchise of the Owner, its employees or the Investors), and all costs
associated therewith, in connection with performance by the Owner of, or
the Owner's rights under, this Charter, including the costs associated
with bonds or letters of credit that are not otherwise the responsibility
of the Charterer under this Charter. The Charterer shall pay the Owner
the amount of all such charges, Taxes and costs upon receipt of an
invoice, subject to the Charterer's right to reasonably verify the
Owner's payment of such amounts. The Owner shall use reasonable efforts,
without filing suit or incurring any out-of-pocket or other additional
costs, to avail itself of any and all applicable exemptions and/or
reductions of such taxes. The Charterer shall, at the Owner's request,
pay such sums directly or post any required bonds or letter of credit
required on any such items.
12.4 Invoices
The Owner shall render to the Charterer a monthly invoice on or before
the 15th day of each month showing all Supplemental Hire payable to the
Owner for the preceding month.
12.5 Security for Obligations
(a) To secure the Obligations, the Obligors have executed and delivered
the Security Documents. Subject to Section 12.5(b), (c), (d) and
(e), the Charterer shall maintain (i) the Cunningham Mortgage or
(ii) any Substitute Collateral that has a fair market value at
least equal to the Stipulated Loss Value at the time of any
delivery of such Substitute Collateral (collectively, the
"Additional Collateral") to secure the Obligations. In addition,
subject to Section 12.5(e) the Charterer shall maintain the Yost
Mortgage.
(b) In the event that, at any time during the periods set forth below,
the Timely Liquidation Value of the Vessel as determined in
accordance with the Appraisal Procedure at such time is at least
the Stipulated Loss Value at such time, neither S&P nor Moody's has
a negative outlook for Reading & Bates at such time and a Drilling
Contract is in full force and effect at such time that provides
adequate cash flow to service the Obligations for the term of such
Drilling Contract, the Charterer may request a reduction in the
amount of Additional Collateral as follows:
(i) after the fourth anniversary of the Delivery Date and so long
as (A) the rating of S&P of the Rated Securities is at least
"BB+" and the rating, if any, of Moody's of the Rated
Securities is at least "Ba1", and (B) no Default has occurred,
the Timely Liquidation Value of the Jim Cunningham or the
Timely Liquidation Value of Substitute Collateral (as
determined by the Appraisal Procedure) required to be
maintained shall be reduced to 50% of the Stipulated Loss
Value;
(ii) after the seventh anniversary of the Delivery Date and so long
as (A) the rating of S&P of the Rated Securities is at least
"BBB-" or higher by S&P and the rating, if any, of Moody's of
the Rated Securities is at least "Baa3", and (B) no Default has
occurred, no Additional Collateral shall be required to be
maintained; or
(iii) at any time, and so long as (A) the rating of S&P of the Rated
Securities is at least "BBB+" or higher by S&P and the rating,
if any, of Moody's of the Rated Securities is at least "Baa1",
and (B) no Default has occurred, no Additional Collateral shall
be required to be maintained.
(c) The Owner shall release its lien and security interest in that
portion of the Additional Collateral that is in excess of the
Additional Collateral (the "Released Collateral") the Charterer is
required to maintain pursuant to Section 12.5(b). From and after
such release the Charterer shall maintain such Released Collateral
or other property (the "Negative Pledge Property") mutually agreed
upon by the Owner and the Charterer that has a Timely Liquidation
Value equal to the Stipulated Loss Value at the time of such
release, free and clear of all Liens (other than Permitted Liens as
defined in the Cunningham Mortgage). The Charterer shall
immediately notify the Owner and each of the Investors of the
occurrence of any event that would not entitle the Charterer to
maintain reduced Additional Collateral pursuant to Section 12.5(b)
and shall promptly reinstate or grant, as the case may be, Liens
upon the Negative Pledge Property or, with the approval of the
Owner, provide other Substitute Collateral in accordance with
Section 12.5(d) as required under Section 12.5(b).
(d) The Charterer shall be entitled to exchange collateral for the
Obligations (other than the Yost Mortgage) or discharge its
obligation to reinstate Additional Collateral or Substitute
Collateral by providing substitute property as collateral securing
the Obligations (the "Substitute Collateral") if each of the
following conditions precedent shall have been satisfied:
(i) The Charterer shall have notified the Owner of its intention to
provide Substitute Collateral, which Substitute Collateral
shall be cash, cash equivalents, or a mobile offshore drilling
unit and otherwise in all respects satisfactory in form and
substance to the Owner.
(ii) All instruments conveying or granting to the Charterer such
Substitute Collateral and any related agreements or instruments
shall in all respects be satisfactory in form and substance to
the Owner.
(iii) The Owner and each of the Investors shall have received with
respect to such Substitute Collateral a report at the sole cost
and expense of the Charterer prepared in accordance with the
Appraisal Procedure, in form and substance reasonably
satisfactory to the Owner, that the fair market value of such
Substitute Collateral when added to the fair market value of
other Additional Collateral for the Obligations shall, after
giving effect to any release, be in compliance with
Section 12.5 (a) or (b), as applicable.
(iv) The Charterer shall at its sole cost and expense have obtained
(to the satisfaction of the Owner) all government approvals
required in connection with the ownership, use, occupancy,
possession, operation or ordinary maintenance of such
Substitute Collateral, compliance with applicable
environmental, health and safety laws and regulations and the
mortgaging of such Substitute Collateral to the Owner. Each
such governmental approval shall be in full force and effect.
(v) The Charterer shall at its sole cost and expense have conducted
or caused to be conducted such title examination or title
review with respect to such Substitute Collateral as a
reasonably prudent operator would conduct under the
circumstances, and the Owner shall have approved the status of
title of such Substitute Collateral. The Charterer shall have
furnished to the Owner such title policy or other title
assurances as it receives in connection with the acquisition of
such Substitute Collateral.
(vi) The Charterer shall at its sole cost and expense have obtained
such casualty, liability and other insurance with respect to
such Substitute Collateral as shall be requested by the Owner,
which insurance shall in all respects comply with, and shall be
in all respects subject to, Article 15. The Owner and each of
the Investors shall have received a certificate of an
independent insurance broker setting forth the insurance
obtained in accordance with this paragraph (vi) and certifying
that such insurance is in full force and effect and that all
premiums then due thereon have been paid.
(vii) The Charterer shall at its sole cost and expense have executed
and delivered to the Owner or to a trustee or collateral agent
designated by them and acting on their behalf, a mortgage and
security agreement or other instrument or other document
granting to the Owner or such trustee or collateral agent a
mortgage Lien and security interest, subject to no other Liens
(other than Permitted Liens as defined in the Cunningham
Mortgage), in and to such Substitute Collateral, each deed,
lease, assignment or other instrument of conveyance referred to
in paragraph (ii) above, each government action as referred to
in paragraph (iv) above, each ancillary contract and any
agreement providing for the operation of such Substitute
Collateral (which assignment shall be consented to by the
operator, on terms satisfactory to the Owner), subject to no
Liens (other than Permitted Liens as defined in the Cunningham
Mortgage). Such mortgage and security agreement or such other
instrument shall be in full force and effect and shall be in
all respects satisfactory in form and substance to the Owner.
Each of the foregoing instruments and any necessary documents
relating thereto, including, without limitation, financing
statements under the applicable Uniform Commercial Code or
other instruments for filing or recordation, shall have been
duly recorded and filed in all public offices in which such
recordation or filing is necessary in order to provide
constructive notice to third parties of the interests and Liens
created thereby and in order to establish, perfect, preserve
and protect the validity and effectiveness thereof and the
mortgage Lien and security interest created by such mortgage
and security agreement or other instrument on all property
purported to be subject thereto; and all taxes, fees and other
charges payable in connection with any and all of the foregoing
shall have been paid in full by the Charterer.
(viii) The Owner and the Investors shall have received such
environmental reports with respect to such Substitute
Collateral (in form and substance satisfactory to the Owner) as
they may request.
(ix) The Owner and each of the Investors shall have received such
opinions of counsel satisfactory to the Owner as to such
matters relating to the acquisition of such Substitute
Collateral, including the validity and enforceability of all
documents and instruments referred to in this Section 12.5(d)
and the validity, extent and priority of the Owner's Lien, as
the Owner shall reasonably request, which opinions shall be in
form and substance satisfactory to the Owner and from counsel
acceptable to the Owner.
(x) The Charterer shall have paid all costs and expenses incurred
by the Owner and each of the Investors in respect of obtaining
any release, Additional Collateral, the Mortgages or the
Substitute Collateral, regardless of whether such release,
Collateral, the Mortgages, Substitute Collateral or Additional
Collateral is delivered.
(xi) The Owner shall have received an Officer's Certificate,
containing such representations and warranties with respect to
such Substitute Collateral and the matters set forth in this
Section 12.5(d) and any other matters as shall be reasonably
requested by the Owner, and such other documents or evidence as
to the satisfaction of the conditions set forth in this
Section 12.5(d), as the Owner shall reasonably request.
(e) The Charterer shall be entitled to obtain a release of the Yost
Mortgage if either (i) the Owner has satisfied itself that it
possesses a perfected first priority lien on the Jim Cunningham or
(ii) the Charterer has provided the Owner with a substitute letter of
credit in form satisfactory to the Owner in an amount equal to the
excess (the "Excess Safe Harbor Exposure") of the maximum amount of
liability, whether direct or contingent, of any member of the
Charterer Group under the Safe Harbor Lease Documents over the lesser
of (i) $11,000,000 or (ii) the amount of such liability that is
secured by the Cunningham, as determined, in each case, by Arthur
Andersen & Co., or other independent expert satisfactory to the Owner
(the "Safe Harbor Exposure Expert"). The amount of such letter of
credit shall be subject to reduction as the Excess Safe Harbor
Exposure reduces as determined by the Safe Harbor Exposure Expert.
Any release shall be in form and substance reasonably satisfactory to
the Owner.
ARTICLE 13
GENERAL OBLIGATIONS AND PERFORMANCE
13.1 Independent Owner Relationships
In the performance of this Charter, the Owner is an independent
contractor. In the performance of this Charter, the Charterer is an
independent contractor and shall control and direct the operation of the
Vessel and the performance of the details of the work to be performed by
the Charterer's personnel and shall be responsible for the results of
such work, all in accordance with the obligations imposed upon the
Charterer hereunder and under the Charter Documents. The presence of and
the observation by the Owner's representative(s) at the site of any work
shall not relieve the Charterer from the Charterer's obligations and
responsibilities hereunder.
13.2 Inspection
The Owner shall have the right, at the Charterer's sole cost and expense,
to inspect the Vessel and its book and records at all reasonable times if
the exercise of such inspection right would not unreasonably interfere
with the operator's operations on the Vessel at the time or any
applicable governmental approval, which approvals the Charterer shall
endeavor to obtain in good faith, and shall have the right to confer with
and have access to the officers and employees of the Charterer and any
Guarantor in connection with any such inspection. The Owner shall have
the right annually to cause the Vessel to be surveyed by a marine
surveyor at the Owner's (but, after the occurrence and during the
continuance of any Default, the Charterer's) expense. The Charterer
shall correct at its sole cost expense all material deficiencies
discovered during any such survey or inspection.
13.3 Performance of the Charterer
The Charterer shall exercise due diligence to carry out any and all
operations with respect to the Vessel in a safe, workmanlike manner in
accordance with good offshore industry practice, which requirement shall
specifically include, not by way of limitation in any manner whatsoever,
the obligations to have the Vessel under the command of an offshore
instillation manager certified by and for the area in which the Vessel is
operating.
13.4 Operations Outside of U.S. Waters
In the event that the Charterer intends to operate the Vessel outside of
U.S. territorial waters and/or the Outer Continental Shelf, the Charterer
shall submit at least 15 days before movement of the Vessel to the
intended area of operation such documentation demonstrating to the
Owner's reasonable satisfaction (a) that operation of the Vessel within
the intended area of operation complies with all applicable laws and
regulations of the United States and of the intended area of operation;
(b) that the Vessel can be removed from such intended area of operation
upon either cessation of the Vessel's operation in the area or
termination of this Charter; (c) that the Charterer provides all
additional indemnities and has secured political risk insurance for such
area additive to the insurances provided for herein and (d) the Vessel is
not subject to any lien or interest that might have priority over the
title and interest of the Owner. Each move to a new area outside U.S.
territorial waters, whether or not subject to the jurisdiction of a
different foreign country, shall meet the foregoing requirements and
those of Section 7.1.
ARTICLE 14
LIABILITY AND INDEMNITY
14.1 Survival of Indemnities
The indemnities set forth in this Charter shall survive the termination
of this Charter, and shall remain enforceable (subject only to debtor
relief laws and general equitable principles) as to any claim, demand,
liability, damage and expense arising out of or incidental to this
Charter, without regard to the termination of this Charter.
14.2 Pollution
The Charterer shall assume all responsibility for the control and removal
of, and hold Owner Group harmless from loss, liabilities or damage or
claims arising from, directly or indirectly, pollution or contamination
by any liquid or nonliquid or waste material wheresoever found that is
discharged, spilled or leaked from the Vessel or noncompliance with
environmental, health and safety laws (including but not limited to,
those stemming from release of pollutants, private toxic tort claims,
off-site disposal of waste or other pollutants, PCB's, and asbestos-
containing materials on or in the Vessel (irrespective of whether any of
the foregoing occurred, existed or arose before or after the date
hereof)). To the extent that any law, regulation or governmental entity
acting within its jurisdiction imposes on Owner Group liability for any
such pollution, notwithstanding such imposition of direct liability, the
Charterer shall have designated Owner Group as an additional insured
under its insurance policies and the Charterer shall hold the Owner
harmless from such loss, liabilities, damage or claims and reimburse
Owner Group for any amounts that Owner Group may be required to pay.
This indemnity is valid irrespective of the negligence or fault, whether
sole, joint, active or passive of the indemnified party and whether
predicated on strict liability, statutory duty, contractual indemnity or
any other theory of liability of the indemnified party.
14.3 The Charterer's Indemnity
(a) The Charterer shall defend, indemnify and hold Owner Group, its
officers, directors, employees, agents and Affiliates
(collectively, the "Indemnitees") harmless from and against all
claims, liabilities, damages, Taxes and expenses (including,
without limitation, attorneys' fees and other costs of defense),
including all claims of any type whatsoever, irrespective of
insurance coverage, arising out of, incidental to, or related to
this Charter, any of the Charter Documents, any of the transactions
contemplated hereby or thereby, the Vessel, the Jim Cunningham, the
Randolph Yost or any Additional Collateral or Substitute
Collateral, except, unless otherwise specifically provided herein,
any claims directly arising out of the Owner's gross negligence or
willful misconduct.
(b) If it is judicially determined that the monetary limits of
insurance required under this Charter or of the indemnities
voluntarily and mutually assumed in this Charter (which the Owner
and the Charterer hereby agree will be supported either by
available liability insurance, under which the insurer has no right
of subrogation against the indemnitee, or voluntarily self-insured
in respect of permitted deductibles) exceed the maximum limits
permitted under applicable law, it is agreed that such insurance
requirements or indemnities shall automatically be amended to
conform to the maximum monetary limits permitted under such law.
(c) The Charterer shall indemnify, pay and hold harmless Owner Group
against any loss, liability, cost or expense incurred in respect of
the Vessel, including actual or constructive loss of the Vessel, or
any effort to interdict the payment to the Owner of proceeds
arising out of or related to this Charter.
(d) The indemnities in this Charter apply without regard to any
conflicting rules of liability under any applicable law or
regulation and shall include indemnification for any and all claims
in which recovery, indemnification or contribution is sought
directly or indirectly by any person or entity against Owner Group
whether predicated on negligence, strict liability, statutory duty
or contractual indemnity, except any such liability directly
arising out of the gross negligence or willful misconduct of the
Owner unless otherwise expressly specified herein.
14.4 Patent Infringement
(a) The Charterer shall assume liability for, and shall defend,
indemnify and hold the Owner harmless from and against, all suits
and actions alleging that the Vessel, any equipment or part
thereof, or any operation of the Vessel, any such equipment or part
thereof constitutes an infringement of any letters patent.
(b) If, as a result of any changes required by the Charterer in
equipment furnished by the Owner, or any changes required by the
Charterer in operation of such equipment or part thereof, a claim
is filed against the Owner alleging that such equipment or any such
operation conducted infringes any letters patent, then the
Charterer shall be liable for all such claims and indemnify and
hold the Owner harmless from all such claims.
14.5 Both-to-Blame Collision Clause
Without limitation on any other indemnity of the Charterer contained
herein, if the liability for any collision in which the Vessel is
involved while performing this Charter should be determined in accordance
with the laws of the United States of America, the following clauses
shall apply:
(a) If the Vessel comes into collision with another ship as a result of
the negligence of the other ship and any act, neglect or default of
the Master, mariner, pilot or the servants of the Charterer in the
navigation or in the management of the Vessel, the Charterer shall
indemnify the Owner against all direct, consequential or special
loss or liability to the other ship or her owner.
(b) The foregoing provisions shall also apply where the owners,
operators or those in charge of any ship or ships or objects other
than, or in addition to, the colliding ships or objects are at
fault in respect of a collision or contact.
14.6 Liens, Attachments and Encumbrances
None of the Charterer, any subcharterer or party to a Drilling Contract
shall have the right, power or authority to create, incur or permit to
exist any Lien upon the Vessel, except for Permitted Liens. The
Charterer further agrees to carry a true copy of this Charter with the
ship's papers on board the Vessel, and to exhibit the same to any person
having business with the Vessel which may give rise to any lien or claim
upon the Vessel other than a Permitted Lien or to the sale, conveyance or
mortgage of the Vessel, and on demand, to any person having business with
the Vessel or to any representative of the Owner, the Owner Group or any
Investor. The Charterer shall also place and keep prominently displayed
on board the Vessel a notice, framed under glass, printed in plain type
of such size that the paragraph of reading matter shall cover a space not
less than six inches wide by nine inches high, reading as follows:
NOTICE OF CHARTER
This Vessel is owned by Deep Sea Investors, L.L.C. It is under
bareboat demise charter to Reading & Bates Drilling Co. Under the
terms of this Charter none of the Charterer, any subcharterer, the
Master nor any other person has any right, power or authority to
create, incur or permit to be imposed on the Vessel (a) any lien
whatsoever other than liens for current crew's wages, general
average and salvage, in each case, incurred in the ordinary course
of business and that are not yet overdue complying with the
provisions of such charter and (b) any claims whatsoever under any
drilling contracts in respect of the Vessel other than claims
complying with the provisions of such charter.
Such notice shall be promptly changed from time to time to reflect the
identity of the successors or assigns of the Owner.
14.7 Indemnification by the Charterer
The Charterer shall indemnify and hold harmless the Owner against any
Liens, claims or liabilities of whatsoever nature, other than Permitted
Liens (but if the Vessel is being redelivered to, or otherwise coming
into the possession of, the Owner pursuant to the terms and conditions of
this Charter, other than Permitted Liens arising as the result of claims
against the Owner for which the Owner is not entitled to indemnification
hereunder only), whether such Liens, claims or liabilities now exist or
are created hereafter or are founded or unfounded, upon or relating to
the Vessel, its possession, management, maintenance, repair, use,
employment, chartering or subchartering or operation or any act or
omission of the Charterer.
14.8 The Charterer's Duties to Remove Liens, etc.
Without limitation of the generality of the Charterer's indemnities
provided for in Section 8.2 and Article 14, the Charterer agrees that if
a libel or a complaint in admiralty or any other legal proceeding shall
be filed against the Vessel, or if the Vessel shall be otherwise levied
upon or taken into custody or detained or sequestered by virtue of
proceedings in any court or tribunal or by any government or other
authority because of any Liens, claims or liabilities arising from any
claims, other than claims against the Owner the payment or discharge of
which is not the obligation of the Charterer or any Guarantor or with
respect to which the Owner is not entitled to indemnification from the
Charterer or any Guarantor. The Charterer shall at its own expense
within 15 days thereafter cause the Vessel to be released and all such
Liens and (except to the extent that the same shall currently be
contested by the Charterer in good faith by appropriate persons and
appropriate proceedings in the Owner's sole judgment and shall not affect
the continued release, or until any risk of forfeiture or other loss of
or to the Vessel, or in any manner whatsoever interfere with the use and
operation of the Vessel) claims and liabilities to be discharged. The
Charterer shall forthwith notify the Owner by telecopy, telex or
telegram, confirmed by letter, of each such event and of each such
release and discharge. The Charterer shall advise the Owner in writing
at least once in each three-month period as to the status and merits of
all such excepted claims and liabilities being so contested by the
Charterer and not discharged within fifteen days as provided above, which
are either not bonded or affect the ability of the Charterer to use any
Vessel in the ordinary course of its business. The Charterer will pay
and discharge when due all claims for repairs and other charges incident
to current operations of the Vessel or with respect to any change,
alteration or addition made pursuant to this Charter and will not permit
any lien referred to in clause [(b) or (c)] of the definition of
"Permitted Liens" which has ripened into a cause of action to be in
effect for more than 30 days unless it is fully bonded or covered by
insurance or Adequate Provision.
ARTICLE 15
INSURANCE
15.1 The Charterer's Insurance
The Charterer shall, at its own expense, procure and maintain in effect
with respect to and for the duration of this Charter the insurance
policies with limits of at least, and with deductibles, if any, of no
more than, those as set forth in Schedule C approved by the Owner and
having such terms and conditions, and with carriers and/or underwriters
approved by the Owner (such approval not to be unreasonably withheld).
Any policies of insurance carried by the Charterer in accordance with
this Article 15 shall (a) provide that the interests of Owner Group in
such policies shall not be invalidated by any action, inaction, neglect,
breach of warranty or misrepresentation of the Charterer or change in
ownership of the Vessel and shall insure Owner Group's interests as they
appear, regardless of any breach or violation by the Charterer of any
warranty, declaration or condition contained in such policies, and (b) be
primary without right of contribution from any other insurance which may
be carried by Owner Group with respect to its interests in the Vessel.
The Charterer shall immediately notify underwriters of and shall furnish
all necessary information concerning any occurrence which may give rise
to a claim under any of said insurance policies. Prior to commencement
of any operations under this Charter and any renewal of the insurance
policies required to be maintained hereunder, the Charterer shall provide
the Owner with insurance certificates evidencing the Charterer's
insurance coverage; such certificates shall provide for at least 30 days'
(seven days, in the case of war risk) prior written notice to the Owner
and each of the Investors of any material change in, reduction or
cancellation of any of said insurance policies and shall show the
Charterer, the Owner, the Owner Group and the Investors as sole loss
payees and additional insureds thereunder as their interests appear. If
requested, copies of all correspondence and documents sent to
underwriters, related to any accident or claim arising out of or in
connection with the performance of the work hereunder, shall be provided
to the Owner.
15.2 Nonperformance of Insurance Companies
The insolvency, liquidation, bankruptcy, or failure of any insurance
company providing insurance for the Charterer or the Owner or their
respective subcontractors, or failure of any such insurance company to
pay claims accruing, shall not be considered a waiver of, nor shall it
excuse the Charterer from complying with, any of the provisions of this
Charter or any of the Charter Documents, except that any such act or
omission by an insurance company shall not be deemed a breach of this
Charter by the Charterer.
15.3 Subrogation
The Charterer agrees to endorse each such insurance policy to waive the
underwriters' and insurance providers' right of subrogation with respect
to Owner Group; and the Charterer agrees to indemnify and hold Owner
Group harmless with respect to any rights of subrogation pursued by the
Charterer's underwriters or insurance providers against Owner Group.
ARTICLE 16
ASSIGNMENT OF CHARTER
16.1 Assignment and Subcontract by the Owner
The Owner shall have the right, at any time, to assign all or part of
this Charter to any Person, so long as such Person agrees to be bound by
this Charter and, at the time of such assignment, has, or is a
consolidated Subsidiary of a parent entity having, a consolidated net
worth of at least $50,000,000 as determined in accordance with generally
accepted accounting principles and is not primarily engaged in the
offshore drilling business, other than as a financier or lessor of
offshore drilling equipment or operations.
16.2 Assignment by the Charterer
The Charterer shall not have the right to assign this Charter or to
subcharter the Vessel without the prior written consent of the Owner.
Subject to the terms of applicable law, the Charterer shall have the
right, without the consent of the Owner, so long as no Default or Event
of Default shall have occurred and be continuing, to subcharter the
Vessel on a bareboat or time basis to any Subsidiary of Reading & Bates
that is and remains throughout the term of such subcharter a Subsidiary
of Reading & Bates and a citizen of the United States within the meaning
of the Shipping Act, 1916, and to enter into, and to permit the Vessel to
serve under, Drilling Contracts that comply with the terms hereof and the
other Charter Documents (provided no such Drilling Contract constitutes a
demise or a bareboat charter or any grant of any property right or other
interest in the Vessel between the Charterer and others) provided that:
(a) each such subcharter and Drilling Contract shall be consistent with
the terms of this Charter and the subcharterer shall have agreed
not further to subcharter the Vessel without complying with this
Section 16.2 with respect to such further subcharter;
(b) either (i) the subcharterer under such subcharter or the customer
under a Drilling Contract is a citizen of the United States within
the meaning of the Shipping Act, 1916 and evidence thereof
satisfactory to the Owner in its sole judgment shall be submitted
to the Owner within 30 days of entering into such subcharter, (ii)
the prior approval of the U.S. Maritime Administration under the
Shipping Act, 1916 of such subcharter, in form satisfactory to the
Owner in its sole judgment, shall have been obtained and, within 30
days of entering into such subcharter or Drilling Contract,
evidence thereof satisfactory to the Owner in its sole judgment,
shall have been submitted to the Owner or (iii) such subcharter or
Drilling Contract shall be covered by a general approval of the
U.S. Maritime Administration under sections 9 and 37 or any other
applicable sections of the Shipping Act, 1916 and the Charterer
shall have given written notice to the Owner to that effect, which
notice shall set forth in reasonable detail the facts which
establish such coverage with respect to such subcharter or Drilling
Contract;
(c) such subcharter or Drilling Contract shall not violate any laws of
the United States of America or any regulations, rules,
interpretations or orders thereunder;
(d) irrespective of any such subcharter, the Charterer shall remain
liable for all of its obligations under this Charter and the
Charter Documents to the same extent as if such subcharter or
Drilling Contract were not in effect;
(e) the subcharterer under each such subcharter shall comply with all
applicable laws and regulations, provided that violations of laws
or regulations by any such subcharterer that (i) will not result in
the Owner, the Owner Group or the Vessel being in violation of, or
subject to any fine, penalty or other sanction under any applicable
law or regulation or any risk of forfeiture or other loss of or to
the Vessel, (ii) do not otherwise adversely affect the interests of
the Owner or the Owner Group or the Investors hereunder, and (iii)
are not consented to by the Charterer shall not, by reason of this
clause (e), constitute a breach, or cause such subcharter to be in
violation of the terms of this Charter so long as the Charterer is
taking appropriate action to terminate such violation or to
terminate such subcharter;
(f) such subcharter or Drilling Contract shall, by its terms, expire no
later than the end of the Charter Period, or any extension thereof,
and Charterer shall not suffer or permit to be continued under any
such subcharter or Drilling Contract any lien or encumbrance
incurred by it or its agents, which might have priority over the
title and interest of the Owner in the Vessel and any part thereof,
or equipment or other property used in connection with the Vessel;
and
(g) any Drilling Contract shall be on terms and conditions in
substantially the form generally used in offshore drilling and with
an operator and having (i) a consolidated tangible net worth as
determined in accordance with generally accepted accounting
principles of at least $500,000,000 (or be a consolidated
Subsidiary of a parent entity having such a consolidated tangible
net worth), or (ii) a senior unsecured debt rating by S&P of "BBB-"
or by Moody's of "Baa3" (or be a consolidated direct or indirect
Subsidiary of a parent entity having a senior unsecured debt rating
meeting such criteria) or (iii) maintaining (or the Charterer
providing) operators extra expense or energy exploration and
development insurance coverage in an amount of at least the
difference between $150,000,000 (or such greater amount, as may be
necessary to meet the applicable financial responsibility
requirements under the Oil Pollution Act of 1990, or any other
applicable laws, as amended from time to time) and the amount of
the Charterer's contingent operators extra expense or energy
exploration and development insurance or other coverage in effect
at such time, with such underwriters or carriers and containing
such terms and conditions as the Owner may require, in the form
normally and customarily maintained by oil and gas operators
engaged in offshore drilling operations, for oil pollution
liability and expense, with the Owner, Investors, the Owner Group
and the Charterer named as additional insureds and having the
benefit of waivers of subrogation and with carriers or underwriters
reasonably acceptable to the Owner.
The Charterer shall within 30 days after entering into each Drilling
Contract notify the Owner of the period thereof and of the identity of
the other party and its relationship with the Charterer, if any.
16.3 Assignment of Subcharter Hire.
The Charterer hereby sells, assigns, transfers, creates a security
interest in and sets over unto the Owner all of the Charterer's right,
title and interest in and to all accounts, chattel paper, contract rights
and general intangibles, and all monies and claims for monies due and to
become due under, or arising out of, and all claims for damages arising
out of the breach of, any subcharter or Drilling Contract (Drilling
Contracts being considered, for purposes of this Section 16.3,
subcharters) relating to the Vessel, whether now existing or hereafter
entered into. It is expressly agreed that, anything herein contained to
the contrary notwithstanding, the Charterer shall remain liable under
each such subcharter to perform all of its obligations thereunder, and
the Owner shall have no obligations or liabilities thereunder by reason
of or arising out of the foregoing assignment (herein, the "Rights
Assignment").
Upon the demand of the Owner after the occurrence and during the
continuation of an Event of Default, the Charterer will specifically
authorize and direct each person liable therefor to make payment of all
monies due and to become due under or arising out of each such subcharter
to the Owner or as the Owner shall direct, and upon such demand
irrevocably authorizes and empowers the Owner to ask, demand, receive,
receipt and give acquittance for any and all such amounts which may be or
become due or payable or remain unpaid at any time or times to the
Charterer by each such person under or arising out of such subcharters;
to endorse any checks, drafts or other orders for the payment of money
payable to the Charterer in payment therefor; and in its discretion to
file any claims or take any action or proceeding either in its own name
or in the name of the Charterer or otherwise which the Owner may deem to
be necessary or advisable in the premises.
The Charterer hereby irrevocably authorizes the Owner after any such
demand has been made, in its own name or in the name and on behalf of the
Charterer, to give notification to persons obligated under such
subcharters that payment is to be made to the Owner or as the Owner
directs and hereby agrees to cause to be delivered to the Owner consents
of such persons to the Rights Assignment, in form and substance
satisfactory to the Owner.
The Charterer agrees that at any time and from time to time, upon the
Owner's written request, the Charterer will execute and deliver such
further documents and do such further acts and things as the Owner may
request in order to effect further the purposes of the Rights Assignment,
provided that no such consent referred to in the preceding paragraph may
be required under this sentence.
The Charterer hereby irrevocably authorizes the Owner, at the Charterer's
expense, to file such financing statements relating to the Rights
Assignment, without the Charterer's signature, as the Owner at its option
may deem appropriate, and appoints the Owner as the Charterer's attorney-
in-fact to execute any such financing statements in the Charterer's name
and to perform all other acts which the Owner deems appropriate to
perfect and continue the security interest created hereby.
The Charterer covenants and agrees with the Owner that the Charterer will
(a) duly perform and observe all of the terms and provisions of such
subcharters on the part of the Charterer to be performed or observed, (b)
clearly record in the books and records of the Charterer notations of the
Rights Assignment and (c) in the event that the Charterer shall receive
payment of any money which should have been paid directly to the Owner
pursuant to a demand made or notice given under this Section 16.3
forthwith turn over the same to the Owner or as the Owner may direct, in
the identical form in which received (except for such endorsements as may
be required thereon).
ARTICLE 17
LOSS, TAKING OR SEIZURE.
17.1 Taking by the U.S. Government
A taking of the Vessel for use by the United States Government shall not
terminate this Charter, but the Charterer shall remain liable for all its
obligations hereunder, including its liability for payment of Hire, until
the expiration of the Charter Period. If, at the expiration of the
lesser of the then remaining term of the Charter Period or 180 days after
the taking of the Vessel for use by the United States Government Charter
Period, the Vessel shall still be subject to such taking for use by the
United States Government, an Event of Loss shall be deemed to have
occurred on the last day of such 180-day period or the Charter Period,
whichever occurs first.
17.2 Event of Loss not a Total Loss
In the case of any Event of Loss arising out of damage to the Vessel
other than actual total loss, the Charterer shall notify the Owner that
the Vessel is deemed to be subject to an Event of Loss and shall not
consent to a compromise or arranged total loss without the prior written
agreement of its insurance underwriters that the Vessel is a constructive
or compromised total loss and that such underwriters agree to pay an
amount at least equal to the amount payable by the Charterer under
Section 17.3.
17.3 Payment of Stipulated Loss Value
Upon the occurrence of an Event of Loss, the Charterer shall forthwith
give the Owner written notice of such Event of Loss and shall pay to the
Owner within 60 days following the date of the occurrence of such Event
of Loss the Stipulated Loss Value of the Vessel calculated as of such
Basic Hire Payment Date occurring after the occurrence of the Event of
Loss plus interest at a rate per annum equal to the Overdue Rate. The
Charterer shall also pay to the Owner all Basic Hire due on the Payment
Dates next occurring after the date of occurrence of such Event of Loss
and, if the date on which such Stipulated Loss Value actually is paid in
full is not such a Payment Date, an amount equal to the Overdue Rate
(computed on the basis of a 360-day year for actual days elapsed) on the
amount of such Stipulated Loss Value for the period from such Payment
Date to the date such Stipulated Loss Value is paid in full.
17.4 Application of Payments
In the case of all payments (other than insurance proceeds) received by
the Owner or the Charterer from any governmental authority or otherwise
as compensation for an Event of Loss, so much of such payments as shall
not exceed the sum of the Stipulated Loss Value and an amount equal to
interest hereon required to be paid by the Charterer as above provided
and any Hire then due and owing by the Charterer hereunder shall be
applied, provided no Default or Event of Default shall have occurred and
be continuing, first, in reduction of the Charterer's obligation to pay
such Hire, if any, then due and owing; and second, in reduction of the
Charterer's obligation to pay such Stipulated Loss Value and such amount
equal to interest thereon as provided above if not already paid by the
Charterer or, if already paid by the Charterer, to reimburse the
Charterer for its payment of such Stipulated Loss Value and the balance,
if any, of such payments remaining thereafter shall be paid over to, or
retained by, the Owner.
17.5 Date of Loss
For the purpose of this Charter, the date of the occurrence of an Event
of Loss shall be the date of the casualty or other occurrence giving rise
to such Event of Loss (or the earlier of the expiration of the remaining
term of the Charter Period or the date 180 days after such taking
thereafter, in the case of a taking of title or use or possession of the
government of the United States of America, as provided in the definition
of Event of Loss set forth in Section 1 hereof), and if the date of such
casualty or other occurrence shall be uncertain, such date shall be
deemed the date the Vessel was last heard from.
17.6 Effect of Payment of Stipulated Loss Value
In the event that the Charterer shall make payment in full of any overdue
payments of Basic Hire, and of such Stipulated Loss Value and an amount
equal to interest thereon as provided above, the Charterer shall have no
further obligation to make any payment of Basic Hire payable after the
Payment Date as of which such Stipulated Loss Value was calculated, and
the Charterer, subject to the Charterer's obtaining any governmental
consent required, (a) shall be subrogated to all rights which the Owner
shall have with respect to the Vessel, (b) shall receive assignments and
bills of sale from the Owner (in such form described in Section 3.7
hereof, but without any representation or warranty of any character on
the part of the Owner) of any or all such rights, together with all of
the Owner's right, title and interest in and to the Vessel and all
machinery and equipment pertaining thereto, and (c) shall have the right
to abandon the Vessel to underwriters on behalf of the Owner as well as
itself. In such case, the Owner shall execute such documents and take
such other action as the Charterer may reasonably require to effect the
surrender of the Vessel to the insurance underwriters. Nothing herein
contained shall relieve the Charterer or the Owner of any of its
obligations under Article 18 incurred up to and including the date of the
Event of Loss. After the payment in full of the Stipulated Loss Value of
the Vessel and such other amounts, the Charterer's obligation to pay
further Basic Hire with respect to such Vessel shall terminate. All
insurance proceeds received as the result of an Event of Loss with
respect to the Vessel, and all payments (other than insurance proceeds)
received by the Owner or the Charterer from any governmental authority or
otherwise as compensation for an Event of Loss with respect to the
Vessel, shall be applied in reduction of the Charterer's obligation to
pay Stipulated Loss Value with respect to the Vessel (plus any other
amounts of Basic Hire and Supplemental Hire then due and payable with
respect to the Vessel), if not already paid by the Charterer, or, if
already paid by the Charterer, shall be applied to reimburse the
Charterer for its payment of the Stipulated Loss Value with respect to
the Vessel and the balance, if any, of such proceeds or payments
remaining thereafter shall be paid over to, or retained by, the
Charterer.
ARTICLE 18
TAX
18.1 Characterization as a Lease
Each of the parties hereto intends that, for Income Tax purposes, this
Charter will be treated as a lease of the Vessel from the Owner to the
Charterer, the Owner will be treated as the sole owner of the Vessel and
the Charterer will be treated as not having any ownership interest in the
Vessel, the Owner or any partnership or joint venture with the Owner.
The Charterer, the Owner, each of the Investors and any Affiliate thereof
will not take any action or file any return or other document which is
inconsistent with such characterization.
18.2 Representations
The Charterer represents, warrants and covenants to the Owner, each of
the Investors and any Affiliate thereof as follows:
(a) All information provided by the Charterer and its Affiliates to any
independent appraiser or engineer with respect to the Vessel was
and is true, complete and accurate, and the Charterer and its
Affiliates did not omit any factual information necessary to make
such first-mentioned information not misleading or omit any factual
information required to permit any such independent appraiser or
engineer to perform the duties for which he was retained;
(b) Reading and Bates, Inc. is the original owner of the Vessel and
initially placed the Vessel in service during its taxable year
ended December 31, 1983;
(c) The Vessel is currently in service at Garden Banks Block 387, Outer
Continental Shelf, Gulf of Mexico (OCS-G-7485);
(d) The Charterer is not, and will not become at any time during any
period in which the Owner is claiming federal income tax
depreciation deductions, a tax-exempt entity (within the meaning
of Section 168(h)(1)(A) of the Code and Section 168(j)(3)(A) of the
1954 Code);
(e) During any period during which the Owner is claiming federal income
tax depreciation deductions, the Charterer will take no action and
will not suffer any action to be taken by any Person (other than
the Owner) which would cause the Vessel to constitute "tax-exempt
use property" within the meaning of Section 168(h)(1) of the Code
(or Section 168(j)(3) of the 1954 Code), or property used
"predominantly outside the United States" within the meaning of
Section 168(g)(1)(A) of the Code (or Section 168(f)(2) of the 1954
Code);
(f) Immediately prior to the Delivery Date, Reading and Bates, Inc. was
entitled to accelerated cost recovery deductions with respect to
the Vessel, computed on the basis that (i) the Vessel is 5-year
property (within the meaning of Section 168(c)(2)(B) of the 1954
Code) and (ii) recovery percentages applicable to the Vessel are
those set forth for 5-year property pursuant to Section 168(b)(1)
of the 1954 Code;
(g) Neither the Charterer nor any of its Affiliates will bear any of
the cost of the Upgrade Nonseverables;
(h) The total cost of the Upgrade Program will be reasonable and based
on arm's-length negotiations;
(i) All of the Upgrade Severables will be readily removable from the
Vessel without causing material damage to the Vessel;
(j) The allocation of the total cost of the Upgrade Program among the
Upgrade Nonseverables, the Upgrade Severables, and the Upgrade
Maintenance as set forth on Schedule B is reasonable;
(k) The Upgrade Maintenance will consist solely of ordinary and routine
maintenance and repairs that will not materially add to the
Vessel's value or appreciably prolong the Vessel's useful life;
(l) The Charterer has not made and will not make, with respect to the
period beginning with the Delivery Date and ending with the date
(if any) on which the Charterer acquires title to the Vessel from
the Owner, any claim predicated on tax or legal ownership of such
Vessel;
(m) Immediately after the Upgrade Completion, the basis for Income Tax
purposes of the Vessel in the hands of the Owner will take into
account (a) the purchase price of the Vessel, including all related
costs, expenses, commissions, taxes, etc. incurred by the Owner in
connection with the acquisition of the Vessel, and (b) all costs
incurred by the Owner pursuant to the Upgrade Program;
(n) The Vessel does not require any improvements, modifications,
upgrades or additions in order to be rendered complete or suitable
for its intended use, and the Vessel is ready and available for the
Charterer's intended use; and
(o) No member of the "Lessee Group" (as such term is defined in Revenue
Procedure 75-21, 1975-1 C.B. 715, as modified by Revenue Procedure
79-48, 1979-2 C.B. 529) of which the Charterer is a member has,
nor will it acquire at any time during the Charter Period, any
investment in the Vessel within the meaning of Section 4(4) of said
Revenue Procedures that is not permitted thereunder.
18.3 Tax Indemnity
The Charterer shall indemnify and hold the Owner, each of the Investors
and any Affiliate thereof harmless from:
(a) Any Taxes (other than Income Taxes) imposed on or incurred by the
Owner, such Investor or any Affiliate, employee, agent or
representative thereof with respect to this Charter or any of the
Charter Documents, the Vessel, any direct or indirect interest
therein or any amounts paid or payable in connection therewith;
(b) Any Income Taxes (other than U.S. federal Income Taxes) imposed on
or incurred by the Owner, such Investor or any Affiliate thereof
(i) caused by or arising from the location or operation of the
Vessel in any particular waters or (ii) imposed by any
jurisdiction, other than the jurisdiction of incorporation of such
Investor or the jurisdiction of a place of business of such
Investor (unless such place of business is determined on the basis
of the location of the Vessel or the operation of the Vessel or
this Charter or any of the Charter Documents), in respect of the
Vessel or by reason of the transactions contemplated by the Charter
or any of the Charter Documents;
(c) Any Income Taxes imposed on or incurred by the Owner, such Investor
or any Affiliate thereof caused by or arising from the Vessel s
failing to qualify for accelerated cost recovery deductions,
computed on the basis that (i) the Vessel is 5-year property
(within the meaning of Section 168(c)(2)(B) of the 1954 Code) and
(ii) recovery percentages applicable to the Vessel are those set
forth for 5-year property pursuant to Section 168(b)(1) of the 1954
Code, by reason of any act of commission or omission,
misrepresentation or breach of any agreement, covenant or warranty
contained in the Charter or any of the Charter Documents on the
part of the Charterer, any subcharterer, assignee or user of the
Vessel or any Affiliate thereof;
(d) Any Income Taxes imposed on or incurred by the Owner, such Investor
or any Affiliate thereof caused by or arising from the charter,
subcharter or use of the Vessel to or by a tax-exempt entity
(within the meaning of Section 168(h)(1)(A) of the Code or Section
168(j)(3)(A) of the 1954 Code);
(e) Any Income Taxes imposed on or incurred by the Owner, such Investor
or any Affiliate thereof caused by or arising from the Vessels
becoming limited use property;
(f) Any Income Taxes imposed on or incurred by the Owner, such Investor
or any Affiliate thereof caused by or arising from any item of loss
or deduction attributable to the Vessel, this Charter or any of the
Charter Documents or the transactions contemplated by the Charter
or any of the Charter Documents not being treated as derived from,
or allocable to, sources within the United States;
(g) Any Income Taxes imposed on or incurred by the Owner, such Investor
or any Affiliate thereof caused by or arising from any replacement,
improvement, modification, upgrade, addition or capital expenditure
made or to be made to or in connection with the Vessel or pursuant
to this Charter, any of the Charter Documents or the transactions
contemplated by the Charter or any of the Charter Documents or
otherwise;
(h) Any Taxes payable as a result of any inaccuracy or breach of any
representation, warranty or covenant of the Charterer under this
Charter or any of the Charter Documents;
(i) Any Income Taxes imposed on or incurred by the Owner, such Investor
or any Affiliate thereof caused by or arising from the inclusion in
income of any amount paid or payable by the Charterer under this
Section 18.3; and
(j) Any attorneys fees or other costs incurred by the Owner, such
Investor or any Affiliate thereof in connection with any payment
from the Charterer under this Section 18.3.
18.4 Payments
Any amount to which the Owner, any of the Investors or any Affiliate
thereof is entitled under Section 18.3 shall be paid in a lump sum equal
to the present value of the amounts of the existing and anticipated Taxes
described in Section 18.3 payable by such indemnitee for all affected
taxable periods. In the case of any such amount caused by a loss of
Income Tax deductions, such amount shall be reduced (but not below zero)
by an amount equal to the present value of the amounts of existing and
anticipated reductions in Income Taxes payable by such indemnitee for all
affected taxable periods that would not be realized but for the loss of
such deductions. Any amount to which such an indemnitee is entitled
under Section 18.3 shall be calculated on the basis of (i) a conclusive
presumption that such indemnitee has and will have sufficient amounts of
taxable income, foreign-source income, and foreign income tax liability
so as to be able to fully utilize on a current basis any Income Tax
benefits which could be derived from the Owner's ownership of the Vessel,
(ii) a conclusive presumption that such indemnitee is and will be liable
for Taxes at the highest marginal rates in effect for the relevant
taxable period, (iii) the date or dates on which any payment of Taxes
(including estimated Taxes) shall be due or would be due for the relevant
taxable period if such indemnitee was actually liable for Taxes for such
relevant period, and (iv) an after-tax discount rate of 4.42% per annum,
discounted quarterly. Any such amount shall be paid by the Charterer to
such indemnitee within thirty (30) days following the receipt by the
Charterer of written notice from such indemnitee which requests such
amount and provides details supporting the calculation of such amount.
18.5 Records
The Charterer will maintain sufficient records with respect to the Vessel
and this Charter, will preserve and retain any such records until the
expiration of the statutory period of limitations (including extensions)
of the taxable periods to which any such records relate and will provide
copies of such records as the Owner or any of the Investors or any
Affiliate thereof may reasonably request to enable the Owner, such
Investor or any Affiliate thereof to fulfill its Tax filing obligations.
ARTICLE 19
GENERAL
19.1 Notices
Notices and other communications required or permitted hereunder shall be
in writing and shall be deemed sufficient for all purposes if sent by
registered or certified letter, nationally recognized overnight courier
service specifying one-day delivery, facsimile or telex to the
recipient's address stipulated below and shall be effective from the date
of receipt thereof. Other addresses may be substituted for those below
upon giving notice thereof in the manner provided above:
if to the Owner: Deep Sea Investors, L.L.C.
c/o Heller Financial
101 Park Avenue
New York, New York 10178
Attn: Legal Department
Fax: (212) 880-7158
GATX Marine Investors Corporation
Four Embarcadero Center, Suite 2200
San Francisco, California 94111
Attn: Portfolio Management
Fax: (415) 955-3415
Heller Financial Leasing, Inc.
500 W. Monroe Street
Chicago, Illinois 60661
Attn: CEFD - Central Region Credit Manager
Fax: (312) 441-7519
MDFC Equipment Leasing Corporation
4060 Lakewood Boulevard, 6th Floor
Long Beach, California 90808
Attn: Director of Operations
Fax: (310) 627-3002
if to the Charterer: Reading & Bates Drilling Co.
901 Threadneedle, Suite 200
Houston, Texas 77079
Attn: Chief Financial Officer
Fax: (713) 496-0285
19.2 Expenses
Whether or not any of the transactions contemplated hereby are
consummated, the Charterer agrees, upon demand, (a) to pay the appraisal
costs, the fees and expenses of the Independent Engineer and expenses and
disbursements of the Owner under the Charter and the Charter Documents
and (b) to pay to the parties entitled thereto, all of the legal fees and
expenses incurred by the Owner and each of the Investors in connection
with the preparation, execution and delivery of the Bill of Sale, the
Guaranty, the Mortgage, this Charter and the Charter Documents up to
$75,000 and all out-of-pocket costs and expenses plus 50% of any legal
fees in excess of $75,000. In addition, the Charter shall pay upon
demand all other costs and expenses incurred by the Owner and the
Investors in connection with the enforcement of any of their rights or
remedies, any future amendments, supplements, waivers or consents with
respect to any of the Charter Documents, including, without limitation:
(a) the reasonable expenses and disbursements of counsel for the Owner
and the reasonable fees, expenses and disbursements of Baker &
Botts, L.L.P., special counsel for the Investors, or any other
counsel for services rendered after the Delivery Date in connection
with any Charter Document or any transaction contemplated thereby,
or any modification, amendment or waiver of any thereof;
(b) all other reasonable expenses in connection with such transactions
including, without limitation, the expenses of appraisers, other
counsel or of experts whose opinions are required by the terms
hereof (to the extent not specifically required to be paid by third
parties by the terms hereof), printing expenses and all fees, taxes
and other charges payable in connection with the recording or
filing of instruments and financing statements desirable under the
Charter Documents;
(c) reimbursement to the Owner and Investors for their reasonable out-
of-pocket expenses in connection with entering into such
transactions, and any and all fees, expenses and disbursements of
the character referred to in clauses (a) and (b) above which shall
have been paid by the Owner or any of the Investors; and
(d) reimbursement to the Owner and Investors in an amount sufficient to
hold each of them harmless from and against any and all liability
and loss with respect to or resulting from any and all claims for
or on account of brokers' or finders' fees or commissions or
financial advisory fees by any brokers, finders or financial
advisors engaged by the Charterer or the Guarantor with respect to
such transactions.
19.3 The Owner's Right to Perform for the Charterer
If the Charterer fails to perform or comply with any of its agreements
contained herein other than its obligations to pay Hire, the Owner, may
upon notice to the Charterer itself perform or comply with such
agreement, and the amount of any expenses of the Owner incurred in
connection with such performance or compliance, together with interest on
such amount at the Overdue Rate, shall be deemed Supplemental Hire,
payable by the Charterer upon demand.
Without in any way limiting the obligations of the Charterer hereunder,
the Charterer hereby irrevocably appoints the Owner as its agent and
attorney, with full power and authority at any time at which the
Charterer is obligated to deliver possession of the Vessel to the Owner,
to demand and take possession of the Vessel in the name and on behalf of
the Charterer from whomsoever shall be at the time in possession thereof
in the manner described in, and with all rights and remedies conferred
under, Section 3.4(a) hereof.
19.4 Waivers
None of the requirements of this Charter shall be considered as waived by
either party unless the same is done in writing, and then only by the
persons executing this Charter, or other duly authorized agent or
representative of the Person designated in writing by a senior officer of
such Person and then any such waiver shall apply only in the specific
instance and for the specific purpose for which such is given.
19.5 Entire Agreement
This Charter and the Charter Documents contain the entire agreement
between the parties with respect to the subject matter hereof and
supersede and replace any oral or written communications heretofore made
between the parties relating to the subject matter hereof.
19.6 Successors and Assigns
This Charter shall inure to the benefit of and be binding upon the
successors and assigns of the parties, provided that, except as expressly
set forth herein, the Charterer may not assign its rights hereunder
without the express written consent of the Owner and that the assignor
shall remain liable for the performance of its assignee unless
specifically released by the other party hereto.
19.7 Law
The validity, construction, interpretation and effect of this Charter
shall be governed by the general maritime laws of the United States,
without regard to any choice of law rules that would otherwise require
the application of the laws of any other jurisdiction, except that where
the general maritime laws of the United States look to or adopt state
law, this Charter shall be governed by the laws of the State of New York,
without regard to any choice of law rules that would otherwise require
the application of the laws of any other jurisdiction.
19.8 Parties' Intention
It is the intent of all parties hereto and affected hereby in the
execution and performance of this Charter, the Charter Documents and all
related documentation to remain in strict compliance with all applicable
laws from time to time in effect. Further, it is the intent of all
parties hereto and affected hereby to evidence, by this Charter, a lease
between the Owner, as lessor, and the Charterer, as lessee, rather than
any other form of financial arrangement including specifically, but
without limitation, a loan or other debt financing. Any and all
payments, amounts, liabilities, commitment fees and other amounts
expended and obligations of the Charterer incurred or arising in
connection with this Charter, the Charter Documents and all related
documentation are intended to evidence, lease payment obligations of the
Charterer or reimbursements to the Owner and the Investors or their
agents, representatives or designees, for services actually performed,
goods actually furnished or provided, or other expenses or liabilities
for which reimbursement is provided in connection with this Charter and
the Charter Documents. To the extent that any such charge herein
provided for or payment herein made is held or deemed to be held by a
court of competent jurisdiction to be "interest", the parties hereto and
affected hereby stipulate and agree that none of the terms and provisions
contained in or pertaining to this Charter, the Charter Documents or any
related document shall ever be construed to create a contract to pay for
the use, forbearance or detention of money with interest at a rate or in
an amount in excess of the maximum lawful non-usurious rate or amount of
interest permitted to be charged, paid or received under said laws. For
purposes of this Charter, the Charter Documents and all related
documentation, "interest" shall include the aggregate of all charges
which constitute interest under applicable laws, which term "applicable
laws" shall include, but not be limited to, the laws of the State of New
York and, to the extent they may apply, the laws of the United States of
America, that are contracted for, chargeable or receivable under this
Charter and all related documentation. The Charterer shall never be
required to pay unearned interest on any of its obligations hereunder or
in connection herewith and shall never be required to pay interest on any
of its obligations hereunder or in connection herewith at a rate or in an
amount in excess of the maximum lawful non-usurious rate or amount of
interest that may be lawfully charged under applicable laws, and the
provisions of this paragraph shall control over all other provisions of
this Charter, the Charter Documents and all related documentation which
may be in apparent conflict herewith. If the effective rate or amount of
interest which would otherwise be payable under or in connection with
this Charter or any related documentation would exceed the maximum lawful
non-usurious rate or amount of interest the Owner or any Investor or any
assignee thereof is allowed by applicable laws to charge, collect and
receive, or in the event any such person or entity shall charge, collect
or receive monies that are deemed to constitute interest which would, in
the absence of this Section 19.8, be in excess of an amount permitted to
be charged, collected and received under the applicable laws then in
effect, then any such excess amount shall be reduced to the amount
allowed under said laws as now or hereafter construed by courts having
jurisdiction, and all such monies so collected, charged or received that
are deemed to constitute interest in excess of the maximum lawful non-
usurious rate or amount of interest permitted by applicable laws shall be
immediately, at the option of the recipient thereof, be applied to
principal, if any outstanding, or returned to or credited to the account
of the Charterer upon such determination.
19.9 Counterparts; Uniform Commercial Code
This Charter may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and
the same instrument. Each counterpart of this Charter which has been
executed by the parties hereto shall be prominently marked to identify
the party to whom originally delivered. If this Charter constitutes
chattel paper (as such term is defined in the Uniform Commercial Code as
in effect in any applicable jurisdiction), a security interest in this
Charter may be created only by the transfer or possession of the
counterpart marked "Owner's Copy" and containing a receipt therefor
executed by the Owner on or immediately following the signature page
thereof and, in addition, the Owner may file Uniform Commercial Code
Financing Statements in any relevant jurisdiction.
19.10 Warranty of Authority
By executing this Charter on behalf of any entity, each signatory to this
Charter represents and warrants that he or she has full and valid
authority to enter into this Charter on behalf of the entity for which he
or she signs.
19.11 Usage; Headings
Unless the context otherwise requires, use of the singular number in this
Charter shall include the plural number and vice versa, and use of one
gender herein shall include each other gender and vice versa. Use of the
words "hereof," "herein," "hereto," "hereby," "hereunder," or words of
similar import in this Charter refer to this Charter as a whole and not
to any specific paragraph, subparagraph, section, sentence, clause or
part of this Charter. Section headings and numbers herein are for
reference purposes only and do not constitute a part of this Charter
(unless the context indicates otherwise).
19.12 WAIVER OF JURY TRIAL
EACH OF THE CHARTERER AND THE OWNER WAIVE ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS CHARTER,
THE CHARTER DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.
19.13 VENUE; SERVICE OF PROCESS
THE CHARTERER, FOR ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY KNOWINGLY
AND INTENTIONALLY AND IRREVOCABLY AND UNCONDITIONALLY a) SUBMITS, FOR
ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE STATE
COURTS OF THE STATE OF NEW YORK AND THE FEDERAL COURTS SITTING IN THE
STATE OF NEW YORK AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE
MADE UPON IT IN ANY LEGAL PROCEEDING ARISING OUT OF OR IN CONNECTION WITH
THIS CHARTER OR THE OTHER CHARTER DOCUMENTS BY SERVICE OF PROCESS AS
PROVIDED BY NEW YORK LAW, b) WAIVES, TO THE EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY LITIGATION ARISING OUT OF OR IN CONNECTION WITH THIS CHARTER OR THE
OTHER CHARTER DOCUMENTS BROUGHT IN ANY NEW YORK STATE COURT OR FEDERAL
COURT SITTING IN THE STATE OF NEW YORK, c) WAIVES ANY CLAIMS THAT ANY
LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM, d) CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH LITIGATION BY THE MAILING OF COPIES
THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, TO
THE CHARTERER AT THE ADDRESS SET FORTH HEREIN AND e) AGREES THAT ANY
LEGAL PROCEEDING AGAINST THE CHARTERER ARISING OUT OF, RELATED TO OR IN
CONNECTION WITH THIS CHARTER OR THE OTHER CHARTER DOCUMENTS OR THE
OBLIGATIONS HEREUNDER OR THEREUNDER MAY BE BROUGHT IN ANY COURT OF
COMPETENT JURISDICTION IN THE STATE OF NEW YORK. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF THE OWNER TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE CHARTERER OR ANY OF THE OTHER MEMBER OF THE CHARTERER
GROUP IN ANY OTHER JURISDICTION OR TO SERVE PROCESS IN ANY MANNER
PERMITTED BY APPLICABLE LAW.
19.14 Agent for Service of Process
The Charterer hereby irrevocably designates The Prentice-Hall
Corporation, with offices at 500 Central Avenue, Albany, New York 12206-
2290, as agent to receive for and on behalf of the Charterer service of
process in New York. In the event that The Prentice-Hall Corporation
System, Inc. resigns or ceases to serve as the Charterer's agent for
service of process hereunder, the Charterer agrees forthwith (a) to
designate another agent for service of process in the State of New York
and (b) to give prompt written notice to the Owner of the name and
address of such agent. The Owner agrees to use reasonable efforts to
cause a copy of such process served on such agent to be promptly
forwarded to the Charterer at its address set forth herein, and the
Charterer agrees that the failure of the Charterer to receive such copy
shall not impair or affect in any way the validity of such service of
process or of any judgment based thereon. The Charterer agrees that the
failure of its agent for service of process to give any notice of any
such service of process to the Charterer shall not impair or affect the
validity of such service or of any judgment based thereon. If, despite
the foregoing, there is for any reason no agent for service of process of
the Charterer available to be served, then the Charterer further
irrevocably consents to the service of process by the mailing thereof by
the Owner by registered or certified mail, postage prepaid, to the
Charterer at its address herein. Nothing in this Section 19.14 shall
affect the right of the Owner to serve legal process in any other manner
permitted by law or affect the right of the Owner to bring any action or
proceeding against the Charterer or its property in the courts of any
other jurisdiction.
IN WITNESS HEREOF, the parties hereto have executed this Charter on
the 28th day of November, 1995.
DEEP SEA INVESTORS, L.L.C. READING & BATES DRILLING CO.
By: GATX MARINE INVESTORS
CORPORATION, Member
By: By:
Name: Name:
Title: Title:
By: HELLER FINANCIAL LEASING, INC.
Member
By:
Name:
Title:
By: MDFC EQUIPMENT LEASING CORPORATION,
Member
By:
Name:
Title:
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SCHEDULE A
DESCRIPTION OF VESSEL M.G. HULME, JR.,
INCLUDING SPECIFICATIONS
- ------------------------------------------------------------------------------
SCHEDULE C
CHARTERER'S INSURANCE
As specified in Article 15, the Charterer shall maintain the following
insurance coverage:
1. Workmen's Compensation and Employers' Liability Insurance
All of the Charterer's employees shall be covered for statutory benefits
as set forth and required by applicable law in the Area of Operation or
such other jurisdiction under which the Charterer may become obligated to
pay benefits. Employers' Liability insurance, including appropriate
maritime coverage covering all employees, shall be provided with minimum
primary policy limits as required by applicable statute, or U.S. $1
million per occurrence, whichever is greater.
2. Comprehensive General Liability
Insurance coverage shall be provided for liability arising from all
operations of the Charterer. The policy shall include coverage for
premises and operations, independent contractors, completed operations,
and contractual liability (or their equivalents). Insurance coverage
shall also be provided for all owned, hired, and nonowned vehicles. The
minimum primary policy limits shall be U.S. $1 million single limit per
occurrence under the General Liability policies. Automobile Liability
insurance shall have minimum policy limits of U.S. $1,000,000 single
limit per occurrence, or such greater amount as required by law.
3. Protection and Indemnity (Marine Liability) Insurance
Full form marine protection and indemnity insurance, including, but not
limited to, sudden and accidental pollution liability and contractual
liability coverage or equivalent insurance (including equivalent
insurance against liability for fines and penalties arising out of the
operation of the Vessel) with such club or under forms of policies
approved by the Owner. Such protection and indemnity insurance shall be
maintained in the broadest forms generally available in the United States
market, shall be in an amount not less than that carried by experienced
and responsible companies engaged in the drilling of petroleum, shall
include a cross-liability endorsement and shall be placed through
independent brokers of recognized standing and with first-class
underwriters reasonably acceptable to the Owner. No hull and machinery
or protection and indemnity insurance shall provide for a deductible
amount in excess of $500,000 with respect to the Vessel without the prior
written consent of the Owner.
4. Excess Liability
The Charterer shall carry Excess Liability Insurance in amounts not less
than $200 million each occurrence in addition to and in excess of all
primary Liability Coverages carried by Charterer, including but not
limited to insurance required under Paragraphs 1, 2 and 3 (oil pollution
sublimit $80 million per Paragraph 6).
5. Marine Physical Damage, Including Hull and Machinery
All risk Marine and hull and machinery shall be provided with a limit
equal to that normally carried by experienced and responsible companies
engaged in offshore drilling, but shall not be less than the greater of
(a) 110% of the Stipulated Loss Value of the Vessel; or (b) the Fair
Market Sale Value of the Vessel. Coverage shall include collision
liability and navigation limits adequate for the Vessel's trade.
6. Oil Pollution Insurance
Oil pollution insurance coverage issued by the Vessel's P & I Club or
equivalent coverage in the amount of not less than US $80,000,000 per
occurrence, unless additional insurance or proof of financial
responsibility of a greater amount shall be required by a governmental
authority, in which case such greater amount shall be obtained and kept
in full force and effect by the Charterer. The Charterer shall maintain
insurance, if available, covering similar oil removal risks or
liabilities and civil or criminal penalties incident thereto and not
attributable to the action or inaction of the Owner under any law,
regulation or judicial decision of any of the United States of America or
foreign jurisdiction or jurisdictions or political subdivision thereof
applicable to the Vessel or its operations to the extent such insurance
is requested in writing by the Owner and recommended by an independent
marine insurance broker as insurance which it would be imprudent not to
carry for the protection of the Charterer and the Owner in view of the
nature of the Vessel and the Vessel's operations.
7. War, Political Risk, Confiscation and Expropriation Insurance
If and to the extent that the Vessel is operated outside of the
territorial waters and/or the Outer Continental Shelf of the United
States (and in addition to any coverage required by the Owner for such
operations under this Charter), War, Political Risk, Confiscation and
Expropriation Insurance shall be provided for the Vessel with a limit
equal to the value insured under Paragraph 5 above.
8. Other Losses
Losses not covered by the above stated policies because of deductibles
and policy limits stated above shall be borne according to the liability
and indemnity provisions of this Charter.
9. Owner Group as Additional Insured
All coverages and other insurance policies carried by the Charterer or
that the Charterer is required at any time to maintain pursuant to this
Charter shall name Owner Group as an additional insured and loss payee
for all risks and losses for which the Charterer is liable under this
Charter.
10. Additional Provisions
The Charterer will deliver to the Owner and each of the Investors copies
of all cover notes and certificates of insurance and, if requested by the
Owner copies of all binders and policies with respect to insurance
carried on the Vessel. On or before the Delivery Date of the Vessel, and
on each anniversary of the Delivery Date, and each time there is a
reduction or material change in the insurance coverage carried on the
Vessel, the Charterer will furnish to the Owner and each of the Investors
a detailed report signed by independent marine insurance brokers (who may
be the insurance brokers regularly employed by the Charterer) appointed
by the Charterer and reasonably acceptable to the Owner, describing the
insurance policies then carried and maintained on the Vessel (including
the names of the underwriters, the types of risk covered by such polices,
the amount insured thereunder and the expiration date thereof) and
stating that in the opinion of said insurance brokers such insurance is
adequate and reasonable for protection of the Owner, is in compliance
with the terms of Article 15 and is comparable with that carried by other
responsible operators of similar drilling vessels. All policies shall
include the following: (i) breach of warranty protection to the Owner
Group, (ii) waiver of subrogation clause and (iii) at least 30 days
prior written notice of cancellation or material modification. The
insurance shall be primary, without right of contribution from any other
insurance which may be carried by the Owner Group, and contain a waiver
of set off of premiums against claims proceeds and provide for no
recourse for premium payments by the Owner Group.
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SCHEDULE D
STIPULATED LOSS VALUE
- ------------------------------------------------------------------------------
SCHEDULE E
PENDING LITIGATION
Proceedings disclosed in Reading & Bates' Report on Form 10-Q dated
September 30, 1995 filed with the Securities & Exchange Commission.
- ------------------------------------------------------------------------------
SCHEDULE F
Computation of Basic Hire Upgrade Adjustment
Effective as of each Upgrade Payment Date after the Delivery Date, the
Basic Hire shall be adjusted for the amount to be funded by the Owner in
respect of the Upgrade Program on such Upgrade Payment Dates using the U.S.
Treasury note rate published in The Wall Street Journal for such notes
maturing on or about the Expiration Date as adjusted and illustrated below,
assuming a November 15, 1995 funding of the first Upgrade Program
installment payment and the Purchase Price under the MOA, the occurrence of
the second installment payment of the Upgrade Program on February 15, 1996
and the third installment payment of the Upgrade Program on Completion,
assumed to be May 15, 1996.
11/15/95 Close (Index change as of 11/13/ WSJ - 19 bp)
Hulme: Rental 1.171945 Implicit to Cap 10.6841
Nov portion of Upgrade: Rental 1.1845983 Implicit to Cap 10.8726
Weighted 50:2.5: Rental 1.1725475 Implicit 10.6931
2/15/96 Close (at original 6/22 index rate)
Feb portion of Upgrade: Rental 1.21079696 Implicit to Cap 11.0884
5/16/96 Close (at original 6/22 index rate)
May portion of Upgrade: Rental 1.22053144 Implicit to Cap 11.0493
- ------------------------------------------------------------------------------
Exhibit A to Charter
FORM OF CERTIFICATE OF COMPLETION
The following certificate (this "Certificate") is required for the
occurrence of the Upgrade Completion (as defined in the Bareboat Charter
(the "Charter") dated as of November 28, 1995 between Deep Sea Investors,
L.L.C., a Delaware limited liability company (the "Owner"), and Reading &
Bates Drilling Co., an Oklahoma corporation (the "Charterer"). Unless
otherwise defined herein, all capitalized terms used herein have the
meanings assigned to such terms in the Charter.
The Charterer hereby certifies as follows:
(a) all environmental, governmental and other operating permits and
approvals necessary, as of the date hereof, for the continued operation of
the Vessel have been obtained and are in full force and effect, there have
been no defaults under any such permits and approvals and the Charterer has
no knowledge that any such permits or approvals will be suspended or
terminated prior to the scheduled expiration thereof;
(b) all insurance required by the Charter is in full force and effect;
(c) the Charter, the Charter Documents, the Drilling Contract and each
Security Document is in full force and effect;
(d) no Event of Default or Default has occurred and is continuing;
(e) all work performed in connection with the construction of the
Upgrade Program has been accepted by the Charterer without material
exception;
(f) the Vessel is capable of being operated for the purposes for which
it has undergone the Upgrade Program without material modification thereto;
(g) the Vessel Upgrade has been completed in accordance with the
plans, specifications and schedules set forth in the Upgrade Program,
industry standards and accepted practices;
(h) the statements contained in the Certificate of Independent
Engineer are true, complete and correct;
(i) the Charterer has paid all costs and expenses for the Upgrade
Program other than for Upgrade Nonseverables, which have been paid by the
Owner; and
(j) the Upgrade Nonseverables Cost is $______, which amount has been
incurred and computed in accordance with the terms of the Charter and is
properly reimburseable by the Owner thereunder.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
_____ day of ________________________, 199___.
READING & BATES DRILLING CO.
By:
Name:
Title:
- -----------------------------------------------------------------------------
Exhibit B to Charter
FORM OF CERTIFICATE OF DELIVERY
The following certificate (this "Certificate") is delivered
pursuant to Section 3.2 of the Bareboat Charter (the "Charter") dated as of
November 28, 1995 between Deep Sea Investors, L.L.C., a Delaware limited
liability company (the "Owner"), and Reading & Bates Drilling Co., an
Oklahoma corporation (the "Charterer"). Unless otherwise defined herein,
all capitalized terms used herein have the meanings assigned to such terms
in the Charter.
The Charterer hereby certifies as follows:
0.14.1 the Charterer has inspected the Vessel and made such
review, inquiry and other investigation necessary or appropriate to deliver
this Certificate.
0.14.2 the Charterer has accepted the Vessel for all
purposes under the Charter and confirms that the Vessel is in compliance
with all requirements of the Charter and that the Vessel is seaworthy, in
accordance with specifications, in good working order, condition and repair
and without defect or inherent vice in title, condition, design, operation
or fitness for use, whether or not discoverable by the Charterer as of the
date hereof, and free and clear of all Liens other than Permitted Liens.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this _____ day of ________________________, 199___.
READING & BATES DRILLING CO.
By:
Name:
Title:
- -----------------------------------------------------------------------------
Exhibit C to Charter
FORM OF CERTIFICATE FOR REIMBURSEMENT
The following certificate (this "Certificate") is delivered
pursuant to Section 5.10 of the Bareboat Charter (the "Charter") dated as of
November 28, 1995 between Deep Sea Investors, L.L.C., a Delaware limited
liability company (the "Owner"), and Reading & Bates Drilling Co., an
Oklahoma corporation (the "Charterer"). Unless otherwise defined herein,
all capitalized terms used herein have the meanings assigned to such terms
in the Charter.
The Charterer hereby certifies as follows:
(a) the Charterer has visited the Shipyard, inspected
the Vessel and the work under the Upgrade Program and made such review,
inquiry and other investigation necessary or appropriate to deliver this
Certificate;
(b) each of the Charter, the Charter Documents, the
Drilling Contract and the Security Documents is in full force and effect;
(c) no Event of Default or Default has occurred and is
continuing;
(d) all work performed to date for the Upgrade Program
has been accepted by the Charterer without material exception and has been
completed in accordance with the plans, specifications and schedules of the
Upgrade Program, industry standards and accepted practices;
(e) the statements contained in the Certificate of
Independent Engineer attached hereto are true, complete and correct;
(f) the Charterer has paid all costs and expenses of the
Upgrade Program that are currently due, except any portion of Upgrade
Nonseverable Cost, all of which have been (or will be from the proceeds of
the advance requested under clause (g) below) and no Lien encumbers the
Vessel or any interest of the Owner therein (other than Permitted Liens) and
no litigation, investigation or proceeding of or before any governmental
authority or arbitrator is pending or threatened by or against the Charterer
or with respect to the Vessel or any interest of the Owner therein or with
respect to the Charter Documents or any of the transactions contemplated
thereby, nor is any litigation, investigation or proceeding of or before any
governmental authority or arbitrator pending or threatened by or against the
Charterer or any of their respective properties or revenues which could
reasonably be expected to create such a Lien or otherwise to have a material
adverse effect on the financial or other condition of the Charterer or its
ability to perform its obligations under the Charter Documents;
(g) the Charterer hereby requests reimbursement under
the Charter of $______, which amount constitutes a portion of the Upgrade
Nonseverable Cost, has been properly incurred and computed in accordance
with Article 5 of the Charter and has been properly paid by the Charterer
thereunder and is properly reimburseable by the Owner under the Charter; and
(h) the representations and warranties of the members of
the Charter Group contained in the Charter Documents are true and correct as
of the date hereof as though made on and as of the date hereof; and
(i) the Charterer agrees that the Basic Hire payable on
each Payment Date shall be increased to $________ and the Schedule D to the
Charter is hereby deleted and Schedule D in the form of Exhibit A attached
hereto is substituted in lieu thereof.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this _____ day of ________________________, 199___.
READING & BATES DRILLING CO.
By:
Name:
Title:
- ------------------------------------------------------------------------------
Exhibit D to Charter
FORM OF COMPLETION CERTIFICATE OF INDEPENDENT ENGINEER
The following certificate (this "Certificate") is delivered
pursuant to Section 5.10 of the Bareboat Charter (the "Charter") dated as of
November 28, 1995, between Deep Sea Investors, L.L.C., a Delaware limited
liability company (the "Owner"), and Reading & Bates Drilling Co., an
Oklahoma corporation (the "Charterer"). Unless otherwise defined herein,
all capitalized terms used herein have the meanings assigned to such terms
in the Charter.
[Name of the Independent Engineer], a [type of entity] organized
under the laws of _____________ (the "Independent Engineer"), acting by and
through ___________, its duly authorized representative, does hereby certify
as follows:
(a) the Independent Engineer has visited the Shipyard,
inspected the Vessel and the work under the Upgrade Program and made such
review, inquiry and other investigation necessary or appropriate to deliver
this Certificate;
(b) the workmanship, quality and construction of the
Upgrade Program has been performed in accordance with the plans,
specifications and schedules for each portion of the Upgrade Program and in
accordance with industry practice;
(c) the Upgrade Program has been completed according to
its plans, specifications and schedule at a cost not to exceed the sum of:
(i) $10,000,000 and (ii) amounts to be expended pursuant to Change Orders
approved by the Owner in accordance with the terms of the Charter;
(d) all guaranties of workmanship, quality, design,
equipment, materials, construction and processes have been met or, to the
extent that any such guaranty has failed to have been met, such failure is
immaterial to the successful completion of the Upgrade Program;
(e) any performance tests under the Upgrade Program
required to have been successfully completed have been successfully
completed or, to the extent that any such test has been failed, such failure
is immaterial to the successful completion of the Upgrade Program; and
(f) to the best knowledge of the Independent Engineer
after due inquiry, no Lien encumbers the Vessel or any part thereof other
than Permitted Liens and no basis exists for the assertion of any such Lien.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this ______ day of _______________________.
By:
Name:
Title:
- -----------------------------------------------------------------------------
Exhibit E to Charter
FORM OF REIMBURSEMENT CERTIFICATE OF INDEPENDENT ENGINEER
The following certificate (this "Certificate") is delivered
pursuant to Section 5.10 of the Bareboat Charter (the "Charter") dated as of
November 28, 1995, between Deep Sea Investors, L.L.C., a Delaware limited
liability company (the "Owner"), and Reading & Bates Drilling Co., an
Oklahoma corporation (the "Charterer"). Unless otherwise defined herein,
all capitalized terms used herein have the meanings assigned to such terms
in the Charter.
[Name of the Independent Engineer], a [type of entity] organized
under the laws of _____________ (the "Independent Engineer"), acting by and
through ___________, its duly authorized representative, does hereby certify
as follows:
(a) the Independent Engineer has visited the Shipyard,
inspected the Vessel and the work under the Upgrade Program and made such
review, inquiry and other investigation necessary or appropriate to deliver
this Certificate;
(b) the workmanship, quality and construction of the Upgrade
Program has been performed to date in accordance with the plans,
specifications and schedules for each portion of the Upgrade Program and in
accordance with industry practice;
(c) in the opinion of the Independent Engineer and as far as
the Independent Engineer can reasonably ascertain, except as described on
Schedule A attached hereto, the Upgrade Program should be completed
according to its plans, specifications and schedule at a cost not to exceed
the sum of: (i) $10,000,000 and (ii) amounts to be expended pursuant to
Change Orders approved by the Owner in accordance with the terms of the
Charter;
(d) all guaranties of workmanship, quality, design, equipment,
materials, construction and processes required to have been met on or before
the date hereof, have been met or, to the extent that any such guaranty has
failed to have been met, such failure is immaterial to the successful
completion of the Upgrade Program;
(e) any performance tests under the Upgrade Program required
to have been successfully completed on or before the date hereof, have been
successfully completed or, to the extent that any such test has been failed,
such failure is immaterial to the successful completion of the Upgrade
Program; and
(f) to the best knowledge of the Independent Engineer after
due inquiry, no Lien encumbers the Vessel or any part thereof other than
Permitted Liens and no basis exists for the assertion of any such Lien.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this ______ day of _______________________.
By:
Name:
Title:
EXHIBIT 10.112
PURCHASE AND SALE AGREEMENT
GREEN CANYON AREA, OUTER CONTINENTAL SHELF
THIS PURCHASE AND SALE AGREEMENT (the Agreement ) is executed this
18th day of October, 1995, by and between Enserch Exploration, Inc., a
Texas corporation, as seller ( Seller ) and Reading & Bates Development
Co., a Delaware corporation, as buyer ( Buyer ).
RECITALS
WHEREAS, Seller desires to sell and Buyer desires to purchase certain
oil and gas properties and related rights on the terms and conditions
provided in this Agreement;
NOW, THEREFORE, Seller and Buyer hereby agree as follows:
1. SALE AND PURCHASE
1.1 Sale. Subject to the terms and conditions of this
Agreement, Seller shall sell and Buyer shall purchase and pay for, at the
Closing but effective as of 12:01 a.m., Central Standard Time, May 1, 1995
(the Effective Date ), the undivided rights, titles and interests
reflected in Exhibit 1.1 hereof (being an undivided twenty percent (20%)
of the interest of Seller) in and to the assets described below located in
or pertaining to the Green Canyon Area on the Outer Continental Shelf off
the coastline of the State of Louisiana (the undivided rights, titles and
interests reflected in Exhibit 1.1 hereof shall hereinafter sometimes be
referred to as the Assets ). The Assets shall consist of the undivided
right, title and interest reflected on Exhibit 1.1:
(a) In and to the oil, gas and mineral leasehold interests,
described on Exhibit 1.1, Part (a) (the Leases ), together
with a like interest with respect to the Leases in and to any
and all (i) mineral interests, (ii) overriding or landowners'
royalty interests, (iii) surface and subsurface interests and
rights, (iv) beneficial, convertible or reversionary
interests, (v) interest owned, claimed or acquired, or to be
owned, claimed or acquired, by agreement, (vi) production
payments, (vii) contractual interests owned pursuant to
participation agreements, operating agreements or similar
agreements, and (viii) any and all like or unlike interests,
including without limitation those specific items identified
on Exhibit 1.1, Part (a). This shall include any contractual
rights providing for the acquisition or earning of any of the
foregoing, and Seller's rights in respect of any pooled,
communitized or unitized acreage of which any of the
foregoing is a part. Except that this Agreement shall not
cover or pertain to or affect any right, title or interest of
Seller in and to, or any rights derived from, any bidding
agreements executed by and between Seller and Mobil Oil
Exploration & Producing Southwest Inc. (All of the foregoing
shall be called collectively the Leasehold Interests. )
(b) In and to any and all wells, wellbores, pipe, gathering
lines, compressors, facilities, equipment, platforms,
pipelines and any and all other personal, real, movable and
immovable property, fixtures or equipment which are located
on or used directly in connection with the production,
treatment or transportation of oil and gas from the Leasehold
Interests, including, without limitation, those items
specifically identified on Exhibit 1.1, Part (b) (the
Equipment ).
(c) In and to any and all easements, rights of way, and
subsurface and surface rights associated or used in
connection with any such easements or rights of way, which
easements, rights-of-way and subsurface and surface rights
have been obtained for use in connection with the Leasehold
Interests (the Gathering Facilities ).
(d) In and to any and all oil, gas and other minerals produced
from or attributable to the Leasehold Interests on or after
the Effective Date.
(e) To the extent the same are assignable or transferable by
Seller and to the extent and only to the extent that the same
relate to the ownership or operation of the Leasehold
Interests, the Gathering Facilities or the Equipment on or
after the Effective Date, a like interest in and to all
orders, contracts, agreements (including without limitation
all operating agreements, transportation agreements, unit
agreements, participation agreements and processing
agreements), instruments, licenses, authorizations, permits,
audits, claims, liens, suits, settlements and demands, and
other rights, privileges, benefits, duties and powers
conferred upon Seller. Except that this Agreement shall not
cover or pertain to or affect any right, title or interest of
Seller in and to, or any rights derived from, any bidding
agreements executed by and between Seller and Mobil Oil
Exploration & Producing Southwest Inc.
1.2 Title Warranty. Seller warrants that:
(a) Except as specifically set forth in Exhibit 1.1 and/or
Exhibit 3.7 or resulting from the application of the
agreements listed therein, neither Seller nor any parent,
subsidiary or affiliate of Seller during their respective
periods of ownership has (A) executed any deed, conveyance,
assignment or other instrument as an assignor, grantor,
sublessor or in another capacity or (B) has breached any
obligation under any Lease that would (i) result in Buyer's
being entitled to receive less than the net revenue interest
for any Lease, well or unit set forth in Exhibit 1.1, except
as otherwise noted on Exhibit 1.1, of all oil and gas in,
under, and that may be produced, saved and marketed from or
attributable to such Lease, well or unit, or (ii) obligate
Buyer to bear the costs and expenses relating to the
maintenance, development and operation of such Lease, well or
unit in an amount greater than the working interest for such
Lease, well or unit set forth in Exhibit 1.1, unless the net
revenue interest attributable to said working interest is
increased by a proportionate or greater amount; and
(b) Except as specifically set forth in Exhibit 1.1 and/or
Exhibit 3.7 or resulting from the application of the
agreements listed therein, the Assets are free of all Seller
created liens, security interests and encumbrances created by
or through Seller as of the Closing Date;
(the limited warranty set forth in subparagraphs (a) and (b) above shall
hereinafter be referred to as the Special Limited Warranty ). Seller
shall convey the Assets with no warranty whatsoever other than the Special
Limited Warranty, but with full substitution and subrogation to Buyer in
and to all covenants, agreements, representations and warranties made by
others heretofore given or made in connection with the Assets or any part
thereof.
1.3 Other Warranty Provisions. Buyer acknowledges that (a) Seller
has not made any warranty or representation, whether express, implied, at
common law, by statute or otherwise, relating to the fitness for an
intended purpose or condition of any movable property constituting a
portion of the Assets and (b) Buyer shall acquire such personal property
in WHERE IS, AS IS condition. Except as may be specifically set forth
to the contrary in this Agreement, Buyer acknowledges that Seller has made
no representations or warranties whatever, expressed or implied, (Seller
having hereby expressly disclaimed all such warranties) as to the
accuracy, completeness, or materiality of any data, information, record or
materials now, heretofore, or hereafter made available in connection with
this Agreement (including, without limitation, any descriptions of oil and
gas leases; quality or quantity or hydrocarbon reserves attributable to
the Assets, if any; production rates, exploratory or development drilling
opportunities, decline rates, potential for production of hydrocarbons
from the Assets; the environmental condition of said Assets; the legal,
tax or other consequences of owning Seller's interest in the Assets; or
any other information contained in any material furnished in connection
with this transaction). Any and all such data, information, records or
materials furnished by Seller to Buyer is provided as a convenience only
and any reliance on or use of same is at the Buyer's sole risk. WITHOUT
LIMITING THE GENERALITY OF THIS PARAGRAPH, SELLER DISCLAIMS AND NEGATES AS
TO ANY PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND APPURTENANCES SUBJECT
TO THIS AGREEMENT (INCLUDING ALL WELLS): (A) ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY
OF CONFORMITY TO MODELS OR SAMPLE OR MATERIALS. THE PURCHASER EXPRESSLY
AGREES THAT TITLE TO SUCH PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND
APPURTENANCES WILL BE ACCEPTED "AS IS", "WHERE IS", "WITH ALL FAULTS", AND
IN ITS PRESENT CONDITION AND STATE OF REPAIR.
2. PURCHASE PRICE AND OTHER CONSIDERATION.
2.1 Determination of Purchase Price. The purchase price for the
Assets (the Purchase Price ) shall be Eighteen Million Two Hundred Fifty
Thousand and No/100 Dollars ($18,250,000.00) (the Purchase Price );
2.2 Payment of Purchase Price. The payment of the Purchase Price
shall be made by Buyer to Seller pursuant to the terms and provisions
ofthe agreement between Buyer and Seller concerning the timing of the
payment of the Purchase Price, attached hereto and made a part hereof for
all purposes as Exhibit 5.2(c). Failure of Buyer to conform to and
perform the payment of the Purchase Price in accordance with the terms and
provisions of such ancillary agreement covering same, shall be grounds for
the rescission of this Agreement by Seller, and Buyer shall reassign unto
Seller all of the interests which Buyer has acquired from Seller
hereunder. Such reassignment shall be free and clear of any and all
burdens and encumbrances on the Assets, save and except those burdens and
encumbrances affecting the Assets as of the date hereof.
3. REPRESENTATIONS OF SELLER.
As a principal cause and material inducement to Buyer's execution of
this Agreement and to Buyer's consummation of the transactions
contemplated hereby, and with the acknowledgment by Seller of Buyer's
reliance hereon, Seller, to the extent set forth below and with respect to
the undivided interests in the Assets covered hereby, represents to Buyer
that as of the date hereof:
3.1 Existence of Seller. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Texas.
3.2 Power of Seller. Seller has the requisite corporate power to
enter into and perform this Agreement and the transactions contemplated
hereby. Subject to rights to consent by, required notices to, and filings
with or other actions by governmental entities where the same are
customarily obtained subsequent to the assignment of oil and gas interests
and leases, the execution, delivery and performance of this Agreement by
Seller, and the transactions contemplated hereby, will not violate (i) any
provision of the articles of incorporation or bylaws of Seller, (ii) any
material agreement or instrument to which Seller is a party or by which
Seller is or the Assets owned by Seller are bound, (iii) any judgment,
order, ruling, or decree applicable to the Assets or to Seller as a party
in interest, or (iv) any law, rule or regulation applicable to Seller or
to the ownership or operation of the Assets.
3.3 Authorization of Seller. The execution, delivery and
performance of this Agreement and the transactions contemplated hereby
have been duly and validly authorized by all requisite corporate action on
the part of Seller. This Agreement has been duly executed and delivered
on behalf of Seller, and at the Closing all documents and instruments
required hereunder to be executed and delivered by Seller shall have been
duly executed and delivered. This Agreement does, and such documents and
instruments shall, constitute legal, valid and binding obligations of
Seller enforceable in accordance with their terms, subject, however, to
the effect of bankruptcy, insolvency, reorganization, moratorium and
similar laws from time to time in effect relating to the rights and
remedies of creditors, as well as to general principles of equity
(regardless of whether such enforceability is considered in a proceeding
in equity or at law).
3.4 Brokers. Seller has incurred no obligation or liability,
contingent or otherwise, for brokers' or finders' fees in respect of the
matters provided for in this Agreement and any such obligation or
liability that might exist and which was incurred by Seller, shall be the
sole obligation or liability of Seller.
3.5 Foreign Person. Seller is not a foreign person within the
meaning of the Sections 1445 and 7701 of Internal Revenue Code of 1986, as
amended (the "Code") (i.e. Seller is not a non-resident alien, foreign
corporation, foreign partnership, foreign trust or foreign estate as those
terms are defined in the Code and any regulations promulgated thereunder).
3.6 Litigation. There are no actions, suits or proceedings pending,
or to the knowledge of Seller threatened, against or affecting the Assets
or any portion or portions thereof, or the operations of Seller relating
to the Assets or any portion or portions thereof, and to the best of
Seller's knowledge after reasonable inquiry, except as set forth in
Exhibit 3.9, no violation of any laws, statutes, regulations or orders
applicable to any Asset or the operation thereof exists.
3.7 Contracts, Agreements, Commitments and Other Matters. Except as
set forth on Exhibit 3.7, to the best of Seller's knowledge, information
and belief after reasonable inquiry, there are no contracts, agreements,
understandings, commitments, or other obligations (other than the oil, gas
and mineral leases, surface leases, rights of way and other interests
described in Exhibit 1.1 hereto and conveyance documents that are a matter
of public record in the Louisiana coastal parishes adjacent to where the
Assets are located or that are filed in the Lease File records
maintained in the New Orleans District of the Minerals Management Service
(the MMS ) or joint bidding agreements executed by and between Seller and
Mobil, with respect to the Leases) affecting the Assets which are in
effect as of the date hereof.
3.8 Consents and Preferential Purchase Rights. Except for any
consent, agreement or waiver from Manta Ray Gathering Systems, Inc. (which
consent, agreement or waiver may not be needed) and except for any
governmental consents necessary under the Hart-Scott-Rodino Anti-trust
Improvements Act, there are no consents (except governmental consents
which are customarily obtained after the assignment of an oil and gas
lease), agreements or waivers of preferential rights necessary to the
valid assignment of the Assets to Buyer at Closing that have not been
affirmatively waived or deemed to have been waived by expiration of the
appropriate notice period, and there are no preferential purchase rights
or calls on production with respect to the production from the Leasehold
Interests, except as may be provided in the agreements listed in Exhibit
3.7, which limit the purchase price for oil or gas, or which are not
subject to termination upon 60 days' notice.
3.9 Environmental Matters. Except as specifically set forth on
Exhibit 3.7 and/or as to operations conducted by parties other than
Seller, to the best of Seller's knowledge, information and belief after
reasonable inquiry, there exists no Environmental Defect with respect to
the Assets. An Environmental Defect means a condition or circumstance
that exists in connection with the Leasehold Interests or the other Assets
that is not in material compliance with any law, regulation, order or
judgment of or agreement with any federal, state or local agency or court
relating to the environment or that under such law, regulation, order,
judgment or agreement requires the owner or operator of such leases or
assets to undertake any cleanup, remediation or other expense (an
Environmental Defect ).
3.10 Open Wells. To the best of Seller's knowledge, information and
belief after reasonable inquiry, except for wells identified in Exhibit
1.1, Part (b), there exists no well that is located on any of the
Leasehold Interests and that is not plugged and abandoned in accordance
with applicable rules, regulations and contractual obligations.
3.11 Casualty Losses. To the best of Seller's knowledge, information
and belief after reasonable inquiry, there has occurred no casualty in any
Asset since the Effective Date that materially and adversely affects the
value, use or operation of such Asset.
3.12 Information. No documents were intentionally removed or
information or documents omitted from the data or documentation furnished
by Seller to Buyer that is necessary to make the data furnished not
misleading in any material respect; provided, however, this representation
is limited solely to matters of fact and specifically excludes any
statement or forecast of existing or future reserves, geologic and
engineering interpretations, forecasts, estimates and economic
assumptions, including without limitation (i) future prices of production,
(ii) future operating costs, (iii) future capital expenditures, (iv)
projections and estimates of future reserves and production and (v) the
prospects for successfully completing wells.
3.13 Compliance with Laws. Except as specifically set forth on
Exhibit 3.9 and/or as to operations conducted by parties other than
Seller, to the best of Seller's knowledge, information and belief after
reasonable inquiry, Seller has operated the Assets, or caused the Assets
to be operated, in compliance with all laws, ordinances, regulations and
orders applicable to the Assets and the operations undertaken in
connection therewith.
3.14 Use of Buyer's Equipment/Personnel. While it is Seller's
present intention to employ a floating production vessel to be provided by
Buyer or one of its affiliated companies, as previously proposed by Buyer,
in the development and production of the Assets, it is specifically
understood and agreed by and between Seller and Buyer, that the employment
of any such system and the provision by Buyer of any such system, is
specifically subject to the approval by and the rights of the various
owners of the interests of which the Assets constitute a part and that the
Operating Agreement described in Article 5.2(e), shall govern and control
the determination of such matters. Seller has made no, and will bear no
liability for any, representation to the contrary.
4. REPRESENTATIONS OF BUYER.
As a principal cause and material inducement to Seller's execution of
this Agreement and to Seller's consummation of the transactions
contemplated hereby, and with the acknowledgment by Buyer of Seller's
reliance hereon, Buyer represents to Seller that as of the date hereof:
4.1 Existence of Buyer. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware.
4.2 Power of Buyer. Buyer has the requisite power to enter into and
perform this Agreement and the transactions contemplated hereby. Subject
to consent by, required notices to, and filings with or other actions by
governmental entities where the same are customarily obtained subsequent
to the assignment of oil and gas interests and leases, the execution,
delivery and performance of this Agreement by Buyer, and the transactions
contemplated hereby, will not violate (i) any provision of the articles of
incorporation or bylaws of Buyer, (ii) any material agreement or
instrument to which Buyer is a party or by which Buyer is bound, (iii) any
judgment, order, ruling, or decree applicable to Buyer as a party in
interest, or (iv) any law, rule or regulation applicable to Buyer.
4.3 Authorization of Buyer. The execution, delivery and performance
of this Agreement and the transactions contemplated hereby have been duly
and validly authorized by all requisite corporate action on the part of
Buyer. This Agreement has been duly executed and delivered on behalf of
Buyer, and at the Closing all documents and instruments required hereunder
to be executed and delivered by Buyer shall have been duly executed and
delivered. This Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of Buyer enforceable in
accordance with their terms, subject, however, to the effect of
bankruptcy, insolvency, reorganization, moratorium and similar laws from
time to time in effect relating to the rights and remedies of creditors,
as well as to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
4.4 Brokers. Buyer has incurred no obligation or liability,
contingent or otherwise, for brokers' or finders' fees in respect of the
matters provided for in this Agreement and any such obligation or
liability that might exist and which was incurred by Buyer, shall be the
sole obligation of Buyer.
4.5 Title Examination. Buyer has conducted a title examination with
respect to Seller's interests in the Assets and acknowledges that there
are no title defects which will prevent the closing under this Agreement.
Buyer has disclosed, prior to the execution of this Agreement, to the best
of its knowledge, information and belief, all known or suspected title
defects which may place Seller in breach of its warranty or its
representations hereunder.
4.6 MMS Approval. Buyer has contemporaneously with the Closing of
the transaction contemplated by this Agreement, filed with the Minerals
Management Service, what it believes to be the appropriate documentation
for the approval of Buyer as an owner and operator of the Assets. Subject
only to the approval of Buyer's filing described in the preceding
sentence, Buyer is not aware of the existence of any fact or condition
with respect to Buyer or the Assets that may cause the MMS to withhold
unconditional approval, to the extent MMS approval is required under
applicable law, of the transfer of the Assets from Seller to Buyer.
5. CLOSING.
5.1 Time and Place of Closing. The consummation of the transactions
contemplated hereby (the Closing ) is to be held at the offices of Buyer
on or before October 20, 1995 or within five (5) business days after the
receipt of any required governmental approvals or within five (5) business
days after the time for any governmental objection has expired (namely
Hart-Scott-Rodino approval), whichever of the three dates is the later
date, unless extended by the mutual consent of the parties hereto. (The
date on which the Closing occurs shall be referred to as the Closing
Date. )
5.2 Closing Obligations. At the Closing:
(a) Seller shall execute, acknowledge and deliver to Buyer the
conveyance instruments in the form of Exhibit 5.2(a) which
will convey title to the Assets to Buyer and deliver
possession thereof to Buyer together with all requisite forms
required to accompany such assignments for filing with the
MMS.
(b) Seller shall execute such other instruments and take such
other action as may be necessary to carry out its obligations
under this Agreement.
(c) Buyer shall execute and deliver to Seller an ancillary
agreement covering and pertaining to the scheduled payment of
the Purchase Price in the form of and containing the terms
and provisions found in Exhibit 5.2(c) and also execute and
deliver to Seller, the mortgage and security agreement, note
and financing statement described therein.
(d) Buyer shall execute such other instruments and take such
other action as may be necessary to carry out its obligations
under this Agreement.
(e) Buyer and Seller shall execute and deliver, each unto the
other, the Operating Agreement dated effective May 1, 1995,
which agreement has been negotiated between the Seller and
Buyer and Mobil Oil Corporation, et al., and which agreement
shall govern the ownership and operation of the Assets on and
after the Effective Date (the "Operating Agreement").
(f) Buyer shall execute and deliver unto Seller, the
Authorization for Expenditure attached hereto and made a part
hereof for all purposes as Exhibit 5.2(f), covering and
pertaining to the drilling and/or completion of the OCS-G
7049 #5 Well.
(g) Buyer shall execute and deliver to Seller the Option
Agreement covering and pertaining to the option set forth in
Section 8.15, in the form of Exhibit 5.2 (g), attached hereto
and made a part hereof for all purposes.
(h) Buyer shall pay in cash to Seller, the sum of Six Million Two
Hundred Fifty Thousand and No/100 Dollars ($6,250,000.00)
6. POST-CLOSING OBLIGATIONS.
6.1 Assumption of Obligations and Grant of Indemnities Relating to
Operations.
(a) SUBJECT TO EACH OF THE FOLLOWING EXCEPTIONS:
(X) EXCEPT AS TO THOSE MATTERS DESCRIBED IN SECTION 6.1(B) AND
TO THE LIMITED EXTENT THAT SELLER HAS AGREED TO INDEMNIFY
BUYER AS PROVIDED IN SUCH SECTION 6.1(B); AND
(Y) EXCEPT TO THE EXTENT ANY OF THE FOLLOWING IS ATTRIBUTABLE
TO THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SELLER AT
ANY TIME BETWEEN THE EFFECTIVE DATE AND THE CLOSING DATE;
TO THE EXTENT OF ITS INTEREST IN THE ASSETS, BUYER HEREBY
ASSUMES ALL OF THE FOLLOWING DESCRIBED OBLIGATIONS, AND SUBJECT
TO THE TERMS, PROVISIONS AND LIMITATIONS OF THE OPERATING
AGREEMENT DESCRIBED IN ARTICLE 5.2(e), BUYER AGREES TO
INDEMNIFY, DEFEND AND HOLD HARMLESS SELLER, ITS OFFICERS,
DIRECTORS, SHAREHOLDERS, EMPLOYEES, AGENTS AND REPRESENTATIVES
(THE SELLER GROUP ), REGARDLESS OF WHETHER SELLER GROUP WAS
WHOLLY OR PARTIALLY NEGLIGENT OR OTHERWISE AT FAULT, FROM AND
AGAINST ANY AND ALL CLAIMS, LIABILITIES, LOSSES, COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, COURT COSTS AND
REASONABLE ATTORNEYS' FEES) ARISING FROM:
(I) EVENTS THAT TRANSPIRE OR CONDITIONS THAT COME INTO
EXISTENCE AFTER THE EFFECTIVE DATE THAT ARE ATTRIBUTABLE
TO THE OWNERSHIP OR OPERATION OF THE ASSETS ON OR AFTER
THE EFFECTIVE DATE;
(II) THE PROPER PLUGGING AND ABANDONMENT OF ALL WELLS NOW OR
HEREAFTER LOCATED ON THE LEASEHOLD INTERESTS;
(III) THE ABANDONMENT OF THE GATHERING FACILITIES; AND
(IV) ALL LIABILITY FOR PROPERTY DAMAGE OR INJURY TO OR DEATH OF
PERSONS OCCURRING AFTER THE EFFECTIVE DATE AND ARISING OUT
OF THE OWNERSHIP OR OPERATION OF THE ASSETS, REGARDLESS OF
WHETHER SAID DAMAGES OR INJURY IS ATTRIBUTABLE IN WHOLE OR
IN PART TO CONDITIONS THAT EXISTED BEFORE THE EFFECTIVE
DATE.
ADDITIONALLY, BUYER HEREBY ASSUMES, TO THE EXTENT OF ITS
INTERESTS IN THE ASSETS CONVEYED BY SELLER TO BUYER HEREUNDER
AND TO THE EXTENT THE SAME ARE ASSIGNABLE OR TRANSFERABLE BY
SELLER (AND ARE SO ASSIGNED OR TRANSFERRED) AND TO THE EXTENT
AND ONLY TO THE EXTENT THAT THE SAME RELATE TO THE OWNERSHIP OR
OPERATION OF THE LEASEHOLD INTERESTS, THE GATHERING FACILITIES
OR THE EQUIPMENT ON OR AFTER THE EFFECTIVE DATE, ANY AND ALL
DUTIES AND OBLIGATIONS ARISING FROM ANY AND ALL ORDERS,
CONTRACTS, AGREEMENTS (INCLUDING WITHOUT LIMITATION ALL
OPERATING AGREEMENTS, TRANSPORTATION AGREEMENTS, UNIT
AGREEMENTS, PARTICIPATION AGREEMENTS AND PROCESSING AGREEMENTS),
INSTRUMENTS, LICENSES, AUTHORIZATIONS, PERMITS, AUDITS, CLAIMS,
LIENS, SUITS, SETTLEMENTS AND DEMANDS, AND OTHER RIGHTS,
PRIVILEGES, BENEFITS AND POWERS CONFERRED UPON SELLER,
INCLUDING, BUT NOT LIMITED TO THOSE LISTED ON EXHIBIT 3.7
(COLLECTIVELY HEREINAFTER REFERRED TO IN THIS PARAGRAPH AS
"AGREEMENTS"). SUBJECT TO THE LIMITATIONS WHICH MAY BE
CONTAINED IN THE OPERATING AGREEMENT DESCRIBED IN ARTICLE
5.2(e), BUYER AGREES TO INDEMNIFY, DEFEND AND HOLD HARMLESS
SELLER, ITS OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, AGENTS
AND REPRESENTATIVES (THE SELLER GROUP ), REGARDLESS OF WHETHER
SELLER GROUP WAS WHOLLY OR PARTIALLY NEGLIGENT OR OTHERWISE AT
FAULT, FROM AND AGAINST ANY AND ALL CLAIMS, LIABILITIES, LOSSES,
COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, COURT COSTS
AND REASONABLE ATTORNEYS' FEES) ARISING FROM BUYER'S BREACH OR
NON-PERFORMANCE OF SUCH AGREEMENTS.
(b) AS TO SELLER'S INTEREST IN AND TO THE ASSETS CONVEYED BY THIS
AGREEMENT, SELLER AGREES TO INDEMNIFY, DEFEND AND HOLD
HARMLESS BUYER, ITS PARTNERS, OFFICERS, DIRECTORS,
SHAREHOLDERS, EMPLOYEES, AGENTS AND REPRESENTATIVES, AND THE
OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, AGENTS AND
REPRESENTATIVES OF ITS PARTNERS (THE BUYER GROUP ),
REGARDLESS OF WHETHER BUYER GROUP WAS WHOLLY OR PARTIALLY
NEGLIGENT OR OTHERWISE AT FAULT, FROM AND AGAINST ANY AND ALL
CLAIMS, LIABILITIES, LOSSES, COSTS AND EXPENSES (INCLUDING,
WITHOUT LIMITATION, COURT COSTS AND REASONABLE ATTORNEYS'
FEES) ARISING FROM:
(I) EVENTS THAT HAVE TRANSPIRED OR CONDITIONS THAT HAVE COME
INTO EXISTENCE PRIOR TO THE EFFECTIVE DATE THAT ARE
ATTRIBUTABLE TO THE OWNERSHIP OR OPERATION OF THE ASSETS;
(II) ALL LIABILITY FOR PROPERTY DAMAGE OR INJURY TO OR DEATH OF
PERSONS OCCURRING PRIOR TO THE EFFECTIVE DATE AND ARISING
OUT OF THE OWNERSHIP OR OPERATION OF THE ASSETS REGARDLESS
OF WHETHER CLAIMS RELATED TO SAID DAMAGE, INJURY OR DEATH
ARE ASSERTED ON, BEFORE OR AFTER THE EFFECTIVE DATE; AND
(III) THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SELLER AT
ANY TIME BETWEEN THE EFFECTIVE DATE AND THE CLOSING DATE.
(c) NOTWITHSTANDING THE FOREGOING PROVISIONS SET FORTH IN
SECTIONS 6.3(A) AND (B), THE ASSUMPTION, INDEMNITY, DEFENSE
AND HOLD HARMLESS OBLIGATIONS OF BUYER AND SELLER THEREUNDER
SHALL NOT APPLY TO (I) ANY LIABILITY OF ONE PARTY HERETO TO
THE OTHER PARTY UNDER THE PROVISIONS OF THIS AGREEMENT, (II)
EITHER PARTY'S COSTS AND EXPENSES WITH RESPECT TO THE
NEGOTIATION AND CONSUMMATION OF THIS AGREEMENT AND THE
PURCHASE AND SALE OF THE ASSETS, OR (III) ANY AMOUNTS COVERED
BY INSURANCE TO THE EXTENT PAID OR REIMBURSED TO THE
INDEMNIFIED PARTY (WHO SHALL USE REASONABLE EFFORTS TO
COLLECT SUCH AMOUNTS).
6.2 Further Assurances. After Closing, Seller and Buyer agree to
take such further actions and to execute, acknowledge and deliver all such
further documents that are necessary or useful in carrying out the
purposes of this Agreement or of any document delivered pursuant hereto.
6.3 Governmental Approvals. After Closing, Seller and Buyer agree
to take all actions and to execute all documents reasonably requested by
the other party to obtain all necessary permissions, approvals or consents
required by federal, state or local governmental authorities to consummate
the sale contemplated by this Agreement . If all such approvals or
consents are not obtained within one (1) year after Closing or such longer
period as may be mutually agreed in writing by Buyer and Seller, the sale
of the Assets shall be null, Buyer shall return possession of the Assets
to Seller, and Seller shall return the Purchase Price to Buyer. In the
event that the sale is deemed null, Buyer shall bear the risk of loss
between the Closing Date and the date that Seller is restored to
possession of the Assets.
6.4 Cooperation. Each party to this Agreement shall provide the
other party with reasonable access to all relevant documents, data and
other information which may be required by the other parties for the
purpose of preparing tax returns and responding to any audit by any taxing
jurisdiction. Each party to this Agreement shall cooperate with all
reasonable requests of the other parties made in connection with
contesting the imposition of taxes. Notwithstanding anything to the
contrary in this Agreement, no party to this Agreement shall be required
at any time to disclose to the other parties any tax return or other
confidential tax information.
6.5 Access. Seller and Buyer each shall use its reasonable efforts
to afford the other with access to its employees, as follows: (i), in the
case of Seller, employees of Seller, as Buyer may reasonably request for
Buyer s proper business purposes, including without limitation, the
defense of legal proceedings, who remain employees of Seller following the
date of Closing and who are familiar with the operations of the Assets,
and (ii), in the case of Buyer, employees of Buyer, as Seller may
reasonably request for Seller s proper business purposes, including
without limitation, the defense of legal proceedings. Such access may
include interviews or attendance at depositions or legal proceedings;
provided, however, that in any event all out-of-pocket expenses (including
wages and salaries) reasonably incurred by any party in connection with
this Section 6.7 shall be paid or promptly reimbursed by the party
requesting such services.
7. TAXES.
7.1 Apportionment of Ad Valorem and Property Taxes. All ad valorem
taxes, real property taxes, personal property taxes, and similar
obligations ( Property Taxes ) with respect to the tax period in which the
Effective Date occurs shall be apportioned as of the Effective Date
between Seller and Buyer. The owner of record on the assessment date
shall file or cause to be filed all required reports and returns incident
to the Property Taxes and shall pay or cause to be paid to the taxing
authorities all Property Taxes relating to the tax period in which the
Effective Date occurs.
7.2 Sales Taxes. Any sales, use or other tax on the transfer of the
Assets from Seller to Buyer shall be paid by Buyer.
7.3 Other Taxes. All taxes (other than income taxes) which are
imposed on or with respect to the production of oil, natural gas or other
hydrocarbons or minerals or the receipt of proceeds therefrom (including
but not limited to severance, production, and excise taxes) shall be
apportioned between the parties based upon the respective shares of
production taken by the parties. All such taxes which have accrued prior
to the Effective Date have been or will be properly paid or withheld by
Seller and all statements, returns, and documents pertinent thereto have
been or will be properly filed by Seller. Buyer shall be responsible for
paying or withholding or causing to be paid or withheld all such taxes
which have accrued after the Effective Date and for filing all statements,
returns, and documents incident thereto.
8. MISCELLANEOUS.
8.1 Governing Law. THIS AGREEMENT AND ALL INSTRUMENTS EXECUTED IN
ACCORDANCE WITH IT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH
THE SUBSTANTIVE LAWS OF THE STATE OF LOUISIANA, WITHOUT REGARD TO CONFLICT
OF LAW RULES THAT WOULD DIRECT APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
8.2 Entire Agreement. This Agreement, including all exhibits
attached hereto and made a part hereof, together with that certain letter
agreement relating to the purchase and sale of the Assets dated April 17,
1995 executed by and between Seller and Buyer, as amended, including all
exhibits attached thereto and made a part thereof, (the Offer Letter )
constitute the entire agreement between the parties and together supersede
all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties. In the event of any conflict
between this Agreement and the Offer Letter, the provisions of this
Agreement shall take precedence. No supplement, amendment, alteration,
modification, waiver or termination of this Agreement or the Offer Letter
shall be binding unless executed in writing by the parties hereto.
8.3 Waiver. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
8.4 Captions. The captions in this Agreement are for convenience
only and shall not be considered part of or affect the construction or
interpretation of any provision of this Agreement.
8.5 Notices. Any notice provided or permitted to be given under
this Agreement shall be in writing, and may be served by personal
delivery, by depositing same in the mail, addressed to the party to be
notified, postage prepaid, and registered or certified with a return
receipt requested or by facsimile transmission. Notice deposited in the
mail in the manner hereinabove described shall be deemed to have been
given and received on the date of the delivery as shown on the
return receipt. Notice served in any other manner shall be deemed to have
been given and received only in and when actually received by the
addressee. For purposes of notice, the addresses of the parties shall be
as follows:
Seller's Mailing Address:
Enserch Exploration, Inc.
4849 Greenville Avenue, Suite 1200
Dallas, Texas 75206
Attention: James K. Teringo, Jr., Esq.
Telephone: (214) 987-6651
Fax: (214) 987-6475
Buyer's Mailing Address:
Reading & Bates Development Co.
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Wayne K. Hillin, Esq.
Telephone: (713) 496-5000
Fax: (713) 496-0285
Each party shall have the right, upon giving ten (10) days prior notice to
the other in the manner hereinabove provided, to change its address for
purposes of notice.
8.6 Expenses. Except as otherwise provided herein, each party shall
be solely responsible for all expenses incurred by it in connection with
this transaction (including, without limitation, fees and expenses of its
own counsel and accountants).
8.7 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced under any rule of law,
all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance
of the transactions contemplated hereby is not affected in a materially
adverse manner with respect to either party.
8.8 Survival. The warranties, representations, covenants,
agreements and obligations of the parties under this Agreement shall
survive the Closing of the transaction contemplated hereby.
8.9 Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors, assigns and legal representatives.
8.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.11 Attorneys' Fees. If a suit or action is filed by any party to
enforce this Agreement, the prevailing party shall be entitled to recover
reasonable attorneys' fees incurred in investigation or related matters
and in preparation for and prosecution or defense of such suit or action
as fixed by the trial court, and, if any appeal is taken from the decision
of the trial court, reasonable attorneys' fees as fixed by the appellate
court or, if appropriate, by the trial court.
8.12 Indemnity. WITH RESPECT TO ANY OBLIGATION OF ANY PARTY UNDER
ANY PROVISION OF THIS AGREEMENT TO PROVIDE INDEMNITY, DEFEND THE
INDEMNITEE PARTY, AND PAY ATTORNEYS' FEES AND OTHER COSTS AND EXPENSES OF
LITIGATION ASSOCIATED WITH THE INDEMNITEE PARTY'S DEFENSE, IF THE
INDEMNITOR PARTY IS HONORING ITS OBLIGATION TO DEFEND THE INDEMNITEE PARTY
AND THE INDEMNITEE PARTY NEVERTHELESS ENGAGES AN ATTORNEY TO REPRESENT
ITSELF AGAINST SUCH CLAIM OR LAWSUIT, THE INDEMNITOR PARTY SHALL NOT BE
RESPONSIBLE FOR AND SHALL NOT PAY ATTORNEYS' FEES AND OTHER COSTS AND
EXPENSES OF LITIGATION INCURRED BY THE INDEMNITEE PARTY THAT ARE
ATTRIBUTABLE TO THE INDEMNITEE PARTY'S INDEPENDENT AND DUPLICATIVE
DEFENSE. IF ANY INDEMNITEE PARTY UNDER ANY CIRCUMSTANCES SETTLES OR
DISCHARGES (OR DELEGATES THE RIGHT TO SETTLE OR DISCHARGE TO ANY THIRD
PARTY) ANY CLAIM OR LAWSUIT COVERED BY ANY SUCH INDEMNITY PROVISION
WITHOUT OBTAINING THE PRIOR WRITTEN CONSENT OF THE INDEMNITOR PARTY, THEN
THE INDEMNITOR PARTY'S OBLIGATION TO DEFEND, INDEMNIFY AND HOLD HARMLESS
SUCH INDEMNITEE PARTY FROM SUCH CLAIM OR LAWSUIT SHALL TERMINATE AND
INDEMNITOR PARTY SHALL HAVE NO OBLIGATION TO FUND THE COST OF ANY SUCH
SETTLEMENT. NOTWITHSTANDING ANY PROVISION HEREOF TO THE CONTRARY, THE
ASSUMPTION, INDEMNITY, DEFENSE AND HOLD HARMLESS PROVISIONS SET FORTH IN
ANY SUCH INDEMNITY PROVISION SHALL NOT APPLY TO ANY AMOUNT COVERED BY
INSURANCE TO THE EXTENT PAID OR REIMBURSED TO THE INDEMNITEE PARTY (WHO
SHALL USE REASONABLE EFFORTS TO COLLECT SUCH AMOUNTS) AND ANY SUCH
INSURANCE COVERAGE SHALL PROVIDE FOR A WAIVER OF SUBROGATION IN FAVOR OF
THE INDEMNITOR PARTY.
8.13 NORM. Buyer acknowledges that it has been informed that oil and
gas producing formations can contain naturally occurring radioactive
material ( NORM ). Formation of scale or deposits can concentrate NORM on
equipment and in sludges. The presence of NORM in certain concentrations
requires that certain appropriate health, safety, and environmental
precautions be taken.
8.14 ASSIGNABILITY. Notwithstanding the provisions of the Operating
Agreement described in Article 5.2(e) hereof, this agreement and the
Assets covered hereby may not be assigned, sold, conveyed, mortgaged,
pledged, transferred or exchanged by Buyer without the express prior
written consent of Seller. Seller may withhold such consent for any
reason which, in its sole discretion, is reasonable under the
circumstances. Any such assignment, sale, conveyance, mortgage, pledge,
transfer or exchange by Buyer in the absence of such consent by Seller
shall be void and without force or effect.
8.15 CHANGE IN CONTROL. In the event that, at any time during the
term of the Operating Agreement or ten (10) years from the date of the
execution hereof, whichever period is lesser, Buyer experiences a "change
in control of the Company", as hereinafter defined, Seller shall have the
right and option, but not the obligation, for a period of sixty (60) days
following receipt of notice from Buyer that a change in control of the
Company has occurred, to acquire all of Buyer's right, title and interest
in and to the Assets and any additional interests which may have been
acquired pursuant to the Operating Agreement described in Article 5.2(e)
hereof. Any such acquisition by Seller pursuant to the terms and
provisions hereof shall be made free and clear of any and all liens,
mortgages, claims, overriding royalty interests, production payments or
any other burdens which may have been created by, through or under Buyer,
and such acquisition shall be made for a consideration equal to and not to
exceed the actual out-of-pocket expenditures made by Buyer with respect to
the Assets and other interests to be acquired hereunder, which were
incurred and paid by Buyer from the date of the acquisition thereof by
Buyer to the date of the acquisition thereof by Seller. For the purposes
of this provision, "Company" shall be deemed to mean Buyer and the parent
of Buyer and/or any other entity controlling a majority of the voting
stock of Buyer. For the purposes of this provision, a "change in control
of the Company" shall mean a change in control of a nature that would be
required to be reported in response to Item 1(a) of the Current Report on
Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended ("Exchange Act") or
would have been required to be so reported but for the fact that such
event had been "previously reported" as that term is defined in Rule 12b-2
of Regulation 12B of the Exchange Act; provided that, without limitation,
such a change in control shall be deemed to have occurred if (a) any
Person is or becomes the beneficial owner (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing 40% or more of the combined voting power of the Company's
then outstanding securities ordinarily (apart from rights accruing under
special circumstances) having the right to vote at elections of directors
("Voting Securities"), or (b) individuals who constitute the Board on the
Effective Date hereof (the "Incumbent Board") cease for any reason to
constitute at least a majority thereof, provided that any person becoming
a director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least
three-quarters of the directors comprising the Incumbent Board (either by
specific vote or by approval of the proxy statement of the Company in
which such person is named as a nominee for director, without objection to
such nomination) shall be, for purposes of this clause (b), considered as
though such person were a member of the Incumbent Board, or (c) a
recapitalization of the Company occurs which results in either a decrease
by 33% or more in the aggregate percentage ownership of Voting Securities
held by Independent Shareholders (on a primary basis or on a fully diluted
basis after giving effect to the exercise of stock option and warrants) or
an increase in the aggregate percentage ownership of Voting Securities
held by non-Independent Shareholders (on a primary basis or on a fully
diluted basis after giving effect to the exercise of stock options and
warrants) to greater than 50%. For purposes of this provision, the term
"Person" shall mean and include any individual, corporation, partnership,
group, association or other "person," as such term is used in Section
14(d) of the Exchange Act, other than the Company, a subsidiary of the
Company or any employee benefit plan(s) sponsored or maintained by the
Company or an subsidiary thereof, and the term "Independent Shareholder"
shall mean any shareholder of the Company except any employee(s) or
director(s) of the Company or any employee benefit plan(s) sponsored or
maintained by the Company or any subsidiary thereof. For purposes of this
Article 8.15, a "change in control of the Company" shall not be deemed to
occur solely as the result of a spin-off or other distribution of the
outstanding stock of the Buyer (or assignee or transferee of the Buyer to
which Seller has consented under the provisions of Article 8.14,
hereinafter a "permitted assignee") to the stockholders of the ultimate
parent corporation controlling a majority of the voting stock of Buyer or
any permitted assignee.
Seller and Buyer acknowledge that this option is granted in connection
with the obligations set forth in this Agreement and the Operating
Agreement, and do hereby agree that this option shall be irrevocable until
the earlier of (i) ten (10) years from the date of the execution hereof;
or (ii) the termination date of the Operating Agreement, as provided
therein. Buyer and Seller shall execute an Option Agreement evidencing
this arrangement, in the form of Exhibit 5.2(g), attached hereto and made
a part hereof for all purposes, which may be filed of record.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first set forth above.
SELLER:
ENSERCH EXPLORATION, INC.
_______________________________ By:________________________________
James K. Teringo, Jr. R. L. Kincheloe
Senior Vice President,
Offshore and International
________________________________
BUYER:
WITNESSES:
READING & BATES DEVELOPMENT CO.
________________________________ By:__________________________________
Name:___________________________ Name: D. C. Toalson
Title: President
________________________________
Name:___________________________
- -----------------------------------------------------------------------------
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
R. L. KINCHELOE, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as Senior
Vice President, Offshore and International of Enserch Exploration, Inc., a
Texas corporation, on behalf of said corporation with full authority, and
that the said instrument is the free act and deed of the said corporation,
and was executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of James K. Teringo, Jr. and ____________________________,
competent witnesses, on the 18th day of October, 1995.
WITNESSES:
______________________________ ___________________________________
James K. Teringo, Jr. R. L. KINCHELOE
______________________________
_____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
____________________________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
D. C. TOALSON, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as
President of Reading & Bates Development Co., a Delaware corporation, on
behalf of the said corporation with full authority, and that the said
instrument is the free act and deed of the said corporation, and was
executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of _________________________________ and
_________________________________, competent witnesses, on the 18th day of
October, 1995.
WITNESSES:
___________________________________ ____________________________________
D. C. TOALSON
___________________________________
____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
__________________________________
EXHIBIT 1.1
PART (a)
LEASEHOLD INTERESTS
1. LEASE OCS-G 8504. That certain Oil and Gas Lease of
Submerged Lands under the Outer Continental Shelf Lands Act
made and effective as of June 1, 1986, by and between the
United States of America, as Lessor, and Placid Oil
Company, et al., as Lessees, bearing Serial No. OCS-G 8504
covering all of Block 209, Green Canyon, OCS Official
Protraction Diagram, NG 15-3.
Working Interest 13.333333%
Net Revenue Interest 11.616868%
2. LEASE OCS-G 7049. That certain Oil and Gas Lease of
Submerged Lands under the Outer Continental Shelf Lands
Act made and effective as of June 1, 1984, by and
between the United States of America, as Lessor, and
Placid Oil Company, et al., as Lessees, bearing Serial
No. OCS-G 7049 covering all of Block 254, Green Canyon,
OCS Official Protraction Diagram, NG 15-3.
Working Interest 20.000000%
Net Revenue Interest 17.3506665%
3. LEASE OCS-G 8010. That certain Oil and Gas Lease of
Submerged Lands under the Outer Continental Shelf Lands
Act made and effective as of July 1, 1985, by and
between the United States of America, as Lessor, and
Placid Oil Company, et al., as Lessees, bearing Serial
No. OCS-G 8010 covering all of Block 298, Green Canyon,
OCS Official Protraction Diagram, NG 15-3.
Working Interest 20.00000%
Net Revenue Interest 17.35066%
4. LEASE OCS-G 8012. That certain Oil and Gas Lease of
Submerged Lands under the Outer Continental Shelf Lands
Act made and effective as of July 1, 1985, by and
between the United States of America, as Lessor, and
Placid Oil Company, et al., as Lessees, bearing Serial
No. OCS-G 8012 covering all of Block 342, Green Canyon,
OCS Official Protraction Diagram, NG 15-3.
Working Interest 20.00000%
Net Revenue Interest 17.35066%
5. LEASE OCS-G 8876. That certain Oil and Gas Lease of
Submerged Lands under the Outer Continental Shelf Lands
Act made and effective as of June 1, 1987, by and
between the United States of America, as Lessor, to Hunt
Petroleum Corporation et al., as Lessees, bearing Serial
No. OCS-G 8876 covering all of Block 297, Green Canyon,
OCS Official Protraction Diagram, NG 15-3.
Working Interest 20.000000%
Net Revenue Interest 16.833333%
6. LEASE OCS-G 13171. That certain Oil and Gas Lease of
Submerged Lands under the Outer Continental Shelf Lands
Act made and effective as of May 1, 1991, by and between
the United States of America, as Lessor, to Exxon
Corporation, as Lessee, bearing Serial No. OCS-G 13171
covering all of Block 341, Green Canyon, OCS Official
Protraction Diagram, NG 15-3.
Working Interest 20.000000%
Net Revenue Interest 17.500000%
7. LEASE OCS-G 13696. That certain Oil and Gas Lease of
Submerged Lands under the Outer Continental Shelf Lands
Act made and effective as of July 1, 1992, by and
between the United States of America, as Lessor, to
Exxon Corporation, as Lessee, bearing Serial No. OCS-G
13696 covering all of Block 210, Green Canyon, OCS
Official Protraction Diagram, NG 15-3.
Working Interest 20.000000%
Net Revenue Interest 17.500000%
8. LEASE OCS-G 8000. That certain Oil and Gas Lease of
Submerged Lands under the Outer Continental Shelf Lands
Act made and effective as of July 1, 1985, by and
between the United States of America, as Lessor, and
Placid Oil Company, et al., as Lessees, bearing Serial
No. OCS-G 8000 covering all of Block 213, Green Canyon,
OCS Official Protraction Diagram, NG 15-3.
Working Interest 20.00000%
Net Revenue Interest 17.35066%
9. LEASE OCS-G 8006. That certain Oil and Gas Lease of
Submerged Lands under the Outer Continental Shelf Lands
Act made and effective as of July 1, 1985, by and
between the United States of America, as Lessor, and
Placid Oil Company, et al., as Lessees, bearing Serial
No. OCS-G 8006 covering all of Block 258, Green Canyon,
OCS Official Protraction Diagram, NG 15-3.
Working Interest 20.00000%
Net Revenue Interest 17.35066%
10. LEASE OCS-G 8005. That certain Oil and Gas Lease of
Submerged Lands under the Outer Continental Shelf Lands
Act made and effective as of July 1, 1985, by and
between the United States of America, as Lessor, to
Amerada Hess et al., as Lessees, bearing Serial No. OCS-
G 8005 covering all of Block 253, Green Canyon, OCS
Official Protraction Diagram, NG 15-3.
Working Interest 20.000000%
Net Revenue Interest 16.500000%
PART (b)
EQUIPMENT
1. WELLS:
WORKING REVENUE
INTEREST INTEREST
A. OCS-G 7049 #3 20.00000% 17.350665%
B. OCS-G 7049 #4 20.00000% 17.350665%
C. OCS-G 7049 #4ST1 20.00000% 17.350665%
D. OCS-G 7049 #5 20.00000% 17.350665%
2. TEMPLATE:
That certain three well drilling template acquired, inter
alia, by Seller for use in connection with the drilling of
the OCS-G 7049 #5 Well.
NOTE: All references in the Exhibit 1.1 made to "Working
Interest" and "Revenue Interest," and to the numbers
set forth in connection therewith, are for title
warranty purposes only.
EXHIBIT 3.7
CONTRACTS, AGREEMENTS, COMMITMENTS AND OTHER MATTERS
GREEN CANYON BLOCK 209:
1. Offer Letter dated April 17, 1995, executed by and between
Enserch Exploration, Inc. and Reading & Bates Development
Co., as such may have been amended.
2. Partial Lease Interest Acquisition Agreement dated
effective September 22, 1988, as amended, executed by and
between Exxon Corporation and Opubco Resources, Inc., et
al.
3. Offshore Operating Agreement dated effective September 22,
1988, executed by and between Exxon Corporation and Placid
Oil Company, et al., as amended by instrument effective
November 21, 1989, covering and pertaining to Green Canyon
Block 209.
4. Farmout Agreement dated July 10, 1991 (including all
amendments to that agreement), between Exxon Corporation
and Hunt Petroleum Corporation covering Green Canyon Blocks
209, 254, 297, 298 and 342.
5. Bidding Agreement dated April 1, 1986, (including all
amendments to that agreement) between Exxon Corporation and
Amoco Production Company, et al., covering and pertaining
to Green Canyon Block 209.
6. Purchase and Sale Agreement dated March 28, 1995, executed
by and between Exxon Corporation, as Seller and Enserch
Exploration, Inc., as Buyer.
7. Purchase and Sale Agreement dated February 28, 1995,
executed by and between Enserch Offshore, Inc., as Buyer
and HI Production Company, Inc., as Seller.
8. Purchase and Sale Agreement dated February 28, 1995,
executed by and between Enserch Offshore, Inc., as Buyer
and Placid Oil Company, as Seller.
9. Purchase and Sale Agreement dated February 28, 1995,
executed by and between Enserch Offshore, Inc., as Buyer
and OPUBCO Resources, Inc., as Seller.
GREEN CANYON BLOCK 254:
1. Offer Letter dated April 17, 1995, executed by and between
Enserch Exploration, Inc. and Reading & Bates Development
Co., as such may have been amended.
2. Farmout Agreement dated July 10, 1991 (including all
amendments to that agreement), between Exxon Corporation
and Hunt Petroleum Corporation covering Green Canyon Blocks
209, 254, 297, 298 and 342.
3. Purchase and Sale Agreement dated March 28, 1995, executed
by and between Exxon Corporation, as Seller and Enserch
Exploration, Inc., as Buyer.
4. Oil Gathering Agreement dated December 2, 1994, executed by
and between EP Operating Limited Partnership, as Producer
and Manta Ray Gathering Systems Inc., as Gatherer.
5. Gas Gathering Agreement dated December 2, 1994, executed by
and between EP Operating Limited Partnership, as Producer
and Manta Ray Gathering Systems Inc., as Gatherer.
6. Purchase and Sale Agreement dated February 28, 1995,
executed by and between Enserch Offshore, Inc., as Buyer
and HI Production Company, Inc., as Seller.
7. Purchase and Sale Agreement dated February 28, 1995,
executed by and between Enserch Offshore, Inc., as Buyer
and Placid Oil Company, as Seller.
8. Purchase and Sale Agreement dated February 28, 1995,
executed by and between Enserch Offshore, Inc., as Buyer
and OPUBCO Resources, Inc., as Seller.
9. That certain Exploration, Drilling and Production Unit
Agreement dated June 22, 1995, executed by and between
Enserch Offshore, Inc. and Enserch Exploration, Inc.,
covering and pertaining to Green Canyon Blocks 253, 254,
297 & 298.
GREEN CANYON BLOCK 298:
1. Offer Letter dated April 17, 1995, executed by and between
Enserch Exploration, Inc. and Reading & Bates Development
Co., as such may have been amended.
2. Farmout Agreement dated July 10, 1991 (including all
amendments to that agreement), between Exxon Corporation
and Hunt Petroleum Corporation covering Green Canyon Blocks
209, 254, 297, 298 and 342.
3. Purchase and Sale Agreement dated March 28, 1995, executed
by and between Exxon Corporation, as Seller and Enserch
Exploration, Inc., as Buyer.
4. Oil Gathering Agreement dated December 2, 1994, executed by
and between EP Operating Limited Partnership, as Producer
and Manta Ray Gathering Systems Inc., as Gatherer.
5. Gas Gathering Agreement dated December 2, 1994, executed by
and between EP Operating Limited Partnership, as Producer
and Manta Ray Gathering Systems Inc., as Gatherer.
6. Purchase and Sale Agreement dated February 28, 1995,
executed by and between Enserch Offshore, Inc., as Buyer
and HI Production Company, Inc., as Seller.
7. Purchase and Sale Agreement dated February 28, 1995,
executed by and between Enserch Offshore, Inc., as Buyer
and Placid Oil Company, as Seller.
8. Purchase and Sale Agreement dated February 28, 1995,
executed by and between Enserch Offshore, Inc., as Buyer
and OPUBCO Resources, Inc., as Seller.
9. That certain Exploration, Drilling and Production Unit
Agreement dated June 22, 1995, executed by and between
Enserch Offshore, Inc. and Enserch Exploration, Inc.,
covering and pertaining to Green Canyon Blocks 253, 254,
297 & 298.
GREEN CANYON BLOCK 342:
1. Offer Letter dated April 17, 1995, executed by and between
Enserch Exploration, Inc. and Reading & Bates Development
Co., as such may have been amended.
2. Farmout Agreement dated July 10, 1991 (including all
amendments to that agreement), between Exxon Corporation
and Hunt Petroleum Corporation covering Green Canyon Blocks
209, 254, 297, 298 and 342.
3. Purchase and Sale Agreement dated March 28, 1995, executed
by and between Exxon Corporation, as Seller and Enserch
Exploration, Inc., as Buyer.
4. Oil Gathering Agreement dated December 2, 1994, executed by
and between EP Operating Limited Partnership, as Producer
and Manta Ray Gathering Systems Inc., as Gatherer.
5. Gas Gathering Agreement dated December 2, 1994, executed by
and between EP Operating Limited Partnership, as Producer
and Manta Ray Gathering Systems Inc., as Gatherer.
6. Purchase and Sale Agreement dated February 28, 1995,
executed by and between Enserch Offshore, Inc., as Buyer
and HI Production Company, Inc., as Seller.
7. Purchase and Sale Agreement dated February 28, 1995,
executed by and between Enserch Offshore, Inc., as Buyer
and Placid Oil Company, as Seller.
8. Purchase and Sale Agreement dated February 28, 1995,
executed by and between Enserch Offshore, Inc., as Buyer
and OPUBCO Resources, Inc., as Seller.
GREEN CANYON BLOCK 297:
1. Offer Letter dated April 17, 1995, executed by and between
Enserch Exploration, Inc. and Reading & Bates Development
Co., as such may have been amended.
2. Farmout Agreement dated July 10, 1991 (including all
amendments to that agreement), between Exxon Corporation
and Hunt Petroleum Corporation covering Green Canyon Blocks
209, 254, 297, 298 and 342.
3. Joint Bidding Agreement dated April 16, 1987, (including
all amendments to that agreement) between EP Operating
Company and Hunt Petroleum Corporation, et al., covering
and pertaining to Green Canyon Block 297.
4. Purchase and Sale Agreement dated March 28, 1995, executed
by and between Exxon Corporation, as Seller and Enserch
Exploration, Inc., as Buyer.
5. Oil Gathering Agreement dated December 2, 1994, executed by
and between EP Operating Limited Partnership, as Producer
and Manta Ray Gathering Systems Inc., as Gatherer.
6. Gas Gathering Agreement dated December 2, 1994, executed by
and between EP Operating Limited Partnership, as Producer
and Manta Ray Gathering Systems Inc., as Gatherer.
7. Purchase and Sale Agreement dated February 28, 1995,
executed by and between Enserch Offshore, Inc., as Buyer
and HI Production Company, Inc., as Seller.
8. Purchase and Sale Agreement dated February 28, 1995,
executed by and between Enserch Offshore, Inc., as Buyer
and Placid Oil Company, as Seller.
9. Purchase and Sale Agreement dated February 28, 1995,
executed by and between Enserch Offshore, Inc., as Buyer
and OPUBCO Resources, Inc., as Seller.
10. That certain Exploration, Drilling and Production Unit
Agreement dated June 22, 1995, executed by and between
Enserch Offshore, Inc. and Enserch Exploration, Inc.,
covering and pertaining to Green Canyon Blocks 253, 254,
297 & 298.
GREEN CANYON BLOCK 341:
1. Offer Letter dated April 17, 1995, executed by and between
Enserch Exploration, Inc. and Reading & Bates Development
Co., as such may have been amended.
2. Purchase and Sale Agreement dated March 28, 1995, executed
by and between Exxon Corporation, as Seller and Enserch
Exploration, Inc., as Buyer.
GREEN CANYON BLOCK 210:
1. Offer Letter dated April 17, 1995, executed by and between
Enserch Exploration, Inc. and Reading & Bates Development
Co., as such may have been amended.
2. Purchase and Sale Agreement dated March 28, 1995, executed
by and between Exxon Corporation, as Seller and Enserch
Exploration, Inc., as Buyer.
GREEN CANYON BLOCK 213:
1. Purchase and Sale Agreement dated February 28, 1995,
executed by and between Enserch Offshore, Inc., as Buyer
and HI Production Company, Inc., as Seller.
2. Purchase and Sale Agreement dated February 28, 1995,
executed by and between Enserch Offshore, Inc., as Buyer
and Placid Oil Company, as Seller.
3. Purchase and Sale Agreement dated February 28, 1995,
executed by and between Enserch Offshore, Inc., as Buyer
and OPUBCO Resources, Inc., as Seller.
GREEN CANYON BLOCK 258:
1. Purchase and Sale Agreement dated February 28, 1995,
executed by and between Enserch Offshore, Inc., as Buyer
and HI Production Company, Inc., as Seller.
2. Purchase and Sale Agreement dated February 28, 1995,
executed by and between Enserch Offshore, Inc., as Buyer
and Placid Oil Company, as Seller.
3. Purchase and Sale Agreement dated February 28, 1995,
executed by and between Enserch Offshore, Inc., as Buyer
and OPUBCO Resources, Inc., as Seller.
GREEN CANYON BLOCK 253:
1. Assignment and Conveyance dated effective March 1, 1995,
executed by and between Shell Offshore, Inc., et al., as
Assignor, and Enserch Exploration, Inc., as Assignee,
subject to letter agreement dated May 12, 1995.
2. That certain Exploration, Drilling and Production Unit
Agreement dated June 22, 1995, executed by and between
Enserch Offshore, Inc. and Enserch Exploration, Inc.,
covering and pertaining to Green Canyon Blocks 253, 254,
297 & 298.
EXHIBIT 3.9
ENVIRONMENTAL DISCLOSURES
Incidents of Non-Compliance:
1. Blow out Preventor test using lower pressure than
required for the OCS-G 7049 #4 Well.
2. Blow out Preventor test did not indicate that each
component was effectively holding pressure for the
OCS-G 7049 #4 Well.
Other:
1. OCS-G 7049 #3 Well
-loss from the MV Hoss Fortune of 2 drums containing 2
gallons each of engine oil and "rig-rite" BOP fluid
-loss from a waste boat while traveling from Grand
Isle base to the Treasure Stawinner of a pallet
containing miscellaneous items from National Oilwell.
-loss of anchor shackle, and some chain which broke
from chain while demooring the rig and left on the
bottom (below mudline) at 3300 feet.
ALL OF THE ABOVE WERE REPORTED TO THE MMS.
EXHIBIT 5.2(a)
TO PURCHASE AND SALE AGREEMENT
FORM OF CONVEYANCE INSTRUMENT
STATE OF TEXAS
COUNTY OF DALLAS
ASSIGNMENT AND BILL OF SALE
THIS Assignment and Bill of Sale (the "Assignment") is
entered into and shall be effective as of 12:01 a.m., May 1,
1995 (hereinafter referred to as the "Effective Date"), by and
between ENSERCH EXPLORATION, INC., a Texas corporation,
(hereinafter referred to as "Assignor"), whose mailing address
is 4849 Greenville Avenue, Suite 1500, Dallas, Texas, 75206;
and READING & BATES DEVELOPMENT CO., a Delaware corporation
(hereinafter referred to as "Assignee"), whose mailing address
is 901 Threadneedle, Suite 200, Houston, Texas 77079.
W I T N E S S E T H:
1. Sale. THAT, FOR THE CONSIDERATION stated hereinbelow
in Article 5. and OTHER VALUABLE CONSIDERATION, the
sufficiency of which is hereby acknowledged, Assignor does
hereby GRANT, SELL, TRANSFER, ASSIGN, and CONVEY unto Assignee
the undivided right, title and interest reflected in Exhibit 1
Part (a) hereof, in and to the following described interests
and properties (the undivided interest being assigned
hereunder in such interests and properties shall hereinafter
be referred to collectively as the "Assets" and the specific
quantitative interest being assigned hereunder represents an
undivided twenty percent (20%) of the interest of Assignor in
the Assets):
a. The oil, gas and mineral lease described on Exhibit
1, Part (a) (the Lease ), together with a like
interest with respect to the Lease in and to any
and all (i) mineral interests, (ii) overriding or
landowners' royalty interests, (iii) surface and
subsurface interests and rights, (iv) beneficial,
convertible or reversionary interests, (v) interest
owned, claimed or acquired, or to be owned, claimed
or acquired, by agreement, (vi) production
payments, (vii) contractual interests owned
pursuant to participation agreements, operating
agreements or similar agreements, and (viii) any
and all like or unlike interests, including without
limitation those specific items identified on
Exhibit 1, Part (a). This shall include any
contractual rights providing for the acquisition or
earning of any of the foregoing, and Assignor's
rights in respect of any pooled, communitized or
unitized acreage of which any of the foregoing is a
part. SAVE AND EXCEPT ANY RIGHT, TITLE OR INTEREST
OF ASSIGNOR IN AND TO, OR ANY RIGHTS DERIVED FROM,
ANY BIDDING AGREEMENTS EXECUTED BY AND BETWEEN
ASSIGNOR AND MOBIL OIL EXPLORATION & PRODUCING
SOUTHWEST INC.. (All of the foregoing shall be
called collectively the Leasehold Interests. )
b. Any and all wells, wellbores, pipe, gathering
lines, compressors, facilities, equipment,
platforms, pipelines and any and all other
personal, real, movable and immovable property,
fixtures or equipment which are located on or used
directly in connection with the production,
treatment or transportation of oil and gas from the
Leasehold Interests, including, without limitation,
those items specifically identified on Exhibit 1,
Part (b) (the Equipment ).
c. Any and all easements, rights of way, and
subsurface and surface rights associated or used in
connection with any such easements or
rights of way, which easements, rights-of-way and
subsurface and surface rights have been obtained
for use in connection with the Leasehold Interests
(the Gathering Facilities ).
d. Any and all oil, gas and other minerals produced
from or attributable to the Leasehold Interests on
or after the Effective Date.
e. To the extent the same are assignable or
transferable by Assignor and to the extent and only
to the extent that the same relate to the ownership
or operation of the Leasehold Interests, the
Gathering Facilities or the Equipment on or after
the Effective Date, a like interest in and to all
orders, contracts, agreements (including without
limitation all operating agreements, transportation
agreements, unit agreements, participation
agreements and processing agreements), instruments,
licenses, authorizations, permits, audits, claims,
liens, suits, settlements and demands, and other
rights, privileges, benefits and powers conferred
upon Assignor, including, but not limited to those
listed on Exhibit 1 part (c).
TO HAVE AND TO HOLD unto Assignee, subject to the terms,
conditions and reservations hereinbelow recounted.
2. Title Warranty. Assignor warrants that:
a. Except as specifically set forth in the Purchase
and Sale Agreement described in Article 10. below
or under the contracts and agreements listed in
Exhibit 1 to this Assignment, and further except as
a consequence of the formation of a unit, neither
Assignor nor any parent, subsidiary or affiliate of
Assignor during their respective periods of
ownership has (A) executed any deed, conveyance,
assignment or other instrument as an assignor,
grantor, sublessor or in another capacity or (B)
has breached any obligation under any Lease that
would (i) result in Assignee's being entitled to
receive less than the net revenue interest for any
Lease, well or unit set forth in Exhibit 1 of all
oil and gas in, under, and that may be produced,
saved and marketed from or attributable to such
Lease, well or unit, or (ii) obligate Assignee to
bear the costs and expenses relating to the
maintenance, development and operation of such
Lease, well or unit in an amount greater than the
working interest for such Lease, well or unit set
forth in Exhibit 1, unless the net revenue interest
attributable to said working interest is increased
by a proportionate or greater amount; and
b. Except as specifically set forth in the Purchase
and Sale Agreement described in Article 10. below
or under the contracts and agreements listed in
Exhibit 1 to this Assignment, the Assets are free
of all liens, security interests and encumbrances;
(the limited warranty set forth in subparagraphs (a) and (b)
above shall hereinafter be referred to as the Special Limited
Warranty ). Assignor shall convey the Assets with no warranty
whatsoever other than the Special Limited Warranty, but with
full substitution and subrogation to Assignee in and to all
covenants, agreements, representations and warranties made by
others heretofore given or made in connection with the Assets
or any part thereof.
3. Acceptance. Assignee accepts this Assignment and
acknowledges delivery of the Assets and accepts the
obligations as provided in the Purchase and Sale Agreement
described in Article 10 below (including those contracts and
agreements listed on Exhibit 1 of this Assignment, insofar and
only insofar as such contracts and agreements cover, pertain
or apply to the Leasehold Interests), on or after the
Effective Date, including, but not limited to, any overriding
royalty interests which may burden the Assets and which were
created by Assignor's predecessor(s) in title.
4. Other Warranty Provisions. Assignee acknowledges that
(a) Assignor has not made any warranty or representation,
whether express, implied, at common law, by statute or
otherwise, relating to the fitness for an intended purpose or
condition of any movable property constituting a portion of
the Assets and (b) Assignee shall acquire such personal
property in WHERE IS, AS IS condition. Except as may be
specifically set forth to the contrary in the Purchase and
Sale Agreement described in 10 below(the "Agreement"), Buyer
acknowledges that Seller has made no representations or
warranties whatever, expressed or implied, (Seller having
hereby expressly disclaimed all such warranties) as to the
accuracy, completeness, or materiality of any data,
information, record or materials now, heretofore, or hereafter
made available in connection with this Agreement (including,
without limitation, any descriptions of oil and gas leases;
quality or quantity or hydrocarbon reserves attributable to
the Assets, if any; production rates, exploratory or
development drilling opportunities, decline rates, potential
for production of hydrocarbons from the Assets; the
environmental condition of said Assets; the legal, tax or
other consequences of owning Seller's interest in the Assets;
or any other information contained in any material furnished
in connection with this transaction). Any and all such data,
information, records or materials furnished by Seller to Buyer
is provided as a convenience only and any reliance on or use
of same is at the Buyer's sole risk. WITHOUT LIMITING THE
GENERALITY OF THIS PARAGRAPH, SELLER DISCLAIMS AND NEGATES AS
TO ANY PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND
APPURTENANCES SUBJECT TO THIS AGREEMENT (INCLUDING ALL WELLS):
(A) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (B)
ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY OF CONFORMITY
TO MODELS OR SAMPLE OR MATERIALS. THE PURCHASER EXPRESSLY
AGREES THAT TITLE TO SUCH PERSONAL PROPERTY, FIXTURES,
IMPROVEMENTS AND APPURTENANCES WILL BE ACCEPTED "AS IS",
"WHERE IS", "WITH ALL FAULTS", AND IN ITS PRESENT CONDITION
AND STATE OF REPAIR.
5. Consideration. The consideration for this Assignment
and the nine other Assignments and Bills of Sale this day
entered into by and between Assignor and Assignee conveying
certain interests in OCS-G 8504, 7049, 8010, 8012, 8876,
13171, 13696, 8000, 8006 and 8005, is the sum of Eighteen
Million Two Hundred Fifty Thousand and No/100 ($18,250,000.00)
Dollars ("Purchase Price"), in part payment thereof, Assignee
has paid, in ready and current funds, the sum of Six Million
Two Hundred Fifty Thousand and NO/100 ($6,250,000.00) Dollars
to the Assignor, who hereby acknowledges the receipt thereof
and grants full acquittance and discharge therefor.
And, for the balance of the Purchase Price, the sum of
Twelve Million and No/100 ($12,000,000.00) Dollars, the
Assignee has furnished one (1) certain Promissory Note in the
amount of Twelve Million and No/100 Dollars ($12,000,000.00),
drawn by the Assignee to the order of Assignor, dated the 18th
day of October, 1995, and payable in two installments of Six
Million and No/100 ($6,000,000.00) Dollars each, the first due
on March 31, 1996 and the second due on September 30, 1996,
which note bears interest at the rate of 8.56% per annum from
date thereof until paid.
6. Liability of Successors. The terms, conditions,
rights and obligations of this Assignment shall run with the
land and extend to and be binding upon the parties hereto and
their respective successors, heirs and/or assigns.
7. Counterparts. This Assignment may be executed in
several original counterparts, all of which are identical.
Each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together
constitute but one and the same instrument. The signature
pages of the counterparts may be amalgamated to form complete
documents for the purpose of recording complete documents in
the public registries.
8. Severability. If any provision of this Assignment is
invalid or unenforceable in part or in whole in any
jurisdiction applicable to this Assignment, then, to the
extent permitted by applicable law, (i) the other provisions
hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in order to
carry out the intentions of the parties hereto as nearly as
may be possible, and (ii) the invalidity or unenforceability
of such provision in any jurisdiction shall not affect the
validity or enforceability thereof in any other jurisdiction.
9. Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED BY
AND INTERPRETED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE
STATE OF LOUISIANA, WITHOUT REGARD TO CONFLICT OF LAW RULES
THAT WOULD DIRECT APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION.
10. Purchase and Sale Agreement. Notwithstanding anything
to the contrary provided herein, this Assignment shall at all
times be subject to the terms, conditions and exceptions
contained in that certain unrecorded Purchase and Sale
Agreement dated the same date as this Assignment by and
between Assignor and Assignee. The unrecorded Purchase and
Sale Agreement shall at all times govern the rights of the
parties in and to the Assets. All interested parties are
hereby given notice of the existence of the unrecorded
Purchase and Sale Agreement.
11. MMS Approval. This Assignment is expressly made
subject to the approval of the Minerals Management Service,
United States Department of the Interior.
IN WITNESS WHEREFORE, this Assignment is executed in
multiple originals and in the presence of the undersigned
witnesses on this 18th day of October, 1995, but to be
effective as of the Effective Date.
WITNESSES: ASSIGNOR:
ENSERCH EXPLORATION, INC.
___________________________________ Tax ID # 75-2556975
Name: James K. Teringo, Jr.
By:______________________
R. L. Kincheloe
Name: Senior Vice President,
Offshore and International
ASSIGNEE:
WITNESSES:
READING & BATES DEVELOPMENT CO.
Tax ID# 73-0797067
Name:_________________________________
_________________________
By: D. C. Toalson
Name:__________________________________ President
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and
qualified within and for the State and County aforesaid,
personally came and appeared:
R. L. KINCHELOE, to me personally known to be the person
whose name is subscribed to the foregoing instrument, who
declared and acknowledged to me, notary, in the presence of
the undersigned competent witnesses, that he executed the
above and foregoing instrument in his capacity as Senior Vice
President, Offshore and International of Enserch Exploration,
Inc., a Texas corporation, on behalf of said corporation with
full authority, and that the said instrument is the free act
and deed of the said corporation, and was executed for the
uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County
aforesaid, in the presence of James K. Teringo, Jr. and
________________________, competent witnesses, on the 18th day
of October, 1995.
WITNESSES:
______________________________ ________________________________
James K. Teringo, Jr. R. L. KINCHELOE
______________________________
_____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
____________________________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and
qualified within and for the State and County aforesaid,
personally came and appeared:
D. C. TOALSON, to me personally known to be the person
whose name is subscribed to the foregoing instrument, who
declared and acknowledged to me, notary, in the presence of
the undersigned competent witnesses, that he executed the
above and foregoing instrument in his capacity as President of
Reading & Bates Development Co., a Delaware corporation, on
behalf of the said corporation with full authority, and that
the said instrument is the free act and deed of the said
corporation, and was executed for the uses, purposes and
benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County
a f o r e s a i d , i n t h e p r e s e n c e o f
_________________________________ and
_________________________________, competent witnesses, on the
18th day of October, 1995.
WITNESSES:
___________________________________ ____________________________________
D. C. TOALSON
___________________________________
____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
__________________________________
EXHIBIT 1
Part (a)
[DESCRIBE LEASE AND INTEREST BEING ASSIGNED THEREIN]
Part (b)
Together with a like interest in and to:
[DESCRIBE WELLS AND EQUIPMENT]
Part (c)
Together with a like interest in and to:
[DESCRIBE CONTRACTS AND AGREEMENTS]
NOTE: ALL REFERENCES IN THIS EXHIBIT 1 MADE TO "WORKING
INTEREST" AND "NET REVENUE INTEREST", AND TO THE NUMBERS SET
FORTH IN CONNECTION THEREWITH, ARE FOR TITLE WARRANTY PURPOSES
ONLY.
EXHIBIT 5.2(c)
TO PURCHASE AND SALE AGREEMENT
PAYMENT AGREEMENT
(Filed seperately as Exhibit 10.123 to the Company's Annual
Report on Form 10-K for 1995.)
EXHIBIT 5.2(f)
TO PURCHASE AND SALE AGREEMENT
AUTHORIZATION FOR EXPENDITURE FOR THE DRILLING OF THE OCS-G
7049 #5 WELL
EXHIBIT 5.2(g)
TO PURCHASE AND SALE AGREEMENT
OPTION AGREEMENT
(Filed seperately as Exhibit 10.126 to the Company's Annual
Report on Form 10-K for 1995.)
EXHIBIT 10.113
STATE OF TEXAS
(OCS-G-8504)
COUNTY OF DALLAS
ASSIGNMENT AND BILL OF SALE
THIS Assignment and Bill of Sale (the "Assignment") is entered into
and shall be effective as of 12:01 a.m., May 1, 1995 (hereinafter referred
to as the "Effective Date"), by and between ENSERCH EXPLORATION, INC., a
Texas corporation, (hereinafter referred to as "Assignor"), whose mailing
address is 4849 Greenville Avenue, Suite 1500, Dallas, Texas, 75206; and
READING & BATES DEVELOPMENT CO., a Delaware corporation (hereinafter
referred to as "Assignee"), whose mailing address is 901 Threadneedle,
Suite 200, Houston, Texas 77079.
W I T N E S S E T H:
1. Sale. THAT, FOR THE CONSIDERATION stated hereinbelow in Article 5.
and OTHER VALUABLE CONSIDERATION, the sufficiency of which is hereby
acknowledged, Assignor does hereby GRANT, SELL, TRANSFER, ASSIGN, and
CONVEY unto Assignee the undivided right, title and interest reflected in
Exhibit 1 Part (a) hereof, in and to the following described interests and
properties (the undivided interest being assigned hereunder in such
interests and properties shall hereinafter be referred to collectively as
the "Assets" and the specific quantitative interest being assigned
hereunder represents an undivided twenty percent (20%) of the interest of
Assignor in the Assets):
a. The oil, gas and mineral lease described on Exhibit 1, Part (a)
(the Lease ), together with a like interest with respect to the
Lease in and to any and all (i) mineral interests, (ii) overriding
or landowners' royalty interests, (iii) surface and subsurface
interests and rights, (iv) beneficial, convertible or
reversionary interests, (v) interest owned, claimed or acquired,
or to be owned, claimed or acquired, by agreement, (vi) production
payments, (vii) contractual interests owned pursuant to
participation agreements, operating agreements or similar
agreements, and (viii) any and all like or unlike interests,
including without limitation those specific items identified on
Exhibit 1, Part (a). This shall include any contractual rights
providing for the acquisition or earning of any of the foregoing,
and Assignor's rights in respect of any pooled, communitized or
unitized acreage of which any of the foregoing is a part. SAVE
AND EXCEPT ANY RIGHT, TITLE OR INTEREST OF ASSIGNOR IN AND TO, OR
ANY RIGHTS DERIVED FROM, ANY BIDDING AGREEMENTS EXECUTED BY AND
BETWEEN ASSIGNOR AND MOBIL OIL EXPLORATION & PRODUCING SOUTHWEST
INC.. (All of the foregoing shall be called collectively the
Leasehold Interests. )
b. Any and all wells, wellbores, pipe, gathering lines, compressors,
facilities, equipment, platforms, pipelines and any and all other
personal, real, movable and immovable property, fixtures or
equipment which are located on or used directly in connection with
the production, treatment or transportation of oil and gas from
the Leasehold Interests, including, without limitation, those
items specifically identified on Exhibit 1, Part (b) (the
Equipment ).
c. Any and all easements, rights of way, and subsurface and surface
rights associated or used in connection with any such easements or
rights of way, which easements, rights-of-way and subsurface and
surface rights have been obtained for use in connection with the
Leasehold Interests (the Gathering Facilities ).
d. Any and all oil, gas and other minerals produced from or
attributable to the Leasehold Interests on or after the Effective
Date.
e. To the extent the same are assignable or transferable by Assignor
and to the extent and only to the extent that the same relate to
the ownership or operation of the Leasehold Interests, the
Gathering Facilities or the Equipment on or after the Effective
Date, a like interest in and to all orders, contracts, agreements
(including without limitation all operating agreements,
transportation agreements, unit agreements, participation
agreements and processing agreements), instruments, licenses,
authorizations, permits, audits, claims, liens, suits, settlements
and demands, and other rights, privileges, benefits and powers
conferred upon Assignor, including, but not limited to those
listed on Exhibit 1 part (c).
TO HAVE AND TO HOLD unto Assignee, subject to the terms, conditions and
reservations hereinbelow recounted.
2. Title Warranty. Assignor warrants that:
a. Except as specifically set forth in the Purchase and Sale
Agreement described in Article 10. below or under the contracts
and agreements listed in Exhibit 1 to this Assignment, and further
except as a consequence of the formation of a unit, neither
Assignor nor any parent, subsidiary or affiliate of Assignor
during their respective periods of ownership has (A) executed any
deed, conveyance, assignment or other instrument as an assignor,
grantor, sublessor or in another capacity or (B) has breached any
obligation under any Lease that would (i) result in Assignee's
being entitled to receive less than the net revenue interest for
any Lease, well or unit set forth in Exhibit 1 of all oil and gas
in, under, and that may be produced, saved and marketed from or
attributable to such Lease, well or unit, or (ii) obligate
Assignee to bear the costs and expenses relating to the
maintenance, development and operation of such Lease, well or unit
in an amount greater than the working interest for such Lease,
well or unit set forth in Exhibit 1, unless the net revenue
interest attributable to said working interest is increased by a
proportionate or greater amount; and
b. Except as specifically set forth in the Purchase and Sale
Agreement described in Article 10. below or under the contracts
and agreements listed in Exhibit 1 to this Assignment, the Assets
are free of all liens, security interests and encumbrances;
(the limited warranty set forth in subparagraphs (a) and (b) above shall
hereinafter be referred to as the Special Limited Warranty ). Assignor
shall convey the Assets with no warranty whatsoever other than the Special
Limited Warranty, but with full substitution and subrogation to Assignee
in and to all covenants, agreements, representations and warranties made
by others heretofore given or made in connection with the Assets or any
part thereof.
3. Acceptance. Assignee accepts this Assignment and acknowledges
delivery of the Assets and accepts the obligations as provided in the
Purchase and Sale Agreement described in Article 10 below (including those
contracts and agreements listed on Exhibit 1 of this Assignment, insofar
and only insofar as such contracts and agreements cover, pertain or apply
to the Leasehold Interests), on or after the Effective Date, including,
but not limited to, any overriding royalty interests which may burden the
Assets and which were created by Assignor's predecessor(s) in title.
4. Other Warranty Provisions. Assignee acknowledges that (a) Assignor
has not made any warranty or representation, whether express, implied, at
common law, by statute or otherwise, relating to the fitness for an
intended purpose or condition of any movable property constituting a
portion of the Assets and (b) Assignee shall acquire such personal
property in WHERE IS, AS IS condition. Except as may be specifically
set forth to the contrary in the Purchase and Sale Agreement described in
10 below(the "Agreement"), Buyer acknowledges that Seller has made no
representations or warranties whatever, expressed or implied, (Seller
having hereby expressly disclaimed all such warranties) as to the
accuracy, completeness, or materiality of any data, information, record or
materials now, heretofore, or hereafter made available in connection with
this Agreement (including, without limitation, any descriptions of oil and
gas leases; quality or quantity or hydrocarbon reserves attributable to
the Assets, if any; production rates, exploratory or development drilling
opportunities, decline rates, potential for production of hydrocarbons
from the Assets; the environmental condition of said Assets; the legal,
tax or other consequences of owning Seller's interest in the Assets; or
any other information contained in any material furnished in connection
with this transaction). Any and all such data, information, records or
materials furnished by Seller to Buyer is provided as a convenience only
and any reliance on or use of same is at the Buyer's sole risk. WITHOUT
LIMITING THE GENERALITY OF THIS PARAGRAPH, SELLER DISCLAIMS AND NEGATES AS
TO ANY PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND APPURTENANCES SUBJECT
TO THIS AGREEMENT (INCLUDING ALL WELLS): (A) ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY
OF CONFORMITY TO MODELS OR SAMPLE OR MATERIALS. THE PURCHASER EXPRESSLY
AGREES THAT TITLE TO SUCH PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND
APPURTENANCES WILL BE ACCEPTED "AS IS", "WHERE IS", "WITH ALL FAULTS", AND
IN ITS PRESENT CONDITION AND STATE OF REPAIR.
5. Consideration. The consideration for this Assignment and the nine
other Assignments and Bills of Sale this day entered into by and between
Assignor and Assignee conveying certain interests in OCS-G 8504, 7049,
8010, 8012, 8876, 13171, 13696, 8000, 8006 and 8005, is the sum of
Eighteen Million Two Hundred Fifty Thousand and No/100 ($18,250,000.00)
Dollars ("Purchase Price"), in part payment thereof, Assignee has paid, in
ready and current funds, the sum of Six Million Two Hundred Fifty Thousand
and NO/100 ($6,250,000.00) Dollars to the Assignor, who hereby
acknowledges the receipt thereof and grants full acquittance and discharge
therefor.
And, for the balance of the Purchase Price, the sum of Twelve Million
and No/100 ($12,000,000.00) Dollars, the Assignee has furnished one (1)
certain Promissory Note in the amount of Twelve Million and No/100 Dollars
($12,000,000.00), drawn by the Assignee to the order of Assignor, dated
the 18th day of October, 1995, and payable in two installments of Six
Million and No/100 ($6,000,000.00) Dollars each, the first due on March
31, 1996 and the second due on September 30, 1996, which note bears
interest at the rate of 8.56% per annum from date thereof until paid.
6. Liability of Successors. The terms, conditions, rights and
obligations of this Assignment shall run with the land and extend to and
be binding upon the parties hereto and their respective successors, heirs
and/or assigns.
7. Counterparts. This Assignment may be executed in several original
counterparts, all of which are identical. Each of such counterparts shall
for all purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument. The signature
pages of the counterparts may be amalgamated to form complete documents
for the purpose of recording complete documents in the public registries.
8. Severability. If any provision of this Assignment is invalid or
unenforceable in part or in whole in any jurisdiction applicable to this
Assignment, then, to the extent permitted by applicable law, (i) the other
provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in order to carry out the
intentions of the parties hereto as nearly as may be possible, and (ii)
the invalidity or unenforceability of such provision in any jurisdiction
shall not affect the validity or enforceability thereof in any other
jurisdiction.
9. Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
LOUISIANA, WITHOUT REGARD TO CONFLICT OF LAW RULES THAT WOULD DIRECT
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
10. Purchase and Sale Agreement. Notwithstanding anything to the
contrary provided herein, this Assignment shall at all times be subject to
the terms, conditions and exceptions contained in that certain unrecorded
Purchase and Sale Agreement dated the same date as this Assignment by and
between Assignor and Assignee. The unrecorded Purchase and Sale Agreement
shall at all times govern the rights of the parties in and to the Assets.
All interested parties are hereby given notice of the existence of the
unrecorded Purchase and Sale Agreement.
11. MMS Approval. This Assignment is expressly made subject to the
approval of the Minerals Management Service, United States Department of
the Interior.
IN WITNESS WHEREFORE, this Assignment is executed in multiple
originals and in the presence of the undersigned witnesses on this 18th
day of October, 1995, but to be effective as of the Effective Date.
WITNESSES: ASSIGNOR:
ENSERCH EXPLORATION, INC.
___________________________________ Tax ID # 75-2556975
Name: James K. Teringo, Jr.
By:
___________________________________ R. L. Kincheloe
Name: Senior Vice President,
Offshore and International
ASSIGNEE:
WITNESSES:
READING & BATES DEVELOPMENT CO.
Tax ID# 73-0797067
______________________________________
Name:_________________________________ By: __________________________
D. C. Toalson
President
Name:__________________________________
- -----------------------------------------------------------------------------
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
R. L. KINCHELOE, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as Senior
Vice President, Offshore and International of Enserch Exploration, Inc., a
Texas corporation, on behalf of said corporation with full authority, and
that the said instrument is the free act and deed of the said corporation,
and was executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of James K. Teringo, Jr. and ________________________, competent
witnesses, on the 18th day of October, 1995.
WITNESSES:
____________________________________ _______________________________
James K. Teringo, Jr. R. L. KINCHELOE
____________________________________
_____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
____________________________
- ----------------------------------------------------------------------------
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
D. C. TOALSON, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as
President of Reading & Bates Development Co., a Delaware corporation, on
behalf of the said corporation with full authority, and that the said
instrument is the free act and deed of the said corporation, and was
executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of _________________________________ and
_________________________________, competent witnesses, on the 18th day of
October, 1995.
WITNESSES:
___________________________________ _________________________________
D. C. TOALSON
___________________________________
____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
__________________________________
- ----------------------------------------------------------------------
EXHIBIT 1
Part (a)
LEASE OCS-G 8504. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
June 1, 1986, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
8504 covering all of Block 209, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 13.33333%
Net Revenue Interest 11.61687%
Part (b)
Together with a like interest in and to:
NONE
Part (c)
Together with a like interest in and to:
1. Offer Letter dated April 17, 1995, executed by and between Enserch
Exploration, Inc. and Reading & Bates Development Co., as such may
have been amended.
2. Partial Lease Interest Acquisition Agreement dated effective
September 22, 1988, as amended, executed by and between Exxon
Corporation and Opubco Resources, Inc., et al.
3. Offshore Operating Agreement dated effective September 22, 1988,
executed by and between Exxon Corporation and Placid Oil Company, et
al., as amended by instrument effective November 21, 1989, covering
and pertaining to Green Canyon Block 209.
4. Farmout Agreement dated July 10, 1991 (including all amendments to
that agreement), between Exxon Corporation and Hunt Petroleum
Corporation covering Green Canyon Blocks 209, 254, 297, 298 and 342.
5. Bidding Agreement dated April 1, 1986, (including all amendments to
that agreement) between Exxon Corporation and Amoco Production
Company, et al., covering and pertaining to Green Canyon Block 209.
6. Purchase and Sale Agreement dated March 28, 1995, executed by and
between Exxon Corporation, as Seller and Enserch Exploration, Inc.,
as Buyer.
7. Purchase and Sale Agreement dated February 28, 1995, executed by and
between Enserch Offshore, Inc., as Buyer and HI Production Company,
Inc., as Seller.
8. Purchase and Sale Agreement dated February 28, 1995, executed by and
betweenEnserch Offshore,Inc., asBuyer andPlacid OilCompany, asSeller.
9. Purchase and Sale Agreement dated February 28, 1995, executed by and
between Enserch Offshore, Inc., as Buyer and OPUBCO Resources, Inc.,
as Seller.
NOTE: ALL REFERENCES IN THIS EXHIBIT 1 MADE TO "WORKING INTEREST" AND
"NET REVENUE INTEREST", AND TO THE NUMBERS SET FORTH IN CONNECTION
THEREWITH, ARE FOR TITLE WARRANTY PURPOSES ONLY.
EXHIBIT 10.114
STATE OF TEXAS
(OCS-G-8012)
COUNTY OF DALLAS
ASSIGNMENT AND BILL OF SALE
THIS Assignment and Bill of Sale (the "Assignment") is entered into
and shall be effective as of 12:01 a.m., May 1, 1995 (hereinafter referred
to as the "Effective Date"), by and between ENSERCH EXPLORATION, INC., a
Texas corporation, (hereinafter referred to as "Assignor"), whose mailing
address is 4849 Greenville Avenue, Suite 1500, Dallas, Texas, 75206; and
READING & BATES DEVELOPMENT CO., a Delaware corporation (hereinafter
referred to as "Assignee"), whose mailing address is 901 Threadneedle,
Suite 200, Houston, Texas 77079.
W I T N E S S E T H:
1. Sale. THAT, FOR THE CONSIDERATION stated hereinbelow in Article 5.
and OTHER VALUABLE CONSIDERATION, the sufficiency of which is hereby
acknowledged, Assignor does hereby GRANT, SELL, TRANSFER, ASSIGN, and
CONVEY unto Assignee the undivided right, title and interest reflected in
Exhibit 1 Part (a) hereof, in and to the following described interests and
properties (the undivided interest being assigned hereunder in such
interests and properties shall hereinafter be referred to collectively as
the "Assets" and the specific quantitative interest being assigned
hereunder represents an undivided twenty percent (20%) of the interest of
Assignor in the Assets):
a. The oil, gas and mineral lease described on Exhibit 1, Part (a)
(the Lease ), together with a like interest with respect to the
Lease in and to any and all (i) mineral interests, (ii) overriding
or landowners' royalty interests, (iii) surface and subsurface
interests and rights, (iv) beneficial, convertible or reversionary
interests, (v) interest owned, claimed or acquired, or to be owned,
claimed or acquired, by agreement, (vi) production payments, (vii)
contractual interests owned pursuant to participation agreements,
operating agreements or similar agreements, and (viii) any and all
like or unlike interests, including without limitation those
specific items identified on Exhibit 1, Part (a). This shall
include any contractual rights providing for the acquisition or
earning of any of the foregoing, and Assignor's rights in respect
of any pooled, communitized or unitized acreage of which any of the
foregoing is a part. SAVE AND EXCEPT ANY RIGHT, TITLE OR INTEREST
OF ASSIGNOR IN AND TO, OR ANY RIGHTS DERIVED FROM, ANY BIDDING
AGREEMENTS EXECUTED BY AND BETWEEN ASSIGNOR AND MOBIL OIL
EXPLORATION & PRODUCING SOUTHWEST INC.. (All of the foregoing
shall be called collectively the Leasehold Interests. )
b. Any and all wells, wellbores, pipe, gathering lines, compressors,
facilities, equipment, platforms, pipelines and any and all other
personal, real, movable and immovable property, fixtures or
equipment which are located on or used directly in connection with
the production, treatment or transportation of oil and gas from the
Leasehold Interests, including, without limitation, those items
specifically identified on Exhibit 1, Part (b) (the Equipment ).
c. Any and all easements, rights of way, and subsurface and surface
rights associated or used in connection with any such easements or
rights of way, which easements, rights-of-way and subsurface and
surface rights have been obtained for use in connection with the
Leasehold Interests (the Gathering Facilities ).
d. Any and all oil, gas and other minerals produced from or
attributable to the Leasehold Interests on or after the Effective
Date.
e. To the extent the same are assignable or transferable by Assignor
and to the extent and only to the extent that the same relate to
the ownership or operation of the Leasehold Interests, the
Gathering Facilities or the Equipment on or after the Effective
Date, a like interest in and to all orders, contracts, agreements
(including without limitation all operating agreements,
transportation agreements, unit agreements, participation
agreements and processing agreements), instruments, licenses,
authorizations, permits, audits, claims, liens, suits, settlements
and demands, and other rights, privileges, benefits and powers
conferred upon Assignor, including, but not limited to those listed
on Exhibit 1 part (c).
TO HAVE AND TO HOLD unto Assignee, subject to the terms, conditions and
reservations hereinbelow recounted.
2. Title Warranty. Assignor warrants that:
a. Except as specifically set forth in the Purchase and Sale Agreement
described in Article 10. below or under the contracts and
agreements listed in Exhibit 1 to this Assignment, and further
except as a consequence of the formation of a unit, neither
Assignor nor any parent, subsidiary or affiliate of Assignor during
their respective periods of ownership has (A) executed any deed,
conveyance, assignment or other instrument as an assignor, grantor,
sublessor or in another capacity or (B) has breached any obligation
under any Lease that would (i) result in Assignee's being entitled
to receive less than the net revenue interest for any Lease, well
or unit set forth in Exhibit 1 of all oil and gas in, under, and
that may be produced, saved and marketed from or attributable to
such Lease, well or unit, or (ii) obligate Assignee to bear the
costs and expenses relating to the maintenance, development and
operation of such Lease, well or unit in an amount greater than the
working interest for such Lease, well or unit set forth in Exhibit
1, unless the net revenue interest attributable to said working
interest is increased by a proportionate or greater amount; and
b. Except as specifically set forth in the Purchase and Sale Agreement
described in Article 10. below or under the contracts and
agreements listed in Exhibit 1 to this Assignment, the Assets are
free of all liens, security interests and encumbrances;
(the limited warranty set forth in subparagraphs (a) and (b) above shall
hereinafter be referred to as the Special Limited Warranty ). Assignor
shall convey the Assets with no warranty whatsoever other than the Special
Limited Warranty, but with full substitution and subrogation to Assignee
in and to all covenants, agreements, representations and warranties made
by others heretofore given or made in connection with the Assets or any
part thereof.
3. Acceptance. Assignee accepts this Assignment and acknowledges
delivery of the Assets and accepts the obligations as provided in the
Purchase and Sale Agreement described in Article 10 below (including those
contracts and agreements listed on Exhibit 1 of this Assignment, insofar
and only insofar as such contracts and agreements cover, pertain or apply
to the Leasehold Interests), on or after the Effective Date, including,
but not limited to, any overriding royalty interests which may burden the
Assets and which were created by Assignor's predecessor(s) in title.
4. Other Warranty Provisions. Assignee acknowledges that (a) Assignor
has not made any warranty or representation, whether express, implied, at
common law, by statute or otherwise, relating to the fitness for an
intended purpose or condition of any movable property constituting a
portion of the Assets and (b) Assignee shall acquire such personal
property in WHERE IS, AS IS condition. Except as may be specifically
set forth to the contrary in the Purchase and Sale Agreement described in
10 below(the "Agreement"), Buyer acknowledges that Seller has made no
representations or warranties whatever, expressed or implied, (Seller
having hereby expressly disclaimed all such warranties) as to the
accuracy, completeness, or materiality of any data, information, record or
materials now, heretofore, or hereafter made available in connection with
this Agreement (including, without limitation, any descriptions of oil and
gas leases; quality or quantity or hydrocarbon reserves attributable to
the Assets, if any; production rates, exploratory or development drilling
opportunities, decline rates, potential for production of hydrocarbons
from the Assets; the environmental condition of said Assets; the legal,
tax or other consequences of owning Seller's interest in the Assets; or
any other information contained in any material furnished in connection
with this transaction). Any and all such data, information, records or
materials furnished by Seller to Buyer is provided as a convenience only
and any reliance on or use of same is at the Buyer's sole risk. WITHOUT
LIMITING THE GENERALITY OF THIS PARAGRAPH, SELLER DISCLAIMS AND NEGATES AS
TO ANY PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND APPURTENANCES SUBJECT
TO THIS AGREEMENT (INCLUDING ALL WELLS): (A) ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY
OF CONFORMITY TO MODELS OR SAMPLE OR MATERIALS. THE PURCHASER EXPRESSLY
AGREES THAT TITLE TO SUCH PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND
APPURTENANCES WILL BE ACCEPTED "AS IS", "WHERE IS", "WITH ALL FAULTS", AND
IN ITS PRESENT CONDITION AND STATE OF REPAIR.
5. Consideration. The consideration for this Assignment and the nine
other Assignments and Bills of Sale this day entered into by and between
Assignor and Assignee conveying certain interests in OCS-G 8504, 7049,
8010, 8012, 8876, 13171, 13696, 8000, 8006 and 8005, is the sum of
Eighteen Million Two Hundred Fifty Thousand and No/100 ($18,250,000.00)
Dollars ("Purchase Price"), in part payment thereof, Assignee has paid, in
ready and current funds, the sum of Six Million Two Hundred Fifty Thousand
and NO/100 ($6,250,000.00) Dollars to the Assignor, who hereby
acknowledges the receipt thereof and grants full acquittance and discharge
therefor.
And, for the balance of the Purchase Price, the sum of Twelve Million
and No/100 ($12,000,000.00) Dollars, the Assignee has furnished one (1)
certain Promissory Note in the amount of Twelve Million and No/100 Dollars
($12,000,000.00), drawn by the Assignee to the order of Assignor, dated
the 18th day of October, 1995, and payable in two installments of Six
Million and No/100 ($6,000,000.00) Dollars each, the first due on March
31, 1996 and the second due on September 30, 1996, which note bears
interest at the rate of 8.56% per annum from date thereof until paid.
6. Liability of Successors. The terms, conditions, rights and
obligations of this Assignment shall run with the land and extend to and
be binding upon the parties hereto and their respective successors, heirs
and/or assigns.
7. Counterparts. This Assignment may be executed in several original
counterparts, all of which are identical. Each of such counterparts shall
for all purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument. The signature
pages of the counterparts may be amalgamated to form complete documents
for the purpose of recording complete documents in the public registries.
8. Severability. If any provision of this Assignment is invalid or
unenforceable in part or in whole in any jurisdiction applicable to this
Assignment, then, to the extent permitted by applicable law, (i) the other
provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in order to carry out the
intentions of the parties hereto as nearly as may be possible, and (ii)
the invalidity or unenforceability of such provision in any jurisdiction
shall not affect the validity or enforceability thereof in any other
jurisdiction.
9. Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF LOUISIANA, WITHOUT
REGARD TO CONFLICT OF LAW RULES THAT WOULD DIRECT APPLICATION OF THE LAWS
OF ANOTHER JURISDICTION.
10. Purchase and Sale Agreement. Notwithstanding anything to the
contrary provided herein, this Assignment shall at all times be subject to
the terms, conditions and exceptions contained in that certain unrecorded
Purchase and Sale Agreement dated the same date as this Assignment by and
between Assignor and Assignee. The unrecorded Purchase and Sale Agreement
shall at all times govern the rights of the parties in and to the Assets.
All interested parties are hereby given notice of the existence of the
unrecorded Purchase and Sale Agreement.
11. MMS Approval. This Assignment is expressly made subject to the
approval of the Minerals Management Service, United States Department of
the Interior.
IN WITNESS WHEREFORE, this Assignment is executed in multiple
originals and in the presence of the undersigned witnesses on this 18th
day of October, 1995, but to be effective as of the Effective Date.
WITNESSES: ASSIGNOR:
ENSERCH EXPLORATION, INC.
___________________________________ Tax ID # 75-2556975
Name: James K. Teringo, Jr.
By:_______________________
R. L. Kincheloe
Name: Senior Vice President,
Offshore and International
ASSIGNEE:
WITNESSES:
READING & BATES DEVELOPMENT CO.
Tax ID# 73-0797067
______________________________________
Name:_________________________________
By:_________________________
D. C. Toalson
President
Name:__________________________________
- ----------------------------------------------------------------------------
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
R. L. KINCHELOE, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as Senior
Vice President, Offshore and International of Enserch Exploration, Inc., a
Texas corporation, on behalf of said corporation with full authority, and
that the said instrument is the free act and deed of the said corporation,
and was executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of James K. Teringo, Jr. and ________________________, competent
witnesses, on the 18th day of October, 1995.
WITNESSES:
______________________________ ____________________________________
James K. Teringo, Jr. R. L. KINCHELOE
______________________________
_____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
____________________________
- ---------------------------------------------------------------------------
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
D. C. TOALSON, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as
President of Reading & Bates Development Co., a Delaware corporation, on
behalf of the said corporation with full authority, and that the said
instrument is the free act and deed of the said corporation, and was
executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of _________________________________ and
_________________________________, competent witnesses, on the 18th day of
October, 1995.
WITNESSES:
___________________________________ ____________________________________
D. C. TOALSON
___________________________________
____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
__________________________________
- ----------------------------------------------------------------------------
EXHIBIT 1
Part (a)
LEASE OCS-G 8012. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
8012 covering all of Block 342, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 20.00000%
Net Revenue Interest 17.35066%
Part (b)
Together with a like interest in and to:
NONE
Part (c)
Together with a like interest in and to:
1. Offer Letter dated April 17, 1995, executed by and between Enserch
Exploration, Inc. and Reading & Bates Development Co., as such may
have been amended.
2. Farmout Agreement dated July 10, 1991 (including all amendments to
that agreement), between Exxon Corporation and Hunt Petroleum
Corporation covering Green Canyon Blocks 209, 254, 297, 298 and 342.
3. Purchase and Sale Agreement dated March 28, 1995, executed by and
between Exxon Corporation, as Seller and Enserch Exploration, Inc., as
Buyer.
4. Oil Gathering Agreement dated December 2, 1994, executed by and
between EP Operating Limited Partnership, as Producer and Manta Ray
Gathering Systems Inc., as Gatherer.
5. Gas Gathering Agreement dated December 2, 1994, executed by and
between EP Operating Limited Partnership, as Producer and Manta Ray
Gathering Systems Inc., as Gatherer.
6. Purchase and Sale Agreement dated February 28, 1995, executed by and
between Enserch Offshore, Inc., as Buyer and HI Production Company,
Inc., as Seller.
7. Purchase and Sale Agreement dated February 28, 1995, executed by and
between Enserch Offshore, Inc., as Buyer and Placid Oil Company, as
Seller.
8. Purchase and Sale Agreement dated February 28, 1995, executed by and
between Enserch Offshore, Inc., as Buyer and OPUBCO Resources, Inc.,
as Seller.
NOTE: ALL REFERENCES IN THIS EXHIBIT 1 MADE TO "WORKING INTEREST" AND
"NET REVENUE INTEREST", AND TO THE NUMBERS SET FORTH IN CONNECTION
THEREWITH, ARE FOR TITLE WARRANTY PURPOSES ONLY.
EXHIBIT 10.115
STATE OF TEXAS
(OCS-G-7049)
COUNTY OF DALLAS
ASSIGNMENT AND BILL OF SALE
THIS Assignment and Bill of Sale (the "Assignment") is entered into
and shall be effective as of 12:01 a.m., May 1, 1995 (hereinafter referred
to as the "Effective Date"), by and between ENSERCH EXPLORATION, INC., a
Texas corporation, (hereinafter referred to as "Assignor"), whose mailing
address is 4849 Greenville Avenue, Suite 1500, Dallas, Texas, 75206; and
READING & BATES DEVELOPMENT CO., a Delaware corporation (hereinafter
referred to as "Assignee"), whose mailing address is 901 Threadneedle,
Suite 200, Houston, Texas 77079.
W I T N E S S E T H:
1. Sale. THAT, FOR THE CONSIDERATION stated hereinbelow in Article 5.
and OTHER VALUABLE CONSIDERATION, the sufficiency of which is hereby
acknowledged, Assignor does hereby GRANT, SELL, TRANSFER, ASSIGN, and
CONVEY unto Assignee the undivided right, title and interest reflected in
Exhibit 1 Part (a) hereof, in and to the following described interests and
properties (the undivided interest being assigned hereunder in such
interests and properties shall hereinafter be referred to collectively as
the "Assets" and the specific quantitative interest being assigned
hereunder represents an undivided twenty percent (20%) of the interest of
Assignor in the Assets):
a. The oil, gas and mineral lease described on Exhibit 1, Part (a)
(the Lease ), together with a like interest with respect to the
Lease in and to any and all (i) mineral interests, (ii)
overriding or landowners' royalty interests, (iii) surface and
subsurface interests and rights, (iv) beneficial, convertible
or reversionary interests, (v) interest owned, claimed or
acquired, or to be owned, claimed or acquired, by agreement,
(vi) production payments, (vii) contractual interests owned
pursuant to participation agreements, operating agreements or
similar agreements, and (viii) any and all like or unlike
interests, including without limitation those specific items
identified on Exhibit 1, Part (a). This shall include any
contractual rights providing for the acquisition or earning of
any of the foregoing, and Assignor's rights in respect of any
pooled, communitized or unitized acreage of which any of the
foregoing is a part. SAVE AND EXCEPT ANY RIGHT, TITLE OR
INTEREST OF ASSIGNOR IN AND TO, OR ANY RIGHTS DERIVED FROM, ANY
BIDDING AGREEMENTS EXECUTED BY AND BETWEEN ASSIGNOR AND MOBIL
OIL EXPLORATION & PRODUCING SOUTHWEST INC.. (All of the
foregoing shall be called collectively the Leasehold
Interests. )
b. Any and all wells, wellbores, pipe, gathering lines,
compressors, facilities, equipment, platforms, pipelines and any
and all other personal, real, movable and immovable property,
fixtures or equipment which are located on or used directly in
connection with the production, treatment or transportation of
oil and gas from the Leasehold Interests, including, without<PAGE>
limitation, those items specifically identified on Exhibit 1,
Part (b) (the Equipment ).
c. Any and all easements, rights of way, and subsurface and surface
rights associated or used in connection with any such easements
or rights of way, which easements, rights-of-way and subsurface
and surface rights have been obtained for use in connection with
the Leasehold Interests (the Gathering Facilities ).
d. Any and all oil, gas and other minerals produced from or
attributable to the Leasehold Interests on or after the
Effective Date.
e. To the extent the same are assignable or transferable by
Assignor and to the extent and only to the extent that the same
relate to the ownership or operation of the Leasehold Interests,
the Gathering Facilities or the Equipment on or after the
Effective Date, a like interest in and to all orders, contracts,
agreements (including without limitation all operating
agreements, transportation agreements, unit agreements,
participation agreements and processing agreements),
instruments, licenses, authorizations, permits, audits, claims,
liens, suits, settlements and demands, and other rights,
privileges, benefits and powers conferred upon Assignor,
including, but not limited to those listed on Exhibit 1 part
(c).
TO HAVE AND TO HOLD unto Assignee, subject to the terms, conditions and
reservations hereinbelow recounted.
2. Title Warranty. Assignor warrants that:
a. Except as specifically set forth in the Purchase and Sale
Agreement described in Article 10. below or under the contracts
and agreements listed in Exhibit 1 to this Assignment, and
further except as a consequence of the formation of a unit,
neither Assignor nor any parent, subsidiary or affiliate of
Assignor during their respective periods of ownership has (A)
executed any deed, conveyance, assignment or other instrument as
an assignor, grantor, sublessor or in another capacity or (B)
has breached any obligation under any Lease that would (i)
result in Assignee's being entitled to receive less than the net
revenue interest for any Lease, well or unit set forth in
Exhibit 1 of all oil and gas in, under, and that may be
produced, saved and marketed from or attributable to such Lease,
well or unit, or (ii) obligate Assignee to bear the costs and
expenses relating to the maintenance, development and operation
of such Lease, well or unit in an amount greater than the
working interest for such Lease, well or unit set forth in
Exhibit 1, unless the net revenue interest attributable to said
working interest is increased by a proportionate or greater
amount; and
b. Except as specifically set forth in the Purchase and Sale
Agreement described in Article 10. below or under the contracts
and agreements listed in Exhibit 1 to this Assignment, the
Assets are free of all liens, security interests and
encumbrances;
(the limited warranty set forth in subparagraphs (a) and (b) above shall
hereinafter be referred to as the Special Limited Warranty ). Assignor
shall convey the Assets with no warranty whatsoever other than the Special
Limited Warranty, but with full substitution and subrogation to Assignee
in and to all covenants, agreements, representations and warranties made
by others heretofore given or made in connection with the Assets or any
part thereof.
3. Acceptance. Assignee accepts this Assignment and acknowledges
delivery of the Assets and accepts the obligations as provided in the
Purchase and Sale Agreement described in Article 10 below (including those
contracts and agreements listed on Exhibit 1 of this Assignment, insofar
and only insofar as such contracts and agreements cover, pertain or apply
to the Leasehold Interests), on or after the Effective Date, including,
but not limited to, any overriding royalty interests which may burden the
Assets and which were created by Assignor's predecessor(s) in title.
4. Other Warranty Provisions. Assignee acknowledges that (a) Assignor
has not made any warranty or representation, whether express, implied, at
common law, by statute or otherwise, relating to the fitness for an
intended purpose or condition of any movable property constituting a
portion of the Assets and (b) Assignee shall acquire such personal
property in WHERE IS, AS IS condition. Except as may be specifically
set forth to the contrary in the Purchase and Sale Agreement described in
10 below(the "Agreement"), Buyer acknowledges that Seller has made no
representations or warranties whatever, expressed or implied, (Seller
having hereby expressly disclaimed all such warranties) as to the
accuracy, completeness, or materiality of any data, information, record or
materials now, heretofore, or hereafter made available in connection with
this Agreement (including, without limitation, any descriptions of oil and
gas leases; quality or quantity or hydrocarbon reserves attributable to
the Assets, if any; production rates, exploratory or development drilling
opportunities, decline rates, potential for production of hydrocarbons
from the Assets; the environmental condition of said Assets; the legal,
tax or other consequences of owning Seller's interest in the Assets; or
any other information contained in any material furnished in connection
with this transaction). Any and all such data, information, records or
materials furnished by Seller to Buyer is provided as a convenience only
and any reliance on or use of same is at the Buyer's sole risk. WITHOUT
LIMITING THE GENERALITY OF THIS PARAGRAPH, SELLER DISCLAIMS AND NEGATES AS
TO ANY PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND APPURTENANCES SUBJECT
TO THIS AGREEMENT (INCLUDING ALL WELLS): (A) ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY
OF CONFORMITY TO MODELS OR SAMPLE OR MATERIALS. THE PURCHASER EXPRESSLY
AGREES THAT TITLE TO SUCH PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND
APPURTENANCES WILL BE ACCEPTED "AS IS", "WHERE IS", "WITH ALL FAULTS", AND
IN ITS PRESENT CONDITION AND STATE OF REPAIR.
5. Consideration. The consideration for this Assignment and the nine
other Assignments and Bills of Sale this day entered into by and between
Assignor and Assignee conveying certain interests in OCS-G 8504, 7049,
8010, 8012, 8876, 13171, 13696, 8000, 8006 and 8005, is the sum of
Eighteen Million Two Hundred Fifty Thousand and No/100 ($18,250,000.00)
Dollars ("Purchase Price"), in part payment thereof, Assignee has paid, in
ready and current funds, the sum of Six Million Two Hundred Fifty Thousand
and NO/100 ($6,250,000.00) Dollars to the Assignor, who hereby
acknowledges the receipt thereof and grants full acquittance and discharge
therefor.
And, for the balance of the Purchase Price, the sum of Twelve Million
and No/100 ($12,000,000.00) Dollars, the Assignee has furnished one (1)
certain Promissory Note in the amount of Twelve Million and No/100 Dollars
($12,000,000.00), drawn by the Assignee to the order of Assignor, dated
the 18th day of October, 1995, and payable in two installments of Six
Million and No/100 ($6,000,000.00) Dollars each, the first due on March
31, 1996 and the second due on September 30, 1996, which note bears
interest at the rate of 8.56% per annum from date thereof until paid.
6. Liability of Successors. The terms, conditions, rights and
obligations of this Assignment shall run with the land and extend to and
be binding upon the parties hereto and their respective successors, heirs
and/or assigns.
7. Counterparts. This Assignment may be executed in several original
counterparts, all of which are identical. Each of such counterparts shall
for all purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument. The signature
pages of the counterparts may be amalgamated to form complete documents
for the purpose of recording complete documents in the public registries.
8. Severability. If any provision of this Assignment is invalid or
unenforceable in part or in whole in any jurisdiction applicable to this
Assignment, then, to the extent permitted by applicable law, (i) the other
provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in order to carry out the
intentions of the parties hereto as nearly as may be possible, and (ii)
the invalidity or unenforceability of such provision in any jurisdiction
shall not affect the validity or enforceability thereof in any other
jurisdiction.
9. Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
LOUISIANA, WITHOUT REGARD TO CONFLICT OF LAW RULES THAT WOULD DIRECT
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
10. Purchase and Sale Agreement. Notwithstanding anything to the
contrary provided herein, this Assignment shall at all times be subject to
the terms, conditions and exceptions contained in that certain unrecorded
Purchase and Sale Agreement dated the same date as this Assignment by and
between Assignor and Assignee. The unrecorded Purchase and Sale Agreement
shall at all times govern the rights of the parties in and to the Assets.
All interested parties are hereby given notice of the existence of the
unrecorded Purchase and Sale Agreement.
11. MMS Approval. This Assignment is expressly made subject to the
approval of the Minerals Management Service, United States Department of
the Interior.
IN WITNESS WHEREFORE, this Assignment is executed in multiple
originals and in the presence of the undersigned witnesses on this 18th
day of October, 1995, but to be effective as of the Effective Date.
WITNESSES: ASSIGNOR:
ENSERCH EXPLORATION, INC.
___________________________________ Tax ID # 75-2556975
Name: James K. Teringo, Jr.
By:_______________________________
___________________________________ R. L. Kincheloe
Name: Senior Vice President,
Offshore and International
ASSIGNEE:
WITNESSES:
READING & BATES DEVELOPMENT CO.
Tax ID# 73-0797067
______________________________________
Name:_________________________________
By:______________________________
D. C. Toalson
President
Name:__________________________________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
R. L. KINCHELOE, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as Senior
Vice President, Offshore and International of Enserch Exploration, Inc., a
Texas corporation, on behalf of said corporation with full authority, and
that the said instrument is the free act and deed of the said corporation,
and was executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of James K. Teringo, Jr. and ________________________, competent
witnesses, on the 18th day of October, 1995.
WITNESSES:
______________________________ ____________________________________
James K. Teringo, Jr. R. L. KINCHELOE
______________________________
_____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
____________________________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
D. C. TOALSON, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as
President of Reading & Bates Development Co., a Delaware corporation, on
behalf of the said corporation with full authority, and that the said
instrument is the free act and deed of the said corporation, and was
executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of _________________________________ and
_________________________________, competent witnesses, on the 18th day of
October, 1995.
WITNESSES:
___________________________________ ____________________________________
D. C. TOALSON
___________________________________
____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
__________________________________
EXHIBIT 1
Part (a)
LEASE OCS-G 7049. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
June 1, 1984, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
7049 covering all of Block 254, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 20.000000%
Net Revenue Interest 17.3506665%
Part (b)
Together with a like interest in and to:
1. WELLS:
WORKING REVENUE
INTEREST INTEREST
A. OCS-G 7049 #3 20.00000% 17.350665%
B. OCS-G 7049 #4 20.00000% 17.350665%
C. OCS-G 7049 #4ST1 20.00000% 17.350665%
D. OCS-G 7049 #5 20.00000% 17.350665%
2. TEMPLATE:
That certain three well drilling template acquired, inter alia, by
Seller for use in connection with the drilling of the OCS-G 7049 #5
Well.
Part (c)
Together with a like interest in and to:
1. Offer Letter dated April 17, 1995, executed by and between Enserch
Exploration, Inc. and Reading & Bates Development Co., as such may
have been amended.
2. Farmout Agreement dated July 10, 1991 (including all amendments to
that agreement), between Exxon Corporation and Hunt Petroleum
Corporation covering Green Canyon Blocks 209, 254, 297, 298 and 342.
3. Purchase and Sale Agreement dated March 28, 1995, executed by and
between Exxon Corporation, as Seller and Enserch Exploration, Inc., as
Buyer.
4. Oil Gathering Agreement dated December 2, 1994, executed by and
between EP Operating Limited Partnership, as Producer and Manta Ray
Gathering Systems Inc., as Gatherer.
5. Gas Gathering Agreement dated December 2, 1994, executed by and
between EP Operating Limited Partnership, as Producer and Manta Ray
Gathering Systems Inc., as Gatherer.
6. Purchase and Sale Agreement dated February 28, 1995, executed by and
between Enserch Offshore, Inc., as Buyer and HI Production Company,
Inc., as Seller.
7. Purchase and Sale Agreement dated February 28, 1995, executed by and
between Enserch Offshore, Inc., as Buyer and Placid Oil Company, as
Seller.
8. Purchase and Sale Agreement dated February 28, 1995, executed by and
between Enserch Offshore, Inc., as Buyer and OPUBCO Resources, Inc.,
as Seller.
9. That certain Exploration, Drilling and Production Unit Agreement dated
June 22, 1995, executed by and between Enserch Offshore, Inc. and
Enserch Exploration, Inc., covering and pertaining to Green Canyon
Blocks 253, 254, 297 & 298.
NOTE: ALL REFERENCES IN THIS EXHIBIT 1 MADE TO "WORKING INTEREST" AND
"NET REVENUE INTEREST", AND TO THE NUMBERS SET FORTH IN CONNECTION
THEREWITH, ARE FOR TITLE WARRANTY PURPOSES ONLY.
EXHIBIT 10.116
STATE OF TEXAS
(OCS-G-8010)
COUNTY OF DALLAS
ASSIGNMENT AND BILL OF SALE
THIS Assignment and Bill of Sale (the "Assignment") is entered into
and shall be effective as of 12:01 a.m., May 1, 1995 (hereinafter referred
to as the "Effective Date"), by and between ENSERCH EXPLORATION, INC., a
Texas corporation, (hereinafter referred to as "Assignor"), whose mailing
address is 4849 Greenville Avenue, Suite 1500, Dallas, Texas, 75206; and
READING & BATES DEVELOPMENT CO., a Delaware corporation (hereinafter
referred to as "Assignee"), whose mailing address is 901 Threadneedle,
Suite 200, Houston, Texas 77079.
W I T N E S S E T H:
1. Sale. THAT, FOR THE CONSIDERATION stated hereinbelow in Article 5.
and OTHER VALUABLE CONSIDERATION, the sufficiency of which is hereby
acknowledged, Assignor does hereby GRANT, SELL, TRANSFER, ASSIGN, and
CONVEY unto Assignee the undivided right, title and interest reflected in
Exhibit 1 Part (a) hereof, in and to the following described interests and
properties (the undivided interest being assigned hereunder in such
interests and properties shall hereinafter be referred to collectively as
the "Assets" and the specific quantitative interest being assigned
hereunder represents an undivided twenty percent (20%) of the interest of
Assignor in the Assets):
a. The oil, gas and mineral lease described on Exhibit 1, Part (a)
(the Lease ), together with a like interest with respect to the
Lease in and to any and all (i) mineral interests, (ii) overriding
or landowners' royalty interests, (iii) surface and subsurface
interests and rights, (iv) beneficial, convertible or
reversionary interests, (v) interest owned, claimed or acquired,
or to be owned, claimed or acquired, by agreement, (vi) production
payments, (vii) contractual interests owned pursuant to
participation agreements, operating agreements or similar
agreements, and (viii) any and all like or unlike interests,
including without limitation those specific items identified on
Exhibit 1, Part (a). This shall include any contractual rights
providing for the acquisition or earning of any of the foregoing,
and Assignor's rights in respect of any pooled, communitized or
unitized acreage of which any of the foregoing is a part. SAVE
AND EXCEPT ANY RIGHT, TITLE OR INTEREST OF ASSIGNOR IN AND TO, OR
ANY RIGHTS DERIVED FROM, ANY BIDDING AGREEMENTS EXECUTED BY AND
BETWEEN ASSIGNOR AND MOBIL OIL EXPLORATION & PRODUCING SOUTHWEST
INC.. (All of the foregoing shall be called collectively the
Leasehold Interests. )
b. Any and all wells, wellbores, pipe, gathering lines, compressors,
facilities, equipment, platforms, pipelines and any and all other
personal, real, movable and immovable property, fixtures or
equipment which are located on or used directly in connection with
the production, treatment or transportation of oil and gas from
the Leasehold Interests, including, without limitation, those
items specifically identified on Exhibit 1, Part (b) (the
Equipment ).
c. Any and all easements, rights of way, and subsurface and surface
rights associated or used in connection with any such easements or
rights of way, which easements, rights-of-way and subsurface and
surface rights have been obtained for use in connection with the
Leasehold Interests (the Gathering Facilities ).
d. Any and all oil, gas and other minerals produced from or
attributable to the Leasehold Interests on or after the Effective
Date.
e. To the extent the same are assignable or transferable by Assignor
and to the extent and only to the extent that the same relate to
the ownership or operation of the Leasehold Interests, the
Gathering Facilities or the Equipment on or after the Effective
Date, a like interest in and to all orders, contracts, agreements
(including without limitation all operating agreements,
transportation agreements, unit agreements, participation
agreements and processing agreements), instruments, licenses,
authorizations, permits, audits, claims, liens, suits, settlements
and demands, and other rights, privileges, benefits and powers
conferred upon Assignor, including, but not limited to those
listed on Exhibit 1 part (c).
TO HAVE AND TO HOLD unto Assignee, subject to the terms, conditions and
reservations hereinbelow recounted.
2. Title Warranty. Assignor warrants that:
a. Except as specifically set forth in the Purchase and Sale
Agreement described in Article 10. below or under the contracts
and agreements listed in Exhibit 1 to this Assignment, and further
except as a consequence of the formation of a unit, neither
Assignor nor any parent, subsidiary or affiliate of Assignor
during their respective periods of ownership has (A) executed any
deed, conveyance, assignment or other instrument as an assignor,
grantor, sublessor or in another capacity or (B) has breached any
obligation under any Lease that would (i) result in Assignee's
being entitled to receive less than the net revenue interest for
any Lease, well or unit set forth in Exhibit 1 of all oil and gas
in, under, and that may be produced, saved and marketed from or
attributable to such Lease, well or unit, or (ii) obligate
Assignee to bear the costs and expenses relating to the
maintenance, development and operation of such Lease, well or unit
in an amount greater than the working interest for such Lease,
well or unit set forth in Exhibit 1, unless the net revenue
interest attributable to said working interest is increased by a
proportionate or greater amount; and
b. Except as specifically set forth in the Purchase and Sale
Agreement described in Article 10. below or under the contracts
and agreements listed in Exhibit 1 to this Assignment, the Assets
are free of all liens, security interests and encumbrances;
(the limited warranty set forth in subparagraphs (a) and (b) above shall
hereinafter be referred to as the Special Limited Warranty ). Assignor
shall convey the Assets with no warranty whatsoever other than the Special
Limited Warranty, but with full substitution and subrogation to Assignee
in and to all covenants, agreements, representations and warranties made
by others heretofore given or made in connection with the Assets or any
part thereof.
3. Acceptance. Assignee accepts this Assignment and acknowledges
delivery of the Assets and accepts the obligations as provided in the
Purchase and Sale Agreement described in Article 10 below (including those
contracts and agreements listed on Exhibit 1 of this Assignment, insofar
and only insofar as such contracts and agreements cover, pertain or apply
to the Leasehold Interests), on or after the Effective Date, including,
but not limited to, any overriding royalty interests which may burden the
Assets and which were created by Assignor's predecessor(s) in title.
4. Other Warranty Provisions. Assignee acknowledges that (a) Assignor
has not made any warranty or representation, whether express, implied, at
common law, by statute or otherwise, relating to the fitness for an
intended purpose or condition of any movable property constituting a
portion of the Assets and (b) Assignee shall acquire such personal
property in WHERE IS, AS IS condition. Except as may be specifically
set forth to the contrary in the Purchase and Sale Agreement described in
10 below(the "Agreement"), Buyer acknowledges that Seller has made no
representations or warranties whatever, expressed or implied, (Seller
having hereby expressly disclaimed all such warranties) as to the
accuracy, completeness, or materiality of any data, information, record or
materials now, heretofore, or hereafter made available in connection with
this Agreement (including, without limitation, any descriptions of oil and
gas leases; quality or quantity or hydrocarbon reserves attributable to
the Assets, if any; production rates, exploratory or development drilling
opportunities, decline rates, potential for production of hydrocarbons
from the Assets; the environmental condition of said Assets; the legal,
tax or other consequences of owning Seller's interest in the Assets; or
any other information contained in any material furnished in connection
with this transaction). Any and all such data, information, records or
materials furnished by Seller to Buyer is provided as a convenience only
and any reliance on or use of same is at the Buyer's sole risk. WITHOUT
LIMITING THE GENERALITY OF THIS PARAGRAPH, SELLER DISCLAIMS AND NEGATES AS
TO ANY PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND APPURTENANCES SUBJECT
TO THIS AGREEMENT (INCLUDING ALL WELLS): (A) ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY
OF CONFORMITY TO MODELS OR SAMPLE OR MATERIALS. THE PURCHASER EXPRESSLY
AGREES THAT TITLE TO SUCH PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND
APPURTENANCES WILL BE ACCEPTED "AS IS", "WHERE IS", "WITH ALL FAULTS", AND
IN ITS PRESENT CONDITION AND STATE OF REPAIR.
5. Consideration. The consideration for this Assignment and the nine
other Assignments and Bills of Sale this day entered into by and between
Assignor and Assignee conveying certain interests in OCS-G 8504, 7049,
8010, 8012, 8876, 13171, 13696, 8000, 8006 and 8005, is the sum of
Eighteen Million Two Hundred Fifty Thousand and No/100 ($18,250,000.00)
Dollars ("Purchase Price"), in part payment thereof, Assignee has paid, in
ready and current funds, the sum of Six Million Two Hundred Fifty Thousand
and NO/100 ($6,250,000.00) Dollars to the Assignor, who hereby
acknowledges the receipt thereof and grants full acquittance and discharge
therefor.
And, for the balance of the Purchase Price, the sum of Twelve Million
and No/100 ($12,000,000.00) Dollars, the Assignee has furnished one (1)
certain Promissory Note in the amount of Twelve Million and No/100 Dollars
($12,000,000.00), drawn by the Assignee to the order of Assignor, dated
the 18th day of October, 1995, and payable in two installments of Six
Million and No/100 ($6,000,000.00) Dollars each, the first due on March
31, 1996 and the second due on September 30, 1996, which note bears
interest at the rate of 8.56% per annum from date thereof until paid.
6. Liability of Successors. The terms, conditions, rights and
obligations of this Assignment shall run with the land and extend to and
be binding upon the parties hereto and their respective successors, heirs
and/or assigns.
7. Counterparts. This Assignment may be executed in several original
counterparts, all of which are identical. Each of such counterparts shall
for all purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument. The signature
pages of the counterparts may be amalgamated to form complete documents
for the purpose of recording complete documents in the public registries.
8. Severability. If any provision of this Assignment is invalid or
unenforceable in part or in whole in any jurisdiction applicable to this
Assignment, then, to the extent permitted by applicable law, (i) the other
provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in order to carry out the
intentions of the parties hereto as nearly as may be possible, and (ii)
the invalidity or unenforceability of such provision in any jurisdiction
shall not affect the validity or enforceability thereof in any other
jurisdiction.
9. Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF LOUISIANA, WITHOUT
REGARD TO CONFLICT OF LAW RULES THAT WOULD DIRECT APPLICATION OF THE LAWS
OF ANOTHER JURISDICTION.
10. Purchase and Sale Agreement. Notwithstanding anything to the
contrary provided herein, this Assignment shall at all times be subject to
the terms, conditions and exceptions contained in that certain unrecorded
Purchase and Sale Agreement dated the same date as this Assignment by and
between Assignor and Assignee. The unrecorded Purchase and Sale Agreement
shall at all times govern the rights of the parties in and to the Assets.
All interested parties are hereby given notice of the existence of the
unrecorded Purchase and Sale Agreement.
11. MMS Approval. This Assignment is expressly made subject to the
approval of the Minerals Management Service, United States Department of
the Interior.
IN WITNESS WHEREFORE, this Assignment is executed in multiple
originals and in the presence of the undersigned witnesses on this 18th
day of October, 1995, but to be effective as of the Effective Date.
WITNESSES: ASSIGNOR:
ENSERCH EXPLORATION, INC.
___________________________________ Tax ID #75-2556975
Name: James K. Teringo, Jr.
By:_____________________________
R. L. Kincheloe
Name:_______________________________ Senior Vice President,
Offshore and International
ASSIGNEE:
WITNESSES:
READING & BATES DEVELOPMENT CO.
Tax ID# 73-0797067
______________________________________
Name:_________________________________ By:____________________________
D. C. Toalson
President
Name:__________________________________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
R. L. KINCHELOE, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as Senior
Vice President, Offshore and International of Enserch Exploration, Inc., a
Texas corporation, on behalf of said corporation with full authority, and
that the said instrument is the free act and deed of the said corporation,
and was executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of James K. Teringo, Jr. and ________________________, competent
witnesses, on the 18th day of October, 1995.
WITNESSES:
______________________________ ____________________________________
James K. Teringo, Jr. R. L. KINCHELOE
______________________________
_____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
____________________________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
D. C. TOALSON, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as
President of Reading & Bates Development Co., a Delaware corporation, on
behalf of the said corporation with full authority, and that the said
instrument is the free act and deed of the said corporation, and was
executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of _________________________________ and
_________________________________, competent witnesses, on the 18th day of
October, 1995.
WITNESSES:
___________________________________ ____________________________________
D. C. TOALSON
___________________________________
____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
__________________________________
EXHIBIT 1
Part (a)
LEASE OCS-G 8010. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
8010 covering all of Block 298, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 20.00000%
Net Revenue Interest 17.35066%
Part (b)
Together with a like interest in and to:
NONE
Part (c)
Together with a like interest in and to:
1. Offer Letter dated April 17, 1995, executed by and between Enserch
Exploration, Inc. and Reading & Bates Development Co., as such may
have been amended.
2. Farmout Agreement dated July 10, 1991 (including all amendments to
that agreement), between Exxon Corporation and Hunt Petroleum
Corporation covering Green Canyon Blocks 209, 254, 297, 298 and 342.
3. Purchase and Sale Agreement dated March 28, 1995, executed by and
between Exxon Corporation, as Seller and Enserch Exploration, Inc.,
as Buyer.
4. Oil Gathering Agreement dated December 2, 1994, executed by and
between EP Operating Limited Partnership, as Producer and Manta Ray
Gathering Systems Inc., as Gatherer.
5. Gas Gathering Agreement dated December 2, 1994, executed by and
between EP Operating Limited Partnership, as Producer and Manta Ray
Gathering Systems Inc., as Gatherer.
6. Purchase and Sale Agreement dated February 28, 1995, executed by and
between Enserch Offshore, Inc., as Buyer and HI Production Company,
Inc., as Seller.
7. Purchase and Sale Agreement dated February 28, 1995, executed by and
between Enserch Offshore, Inc., as Buyer and Placid Oil Company, as
Seller.
8. Purchase and Sale Agreement dated February 28, 1995, executed by and
between Enserch Offshore, Inc., as Buyer and OPUBCO Resources, Inc.,
as Seller.
9. That certain Exploration, Drilling and Production Unit Agreement
dated June 22, 1995, executed by and between Enserch Offshore, Inc.
and Enserch Exploration, Inc., covering and pertaining to Green
Canyon Blocks 253, 254, 297 & 298.
NOTE: ALL REFERENCES IN THIS EXHIBIT 1 MADE TO "WORKING INTEREST" AND
"NET REVENUE INTEREST", AND TO THE NUMBERS SET FORTH IN CONNECTION
THEREWITH, ARE FOR TITLE WARRANTY PURPOSES ONLY.
EXHIBIT 10.117
STATE OF TEXAS
(OCS-G-13696)
COUNTY OF DALLAS
ASSIGNMENT AND BILL OF SALE
THIS Assignment and Bill of Sale (the "Assignment") is entered into
and shall be effective as of 12:01 a.m., May 1, 1995 (hereinafter referred
to as the "Effective Date"), by and between ENSERCH EXPLORATION, INC., a
Texas corporation, (hereinafter referred to as "Assignor"), whose mailing
address is 4849 Greenville Avenue, Suite 1500, Dallas, Texas, 75206; and
READING & BATES DEVELOPMENT CO., a Delaware corporation (hereinafter
referred to as "Assignee"), whose mailing address is 901 Threadneedle,
Suite 200, Houston, Texas 77079.
W I T N E S S E T H:
1. Sale. THAT, FOR THE CONSIDERATION stated hereinbelow in Article 5.
and OTHER VALUABLE CONSIDERATION, the sufficiency of which is hereby
acknowledged, Assignor does hereby GRANT, SELL, TRANSFER, ASSIGN, and
CONVEY unto Assignee the undivided right, title and interest reflected in
Exhibit 1 Part (a) hereof, in and to the following described interests and
properties (the undivided interest being assigned hereunder in such
interests and properties shall hereinafter be referred to collectively as
the "Assets" and the specific quantitative interest being assigned
hereunder represents an undivided twenty percent (20%) of the interest of
Assignor in the Assets):
a. The oil, gas and mineral lease described on Exhibit 1, Part (a)
(the Lease ), together with a like interest with respect to the
Lease in and to any and all (i) mineral interests, (ii) overriding
or landowners' royalty interests, (iii) surface and subsurface
interests and rights, (iv) beneficial, convertible or
reversionary interests, (v) interest owned, claimed or acquired,
or to be owned, claimed or acquired, by agreement, (vi) production
payments, (vii) contractual interests owned pursuant to
participation agreements, operating agreements or similar
agreements, and (viii) any and all like or unlike interests,
including without limitation those specific items identified on
Exhibit 1, Part (a). This shall include any contractual rights
providing for the acquisition or earning of any of the foregoing,
and Assignor's rights in respect of any pooled, communitized or
unitized acreage of which any of the foregoing is a part. SAVE
AND EXCEPT ANY RIGHT, TITLE OR INTEREST OF ASSIGNOR IN AND TO, OR
ANY RIGHTS DERIVED FROM, ANY BIDDING AGREEMENTS EXECUTED BY AND
BETWEEN ASSIGNOR AND MOBIL OIL EXPLORATION & PRODUCING SOUTHWEST
INC.. (All of the foregoing shall be called collectively the
Leasehold Interests. )
b. Any and all wells, wellbores, pipe, gathering lines, compressors,
facilities, equipment, platforms, pipelines and any and all other
personal, real, movable and immovable property, fixtures or
equipment which are located on or used directly in connection with
the production, treatment or transportation of oil and gas from
the Leasehold Interests, including, without limitation, those
items specifically identified on Exhibit 1, Part (b) (the
Equipment ).
c. Any and all easements, rights of way, and subsurface and surface
rights associated or used in connection with any such easements or
rights of way, which easements, rights-of-way and subsurface and
surface rights have been obtained for use in connection with the
Leasehold Interests (the Gathering Facilities ).
d. Any and all oil, gas and other minerals produced from or
attributable to the Leasehold Interests on or after the Effective
Date.
e. To the extent the same are assignable or transferable by Assignor
and to the extent and only to the extent that the same relate to
the ownership or operation of the Leasehold Interests, the
Gathering Facilities or the Equipment on or after the Effective
Date, a like interest in and to all orders, contracts, agreements
(including without limitation all operating agreements,
transportation agreements, unit agreements, participation
agreements and processing agreements), instruments, licenses,
authorizations, permits, audits, claims, liens, suits, settlements
and demands, and other rights, privileges, benefits and powers
conferred upon Assignor, including, but not limited to those
listed on Exhibit 1 part (c).
TO HAVE AND TO HOLD unto Assignee, subject to the terms, conditions and
reservations hereinbelow recounted.
2. Title Warranty. Assignor warrants that:
a. Except as specifically set forth in the Purchase and Sale
Agreement described in Article 10. below or under the contracts
and agreements listed in Exhibit 1 to this Assignment, and further
except as a consequence of the formation of a unit, neither
Assignor nor any parent, subsidiary or affiliate of Assignor
during their respective periods of ownership has (A) executed any
deed, conveyance, assignment or other instrument as an assignor,
grantor, sublessor or in another capacity or (B) has breached any
obligation under any Lease that would (i) result in Assignee's
being entitled to receive less than the net revenue interest for
any Lease, well or unit set forth in Exhibit 1 of all oil and gas
in, under, and that may be produced, saved and marketed from or
attributable to such Lease, well or unit, or (ii) obligate
Assignee to bear the costs and expenses relating to the
maintenance, development and operation of such Lease, well or unit
in an amount greater than the working interest for such Lease,
well or unit set forth in Exhibit 1, unless the net revenue
interest attributable to said working interest is increased by a
proportionate or greater amount; and
b. Except as specifically set forth in the Purchase and Sale
Agreement described in Article 10. below or under the contracts
and agreements listed in Exhibit 1 to this Assignment, the Assets
are free of all liens, security interests and encumbrances;
(the limited warranty set forth in subparagraphs (a) and (b) above shall
hereinafter be referred to as the Special Limited Warranty ). Assignor
shall convey the Assets with no warranty whatsoever other than the Special
Limited Warranty, but with full substitution and subrogation to Assignee
in and to all covenants, agreements, representations and warranties made
by others heretofore given or made in connection with the Assets or any
part thereof.
3. Acceptance. Assignee accepts this Assignment and acknowledges
delivery of the Assets and accepts the obligations as provided in the
Purchase and Sale Agreement described in Article 10 below (including those
contracts and agreements listed on Exhibit 1 of this Assignment, insofar
and only insofar as such contracts and agreements cover, pertain or apply
to the Leasehold Interests), on or after the Effective Date, including,
but not limited to, any overriding royalty interests which may burden the
Assets and which were created by Assignor's predecessor(s) in title.
4. Other Warranty Provisions. Assignee acknowledges that (a) Assignor
has not made any warranty or representation, whether express, implied, at
common law, by statute or otherwise, relating to the fitness for an
intended purpose or condition of any movable property constituting a
portion of the Assets and (b) Assignee shall acquire such personal
property in WHERE IS, AS IS condition. Except as may be specifically
set forth to the contrary in the Purchase and Sale Agreement described in
10 below(the "Agreement"), Buyer acknowledges that Seller has made no
representations or warranties whatever, expressed or implied, (Seller
having hereby expressly disclaimed all such warranties) as to the
accuracy, completeness, or materiality of any data, information, record or
materials now, heretofore, or hereafter made available in connection with
this Agreement (including, without limitation, any descriptions of oil and
gas leases; quality or quantity or hydrocarbon reserves attributable to
the Assets, if any; production rates, exploratory or development drilling
opportunities, decline rates, potential for production of hydrocarbons
from the Assets; the environmental condition of said Assets; the legal,
tax or other consequences of owning Seller's interest in the Assets; or
any other information contained in any material furnished in connection
with this transaction). Any and all such data, information, records or
materials furnished by Seller to Buyer is provided as a convenience only
and any reliance on or use of same is at the Buyer's sole risk. WITHOUT
LIMITING THE GENERALITY OF THIS PARAGRAPH, SELLER DISCLAIMS AND NEGATES AS
TO ANY PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND APPURTENANCES SUBJECT
TO THIS AGREEMENT (INCLUDING ALL WELLS): (A) ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY
OF CONFORMITY TO MODELS OR SAMPLE OR MATERIALS. THE PURCHASER EXPRESSLY
AGREES THAT TITLE TO SUCH PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND
APPURTENANCES WILL BE ACCEPTED "AS IS", "WHERE IS", "WITH ALL FAULTS", AND
IN ITS PRESENT CONDITION AND STATE OF REPAIR.
5. Consideration. The consideration for this Assignment and the nine
other Assignments and Bills of Sale this day entered into by and between
Assignor and Assignee conveying certain interests in OCS-G 8504, 7049,
8010, 8012, 8876, 13171, 13696, 8000, 8006 and 8005, is the sum of
Eighteen Million Two Hundred Fifty Thousand and No/100 ($18,250,000.00)
Dollars ("Purchase Price"), in part payment thereof, Assignee has paid, in
ready and current funds, the sum of Six Million Two Hundred Fifty Thousand
and NO/100 ($6,250,000.00) Dollars to the Assignor, who hereby
acknowledges the receipt thereof and grants full acquittance and discharge
therefor.
And, for the balance of the Purchase Price, the sum of Twelve Million
and No/100 ($12,000,000.00) Dollars, the Assignee has furnished one (1)
certain Promissory Note in the amount of Twelve Million and No/100 Dollars
($12,000,000.00), drawn by the Assignee to the order of Assignor, dated
the 18th day of October, 1995, and payable in two installments of Six
Million and No/100 ($6,000,000.00) Dollars each, the first due on March
31, 1996 and the second due on September 30, 1996, which note bears
interest at the rate of 8.56% per annum from date thereof until paid.
6. Liability of Successors. The terms, conditions, rights and
obligations of this Assignment shall run with the land and extend to and
be binding upon the parties hereto and their respective successors, heirs
and/or assigns.
7. Counterparts. This Assignment may be executed in several original
counterparts, all of which are identical. Each of such counterparts shall
for all purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument. The signature
pages of the counterparts may be amalgamated to form complete documents
for the purpose of recording complete documents in the public registries.
8. Severability. If any provision of this Assignment is invalid or
unenforceable in part or in whole in any jurisdiction applicable to this
Assignment, then, to the extent permitted by applicable law, (i) the other
provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in order to carry out the
intentions of the parties hereto as nearly as may be possible, and (ii)
the invalidity or unenforceability of such provision in any jurisdiction
shall not affect the validity or enforceability thereof in any other
jurisdiction.
9. Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF LOUISIANA, WITHOUT
REGARD TO CONFLICT OF LAW RULES THAT WOULD DIRECT APPLICATION OF THE LAWS
OF ANOTHER JURISDICTION.
10. Purchase and Sale Agreement. Notwithstanding anything to the
contrary provided herein, this Assignment shall at all times be subject to
the terms, conditions and exceptions contained in that certain unrecorded
Purchase and Sale Agreement dated the same date as this Assignment by and
between Assignor and Assignee. The unrecorded Purchase and Sale Agreement
shall at all times govern the rights of the parties in and to the Assets.
All interested parties are hereby given notice of the existence of the
unrecorded Purchase and Sale Agreement.
11. MMS Approval. This Assignment is expressly made subject to the
approval of the Minerals Management Service, United States Department of
the Interior.
IN WITNESS WHEREFORE, this Assignment is executed in multiple
originals and in the presence of the undersigned witnesses on this 18th
day of October, 1995, but to be effective as of the Effective Date.
WITNESSES: ASSIGNOR:
ENSERCH EXPLORATION, INC.
___________________________________ Tax ID # 75-2556975
Name: James K. Teringo, Jr.
By:______________________
R. L. Kincheloe
Name: Senior Vice President,
Offshore and International
ASSIGNEE:
WITNESSES:
READING & BATES DEVELOPMENT CO.
Tax ID# 73-0797067
________________________________
Name:___________________________
By: __________________________
D. C. Toalson
President
Name:___________________________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
R. L. KINCHELOE, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as Senior
Vice President, Offshore and International of Enserch Exploration, Inc., a
Texas corporation, on behalf of said corporation with full authority, and
that the said instrument is the free act and deed of the said corporation,
and was executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of James K. Teringo, Jr. and ________________________, competent
witnesses, on the 18th day of October, 1995.
WITNESSES:
______________________________ ____________________________________
James K. Teringo, Jr. R. L. KINCHELOE
______________________________
_____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
____________________________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
D. C. TOALSON, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as
President of Reading & Bates Development Co., a Delaware corporation, on
behalf of the said corporation with full authority, and that the said
instrument is the free act and deed of the said corporation, and was
executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of _________________________________ and
_________________________________, competent witnesses, on the 18th day of
October, 1995.
WITNESSES:
___________________________________ ____________________________________
D. C. TOALSON
___________________________________
____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
__________________________________
EXHIBIT 1
Part (a)
LEASE OCS-G 13696. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1992, by and between the United States of America, as Lessor, to
Exxon Corporation, as Lessee, bearing Serial No. OCS-G 13696 covering
all of Block 210, Green Canyon, OCS Official Protraction Diagram, NG 15-
3.
Working Interest 20.000000%
Net Revenue Interest 17.500000%
Part (b)
Together with a like interest in and to:
NONE
Part (c)
Together with a like interest in and to:
1. Offer Letter dated April 17, 1995, executed by and between Enserch
Exploration, Inc. and Reading & Bates Development Co., as such may
have been amended.
2. Purchase and Sale Agreement dated March 28, 1995, executed by and
between Exxon Corporation, as Seller and Enserch Exploration, Inc.,
as Buyer.
NOTE: ALL REFERENCES IN THIS EXHIBIT 1 MADE TO "WORKING INTEREST" AND
"NET REVENUE INTEREST", AND TO THE NUMBERS SET FORTH IN CONNECTION
THEREWITH, ARE FOR TITLE WARRANTY PURPOSES ONLY.
EXHIBIT 10.118
STATE OF TEXAS
(OCS-G-13171)
COUNTY OF DALLAS
ASSIGNMENT AND BILL OF SALE
THIS Assignment and Bill of Sale (the "Assignment") is entered into
and shall be effective as of 12:01 a.m., May 1, 1995 (hereinafter referred
to as the "Effective Date"), by and between ENSERCH EXPLORATION, INC., a
Texas corporation, (hereinafter referred to as "Assignor"), whose mailing
address is 4849 Greenville Avenue, Suite 1500, Dallas, Texas, 75206; and
READING & BATES DEVELOPMENT CO., a Delaware corporation (hereinafter
referred to as "Assignee"), whose mailing address is 901 Threadneedle,
Suite 200, Houston, Texas 77079.
W I T N E S S E T H:
1. Sale. THAT, FOR THE CONSIDERATION stated hereinbelow in Article 5.
and OTHER VALUABLE CONSIDERATION, the sufficiency of which is hereby
acknowledged, Assignor does hereby GRANT, SELL, TRANSFER, ASSIGN, and
CONVEY unto Assignee the undivided right, title and interest reflected in
Exhibit 1 Part (a) hereof, in and to the following described interests and
properties (the undivided interest being assigned hereunder in such
interests and properties shall hereinafter be referred to collectively as
the "Assets" and the specific quantitative interest being assigned
hereunder represents an undivided twenty percent (20%) of the interest of
Assignor in the Assets):
a. The oil, gas and mineral lease described on Exhibit 1, Part (a)
(the Lease ), together with a like interest with respect to the
Lease in and to any and all (i) mineral interests, (ii) overriding
or landowners' royalty interests, (iii) surface and subsurface
interests and rights, (iv) beneficial, convertible or
reversionary interests, (v) interest owned, claimed or acquired,
or to be owned, claimed or acquired, by agreement, (vi) production
payments, (vii) contractual interests owned pursuant to
participation agreements, operating agreements or similar
agreements, and (viii) any and all like or unlike interests,
including without limitation those specific items identified on
Exhibit 1, Part (a). This shall include any contractual rights
providing for the acquisition or earning of any of the foregoing,
and Assignor's rights in respect of any pooled, communitized or
unitized acreage of which any of the foregoing is a part. SAVE
AND EXCEPT ANY RIGHT, TITLE OR INTEREST OF ASSIGNOR IN AND TO, OR
ANY RIGHTS DERIVED FROM, ANY BIDDING AGREEMENTS EXECUTED BY AND
BETWEEN ASSIGNOR AND MOBIL OIL EXPLORATION & PRODUCING SOUTHWEST
INC.. (All of the foregoing shall be called collectively the
Leasehold Interests. )
b. Any and all wells, wellbores, pipe, gathering lines, compressors,
facilities, equipment, platforms, pipelines and any and all other
personal, real, movable and immovable property, fixtures or
equipment which are located on or used directly in connection with
the production, treatment or transportation of oil and gas from
the Leasehold Interests, including, without limitation, those
items specifically identified on Exhibit 1, Part (b) (the
Equipment ).
c. Any and all easements, rights of way, and subsurface and surface
rights associated or used in connection with any such easements or
rights of way, which easements, rights-of-way and subsurface and
surface rights have been obtained for use in connection with the
Leasehold Interests (the Gathering Facilities ).
d. Any and all oil, gas and other minerals produced from or
attributable to the Leasehold Interests on or after the Effective
Date.
e. To the extent the same are assignable or transferable by Assignor
and to the extent and only to the extent that the same relate to
the ownership or operation of the Leasehold Interests, the
Gathering Facilities or the Equipment on or after the Effective
Date, a like interest in and to all orders, contracts, agreements
(including without limitation all operating agreements,
transportation agreements, unit agreements, participation
agreements and processing agreements), instruments, licenses,
authorizations, permits, audits, claims, liens, suits, settlements
and demands, and other rights, privileges, benefits and powers
conferred upon Assignor, including, but not limited to those
listed on Exhibit 1 part (c).
TO HAVE AND TO HOLD unto Assignee, subject to the terms, conditions and
reservations hereinbelow recounted.
2. Title Warranty. Assignor warrants that:
a. Except as specifically set forth in the Purchase and Sale
Agreement described in Article 10. below or under the contracts
and agreements listed in Exhibit 1 to this Assignment, and further
except as a consequence of the formation of a unit, neither
Assignor nor any parent, subsidiary or affiliate of Assignor
during their respective periods of ownership has (A) executed any
deed, conveyance, assignment or other instrument as an assignor,
grantor, sublessor or in another capacity or (B) has breached any
obligation under any Lease that would (i) result in Assignee's
being entitled to receive less than the net revenue interest for
any Lease, well or unit set forth in Exhibit 1 of all oil and gas
in, under, and that may be produced, saved and marketed from or
attributable to such Lease, well or unit, or (ii) obligate
Assignee to bear the costs and expenses relating to the
maintenance, development and operation of such Lease, well or unit
in an amount greater than the working interest for such Lease,
well or unit set forth in Exhibit 1, unless the net revenue
interest attributable to said working interest is increased by a
proportionate or greater amount; and
b. Except as specifically set forth in the Purchase and Sale
Agreement described in Article 10. below or under the contracts
and agreements listed in Exhibit 1 to this Assignment, the Assets
are free of all liens, security interests and encumbrances;
(the limited warranty set forth in subparagraphs (a) and (b) above shall
hereinafter be referred to as the Special Limited Warranty ). Assignor
shall convey the Assets with no warranty whatsoever other than the Special
Limited Warranty, but with full substitution and subrogation to Assignee
in and to all covenants, agreements, representations and warranties made
by others heretofore given or made in connection with the Assets or any
part thereof.
3. Acceptance. Assignee accepts this Assignment and acknowledges
delivery of the Assets and accepts the obligations as provided in the
Purchase and Sale Agreement described in Article 10 below (including those
contracts and agreements listed on Exhibit 1 of this Assignment, insofar
and only insofar as such contracts and agreements cover, pertain or apply
to the Leasehold Interests), on or after the Effective Date, including,
but not limited to, any overriding royalty interests which may burden the
Assets and which were created by Assignor's predecessor(s) in title.
4. Other Warranty Provisions. Assignee acknowledges that (a) Assignor
has not made any warranty or representation, whether express, implied, at
common law, by statute or otherwise, relating to the fitness for an
intended purpose or condition of any movable property constituting a
portion of the Assets and (b) Assignee shall acquire such personal
property in WHERE IS, AS IS condition. Except as may be specifically
set forth to the contrary in the Purchase and Sale Agreement described in
10 below(the "Agreement"), Buyer acknowledges that Seller has made no
representations or warranties whatever, expressed or implied, (Seller
having hereby expressly disclaimed all such warranties) as to the
accuracy, completeness, or materiality of any data, information, record or
materials now, heretofore, or hereafter made available in connection with
this Agreement (including, without limitation, any descriptions of oil and
gas leases; quality or quantity or hydrocarbon reserves attributable to
the Assets, if any; production rates, exploratory or development drilling
opportunities, decline rates, potential for production of hydrocarbons
from the Assets; the environmental condition of said Assets; the legal,
tax or other consequences of owning Seller's interest in the Assets; or
any other information contained in any material furnished in connection
with this transaction). Any and all such data, information, records or
materials furnished by Seller to Buyer is provided as a convenience only
and any reliance on or use of same is at the Buyer's sole risk. WITHOUT
LIMITING THE GENERALITY OF THIS PARAGRAPH, SELLER DISCLAIMS AND NEGATES AS
TO ANY PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND APPURTENANCES SUBJECT
TO THIS AGREEMENT (INCLUDING ALL WELLS): (A) ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY
OF CONFORMITY TO MODELS OR SAMPLE OR MATERIALS. THE PURCHASER EXPRESSLY
AGREES THAT TITLE TO SUCH PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND
APPURTENANCES WILL BE ACCEPTED "AS IS", "WHERE IS", "WITH ALL FAULTS", AND
IN ITS PRESENT CONDITION AND STATE OF REPAIR.
5. Consideration. The consideration for this Assignment and the nine
other Assignments and Bills of Sale this day entered into by and between
Assignor and Assignee conveying certain interests in OCS-G 8504, 7049,
8010, 8012, 8876, 13171, 13696, 8000, 8006 and 8005, is the sum of
Eighteen Million Two Hundred Fifty Thousand and No/100 ($18,250,000.00)
Dollars ("Purchase Price"), in part payment thereof, Assignee has paid, in
ready and current funds, the sum of Six Million Two Hundred Fifty Thousand
and NO/100 ($6,250,000.00) Dollars to the Assignor, who hereby
acknowledges the receipt thereof and grants full acquittance and discharge
therefor.
And, for the balance of the Purchase Price, the sum of Twelve Million
and No/100 ($12,000,000.00) Dollars, the Assignee has furnished one (1)
certain Promissory Note in the amount of Twelve Million and No/100 Dollars
($12,000,000.00), drawn by the Assignee to the order of Assignor, dated
the 18th day of October, 1995, and payable in two installments of Six
Million and No/100 ($6,000,000.00) Dollars each, the first due on March
31, 1996 and the second due on September 30, 1996, which note bears
interest at the rate of 8.56% per annum from date thereof until paid.
6. Liability of Successors. The terms, conditions, rights and
obligations of this Assignment shall run with the land and extend to and
be binding upon the parties hereto and their respective successors, heirs
and/or assigns.
7. Counterparts. This Assignment may be executed in several original
counterparts, all of which are identical. Each of such counterparts shall
for all purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument. The signature
pages of the counterparts may be amalgamated to form complete documents
for the purpose of recording complete documents in the public registries.
8. Severability. If any provision of this Assignment is invalid or
unenforceable in part or in whole in any jurisdiction applicable to this
Assignment, then, to the extent permitted by applicable law, (i) the other
provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in order to carry out the
intentions of the parties hereto as nearly as may be possible, and (ii)
the invalidity or unenforceability of such provision in any jurisdiction
shall not affect the validity or enforceability thereof in any other
jurisdiction.
9. Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF LOUISIANA, WITHOUT
REGARD TO CONFLICT OF LAW RULES THAT WOULD DIRECT APPLICATION OF THE LAWS
OF ANOTHER JURISDICTION.
10. Purchase and Sale Agreement. Notwithstanding anything to the
contrary provided herein, this Assignment shall at all times be subject to
the terms, conditions and exceptions contained in that certain unrecorded
Purchase and Sale Agreement dated the same date as this Assignment by and
between Assignor and Assignee. The unrecorded Purchase and Sale Agreement
shall at all times govern the rights of the parties in and to the Assets.
All interested parties are hereby given notice of the existence of the
unrecorded Purchase and Sale Agreement.
11. MMS Approval. This Assignment is expressly made subject to the
approval of the Minerals Management Service, United States Department of
the Interior.
IN WITNESS WHEREFORE, this Assignment is executed in multiple
originals and in the presence of the undersigned witnesses on this 18th
day of October, 1995, but to be effective as of the Effective Date.
WITNESSES: ASSIGNOR:
ENSERCH EXPLORATION, INC.
___________________________________ Tax ID # 75-2556975
Name: James K. Teringo, Jr.
By:________________________
R. L. Kincheloe
Name: Senior Vice President,
Offshore and International
ASSIGNEE:
WITNESSES:
READING & BATES DEVELOPMENT CO.
Tax ID# 73-0797067
______________________________________
Name:_________________________________ By:_________________________
D. C. Toalson
President
Name:__________________________________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
R. L. KINCHELOE, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as Senior
Vice President, Offshore and International of Enserch Exploration, Inc., a
Texas corporation, on behalf of said corporation with full authority, and
that the said instrument is the free act and deed of the said corporation,
and was executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of James K. Teringo, Jr. and ________________________, competent
witnesses, on the 18th day of October, 1995.
WITNESSES:
______________________________ ____________________________________
James K. Teringo, Jr. R. L. KINCHELOE
______________________________
_____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
____________________________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
D. C. TOALSON, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as
President of Reading & Bates Development Co., a Delaware corporation, on
behalf of the said corporation with full authority, and that the said
instrument is the free act and deed of the said corporation, and was
executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of _________________________________ and
_________________________________, competent witnesses, on the 18th day of
October, 1995.
WITNESSES:
___________________________________ ____________________________________
D. C. TOALSON
___________________________________
____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
__________________________________
EXHIBIT 1
Part (a)
LEASE OCS-G 13171. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of May
1, 1991, by and between the United States of America, as Lessor, to
Exxon Corporation, as Lessee, bearing Serial No. OCS-G 13171 covering
all of Block 341, Green Canyon, OCS Official Protraction Diagram, NG 15-
3.
Working Interest 20.000000%
Net Revenue Interest 17.500000%
Part (b)
Together with a like interest in and to:
NONE
Part (c)
Together with a like interest in and to:
1. Offer Letter dated April 17, 1995, executed by and between Enserch
Exploration, Inc. and Reading & Bates Development Co., as such may
have been amended.
2. Purchase and Sale Agreement dated March 28, 1995, executed by and
between Exxon Corporation, as Seller and Enserch Exploration, Inc.,
as Buyer.
NOTE: ALL REFERENCES IN THIS EXHIBIT 1 MADE TO "WORKING INTEREST" AND
"NET REVENUE INTEREST", AND TO THE NUMBERS SET FORTH IN CONNECTION
THEREWITH, ARE FOR TITLE WARRANTY PURPOSES ONLY.
EXHIBIT 10.119
STATE OF TEXAS
(OCS-G-8005)
COUNTY OF DALLAS
ASSIGNMENT AND BILL OF SALE
THIS Assignment and Bill of Sale (the "Assignment") is entered into
and shall be effective as of 12:01 a.m., May 1, 1995 (hereinafter referred
to as the "Effective Date"), by and between ENSERCH EXPLORATION, INC., a
Texas corporation, (hereinafter referred to as "Assignor"), whose mailing
address is 4849 Greenville Avenue, Suite 1500, Dallas, Texas, 75206; and
READING & BATES DEVELOPMENT CO., a Delaware corporation (hereinafter
referred to as "Assignee"), whose mailing address is 901 Threadneedle,
Suite 200, Houston, Texas 77079.
W I T N E S S E T H:
1. Sale. THAT, FOR THE CONSIDERATION stated hereinbelow in Article
5. and OTHER VALUABLE CONSIDERATION, the sufficiency of which is hereby
acknowledged, Assignor does hereby GRANT, SELL, TRANSFER, ASSIGN, and
CONVEY unto Assignee the undivided right, title and interest reflected in
Exhibit 1 Part (a) hereof, in and to the following described interests and
properties (the undivided interest being assigned hereunder in such
interests and properties shall hereinafter be referred to collectively as
the "Assets" and the specific quantitative interest being assigned
hereunder represents an undivided twenty percent (20%) of the interest of
Assignor in the Assets):
a. The oil, gas and mineral lease described on Exhibit 1, Part (a)
(the Lease ), together with a like interest with respect to the
Lease in and to any and all (i) mineral interests, (ii) overriding
or landowners' royalty interests, (iii) surface and subsurface
interests and rights, (iv) beneficial, convertible or
reversionary interests, (v) interest owned, claimed or acquired,
or to be owned, claimed or acquired, by agreement, (vi) production
payments, (vii) contractual interests owned pursuant to
participation agreements, operating agreements or similar
agreements, and (viii) any and all like or unlike interests,
including without limitation those specific items identified on
Exhibit 1, Part (a). This shall include any contractual rights
providing for the acquisition or earning of any of the foregoing,
and Assignor's rights in respect of any pooled, communitized or
unitized acreage of which any of the foregoing is a part. SAVE
AND EXCEPT ANY RIGHT, TITLE OR INTEREST OF ASSIGNOR IN AND TO, OR
ANY RIGHTS DERIVED FROM, ANY BIDDING AGREEMENTS EXECUTED BY AND
BETWEEN ASSIGNOR AND MOBIL OIL EXPLORATION & PRODUCING SOUTHWEST
INC.. (All of the foregoing shall be called collectively the
Leasehold Interests. )
b. Any and all wells, wellbores, pipe, gathering lines, compressors,
facilities, equipment, platforms, pipelines and any and all other
personal, real, movable and immovable property, fixtures or
equipment which are located on or used directly in connection with
the production, treatment or transportation of oil and gas from
the Leasehold Interests, including, without limitation, those
items specifically identified on Exhibit 1, Part (b) (the
Equipment ).
c. Any and all easements, rights of way, and subsurface and surface
rights associated or used in connection with any such easements or
rights of way, which easements, rights-of-way and subsurface and
surface rights have been obtained for use in connection with the
Leasehold Interests (the Gathering Facilities ).
d. Any and all oil, gas and other minerals produced from or
attributable to the Leasehold Interests on or after the Effective
Date.
e. To the extent the same are assignable or transferable by Assignor
and to the extent and only to the extent that the same relate to
the ownership or operation of the Leasehold Interests, the
Gathering Facilities or the Equipment on or after the Effective
Date, a like interest in and to all orders, contracts, agreements
(including without limitation all operating agreements,
transportation agreements, unit agreements, participation
agreements and processing agreements), instruments, licenses,
authorizations, permits, audits, claims, liens, suits, settlements
and demands, and other rights, privileges, benefits and powers
conferred upon Assignor, including, but not limited to those
listed on Exhibit 1 part (c).
TO HAVE AND TO HOLD unto Assignee, subject to the terms, conditions and
reservations hereinbelow recounted.
2. Title Warranty. Assignor warrants that:
a. Except as specifically set forth in the Purchase and Sale
Agreement described in Article 10. below or under the contracts
and agreements listed in Exhibit 1 to this Assignment, and further
except as a consequence of the formation of a unit, neither
Assignor nor any parent, subsidiary or affiliate of Assignor
during their respective periods of ownership has (A) executed any
deed, conveyance, assignment or other instrument as an assignor,
grantor, sublessor or in another capacity or (B) has breached any
obligation under any Lease that would (i) result in Assignee's
being entitled to receive less than the net revenue interest for
any Lease, well or unit set forth in Exhibit 1 of all oil and gas
in, under, and that may be produced, saved and marketed from or
attributable to such Lease, well or unit, or (ii) obligate
Assignee to bear the costs and expenses relating to the
maintenance, development and operation of such Lease, well or unit
in an amount greater than the working interest for such Lease,
well or unit set forth in Exhibit 1, unless the net revenue
interest attributable to said working interest is increased by a
proportionate or greater amount; and
b. Except as specifically set forth in the Purchase and Sale
Agreement described in Article 10. below or under the contracts
and agreements listed in Exhibit 1 to this Assignment, the Assets
are free of all liens, security interests and encumbrances;
(the limited warranty set forth in subparagraphs (a) and (b) above shall
hereinafter be referred to as the Special Limited Warranty ). Assignor
shall convey the Assets with no warranty whatsoever other than the Special
Limited Warranty, but with full substitution and subrogation to Assignee
in and to all covenants, agreements, representations and warranties made
by others heretofore given or made in connection with the Assets or any
part thereof.
3. Acceptance. Assignee accepts this Assignment and acknowledges
delivery of the Assets and accepts the obligations as provided in the
Purchase and Sale Agreement described in Article 10 below (including those
contracts and agreements listed on Exhibit 1 of this Assignment, insofar
and only insofar as such contracts and agreements cover, pertain or apply
to the Leasehold Interests), on or after the Effective Date, including,
but not limited to, any overriding royalty interests which may burden the
Assets and which were created by Assignor's predecessor(s) in title.
4. Other Warranty Provisions. Assignee acknowledges that (a)
Assignor has not made any warranty or representation, whether express,
implied, at common law, by statute or otherwise, relating to the fitness
for an intended purpose or condition of any movable property constituting
a portion of the Assets and (b) Assignee shall acquire such personal
property in WHERE IS, AS IS condition. Except as may be specifically
set forth to the contrary in the Purchase and Sale Agreement described in
10 below(the "Agreement"), Buyer acknowledges that Seller has made no
representations or warranties whatever, expressed or implied, (Seller
having hereby expressly disclaimed all such warranties) as to the
accuracy, completeness, or materiality of any data, information, record or
materials now, heretofore, or hereafter made available in connection with
this Agreement (including, without limitation, any descriptions of oil and
gas leases; quality or quantity or hydrocarbon reserves attributable to
the Assets, if any; production rates, exploratory or development drilling
opportunities, decline rates, potential for production of hydrocarbons
from the Assets; the environmental condition of said Assets; the legal,
tax or other consequences of owning Seller's interest in the Assets; or
any other information contained in any material furnished in connection
with this transaction). Any and all such data, information, records or
materials furnished by Seller to Buyer is provided as a convenience only
and any reliance on or use of same is at the Buyer's sole risk. WITHOUT
LIMITING THE GENERALITY OF THIS PARAGRAPH, SELLER DISCLAIMS AND NEGATES AS
TO ANY PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND APPURTENANCES SUBJECT
TO THIS AGREEMENT (INCLUDING ALL WELLS): (A) ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY
OF CONFORMITY TO MODELS OR SAMPLE OR MATERIALS. THE PURCHASER EXPRESSLY
AGREES THAT TITLE TO SUCH PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND
APPURTENANCES WILL BE ACCEPTED "AS IS", "WHERE IS", "WITH ALL FAULTS", AND
IN ITS PRESENT CONDITION AND STATE OF REPAIR.
5. Consideration. The consideration for this Assignment and the nine
other Assignments and Bills of Sale this day entered into by and between
Assignor and Assignee conveying certain interests in OCS-G 8504, 7049,
8010, 8012, 8876, 13171, 13696, 8000, 8006 and 8005, is the sum of
Eighteen Million Two Hundred Fifty Thousand and No/100 ($18,250,000.00)
Dollars ("Purchase Price"), in part payment thereof, Assignee has paid, in
ready and current funds, the sum of Six Million Two Hundred Fifty Thousand
and NO/100 ($6,250,000.00) Dollars to the Assignor, who hereby
acknowledges the receipt thereof and grants full acquittance and discharge
therefor.
And, for the balance of the Purchase Price, the sum of Twelve Million
and No/100 ($12,000,000.00) Dollars, the Assignee has furnished one (1)
certain Promissory Note in the amount of Twelve Million and No/100 Dollars
($12,000,000.00), drawn by the Assignee to the order of Assignor, dated
the 18th day of October, 1995, and payable in two installments of Six
Million and No/100 ($6,000,000.00) Dollars each, the first due on March
31, 1996 and the second due on September 30, 1996, which note bears
interest at the rate of 8.56% per annum from date thereof until paid.
6. Liability of Successors. The terms, conditions, rights and
obligations of this Assignment shall run with the land and extend to and
be binding upon the parties hereto and their respective successors, heirs
and/or assigns.
7. Counterparts. This Assignment may be executed in several original
counterparts, all of which are identical. Each of such counterparts shall
for all purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument. The signature
pages of the counterparts may be amalgamated to form complete documents
for the purpose of recording complete documents in the public registries.
8. Severability. If any provision of this Assignment is invalid or
unenforceable in part or in whole in any jurisdiction applicable to this
Assignment, then, to the extent permitted by applicable law, (i) the other
provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in order to carry out the
intentions of the parties hereto as nearly as may be possible, and (ii)
the invalidity or unenforceability of such provision in any jurisdiction
shall not affect the validity or enforceability thereof in any other
jurisdiction.
9. Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
LOUISIANA, WITHOUT REGARD TO CONFLICT OF LAW RULES THAT WOULD DIRECT
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
10. Purchase and Sale Agreement. Notwithstanding anything to the
contrary provided herein, this Assignment shall at all times be subject to
the terms, conditions and exceptions contained in that certain unrecorded
Purchase and Sale Agreement dated the same date as this Assignment by and
between Assignor and Assignee. The unrecorded Purchase and Sale Agreement
shall at all times govern the rights of the parties in and to the Assets.
All interested parties are hereby given notice of the existence of the
unrecorded Purchase and Sale Agreement.
11. MMS Approval. This Assignment is expressly made subject to the
approval of the Minerals Management Service, United States Department of
the Interior.
IN WITNESS WHEREFORE, this Assignment is executed in multiple
originals and in the presence of the undersigned witnesses on this 18th
day of October, 1995, but to be effective as of the Effective Date.
WITNESSES: ASSIGNOR:
ENSERCH EXPLORATION, INC.
___________________________________ Tax ID # 75-2556975
Name: James K. Teringo, Jr.
By: _________________________
R. L. Kincheloe
Name: Senior Vice President,
Offshore and International
ASSIGNEE:
WITNESSES:
READING & BATES DEVELOPMENT CO.
Tax ID# 73-0797067
______________________________________
Name:_________________________________
By:_________________________
D. C. Toalson
President
Name:__________________________________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
R. L. KINCHELOE, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as Senior
Vice President, Offshore and International of Enserch Exploration, Inc., a
Texas corporation, on behalf of said corporation with full authority, and
that the said instrument is the free act and deed of the said corporation,
and was executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of James K. Teringo, Jr. and ________________________, competent
witnesses, on the 18th day of October, 1995.
WITNESSES:
______________________________ ________________________________
James K. Teringo, Jr. R. L. KINCHELOE
______________________________
_____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
____________________________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
D. C. TOALSON, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as
President of Reading & Bates Development Co., a Delaware corporation, on
behalf of the said corporation with full authority, and that the said
instrument is the free act and deed of the said corporation, and was
executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of _________________________________ and
_________________________________, competent witnesses, on the 18th day of
October, 1995.
WITNESSES:
___________________________________ _________________________________
D. C. TOALSON
___________________________________
____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
__________________________________
EXHIBIT 1
Part (a)
LEASE OCS-G 8005. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
to Amerada Hess et al., as Lessees, bearing Serial No. OCS-G 8005
covering all of Block 253, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 20.000000%
Net Revenue Interest 16.500000%
Part (b)
Together with a like interest in and to:
NONE
Part (c)
Together with a like interest in and to:
1. Assignment and Conveyance dated effective March 1, 1995, executed by
and between Shell Offshore, Inc., et al., as Assignor, and Enserch
Exploration, Inc., as Assignee, subject to letter agreement dated May
12, 1995.
2. That certain Exploration, Drilling and Production Unit Agreement
dated June 22, 1995, executed by and between Enserch Offshore, Inc.
and Enserch Exploration, Inc., covering and pertaining to Green
Canyon Blocks 253, 254, 297 & 298.
NOTE: ALL REFERENCES IN THIS EXHIBIT 1 MADE TO "WORKING INTEREST" AND
"NET REVENUE INTEREST", AND TO THE NUMBERS SET FORTH IN CONNECTION
THEREWITH, ARE FOR TITLE WARRANTY PURPOSES ONLY.
EXHIBIT 10.120
STATE OF TEXAS
(OCS-G-8000)
COUNTY OF DALLAS
ASSIGNMENT AND BILL OF SALE
THIS Assignment and Bill of Sale (the "Assignment") is entered into
and shall be effective as of 12:01 a.m., May 1, 1995 (hereinafter referred
to as the "Effective Date"), by and between ENSERCH EXPLORATION, INC., a
Texas corporation, (hereinafter referred to as "Assignor"), whose mailing
address is 4849 Greenville Avenue, Suite 1500, Dallas, Texas, 75206; and
READING & BATES DEVELOPMENT CO., a Delaware corporation (hereinafter
referred to as "Assignee"), whose mailing address is 901 Threadneedle,
Suite 200, Houston, Texas 77079.
W I T N E S S E T H:
1. Sale. THAT, FOR THE CONSIDERATION stated hereinbelow in Article 5.
and OTHER VALUABLE CONSIDERATION, the sufficiency of which is hereby
acknowledged, Assignor does hereby GRANT, SELL, TRANSFER, ASSIGN, and
CONVEY unto Assignee the undivided right, title and interest reflected in
Exhibit 1 Part (a) hereof, in and to the following described interests and
properties (the undivided interest being assigned hereunder in such
interests and properties shall hereinafter be referred to collectively as
the "Assets" and the specific quantitative interest being assigned
hereunder represents an undivided twenty percent (20%) of the interest of
Assignor in the Assets):
a. The oil, gas and mineral lease described on Exhibit 1, Part (a)
(the Lease ), together with a like interest with respect to the
Lease in and to any and all (i) mineral interests, (ii) overriding
or landowners' royalty interests, (iii) surface and subsurface
interests and rights, (iv) beneficial, convertible or
reversionary interests, (v) interest owned, claimed or acquired,
or to be owned, claimed or acquired, by agreement, (vi) production
payments, (vii) contractual interests owned pursuant to
participation agreements, operating agreements or similar
agreements, and (viii) any and all like or unlike interests,
including without limitation those specific items identified on
Exhibit 1, Part (a). This shall include any contractual rights
providing for the acquisition or earning of any of the foregoing,
and Assignor's rights in respect of any pooled, communitized or
unitized acreage of which any of the foregoing is a part. SAVE
AND EXCEPT ANY RIGHT, TITLE OR INTEREST OF ASSIGNOR IN AND TO, OR
ANY RIGHTS DERIVED FROM, ANY BIDDING AGREEMENTS EXECUTED BY AND
BETWEEN ASSIGNOR AND MOBIL OIL EXPLORATION & PRODUCING SOUTHWEST
INC.. (All of the foregoing shall be called collectively the
Leasehold Interests. )
b. Any and all wells, wellbores, pipe, gathering lines, compressors,
facilities, equipment, platforms, pipelines and any and all other
personal, real, movable and immovable property, fixtures or
equipment which are located on or used directly in connection with
the production, treatment or transportation of oil and gas from
the Leasehold Interests, including, without limitation, those
items specifically identified on Exhibit 1, Part (b) (the
Equipment ).
c. Any and all easements, rights of way, and subsurface and surface
rights associated or used in connection with any such easements or
rights of way, which easements, rights-of-way and subsurface and
surface rights have been obtained for use in connection with the
Leasehold Interests (the Gathering Facilities ).
d. Any and all oil, gas and other minerals produced from or
attributable to the Leasehold Interests on or after the Effective
Date.
e. To the extent the same are assignable or transferable by Assignor
and to the extent and only to the extent that the same relate to
the ownership or operation of the Leasehold Interests, the
Gathering Facilities or the Equipment on or after the Effective
Date, a like interest in and to all orders, contracts, agreements
(including without limitation all operating agreements,
transportation agreements, unit agreements, participation
agreements and processing agreements), instruments, licenses,
authorizations, permits, audits, claims, liens, suits, settlements
and demands, and other rights, privileges, benefits and powers
conferred upon Assignor, including, but not limited to those
listed on Exhibit 1 part (c).
TO HAVE AND TO HOLD unto Assignee, subject to the terms, conditions and
reservations hereinbelow recounted.
2. Title Warranty. Assignor warrants that:
a. Except as specifically set forth in the Purchase and Sale
Agreement described in Article 10. below or under the contracts
and agreements listed in Exhibit 1 to this Assignment, and further
except as a consequence of the formation of a unit, neither
Assignor nor any parent, subsidiary or affiliate of Assignor
during their respective periods of ownership has (A) executed any
deed, conveyance, assignment or other instrument as an assignor,
grantor, sublessor or in another capacity or (B) has breached any
obligation under any Lease that would (i) result in Assignee's
being entitled to receive less than the net revenue interest for
any Lease, well or unit set forth in Exhibit 1 of all oil and gas
in, under, and that may be produced, saved and marketed from or
attributable to such Lease, well or unit, or (ii) obligate
Assignee to bear the costs and expenses relating to the
maintenance, development and operation of such Lease, well or unit
in an amount greater than the working interest for such Lease,
well or unit set forth in Exhibit 1, unless the net revenue
interest attributable to said working interest is increased by a
proportionate or greater amount; and
b. Except as specifically set forth in the Purchase and Sale
Agreement described in Article 10. below or under the contracts
and agreements listed in Exhibit 1 to this Assignment, the Assets
are free of all liens, security interests and encumbrances;
(the limited warranty set forth in subparagraphs (a) and (b) above shall
hereinafter be referred to as the Special Limited Warranty ). Assignor
shall convey the Assets with no warranty whatsoever other than the Special
Limited Warranty, but with full substitution and subrogation to Assignee
in and to all covenants, agreements, representations and warranties made
by others heretofore given or made in connection with the Assets or any
part thereof.
3. Acceptance. Assignee accepts this Assignment and acknowledges
delivery of the Assets and accepts the obligations as provided in the
Purchase and Sale Agreement described in Article 10 below (including those
contracts and agreements listed on Exhibit 1 of this Assignment, insofar
and only insofar as such contracts and agreements cover, pertain or apply
to the Leasehold Interests), on or after the Effective Date, including,
but not limited to, any overriding royalty interests which may burden the
Assets and which were created by Assignor's predecessor(s) in title.
4. Other Warranty Provisions. Assignee acknowledges that (a) Assignor
has not made any warranty or representation, whether express, implied, at
common law, by statute or otherwise, relating to the fitness for an
intended purpose or condition of any movable property constituting a
portion of the Assets and (b) Assignee shall acquire such personal
property in WHERE IS, AS IS condition. Except as may be specifically
set forth to the contrary in the Purchase and Sale Agreement described in
10 below(the "Agreement"), Buyer acknowledges that Seller has made no
representations or warranties whatever, expressed or implied, (Seller
having hereby expressly disclaimed all such warranties) as to the
accuracy, completeness, or materiality of any data, information, record or
materials now, heretofore, or hereafter made available in connection with
this Agreement (including, without limitation, any descriptions of oil and
gas leases; quality or quantity or hydrocarbon reserves attributable to
the Assets, if any; production rates, exploratory or development drilling
opportunities, decline rates, potential for production of hydrocarbons
from the Assets; the environmental condition of said Assets; the legal,
tax or other consequences of owning Seller's interest in the Assets; or
any other information contained in any material furnished in connection
with this transaction). Any and all such data, information, records or
materials furnished by Seller to Buyer is provided as a convenience only
and any reliance on or use of same is at the Buyer's sole risk. WITHOUT
LIMITING THE GENERALITY OF THIS PARAGRAPH, SELLER DISCLAIMS AND NEGATES AS
TO ANY PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND APPURTENANCES SUBJECT
TO THIS AGREEMENT (INCLUDING ALL WELLS): (A) ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY
OF CONFORMITY TO MODELS OR SAMPLE OR MATERIALS. THE PURCHASER EXPRESSLY
AGREES THAT TITLE TO SUCH PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND
APPURTENANCES WILL BE ACCEPTED "AS IS", "WHERE IS", "WITH ALL FAULTS", AND
IN ITS PRESENT CONDITION AND STATE OF REPAIR.
5. Consideration. The consideration for this Assignment and the nine
other Assignments and Bills of Sale this day entered into by and between
Assignor and Assignee conveying certain interests in OCS-G 8504, 7049,
8010, 8012, 8876, 13171, 13696, 8000, 8006 and 8005, is the sum of
Eighteen Million Two Hundred Fifty Thousand and No/100 ($18,250,000.00)
Dollars ("Purchase Price"), in part payment thereof, Assignee has paid, in
ready and current funds, the sum of Six Million Two Hundred Fifty Thousand
and NO/100 ($6,250,000.00) Dollars to the Assignor, who hereby
acknowledges the receipt thereof and grants full acquittance and discharge
therefor.
And, for the balance of the Purchase Price, the sum of Twelve Million
and No/100 ($12,000,000.00) Dollars, the Assignee has furnished one (1)
certain Promissory Note in the amount of Twelve Million and No/100 Dollars
($12,000,000.00), drawn by the Assignee to the order of Assignor, dated
the 18th day of October, 1995, and payable in two installments of Six
Million and No/100 ($6,000,000.00) Dollars each, the first due on March
31, 1996 and the second due on September 30, 1996, which note bears
interest at the rate of 8.56% per annum from date thereof until paid.
6. Liability of Successors. The terms, conditions, rights and
obligations of this Assignment shall run with the land and extend to and
be binding upon the parties hereto and their respective successors, heirs
and/or assigns.
7. Counterparts. This Assignment may be executed in several original
counterparts, all of which are identical. Each of such counterparts shall
for all purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument. The signature
pages of the counterparts may be amalgamated to form complete documents
for the purpose of recording complete documents in the public registries.
8. Severability. If any provision of this Assignment is invalid or
unenforceable in part or in whole in any jurisdiction applicable to this
Assignment, then, to the extent permitted by applicable law, (i) the other
provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in order to carry out the
intentions of the parties hereto as nearly as may be possible, and (ii)
the invalidity or unenforceability of such provision in any jurisdiction
shall not affect the validity or enforceability thereof in any other
jurisdiction.
9. Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF LOUISIANA, WITHOUT
REGARD TO CONFLICT OF LAW RULES THAT WOULD DIRECT APPLICATION OF THE LAWS
OF ANOTHER JURISDICTION.
10. Purchase and Sale Agreement. Notwithstanding anything to the
contrary provided herein, this Assignment shall at all times be subject to
the terms, conditions and exceptions contained in that certain unrecorded
Purchase and Sale Agreement dated the same date as this Assignment by and
between Assignor and Assignee. The unrecorded Purchase and Sale Agreement
shall at all times govern the rights of the parties in and to the Assets.
All interested parties are hereby given notice of the existence of the
unrecorded Purchase and Sale Agreement.
11. MMS Approval. This Assignment is expressly made subject to the
approval of the Minerals Management Service, United States Department of
the Interior.
IN WITNESS WHEREFORE, this Assignment is executed in multiple
originals and in the presence of the undersigned witnesses on this 18th
day of October, 1995, but to be effective as of the Effective Date.
WITNESSES: ASSIGNOR:
ENSERCH EXPLORATION, INC.
___________________________________ Tax ID # 75-2556975
Name: James K. Teringo, Jr.
By:________________________
R. L. Kincheloe
Name: Senior Vice President,
Offshore and International
ASSIGNEE:
WITNESSES:
READING & BATES DEVELOPMENT CO.
Tax ID# 73-0797067
______________________________________
Name:_________________________________
By:__________________________
D. C. Toalson
President
Name:__________________________________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
R. L. KINCHELOE, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as Senior
Vice President, Offshore and International of Enserch Exploration, Inc., a
Texas corporation, on behalf of said corporation with full authority, and
that the said instrument is the free act and deed of the said corporation,
and was executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of James K. Teringo, Jr. and ________________________, competent
witnesses, on the 18th day of October, 1995.
WITNESSES:
______________________________ ____________________________________
James K. Teringo, Jr. R. L. KINCHELOE
______________________________
_____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
____________________________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
D. C. TOALSON, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as
President of Reading & Bates Development Co., a Delaware corporation, on
behalf of the said corporation with full authority, and that the said
instrument is the free act and deed of the said corporation, and was
executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of _________________________________ and
_________________________________, competent witnesses, on the 18th day of
October, 1995.
WITNESSES:
___________________________________ ____________________________________
D. C. TOALSON
___________________________________
____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
__________________________________
EXHIBIT 1
Part (a)
LEASE OCS-G 8000. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
8000 covering all of Block 213, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 20.00000%
Net Revenue Interest 17.35066%
Part (b)
Together with a like interest in and to:
NONE
Part (c)
Together with a like interest in and to:
1. Purchase and Sale Agreement dated February 28, 1995, executed by and
between Enserch Offshore, Inc., as Buyer and HI Production Company,
Inc., as Seller.
2. Purchase and Sale Agreement dated February 28, 1995, executed by and
between Enserch Offshore, Inc., as Buyer and Placid Oil Company, as
Seller.
3. Purchase and Sale Agreement dated February 28, 1995, executed by and
between Enserch Offshore, Inc., as Buyer and OPUBCO Resources, Inc.,
as Seller.
NOTE: ALL REFERENCES IN THIS EXHIBIT 1 MADE TO "WORKING INTEREST" AND
"NET REVENUE INTEREST", AND TO THE NUMBERS SET FORTH IN CONNECTION
THEREWITH, ARE FOR TITLE WARRANTY PURPOSES ONLY.
EXHIBIT 10.121
STATE OF TEXAS
(OCS-G-8006)
COUNTY OF DALLAS
ASSIGNMENT AND BILL OF SALE
THIS Assignment and Bill of Sale (the "Assignment") is entered into
and shall be effective as of 12:01 a.m., May 1, 1995 (hereinafter referred
to as the "Effective Date"), by and between ENSERCH EXPLORATION, INC., a
Texas corporation, (hereinafter referred to as "Assignor"), whose mailing
address is 4849 Greenville Avenue, Suite 1500, Dallas, Texas, 75206; and
READING & BATES DEVELOPMENT CO., a Delaware corporation (hereinafter
referred to as "Assignee"), whose mailing address is 901 Threadneedle,
Suite 200, Houston, Texas 77079.
W I T N E S S E T H:
1. Sale. THAT, FOR THE CONSIDERATION stated hereinbelow in Article 5.
and OTHER VALUABLE CONSIDERATION, the sufficiency of which is hereby
acknowledged, Assignor does hereby GRANT, SELL, TRANSFER, ASSIGN, and
CONVEY unto Assignee the undivided right, title and interest reflected in
Exhibit 1 Part (a) hereof, in and to the following described interests and
properties (the undivided interest being assigned hereunder in such
interests and properties shall hereinafter be referred to collectively as
the "Assets" and the specific quantitative interest being assigned
hereunder represents an undivided twenty percent (20%) of the interest of
Assignor in the Assets):
a. The oil, gas and mineral lease described on Exhibit 1, Part (a)
(the Lease ), together with a like interest with respect to the
Lease in and to any and all (i) mineral interests, (ii) overriding
or landowners' royalty interests, (iii) surface and subsurface
interests and rights, (iv) beneficial, convertible or
reversionary interests, (v) interest owned, claimed or acquired,
or to be owned, claimed or acquired, by agreement, (vi) production
payments, (vii) contractual interests owned pursuant to
participation agreements, operating agreements or similar
agreements, and (viii) any and all like or unlike interests,
including without limitation those specific items identified on
Exhibit 1, Part (a). This shall include any contractual rights
providing for the acquisition or earning of any of the foregoing,
and Assignor's rights in respect of any pooled, communitized or
unitized acreage of which any of the foregoing is a part. SAVE
AND EXCEPT ANY RIGHT, TITLE OR INTEREST OF ASSIGNOR IN AND TO, OR
ANY RIGHTS DERIVED FROM, ANY BIDDING AGREEMENTS EXECUTED BY AND
BETWEEN ASSIGNOR AND MOBIL OIL EXPLORATION & PRODUCING SOUTHWEST
INC.. (All of the foregoing shall be called collectively the
Leasehold Interests. )
b. Any and all wells, wellbores, pipe, gathering lines, compressors,
facilities, equipment, platforms, pipelines and any and all other
personal, real, movable and immovable property, fixtures or
equipment which are located on or used directly in connection with
the production, treatment or transportation of oil and gas from
the Leasehold Interests, including, without limitation, those
items specifically identified on Exhibit 1, Part (b) (the
Equipment ).
c. Any and all easements, rights of way, and subsurface and surface
rights associated or used in connection with any such easements or
rights of way, which easements, rights-of-way and subsurface and
surface rights have been obtained for use in connection with the
Leasehold Interests (the Gathering Facilities ).
d. Any and all oil, gas and other minerals produced from or
attributable to the Leasehold Interests on or after the Effective
Date.
e. To the extent the same are assignable or transferable by Assignor
and to the extent and only to the extent that the same relate to
the ownership or operation of the Leasehold Interests, the
Gathering Facilities or the Equipment on or after the Effective
Date, a like interest in and to all orders, contracts, agreements
(including without limitation all operating agreements,
transportation agreements, unit agreements, participation
agreements and processing agreements), instruments, licenses,
authorizations, permits, audits, claims, liens, suits, settlements
and demands, and other rights, privileges, benefits and powers
conferred upon Assignor, including, but not limited to those
listed on Exhibit 1 part (c).
TO HAVE AND TO HOLD unto Assignee, subject to the terms, conditions and
reservations hereinbelow recounted.
2. Title Warranty. Assignor warrants that:
a. Except as specifically set forth in the Purchase and Sale
Agreement described in Article 10. below or under the contracts
and agreements listed in Exhibit 1 to this Assignment, and further
except as a consequence of the formation of a unit, neither
Assignor nor any parent, subsidiary or affiliate of Assignor
during their respective periods of ownership has (A) executed any
deed, conveyance, assignment or other instrument as an assignor,
grantor, sublessor or in another capacity or (B) has breached any
obligation under any Lease that would (i) result in Assignee's
being entitled to receive less than the net revenue interest for
any Lease, well or unit set forth in Exhibit 1 of all oil and gas
in, under, and that may be produced, saved and marketed from or
attributable to such Lease, well or unit, or (ii) obligate
Assignee to bear the costs and expenses relating to the
maintenance, development and operation of such Lease, well or unit
in an amount greater than the working interest for such Lease,
well or unit set forth in Exhibit 1, unless the net revenue
interest attributable to said working interest is increased by a
proportionate or greater amount; and
b. Except as specifically set forth in the Purchase and Sale
Agreement described in Article 10. below or under the contracts
and agreements listed in Exhibit 1 to this Assignment, the Assets
are free of all liens, security interests and encumbrances;
(the limited warranty set forth in subparagraphs (a) and (b) above shall
hereinafter be referred to as the Special Limited Warranty ). Assignor
shall convey the Assets with no warranty whatsoever other than the Special
Limited Warranty, but with full substitution and subrogation to Assignee
in and to all covenants, agreements, representations and warranties made
by others heretofore given or made in connection with the Assets or any
part thereof.
3. Acceptance. Assignee accepts this Assignment and acknowledges
delivery of the Assets and accepts the obligations as provided in the
Purchase and Sale Agreement described in Article 10 below (including those
contracts and agreements listed on Exhibit 1 of this Assignment, insofar
and only insofar as such contracts and agreements cover, pertain or apply
to the Leasehold Interests), on or after the Effective Date, including,
but not limited to, any overriding royalty interests which may burden the
Assets and which were created by Assignor's predecessor(s) in title.
4. Other Warranty Provisions. Assignee acknowledges that (a) Assignor
has not made any warranty or representation, whether express, implied, at
common law, by statute or otherwise, relating to the fitness for an
intended purpose or condition of any movable property constituting a
portion of the Assets and (b) Assignee shall acquire such personal
property in WHERE IS, AS IS condition. Except as may be specifically
set forth to the contrary in the Purchase and Sale Agreement described in
10 below(the "Agreement"), Buyer acknowledges that Seller has made no
representations or warranties whatever, expressed or implied, (Seller
having hereby expressly disclaimed all such warranties) as to the
accuracy, completeness, or materiality of any data, information, record or
materials now, heretofore, or hereafter made available in connection with
this Agreement (including, without limitation, any descriptions of oil and
gas leases; quality or quantity or hydrocarbon reserves attributable to
the Assets, if any; production rates, exploratory or development drilling
opportunities, decline rates, potential for production of hydrocarbons
from the Assets; the environmental condition of said Assets; the legal,
tax or other consequences of owning Seller's interest in the Assets; or
any other information contained in any material furnished in connection
with this transaction). Any and all such data, information, records or
materials furnished by Seller to Buyer is provided as a convenience only
and any reliance on or use of same is at the Buyer's sole risk. WITHOUT
LIMITING THE GENERALITY OF THIS PARAGRAPH, SELLER DISCLAIMS AND NEGATES AS
TO ANY PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND APPURTENANCES SUBJECT
TO THIS AGREEMENT (INCLUDING ALL WELLS): (A) ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY
OF CONFORMITY TO MODELS OR SAMPLE OR MATERIALS. THE PURCHASER EXPRESSLY
AGREES THAT TITLE TO SUCH PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND
APPURTENANCES WILL BE ACCEPTED "AS IS", "WHERE IS", "WITH ALL FAULTS", AND
IN ITS PRESENT CONDITION AND STATE OF REPAIR.
5. Consideration. The consideration for this Assignment and the nine
other Assignments and Bills of Sale this day entered into by and between
Assignor and Assignee conveying certain interests in OCS-G 8504, 7049,
8010, 8012, 8876, 13171, 13696, 8000, 8006 and 8005, is the sum of
Eighteen Million Two Hundred Fifty Thousand and No/100 ($18,250,000.00)
Dollars ("Purchase Price"), in part payment thereof, Assignee has paid, in
ready and current funds, the sum of Six Million Two Hundred Fifty Thousand
and NO/100 ($6,250,000.00) Dollars to the Assignor, who hereby
acknowledges the receipt thereof and grants full acquittance and discharge
therefor.
And, for the balance of the Purchase Price, the sum of Twelve Million
and No/100 ($12,000,000.00) Dollars, the Assignee has furnished one (1)
certain Promissory Note in the amount of Twelve Million and No/100 Dollars
($12,000,000.00), drawn by the Assignee to the order of Assignor, dated
the 18th day of October, 1995, and payable in two installments of Six
Million and No/100 ($6,000,000.00) Dollars each, the first due on March
31, 1996 and the second due on September 30, 1996, which note bears
interest at the rate of 8.56% per annum from date thereof until paid.
6. Liability of Successors. The terms, conditions, rights and
obligations of this Assignment shall run with the land and extend to and
be binding upon the parties hereto and their respective successors, heirs
and/or assigns.
7. Counterparts. This Assignment may be executed in several original
counterparts, all of which are identical. Each of such counterparts shall
for all purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument. The signature
pages of the counterparts may be amalgamated to form complete documents
for the purpose of recording complete documents in the public registries.
8. Severability. If any provision of this Assignment is invalid or
unenforceable in part or in whole in any jurisdiction applicable to this
Assignment, then, to the extent permitted by applicable law, (i) the other
provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in order to carry out the
intentions of the parties hereto as nearly as may be possible, and (ii)
the invalidity or unenforceability of such provision in any jurisdiction
shall not affect the validity or enforceability thereof in any other
jurisdiction.
9. Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF LOUISIANA, WITHOUT
REGARD TO CONFLICT OF LAW RULES THAT WOULD DIRECT APPLICATION OF THE LAWS
OF ANOTHER JURISDICTION.
10. Purchase and Sale Agreement. Notwithstanding anything to the
contrary provided herein, this Assignment shall at all times be subject to
the terms, conditions and exceptions contained in that certain unrecorded
Purchase and Sale Agreement dated the same date as this Assignment by and
between Assignor and Assignee. The unrecorded Purchase and Sale Agreement
shall at all times govern the rights of the parties in and to the Assets.
All interested parties are hereby given notice of the existence of the
unrecorded Purchase and Sale Agreement.
11. MMS Approval. This Assignment is expressly made subject to the
approval of the Minerals Management Service, United States Department of
the Interior.
IN WITNESS WHEREFORE, this Assignment is executed in multiple
originals and in the presence of the undersigned witnesses on this 18th
day of October, 1995, but to be effective as of the Effective Date.
WITNESSES: ASSIGNOR:
ENSERCH EXPLORATION, INC.
___________________________________ Tax ID # 75-2556975
Name: James K. Teringo, Jr.
By:________________________
___________________________________ R. L. Kincheloe
Name: Senior Vice President, Offshore
and International
ASSIGNEE:
WITNESSES:
READING & BATES DEVELOPMENT CO.
Tax ID# 73-0797067
______________________________________
Name:_________________________________
By: _________________________
_______________________________________ D. C. Toalson
President
Name:__________________________________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
R. L. KINCHELOE, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as Senior
Vice President, Offshore and International of Enserch Exploration, Inc., a
Texas corporation, on behalf of said corporation with full authority, and
that the said instrument is the free act and deed of the said corporation,
and was executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of James K. Teringo, Jr. and ________________________, competent
witnesses, on the 18th day of October, 1995.
WITNESSES:
______________________________ ____________________________________
James K. Teringo, Jr. R. L. KINCHELOE
______________________________
_____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
____________________________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
D. C. TOALSON, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as
President of Reading & Bates Development Co., a Delaware corporation, on
behalf of the said corporation with full authority, and that the said
instrument is the free act and deed of the said corporation, and was
executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of _________________________________ and
_________________________________, competent witnesses, on the 18th day of
October, 1995.
WITNESSES:
___________________________________ ____________________________________
D. C. TOALSON
___________________________________
____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
__________________________________
EXHIBIT 1
Part (a)
LEASE OCS-G 8006. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
8006 covering all of Block 258, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 20.00000%
Net Revenue Interest 17.35066%
Part (b)
Together with a like interest in and to:
NONE
Part (c)
Together with a like interest in and to:
1. Purchase and Sale Agreement dated February 28, 1995, executed by and
between Enserch Offshore, Inc., as Buyer and HI Production Company,
Inc., as Seller.
2. Purchase and Sale Agreement dated February 28, 1995, executed by and
between Enserch Offshore, Inc., as Buyer and Placid Oil Company, as
Seller.
3. Purchase and Sale Agreement dated February 28, 1995, executed by and
between Enserch Offshore, Inc., as Buyer and OPUBCO Resources, Inc.,
as Seller.
NOTE: ALL REFERENCES IN THIS EXHIBIT 1 MADE TO "WORKING INTEREST" AND
"NET REVENUE INTEREST", AND TO THE NUMBERS SET FORTH IN CONNECTION
THEREWITH, ARE FOR TITLE WARRANTY PURPOSES ONLY.
EXHIBIT 10.122
STATE OF TEXAS
(OCS-G-8876)
COUNTY OF DALLAS
ASSIGNMENT AND BILL OF SALE
THIS Assignment and Bill of Sale (the "Assignment") is entered into
and shall be effective as of 12:01 a.m., May 1, 1995 (hereinafter referred
to as the "Effective Date"), by and between ENSERCH EXPLORATION, INC., a
Texas corporation, (hereinafter referred to as "Assignor"), whose mailing
address is 4849 Greenville Avenue, Suite 1500, Dallas, Texas, 75206; and
READING & BATES DEVELOPMENT CO., a Delaware corporation (hereinafter
referred to as "Assignee"), whose mailing address is 901 Threadneedle,
Suite 200, Houston, Texas 77079.
W I T N E S S E T H:
1. Sale. THAT, FOR THE CONSIDERATION stated hereinbelow in Article 5.
and OTHER VALUABLE CONSIDERATION, the sufficiency of which is hereby
acknowledged, Assignor does hereby GRANT, SELL, TRANSFER, ASSIGN, and
CONVEY unto Assignee the undivided right, title and interest reflected in
Exhibit 1 Part (a) hereof, in and to the following described interests and
properties (the undivided interest being assigned hereunder in such
interests and properties shall hereinafter be referred to collectively as
the "Assets" and the specific quantitative interest being assigned
hereunder represents an undivided twenty percent (20%) of the interest of
Assignor in the Assets):
a. The oil, gas and mineral lease described on Exhibit 1, Part (a)
(the Lease ), together with a like interest with respect to the
Lease in and to any and all (i) mineral interests, (ii) overriding
or landowners' royalty interests, (iii) surface and subsurface
interests and rights, (iv) beneficial, convertible or
reversionary interests, (v) interest owned, claimed or acquired,
or to be owned, claimed or acquired, by agreement, (vi) production
payments, (vii) contractual interests owned pursuant to
participation agreements, operating agreements or similar
agreements, and (viii) any and all like or unlike interests,
including without limitation those specific items identified on
Exhibit 1, Part (a). This shall include any contractual rights
providing for the acquisition or earning of any of the foregoing,
and Assignor's rights in respect of any pooled, communitized or
unitized acreage of which any of the foregoing is a part. SAVE
AND EXCEPT ANY RIGHT, TITLE OR INTEREST OF ASSIGNOR IN AND TO, OR
ANY RIGHTS DERIVED FROM, ANY BIDDING AGREEMENTS EXECUTED BY AND
BETWEEN ASSIGNOR AND MOBIL OIL EXPLORATION & PRODUCING SOUTHWEST
INC.. (All of the foregoing shall be called collectively the
Leasehold Interests. )
b. Any and all wells, wellbores, pipe, gathering lines, compressors,
facilities, equipment, platforms, pipelines and any and all other
personal, real, movable and immovable property, fixtures or
equipment which are located on or used directly in connection with
the production, treatment or transportation of oil and gas from
the Leasehold Interests, including, without limitation, those
items specifically identified on Exhibit 1, Part (b) (the
Equipment ).
c. Any and all easements, rights of way, and subsurface and surface
rights associated or used in connection with any such easements or
rights of way, which easements, rights-of-way and subsurface and
surface rights have been obtained for use in connection with the
Leasehold Interests (the Gathering Facilities ).
d. Any and all oil, gas and other minerals produced from or
attributable to the Leasehold Interests on or after the Effective
Date.
e. To the extent the same are assignable or transferable by Assignor
and to the extent and only to the extent that the same relate to
the ownership or operation of the Leasehold Interests, the
Gathering Facilities or the Equipment on or after the Effective
Date, a like interest in and to all orders, contracts, agreements
(including without limitation all operating agreements,
transportation agreements, unit agreements, participation
agreements and processing agreements), instruments, licenses,
authorizations, permits, audits, claims, liens, suits, settlements
and demands, and other rights, privileges, benefits and powers
conferred upon Assignor, including, but not limited to those
listed on Exhibit 1 part (c).
TO HAVE AND TO HOLD unto Assignee, subject to the terms, conditions and
reservations hereinbelow recounted.
2. Title Warranty. Assignor warrants that:
a. Except as specifically set forth in the Purchase and Sale
Agreement described in Article 10. below or under the contracts
and agreements listed in Exhibit 1 to this Assignment, and further
except as a consequence of the formation of a unit, neither
Assignor nor any parent, subsidiary or affiliate of Assignor
during their respective periods of ownership has (A) executed any
deed, conveyance, assignment or other instrument as an assignor,
grantor, sublessor or in another capacity or (B) has breached any
obligation under any Lease that would (i) result in Assignee's
being entitled to receive less than the net revenue interest for
any Lease, well or unit set forth in Exhibit 1 of all oil and gas
in, under, and that may be produced, saved and marketed from or
attributable to such Lease, well or unit, or (ii) obligate
Assignee to bear the costs and expenses relating to the
maintenance, development and operation of such Lease, well or unit
in an amount greater than the working interest for such Lease,
well or unit set forth in Exhibit 1, unless the net revenue
interest attributable to said working interest is increased by a
proportionate or greater amount; and
b. Except as specifically set forth in the Purchase and Sale
Agreement described in Article 10. below or under the contracts
and agreements listed in Exhibit 1 to this Assignment, the Assets
are free of all liens, security interests and encumbrances;
(the limited warranty set forth in subparagraphs (a) and (b) above shall
hereinafter be referred to as the Special Limited Warranty ). Assignor
shall convey the Assets with no warranty whatsoever other than the Special
Limited Warranty, but with full substitution and subrogation to Assignee
in and to all covenants, agreements, representations and warranties made
by others heretofore given or made in connection with the Assets or any
part thereof.
3. Acceptance. Assignee accepts this Assignment and acknowledges
delivery of the Assets and accepts the obligations as provided in the
Purchase and Sale Agreement described in Article 10 below (including those
contracts and agreements listed on Exhibit 1 of this Assignment, insofar
and only insofar as such contracts and agreements cover, pertain or apply
to the Leasehold Interests), on or after the Effective Date, including,
but not limited to, any overriding royalty interests which may burden the
Assets and which were created by Assignor's predecessor(s) in title.
4. Other Warranty Provisions. Assignee acknowledges that (a) Assignor
has not made any warranty or representation, whether express, implied, at
common law, by statute or otherwise, relating to the fitness for an
intended purpose or condition of any movable property constituting a
portion of the Assets and (b) Assignee shall acquire such personal
property in WHERE IS, AS IS condition. Except as may be specifically
set forth to the contrary in the Purchase and Sale Agreement described in
10 below(the "Agreement"), Buyer acknowledges that Seller has made no
representations or warranties whatever, expressed or implied, (Seller
having hereby expressly disclaimed all such warranties) as to the
accuracy, completeness, or materiality of any data, information, record or
materials now, heretofore, or hereafter made available in connection with
this Agreement (including, without limitation, any descriptions of oil and
gas leases; quality or quantity or hydrocarbon reserves attributable to
the Assets, if any; production rates, exploratory or development drilling
opportunities, decline rates, potential for production of hydrocarbons
from the Assets; the environmental condition of said Assets; the legal,
tax or other consequences of owning Seller's interest in the Assets; or
any other information contained in any material furnished in connection
with this transaction). Any and all such data, information, records or
materials furnished by Seller to Buyer is provided as a convenience only
and any reliance on or use of same is at the Buyer's sole risk. WITHOUT
LIMITING THE GENERALITY OF THIS PARAGRAPH, SELLER DISCLAIMS AND NEGATES AS
TO ANY PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND APPURTENANCES SUBJECT
TO THIS AGREEMENT (INCLUDING ALL WELLS): (A) ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, AND (C) ANY IMPLIED OR EXPRESS WARRANTY
OF CONFORMITY TO MODELS OR SAMPLE OR MATERIALS. THE PURCHASER EXPRESSLY
AGREES THAT TITLE TO SUCH PERSONAL PROPERTY, FIXTURES, IMPROVEMENTS AND
APPURTENANCES WILL BE ACCEPTED "AS IS", "WHERE IS", "WITH ALL FAULTS", AND
IN ITS PRESENT CONDITION AND STATE OF REPAIR.
5. Consideration. The consideration for this Assignment and the nine
other Assignments and Bills of Sale this day entered into by and between
Assignor and Assignee conveying certain interests in OCS-G 8504, 7049,
8010, 8012, 8876, 13171, 13696, 8000, 8006 and 8005, is the sum of
Eighteen Million Two Hundred Fifty Thousand and No/100 ($18,250,000.00)
Dollars ("Purchase Price"), in part payment thereof, Assignee has paid, in
ready and current funds, the sum of Six Million Two Hundred Fifty Thousand
and NO/100 ($6,250,000.00) Dollars to the Assignor, who hereby
acknowledges the receipt thereof and grants full acquittance and discharge
therefor.
And, for the balance of the Purchase Price, the sum of Twelve Million
and No/100 ($12,000,000.00) Dollars, the Assignee has furnished one (1)
certain Promissory Note in the amount of Twelve Million and No/100 Dollars
($12,000,000.00), drawn by the Assignee to the order of Assignor, dated
the 18th day of October, 1995, and payable in two installments of Six
Million and No/100 ($6,000,000.00) Dollars each, the first due on March
31, 1996 and the second due on September 30, 1996, which note bears
interest at the rate of 8.56% per annum from date thereof until paid.
6. Liability of Successors. The terms, conditions, rights and
obligations of this Assignment shall run with the land and extend to and
be binding upon the parties hereto and their respective successors, heirs
and/or assigns.
7. Counterparts. This Assignment may be executed in several original
counterparts, all of which are identical. Each of such counterparts shall
for all purposes be deemed to be an original, and all such counterparts
shall together constitute but one and the same instrument. The signature
pages of the counterparts may be amalgamated to form complete documents
for the purpose of recording complete documents in the public registries.
8. Severability. If any provision of this Assignment is invalid or
unenforceable in part or in whole in any jurisdiction applicable to this
Assignment, then, to the extent permitted by applicable law, (i) the other
provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in order to carry out the
intentions of the parties hereto as nearly as may be possible, and (ii)
the invalidity or unenforceability of such provision in any jurisdiction
shall not affect the validity or enforceability thereof in any other
jurisdiction.
9. Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF LOUISIANA, WITHOUT
REGARD TO CONFLICT OF LAW RULES THAT WOULD DIRECT APPLICATION OF THE LAWS
OF ANOTHER JURISDICTION.
10. Purchase and Sale Agreement. Notwithstanding anything to the
contrary provided herein, this Assignment shall at all times be subject to
the terms, conditions and exceptions contained in that certain unrecorded
Purchase and Sale Agreement dated the same date as this Assignment by and
between Assignor and Assignee. The unrecorded Purchase and Sale Agreement
shall at all times govern the rights of the parties in and to the Assets.
All interested parties are hereby given notice of the existence of the
unrecorded Purchase and Sale Agreement.
11. MMS Approval. This Assignment is expressly made subject to the
approval of the Minerals Management Service, United States Department of
the Interior.
IN WITNESS WHEREFORE, this Assignment is executed in multiple
originals and in the presence of the undersigned witnesses on this 18th
day of October, 1995, but to be effective as of the Effective Date.
WITNESSES: ASSIGNOR:
ENSERCH EXPLORATION, INC.
___________________________________ Tax ID # 75-2556975
Name: James K. Teringo, Jr.
By:_________________________
___________________________________ R. L. Kincheloe
Name: Senior Vice President,
Offshore and International
ASSIGNEE:
WITNESSES:
READING & BATES DEVELOPMENT CO.
Tax ID# 73-0797067
______________________________________
Name:_________________________________
By:__________________________
_______________________________________ D. C. Toalson
President
Name:__________________________________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
R. L. KINCHELOE, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as Senior
Vice President, Offshore and International of Enserch Exploration, Inc., a
Texas corporation, on behalf of said corporation with full authority, and
that the said instrument is the free act and deed of the said corporation,
and was executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of James K. Teringo, Jr. and ________________________, competent
witnesses, on the 18th day of October, 1995.
WITNESSES:
______________________________ ____________________________________
James K. Teringo, Jr. R. L. KINCHELOE
______________________________
_____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
____________________________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
D. C. TOALSON, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as
President of Reading & Bates Development Co., a Delaware corporation, on
behalf of the said corporation with full authority, and that the said
instrument is the free act and deed of the said corporation, and was
executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of _________________________________ and
_________________________________, competent witnesses, on the 18th day of
October, 1995.
WITNESSES:
___________________________________ ____________________________________
D. C. TOALSON
___________________________________
____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
__________________________________
EXHIBIT 1
Part (a)
LEASE OCS-G 8876. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
June 1, 1987, by and between the United States of America, as Lessor, to
Hunt Petroleum Corporation et al., as Lessees, bearing Serial No. OCS-G
8876 covering all of Block 297, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 20.000000%
Net Revenue Interest 16.833333%
Part (b)
Together with a like interest in and to:
NONE
Part (c)
Together with a like interest in and to:
1. Offer Letter dated April 17, 1995, executed by and between Enserch
Exploration, Inc. and Reading & Bates Development Co., as such may
have been amended.
2. Farmout Agreement dated July 10, 1991 (including all amendments to
that agreement), between Exxon Corporation and Hunt Petroleum
Corporation covering Green Canyon Blocks 209, 254, 297, 298 and 342.
3. Joint Bidding Agreement dated April 16, 1987, (including all
amendments to that agreement) between EP Operating Company and Hunt
Petroleum Corporation, et al., covering and pertaining to Green
Canyon Block 297.
4. Purchase and Sale Agreement dated March 28, 1995, executed by and
between Exxon Corporation, as Seller and Enserch Exploration, Inc.,
as Buyer.
5. Oil Gathering Agreement dated December 2, 1994, executed by and
between EP Operating Limited Partnership, as Producer and Manta Ray
Gathering Systems Inc., as Gatherer.
6. Gas Gathering Agreement dated December 2, 1994, executed by and
between EP Operating Limited Partnership, as Producer and Manta Ray
Gathering Systems Inc., as Gatherer.
7. Purchase and Sale Agreement dated February 28, 1995, executed by and
between Enserch Offshore, Inc., as Buyer and HI Production Company,
Inc., as Seller.
8. Purchase and Sale Agreement dated February 28, 1995, executed by and
between Enserch Offshore, Inc., as Buyer and Placid Oil Company, as
Seller.
9. Purchase and Sale Agreement dated February 28, 1995, executed by and
between Enserch Offshore, Inc., as Buyer and OPUBCO Resources, Inc.,
as Seller.
10. That certain Exploration, Drilling and Production Unit Agreement
dated June 22, 1995, executed by and between Enserch Offshore, Inc.
and Enserch Exploration, Inc., covering and pertaining to Green
Canyon Blocks 253, 254, 297 & 298.
NOTE: ALL REFERENCES IN THIS EXHIBIT 1 MADE TO "WORKING INTEREST" AND
"NET REVENUE INTEREST", AND TO THE NUMBERS SET FORTH IN CONNECTION
THEREWITH, ARE FOR TITLE WARRANTY PURPOSES ONLY.
EXHIBIT 10.123
PAYMENT AGREEMENT
This Payment Agreement (the "Agreement") is executed this 18th day of
October, 1995, by and between Enserch Exploration, Inc., a Texas
corporation ("Seller"), and Reading & Bates Development Co., a Delaware
corporation ("Buyer").
RECITALS
WHEREAS, Seller and Buyer have entered into that Purchase and Sale
Agreement dated the date hereof (the "Purchase Agreement") and have
entered into this Agreement with respect to the deferred payment terms
applicable to payment of Buyer of the Purchase Price set out in Section
2.1 of the Purchase Agreement;
NOW THEREFORE, Seller and Buyer hereby agree as follows:
1. Definitions. Unless otherwise defined in this Agreement,
capitalized terms shall have the meanings ascribed to them in the
Purchase Agreement.
2. Deferred Payment Terms. Buyer shall pay to Seller, Six Million Two
Hundred Fifty Thousand and No/100 Dollars ($6,250,000.00) of the
Purchase Price on the date of this Agreement and shall execute a
promissory note in the principal amount of Twelve Million and No/100
Dollars ($12,000,000.00) as evidence of the unpaid balance of the
Purchase Price which note shall be payable in two installments of Six
Million and No/100 Dollars ($6,000,000.00) each, the first
installment of which shall be due on March 31, 1996 and the second
installment of which shall be due on September 30, 1996 and which
note shall be secured by a mortgage and security agreement and
financing statement granting a mortgage lien and security interest in
the Assets and any additional interests acquired by Buyer pursuant to
the Operating Agreement. Failure of Buyer to conform to and perform
the payment of the Purchase Price, in accordance with the terms and
provisions of this Agreement, shall constitute a breach hereof and
entitle Seller to damages, be grounds for the rescission of the
Purchase Agreement by Seller and/or a suit for specific performance
by Seller. In the event Seller elects to rescind the Purchase
Agreement hereunder, Buyer shall reassign unto Seller, all of the
interests which Buyer acquired from Seller under the terms and
provisions of the Purchase Agreement, free and clear of any and all
burdens and encumbrances, save and except those burdens and
encumbrances affecting the interests and Assets as of the date
hereof. In the event Buyer defaults in the timely payment of any
installment or interest due hereunder, Seller shall have the right
and option to accelerate the due date of any and all outstanding
installments which shall then and thereupon become due and payable.
Buyer does hereby expressly waive any and all rights of notice,
presentment and dishonor which may attach to the obligation created
hereunder.
3. Interest. Interest shall accrue in favor of Seller on the unpaid
balance of the Purchase Price and shall be paid current by Buyer with
each installment. Interest shall be calculated at a rate of 8.56%
per annum.
4. Conflict. In the event of any conflict between the terms of this
Agreement and the terms of the Purchase Agreement, the terms of the
Purchase Agreement shall be deemed to prevail. It is the intent of
the parties hereto that this Agreement cover and pertain only to the
payment of the Purchase Price and is not intended to alter or change
the rights and obligations of the parties created under the terms and
provisions of the Purchase Agreement.
5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF LOUISIANA,
WITHOUT REGARD TO CONFLICT OF LAW RULES OR PROVISIONS THAT DIRECT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
6. Waiver. No waiver of the performance under any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of any
other provisions hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly
provided.
7. Captions. The captions in this Agreement are for convenience only
and shall not be considered part of or affect the construction or
interpretation of any provision of this Agreement.
8. Liability of Successors. The terms, conditions, rights and
obligations of this Agreement shall run with the Assets and extend to
and be binding upon the parties hereto and their respective
successors, legal representatives and/or assigns.
9. Severability. If any provision of this Agreement is invalid or
unenforceable in part or in whole in any jurisdiction applicable to
this Agreement, then, to the extent permitted by applicable law, (i)
the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in order to carry
out the intentions of the parties hereto as nearly as may be
possible, and (ii) the invalidity or unenforceability of such
provision in any jurisdiction shall not affect the validity or
enforceability thereof in any other jurisdiction.
10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
11. Attorney's Fees. If a suit or action is filed by any party to
enforce this Agreement, the prevailing party shall be entitled to
recover reasonable attorneys' fees incurred in investigation or
related matters and in preparation for and prosecution or defense
of such suit or action as fixed by the trial court, together with
reasonable court costs, and, if any appeal is taken from the
decision of the trial court, reasonable attorneys' fees as fixed
by the appellate court or, if appropriate, by the trial court.
12. Change in Control. In the event Seller exercises its right and
option under Section 8.15 of the Purchase Agreement to acquire all
of Buyer's right, title and interest in an to the Assets and any
additional interest which may have been acquired pursuant to the
Operating Agreement described in Section 5.2(e) of the Purchase
Agreement, Seller shall promptly reimburse Buyer for all
installments of the Purchase Price (not including interest) paid
by Buyer prior to the date of such exercise and all other amounts
specified in Section 8.15 of the Purchase Agreement, and Buyer
shall thereafter be relieved of any liability or responsibility to
make future installments or payments hereunder or thereunder.
13. Release of Security. Upon payment in full of the Purchase Price
and any accrued interest hereunder or under the promissory note
referred to in Section 2. of this Agreement, Seller shall cause
the mortgage and security interest referred to in Section 2. to be
released of record and the financing statement, also referred to
in Section 2., to be terminated of record.
IN WITNESS WHEREOF, the parties have entered into and executed this
Agreement as of the day and year first set forth above.
WITNESSES: SELLER:
ENSERCH EXPLORATION, INC.
___________________________________
Name: James K. Teringo, Jr.
By: ___________________________
___________________________________ R. L. Kincheloe
Name: Senior Vice President,
Offshore and International
WITNESSES: BUYER:
READING & BATES DEVELOPMENT CO.
______________________________________
Name:_________________________________
By:____________________________
_______________________________________ D. C. Toalson
Name:__________________________________ President
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
R. L. KINCHELOE, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as Senior
Vice President, Offshore and International of Enserch Exploration, Inc., a
Texas corporation, on behalf of said corporation with full authority, and
that the said instrument is the free act and deed of the said corporation,
and was executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of James K. Teringo, Jr. and _____________________________,
competent witnesses, on the 18th day of October, 1995.
WITNESSES:
______________________________ ____________________________________
James K. Teringo, Jr. R. L. KINCHELOE
______________________________
_____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
____________________________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
D. C. TOALSON, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as
President of Reading & Bates Development Co., a Delaware corporation, on
behalf of the said corporation with full authority, and that the said
instrument is the free act and deed of the said corporation, and was
executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of _________________________________ and
_________________________________, competent witnesses, on the 18th day of
October, 1995.
WITNESSES:
___________________________________ ____________________________________
D. C. TOALSON
___________________________________
____________________________________
Notary Public in and for the
State of Texas
My Commission expires:
__________________________________
EXHIBIT 10.124
MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE AND SECURITY AGREEMENT (the "Mortgage") dated as of
this 18th day of October, is by and among READING & BATES DEVELOPMENT CO.,
a Delaware corporation whose mailing address is 901 Threadneedle, Suite
100, Houston, Texas 77079, and whose federal taxpayer identification
number is 73-0797067 (hereinafter referred to as "Borrower"), and ENSERCH
EXPLORATION, INC., a Texas corporation whose mailing address is 4849
Greenville Avenue, Suite 1500, Dallas, Texas 75206, and whose federal
taxpayer identification number is 75-2556975 (the "Lender"), here present
who accepts this Mortgage.
Recitals
WHEREAS, By assignments dated effective May 1, 1995 and entitled
"Assignment and Bill of Sale"( the "Assignments"), Lender has assigned to
Borrower certain leasehold interests in certain parcels of oil and gas
leasehold acreage (which interests and leases are more particularly
described in Exhibit "A" attached hereto) in exchange for Borrower's
agreement to pay to Lender the sum of Eighteen Million Two Hundred Fifty
Thousand and No/100($18,250,000.00) Dollars (the "Loan"), of which Six
Million Two Hundred Fifty Thousand and No/100 ($6,250,000.00) has been
paid and the remainder is evidenced by that certain Promissory Note of
even date herewith executed by Borrower and payable to Lender in the
principal amount of Twelve Million and No/100 ($12,000,000.00) Dollars
(the "Note");
WHEREAS, in order to secure the full and punctual payment and
performance of the Indebtedness (as hereafter defined), the Borrower has
agreed to execute and deliver this Mortgage and to grant a mortgage lien
and continuing security interest in and to the Collateral (as hereafter
defined);
NOW, THEREFORE, in consideration of the premises, the Borrower and
Lender agree as follows:
ARTICLE 1.
General Terms
Section 1.1 Definitions. As used in this Mortgage, the terms
"Assignments," "Borrower," "Lender," "Loan," "Mortgage," and "Note" shall
have the meanings indicated above. As used in this Mortgage, the
following additional terms shall have the meanings indicated:
"Accounts" means all "accounts" (as defined in the UCC) now owned or
hereafter acquired by the Borrower (including without limitation accounts
resulting from the sale of Hydrocarbons at the well head) now or hereafter
arising in connection with the sale or other disposition of any
Hydrocarbons, and further means all rights accrued, accruing or to accrue
to receive payments of any and every kind under all Contracts, including
without limitation bonuses, rents and royalties which are payable out of
or measured by production of any Hydrocarbons or are otherwise
attributable to the Mineral Properties and all other revenues owing to the
Borrower in connection with the Mineral Properties, including revenues
from the treatment, transportation or storage of Hydrocarbons for third
parties.
"Advances" has the meaning set forth in Section 4.23 ("Advances by
Lender") of this Mortgage.
"Collateral" has the meaning set forth in Section 2.2 ("The Security
Interests") of this Mortgage".
"Collateral Documents" means collectively all mortgages, pledges,
security agreements and other documents by which the Borrower grants Liens
and security interests in immovable or movable property to the Lender.
"Contracts" means all contracts, agreements, operating agreements,
farm-out or farm-in agreements, sharing agreements, limited or general
partnership agreements, area of mutual interest agreements, mineral
purchase agreements, contracts for the sale, exchange, transportation or
processing of Hydrocarbons, rights-of-way, easements, surface leases, salt
water disposal agreements, service contracts, permits, franchises,
licenses, pooling or unitization agreements, unit designations and pooling
orders now in effect or hereafter entered into by the Borrower affecting
any of the Mineral Properties, Equipment or Hydrocarbons now or hereafter
covered hereby, or which are useful or appropriate in drilling for,
producing, treating, handling, storing, transporting or marketing oil, gas
or other minerals produced from any lands affected by the Mineral
Properties.
"Default" means the occurrence of any of the events specified as an
Event of Default, whether or not any requirement for notice or lapse of
time or other condition precedent has been satisfied.
"Equipment" means all equipment now owned or hereafter acquired by
the Borrower and now or hereafter located on or used or held for use in
connection with the Mineral Properties or in connection with the operation
thereof or the treating, handling, storing, transporting, processing,
purchasing, exchanging or marketing of Hydrocarbons, including without
limitation all wells, rigs, platforms, constructions, extraction plants,
facilities, gas systems (for gathering, treating, injection and
compression), water systems (for treating, disposal and injection),
compressors, casing, tubing, rods, flow lines, pipelines, derricks, tanks,
separators, pumps, machinery, tools and all other movable property and
fixtures now or hereafter located upon and dedicated to be used (or held
for use) in connection with any of the Mineral Properties, together with
all additions, accessories, parts, attachments, special tools and
accessions now and hereafter affixed thereto or used in connection
therewith, and all replacements thereof and substitutions therefor.
"Event of Default" has the meaning set forth in Section 5.1 ("Events
of Default") of this Mortgage.
"General Intangibles" means all "general intangibles" (as defined in
the UCC) now owned or hereafter acquired by the Borrower related to the
Mineral Properties, the Equipment or the Hydrocarbons, the operation of
the Mineral Properties or the Equipment (whether the Borrower is operator
or non-operator), or the treating, handling, storing, transporting,
processing, purchasing, exchanging or marketing of Hydrocarbons, or under
which the proceeds of Hydrocarbons arise or are evidenced or governed,
including, without limitation, (i) all contractual rights and obligations
or indebtedness owing to the Borrower (other than Accounts) from whatever
source arising in connection with the sale or other disposition of any
Hydrocarbons, including all rights to payment owed or received by the
Borrower pursuant to a "take-or-pay" provision or gas balancing
arrangement, (ii) all Contracts and other general intangibles now or
hereafter arising in connection with or resulting from Contracts, (iii)
all insurance proceeds and unearned insurance premiums affecting all or
any part of the Collateral, and (iv) all things in action, rights
represented by judgments, claims arising out of tort and other claims
relating to the Collateral, including the right to assert and otherwise to
be the plaintiff and proper party of interest to commence and prosecute
such action (whether as claims, counterclaims or otherwise, and whether
involving matters arising from casualty, condemnation, indemnification,
negligence, strict liability, other tort, contract or in any other
manner).
"Hydrocarbons" mean all oil, gas, casinghead gas, condensate,
distillate, other liquid and gaseous hydrocarbons, sulfur, and all other
minerals, whether similar to the foregoing or not, produced, obtained or
secured from or allocable to the Mineral Properties, and any products
refined, processed, recovered or obtained therefrom, including oil in
tanks.
"Indebtedness" means the Note, that certain Payment Agreement of even
date herewith by and between Borrower and Lender (the "Payment Agreement")
and all other present and future amounts, liabilities and obligations of
the Borrower to the Lender or to any successor or transferee thereof under
or pursuant to the Note or the Payment Agreement, this Mortgage, the other
Collateral Documents or otherwise, whether said amounts, liabilities or
obligations are liquidated or unliquidated, now existing or hereafter
arising, direct or indirect, primary or secondary, fixed or contingent,
and irrespective of the manner in which same may be incurred, including
without limitation all promissory notes heretofore or hereafter executed
by the Borrower in favor of Lender, in principal, interest, deferral and
delinquency charges, prepayment premiums, costs and attorneys' fees, as
therein stipulated, and under and pursuant to all amendments, supplements
and restatements to any of said documents, together with any and all
renewals and extensions of such loans, advances, debts, obligations and
liabilities or any part thereof. The Indebtedness includes without
limitation all Advances and other amounts for which the Borrower is
obligated under the terms of this Mortgage.
"Lien" means any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on jurisprudence, statute or contract, and including but
not limited to the lien or security interest arising from a mortgage,
encumbrance, pledge, security agreement, conditional sale or trust receipt
or a lease, consignment or bailment for security purposes. The term "Lien"
shall include reservations, exceptions, encroachments, easements,
servitudes, usufructs, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances affecting property.
"Mineral Properties" means the right, title and interest of Borrower
in those certain interests described in Exhibit "A" hereto in the oil, gas
and mineral leases described in Exhibit "A" hereto, together with all
interests of the Borrower with respect to all unitization and pooling
agreements and orders now or hereafter existing or which relate to those
certain interests described in Exhibit "A", and all interests of the
Borrower in agreements and rights pertaining to the use or occupation of
the subsurface depths that relate to those certain interests described in
Exhibit "A".
"Mortgage" means this Mortgage and Security Agreement, as amended or
supplemented from time to time.
"Mortgaged Property" has the meaning set forth in Section 2.1
("Hypothecation") of this Mortgage.
"Permitted Liens" means the Security Interests; any other Liens in
favor of the Lender; any validly perfected mechanic's and materialman's
lien filed as of the date of this Mortgage; the Lien created by the
Financing Statement executed by Borrower, as debtor, in favor of Lender
and other parties, as Secured Party, securing certain obligations of
Borrower under the Operating Agreement dated effective May 1, 1995; Liens
permitted by the Lender in writing to be created or assumed or to
otherwise exist on the Collateral (including without limitation the Liens
permitted by the provisions of Section 4.3 ("Liens") hereof).
"Person" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof,
or any other form of entity.
"Proceeds" means all cash and non-cash proceeds of, and all other
profits, rentals or receipts, in whatever form, arising from the
collection, sale, lease, exchange, assignment, licensing or other
disposition of, or realization upon, Collateral, including without
limitation all claims of the Borrower against third parties for loss of,
damage to or destruction of, or for proceeds payable under, or unearned
premiums with respect to, policies of insurance in respect of, any
Collateral, and any condemnation or requisition payments with respect to
any Collateral, and including proceeds of all such proceeds, in each case
whether now existing or hereafter arising.
"Proceeds of Runs" has the meaning set forth in Section 2.3
("Assignment") of this Mortgage.
"Security Interests" means the security interests in the Collateral
granted hereunder securing the Indebtedness.
"UCC" means the Uniform Commercial Code, Commercial Laws-Secured
Transactions (Louisiana Revised Statutes 10:9-101 through 9-605) in the
State of Louisiana, as amended from time to time; provided that if by
reason of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection of the Security Interests in any Collateral
is governed by the Uniform Commercial Code as in effect in a jurisdiction
other than Louisiana, "UCC" means the Uniform Commercial Code as in effect
in such other jurisdiction for purposes of the provisions hereof relating
to such perfection or effect of perfection or non-perfection.
ARTICLE 2.
Liens and Security Interests
Section 2.1 Hypothecation. (a) In order to secure the full and
punctual payment and performance of all present and future Indebtedness,
the Borrower does by these presents specially mortgage, affect,
hypothecate, pledge and assign unto and in favor of the Lender, to inure
to the use and benefit of the Lender, the following described property,
to-wit:
(1) The Mineral Properties, together with all profits, products and
proceeds, whether now or hereafter existing or arising, from the Mineral
Properties.
(2) The Borrower's rights in the improvements and other
constructions now or hereafter located on the Mineral Properties,
including without limitation the Equipment, to the extent (i) any such
property should constitute or be deemed to constitute immovable property
for the purposes of Louisiana law, including without limitation any
buildings, platforms, structures, towers, rigs or other immovable property
or component parts thereof, or (ii) any such property that is otherwise
susceptible of mortgage pursuant to Louisiana Civil Code Article 3286 or
Louisiana Mineral Code Article 203.
The descriptions of the Mineral Properties contained in Exhibit "A"
are qualified by the explanations contained in Exhibit 1 attached hereto
and made a part hereof.
All of the foregoing property and rights covered by and subject to
this Mortgage are herein collectively referred to as the "Mortgaged
Property."
SUBJECT, however, to (i) the restrictions, exceptions, reservations,
conditions, limitations and other matters, if any, set forth or specified
in the specific descriptions of such properties and interests in Exhibit
"A" (including all presently existing royalties, overriding royalties,
payments out of production and other burdens which are specified in
Exhibit "A" and which are taken into consideration in computing any
percentage, decimal or fractional interests set forth in Exhibit "A"), and
(ii) the condition that the Lender shall not be liable in any respect
hereunder for the performance of any covenant or obligation of the
Borrower in respect of the Mortgaged Property.
The Mortgaged Property is to remain so specially mortgaged, affected
and hypothecated unto and in favor of Lender until the full and final
payment or discharge of the Indebtedness, and Borrower is herein and
hereby bound and obligated not to sell or alienate the Mortgaged Property
to the prejudice of this act.
(b) In the event that the Borrower acquires additional undivided
interests in some or all of the Mineral Properties, this Mortgage shall
automatically encumber such additions or increases to the Borrower's
interest in the Mineral Properties without need of further act or
document. Further, in the event the Borrower becomes the owner of an
interest in any part of the land described either in Exhibit A or in the
documents described in Exhibit A or otherwise subject to or covered by the
Mineral Properties, this Mortgage shall automatically encumber such
ownership interest of the Borrower without need of further act or
document.
Section 2.2 The Security Interests. In order to secure the full and
punctual payment and performance of all present and future Indebtedness,
the Borrower hereby grants to the Lender a continuing security interest in
and to all right, title and interest of the Borrower in, to and under the
following property, whether now owned or existing or hereafter acquired or
arising and regardless of where located:
(1) the Mineral Properties;
(2) the Accounts;
(3) the Hydrocarbons;
(4) the Equipment;
(5) the General Intangibles (including the Contracts);
(6) all engineering, seismic, reserve, production, accounting,
title and legal data, reports and all books and records in any form
(including, without limitation, customer lists, credit files, computer
programs, tapes, disks, punch cards, data processing software, transaction
files, master files, printouts and other computer materials and records)
of the Borrower pertaining to any of the Mineral Properties or Collateral;
and
(7) all Proceeds and products of all or any of the Collateral
described in clauses 1 through 6 hereof.
The term "Collateral" means each and all of the items and property
rights described in clauses 1-7 above, together with the Mortgaged
Property.
Section 2.3 Assignment. To further secure the full and punctual
payment and performance of all present and future Indebtedness, up to the
maximum amount outstanding at any time and from time to time set forth in
Section 2.5 ("Maximum Amount") below, the Borrower does hereby absolutely,
irrevocably and unconditionally pledge, pawn, transfer and assign to the
Lender all monies which accrue after 8:00 a.m. Central Time, U.S.A., on
the date of this Mortgage, attributable to the Borrower's interest in the
Mineral Properties and all present and future rents therefrom (which rents
include without limitation all royalties, delay rentals, shut-in payments
and other payments which are rentals under Title 31 of the Louisiana
Revised Statutes) and all proceeds of the Hydrocarbons (which proceeds
include without limitation all payments for Hydrocarbons not yet
delivered, such as those received pursuant to "take or pay" arrangements)
and of the products obtained, produced or processed from or attributable
to the Mineral Properties now or hereafter (which monies, rents and
proceeds are referred to herein as the "Proceeds of Runs"). The Borrower
hereby authorizes and directs all obligors or payors of any Proceeds of
Runs to pay and deliver to Lender, upon request therefor by Lender, all of
the Proceeds of Runs accruing to the Borrower's interest without further
inquiry as to the rights of the Lender to receive the same and without any
further action or consent on the part of Borrower; provided, however, that
Lender hereby agrees that it shall not request that the Proceeds of Runs
be paid directly to Lender unless and until there has occurred an Event of
Default. The Borrower agrees that such obligors shall have no
responsibility to see to the application of any funds so paid to Lender.
Section 2.4 Condemnation. The Borrower hereby assigns to the Lender
any and all awards that may be given or made in any proceedings by any
legally constituted authority to condemn or expropriate the Collateral, or
any part thereof, under power of eminent domain, and if there is such a
condemnation or expropriation, the Lender may, at its election, either pay
the net proceeds thereof toward the payment of the Indebtedness or pay the
net proceeds thereof to the Borrower.
Section 2.5 Maximum Amount. (a) The maximum amount of the
Indebtedness that may be outstanding at any time and from time to time
that this Mortgage secures, including without limitation as a mortgage and
as a collateral assignment, and including any Advances made and included
within the Indebtedness, is Fifteen Million and No/100 ($15,000,000.00)
Dollars.
(b) The Borrower acknowledges that this Mortgage secures all
Indebtedness under or pursuant to the Note, the Payment Agreement, this
Mortgage or the other Collateral Documents, whether such loans or advances
made or incurred by the Lender are optional or obligatory by the Lender.
This Mortgage is and shall remain effective until all of the amounts,
liabilities and obligations, present and future, comprising the
Indebtedness have been incurred and are extinguished. When no
Indebtedness secured by this Mortgage exists, this Mortgage shall
terminate, Borrower shall have no further obligation hereunder and Lender
shall promptly cause this Mortgage to be released of record.
Section 2.6 Delivery of Transfer Orders. Independent of the other
provisions and authorities herein granted, the Borrower agrees to execute
and deliver any and all transfer orders, letters in lieu thereof, division
orders and other instruments that may be requested by Lender or that may
be required by any purchaser of any Hydrocarbons for the purpose of
effectuating payment of the Proceeds of Runs to Lender. If under any
existing sales agreements, other than division orders or transfer orders,
any Proceeds of Runs are required to be paid by the purchaser or any other
payor to the Borrower so that under such existing agreements payment
cannot be made of such Proceeds of Runs to Lender, upon the occurrence of
an Event of Default, the Borrower's interest in all Proceeds of Runs under
such sales agreements and in all other Proceeds of Runs which for any
reason may be paid to the Borrower shall, when received by the Borrower,
constitute trust funds in the Borrower's hands and shall be immediately
paid over to Lender.
Section 2.7 Change of Purchaser. Should any Person now or hereafter
purchasing or taking Hydrocarbons fail to make payment promptly to Lender
of the Proceeds of Runs, Lender shall have the right to make, or to
require Borrower to make, a change of connection and the right to
designate or approve the purchaser with those facilities a new connection
shall be made, and Lender shall have no liability or responsibility in
connection therewith so long as ordinary care is used in making such
designation.
Section 2.8 Application. All Proceeds of Runs from time to time in
the hands of Lender shall be applied by it toward the payment and
prepayment of all Indebtedness at such times and in such manner as Lender
deems advisable, may be held by Lender pending a resolution of any dispute
as to Lender's right to collect such Proceeds of Runs, or may be delivered
by Lender to the Borrower without in any way reducing or paying the
Indebtedness.
Section 2.9 Payment of Proceeds. In the event that, for any reason,
the Lender, upon the occurrence of an Event of Default, should elect with
respect to all or particular Mineral Properties or Contracts not to
exercise immediately its right to receive Proceeds of Runs, then the
purchasers or other Persons obligated to make such payment shall continue
to make payment to the Borrower until such time as written demand has been
made upon them by the Lender that payment be made direct to the Lender.
Such failure to notify such purchasers or other Persons shall not in any
way waive, remit or release the right of the Lender to receive any
payments not theretofore paid over to the Borrower before the giving of
written notice. In this regard, in the event payments are made direct to
the Lender, and then, at the request of the Lender payments are, for a
period or periods of time, paid to the Borrower, the Lender shall
nevertheless have the right, effective upon written notice, to require
future payments be again made to it.
Section 2.10 Limitation of Liability. The Lender and its successors
and assigns are hereby absolved from all liability for failure to enforce
collection of the Proceeds of Runs and from all other responsibility in
connection therewith, except the responsibility of each to account (by
application upon the Indebtedness or otherwise) to the Borrower for funds
actually received. The Borrower agrees to indemnify and hold harmless
Lender against any and all liabilities, actions, claims, judgments, costs,
charges and attorneys' fees by reason of the assertion that such parties
received, either before or after payment and performance in full of the
Indebtedness, funds from the production of Hydrocarbons or the Proceeds of
Runs claimed by third persons (and/or funds attributable to sales of
production which (i) were made at prices in excess of the maximum price
permitted by or (ii) were otherwise made in violation of laws, rules,
regulations and/or orders governing such sales), and the Lender shall have
the right to defend against any such claims or actions, employing
attorneys of Lender's own selection and if not furnished with indemnify
satisfactory to them, the Lender shall have the right to compromise and
adjust any such claims, actions and judgments, and in addition to the
rights to be indemnified as herein provided, all amounts paid by the
Lender in compromise, satisfaction or discharge of any such claim, actions
or judgments, and all court costs, attorneys' fees and other expenses of
every character expended by the Lender pursuant to the provisions of this
Section shall be a demand obligation (which obligation the Borrower hereby
expressly promises to pay) owing by the Borrower to such parties and shall
bear interest, from the date expended until paid, at the rate described in
Section 4.23 ("Advances by Lender") hereof.
Section 2.11 Duty to Perform. Nothing herein contained shall detract
from or limit the obligation of the Borrower to make prompt payment of the
Indebtedness at the time and in the manner provided herein. The Borrower
will do and perform every act required of it by this Mortgage at the time
or times and in the manner specified.
Section 2.12 No Liability. The foregoing mortgage Liens and
Security Interests are granted as security only and shall not subject the
Lender to, or transfer or in any way affect or modify, any obligation or
liability of the Borrower with respect to any of the Collateral or any
transaction in connection therewith.
Section 2.13 Priority. Notwithstanding any other provision in this
Mortgage, Lender hereby agrees that this Mortgage shall in all respects be
subordinate to that Permitted Lien granted by Borrower in favor of Lender
and other parties under and pursuant to Article 6.3 of the Operating
Agreement dated effective May 1, 1995 to which Lender and Borrower are
parties.
ARTICLE 3.
Representations and Warranties
The Borrower represents and warrants to the Lender (such
representations and warranties are limited to the best of Borrower's
knowledge with respect to Sections 3.1, 3.2, 3.3, 3.7, 3.8 and 3.9) that:
Section 3.1 Title. The Collateral (including without limitation the
Mineral Properties) is accurately, completely, adequately and sufficiently
described herein and in Exhibit "A" as required by all applicable laws for
this Mortgage to create a Lien on all of the Collateral. The execution,
delivery and performance of this Mortgage and the creation of the liens
hereunder do not violate any provision of or constitute a default under
any operating agreement or other instrument affecting or comprising any of
the Collateral or to which the Borrower is a party. The Borrower
represents and warrants to the Lender that (a) the Mineral Properties
described in Exhibit "A" hereto are valid, subsisting leases and
contracts, in full force and effect, (b) all producing wells located on
the lands described in Exhibit "A" have been drilled, operated and
produced in conformity with all applicable laws, rules and regulations of
all regulatory authorities having jurisdiction, and are subject to no
penalties on account of past production, and that such wells are in fact
bottomed under and are producing from, and the well bores are wholly
within, lands described in Exhibit "A" (or in the case of wells located on
properties unitized therewith, such unitized properties), (c) upon
approval of the Assignments by the United States of America Department of
Interior, Minerals Management Service, the Borrower, to the extent of the
interest specified in Exhibit "A", shall have legal, valid and defensible
title to each property right or interest constituting the Mineral
Properties and the respective gross working interests and net revenue
interests of the Borrower in and to the Hydrocarbons as set forth on
Exhibit "A" hereto, and the Borrower's percentage interests in the Mineral
Properties, cash flow, net income and other distributions and in the cost
of exploration, development and production, all as set forth in Exhibit
"A" hereto, are true and correct in all material respects and accurately
reflect the respective interests to which the Borrower is legally
entitled, (d) the Borrower is not obligated, by virtue of any prepayment
under any contract providing for the sale by the Borrower of Hydrocarbons
which contains a "take or pay" clause or under any similar arrangement, to
deliver Hydrocarbons at some future time without then or thereafter
receiving full payment therefor and (e) no agreement, contract or
instrument set forth in Exhibit "A" contains any provision which would
prevent the practical realization of the benefits of this Mortgage as to
the Collateral. With respect to all wells existing on the date hereof,
such shares of production and expenses are not subject to change (pursuant
to non-consent provisions of operating agreements described in Exhibit "A"
or otherwise) except, and only to the extent that, such changes are
expressly described in Exhibit "A".
Section 3.2 No Liens Except for Permitted Liens. Other than
financing statements or other similar or equivalent documents or
instruments with respect to the Security Interests and the other Permitted
Liens, no financing statement, mortgage, security agreement or similar or
equivalent document or instrument covering all or any part of the
Collateral has been executed by the Borrower. No Collateral is in the
possession of any Person (other than the Borrower) asserting any claim
thereto or security interest therein, except that the Lender or its
designee may have possession of Collateral as contemplated hereby.
Section 3.3 Rents; Royalties. All rents, royalties and other
payments (except for those which are being contested in good faith and by
appropriate proceedings and for which the Borrower has established
adequate reserves and so long as the payment of same is not a condition to
be met in order to maintain an oil, gas and/or other mineral lease or
other agreement in force) due and payable under the Mineral Properties
which are productive of oil and/or gas (or are included in units
productive of oil and/or gas) and all other oil, gas and/or mineral
leases, contracts and other agreements forming a part of the Mortgaged
Property, have been and are being properly and timely paid, and the
Borrower is not in default with respect to any obligations (and the
Borrower is not aware of any default by any third party with respect to
such third party's obligations) under such leases, contracts and other
agreements, or otherwise attendant to the ownership or operation of the
Collateral, where such default could adversely affect the ownership or
operation of the Collateral to which such obligations relate. The
Borrower is not currently accounting (and does not anticipate accounting)
for any royalties, or overriding royalties or other payments out of
production, on a basis (other than delivery in kind) where such payments
are based other than on proceeds received by Borrower from sale; the
Borrower has advised the Lender in writing of situations, if any, where a
contingent liability to account in such manner may exist.
Section 3.4 No Limitations on Payments for Production. Except as
otherwise specifically disclosed to the Lender in writing with respect to
any particular part of the Mineral Properties, (i) neither Borrower, nor
its predecessors in title, have received prepayments (including, but not
limited to, payments for gas not taken pursuant to "take or pay"
arrangements) for any Hydrocarbons produced or to be produced from the
Mineral Properties after the date hereof; (ii) none of the Mineral
Properties is subject to any contractual or other arrangement whereby
payment for production is to be deferred for a substantial period after
the month in which such production is delivered (i.e., in the case of oil
not in excess of sixty (60) days, and in the case of gas not in excess of
ninety (90) days); (iii) none of the Mineral Properties is subject to a
gas sales contract which contains terms which are not customary in the
industry; (iv) none of the Mineral Properties is subject at the present
time to any regulatory refund obligation and, to the best of Borrower's
knowledge, no facts exist which might cause the same to be imposed; (v)
none of the Mineral Properties is subject to an arrangement or agreement
under which any purchaser or other Person is entitled to "make-up" or
otherwise receive deliveries of Hydrocarbons at any time after the date
hereof without paying at such time the full contract price therefor; and
(vi) no Person is entitled to receive any portion of the interest of the
Borrower in any Hydrocarbons or to receive cash or other payments from the
Borrower to "balance" any disproportionate allocation of Hydrocarbons
under any operating agreement, gas balancing and storage agreement, gas
processing or dehydration agreement, or other similar agreements. Lender
acknowledges that Borrower may be obligated to escrow a portion of the
proceeds of the Hydrocarbons for certain plugging and abandonment
obligations.
Section 3.5 Consents and Preferential Rights. There are no
preferential purchase rights held by third parties affecting any part of
the Collateral or rights of third parties to prohibit the pledge or
mortgage of any part of the Collateral without the consent of such third
parties, other than as set out in the Operating Agreement dated effective
May 1, 1995 to which Lender and Borrower are parties.
Section 3.6 No Inconsistent Agreements. The Borrower has not
performed any acts or signed any agreements which might prevent the Lender
from enforcing any of the terms of this Mortgage or which would limit the
Lender in any such enforcement.
Section 3.7 Status of Contracts. All of the Contracts and
obligations of the Borrower that relate to the Mineral Properties (i) are
in full force and effect and constitute legal, valid and binding
obligations of the Borrower, and (ii) neither the Borrower nor, to the
knowledge of the Borrower, any other party to the Contracts (a) is in
breach of or default, or with the lapse of time or the giving of notice,
or both, would be in breach or default, with respect to any of its
obligations thereunder or (b) has given or threatened to give notice of
any default under or inquiry into any possible default under, or action to
alter, terminate, rescind or procure a judicial reformation of any
Contract.
Section 3.8 Accounts. The Accounts represent bona fide obligations
of the respective account debtors, which obligations are free and clear of
any set off, compensation, counterclaim, defense, allowance or adjustment
other than discounts for prompt payment shown on the invoice, and arose in
the ordinary course of the Borrower's business.
Section 3.9 Status of Equipment. The Equipment, fixtures and other
tangible personal property forming a part of the Collateral are in good
repair and condition and are adequate for the normal operation of the
Collateral in accordance with prudent industry standards; all of such
Collateral is located on the Mineral Properties, except for that portion
thereof which is located elsewhere (including that usually located on the
Mineral Properties but now temporarily located elsewhere) in the course of
the normal operation of the Mineral Properties.
Section 3.10 Name. The corporate name of the Borrower as it appears
in its Articles of Incorporation is as it appears on page 1 of this
Mortgage.
Section 3.11 Taxpayer Identification Number. The federal taxpayer
identification number of the Borrower is as follows: -73-0797067.
Section 3.12 Chief Executive Office. The chief executive office of
the Borrower is located at 901 Threadneedle, Suite 200, Houston, Texas
77079.
Section 3.13 Filing Location. When UCC financing statement(s) have
been filed in the offices of a Louisiana Clerk of Court (or, in the case
of Orleans Parish, the Recorder of Mortgages), the Security Interests
shall constitute perfected security interests in the Collateral to the
extent that a security interest therein may be perfected by filing in the
Uniform Commercial Code records of Louisiana, prior to all other Liens and
rights of others therein except for the Permitted Liens to the extent that
such priority is afforded by the UCC or otherwise.
ARTICLE 4.
Covenants
The Borrower covenants and agrees as follows:
Section 4.1 Taxes. The Borrower will pay and discharge promptly when
due all taxes, license fees, assessments and governmental charges or
levies imposed upon it or upon its income or upon the Collateral or any
part thereof (including production, severance, windfall profit, excise and
other taxes assessed against or measured by the production of, or the
value or proceeds of production of, Hydrocarbons; provided, however, the
Borrower shall not be required to pay any such tax, assessment, charge or
levy if the amount, applicability or validity thereof shall currently be
contested in good faith by appropriate proceedings diligently conducted
and if the contesting party shall have set up reserves therefor adequate
under generally accepted accounting principles (provided that such
reserves may be set up under generally accepted accounting principles).
Section 4.2 Insurance. The Borrower will procure and maintain for
the benefit of the Lender and Borrower original paid-up insurance policies
against such liabilities, casualties, risks and contingencies, in such
amounts and form and substance, with such financially sound and reputable
companies, and with such expiration dates, as are reasonably acceptable to
the Lender, and containing a noncontributory standard mortgagee clause or
its equivalent in favor of the Lender. The Borrower will at all times
maintain costs of regaining control of well insurance or similar insurance
to the extent customary in the industry in the pertinent area of
operations. Each policy shall contain an agreement by the insurer not to
cancel or amend the policy without giving the Lender at least thirty (30)
days' prior written notice of its intention to do so. Upon request of the
Lender, the Borrower will furnish or cause to be furnished to the Lender
from time to time a summary of the insurance coverage of the Borrower in
form and substance reasonably satisfactory to the Lender and if requested
will furnish the Lender original certificates of insurance and/or copies
of the applicable policies and all renewals thereof. In the event the
Borrower should, for any reason whatsoever, fail to keep the corporeal
(tangible) Collateral or any part thereof so insured, or to keep said
policies so payable, or fail to deliver to the Lender the original or
certified policies of insurance and the renewals therefor upon demand,
then the Lender, if it so elects, may itself have such insurance effected
in such amounts and with such companies as it may deem proper and may pay
the premiums therefor (as an Advance as defined hereinbelow). The
Borrower will notify the Lender immediately in writing of any material
blowout, fire or other casualty to or accident involving the Mortgaged
Property, the Equipment or the Hydrocarbons, whether or not such blowout,
fire, casualty or accident is covered by insurance. Further, the Borrower
will notify promptly the Borrower's insurance company and submit an
appropriate claim and proof of claim to the insurance company if such a
casualty or accident occurs. In the event of any loss on any of such
policies, the Lender may, at its election, either apply the net proceeds
thereof toward the payment of the Indebtedness or pay the net proceeds
thereof to the Borrower, either wholly or in part, and under such
conditions as the Lender may determine to enable the Borrower to repair or
restore the Collateral.
Section 4.3 Liens. The Borrower will not create, incur, assume or
permit to exist any Lien on any portion of the Collateral, except for (i)
the Lien and Security Interests hereof and the Permitted Liens, (ii)
taxes, assessments or governmental charges or levies if the same shall not
at the time be delinquent or thereafter can be paid without penalty, or
are being contested in compliance with the preceding Section 4.1
("Taxes"), (iii) defects or irregularities of title and Liens which are
not such as to interfere materially with the development, operation or
value of the Mortgaged Property or the title thereto, (iv) those imposed
by law, such as carriers', warehousemen's and mechanics' liens and other
similar liens arising in the ordinary course of business which would
secure obligations not more than ninety (90) days past due or which are
being contested in good faith by appropriate proceedings diligently
conducted and for which adequate reserves shall have been set aside on its
books, (v) those arising out of pledges or deposits under workmen's
compensation laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar legislation, (vi)
utility easements, building restrictions and such other encumbrances or
charges against real property as are of a nature generally existing with
respect to properties of a similar character as the Mortgaged Property and
which do not in any material way affect the merchantability of the same or
interfere with the use thereof and the business of the Borrower, and (vii)
those consented to in writing by the Lender.
Section 4.4 Sale. Except for (i) sales of severed Hydrocarbons in
the ordinary course of the Borrower's business on the best terms which
would be available in bona fide and arms length transactions with third
parties not affiliated with the Borrower (which in the case of production
which is subject to price controls or is sold in accordance with customary
industry practice pursuant to long term purchase contracts, shall be
determined giving consideration to such matters), (ii) dispositions made
in connection with a permitted (as provided below) release, surrender or
abandonment of a lease, or (iii) in the absence of an Event of Default,
collection of Accounts and General Intangibles, the Borrower will not
sell, convey, lease or otherwise transfer or dispose of all or any portion
of the Collateral without the written consent of Lender (which consent
shall not be unreasonably withheld).
Section 4.5 Compliance with Laws and Covenants. The Borrower will
observe and comply with all laws, statutes, codes, acts, ordinances,
orders, judgments, decrees, injunctions, rules, regulations, certificates,
franchises, permits, licenses, authorizations, directions and requirements
of all federal, state, county, municipal and other governments,
departments, commissions, boards, courts, authorities, officials and
officers domestic or foreign, applicable to the Borrower or to the
Collateral, except those being contested in good faith.
Section 4.6 Payment of Debts. The Borrower will cause all debts and
liabilities of any character (including, without limitation, all debts and
liabilities for labor, material and equipment used or furnished for use on
the Mortgaged Property) incurred in the operation, maintenance and
development of the Collateral to be paid within ninety (90) days after
same becomes due. The Borrower may, however, delay paying or discharging
any such debts and liabilities so long as the validity thereof is
contested in good faith and by appropriate proceedings diligently
conducted and the Borrower has established adequate reserves therefor in
accordance with generally accepted accounting principles and so long as
the payment of same is not a condition to be met in order to maintain an
oil, gas and/or mineral lease in force.
Section 4.7 Operation of the Mortgaged Property. Whether or not the
Borrower is the operator of the Mortgaged Property, the Borrower will, at
the Borrower's own expense, (a) do all things necessary to keep unimpaired
the Borrower's rights in the Mortgaged Property (subject to any permitted
abandonment provisions hereinbelow), (b) use its best efforts to cause the
lands described in Exhibit "A" to be maintained, developed, protected
against drainage, and continuously operated for the production of
hydrocarbons in a good and workmanlike manner as would a prudent operator,
and in accordance with generally accepted practices and applicable
operating agreements, and (c) cause to be paid, promptly as and when due
and payable, all rentals and royalties payable in respect of the Mortgaged
Property, and all expenses incurred in or arising from the operation or
development of the Mortgaged Property. The Borrower will observe and
comply with all terms and provisions, express or implied, of the Mineral
Properties, and all agreements and contracts of any type relating to the
Mortgaged Property, in order to keep the same in full force and effect,
including, without limitation, maintenance of productive capacity of each
well or unit comprising the Mortgaged Property, and will not, without the
prior written consent, which consent shall not be unreasonably withheld,
of the Lender, surrender, abandon or release (or otherwise reduce its
rights under) any such lease, in whole or in part, so long as any well
situated thereon (whether or not such well is located on the Mineral
Properties), or located on any unit containing all or any part of such
leases, is capable (or is subject to being made capable through drilling,
reworking or other operations which it would be economically feasible to
conduct) of producing hydrocarbons in commercial quantities (as determined
without considering the effect of this Mortgage); provided, however that
the Borrower may, to the extent expressly required by the terms of any
such lease under a "Pugh clause" or similar provision, or to the extent
otherwise required by law, confirm to the lessor thereof that the lease
has by its terms terminated as to any specified portion thereof on which
no such well exists. Without the express prior written consent of the
Lender, which consent shall not be unreasonably withheld, Borrower will
not abandon or consent to the abandonment of any well producing from the
Mortgaged Property (or properties unitized therewith) so long as such well
is capable (or is subject to being made capable through drilling,
reworking or other operations which it would be commercially feasible to
conduct) of producing hydrocarbons in commercial quantities (as determined
without considering the effect of this Mortgage but considering the cost
of such drilling, reworking and other operations). The Borrower will not
without the express prior written consent of the Lender, which consent
shall not be unreasonably withheld, elect not to participate in a proposed
operation on the Mortgaged Property where the effects of such election
would be the forfeiture either temporarily (i.e., until a certain sum of
money is received out of the forfeited interest) or permanently of any
interest in the Mortgaged Property.
Section 4.8 Pooling and Unitization. The Borrower has the right, and
is hereby authorized, to pool or unitize all or any part of any tract of
land described in Exhibit "A", insofar as relates to the Mortgaged
Property, with adjacent lands, leaseholds and other interests, when, in
the reasonable judgment of the Borrower, it is necessary or advisable to
do so in order to form a drilling unit to facilitate the orderly
development of that part of the Mortgaged Property affected thereby, or to
comply with the requirements of any law or governmental order or
regulation relating to the spacing of wells or proration of the production
therefrom; provided, however, that the Hydrocarbons produced from any unit
so formed shall be allocated among the separately owned tracts or
interests comprising the unit in proportion to the respective surface
areas thereof; and provided further that the Borrower shall not be
entitled to form any such unit without the written consent of the Lender
(which consent shall not be unreasonably withheld) if the effect of such
formation would be to decrease the amount of Hydrocarbons which would be
subject to this Mortgage. Any unit so formed may relate to one or more
zones or horizons, and a unit formed for a particular zone or horizon need
not conform in area to any other unit relating to a different zone or
horizon, and a unit formed for the production of oil need not conform in
area with any unit formed for the production of gas. Immediately after
formation of any such unit, the Borrower shall furnish to the Lender a
true copy of the pooling agreement, declaration of pooling or other
instrument creating such unit, in such number of counterparts as the
Lender may reasonably request. The interest in any such unit attributable
to the Mortgaged Property (or any part thereof) included therein shall
become a part of the Mortgaged Property and shall be subject to the Lien
hereof in the same manner and with the same effect as though such unit and
the interest of the Borrower therein were specifically described in
Exhibit "A". The Borrower may enter into pooling or unitization
agreements not hereinabove authorized only with the prior written consent
of the Lender.
Section 4.9 Contracts. The Borrower will not enter into any
operating agreement, other than the Operating Agreement dated effective
May 1, 1995 entered into by and between Lender, Borrower and other
parties, or other Contract which materially adversely affects the
Collateral or the Mineral Properties, or which is not in the ordinary
course of business. The Borrower will promptly take all action necessary
to enforce or secure the observance or performance of any term, covenant,
agreement or condition to be observed or performed by third parties under
any Contract, or any part thereof, or to exercise any of its rights,
remedies, powers and privileges under any Contract, all in accordance with
the respective terms thereof. The Borrower will not do or permit anything
to be done to the Collateral that may violate the terms of any insurance
covering the Collateral or any part thereof.
Section 4.10 Condition of Equipment. The Borrower will maintain,
preserve and keep the Equipment at all times in thorough repair and good
working order and condition, and from time to time make all needful
repairs, renewals and additions so that its value and the Security
Interests shall at no time become impaired.
Section 4.11 Accounts Collection. The Borrower shall use its best
efforts to cause to be collected from its account debtors, as and when
due, any and all amounts owing under or on account of each Account
(including, without limitation, Accounts which are delinquent, such
Accounts to be collected in accordance with lawful collection procedures)
and shall apply forthwith upon receipt thereof all such amounts as are so
collected to the outstanding balance of such Account. Subject to the
rights of the Lender hereunder if an Event of Default shall have occurred
and be continuing, the Borrower may allow in the ordinary course of
business as adjustments to amounts owing under its Accounts an extension
or renewal of the time or times of payment, or settlement for less than
the total unpaid balance, which the Borrower finds appropriate in
accordance with sound business judgment in accordance with the Borrower's
ordinary course of business consistent with its historical collection
practices. The costs and expenses (including, without limitation,
attorneys' fees) of collection, whether incurred by the Borrower or the
Lender, shall be borne by the Borrower.
Section 4.12 Governmental Accounts. If the Collateral is or becomes
subject to the Federal Assignment of Claims Act, the Borrower will
immediately notify the Lender thereof in writing and execute all
instruments and take all steps required by the Lender to comply with that
act.
Section 4.13 Accounts Aging. The Borrower will from time to time at
the request of the Lender furnish the Lender with a schedule of the
Accounts which shall include the names and addresses of each account
debtor. The Lender shall also have the right to make test verification of
the Accounts or any portion thereof. The Borrower at its expense shall
furnish to the Lender from time to time upon request by the Lender a
listing and aging of all Accounts.
Section 4.14 Right of Inspection and Information. The Borrower will
permit any officer, employee or agent of the Lender to visit and inspect
the Collateral, examine the books of record and accounts of the Borrower,
take copies and extracts therefrom, and discuss the affairs, finances and
accounts of the Borrower with the Borrower's officers, accountants and
auditors, and the Borrower will furnish information concerning the
Collateral, including schedules of all internal and third party
information identifying the Collateral (such as, for example, lease and
well names and numbers assigned by the Borrower or the operator of any
Mineral Properties, division orders and payment names and numbers assigned
by purchasers of the Hydrocarbons, and internal identification names and
numbers used by the Borrower in accounting for revenues, costs and joint
interest transactions attributable to the Mineral Properties), all on
reasonable notice, at such reasonable times without hindrance or delay and
as often as the Lender may reasonably desire. The Borrower will furnish
to the Lender promptly upon request and in the form and content specified
by the Lender lists of purchasers of Hydrocarbons and other account
debtors, schedules of Equipment and other data concerning the Collateral
as the Lender may from time to time specify.
Section 4.15 Financial Statements and Reports. The Borrower will
furnish to the Lender promptly upon the request of the Lender, all regular
financial statements, reports, budgets and such other information
regarding the business and affairs and financial condition of the Borrower
as the Lender may reasonably request. All financial statements shall be
in such detail as the Lender may reasonably request and shall conform to
generally accepted accounting principles applied on a consistent basis,
except only for such changes in accounting principles or practice with
which the independent certified public accountants concur.
Section 4.16 Further Assurances. The Borrower will keep the Lien of
this Mortgage valid and unimpaired except for the Permitted Liens. The
Borrower will promptly (and in no event later than thirty (30) days after
written notice from the Lender is received) (i) correct any defect, error
or omission which may be discovered in the contents of this Mortgage or
any financing statement relating thereto or in the execution or
acknowledgment of this Mortgage or any financing statement; (ii) execute,
acknowledge, deliver and record such further instruments (including,
without limitation, further security agreements, financing statements,
continuation statements and assignments of accounts, contract rights,
general intangibles and proceeds) and do such further acts as may be
necessary, desirable or proper to carry out more effectively the purposes
of this Mortgage and to more fully identify and subject to the Liens
hereof any property intended to be covered hereby, including without
limitation any renewals, additions, substitutions, replacements or
accessions to the Collateral; and (iii) execute, acknowledge, deliver and
record any document or instrument (including specifically any financing
statement) and obtain any consents necessary, desirable or proper to
perfect, protect or preserve the Lien and Security Interests hereunder
against the rights or interests of third persons.
Section 4.17 Notice of Changes. The Borrower will not change its
name, identity, federal tax identification number or corporate structure
in any manner unless it shall have given the Lender at least thirty (30)
days' prior written notice thereof.
Section 4.18 Filing. The Borrower agrees that a carbon,
photographic, facsimile, photostatic or other reproduction of this
Mortgage or of a financing statement is sufficient as a financing
statement. This Mortgage may be effective as a financing statement filed
as a fixture filing with respect to all fixtures included within the
Collateral, and shall also be effective as the financing statement
covering minerals or the like (including oil and gas) and accounts subject
to subsection (5) of Section 9-103 of the UCC, as amended, and similar
provisions (if any) of the UCC as enacted in any other state where filing
may be appropriate. The mailing address of the Borrower and the address
of the Lender from which information concerning the Security Interests
evidenced hereunder may be obtained are the respective addresses of the
Borrower and the Lender set forth in Article 6. The Lender shall pay all
costs of or incidental to the recording or filing of this Mortgage and of
any financing, amendment, continuation, termination or other statements
concerning the Collateral.
Section 4.19 Collateral Indemnity. If the validity or priority of
this Mortgage (except with respect to the Permitted Liens) or any rights,
security interests or other interests created or evidenced hereby shall be
attacked, endangered or questioned or if any legal proceedings are
instituted with respect thereto, the Borrower will give prompt written
notice thereof to the Lender and at the Borrower's own cost and expense
will diligently endeavor to cure any defect that may be developed or
claimed, and will take all necessary and proper steps for the defense of
such legal proceedings, and the Lender (whether or not named as a party to
legal proceedings with respect thereto) is hereby authorized and empowered
to take such additional steps as in its judgment and discretion may be
necessary or proper for the defense of any such legal proceedings or the
protection of the validity or priority of this Mortgage and the rights,
security interests and other interests created or evidenced hereby, and
all expenses so incurred of every kind and character shall be considered
Advances as provided in Section 4.23 ("Advances by Lender") hereof, and
shall be a part of the Indebtedness.
Section 4.20 Environmental Indemnity. To the extent of its interests
in the Mineral Properties, the Borrower will defend, indemnify and hold
Lender and its directors, officers, agents and employees harmless from and
against all claims, demands, causes of action, liabilities, losses, costs
and expenses (including, without limitation, costs of suit, reasonable
attorneys' fees and fees of expert witnesses) arising from or in
connection with (i) the presence in, on or under or the removal from the
Collateral of any hazardous substances or solid wastes (as hereafter
defined), or any releases or discharges of any hazardous substances or
solid wastes on, under or from such property, (ii) any activity carried on
or undertaken on or off the Collateral, whether prior to or during the
term of this Mortgage, and whether by the Borrower or any predecessor in
title or any officers, employees, agents, contractors or subcontractors of
Borrower or any predecessor in title, or any third persons at any time
operating the Collateral or occupying or present on the Collateral, in
connection with the handling, use, generation, manufacture, treatment,
removal, storage, decontamination, clean-up, transport or disposal of any
hazardous substances or solid wastes at any time located or present on or
under the Collateral or involving the use or operation of the Collateral,
or (iii) any breach of any representation, warranty or covenant under the
terms of this Mortgage. The foregoing indemnity shall further apply to
any residual contamination on or under the Collateral, or affecting any
natural resources, and to any contamination of the Collateral or natural
resources arising in connection with the generation, use, handling,
storage, transport or disposal of any such hazardous substances or solid
wastes, and irrespective of whether any of such activities were or will be
undertaken in accordance with applicable laws, regulations, codes and
ordinances. The terms "hazardous substance" and "release" as used in this
Mortgage shall have the meanings specified in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986 (as
amended, "CERCLA"), and the terms "solid waste" and "disposal" (or
"disposed") shall have the meanings specified in the Resource Conservation
and Recovery Act of 1976, as amended by the Used Oil Recycling Act of
1980, the Solid Waste Disposal Act Amendments of 1980, and the Hazardous
and Solid Waste Amendments of 1984 (as amended, "RCRA"); provided, in the
event that the laws of the State of Louisiana establish a meaning for
"Hazardous Substance," "Release," "Solid Waste" or "Disposal" which is
broader than that specified in either CERCLA or RCRA, such broader meaning
shall apply. Without prejudice to the survival of any other agreements of
the Borrower hereunder, the provisions of this Section shall survive the
final payment of all Indebtedness and the termination of this Mortgage and
shall continue thereafter in full force and effect.
Section 4.21 Release of Collateral. The Lender may at any time and
without notice to the Borrower, release any part of the Collateral from
the effect of this Mortgage, or grant an extension or deferment of time
for the discharge of any obligation hereunder (or other Indebtedness),
without affecting the liability of the Borrower hereunder.
Section 4.22 Taxation of Mortgage. In the event that any
governmental authority shall impose any taxation of mortgages or the
indebtedness they secure, the Borrower agrees to pay such governmental
taxes, assessments or charges either to the governmental authority or to
the Lender, as provided by law.
Section 4.23 Advances by Lender. The Borrower authorizes the Lender
in the Lender's discretion to advance any sums necessary for the purpose
of paying (i) insurance premiums, (ii) taxes, forced contributions,
service charges, local assessments and governmental charges, (iii) any
Liens or encumbrances affecting the Collateral (whether superior or
subordinate to the Lien of this Mortgage) other than Permitted Liens, (iv)
necessary repairs and maintenance expenses or (v) any other amounts which
are covered by Section 4.16 ("Further Assurances") or which the Lender
deems necessary and appropriate to preserve the validity and ranking of
this Mortgage, to cure any Defaults or to prevent the occurrence of any
Default, or otherwise authorized by this Mortgage (collectively, the
"Advances") of whatever kind; provided, however, that nothing herein
contained shall be construed as making such Advances obligatory upon
Lender, or as making Lender liable for any loss, damage, or injury
resulting from the nonpayment thereof. The Borrower covenants and agrees
that within five (5) days after demand therefor by the Lender, the
Borrower will repay the Advances to the Lender, together with interest
thereon at the rate of twelve (12%) percent per annum from the date
incurred. All such Advances (and interest) shall be included in the
Indebtedness secured hereby, subject to the maximum amount of the
Indebtedness set forth above in Section 2.5 ("Maximum Amount").
ARTICLE 5.
Default and Remedies
Section 5.1 Events of Default. Any of the following events shall be
considered an "Event of Default" as that term is used herein:
(a) Principal and Interest Payments. The Borrower fails to make
payment of any principal or interest installment on the Indebtedness to
the Lender within fifteen (15) days after the same shall become due and
payable.
(b) Representations and Warranties. Any representation or warranty
made by the Borrower proves to have been incorrect in any material respect
as of the date thereof; or any representation, statement (including
financial statements), certificate or data furnished or made by the
Borrower (or any officer, accountant or attorney of the Borrower) under
this Mortgage, proves to have been untrue in any material adverse respect,
as of the date as of which the facts therein set forth were stated or
certified.
(c) Insurance. The Borrower fails to maintain at any time the
insurance required by this Mortgage.
(d) Alienation or Encumbrance of Collateral. The Borrower sells,
conveys or otherwise transfers or disposes of all or any portion of the
Collateral or grants any mortgage, security interest or other Lien (other
than Permitted Liens) affecting all or any portion of the Collateral, or
permits any judgment, Lien (other than Permitted Liens) or other
encumbrance against all or any portion of the Collateral.
(e) Covenants. The Borrower defaults in the observance or
performance of any of the covenants or agreements contained in this
Mortgage to be kept or performed by the Borrower (other than a default
under Subsections (a) through (d) hereof), and such default continues
unremedied for a period of 30 days after the notice thereof being given by
the Lender to the Borrower.
(f) Involuntary Bankruptcy or Receivership Proceedings. A
receiver, conservator, liquidator or trustee of the Borrower, or of any of
its property (including the Collateral), is appointed by order or decree
of any court or agency or supervisory authority having jurisdiction; or an
order for relief is entered against the Borrower under the Federal
Bankruptcy Code; or the Borrower is adjudicated bankrupt or insolvent; or
any material portion of the property (including the Collateral) of the
Borrower is sequestered by court order and such order remains in effect
for more than 60 days; or a petition is filed against the Borrower under
any state, reorganization, arrangement, insolvency, readjustment of debt,
dissolution, liquidation or receivership law of any jurisdiction, whether
now or hereafter in effect, and such petition is not dismissed within 60
days.
(g) Voluntary Petitions. The Borrower files a case under the
Federal Bankruptcy Code or seeking relief under any provision of any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
hereafter in effect, or consents to the filing of any case or petition
against it under any such law.
(h) Assignments for Benefit of Creditors. The Borrower makes an
assignment for the benefit of its creditors', or admits in writing its
inability to pay its debts generally as they become due, or consents to
the appointment of a receiver, trustee or liquidator of the Borrower or of
all or any part of its property (including the Collateral).
(i) Undischarged Judgments. Judgment for the payment of money in
excess of $1,000,000 (which is not covered by insurance) is rendered by
any court or other governmental body against the Borrower, and the
Borrower does not discharge the same or provide for its discharge in
accordance with its terms, or procure a stay of execution thereof within
30 days from the date of entry thereof, and within said 30-day period or
such longer period during which execution of such judgment shall have been
stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal while providing such reserves therefor as may be
required under generally accepted accounting principles.
(j) Attachment. A writ or warrant of executory process, fieri
facias, attachment or any similar process shall be issued by any court
against the Collateral, and such writ or warrant is not released or bonded
within 10 days after its entry.
(k) Condemnation. The Collateral, or any portion thereof, is
condemned or expropriated under power of eminent domain by any legally
constituted governmental authority.
Section 5.2 Remedies. (a) Upon the happening of any Event of Default
specified in the preceding Section (other than Subsections (f) or (g)
thereof), the Lender may by written notice to the Borrower declare the
entire principal amount of all Indebtedness then outstanding including
interest accrued thereon to be immediately due and payable without
presentment, demand, protest, notice of protest or dishonor or other
notice of default of any kind, all of which are hereby expressly waived by
the Borrower.
(b) Upon the happening of any Event of Default specified in
Subsections (f) or (g) of the preceding Section, the entire principal
amount of all obligations then outstanding including interest accrued
thereon shall, without notice or action by the Lender, be immediately due
and payable without presentment, demand, protest, notice of protest or
dishonor or other notice of default of any kind, all of which are hereby
expressly waived by the Borrower.
(c) Upon the occurrence of any Event of Default, the Lender may
take such action, without notice or demand, as it deems advisable to
protect and enforce its rights against the Borrower and in and to the
Collateral, including, but not limited to, the following actions, each of
which may be pursued concurrently or otherwise, at such time and in such
order as the Lender may determine, in its sole discretion, without
impairing or otherwise affecting the other rights and remedies of the
Lender: (i) institute proceedings for the complete foreclosure of this
Mortgage in which case the Collateral or any part thereof may be sold for
cash or upon credit in one or more portions; or (ii) to the extent
permitted and pursuant to the procedures provided by applicable law,
institute proceedings for the partial foreclosure of this Mortgage for the
portion of the Indebtedness then due and payable, subject to the
continuing Lien of this Mortgage for the balance of the Indebtedness not
then due; or (iii) institute an action, suit or proceeding in equity for
the specific performance of any covenant, condition or agreement contained
in this Mortgage; or (iv) apply for the appointment of a trustee,
receiver, liquidator or conservator of the Collateral, without regard for
the adequacy of the security for the Indebtedness and without regard for
the solvency of the Borrower or of any person, firm or other entity liable
for the payment of the Indebtedness; (v) exercise its rights under Section
2.3 ("Assignment") hereof; or (vi) pursue such other remedies as the
Lender may have under applicable law.
(d) The proceeds or avails of any sale made under or by virtue of
this Section, together with any other sums which then may be held by the
Lender under this Mortgage, whether under the provisions of this Section
or otherwise, shall be applied in such manner as the Lender, in its sole
discretion, shall determine.
(e) Upon any sale made under or by virtue of this Section, the
Lender may bid for and acquire the Collateral or any part thereof and in
lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the Indebtedness the net sales price after deducting
therefrom the expenses of the sale and the costs of the action and any
other sums which the Lender is authorized to deduct under this Mortgage.
Section 5.3 General Authority and Power of Attorney. The Borrower
hereby irrevocably appoints the Lender its agent and attorney in fact,
with full power of substitution, in the name of the Borrower or the
Lender, for the sole use and benefit of the Lender, but at the Borrower's
expense, to exercise, at any time and from time to time while an Event of
Default has occurred and is continuing, all or any of the following powers
with respect to all or any of the Collateral:
(i) to endorse the name of the Borrower upon any
check, draft or other instrument payable to the Borrower evidencing
payment upon any Accounts or General Intangible,
(ii) to demand, sue for, collect, receive and give
acquittance for any and all Accounts and other monies due or to become due
for or as Collateral or by virtue thereof,
(iii) to settle, compromise, compound, prosecute or
defend any action or proceeding with respect to any of the Collateral, and
(iv) to extend the time of payment of any or all of
the Collateral and to make any allowance and other adjustments with
reference thereto.
The aforesaid mandate and power of attorney, being coupled
with an interest, is irrevocable so long as any of the Indebtedness
remains outstanding.
Section 5.4 Accounts and Contracts. While an Event of Default
has occurred and is continuing, (i) the Borrower will make no material
change to the terms of any Account or Contract without the prior written
permission of the Lender, and (ii) the Borrower upon request of the Lender
will promptly notify (and the Borrower hereby authorizes the Lender so to
notify) each account debtor in respect of any Account or General
Intangible that such Collateral has been assigned to the Lender hereunder,
and that any payments due or to become due in respect of such Collateral
are to be made directly to the Lender or its designee.
Section 5.5 Sale. Upon the occurrence of an Event of Default,
the Lender may exercise all rights of a secured party under the UCC and
other applicable law (including the Uniform Commercial Code as in effect
in another applicable jurisdiction) and, in addition, the Lender may,
without being required to give any notice, except as herein provided or as
may be required by mandatory provisions of law, sell the Collateral or any
part thereof at public sale, for cash, upon credit or for future delivery,
and at such price or prices as the Lender may deem satisfactory. The
Lender may be the purchaser of any or all of the Collateral so sold at any
public sale. The Borrower will execute and deliver such documents and
take such other action as the Lender deems necessary or advisable in order
that any such sale may be made in compliance with law. Upon any such sale
the Lender shall have the right to deliver, assign and transfer to the
purchaser thereof the Collateral so sold. Each purchaser at any such sale
shall hold the Collateral so sold to it absolutely and free from any claim
or right of whatsoever kind and the Borrower, to the extent permitted by
law, hereby specifically waives all rights of appraisal which it has or
may have under any law now existing or hereafter adopted. The Borrower
agrees that ten (10) days' prior written notice of the time and place of
any sale or other intended disposition of any of the Collateral
constitutes "reasonable notification" within the meaning of Section
9-504(3) of the UCC. The notice (if any) of such sale shall state the
time and place fixed for such sale. Any such public sale shall be held at
such time or times within ordinary business hours and at such place or
places as the Lender may fix in the notice of such sale. At any such sale
the Collateral may be sold in one lot as an entirety or in separate
parcels, as the Lender may determine. The Lender shall not be obligated
to make any such sale pursuant to any such notice. The Lender may,
without notice or publication, adjourn any public sale or cause the same
to be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to
which the same may be so adjourned. In case of any sale of all or any
part of the Collateral on credit or for future delivery, the Collateral so
sold may be retained by the Lender until the selling price is paid by the
purchaser thereof, but the Lender shall not incur any liability in case of
the failure of such purchaser to take up and pay for the Collateral so
sold and, in case of any such failure, such Collateral may again be sold
upon like notice.
Section 5.6 Set-Off. Upon the occurrence of any Event of
Default, the Lender shall have the right to set-off any funds of the
Borrower in the possession of the Lender against any amounts then due by
the Borrower to the Lender pursuant to the Mortgage.
Section 5.7 Confession of Judgment. For purposes of
foreclosure under Louisiana executory process procedures, the Borrower
hereby acknowledges the Indebtedness and confesses judgment in favor of
Lender for the full amount of the Indebtedness.
Section 5.8 Expenses. The Borrower will pay all reasonable
expenses, including but not limited to reasonable attorneys' fees,
incurred in connection with the full protection and preservation of, and
foreclosure, collection or other realization of or on, the Collateral or
this Mortgage, or in connection with the enforcement of any of the
Borrower's obligations or the Lender's rights and remedies set forth
herein, whether or not suit or any foreclosure proceedings are filed. All
insurance expenses and all expenses of protecting, storing, warehousing,
appraising, preparing for sale, handling, maintaining and shipping the
Collateral, any and all excise, property, sales, and use taxes imposed by
any federal, state or local authority on any of the Collateral, all
expenses in respect of periodic appraisals and inspections of the
Collateral to the extent the same may be requested from time to time, and
all expenses in respect of the sale or other disposition thereof shall be
borne and paid by the Borrower. All such expenses shall be treated as
Advances as provided in Section 4.23 ("Advances by Lender") hereof and
thus included in the Indebtedness secured hereby.
Section 5.9 Keeper. In the event the Collateral, or any part
thereof, is seized as an incident to an action for the recognition or
enforcement of this Mortgage by executory process, ordinary process,
sequestration, writ of fieri facias or otherwise, the Borrower and the
Lender agree that the court issuing any such order shall, if petitioned
for by Lender, direct the applicable sheriff to appoint as a keeper of the
Collateral, the Lender or any agent designated by Lender or any person
named by the Lender at the time such seizure is effected. This
designation is pursuant to Louisiana Revised Statutes 9:5131 through 5135
and 9:5136 through 5140.2, as the same may be amended, and Lender shall be
entitled to all the rights and benefits afforded thereunder. It is hereby
agreed that the keeper shall be entitled to receive as compensation, in
excess of its reasonable costs and expenses incurred in the administration
or preservation of the Collateral, an amount equal to 3% of the gross
revenues of the Collateral, which shall be included as Indebtedness
secured by this Mortgage. The designation of keeper made herein shall not
be deemed to require Lender to provoke the appointment of such a keeper.
Section 5.10 Waivers. The Borrower waives in favor of the
Lender any and all homestead exemptions and other exemptions of seizure or
otherwise to which Borrower is or may be entitled under the constitution
and statutes of the State of Louisiana insofar as the Collateral is
concerned. The Borrower further waives: (a) the benefit of appraisement
as provided in Louisiana Code of Civil Procedure Articles 2332, 2336, 2723
and 2724, and all other laws conferring the same; (b) the demand and three
days' delay accorded by Louisiana Code of Civil Procedure Articles 2639
and 2721; (c) the notice of seizure required by Louisiana Code of Civil
Procedure Articles 2293 and 2721; (d) the three days' delay provided by
Louisiana Code of Civil Procedure Articles 2331 and 2722; and (e) the
benefit of the other provisions of Louisiana Code of Civil Procedure
Articles 2331, 2722 and 2723, not specifically mentioned above.
Section 5.11 Authentic Evidence. Any and all declarations of
facts made by authentic act before a notary public in the presence of two
witnesses by a person declaring that such facts lie within his knowledge,
shall constitute authentic evidence of such facts for the purpose of
executory process. The Borrower specifically agrees that such an
affidavit by a representative of the Lender as to the existence, amount,
terms and maturity of the Indebtedness and of a default thereunder shall
constitute authentic evidence of such facts for the purpose of executory
process.
Section 5.12 Assemble Collateral. For the purpose of
enforcing any and all rights and remedies under this Mortgage the Lender
may (i) require the Borrower to, and the Borrower agrees that it will, at
its expense and upon the request of the Lender, forthwith assemble all or
any part of the Collateral as directed by the Lender and make it available
at a place designated by the Lender which is, in its opinion, reasonably
convenient to the Lender and the Borrower, whether at the premises of the
Borrower or otherwise, and Lender shall be entitled to specific
performance of this obligation, (ii) to the extent permitted by applicable
law of this or any other state, enter, with or without process of law and
without breach of the peace, any premise where any of the Collateral is or
may be located, and without charge or liability to it seize and remove
such Collateral from such premises, (iii) have access to and use the
Borrower's books and records relating to the Collateral, and (iv) prior to
the disposition of the Collateral, store or transfer it without charge in
or by means of any storage or transportation facility owned or leased by
the Borrower, process, repair or recondition it or otherwise prepare it
for disposition in any manner and to the extent the Lender deems
appropriate and, in connection with such preparation and disposition, use
without charge any trademark, trade name, copyright, patent or technical
process used by the Borrower.
Section 5.13 Limitation on Duty of Lender. Beyond the
exercise of reasonable care in the custody thereof, the Lender shall have
no duty as to any Collateral in its possession or control or in the
possession or control of any agent or bailee or any income thereon. The
Lender shall be deemed to have exercised reasonable care in the custody of
the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which it accords its own property, and shall
not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the
act or omission of any warehouseman, carrier, forwarding agency, consignee
or other agent or bailee selected by the Lender in good faith.
Section 5.14 Appointment of Agent. At any time or times, in
order to comply with any legal requirement in any jurisdiction, the Lender
may appoint a bank or trust company or one or more other Persons with such
power and authority as may be necessary for the effectual operation of the
provisions hereof and may be specified in the instrument of appointment.
ARTICLE 6.
Miscellaneous
Section 6.1 Notices. Any notice or demand which, by provision
of this Mortgage, is required or permitted to be given or served to the
Borrower or the Lender shall be deemed to have been sufficiently given and
served for all purposes (if mailed) three calendar days after being
deposited, postage prepaid, in the United States Mail, or (if delivered by
express courier) one business day after being delivered to such courier,
or (if delivered in person) the same day as delivery, in each case if made
addressed to (i) the address of such party shown on page 1 hereof or
(ii) Borrower or Lender at such different address(es) as shall have been
designated by written notice actually received by Borrower or Lender, as
applicable at least ten (10) days in advance of the date upon which such
change of address shall be effective under this Section 6.1.
Section 6.2 Amendment. Neither this Mortgage nor any
provisions hereof may be changed, waived, discharged or terminated orally
or in any manner other than by an authentic instrument in writing signed
by the party against whom enforcement of the change, waiver, discharge or
termination is sought.
Section 6.3 Invalidity. In the event that any one or more of
the provisions contained in this Mortgage shall, for any reason, be held
invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of
this Mortgage.
Section 6.4 Waivers. No course of dealing on the part of the
Lender, its officers, employees, consultants or agents, nor any failure or
delay by the Lender with respect to exercising any of its rights, powers
or privileges under this Mortgage shall operate as a waiver thereof.
Section 6.5 Cumulative Rights. The rights and remedies of the
Lender under this Mortgage and the Collateral Documents shall be
cumulative, and the exercise or partial exercise of any such right or
remedy shall not preclude the exercise of any other right or remedy.
Section 6.6 Titles of Articles, Sections and Subsections. All
titles or headings to articles, sections, subsections or other divisions
of this Mortgage or the exhibits hereto are only for the convenience of
the parties and shall not be construed to have any effect or meaning with
respect to the other content of such articles, sections, subsections or
other divisions, such other content being controlling as to the agreement
between the parties hereto.
Section 6.7 Singular and Plural. Words used herein in the
singular, where the context so permits, shall be deemed to include the
plural and vice versa. The definitions of words in the singular herein
shall apply to such words when used in the plural where the context so
permits and vice versa.
Section 6.8 Termination. Upon full and final payment and
performance of the Indebtedness and the payment or redemption of the Note,
or upon Lender's acquisition of the Mineral Properties (other than by
reason of an Event of Default hereunder), this Mortgage shall terminate,
and the Lender shall pay to the Borrower all amounts then remaining in the
possession of the Lender from collections on or proceeds of the
Collateral. Upon request of the Borrower, the Lender shall execute and
deliver to the Borrower at the Borrower's expense such termination
statements as the Borrower may reasonably request to evidence such
termination.
Section 6.9 Successors and Assigns. (a) All covenants and
agreements contained by or on behalf of the Borrower in this Mortgage
shall bind its successors and assigns and shall inure to the benefit of
the Lender and its successors and assigns.
(b) This Mortgage is for the benefit of the Lender and for
such other Person or Persons as may from time to time become or be the
holder of the Note and the other Indebtedness, and this Mortgage shall be
transferrable and negotiable, with the same force and effect and to the
same extent as the Note may be transferrable, it being understood that,
upon the transfer or assignment by the Lender of the Note (to the extent
transfer is permitted thereby), the legal holder of such Note shall have
all of the rights granted to the Lender under this Mortgage.
(c) The Borrower hereby recognizes and agrees that the
Lender may, from time to time, one or more times, transfer all or any
portion of the Indebtedness to one or more third parties. Such transfers
may include, but not be limited to, sales of participation interests in
such Indebtedness in favor of one or more third party lenders. Upon any
transfer of all or any portion of the Indebtedness, the Lender may
transfer and deliver any or all of the Collateral to the transferee of
such Indebtedness and such Collateral shall secure any and all of the
Indebtedness in favor of such a transferee then existing and thereafter
arising, and after any such transfer has taken place, the Lender shall be
fully discharged from any and all future liability and responsibility to
the Borrower with respect to such Collateral, and the transferee
thereafter shall be vested with all the powers, rights and duties with
respect to such Collateral.
Section 6.10 Governing Law. This Mortgage is made under and
shall be construed in accordance with and governed by the laws of the
United States of America and the State of Louisiana.
Section 6.11 Certificates. The production of mortgage,
conveyance, tax research or other certificates is waived by consent, and
the Borrower and the Lender agree to hold me, Notary, harmless for failure
to procure and attach same.
Section 6.12 No Paraph. The notes and other written
obligations that comprise a part of the Indebtedness have not been
presented to me, Notary, for purposes of being paraphed herewith.
THUS DONE AND PASSED as of the day and in the month and year
hereinabove first written, in the presence of the undersigned witnesses
who hereunto sign their names with the Borrower and Lender and me, Notary,
after due reading of the whole.
WITNESSES: READING & BATES DEVELOPMENT CO.
_________________________ By:________________________________
Name:____________________ D. C. Toalson
(Please Print) President
_________________________ ENSERCH EXPLORATION, INC.
Name:____________________
(Please Print)
By:________________________________
R. L. Kincheloe
Senior Vice President
Offshore and International
_____________________________________________
Notary Public
My Commission Expires:_______________________
EXHIBIT 1
TO MORTGAGE AND SECURITY AGREEMENT
BY READING & BATES DEVELOPMENT CO.
The Borrower and the Lender hereby agree and affirm that this
Introduction to Description of Properties is an explanation of the
terminology, format and information contained in Exhibit "A" and that this
instrument shall be construed as a whole with reference to the entirety of
its provisions (including all Exhibits).
0.1 This instrument covers the Borrower's entire interest in
each of the mineral servitudes, mineral leases, mineral
royalties and other mineral rights described in Exhibit
A, as now owned or as hereafter acquired. The inclusion
of the Borrower's "Net Revenue Interest," "Working
Interest" and undivided leasehold interests, by the
listing of percentage, decimal or fractional numbers or
otherwise, as well as the inclusion of depth
limitations, spacing unit designations and agreements,
well names and well arabic numbers, are in some
instances for purposes of certain representations of the
Borrower contained in this instrument and are generally
for descriptive purposes. The inclusion (or the
inaccuracy thereof) of this information is not in any
way a limitation or restriction on the interest of the
Borrower being subjected to the lien and encumbrance of
this instrument. In the event that the Borrower
acquires additional undivided interests in some or all
of such mineral or leasehold rights, this Mortgage shall
automatically encumber such additions or increases to
the Borrower's interest in such mineral or leasehold
rights without need of further act or document.
0.2 References in Exhibit "A" to instruments on file in the
public records are made for all purposes. Unless
provided otherwise, all recording references in Exhibit
"A" are to the official real property records of the
parish or parishes in which the mortgaged property is
located and in which records of such documents are or in
the past have been customarily recorded, whether
Conveyance Records, Oil and Gas Records, Mineral Lease
Records, Oil and Gas Lease Records or other records.
0.3 A statement herein that a certain interest described
herein is subject to the terms of certain described or
referred to agreements, instruments or other matters
shall not operate to subject such interest to any such
agreement, instrument or other matter except to the
extent that such agreement, instrument or matter is
otherwise valid and presently subsisting nor shall such
statement be deemed to constitute a recognition by the
parties hereto that any such agreement, instrument or
other matter is valid and presently subsisting or
binding against the Lender.
EXHIBIT "A"
TO MORTGAGE AND SECURITY AGREEMENT BY
READING & BATES DEVELOPMENT CO.
PROPERTY DESCRIPTION
1. LEASE OCS-G 8504. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
June 1, 1986, by and between the United States of America, as
Lessor, and Placid Oil Company, et al., as Lessees, bearing Serial
No. OCS-G 8504 covering all of Block 209, Green Canyon, OCS Official
Protraction Diagram, NA 15-3.
Working Interest 13.333333%
Net Revenue Interest 11.616868%
2. LEASE OCS-G 7049. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
June 1, 1984, by and between the United States of America, as
Lessor, and Placid Oil Company, et al., as Lessees, bearing Serial
No. OCS-G 7049 covering all of Block 254, Green Canyon, OCS Official
Protraction Diagram, NA 15-3.
Working Interest 20.000000%
Net Revenue Interest 17.3506665%
3. LEASE OCS-G 8010. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as
Lessor, and Placid Oil Company, et al., as Lessees, bearing Serial
No. OCS-G 8010 covering all of Block 298, Green Canyon, OCS Official
Protraction Diagram, NA 15-3.
Working Interest 20.00000%
Net Revenue Interest 17.35066%
4. LEASE OCS-G 8012. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as
Lessor, and Placid Oil Company, et al., as Lessees, bearing Serial
No. OCS-G 8012 covering all of Block 342, Green Canyon, OCS Official
Protraction Diagram, NA 15-3.
Working Interest 20.00000%
Net Revenue Interest 17.35066%
5. LEASE OCS-G 8876. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
June 1, 1987, by and between the United States of America, as
Lessor, and Hunt Petroleum Corporation, et al., as Lessees, bearing
Serial No. OCS-G 8876 covering all of Block 297, Green Canyon, OCS
Official Protraction Diagram, NA 15-3.
Working Interest 20.000000%
Net Revenue Interest 16.833333%
6. LEASE OCS-G 13171. That certain Oil and Gas Lease of Submerged
Lands under the Outer Continental Shelf Lands Act made and effective
as of May 1, 1991, by and between the United States of America, as
Lessor, and Exxon Corporation, as Lessees, bearing Serial No. OCS-G
13171 covering all of Block 341, Green Canyon, OCS Official
Protraction Diagram, NA 15-3.
Working Interest 20.000000%
Net Revenue Interest 17.500000%
7. LEASE OCS-G 13696. That certain Oil and Gas Lease of Submerged
Lands under the Outer Continental Shelf Lands Act made and effective
as of July 1, 1992, by and between the United States of America, as
Lessor, and Exxon Corporation, as Lessees, bearing Serial No. OCS-G
13696 covering all of Block 210, Green Canyon, OCS Official
Protraction Diagram, NA 15-3.
Working Interest 20.000000%
Net Revenue Interest 17.500000%
8. LEASE OCS-G 8000. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as
Lessor, and Placid Oil Company, et al., as Lessees, bearing Serial
No. OCS-G 8000 covering all of Block 213, Green Canyon, OCS Official
Protraction Diagram, NA 15-3.
Working Interest 20.00000%
Net Revenue Interest 17.35066%
9. LEASE OCS-G 8006. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as
Lessor, and Placid Oil Company, et al., as Lessees, bearing Serial
No. OCS-G 8006 covering all of Block 258, Green Canyon, OCS Official
Protraction Diagram, NA 15-3.
Working Interest 20.00000%
Net Revenue Interest 17.35066%
10. LEASE OCS-G 8005. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as
Lessor, and Amerada Hess, et al., as Lessees, bearing Serial No.
OCS-G 8005 covering all of Block 253, Green Canyon, OCS Official
Protraction Diagram, NA 15-3.
Working Interest 20.000000%
Net Revenue Interest 16.500000%
1. WELLS:
WORKING REVENUE
INTEREST INTEREST
A. OCS-G 7049 #3 20.00000% 17.350665%
B. OCS-G 7049 #4 20.00000% 17.350665%
C. 0CS-G 7049 #4ST1 20.00000% 17.350665%
D. 0CS-G 7049 #5 20.00000% 17.350665%
2. TEMPLATE:
That certain three well drilling template acquired, inter alia, by
Seller for use in connection with the drilling of the OCS-G 7049 #5
Well.
EXHIBIT 10.125
OPERATING AGREEMENT
ALLEGHENY AREA
Green Canyon 254, et al
OUTER CONTINENTAL SHELF - GULF OF MEXICO
OFFSHORE LOUISIANA
ENSERCH EXPLORATION, INC.,
READING & BATES DEVELOPMENT CO.,
MOBIL OIL CORPORATION, AND
MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST INC.
October 17, 1995
- ----------------------------------------------------------------------------
TABLE OF CONTENTS
ARTICLE 1 CONTRACT APPLICATION . . . . . . . . . . . . . . . . . . . .
1.1 Application in General . . . . . . . . . . . . . . . . . . . . . .
1.2 Application to the Contract Area . . . . . . . . . . . . . . . . .
ARTICLE 2 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.1 Additional Testing, Coring, or Logging. . . . . . . . . . . . . . .
2.2 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.3 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.4 Annual Operating Plan . . . . . . . . . . . . . . . . . . . . . . .
2.5 Appraisal Operations . . . . . . . . . . . . . . . . . . . . . . .
2.6 Appraisal Well . . . . . . . . . . . . . . . . . . . . . . . . . .
2.7 Authorization for Expenditure (AFE) . . . . . . . . . . . . . . . .
2.8 Confidential Data . . . . . . . . . . . . . . . . . . . . . . . . .
2.9 Contract Area . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.10 Cost(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.11 Deepen or Deepening . . . . . . . . . . . . . . . . . . . . . . . .
2.12 Deeper Drilling . . . . . . . . . . . . . . . . . . . . . . . . . .
2.13 Designated Prospect(s) . . . . . . . . . . . . . . . . . . . . . .
2.14 Development Operations . . . . . . . . . . . . . . . . . . . . . .
2.15 Development Phase . . . . . . . . . . . . . . . . . . . . . . . . .
2.16 Development Plan . . . . . . . . . . . . . . . . . . . . . . . . .
2.17 Development Well . . . . . . . . . . . . . . . . . . . . . . . . .
2.18 Disproportionate Spending Settlement . . . . . . . . . . . . . . .
2.19 Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.20 Exploratory Operations . . . . . . . . . . . . . . . . . . . . . .
2.21 Exploratory Well . . . . . . . . . . . . . . . . . . . . . . . . .
2.22 Fabrication AFE . . . . . . . . . . . . . . . . . . . . . . . . . .
2.23 Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.24 Final Design AFEs . . . . . . . . . . . . . . . . . . . . . . . . .
2.25 General Matters . . . . . . . . . . . . . . . . . . . . . . . . . .
2.27 Hydrocarbon(s) . . . . . . . . . . . . . . . . . . . . . . . . . .
2.28 Initial Exploratory Well . . . . . . . . . . . . . . . . . . . . .
2.29 Integrated Project Team (IPT) . . . . . . . . . . . . . . . . . . .
2.30 Joint Account . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.31 Lease(s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.32 Non-Consent Operations . . . . . . . . . . . . . . . . . . . . . .
2.33 Non-Operating Party . . . . . . . . . . . . . . . . . . . . . . . .
2.34 Non-Participating Party . . . . . . . . . . . . . . . . . . . . . .
2.35 Non-Participating Party's Share . . . . . . . . . . . . . . . . . .
2.36 Objective Depth . . . . . . . . . . . . . . . . . . . . . . . . . .
2.37 Operator . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.38 Participating Interest. . . . . . . . . . . . . . . . . . . . . . .
2.39 Participating Party . . . . . . . . . . . . . . . . . . . . . . . .
2.40 Producible Reservoir . . . . . . . . . . . . . . . . . . . . . . .
2.41 Producible Well . . . . . . . . . . . . . . . . . . . . . . . . . .
2.42 Production System . . . . . . . . . . . . . . . . . . . . . . . . .
2.42.1 Subsea Production System . . . . . . . . . . . . . . . . .
2.42.2 Initial Production System . . . . . . . . . . . . . . . .
2.42.3 Subsequent Production System . . . . . . . . . . . . . . .
2.43 Sidetrack or Sidetracking . . . . . . . . . . . . . . . . . . . . .
2.44 Subsequent Exploratory, Appraisal or Development Operation . . . .
2.45 Well Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.46 Withdrawing Party . . . . . . . . . . . . . . . . . . . . . . . . .
2.47 Working Interest . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 3 EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.1 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 4 SELECTION OF OPERATOR . . . . . . . . . . . . . . . . . . . . .
4.1 Designation of the Operator . . . . . . . . . . . . . . . . . . . .
4.2 Substitute Operator . . . . . . . . . . . . . . . . . . . . . . . .
4.3 Resignation of Operator . . . . . . . . . . . . . . . . . . . . . .
4.4 Removal of Operator . . . . . . . . . . . . . . . . . . . . . . . .
4.4.1 Removal Upon Assignment . . . . . . . . . . . . . . . . . . .
4.4.2 Removal for Cause by Vote . . . . . . . . . . . . . . . . . .
4.5 Selection of Successor Operator . . . . . . . . . . . . . . . . . .
4.6 Effective Date of Resignation or Removal . . . . . . . . . . . . .
4.7 Delivery of Property . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 5 RIGHTS AND DUTIES OF OPERATOR . . . . . . . . . . . . . . . . .
5.1 Exclusive Right to Operate . . . . . . . . . . . . . . . . . . . .
5.2 Workmanlike Conduct . . . . . . . . . . . . . . . . . . . . . . . .
5.3 Drilling . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.4 Liens and Encumbrances . . . . . . . . . . . . . . . . . . . . . .
5.5 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.6 Reports to Government Agencies . . . . . . . . . . . . . . . . . .
5.7 Information to Participating Parties . . . . . . . . . . . . . . .
5.8 Completed Well Information . . . . . . . . . . . . . . . . . . . .
5.9 Information to Non-Participating Parties . . . . . . . . . . . . .
5.10 Cost Information . . . . . . . . . . . . . . . . . . . . . . . . .
5.11 Managing Production . . . . . . . . . . . . . . . . . . . . . . . .
5.11.1 Compensation . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 6 EXPENDITURES AND SECURITY RIGHTS . . . . . . . . . . . . . .
6.1 Basis of Charges to the Parties . . . . . . . . . . . . . . . . . .
6.2 Authorization for Expenditure and Supplemental AFE . . . . . . . .
6.2.1 Required Authorization . . . . . . . . . . . . . . . . . . .
6.2.2 AFE Overrun Notice . . . . . . . . . . . . . . . . . . . . .
6.2.3 Supplemental AFE for Cost Overruns for Wells . . . . . . . .
6.2.4 Supplemental AFE for Cost Overruns on Integrated Project Team
AFE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.2.5 Supplemental AFE for Cost Overruns on Final Design AFE . . .
6.2.6 Supplemental AFE for Cost Overruns on Fabrication AFE . . . .
6.2.7 Supplemental AFE for Cost Overruns on All Other AFEs . . . .
6.2.8 Supplemental AFE for Cost Overruns for All Supplemented AFEs
6.2.9 Further Operations During a Force Majeure . . . . . . . . . .
6.3 Security Provisions . . . . . . . . . . . . . . . . . . . . . . .
6.4 Financing Statement and Recording of this Agreement . . . . . . . .
6.5 Unpaid Charges . . . . . . . . . . . . . . . . . . . . . . . . . .
6.6 Contributions by Non-Delinquent Parties . . . . . . . . . . . . . .
6.7 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.8 Carved-out Interests . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 7 CONFIDENTIALITY OF DATA . . . . . . . . . . . . . . . . . . . .
7.1 Confidentiality Obligation . . . . . . . . . . . . . . . . . . . .
7.1.1 Exceptions to Confidentiality . . . . . . . . . . . . . . . .
7.1.2 Permitted Disclosures . . . . . . . . . . . . . . . . . . .
7.1.3 Limited Releases to Offshore Scout Association . . . . . . .
7.1.3.1 Well Location . . . . . . . . . . . . . . . . . . . .
7.1.3.2 Well Operations . . . . . . . . . . . . . . . . . . .
7.1.3.3 Well Completion Information . . . . . . . . . . . . .
7.1.4 Continuing Confidentiality Obligation . . . . . . . . . . .
7.2 Ownership of Confidential Data . . . . . . . . . . . . . . . . . .
7.2.1 Well Log and Data Trades . . . . . . . . . . . . . . . . . .
7.2.2 Ownership of Non-Consent Data . . . . . . . . . . . . . . . .
7.3 Access to the Lease and Rig . . . . . . . . . . . . . . . . . . . .
7.4 Development of Proprietary Information and/or Technology . . . . .
7.5 News Releases . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 8 VOTING, ELECTIONS, AND NOTICES . . . . . . . . . . . . . . . .
8.1 Overall Supervision of Business Affairs . . . . . . . . . . . . . .
8.1.1 General Matter Vote . . . . . . . . . . . . . . . . . . . . .
8.1.2 Elections . . . . . . . . . . . . . . . . . . . . . . . . . .
8.2 Voting Procedures on General Matters and Elections . . . . . . . .
8.2.1 Voting Interest . . . . . . . . . . . . . . . . . . . . . . .
8.2.2 Vote Required . . . . . . . . . . . . . . . . . . . . . . . .
8.2.3 Second Opportunity for an Election . . . . . . . . . . . . .
8.3 Response Time for General Matters and Elections . . . . . . . . . .
8.3.1 Well Operation Proposal . . . . . . . . . . . . . . . . . . .
8.3.2 Production System Construction . . . . . . . . . . . . . . .
8.3.3 Other AFE Related Operations . . . . . . . . . . . . . . . .
8.3.4 Other Proposals . . . . . . . . . . . . . . . . . . . . . . .
8.3.5 Failure to Respond . . . . . . . . . . . . . . . . . . . . .
8.3.6 Suspensions of Production . . . . . . . . . . . . . . . . . .
8.3.7 Standby Charges . . . . . . . . . . . . . . . . . . . . . . .
8.4 Meetings of the Parties . . . . . . . . . . . . . . . . . . . . . .
8.5 Designation of Representatives . . . . . . . . . . . . . . . . . .
8.6 Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.7 Giving and Responding to Notices . . . . . . . . . . . . . . . . .
8.8 Content of Notice . . . . . . . . . . . . . . . . . . . . . . . . .
8.9 Agent for Mobil Entities . . . . . . . . . . . . . . . . . . . . .
8.10 Votes by Affiliates . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 9 GEOPHYSICAL OPERATIONS . . . . . . . . . . . . . . . . . . . .
9.1 Geophysical Operations . . . . . . . . . . . . . . . . . . . . . .
9.1.1 Conduct of Proprietary Geophysical Operations . . . . . . . .
9.1.2 Group-Shoot and Speculative Seismic Surveys . . . . . . . . .
ARTICLE 10 EXPLORATORY OPERATIONS . . . . . . . . . . . . . . . . . . . .
10.1 Application . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.2 Proposal of Exploratory Operations . . . . . . . . . . . . . . . .
10.2.1 Well Plan's Minimum Specifics . . . . . . . . . . . . . . .
10.2.2 Pre-Spud Technical Meeting and Revision of Well Plan . . . .
10.2.3 Timely Operation . . . . . . . . . . . . . . . . . . . . . .
10.2.4 Exploratory Operations Costs . . . . . . . . . . . . . . . .
10.2.5 AFE Overruns and Substitute Well . . . . . . . . . . . . . .
10.3 Subsequent Exploratory Operations at Objective Depth . . . . . . .
10.3.1 Response to Operator's Proposals . . . . . . . . . . . . . .
10.3.2 Counterproposals . . . . . . . . . . . . . . . . . . . . . .
10.3.3 Approval of Subsequent Exploratory Operations by All Parties
10.3.4 Approval of Subsequent Exploratory Operations by Fewer Than
All Parties . . . . . . . . . . . . . . . . . . . . . . .
10.3.5 Subsequent Exploratory Operations If Not Approved . . . . .
10.4 Deeper Drilling . . . . . . . . . . . . . . . . . . . . . . . . .
10.5 Plugging and Abandoning Costs . . . . . . . . . . . . . . . . . . .
10.6 Conclusion of Exploratory Operations . . . . . . . . . . . . . . .
10.7 Subsurface Team . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 11 APPRAISAL OPERATIONS . . . . . . . . . . . . . . . . . . . . .
11.1 Proposal of Appraisal Operations . . . . . . . . . . . . . . . . .
11.1.1 Well Plan's Minimum Specifics . . . . . . . . . . . . . . .
11.1.2 Pre-Spud Technical Meeting and Revision of Well Plan . . . .
11.1.3 Timely Operation . . . . . . . . . . . . . . . . . . . . . .
11.1.4 AFE Overruns and Substitute Well . . . . . . . . . . . . . .
11.2 Subsequent Appraisal Operations at Objective Depth . . . . . . . .
11.2.1 Response to Operator's Proposals . . . . . . . . . . . . . .
11.2.2 Counterproposals . . . . . . . . . . . . . . . . . . . . . .
11.2.3 Approval of Subsequent Appraisal Operations by All Parties .
11.2.4 Approval of Subsequent Appraisal Operations by Fewer . . . .
Than All Parties . . . . . . . . . . . . . . . . . . . . .
11.2.5 Subsequent Appraisal Operations If Not Approved . . . . . .
11.3 Election by Non-Participating Parties in Deepening or
Sidetracking Appraisal Operations . . . . . . . . . . . . . . . . .
11.4 Deeper Drilling . . . . . . . . . . . . . . . . . . . . . . . . . .
11.4.1 Limited Participation in Deeper Drilling . . . . . . . . . .
11.4.2 Multiple Completion Alternatives Above and Below the Deepest
Producible Reservoir . . . . . . . . . . . . . . . . . . .
11.4.3 Completion Attempts At or Above the Deepest Producible
Reservoir . . . . . . . . . . . . . . . . . . . . . . . .
11.5 Plugging and Abandoning Costs . . . . . . . . . . . . . . . . . . .
ARTICLE 12 DEVELOPMENT PLAN . . . . . . . . . . . . . . . . . . . . . . .
12.1 Phased Development Plans . . . . . . . . . . . . . . . . . . . . .
12.2 Proposal of Integrated Project Team . . . . . . . . . . . . . . . .
12.3 Integrated Project Team Election . . . . . . . . . . . . . . . . .
12.4 Proposal of a Development Plan . . . . . . . . . . . . . . . . . .
12.4.1 Alternative Development Plans . . . . . . . . . . . . . . .
12.5 Content of the Development Plan . . . . . . . . . . . . . . . . . .
12.6 Approval of a Development Plan . . . . . . . . . . . . . . . . . .
12.6.1 Amended Approval Requirement for Development Plans . . . . .
12.7 Final Design AFE . . . . . . . . . . . . . . . . . . . . . . . . .
12.7.1 Response to Final Design AFE . . . . . . . . . . . . . . . .
12.8 Fabrication AFE . . . . . . . . . . . . . . . . . . . . . . . . . .
12.8.1 Response to Fabrication AFE . . . . . . . . . . . . . . . .
12.9 Minor Modifications and Revisions to Development Plans . . . . . .
12.9.1 Minor Modifications to Development Plans . . . . . . . . . .
12.9.2 Revisions to Development Plans . . . . . . . . . . . . . .
12.10 Major Modifications to Development Plans . . . . . . . . . . . . .
12.11 Supplemental AFE for Cost Overruns on Fabrication AFE . . . . . . .
12.12 Termination of a Development Plan . . . . . . . . . . . . . . . . .
12.13 Timely Operations for Initial Production Systems . . . . . . . . .
12.14 Expansion, Modification, or Repair of an Initial Production System
12.15 Subsequent Development Phases . . . . . . . . . . . . . . . . . . .
12.16 Access to Existing Facilities . . . . . . . . . . . . . . . . . . .
12.17 Non-Consent Operations in Subsequent Development Phases . . . . . .
12.18 Annual Operating Plan . . . . . . . . . . . . . . . . . . . . . . .
12.18.1 Development and Submission of the Annual Operating Plan . .
12.18.2 Review of the Annual Operating Plan . . . . . . . . . . . .
12.18.3 Content of Annual Operating Plan . . . . . . . . . . . . .
12.18.3.1 Capital Budget . . . . . . . . . . . . . . . .
12.18.3.2 Expense Budget . . . . . . . . . . . . . . . .
12.18.3.3 Operator Forecasts and Informational Items . .
12.18.4 Effect of the Annual Operating Plan . . . . . . . . . . . .
ARTICLE 13 DEVELOPMENT OPERATIONS . . . . . . . . . . . . . . . . . . . .
13.1 Proposal of Development Operations . . . . . . . . . . . . . . . .
13.1.1 Operator's Counterproposal . . . . . . . . . . . . . . . . .
13.1.2 AFE Overruns and Substitute Wells . . . . . . . . . . . . .
13.1.3 Timely Operations . . . . . . . . . . . . . . . . . . . . .
13.2 Subsequent Development Operations at Objective Depth . . . . . . .
13.2.1 Response to Operator's Proposal . . . . . . . . . . . . . .
13.2.2 Counterproposals . . . . . . . . . . . . . . . . . . . . . .
13.2.3 Approval of Subsequent Development Operations by All Parties
13.2.4 Approval of Subsequent Development Operations as a General
Matter by Fewer Than All Parties . . . . . . . . . . . . .
13.3 Election by Non-Participating Parties in Deepening or Sidetracking
Operations . . . . . . . . . . . . . . . . . . . . . . . . .
13.4 Deeper Drilling . . . . . . . . . . . . . . . . . . . . . . . . . .
13.4.1 Limited Participation in Deeper Drilling . . . . . . . . . .
13.4.2 Multiple Completion Alternatives Above and Below the Deepest
Producible Reservoir . . . . . . . . . . . . . . . . . . .
13.4.3 Completion Attempts At or Above the Deepest Producible
Reservoir . . . . . . . . . . . . . . . . . . . . . . . .
13.5 Plugging and Abandoning Costs . . . . . . . . . . . . . . . . . . .
ARTICLE 14 USE OF/AND ADDITIONAL FACILITIES AND GATHERING SYSTEMS . . . .
14.1 Approval of Additional Facilities . . . . . . . . . . . . . . . . .
14.2 Expansion, Modification or Repair of an Existing Production System
14.3 Use of Production System Located on a Designated Prospect . . . . .
14.4 Approval of Additional Facilities on a Designated Prospect . . . .
14.5 Contract Area Production . . . . . . . . . . . . . . . . . . . . .
ARTICLE 15 DISPOSITION OF PRODUCTION . . . . . . . . . . . . . . . . . .
15.1 Facilities to Take in Kind . . . . . . . . . . . . . . . . . . . .
15.2 Duty to Take in Kind . . . . . . . . . . . . . . . . . . . . . . .
15.3 Failure to Take in Kind . . . . . . . . . . . . . . . . . . . . . .
15.3.1 Failure to Take Oil . . . . . . . . . . . . . . . . . . . .
15.3.2 Failure to Take Gas . . . . . . . . . . . . . . . . . . . .
15.3.3 Operator's Disposition of Oil for Non-Taking Party . . . . .
15.3.4 Operator's Purchase of Oil of Non-Taking Party . . . . . . .
15.3.5 No Obligation to Market Share . . . . . . . . . . . . . . .
15.4 Expenses of Delivery in Kind . . . . . . . . . . . . . . . . . . .
ARTICLE 16 NON-CONSENT OPERATIONS . . . . . . . . . . . . . . . . . . .
16.1 Conduct of Non-Consent Operations . . . . . . . . . . . . . . . . .
16.1.1 Indemnity for Non-Consent Operations . . . . . . . . . . . .
16.1.2 Cost Information . . . . . . . . . . . . . . . . . . . . . .
16.1.3 Non-Consent Operations in Producible Well . . . . . . . . .
16.1.4 Non-Consent Operations in Producible Reservoirs . . . . . .
16.1.5 Multiple Completions . . . . . . . . . . . . . . . . . . . .
16.2 Acreage Forfeiture Provisions . . . . . . . . . . . . . . . . . . .
16.2.1 Exploratory Operations . . . . . . . . . . . . . . . . . .
16.2.2 Initial Production System . . . . . . . . . . . . . . . . .
16.2.3 Costs of Prior Operations . . . . . . . . . . . . . . . . .
16.3 Notices and Orders . . . . . . . . . . . . . . . . . . . . . . . .
16.4 Non-Consent Operations to Maintain a Designated Prospect . . . . .
16.4.1 Acreage Forfeiture in the Entire Designated Prospect . . . .
16.4.2 Acreage Forfeiture in a Portion of the Designated Prospect
16.4.3 Limitations on Acreage Forfeiture . . . . . . . . . . . . .
16.5 Percentage Recoupment for Non-Consent Operations . . . . . . . . .
16.5.1 Non-Consent Subsequent Exploratory Operations . . . . . . .
16.5.2 Non-Consent Appraisal Operations . . . . . . . . . . . . . .
16.5.3 Non-Consent Geophysical Operations, Integrated Project Team
and/or Final Design AFE . . . . . . . . . . . . . . . . .
16.5.4 Non-Consent Development Operations . . . . . . . . . . . . .
16.5.5 Non-Consent Subsequent Production System and Facilities . .
16.5.6 Additional Production Recoupment . . . . . . . . . . . . . .
16.5.7 Recoupment From Hydrocarbon Production . . . . . . . . . . .
16.6 Reversion of Interests to Non-Participating Party . . . . . . . . .
16.6.1 Dry Hole Reversion . . . . . . . . . . . . . . . . . . . . .
16.6.2 Deepening a Non-Consent Well . . . . . . . . . . . . . . . .
16.7 Operations From a Subsequent Non-Consent Production System . . . .
16.8 Allocation of Production System Costs to Non-Consent Operations . .
16.8.1 Investment Charges . . . . . . . . . . . . . . . . . . . . .
16.8.2 Operating and Maintenance Charges . . . . . . . . . . . . .
16.8.3 Payments . . . . . . . . . . . . . . . . . . . . . . . . . .
16.9 Underinvestment of Costs . . . . . . . . . . . . . . . . . . . . .
16.9.1 Settlement of Underinvestments . . . . . . . . . . . . . . .
16.9.2 Cash Settlement of Underinvestment . . . . . . . . . . . .
ARTICLE 17 WITHDRAWAL . . . . . . . . . . . . . . . . . . . . . . . . . .
17.1 Withdrawal. . . . . . . . . . . . . . . . . . . . . . . . . . . .
17.2 Limitations on Withdrawal . . . . . . . . . . . . . . . . . . . . .
17.2.1 During an Emergency . . . . . . . . . . . . . . . . . . . .
17.2.2 Current Operations and Voting . . . . . . . . . . . . . . .
17.2.3 Prior Expenses . . . . . . . . . . . . . . . . . . . . . . .
17.2.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 18 ABANDONMENT AND SALVAGE . . . . . . . . . . . . . . . . . . .
18.1 Abandonment of Wells . . . . . . . . . . . . . . . . . . . . . . .
18.2 Facilities and Platform Salvage and Removal Costs: . . . . . . . .
18.3 Approval Not Required . . . . . . . . . . . . . . . . . . . . . . .
18.4 Abandonment Operations Required by Governmental Authority . . . . .
ARTICLE 19 RENTALS, ROYALTIES AND MINIMUM ROYALTIES . . . . . . . . . . .
19.1 Overriding Royalties and Burdens on Production . . . . . . . . . .
19.1.1 Subsequent Creation of Overriding Royalty . . . . . . . . .
19.1.2 Subordination of Overriding Royalties . . . . . . . . . . .
19.2 Payment of Rentals and Royalties . . . . . . . . . . . . . . . . .
19.2.1 Non-Participation in Payments . . . . . . . . . . . . . . .
19.2.2 Royalty Payments . . . . . . . . . . . . . . . . . . . . . .
19.2.3 Federal Environmental Tax . . . . . . . . . . . . . . . . .
ARTICLE 20 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20.1 Internal Revenue Provision: . . . . . . . . . . . . . . . . . . . .
20.2 Other Taxes and Assessments . . . . . . . . . . . . . . . . . . . .
20.2.1 Property Taxes . . . . . . . . . . . . . . . . . . . . . . .
20.2.2 Production and Severance Taxes . . . . . . . . . . . . . . .
ARTICLE 21 INSURANCE AND BONDS . . . . . . . . . . . . . . . . . . . . .
21.1 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21.2 Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 22 LIABILITY, CLAIMS, LAWSUITS AND ALTERNATE DISPUTE RESOLUTION .
22.1 Individual Obligations . . . . . . . . . . . . . . . . . . . . . .
22.2 Notice of Claim or Lawsuit . . . . . . . . . . . . . . . . . . . .
22.3 Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22.4 Defense of Claims and Lawsuits . . . . . . . . . . . . . . . . . .
22.5 Liability for Damages . . . . . . . . . . . . . . . . . . . . . . .
22.6 Indemnification for Non-Consent Operations . . . . . . . . . . . .
22.7 Damage to Reservoir, Loss of Reserves and Profits . . . . . . . . .
22.8 Non-Essential Personnel . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 23 FARM-INS AND CONTRIBUTIONS . . . . . . . . . . . . . . . . . .
23.1 Contributions From Third Parties . . . . . . . . . . . . . . . . .
23.1.1 Cash Contributions . . . . . . . . . . . . . . . . . . . .
23.1.2 Acreage Contributions . . . . . . . . . . . . . . . . . . .
23.1.3 Data Contributions . . . . . . . . . . . . . . . . . . . .
23.2 Restricted Bidding . . . . . . . . . . . . . . . . . . . . . . . .
23.3 Area of Mutual Interst . . . . . . . . . . . . . . . . . . . . . .
23.3.1 Notification Required . . . . . . . . . . . . . . . . . . .
23.3.2 Right of Participation . . . . . . . . . . . . . . . . . . .
23.3.3 Election Period If Operations Are Not Required . . . . . . .
23.3.4 Election Period If Operations Are Required . . . . . . . . .
23.3.5 Assignments . . . . . . . . . . . . . . . . . . . . . . . .
23.3.6 Operating Agreement . . . . . . . . . . . . . . . . . . . .
23.3.7 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23.3.8 Conflicting Agreements . . . . . . . . . . . . . . . . . . .
23.3.9 Bidding Agreement . . . . . . . . . . . . . . . . . . . . .
ARTICLE 24SUCCESSORS, ASSIGNS, AND SALE OF INTEREST . . . . . . . . . . . .
24.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . .
24.2 Effective Date of Transfer . . . . . . . . . . . . . . . . . . . .
24.3 Transferee Bound . . . . . . . . . . . . . . . . . . . . . . . . .
24.4 Assignments and Transfers of Working Interests . . . . . . . . . .
24.4.1 Exceptions to Prior Written Notice . . . . . . . . . . . . .
24.4.2 Effective Date of Assignments . . . . . . . . . . . . . . .
24.4.3 Minimum Transfer of Interest . . . . . . . . . . . . . . .
24.4.4 Form of Assignments . . . . . . . . . . . . . . . . . . . .
24.4.5 Limited Warranty. . . . . . . . . . . . . . . . . . . . . .
24.5 Preferential Right to Purchase . . . . . . . . . . . . . . . . . .
24.5.1 Notice of Proposed Transaction . . . . . . . . . . . . . . .
24.5.2 Exercise of Preferential Right to Purchase . . . . . . . . .
24.5.3 Transactions Not Affected by the Preferential Right to
Purchase . . . . . . . . . . . . . . . . . . . . . . . . .
24.5.4 Completion of the Transaction . . . . . . . . . . . . . . .
24.5.5 Special Circumstances Preferential Rights toPurchase . . . .
ARTICLE 25 FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . .
25.1 Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . .
ARTICLE 26 ADMINISTRATIVE PROVISIONS . . . . . . . . . . . . . . . . . .
26.1 Term of Agreement . . . . . . . . . . . . . . . . . . . . . . . . .
26.2 Time Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26.3 Waiver of Right to Partition . . . . . . . . . . . . . . . . . . .
26.4 Compliance With Laws and Regulations . . . . . . . . . . . . . . .
26.4.1 Applicable Law . . . . . . . . . . . . . . . . . . . . . . .
26.4.2 Severance of Invalid Provisions . . . . . . . . . . . . . .
26.4.3 Fair and Equal Employment . . . . . . . . . . . . . . . . .
26.5 Construction and Interpretation of This Agreement . . . . . . . . .
26.5.1 Headings for Convenience . . . . . . . . . . . . . . . . . .
26.5.2 Gender and Number . . . . . . . . . . . . . . . . . . . . .
26.5.3 Independent Representation . . . . . . . . . . . . . . . . .
26.6 Integrated Agreement . . . . . . . . . . . . . . . . . . . . . . .
26.7 Execution of Documents . . . . . . . . . . . . . . . . . . . . . .
26.7.1 Binding Effect . . . . . . . . . . . . . . . . . . . . . . .
26.7.2 Corporate Authority . . . . . . . . . . . . . . . . . . . .
26.7.3 Further Assurances . . . . . . . . . . . . . . . . . . . . .
26.7.4 Multiple Counterparts . . . . . . . . . . . . . . . . . . .
- -----------------------------------------------------------------------------
OPERATING AGREEMENT
ALLEGHENY AREA
OUTER CONTINENTAL SHELF GULF OF MEXICO
OFFSHORE LOUISIANA
THIS AGREEMENT is made effective as of the 1st day of May, 1995, by
and between ENSERCH EXPLORATION, INC., READING & BATES DEVELOPMENT CO.,
MOBIL OIL CORPORATION AND MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST
INC., the signers hereof, herein referred to collectively as "Parties" and
individually as "Party."
WHEREAS, the Parties are co-owners of one or more of the OCS oil and
gas Leases, identified in Exhibit "A-2" (Description of Leases) and desire
to provide for the sharing of Costs, risks and benefits in the
exploration, development, appraisal, and operation of these Leases lying
within the Contract Area for the production of Hydrocarbons.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises exchanged and contained within this Agreement, the Parties agree
to explore, appraise, develop and operate the Leases in the Contract Area
according to the following provisions:
ARTICLE 1
CONTRACT APPLICATION
1.1 Application in General: This Agreement applies to the exploration,
appraisal, development and operation of the Leases in the Contract
Area for the production of Hydrocarbons therefrom.
1.2 Application to the Contract Area: This Agreement and all of its
Exhibits shall apply to the entire Contract Area and shall be deemed
a separate agreement as to each of the Designated Prospects as
defined in Article 2 below. If an MMS approved unit is formed
comprising any of the Leases herein, each of the Parties shall use
its best efforts to enter into a unit operating agreement containing
the same terms and provisions as this Agreement. Regardless of
which Leases are contained in any approved unit, if at all possible,
the new unit operating agreement shall continue to be deemed a
separate agreement as to each Designated Prospect. All of the
rights and obligations in and under the Lease(s) comprising each of
the Designated Prospects, and all property and the right to produce
Hydrocarbons from each of the Designated Prospects shall be owned by
the Parties in accordance with and subject to the terms and
provisions of this Agreement.
ARTICLE 2
DEFINITIONS
As used in this Agreement (or in the Exhibits attached hereto), the
initially capitalized terms listed below shall have the following
meanings:
2.1 Additional Testing, Coring, or Logging: shall mean any testing
(excluding production testing), coring or logging which is in
addition to that approved by virtue of any previously approved AFE.
2.2 Affiliate: shall mean any corporation, limited liability company or
partnership (including a limited partnership) or other entity owned
or controlled by a Party to this Agreement. The term "Affiliate" of
a Party includes any parent corporation, partnership or other entity
that directly or indirectly owns or controls fifty percent (50%) or
more of the outstanding stock (or other interests) having the right
to vote for directors of a Party to this Agreement, and also
includes any other corporation, partnership or other entity in which
the parent corporation of a Party directly or indirectly owns or
controls fifty (50%) of the voting stock (or other interests) in the
other corporation, partnership or other entity.
- Ownership or control by a Party is deemed to exist if a Party to
this Agreement directly or indirectly owns or controls fifty
percent (50%) or more of the outstanding stock of the corporation
having the right to vote for directors of the corporation or
fifty percent (50%) or more of the interests in the partnership
or other entity.
- The stock (or interests in a partnership or other entity) owned
or controlled by a Party shall include all stock (or other
interests) directly or indirectly owned or controlled by any
other corporation, partnership or other entity owned or
controlled by a Party to this Agreement.
2.3 Agreement: shall mean this ALLEGHENY AREA Operating Agreement,
together with its attached Exhibits set out in Article 3.1 hereof.
2.4 Annual Operating Plan: shall mean the operational plan and estimate
of Costs for operations in the next ensuing calendar year as
described in Article 12.18 (Annual Operating Plan). This is not the
Unit Operating Plan as required in Article IX of the Green Canyon
254 Unit Agreement.
2.5 Appraisal Operations: shall mean all operations conducted within a
Designated Prospect subsequent to Exploratory Operations and
proposed pursuant to Article 11.0 (Appraisal Operations). The terms
Appraisal Operations and Appraisal Well are interchangeable
throughout this Agreement unless the context requires otherwise.
2.6 Appraisal Well: shall mean any well proposed and drilled as an
Appraisal Operation.
2.7 Authorization for Expenditure (AFE): shall mean any written
proposal in sufficient detail as required in Article 8.8 (Content of
Notice) made by a Party for the purpose of describing an operation
being proposed and estimating the Costs to be incurred. The AFE,
when executed by a Party, evidences that Party's Election to
participate in the proposed operation and grants the Operator the
authority to commit or expend funds, pursuant to this Agreement, for
the account of the Participating Parties. Any AFE which proposes
more than one operation shall be considered a separate AFE as to
each operation only for those operations for which Parties are
permitted separate Elections under the terms of this Agreement.
2.8 Confidential Data: shall mean all proprietary geophysical,
geological, geochemical, drilling or engineering data owned or
developed by the Parties relating to operations conducted within the
Contract Area including data owned or developed by any Party prior
to the effective date of this Agreement. The term shall also
include (but may not be limited to):
- certain commercial, contractual or financial information;
- analyses, compilations, maps, models, interpretations or other
documents that reflect or incorporate Confidential Data;
- both originals and copies of geological and geophysical data, and
well logs; and
- all other subsurface, seismic and related data acquired or
derived from operations conducted pursuant to this Agreement.
The provisions of this Agreement with respect to Confidential Data
shall not be applicable to "Confidential Information" as that term
is defined in Exhibit "G" (Integrated Project Team and Technology
Sharing).
2.9 Contract Area: shall mean the OCS Leases described in Exhibit "A-2"
(Description of Leases) which are graphically depicted in Exhibit
"A-1" (Contract Area and Designated Prospect Outlines) as to all
depths.
2.10 Cost(s): shall mean the monetary amount of all expenses incurred by
the Operator and the Participating Parties for (or on account of)
any and all operations conducted pursuant to this Agreement. The
terms expenses , expenditures , and Costs may be used
interchangeably in this Agreement.
2.11 Deepen or Deepening: shall mean any operation to drill an existing
well (including sidetracking a well) deeper than the stratigraphic
equivalent of the deepest formation previously authorized to be
encountered in such well.
2.12 Deeper Drilling: shall mean the drilling of a well below the
deepest Producible Reservoir penetrated by a Producible Well within
the same Designated Prospect.
2.13 Designated Prospect(s): shall mean those Leases or portions
thereof, grouped as the prospect areas described in Exhibit "A-1"
(Contract Area and Designated Prospect Outlines) attached hereto.
The Parties intend that the boundaries of the Designated Prospects
shall each cover as large an area as is practical using sound
geological and geophysical principles. The Designated Prospect areas
shall be periodically reviewed by the Parties, and, based upon
drilling results and/or other information obtained, may be amended
by the unanimous agreement of the Parties during such review.
2.14 Development Operations: shall mean all operations conducted
pursuant to a Development Plan.
2.15 Development Phase: shall mean Development Operations associated
with the installation of a Production System within the Designated
Prospect.
2.16 Development Plan: shall mean the plan for installing a Production
System and developing and producing Hydrocarbons from the Designated
Prospect as described in Article 12 (Development Plan). This is not
the Development Plan as required by the MMS under 30 CFR 250.34
Section (a) nor the DOCD required under 30 CFR 250.34 Section
(d)(1).
2.17 Development Well: shall mean any well proposed within a Designated
Prospect subsequent to the approval of a Development Plan for such
Designated Prospect.
2.18 Disproportionate Spending Settlement: shall mean the financial
settlement of all or a portion of the percentage recoupment by a
Non-Participating Party paying a disproportionate amount of Costs in
the next ensuing operation in which the Non-Participating Party
makes an Election to participate.
2.19 Election: shall mean either: (i) a written decision by a Party
either to participate or to become a Non-Participating Party in a
proposed operation (including the AFE associated with the operation)
or (ii) a failure of a Party to respond within the time limits set
out in Article 8 (Voting, Elections, and Notices) or elsewhere as
provided herein. An Election to participate is evidenced by a
Party's execution of the AFE. An Election not to participate
(become a Non-Participating Party) is evidenced either by a Party's
written response against a proposal or such Party's failure to
timely execute the AFE within the time limits set out in Article 8,
or elsewhere herein, as applicable.
2.20 Exploratory Operations: shall mean all operations (including any
subsequent Exploratory Operation) conducted by one or more Parties
in the drilling, testing and completing of the first well (including
a substitute well for such well) in a Designated Prospect. With
respect to the Green Canyon 254 Designated Prospect, the Enserch
Exploration, Inc. Green Canyon 254 OCS-G 7049 #5 Well shall be
deemed an Exploratory Operation.
2.21 Exploratory Well: shall mean any well proposed and drilled as an
Exploratory Operation by one or more of the Parties hereunder. The
terms Exploratory Operations and Exploratory Well are
interchangeable in this Agreement unless the context requires
otherwise.
2.22 Fabrication AFE: shall mean the individual AFEs as described in
Article 12.8 (Fabrication AFE) collectively submitted pursuant to an
approved Development Plan for the procurement, fabrication,
construction and installation of a Production System.
2.23 Facilities: shall mean all production processing and handling
equipment beyond the wellhead connections installed for the benefit
of a Designated Prospect(s) to handle or service Hydrocarbon
production from such Designated Prospect(s). Facilities also
include (but are not limited to) the flowlines and gathering lines
that transport the Hydrocarbons from the wellhead to the processing
and treating equipment but exclude pipelines used to move
Hydrocarbons to shore.
2.24 Final Design AFEs: shall mean the individual detailed design AFEs,
collectively submitted pursuant to an approved Development Plan
pursuant to Article 12.5 (Content of the Development Plan).
2.25 General Matters: shall mean any matter decided by a vote of the
Parties in accordance with Article 8.2 (Voting Procedures on General
Matters and Elections). A proposal as a General Matter may or may
not include an AFE. If the nature of the proposal requires that an
AFE be submitted with the proposal, an affirmative vote for such
proposal shall be evidenced by a Party s execution of the AFE for
the proposal.
2.26 Geophysical Operations: shall mean all operations associated with
the acquisition of geophysical data over any part of the Contract
Area pursuant to Article 9 (Geophysical Operations).
2.27 Hydrocarbon(s): shall mean the oil and gas and associated liquid
and gaseous by-products which may be produced from a wellbore
located on a Designated Prospect.
2.28 Initial Exploratory Well: Deleted.
2.29 Integrated Project Team (IPT): shall mean the group of management,
supervisory, technical, and support personnel from the Parties
assigned to assist the Operator with preparing a Development Plan
for each Designated Prospect and for the planning, design,
engineering, and installation of a Production System for each
Designated Prospect as further provided for in Exhibit "G"
(Integrated Project Team and Technology Sharing). The IPT shall be
formed pursuant to Article 12 (Development Plan).
2.30 Joint Account: shall mean the account maintained by the Operator
showing the charges paid and credits received in the conduct of the
operations hereunder and which are to be shared by the Parties as
provided in this Agreement.
2.31 Lease(s): shall mean each of the OCS federal oil and gas Leases (or
portion thereof) identified on Exhibits "A-1" (Contract Area and
Designated Prospect Outlines) and "A-2" (Description of Leases)
attached hereto.
2.32 Non-Consent Operations: shall mean Exploratory Operations,
Appraisal Operations, Development Operations or other operations or
matters for which an AFE is approved and, for which one or more
Parties, having the contractual right to do so, makes an Election or
is deemed to have made an Election not to participate in the
proposed operation or matter and where the Participating Parties
proceed to conduct the operation at their sole Cost, risk, and
benefit pursuant to provisions of Article 16 (Non-Consent
Operations).
2.33 Non-Operating Party: shall mean for each Designated Prospect any
Party to this Agreement other than the Operator (or a substitute
Operator).
2.34 Non-Participating Party: shall mean any Party to this Agreement
who, having the contractual right to do so, makes an Election or is
deemed to have made an Election not to participate in the proposed
operation and who is subject to the provisions of Article 16 (Non-
Consent Operations).
2.35 Non-Participating Party's Share: shall mean the share of Working
Interest, Costs and rights to produce Hydrocarbons that a Non-
Participating Party would have assumed or received if all Parties
had made an Election to participate in the proposed operation.
2.36 Objective Depth: shall mean, for any well, the shallower of the
total footage to be drilled (as measured in true vertical depth) or
the penetration by the drill bit of a depth sufficient to test to
the stratigraphic equivalent of the base of the deepest target
formation or interval. Said depth, formation or interval (together
with a bottomhole location) shall be set forth in the proposed Well
Plan and AFE.
2.37 Operator: shall mean the Party identified in Exhibit A-3"
(Operator Designations) designated to conduct all operations in a
particular Designated Prospect pursuant to the terms of this
Agreement. The term shall also refer to any successor or substitute
Operator selected pursuant to Article 4.2 (Designation of Operator
for Development Operations), Article 4.3 (Substitute Operator) or
Article 4.6 (Selection of Successor Operator).
2.38 Participating Interest: shall mean a Participating Party's
interest of participation in the Costs, risks and benefits
(including rights to Hydrocarbons) of an operation conducted
pursuant to this Agreement; that is, the proportion that the Party's
Working Interest bears to the total Working Interest of all the
Participating Parties in any operation (unless a different Cost
sharing basis has been agreed upon by the Participating Parties in
such operation).
2.39 Participating Party: shall mean a Party who makes an Election to
participate in sharing the Costs, risks and benefits (including
rights to Hydrocarbons) of an operation conducted pursuant to this
Agreement. If the Parties have agreed upon a different Cost sharing
arrangement, those Parties shall be considered Participating Parties
for all purposes of this Agreement.
2.40 Producible Reservoir: shall mean a Hydrocarbon accumulation into
which a Producible Well has been drilled and which is separated from
and not in oil or gas communication with any other accumulation and
identified as a Hydrocarbon bearing accumulation expected to be
developed under any Development Plan or any other accumulation from
which Hydrocarbons are ultimately produced.
2.41 Producible Well: shall mean a well producing Hydrocarbons or, if
not producing, a well that shall meet, according to either the MMS
or the Participating Parties, the well producibility criteria set
forth in Title 30 CFR 250.11 (effective May 31, 1988) or any
succeeding order issued by an appropriate governmental authority.
2.42 Production System: shall mean an offshore structure (whether fixed,
compliant, subsea, or floating) and all associated components
thereof including drilling components thereon, the associated
Facilities as defined in Article 2.23, and risers which are used for
the production of Hydrocarbons from the Designated Prospect. This
term shall also include the following defined terms:
2.42.1 Subsea Production System: shall mean an offshore subsea
structure (i.e., where multiple wells or a single well
could be utilized) or template and the components thereof
(including flow lines and control systems) which are
attached to the seafloor for use in obtaining Hydrocarbon
production from a well not drilled from a Production System
and routed to the Production System;
2.42.2 Initial Production System: shall mean the Production System
for the Designated Prospect included in the first approved
Development Plan;
2.42.3 Subsequent Production System: shall mean any new or
expanded Production System proposed after the installation
of the Initial Production System for the Designated
Prospect.
2.43 Sidetrack or Sidetracking: shall mean any operation to
directionally control and/or intentionally deviate a well so as to
change the bottomhole location to another bottomhole location not
deeper than the stratigraphic equivalent of the original Objective
Depth, unless such intentional deviation is done to straighten the
hole, drill around junk or to overcome other mechanical
difficulties.
2.44 Subsequent Exploratory, Appraisal or Development Operation: shall
mean any operation conducted subsequent to its respective
Exploratory, Appraisal, or Development Well having reached its
Objective Depth, but prior to the plugging and abandonment of such
Exploratory, Appraisal or Development Well.
2.45 Well Plan: shall mean a plan for any proposed Exploratory,
Appraisal or Development Well which contains at least the
information defined in Article 10.2.1 (Well Plan's Minimum
Specifics).
2.46 Withdrawing Party: shall mean a Party that withdraws from this
Agreement under the conditions defined in Article 17.1 (Withdrawal),
or is deemed to have withdrawn under Article 16.2 (Acreage
Forfeiture Provisions).
2.47 Working Interest: shall mean the interests of the Parties as
reflected on Exhibit A (Working Interests of the Parties and
Representatives) as such interest may be adjusted from time to time
pursuant to the terms and provisions of this Agreement.
ARTICLE 3
EXHIBITS
3.1 Exhibits: All references in this Agreement to "Exhibits" without
further qualification shall mean the Exhibits listed below and
attached to this Agreement. Each of the Exhibits listed below are
made a part of this Agreement and shall be deemed incorporated into
the body of this Agreement by this reference, as completely as if
the full text of each Exhibit were contained within the text of this
Agreement. If the provisions of any of the Exhibits conflict with
any provisions of this Agreement, the provisions of this Agreement
shall prevail with exception of Exhibits "C , D , and G" , where
the conflicting provisions of Exhibits C , D , and G will
prevail.
Exhibit "A" Working Interests of the Parties and
Representatives
Exhibit "A-1" Contract Area and Designated Prospect Outlines
Exhibit "A-2" Description of Leases
Exhibit "A-3" Operator Designations
Exhibit "A-4" Area of Mutual Interest Outline
Exhibit "B" Offshore Insurance Provisions
Exhibit "C" Accounting Procedure
Exhibit "D" Gas Balancing Agreement
Exhibit "E" Equal Employment Opportunity Provision and
Certification of Nonsegregated Facilities
Exhibit "F" News Release Guidelines
Exhibit "G" Integrated Project Team and Technology Sharing
Exhibit "H" Production Handling
Exhibit "J" Security Instruments
Exhibit "K" Joint Bidding Agreement
ARTICLE 4
SELECTION OF OPERATOR
4.1 Designation of the Operator: The Party designated on Exhibit "A-3"
(Operator Designations) will be the Operator of the associated
Designated Prospect and shall conduct all operations within such
Designated Prospect for the Joint Account of the Parties. This
designation of operatorship is subject to approval by the Minerals
Management Service (MMS) and the Parties agree to promptly execute
and file such documents as may be required to gain approval of this
designation of operatorship.
4.2 Substitute Operator: If the Operator becomes a Non-Participating
Party in a Non-Consent Operation, any Participating Party may be
selected by the Participating Parties as a General Matter and
designated as the substitute Operator for the Designated Prospect,
with the same authority, rights, obligations and duties as the
Operator, except when:
(a) the drilling and other contracts for equipment and Facilities
to be utilized on the Non-Consent Operation are not
assignable; or
(b) the operation is conducted from a Production System being
operated by the Operator.
If no substitute Operator is designated by the Participating
Parties, then the Operator, at its option, shall conduct such Non-
Consent Operations at the sole risk, Costs and expense of the
Participating Parties. If the Operator conducts Non-Consent
Operations on behalf of the Participating Parties (when the Operator
is a Non-Participating Party), the Operator shall furnish the
Participating Parties an estimate of the Costs of the Non-Consent
Operation. The Operator shall not be required to proceed with such
Non-Consent Operations unless and until the Costs thereof have been
advanced to it by the Participating Parties, to the end that the
Operator need not expend any of its own funds for such Non-Consent
Operation. If a Non-Consent Operation conducted by a substitute
Operator is completed or results in a producing well, said well
shall be turned over to the Operator for future operations within
thirty (30) days of completion of such operations.
4.3 Resignation of Operator: The Operator may resign at any time by
giving written notice to the Parties; provided, however, the
Operator shall not resign during a Force Majeure situation described
in Article 25.1 (Force Majeure). If the Operator no longer owns an
interest in the Designated Prospect, the Operator shall be deemed
to have resigned without any action by the Non-Operating Parties
other than the selection of a successor Operator.
4.4 Removal of Operator: The Operator may be removed either as a result
of an assignment of all or a portion of the Operator's Working
Interest in such Designated Prospect or for good cause under the
following circumstances.
4.4.1 Removal Upon Assignment: If the Operator assigns a ten
percent (10%) or greater Working Interest in a Designated
Prospect (excluding any interest assigned to an Affiliate)
which reduces the Operator's Working Interest in the
Designated Prospect to less than the Working Interest of
another Non-Operating Party (and in Mobil s case, the combined
Mobil ownership), whether accomplished by single or multiple
assignments, then the Operator may be removed by vote of the
Parties as a General Matter. Provided however, the Operator
shall not be removed solely on the basis of a reduced Working
Interest when the reduced Working Interest is equal to or
larger than the next largest Working Interest of a Party (and
in Mobil s case, the combined Mobil ownership) in the
Designated Prospect.
4.4.2 Removal for Cause by Vote: The Operator shall resign upon the
unanimous vote of the Non-Operating Parties in the event this
is a two or three-party Agreement or the majority vote of the
Non-Operating Parties if the Agreement applies to four (4) or
more Parties, if:
(a) the Operator commits an event of default as hereafter
defined and fails to commence to cure such default
within thirty (30) days after receiving notice of such
default. An event of default is defined as a material
breach of this Agreement and includes, but is not
limited to failure to pay timely contract invoices as
they become due, failure to keep the property free of
liens (except as provided herein), or a failure to pay
properly in accordance with Exhibit C .
(b) the Operator commits an act of gross negligence or
willful misconduct; or,
(c) the Operator is unable to meet the standards of
operation contained in Articles 5.2 (Workmanlike
Conduct), 5.3 (Drilling), and 5.6 (Reports to
Government Agencies).
4.5 Selection of Successor Operator: Upon resignation or removal of the
Operator, a successor Operator shall be selected by the Parties as a
General Matter. If the resigned or removed Operator fails to vote
or votes only to succeed itself, then the successor Operator shall
be selected as a General Matter after excluding the vote of the
resigned or removed Operator. In the event there are only two
Parties to this Agreement, the Non-Operating Party shall become the
Operator.
4.6 Effective Date of Resignation or Removal: The resignation or
removal of the Operator shall become effective at 7:00 a.m. on the
first day of the month following a period of ninety (90) days after
said notice, unless a longer period of time is required to obtain
approval by the Minerals Management Service. Prior to the successor
Operator's assumption of the Operator's duties, the previous
Operator (the "outgoing Operator") shall continue to exercise its
authorities and meet its duties as Operator. Upon selection of a
successor Operator, the outgoing Operator shall be bound by the
terms of this Agreement as a Non-Operating Party. The resignation
or removal of the outgoing Operator shall not prejudice any rights,
obligations or liabilities which accrued during the period when the
outgoing Operator acted as the Operator. If the outgoing Operator
resigns or is removed, it shall be entitled to charge the Joint
Account for the reasonable Costs incurred in connection with the
change of operatorship.
4.7 Delivery of Property: On the effective date of resignation or
removal of the Operator, the outgoing Operator shall deliver to the
successor Operator possession of everything relating to operations
hereunder and co-owned by the Parties, including all funds relating
to the Joint Account, all co-owned equipment, materials and
appurtenances used in conducting operations and all books, records
and inventories relating to operations hereunder (other than those
books, records and inventories maintained by the outgoing Operator
as the owner of a Working Interest). Upon such delivery, the
outgoing Operator shall be discharged from all future rights and
obligations as the Operator. The outgoing Operator shall further
use its reasonable efforts to transfer to the successor Operator,
effective as of the effective date of such resignation or removal,
its rights as the Operator under all contracts exclusively relating
to operations hereunder and the successor Operator shall assume all
obligations of the Operator thereunder. As soon as practicable
after the effective date of such resignation or removal, the Parties
shall audit the Joint Account and conduct an inventory of all co-
owned property, and such inventory shall be used in the return of
and the accounting for the co-owned property by the outgoing
Operator. All Costs incurred in connection with such audit and
inventory shall be charged to the Joint Account.
ARTICLE 5
RIGHTS AND DUTIES OF OPERATOR
5.1 Exclusive Right to Operate: Except as otherwise provided, the
Operator shall have the exclusive right and duty to conduct (or
cause to be conducted) all operations pursuant to this Agreement.
With the exception of any team formed pursuant to this Agreement,
the number of employees or contractors used by the Operator in
conducting operations hereunder, their selection, and the hours of
labor and the compensation for services performed shall be
determined by the Operator, and all such employees or contractors
shall be the employees or contractors, respectively, of the
Operator. The Operator shall contract for and employ any drilling
rigs, tools, machinery, equipment, materials, supplies, vessels,
services, consultants, and personnel reasonably necessary for the
Operator to conduct the operations provided for in this Agreement.
Except with the unanimous consent of all Parties, Operator shall not
contract out to a third party the operation of the Production System
or any platform provided, however, such operations by any of the
Mobil Entities, as Operator, may be performed by Mobil Exploration &
Producing U.S. Inc., as agent for the Mobil Entitles or any Mobil
affiliate.
5.2 Workmanlike Conduct: The Operator shall conduct all operations in a
proper and workmanlike manner in accordance with methods and
practices customarily used in sound oil and gas field practice and
with that degree of diligence reasonably and ordinarily exercised by
an experienced prudent operator engaged in a similar activity under
the same or similar circumstances. The Operator shall not be liable
to the Parties for losses sustained or liabilities incurred as a
result of its actions as the Operator, except such as may result
from its gross negligence or willful misconduct. Unless otherwise
provided, Operator shall consult with the Parties and keep them all
informed of all important matters.
5.3 Drilling: The Operator may have all drilling operations conducted
by qualified and responsible independent contractors who are not
affiliated with the Operator and are employed under competitive
contracts. A competitive contract is a contract containing current
terms, rates and provisions that do not exceed those generally
prevailing on the OCS in the Gulf of Mexico for operations involving
drilling rigs of an equivalent type, operating in similar
environments, and equipped to the Operator's standard conditions
which are capable of drilling the proposed well(s) within the time
schedule for the operations to be conducted. The Operator may
employ its equipment, personnel, drilling rig, workover rig or
snubbing unit in the conduct of such operations in accordance with
Exhibit "C" (Accounting Procedure) or pursuant to a written agree-
ment among the Participating Parties. If the Operator's equipment,
personnel, drilling rig, workover rig or snubbing unit are employed
in conducting operations under this Agreement, the terms, rates and
provisions for use shall be consistent with then current competitive
contracts prevailing in the OCS in the deepwater Gulf of Mexico.
The Participating Parties may acquire by purchase or lease, a
drilling rig as part of the Production System and in this instance
the Costs to the Joint Account shall be as stated in Exhibit C .
5.4 Liens and Encumbrances: The Operator shall use reasonable efforts
to keep the Leases, Production Systems, Facilities and other
equipment and any Hydrocarbons free from all liens and encumbrances,
except those provided for in Article 6.3 (Security Provisions) which
might arise by reason of the operations conducted under this
Agreement.
5.5 Records: The Operator shall keep accurate books, accounts and
records of operations hereunder in compliance with the Accounting
Procedure in Exhibit "C" (Accounting Procedure). Unless otherwise
provided for in this Agreement, all records of the Joint Account
shall be available to a Non-Operating Party at all reasonable times
during the Operator's normal office hours pursuant to the provisions
contained in Exhibit "C".
5.6 Reports to Government Agencies: The Operator shall make timely to
all governmental authorities reports that it has a duty to make as
Operator and shall furnish copies of such reports to the
Participating Parties. The Operator shall give timely written
notice to the Parties of litigation and/or administrative
proceedings of which it has notice affecting any Designated Prospect
or operations hereunder.
5.7 Information to Participating Parties: The Operator shall, in a
timely manner, furnish each Participating Party the following
information pertaining to each well being drilled (provided such
information was obtained or received by Operator):
(a) copy of the application for permit to drill and all amendments
thereto;
(b) daily drilling and workover reports; daily mud checks, mud
logs, lithological, and Hydrocarbon information; daily casing
and cement tallies and cumulative Costs incurred on the
operation;
(c) complete report of all core analysis;
(d) copies of any logs or surveys as run (including a complete
"library tape" of the digitally recorded data);
(e) copies of well test results, bottomhole pressure surveys, gas
and condensate analyses or similar information;
(f) copies of reports made to and notices or orders received from
regulatory agencies;
(g) 48 hours advance notice of logging, coring or testing
operations (or, if conditions do not permit such advance
notice, as much advance notice as is reasonably possible);
(h) upon written request, and if sufficient quantities are
available, samples of cutting and sidewall cores marked as to
depth, to be packaged and shipped at expense of the requesting
Party;
(i) copies of the drilling prognosis;
(j) if conventional cores are taken, the requesting Party shall be
allowed access to inspect and evaluate said cores; and
(k) samples of gas, condensate and oil, if sufficient quantities
are available.
Upon written request, the Operator shall use its reasonable efforts
to furnish to a requesting Participating Party any additional
available information (including a complete slabbed section of all
recovered cores, if requested and available), acquired by the
Operator for the Participating Parties, not otherwise furnished
under this Article (not including any derivative information
independently developed at Operator's sole Cost and expense). The
Costs of gathering and furnishing such additional available
information shall be charged to the requesting Participating Party.
5.8 Completed Well Information: Operator shall, in a timely manner,
furnish to each Participating Party the following information
pertaining to each completed well:
(a) monthly report of production and injection;
(b) copies of reports made to regulatory agencies;
(c) report on status of wells not producing and not abandoned;
(d) Hydrocarbon status report;
(e) bottomhole pressure data;
(f) composite of all logs run (e.g., TDT, Carbon-Oxygen, Spinner
Surveys, Casing Collar, etc.); and,
(g) reports of inventory.
5.9 Information to Non-Participating Parties: The Operator shall
furnish to each Non-Participating Party copies of all non-
confidential reports made to regulatory agencies. A Non-
Participating Party shall be entitled to receive the information
specified in Article 5.7 and 5.8 only after fulfilling the
requirements specified in Article 16 (Non-Consent Operations). A
Party which has permanently relinquished all of its Working Interest
in either the Contract Area or a specific Designated Prospect, shall
not be entitled to receive any information specified in Article 5.7
and 5.8 above with respect to such relinquished interest.
5.10 Cost Information: Within one hundred twenty (120) days after
completion of a Non-Consent Operation, the Operator shall furnish
all Parties an itemized statement of the Cost of such operations and
an inventory of the equipment pertaining thereto or, at its option,
the Operator in lieu of an itemized statement of such Costs may
submit a detailed statement of monthly billings. For the purposes
of calculating recoupment of Costs pursuant to Article 16 (Non-
Consent Operations), the Operator shall furnish to all Parties a
quarterly statement showing operating expenses and the proceeds from
the sale of Hydrocarbon production from the wells from which
recoupment is being made.
5.11 Managing Production: All Parties shall comply with the COPAS
Operator/Producer Roles and Responsibilities Guidelines (October
1993) ( OPRR Guidelines ) and shall cooperate and use due diligence
to avoid gas imbalances resulting in Pipeline Penalties under the
provisions of the transportation tariffs of any transporting
pipelines. Notwithstanding anything in this Article 5 to the
contrary, the Parties shall use the OPRR Guidelines to determine the
allocation of penalties among the Parties. The Operator shall be
solely responsible and liable for and shall protect, defend,
indemnify and hold all other Parties harmless from and against any
Pipeline Penalties allocated to the Operator in accordance with this
Article 5.11. Each of the other Parties shall be solely responsible
and liable for and shall protect, defend, indemnify and hold the
Operator harmless from and against Pipeline Penalties allocated to
such Party in accordance with this Article 5.11.
5.11.1 Compensation: The Parties hereto recognize that Operator
may be performing penalty avoidance services for Non-
Operators, implementing procedures to avoid penalties
and will be subject to additional risk of incurring
penalties. Operator may be performing these services
and incurring this additional risk without compensation.
The Parties agree that in the event Operator and one or
more Non-Operators enter into a subsequent Operating
Agreement(s) within the Area of Mutual Interest as
identified on Exhibit A-4 hereof and such Agreement
provides that its operator will be separately
compensated for performing these services and incurring
such risk, then Operator shall have the right to have
this Agreement amended ( Amendment ) to provide for an
identical fee which shall be effective retroactive to
the effective date of such Non-Operator s participation
under this Agreement on the date of such Amendment. The
Amendment shall be applicable only to such Non-
Operator s share of production hereunder. Operator
shall notify the affected Non-Operator(s) of its
election and shall forward a copy of the Amendment to
such Party. The Amendment shall be effective without
further action of the Parties to this Agreement. Non-
Operator(s) shall pay Operator the fee provided in the
Amendment for past production within sixty (60) days of
receipt of such Amendment and Operator shall continue to
receive such fee in accordance with the Amendment. This
Agreement may be further amended as set forth above in
the event other Non-Operators, acting as operator, are
parties to operating agreements with Operator and
separately receive payment for performing such services
and incurring such risks. In any event, the Operator
(or any Non-Operator, acting as Operator) shall keep the
other Parties apprised of any and all penalty avoidance
services being performed.
ARTICLE 6
EXPENDITURES AND SECURITY RIGHTS
6.1 Basis of Charges to the Parties: Except as otherwise provided, the
Operator shall pay all Costs of operations hereunder and each
Participating Party shall reimburse the Operator, in proportion to
its Participating Interest, for the Costs of each such operation.
The Operator shall have the right to require each Participating
Party to advance its respective share of estimated expenditures, as
provided in Exhibit "C" (Accounting Procedure). Funds received by
the Operator under this Agreement may be commingled with Operator's
own funds. All charges, credits and accounting for expenditures
shall be made pursuant to Exhibit "C".
6.2 Authorization for Expenditure and Supplemental Authorization For
Expenditure: The Operator shall not make any single expenditure or
undertake any project or operation costing Two Hundred Fifty
Thousand Dollars ($250,000) or more, unless an Authorization for
Expenditure (AFE) has either: (1) been included in a proposal for
an operation and approved by the Participating Parties through their
Election to participate in the operation, or (2) received the
approval of the Parties as a General Matter. For any single
expenditure or project costing in excess of Fifty Thousand Dollars
($50,000), but less than Two Hundred Fifty Thousand Dollars
($250,000), the Operator need not submit an AFE, but shall furnish
written information describing the expenditure to each of the
Participating Parties. In the event of an emergency and
notwithstanding the foregoing, the Operator shall be empowered to
immediately make such expenditures for the Joint Account of the
Participating Parties as, in its opinion as a reasonable and prudent
Operator, are required to deal with the emergency. The Operator
shall report to the Participating Parties, as promptly as possible,
the nature of the emergency and action taken.
6.2.1 Required Authorization: Prior to making any expenditure for
the Joint Account of less than Two Hundred Fifty Thousand
Dollars ($250,000) that requires the utilization of a drilling
or workover rig, the Operator shall obtain the approval of the
Parties as a General Matter.
6.2.2 AFE Overrun Notice: Operator shall provide an AFE overrun
notice to all Participating Parties whenever it appears (based
upon Operator's reasonable estimate) that the actual total
Costs associated with any separate AFE will exceed the
original AFE by more than ten percent (10%).
6.2.3 Supplemental AFE for Cost Overruns for Wells: If during the
drilling of Exploratory Wells, Subsequent Exploratory
Operations, Appraisal Wells, subsequent Appraisal Operations,
Development Wells, or subsequent Development Operations, it
appears (based upon Operator's reasonable estimate) that the
actual Costs will exceed the latest approved AFE for the well
by twenty-five percent (25%) or two million dollars
($2,000,000), whichever is less, Operator shall submit a
supplemental AFE to the Participating Parties to make an
Election as to their further participation in the well AFE.
Any Participating Party which becomes a Non-Participating
Party as to such further operation under this Article 6.2.3
shall be subject to the provisions of Article 16 (Non-Consent
Operations).
6.2.4 Supplemental AFE for Cost Overruns on Integrated Project Team
AFE: If it appears (based upon Operator's reasonable
estimate) that the actual Integrated Project Team Costs will
exceed the latest approved AFE by twenty-five percent (25%) or
two million dollars ($2,000,000), whichever is less, Operator
shall submit a supplemental AFE to the Participating Parties
to make an Election as to their further participation in the
Integrated Project Team AFE. Any Participating Party which
becomes a Non-Participating Party as to such further operation
under this Article 6.2.4 shall be subject to the provisions of
Article 16.5.3 (Non-Consent Geophysical Operations, Integrated
Project Team and/or Final Design AFE) only for the amount of
such supplement.
6.2.5 Supplemental AFE for Cost Overruns on Final Design AFE: If it
appears (based upon Operator's reasonable estimate) that the
actual design Costs will exceed the latest approved Final
Design AFE by twenty-five percent (25%) or five million
dollars ($5,000,000), whichever is less, Operator shall submit
a supplemental AFE to the Participating Parties to make an
Election as to their further participation in the Final Design
AFE. Any Participating Party which becomes a Non-
Participating Party as to such further operation under this
Article 6.2.5 shall be subject to the provisions of Article
16.5.3 (Non-Consent Geophysical Operations, Integrated Project
Team and/or Final Design AFE) only for the amount of such
supplement.
6.2.6 Supplemental AFE for Cost Overruns on Fabrication AFE: If it
appears (based upon Operator's reasonable estimate) that the
actual Costs associated with any separate AFE submitted under
the Fabrication AFE will exceed the latest approved
Fabrication AFE by twenty-five percent (25%) or ten million
dollars ($10,000,000), whichever is less, Operator shall
submit a supplemental AFE to the Participating Parties to make
an Election as to their further participation in the
Fabrication AFE. Any Participating Party which becomes a Non-
Participating Party as to such further operation under this
Article 6.2.6 shall be subject to the provisions of Article
16.2 (Acreage Forfeiture Provisions).
6.2.7 Supplemental AFE for Cost Overruns on All Other AFEs: If it
appears (based upon Operator's reasonable estimate) that the
actual Costs will exceed the latest approved AFE for the
operation by twenty-five percent (25%) or two million dollars
($2,000,000), whichever is less, Operator shall submit a
supplemental AFE to the Participating Parties to make an
Election as to their further participation in the operation.
Any Participating Party which becomes a Non-Participating
Party as to such further operation under this Article 6.2.7
shall be subject, if applicable, to the provisions of Article
16 (Non-Consent Operations) only for the amount of such
supplement.
6.2.8 Supplemental AFE for Cost Overruns for All Supplemented AFEs:
If it appears (based upon Operator s reasonable estimate) that
the actual Costs associated with any already supplemented AFE
will exceed the revised total (original plus all
supplementals) AFE by twenty-five percent (25%) or two million
dollars ($2,000,000), whichever is less, Operator shall submit
another supplemental AFE to the Participating Party(s) to make
an Election as to their future participation in such project.
Any Participating Party which becomes a Non-Participating
Party as to such further operation under such project shall be
subject to the appropriate Non-Consent provisions of the
supplemental AFE provision applicable thereto as set forth
hereinabove.
6.2.9 Further Operations During a Force Majeure: No Party shall be
allowed to make an Election not to participate in a further
operations under Articles 6.2.3 (Supplemental AFE for Cost
Overruns for Wells), 6.2.4 (Supplemental AFE for Cost Overruns
on Integrated Project Team AFE), 6.2.5 (Supplemental AFE for
Cost Overruns on Final Design AFE), 6.2.6 (Supplemental AFE
for Cost Overruns on Fabrication AFE), 6.2.7 (Supplemental AFE
for Cost Overruns on All Other AFEs) or 6.2.8 (Supplemental
AFE for Cost Overruns for All Supplemented AFES) during a
Force Majeure or other emergency as described in Article 25.1
(Force Majeure), but may make its Election not to participate
after termination of such emergency.
6.3 Security Provisions: Notwithstanding anything to the contrary
contained in this Agreement, it is understood and agreed that: (a)
each Non-Operator hereby mortgages, pledges, and hypothecates to
Operator and each other Non-Operator and grants Operator and each
other Non-Operator a security interest in, and Operator hereby
mortgages, pledges, and hypothecates to each Non-Operator and grants
each Non-Operator a security interest in, all right, title, and
interest of each such Non-Operator and Operator, as applicable, now
or hereafter acquired in and to: (i) the oil and gas leases located
within each and every Designated Prospect in the Contract Area
( the Designated Prospect Leases ); (ii) all surface or subsurface
machinery, equipment, fixtures, inventory, facilities, and other
property of whatever kind, character or nature, now or hereafter
located on the Designated Prospect Leases or held for use in
connection with the Designated Prospect Leases or in connection with
the operation hereof, or the treating, handling, storing,
transportation, processing, marketing or sales of Hydrocarbons,
including without limitation, all oil wells, gas wells, water wells,
injection wells, casing, tubing, tubular goods, rods, pumping units,
engines, Christmas trees, platforms, derricks, separators,
compressors, flow lines, tanks, gas systems (for gathering, treating
or compression) pipe lines, chemicals, solutions, water systems,
power plants, transformers, starters and controllers, tools,
telegraph, telephone, loading racks, loading docks, and shipping
facilities, but not the Production System, (collectively, the
Equipment ); (iii) Hydrocarbons which are produced from the
Designated Prospect Leases, all products processed or obtained
therefrom, and all inventory thereof upon extraction from the
wellhead; (iv) all contract rights and other general intangibles
related to the Designated Prospect Leases, the operation thereof or
the treating, handling, storing, transportation, processing,
marketing or sales of Hydrocarbons, or under which the proceeds of
Hydrocarbons arise or are evidenced or governed; (v) all accounts
resulting from the sale of Hydrocarbons at the wellhead and all
other accounts, contract rights, operating rights, general
intangibles, chattel paper, documents, and instruments arising from
or by virtue of any transaction related to the Designated Prospect
Leases, the Equipment, or the Hydrocarbons: (vi) all proceeds of the
foregoing or payments in lieu of Hydrocarbons, whether such proceeds
or payments are goods, money, documents, instruments, chattel paper,
securities, accounts, general intangibles, fixtures or other assets
(all of the aforesaid properties, rights and interest of Operator,
herein called the Operator s Property , and all the aforesaid
properties, rights and interests of each Non-Operator with respect
to each Non-Operator, herein called such Non-Operator s Property ).
The liens and security interests granted by each Party in favor of
the other Party secures the payment and performance of all present
and future obligations, liabilities, and indebtedness of each party
under this Agreement together with interest thereon at the rate
provided in the Accounting Procedure (attached hereto as Exhibit
C ), now or hereafter arising, up to the Limit (as hereinafter
defined) for each Party as hereinafter set forth (as to each party,
the Secured Obligations). Any party (not an original signatory to
this Agreement or the Leases) whether by assignment, merger,
mortgage, operation of law or otherwise, shall be deemed to have
taken such interest subject to the liens and security interests
granted by this Article 6.3 as to all Secured Obligations
attributable to such interest being acquired, whether or not such
Secured Obligations arose before or after such interest is acquired.
Each Party hereunder shall be entitled to exercise all of the rights
and remedies of a mortgagee of immovable or real property and/or of
a secured party under applicable Louisiana law, including but not
limited to Chapter 9 of the Louisiana Commercial Laws. R.S. 10:9-
101, et seq. If Operator seeks to enforce the liens and security
interests granted to it hereunder against any Non-Operator, Operator
shall have the right to appoint a keeper of such Non-Operator s
Property, or any part thereof, pursuant to the terms and provisions
of La. R.S. 9:5131 et seq. and 9:5136 et seq. If a Non-Operator
seeks to enforce the liens and security interests granted to it
hereunder against Operator or another Non-Operator, such Non-
Operator shall have the right to appoint a keeper of the Operator s
Property, or any part thereof, or of the Non-Operator s Property, or
any part thereof, as applicable, pursuant to the terms and
provisions of La. R.S. 9:5131 et seq. and 9:5136 et seq. The
maximum amount of the Secured Obligations of each Party to be
secured hereunder that may be outstanding at any time (the Limit )
is fixed at ten million dollars ($10,000,000) with reference to each
Non-Operator, and ten million dollars ($10,000,000) with reference
to Operator.
6.4 Financing Statement and Recording of this Agreement: To perfect the
security interests grated here under, the Parties hereto agree to
execute simultaneously herewith and cause to be filed in the
appropriate filing offices, this Agreement and a financing statement
on form UCC-1, as in the form attached hereto as Exhibit J
(Security Instruments). The Parties shall have a continuing
obligation to execute additional financing statements to continue
such perfection and to accurately reflect the current properties
covered by this Agreement. The Parties hereto further agree to
execute and thereafter register, file or record or cause to be
registered, filed or recorded in any appropriate governmental
office, this Agreement and any document or instrument supplemental
to or confirmatory of this Agreement, which may be necessary or
desirable for the continued validity, perfection or priority of the
rights of the Parties under this Agreement.
6.5 Unpaid Charges: In the event of the failure of any Party to pay its
share of the Costs when due as provided in this Agreement, Operator
(or the Non-Operator with the largest Working Interest in the
Designated Prospect to which such failure applies if Operator is in
default of the payment of costs hereunder), at any time and from
time to time, shall be entitled to collect and receive the proceeds
from the sale of all or any part of such Party s share of the
Hydrocarbons from the Leases, including the proceeds from previously
executed sales contracts made by or for such delinquent Party. All
sums so collected shall be applied against the delinquent or unpaid
expenses due from such Party, the balance of such proceeds, if any,
to be paid to the Party or other person entitled thereto. Operator
may likewise take any other credit due any such delinquent Party and
apply the same against sums due from such Party under this
Agreement. Except to the extent they conflict with the options
granted to a non-defaulting Party in Article 6.7 (Default), the
rights granted to Operator in this Article shall not be construed as
exclusive remedies but shall be in addition to all rights,
privileges and remedies afforded Operator by other provisions of
this Agreement and by law or equity. Service of a true copy of this
Agreement upon any purchaser of all or any part of a delinquent
Party s share of the Hydrocarbons from the Leases shall constitute
written authorization on the part of such delinquent Party for such
purchaser to pay the proceeds from such sale to the Operator (or the
Non-Operator with the largest Working Interest in the Designated
Prospect to which such failure applies if the Operator is in default
on the payment of costs hereunder) during such delinquency, and such
purchaser shall be considered as having been notified of such
authorization prior to the time of such service. The books and
records kept by Operator with respect to operations hereunder shall
constitute conclusive proof for purposes of this Article of the
existence or nonexistence of any such delinquency insofar as the
right of Operator (or the Non-Operator) to collect the proceeds from
the sale of all or any part of the Hydrocarbons is concerned,
subject, however, to all rights of inspection, verification, and
audit provided for in this Agreement. The exercise of the rights
granted in this Article shall not in anyway affect the obligation of
any delinquent Party to make royalty payments. If the Operator
fails to pay its share of the Costs, the Non-Operator shall be
afforded the same remedy and rights as provided to the Operator in
this Article 6.
6.6 Contributions by Non-Delinquent Parties: If any Party neglects or
fails to pay its share of Costs incurred hereunder within ninety
(90) days after rendition of billing therefor by Operator, the other
Parties (including Operator) shall advance to Operator their
respective proportionate part of the Costs and expenses of such
defaulting Party. Parties so advancing the unpaid Costs and
expenses of any such defaulting Party shall bear the cost of
collecting any payments in proportionate part and shall be
reimbursed by the Operator in like fashion upon receipt by the
Operator of any past due amounts owing by any such defaulting Party.
Any interest collected by Operator in such connection shall likewise
be applied to such reimbursement. Any Party so advancing a
defaulting Party s Costs and expenses shall be subrogated to the
lien and rights appurtenant thereto herein given Operator or any
other Party.
6.7 Default: If any Party (including the Operator) fails to pay, as
provided above and in Exhibit C , its share of any Cost which it is
obligated to make under any provision of this Agreement, and if such
default continues for a period of thirty (30) days following
delivery by Operator (or by any Non-Operator in case of a default by
Operator) of notice of such default to such Party, then at any time
after the expiration of such 30-day notice period the Operator (or
any Non-Operator if the Operator is the Party in default) shall be
entitled to the remedies in (a) and (b) or (a) and (c)below:
(a) Operator (or any Non-Operator if Operator is the Party in
default) may suspend by written notice any or all of the
rights of the defaulting Party granted by this Agreement,
without prejudice to the right of the non-defaulting Party to
continue to enforce the obligations of the defaulting Party
under this Agreement. The rights of a defaulting Party that
may be suspended hereunder at the election of the non-
defaulting Parties shall include, without limitation, the
right to elect to participate in any further operation
regarding the well or subject operation proposed under this
Agreement to which the default relates; and
(b) Operator (or any Non-Operator if Operator is the Party in
default) may sue to collect the amounts in default and
attorney fees together with all damages suffered by the non-
defaulting Parties as a result of the default, plus interest
accruing on the amounts recovered from the date of default
until the date of collection at the rate specified in Exhibit
"C" hereto and to enforce the liens and security interests
granted under Article 6.3; or
(c) Operator (or any Non-Operator if the Operator is the Party in
default) may deliver a written Notice of Non-Participation
Election to the defaulting Party at any time after the default
occurs with the following effect:
(i) If the billing is for the drilling of a new well or the
plugging back, reworking or deepening (including
sidetracking) of a dry hole or a well not then producing
in paying quantities, or for the completion or
recompletion of any well, the defaulting Party will be
conclusively deemed to have elected not to participate
in the subject operation subsequent to the time of
default and to be a Non-Participating Party with respect
thereto under the Article which is applicable to the
operation, notwithstanding any Election to participate
theretofore made.
(ii) Until the delivery of such Notice of Nonparticipation
Election to the defaulting Party, such Party shall have
the right to cure its default by paying the unpaid
billing plus interest at the rate set forth in Exhibit
C hereto. Any interest relinquished pursuant to this
Article shall be owned by the non-defaulting Parties in
proportion to their interests, and the non-defaulting
Parties shall be liable to contribute their shares of
the defaulted amount.
Notwithstanding the other provisions of this paragraph, if a Party
fails to pay part or all of its share of Costs hereunder because of
a legitimate disagreement as to the appropriateness of part or all
of the billing in question, and if such Party makes such
disagreement and the grounds therefor known to the Operator in
writing prior to the due date of such billing and timely tenders
payment of all undisputed amounts, then such Party shall not be
subject to sub-paragraph (a) or (c) of Section 6.7.
6.8 Carved-out Interests: Except for those which are set forth in
Exhibit A-2 (Description of Leases) hereof, agreements creating
any overriding royalty, production payment, net proceeds interest,
carried interest or any other interest carved out of a Working
Interest in a Lease(s) shall specifically make such interests
inferior to the rights of the Parties to this Agreement. If any
Party whose Participating Interest is so encumbered does not pay its
share of expenses, and the proceeds from the sale of its Hydrocarbon
production under Article 6.3 (Security Provisions) are insufficient
for that purpose, the security rights provided for herein may be
applied against the carved-out interests with which such Working
Interest is burdened. In such event, the rights of the owner of
such carved-out interest shall be subordinated to the security
rights granted by Article 6.3. Additionally, in the event a Party
elects not to participate in any operation hereunder and becomes a
Non-Participating Party pursuant hereto, then and in that event, the
Participating Parties shall acquire the interest of such Non-
Participating Party with respect to such Election, free and clear of
any and all obligations created under or pursuant to any carved-out
interest as described above.
ARTICLE 7
CONFIDENTIALITY OF DATA
7.1 Confidentiality Obligation: The Parties agree that all Confidential
Data acquired or obtained by any Party shall be kept confidential
during the term of this Agreement and for an additional period of
two (2) years after the termination of this Agreement. Each Party
agrees to maintain the secrecy of the Confidential Data using at
least the standard of care it normally uses in protecting its own
confidential information and trade secrets. The Confidential Data
shall be made available to each Participating Party for its
exclusive use. During the confidentiality period, the Confidential
Data shall not be disclosed to any third party (unless disclosed
under an "exception to confidentiality" or as a "permitted
disclosure", as set out in Article 7.1.1 or 7.1.2, respectively).
7.1.1 Exceptions to Confidentiality: The confidentiality obligation
shall not apply to the extent that particular items of
Confidential Data:
(a) are now or later become part of the public domain
(other than as a result of a wrongful act or
omission by the Party disclosing the Confidential
Data); or
(b) are now or later become available to a Party on a
non-confidential basis from a source, other than a
Party hereto, that is legally permitted to
disclose the item of Confidential Data; or
(c) were known to a Party on a non-confidential basis
prior to the disclosure of the Confidential Data
to it under the terms of this Agreement or to
which such Party was otherwise entitled at the
time of disclosure; or
(d) is independently developed by employees or
contractors of a Party whose employees or
contractors have not had access to Confidential
Data.
7.1.2 Permitted Disclosures: The Operator may disclose items of
Confidential Data to such third parties as may be necessary in
connection with the operation of a Designated Prospect,
provided such third parties are bound by written agreement to
keep secret the Confidential Data for a period of time not
less than is set forth in Article 7.1 of this Agreement (or a
lesser period if agreed by all Parties). The Operator shall
promptly inform the other Parties hereto of the names of such
third parties and list the items of Confidential Data
disclosed. Notwithstanding anything herein to the contrary
and subject to the restrictions that: (i) the Confidential
Data shall not be removed from the custody and premises of the
Party making such disclosure, excepting disclosure made
pursuant to items (1) and (5) below; and (ii) that such third
party be bound by written agreement not to use or disclose the
Confidential Data except for the express purpose for which
such disclosure is to be made, any Party may disclose, in
whole or in part, the Confidential Data:
(1) to any Affiliate of such Party provided such
Affiliate shall be bound by the confidentiality
provision contained herein; or
(2) to any bona fide financially responsible,
prospective assignee of any portion of such
Party's Working Interest (including but not
limited to an entity with whom a Party or its
Affiliates is conducting bona fide negotiations
directed toward a merger, consolidation or a sale
of a Party's or an Affiliate's shares or
substantially all of its assets in the OCS Gulf of
Mexico), provided that the disclosing Party shall
give all other Parties to this Agreement not less
than fifteen (15) days advance written notice
specifying the extent to which that Party intends
to disclose the Confidential Data to the
prospective assignee and the name of such
prospective assignee; or
(3) to any potential contractors or professional
consultants engaged by or on behalf of such Party
and acting in that capacity where such disclosure
is essential to such contractor's or consultant's
work; or
(4) to any bank or other financial institution to the
extent appropriate to a Party arranging financing
for its obligations under this Agreement; or,
(5) to the extent required by the terms of any Lease,
or by law, order, decree, regulation or rule
(including without limitation, those of any
regulatory agency, securities commission, stock
exchange, judicial or administrative proceeding).
If a Party is legally compelled to disclose any
Confidential Data such Party shall promptly
provide all other Parties to this Agreement
written notice of such proceedings so that the
non-disclosing Parties may seek a protective order
or other remedy. A disclosing Party shall furnish
only such Confidential Data as is legally required
and will use its reasonable efforts to obtain
confidential treatment for any Confidential Data
disclosed; or,
(6) to an entity desiring to transport and/or purchase
Hydrocarbons produced hereunder for the purpose of
making Hydrocarbon reserve estimates and other
technical evaluations.
7.1.3 Limited Releases to Offshore Scout Association: The Operator
may disclose the following well information at weekly Offshore
Oil Scout meetings:
7.1.3.1 Well Location:
(a) proposed surface location;
(b) surveyed surface location with X & Y;
(c) proposed bottom hole location;
(d) KB and water depth;
(e) OCS number and well number; and
(f) actual bottom hole location (must be
reported within two weeks of reaching
total depth of the well).
7.1.3.2 Well Operations:
(a) rig move in date;
(b) spud date;
(c) weekly drilling depth, MW;
(d) casing depths, cement, EMWs;
(e) mud weight, sidewall cores, cores,
RFTs (only that they were taken);
(f) logs (only the depths and type run);
(g) date total depth is reached; and
(h) date rig is released.
7.1.3.3 Well Completion Information:
(a) any Media Release or public filing of
well completion information will be
furnished at weekly Scout meetings.
7.1.4 Continuing Confidentiality Obligation: Any Party who ceases
to own a Working Interest in the Contract Area shall
nonetheless remain bound by the confidentiality and use
obligations of this Agreement as to any Confidential Data
obtained through this Agreement.
7.2 Ownership of Confidential Data: Except as otherwise provided for in
this Article, all Confidential Data produced as a result of an
operation hereunder shall be the property of all Participating
Parties in that operation. Any Non-Participating Party shall have
no rights in or access to Confidential Data produced or derived from
a Non-Consent Operation unless and until the provisions of Article
16 (Non-Consent Operations) are satisfied.
7.2.1 Well Log and Data Trades: Any Participating Party may propose
the exchange or trade of any co-owned Confidential Data for
other similar data and information owned by a third party.
The approval of such exchange or trade shall require the
unanimous approval of the Participating Parties who own such
data. Upon approval of such trade by all Participating
Parties, the Operator shall consummate such exchange or trade
with the third party. The Operator shall promptly provide all
Participating Parties copies of the third-party data obtained
along with copies of any agreement relating to such exchange.
7.2.2 Ownership of Non-Consent Data: When the Non-Participating
Party becomes a Participating Party in the operation, as
provided herein, such non-consent Confidential Data and
information previously withheld from such Non-Participating
Party shall thereafter become co-owned by such Party.
7.3 Access to the Lease and Rig: Each Participating Party's authorized
representatives including those related to financing arrangements of
the Production System shall have access to any drilling rig,
Production System or Facility serving a Designated Prospect to
observe and inspect operations and wells in which it participates
(and the records and other data pertaining thereto). Access by the
Participating Party to any drilling rig, Production System or
Facility serving a Designated Prospect shall be arranged through the
Operator twenty-four (24) hours in advance (or, if conditions do not
permit, as much advance notice as is reasonably possible). Each
Party's access will be at its sole Cost, risk and expense and at
reasonable times and provided such access does not unreasonably
interfere with the operations being conducted.
7.4 Development of Proprietary Information and/or Technology: The
ownership, use, treatment and disclosure of any proprietary
information and/or technology specific to drilling technology,
production technology, production structure and Facilities and their
transportation and installation, pipelines, flowlines and offshore
oil and gas transportation which are charged to the Joint Account
shall be handled in accordance with Exhibit "G" (Integrated Project
Team and Technology Sharing).
7.5 News Releases: Except to the extent required by the terms of any
Lease, or by law, order, decree, regulation or rule (including
without limitation, those of any regulatory agency, securities
commission, stock exchange, judicial or administrative proceeding),
the Parties shall use reasonable efforts to unanimously agree upon
the timing and content of releases to the news media concerning
operations covered by this Agreement. However, in the event the
Parties cannot unanimously agree upon either the timing and/or
content of the news release within five (5) days of such proposed
news release, then such timing and/or content shall require approval
as a General Matter. Failing General Matter approval of a news
release, such news release may be prepared in accordance with
Exhibit "F" (News Release Guidelines).
ARTICLE 8
VOTING, ELECTIONS, AND NOTICES
8.1 Overall Supervision of Business Affairs: The activities of the
Parties under this Agreement that are not within the scope of the
Operator s authority to unilaterally decide under Article 5.0
(Rights and Duties of Operator) or Article 6.2 (Authorization for
Expenditure) shall be divided into the following broad classes:
8.1.1 General Matter Vote: General Matters for which a vote for
approval is required prior to action, but no accompanying
Election regarding participation is required, or;
8.1.2 Elections: Proposed operations for which an Election regarding
participation is required for such operation. (An example of
such an operation is an Election for a Fabrication AFE
proposed pursuant to a previously approved Development Plan
under Article 12.8 (Fabrication AFE) without the requirement
for approval as a General Matter.)
The Parties shall decide and take action upon all General Matters
and Elections in accordance with the provisions of this Article 8.
8.2 Voting Procedures on General Matters and Elections: Unless
otherwise provided, any General Matter or Election shall require
the approval of the Parties and shall be decided by a vote of the
Parties as follows:
8.2.1 Voting Interest: Each Party shall have a voting interest
equal to its Working Interest in a Designated Prospect or,
with respect to a Non-Consent Operation, its Participating
Interest in such operation, as applicable.
8.2.2 Vote Required: The Parties shall attempt to reach unanimous
agreement regarding proposals requiring approval of the
Parties. However, in the event that the Parties cannot
unanimously agree, (except as otherwise provided in this
Agreement), a General Matter shall be decided by an
affirmative vote of: one (1) or more of the Parties having a
combined voting interest of fifty percent (50%) or more.
For General Matters where an AFE is not required with a
proposal, a Party shall evidence its vote for approval in
writing. A Party failing to vote, or respond timely to a
General Matter, shall be deemed to have voted against the
proposal.
8.2.3 Second Opportunity for an Election: Upon approval of a
proposal which requires an Election, any Party who either: (i)
elected not to approve the proposal; or (ii) failed to elect
shall have forty eight (48) hours (exclusive of Saturdays,
Sundays and federal holidays) from receipt of notice from the
Operator that a proposal has been approved, to respond with a
second Election as to its participation in the proposal.
Failure to respond in a timely manner shall be deemed an
Election not to participate. When a drilling rig is on
location and standby charges are accumulating, the time
permitted for such a response shall not exceed forty-eight
(48) hours (inclusive of Saturday, Sunday or legal holidays)
or longer period if such requesting Party agrees to bear one
hundred percent (100%) of all standby charges for said
extended period.
8.3 Response Time for General Matters and Elections: After receipt of
notice pursuant this Article 8, the Parties shall either: (i) submit
their vote in response to a General Matter proposal as described
under Article 8.1.1, or (ii) make an Election if the proposal does
not require a vote as a General Matter as described under Article
8.1.2. The Operator shall give prompt notice of the results of such
voting or Elections to each Party. Unless specified otherwise
herein, the response times required for each type of proposal shall
be as follows:
8.3.1 Well Operation Proposal: When any proposed well operation
does not require construction of a Production System, each
Party shall respond with its Election within thirty (30) days
after receipt of the proposal. When a drilling rig is on
location and standby charges are accumulating, an Election in
response to the proposal shall be made within forty-eight (48)
hours after receipt of the proposal (exclusive of Saturdays,
Sundays and federal holidays or longer period if such
requesting Party agrees to bear one hundred percent (100%) of
all standby charges for said extended period); provided that
the forty-eight (48) hour provision of this Article 8.3.1
shall not apply to a new well (other than a substitute well)
proposed under Articles 10.2 (Proposal of Exploratory
Operations), 11.1 (Proposal of Appraisal Operations) or 13.1
(Proposal of Development Operations).
8.3.2 Production System Construction: Elections involving the
construction and installation of a Production System shall
require a response within one hundred eighty (180) days after
receipt of the Fabrication AFE.
8.3.3 Other AFE Related Operations: Except as otherwise provided
for in Articles 8.3.1 and 8.3.2, the response time to a
proposed operation will depend upon the AFE gross expenditure
amount. Response times will be as follows:
(a) AFE of $250,000 or more but less than
$10,000,000 response will be made within thirty
(30) days after receipt of said proposal.
(b) AFE of $10,000,000 or more but less than
$50,000,000 response will be made within sixty
(60) days after receipt of said proposal.
(c) AFE of $50,000,000 or more response will be made
within one hundred eighty (180) days after receipt
of said proposal.
8.3.4 Other Proposals: For all other proposals requiring notice,
each Party shall respond with an Election within thirty (30)
days after receipt of the proposal.
8.3.5 Failure to Respond: Failure of any Party to respond to a
proposal within the required period shall be an Election not
to participate in the proposed operation.
8.3.6 Suspensions of Production: Anything in this Article 8.3
notwithstanding, if the MMS grants a Suspension of Production
(an "SOP") or a Suspension of Operations (an "SOO") for all or
any part of the Designated Prospect, shorter time limits set
forth as requirements of the SOP/SOO shall supersede the
longer time periods for a Party's Election as provided for
under this Agreement.
8.3.7 Standby Charges: Unless otherwise agreed between the Parties,
the Participating Parties in a prior operation shall be
responsible for standby charges accrued until all Parties
having a right to do so, have made an election to either
participate or not participate in a subsequent proposed
operation. All standby charges accruing after the final
Election regarding the subsequent operation has been made
shall be the responsibility of the Participating Parties in
the subsequent operation.
8.4 Meetings of the Parties: In addition to the annual meeting required
by Article 12.18 (Annual Operating Plan), meetings of the Parties
shall be called by the Operator upon its own motion or at the
request of any Party. Except in the case of emergency, or except
when agreed by unanimous consent, no meeting shall be called on less
than ten (10) days (exclusive of Saturdays, Sundays and federal
holidays) advance notice, and such notice shall include an agenda of
the meeting. The representative of the Operator shall be chairman
of each meeting and shall take minutes of each meeting. Only
matters set out in the agenda for the meeting shall be considered at
the meeting unless unanimously agreed to by all the Parties to this
Agreement. A Party may add items to the agenda by providing at
least five (5) days advance written notice to all Parties of such
additional items.
8.5 Designation of Representatives: The names and addresses of the
representatives who are authorized to represent and bind each Party
with respect to voting on General Matters or Elections hereunder,
are set forth in Article II of Exhibit "A" (Working Interests of
the Parties and Representatives) attached hereto. The designated
representatives may be changed by written notice to the other
Parties in accordance with Article 8.7 (Giving and Responding to
Notices).
8.6 Elections: An Election to participate in an Exploratory Operation,
an Appraisal Operation or a Development Operation shall include an
Election to participate in all necessary expenditures for drilling,
testing, logging and plugging/abandonment to the Objective Depth as
set out in the Well Plan. An Election to participate in a
Development Well shall also include an Election to participate in
all necessary expenditures through the installation of the wellhead
if set forth in the Well Plan.
8.7 Giving and Responding to Notices: All notices and responses
(including notices/proposals of General Matters, Elections) shall be
made in writing and delivered to the designated representative in
person or by facsimile transmission (followed by a phone call
confirming receipt), U.S. mail, overnight express or courier. When
a drilling rig is on location and standby charges are accumulating,
all notices and responses shall be given by telephone and
immediately confirmed in writing. Any notices and responses shall
be effective only when received by the Party to whom such notice,
proposal or response is directed except as otherwise provided in
this Article 8.7. Any notice or response transmitted by facsimile
shall be deemed given and received only after the receiving Party
has confirmed receipt of such facsimile. Any notice or response
transmitted by overnight express or courier shall be deemed given
and received twenty-four (24) hours (exclusive of Saturdays, Sundays
and federal holidays) after such notice or response is deposited or
transmitted. Any notice or response by U.S. mail (other than
overnight express) shall be deemed given and received five days
(exclusive of Saturdays, Sundays and federal holidays) after the
notice or response is deposited in the mail.
8.8 Content of Notice: Any notice which requires a response within a
time period shall indicate which of the response times specified in
Article 8.3 (Response Time for General Matters and Elections) is
required. If a notice proposes a well operation, the notice shall
include the following information:
(a) the type of well operation being proposed, i.e., Exploratory,
Appraisal or Development Operation(s);
(b) any Well Plan applicable to for the proposed operation; and
(c) an AFE showing the estimated Costs of the operation, including
all necessary expenditures associated with the drilling,
testing and completing or abandoning the well.
If the notice proposes a Production System, Subsea Production
System, Subsequent Production System or Facilities, the notice shall
include the following information:
(a) the type of system or Facilities being proposed; and
(b) description of same, including location, estimated Costs of
operation, including design, engineering, fabrication,
transportation and installation.
8.9 Agent for Mobil Entities:
(a) For all purposes of this Agreement, except for any Designation
of Operator recognized by the MMS, Mobil Oil Corporation and
Mobil Oil Exploration & Producing Southeast Inc., collectively
herein the Mobil Entities , agree that Mobil Exploration &
Producing U.S. Inc. shall be the true and lawful agent of the
Mobil Entities hereunder with respect to all of the rights,
powers and duties of the individual Mobil Entities, including,
without limitation, the giving and receiving of notices and
taking any action on behalf of the individual Mobil Entities.
Mobil Exploration & Producing U.S. Inc. accepts and
acknowledges this relationship and agrees to perform same
hereunder.
(b) Enserch Exploration, Inc. and Reading & Bates Development Co.
shall be entitled to and agrees to treat any notice given or
action taken by Mobil Exploration & Producing U.S. Inc., as a
notice from or an action by the Mobil Entities.
8.10 Votes by Affiliates: For purposes of this Article 8 it is understood
and agreed that the interest of the Mobil Entities, as well as any
of its or their Affiliates which subsequently become a Party to this
Agreement, shall be aggregated and combined, for all purposes
hereof, including but not limited to notice, voting, Election and
approval purposes, as if the Mobil Entities constituted a single
Party to this Agreement. Similarly, each of Enserch Exploration,
Inc. and its Affiliates or Reading & Bates Development Co. and its
Affiliates shall be aggregated and combined, for all purposes
hereof, including but not limited to notice , voting, Election and
approval purposes, should any of their respective Affiliates
subsequently become a Party to this Agreement. Such aggregation
and combination shall not extend to any assignee or transferee to a
non-Affiliate permitted under the terms of Article 24 (Successors,
Assigns and Sale of Interest).
ARTICLE 9
GEOPHYSICAL OPERATIONS
9.1 Geophysical Operations: Any Party may propose to acquire or process
geophysical surveys (other than shallow hazard surveys, velocity
surveys or other similar well bore geophysical operations) to
evaluate all or any portion (s) of the Contract Area at any time
during the term of this Agreement. These geophysical surveys may
consist of either conducting proprietary surveys, purchasing
speculative surveys from vendors, or participating in group
shoot surveys. Geophysical Operations are not to be considered
Exploratory, Appraisal, or Development Operations and may be
conducted simultaneously with Exploratory, Appraisal, or Development
Operations.
9.1.1 Conduct of Proprietary Geophysical Operations: The Operator
shall conduct all proprietary geophysical surveys (or
processing) for the account of the Participating Parties based
upon their Participating Interest share of the Costs of the
surveys. The Operator shall provide the Participating Parties
with copies of all field data and support documentation as
appropriate for any and all seismic data collected from the
geophysical survey. The Operator shall obtain all licenses
and/or permits from all governmental agencies necessary to
support the surveys. The ownership of any proprietary
geophysical data derived from a proprietary survey shall be
limited to the field tapes, i.e., raw data and initial
processing (not including re-processed or interpreted data)
and owned on the basis of the Parties Participating Interests
in the survey. If the geophysical data is acquired by a
geophysical contractor instead of through the Operator, then
wherever in this Article the word Operator appears,
Contractor shall be substituted therefor. If a Party elects
not to participate in a proprietary geophysical survey, then a
Participating Party shall elect to either : (i) proceed with
the Geophysical Operation with the interest of the Non-
Participating Party shared by the Participating Parties on the
basis of their respective Working Interests, unless otherwise
agreed, or (ii) change its Election to become a Non-
Participating Party. A Non-Participating Party shall not be
entitled to any geophysical data obtained from the proprietary
geophysical survey unless the Non-Participating Party agrees
to become an underinvested Party per terms of Article 16.5.3
(Geophysical Operations, Integrated Project Team and/or Final
Design AFE).
9.1.2 Group-Shoot and Speculative Seismic Surveys: The Parties
shall make a good faith effort to coordinate the acquisition
of any new group-shoot or speculative seismic surveys covering
one or more of the Leases within the Contract Area. This
shall enable all Parties who desire to acquire such data to
take advantage of group rates available from most seismic
contractors and will allow each Party a license to use such
data. For such seismic data purchases covering the Leases,
the acquiring Parties shall mutually agree upon the Cost
shares of the total licensing fee (rather than on their
Working Interest shares).
ARTICLE 10
EXPLORATORY OPERATIONS
10.1 Application: Exploratory Operations shall mean all operations
(including any subsequent Exploratory Operation) conducted by one or
more of the Parties hereunder in the drilling, testing and
completing of the first well (including a substitute well for such
well) in a Designated Prospect as described in this Article 10
(Exploratory Operations). The Costs, risks and obligations of
Exploratory Operations conducted in accordance with this Agreement
shall be borne by the Parties as provided in Article 10.2.4
(Exploratory Operations Costs) below.
10.2 Proposal of Exploratory Operations: Any Party may propose to
conduct an Exploratory Operation within a Designated Prospect by
giving notice of the proposal (along with the associated AFE and
Well Plan) to all other Parties. If all the Parties elect to
participate in drilling the proposed Exploratory Well, Operator
shall commence the proposed well in accordance with this Article 10
and drill same at their Cost and risk. No Exploratory Well shall be
drilled by any Party hereto on any Designated Prospect without the
approval of one or more Parties having a combined voting interest of
fifty percent (50%) or more except, however: (a) subsequent to the
beginning of the last two (2) years of the primary term of any Lease
within such Designated Prospect having a primary term of five (5)
years (regardless of whether the lease has a primary term which will
extend to eight (8) years) or (b) subsequent to the beginning of the
last three (3) years of any Lease within such Designated Prospect
having a primary term of ten (10) years upon which there is no well
agreed to be drilled by at least a fifty percent (50%) voting
interest, any one or more of the Parties hereto may drill an
Exploratory Well upon such Lease upon its Election. If fewer than
all the Parties elect to participate in and agree to bear one
hundred percent (100%) of the Cost and risk of drilling the proposed
well or conducting a proposed operation, Operator shall drill such
well or conduct such operation, provided that a Participating Party
may, subject to Article 4.2, take over the operation as substitute
Operator in the event Operator does not elect to participate. The
Operator (or substitute operator) shall then commence the
Exploratory Operation at the sole Cost and risk of the Participating
Parties. Except as provided in Article 16.2 (Acreage Forfeiture
Provisions) and Article 16.4 (Non-Consent Operations to Maintain a
Designated Prospect), Costs of a Non-Consent Exploratory Operation
will be recouped in accordance with Article 16 (Non-Consent
Operations).
10.2.1 Well Plan's Minimum Specifics: The Well Plan for any
Exploratory Well and any proposed Subsequent Exploratory
Operation will include at least the following
information:
(a) the surface and target bottomhole locations;
(b) the expected spud date and the anticipated time
necessary to conclude drilling, evaluation,
completion and/or abandonment operations;
(c) the true vertical depth to be drilled, along with
the specified Objective Depth (and other target
zones to be penetrated);
(d) the proposed drilling plan, including the casing
program and any anticipated Sidetracking
operations;
(e) details of any coring, logging or other evaluation
operations to be conducted; and
(f) information concerning the drilling rig to be
used, including day rates, water depth rating and
other limitations relevant to the drilling
operations to be conducted.
10.2.2 Pre-Spud Technical Meeting and Revision of Well Plan:
Subsequent to the approval of the Exploratory Operation,
but prior to commencing such Exploratory Operations
(other than a substitute operation), the Participating
Parties shall meet for a Pre-Spud Technical Meeting .
The purpose of the meeting is to review the Well Plan
describing the specific operations planned for the
Exploratory Well. Any proposed revision to the
operations specified in the original Well Plan and AFE
shall require mutual agreement of the Participating
Parties. Any such revision to the Well Plan shall be
evidenced by the signature to an amended AFE for the
proposed Exploratory Operation. In the absence of
agreement upon a revised Well Plan, the original Well
Plan and AFE shall stand as approved. Any revisions to
the original Well Plan or AFE by the Participating
Parties shall not give any Non-Participating Party an
additional opportunity to make an Election unless the
Objective Depth is changed or the target bottomhole
location is changed by more than three hundred (300)
feet, in which case the Exploratory Operation shall be
proposed anew to all Parties having the right to elect
thereon.
10.2.3 Timely Operation: A proposed Exploratory Operation
shall be commenced within one hundred eighty (180) days
from the date upon which it is approved except as a
result of Force Majeure as set forth in Article 25.1.
If operations have not commenced in a timely manner, the
approved Exploratory Operation shall be deemed
withdrawn, with the effect as if the Exploratory
Operation had never been approved. If an approved Ex-
ploratory Operation is deemed withdrawn due to lack of
timely commencement of operations, any Costs incurred
during said one hundred eighty (180) day period which
are attributable to the proposed operation shall still
be chargeable to the Participating Parties. An
Exploratory Operation shall be deemed to have commenced
on the date the rig arrives on location or, if the rig
is already on location, the date when actual drilling
operations for the proposed Exploratory Operation are
begun.
10.2.4 Exploratory Operations Costs: The Costs, risks and
obligations associated with drilling, testing, logging
and abandoning (whether permanent or temporary) an
Exploratory Well, any substitute well and any subsequent
Exploratory Operations shall be borne by the Par-
ticipating Parties in proportion to their Participating
Interest in such Exploratory Operation.
10.2.5 AFE Overruns and Substitute Well: The Operator shall
timely commence an Exploratory Operation and continue
the operation with due diligence to the Objective Depth
subject to (i) a supplemental AFE s being required
pursuant to Article 6.2 (Authorization for Expenditure
and Supplemental Authorization For Expenditure) or (ii)
the Operator encountering mechanical difficulties,
uncontrolled influx of subsurface water, abnormal
pressures, pressured or heaving shale, salt, granite or
other practicably impenetrable substances or other
similar conditions prevailing in the hole that render
further drilling impracticable. If the Exploratory Well
is abandoned due to the conditions described under
10.2.5 (ii), then the Operator or any Participating
Party may propose a substitute well (with the associated
AFE and Well Plan), and each Participating Party in the
abandoned Exploratory Well shall make an Election
whether to participate in the proposed substitute well.
The Operator (or substitute Operator) shall commence the
substitute well at the sole Cost and risk of the Parties
making an Election to participate. Any Party who makes
an Election not to participate in either (i) or (ii)
above shall be subject to the provisions of Article 16.2
(Acreage Forfeiture Provisions) or Article 16.5.1 (Non-
Consent Subsequent Exploratory Operations), whichever is
applicable.
10.3 Subsequent Exploratory Operations at Objective Depth: After (i) the
Exploratory Well (or its substitute) has been drilled to its
Objective Depth, (ii) all operations in the controlling AFE and Well
Plan have been completed or terminated (except plug and abandon) and
(iii) all logs and test results have been distributed to the
Participating Parties, the Operator, shall promptly notify the
Participating Parties of the Operator's proposal for one of the
following operations:
(a) conduct Additional Testing, Coring or Logging of the
formations encountered prior to setting production casing;
(b) Sidetrack the well bore to core the formations encountered;
(c) Deepen the well to a new Objective Depth (however, if a casing
string is required to Deepen the well, then option "d" shall
precede Deepening the well);
(d) Sidetrack the well to another bottomhole location not deeper
than the stratigraphic equivalent of the original Objective
Depth;
(e) conduct production testing;
(f) conduct on the well other operations not listed herein;
(g) complete the well at Objective Depth in the objective zone or
formation;
(h) plug back the well and attempt a completion in a shallower
zone or formation;
(i) temporarily abandon the well; or
(j) permanently plug and abandon the well.
10.3.1 Response to Operator's Proposals: Within forty-eight
(48) hours (exclusive of Saturdays, Sundays and federal
holidays) after receipt of Operator's proposal to
conduct Subsequent Exploratory Operations, or longer
period if such requesting Party agrees to bear one
hundred percent (100%) of all standby charges for said
extended period, each Participating Party shall respond
to the Operator's proposal by making its Election to
participate in Operator's proposal or by making a
counterproposal. Failure of a Participating Party to
respond to a proposal (except a proposal to plug and
abandon) shall be deemed an Election not to participate
in the Operator's proposal and to become a Non-
Participating Party from that point.
10.3.2 Counterproposals: If a Participating Party makes a
counterproposal for Subsequent Exploratory Operations,
the other Participating Parties shall have an additional
twenty-four (24) hours to respond to all
counterproposals. If conflicting proposals for
Subsequent Exploratory Operations are made, preference
for voting shall be given first to operation (a) above,
next to operation (b) above, and so forth. If different
depths or locations are proposed for Subsequent
Exploratory Operations, preference shall be given to the
shallowest depth (or the bottomhole location nearest the
existing well bore) and then to other depths or
bottomhole locations in descending (or more distant)
order. After a decision to conduct a Subsequent
Exploratory Operation is made and the Subsequent
Exploratory Operation is commenced, the remaining
proposals for other types of subsequent Exploratory
Operations shall be deemed withdrawn. At the completion
of the Subsequent Exploratory Operation, the Operator
shall again submit proposal(s) for Subsequent
Exploratory Operations to the Participating Parties,
through the procedure provided herein, until such time
as the well is plugged and abandoned.
10.3.3 Approval of Subsequent Exploratory Operations by All
Parties: If the proposed Subsequent Exploratory
Operation is approved by all then-Participating Parties,
the Operator (or substitute Operator) shall commence the
Subsequent Exploratory Operation at the Cost(s) and risk
of the Participating Parties.
10.3.4 Approval of Subsequent Exploratory Operations by Fewer
Than All Parties: If a proposal for Subsequent
Exploratory Operations (except a proposal to plug and
abandon), is approved by at least a fifty percent (50%)
interest but by fewer than all then-Participating
Parties, then the Operator (or substitute Operator)
shall conduct the operation at the sole Cost and risk of
the Participating Parties. Any Non-Participating Party
in a Subsequent Exploratory Operation shall be subject
to Article 16.5.1(Non-Consent Subsequent Exploratory
Operations). A Non-Participating Party in a Subsequent
Exploratory Operation shall be relieved of the Costs,
risks and obligations of the Subsequent Exploratory
Operation, except as to its share of the Costs of
plugging and abandoning the Exploratory Well in its
then-current condition. No operation shall be performed
on the well unless deemed by the Operator to be safe and
the well bore is in a condition to perform the proposed
operation.
10.3.5 Subsequent Exploratory Operations If Not Approved: If
no proposed Subsequent Exploratory Operation (except a
proposal to plug and abandon) receives approval by the
Participating Parties having a voting interest of at
least fifty percent (50%), then prior to an Exploratory
Wells being plugged and abandoned, Operator (or
substitute Operator) shall conduct at the sole Cost and
risk of the Participating Parties, the proposed
Subsequent Exploratory Operation receiving the largest
percentage of Participating interest approval, and in
the event of conflicting Elections between two (2) or
more Subsequent Exploratory Operations, by Parties
having equal interests, then preference shall be given
first to operation (a) then (b) and so on, as set forth
in Article 10.3 (Subsequent Exploratory Operations at
Objective Depth). Any Non-Participating Party in such
subsequent Exploratory Operation shall be subject to
Article 16 (Non-Consent Operations). Such Non-
Participating Party shall be relieved of the Costs, risk
and obligation of the Subsequent Exploratory Operation,
except as to its share of the Costs of plugging and
abandoning the Exploratory Well in its then-current
condition. No operation shall be performed on the well
unless deemed by the Operator to be safe and the well
bore is in a condition to perform the operation.
10.4 Deeper Drilling: A proposal to drill an Exploratory Well to an
Objective Depth below the deepest Producible Reservoir penetrated by
a Producible Well or to reenter and Deepen an existing Exploratory
Well to an Objective Depth below the deepest Producible Reservoir
penetrated by a Producible Well shall require unanimous approval of
the Parties.
10.5 Plugging and Abandoning Costs: Upon the conclusion of all operations
set forth in an Exploratory Operation s Well Plan and all Subsequent
Exploratory Operations on such well, or if the Operator encounters
mechanical difficulties or impenetrable conditions, which make
further drilling impracticable, then the Operator may propose to
plug and abandon the well. Upon approval of the well abandonment by
the Participating Parties having a voting interest of at least fifty
percent (50%) or, failing approval, the Operator deems the well bore
not to be safe or in a condition to perform operations, the Operator
shall commence the plugging and abandonment of the well. The
Participating Parties in the original operation shall pay all Costs
of plugging and abandoning the Exploratory Well (except any
increased plugging and abandoning Costs associated solely with a
Subsequent Exploratory Operation conducted as a Non-Consent
Operation). The Participating Parties in any Non-Consent Operation
shall be responsible for the increased plugging and abandoning Costs
attributable to the Non-Consent Operation.
10.6 Conclusion of Exploratory Operations: Exploratory Operations shall
cease in any Designated Prospect after the abandonment of the
Exploratory Well, whether permanent or temporary, and the release of
the rig from the Exploratory Well (including any substitute well).
10.7 Subsurface Team: Within sixty (60) days after rig release of the
Exploratory Well, the Parties shall form a subsurface team. Each
Party shall be entitled to have at least one (1) representative on
the subsurface team. Each Party shall be responsible for designating
its representative(s) for the subsurface team. A Party's
representatives for the subsurface team may be changed at any time.
The salaries, burdens, benefits, other compensation and expenses of
each subsurface team member shall be the responsibility of the Party
employing or providing the subsurface team member. The Operator
shall serve as the coordinator for the subsurface team. Members of
the subsurface team will work independently at office locations
provided by the Party designating such member. The responsibilities
of the subsurface team shall include but not be limited to the
following items:
- making recommendations for Appraisal Operations,
- evaluating potential Producible Reservoirs within a Designated
Prospect, and;
- advising the Integrated Project Team regarding subsurface
matters so the Integrated Project Team can more effectively
assist the Operator in the preparation of the Development Plan
pursuant to Article 12 (Development Plan).
The subsurface team will meet as it deems necessary to carry out the
above activities. Once the subsurface team is formed, it will
remain in existence until the expiration or dissolution of the
Designated Prospect.
ARTICLE 11
APPRAISAL OPERATIONS
11.1 Proposal of Appraisal Operations: After completion of Exploratory
Operations any Party may propose to conduct an Appraisal Operation
within a Designated Prospect by giving notice of the proposal (along
with the associated AFE and Well Plan) to all other Parties. If all
the Parties agree to participate in drilling the proposed Appraisal
Well, Operator shall commence the proposed well in accordance with
this Article 11 and drill same at their Cost and risk. No Appraisal
Well shall be drilled by any Party hereto on any Designated Prospect
without the approval of one or more Parties having a combined voting
interest of fifty percent (50%) or more except, however: (a)
subsequent to the beginning of the last two (2) years of the primary
term of any Lease within such Designated Prospect having a primary
term of five (5) years (regardless of whether the Lease has a
primary term which extends to eight (8) years); (b) the last three
(3) years of the primary term of any Lease within such Designated
Prospect having a primary term which has been extended to eight (8)
years; or (c) subsequent to the beginning of the last three (3)
years of any Lease within such Designated Prospect having a primary
term of ten (10) years upon which there is no well being reworked,
drilled, or agreed to be drilled by at least a fifty percent (50%)
voting interest, any one or more of the Parties hereto may drill an
Appraisal Well upon such Lease upon its Election. If fewer than all
the Parties elect to participate in and agree to bear 100% of the
Cost and risk of drilling the proposed well or conducting a proposed
operation, Operator shall drill such well or conduct such operation,
provided that a Participating Party may, subject to Article 4.2,
take over the operation as substitute Operator in the event Operator
does not elect to participate. Costs of a Non-Consent Appraisal
Operation will be recouped in accordance with Article 16 (Non-
Consent Operations). The formation of an Integrated Project Team
may occur concurrently with Appraisal Operations.
11.1.1 Well Plan's Minimum Specifics: The Well Plan for the
Appraisal Operation shall include at least the
information set forth under Article 10.2.1 (Well Plan's
Minimum Specifics).
11.1.2 Pre-Spud Technical Meeting and Revision of Well Plan:
The Pre-spud Technical Meeting and Revision of the Well
Plan shall be in accordance with Article 10.2.2 (Pre-
Spud Technical Meeting and Revision of Well Plan). The
Well Plan for an Appraisal Operation shall be deemed
automatically revised with each Sidetracking, Deepening,
or additional Operations approved by the Participating
Parties.
11.1.3 Timely Operation: A proposed Appraisal Operation shall
be commenced within one hundred eighty (180) days from
the date upon which it is approved. Except as a result
of Force Majeure (Article 25.1), if operations have not
commenced in a timely manner, the approved Appraisal
Operation shall be deemed withdrawn, with the effect as
if the Appraisal Operation had never been approved. If
an approved Appraisal Operation is deemed withdrawn due
to lack of timely commencement of operations, any Costs
incurred during said one hundred eighty (180) day period
which are attributable to the proposed operation shall
still be chargeable to the Participating Parties. An
Appraisal Operation for the drilling of an Appraisal
Well shall be deemed to have commenced on the date the
rig arrives on location or, if the rig is already on
location, the date when actual drilling operations are
begun.
11.1.4 AFE Overruns and Substitute Well: The Operator shall
timely commence an Appraisal Operation and continue the
operation with due diligence to the Objective Depth,
subject to (i) a supplemental AFE being required
pursuant to Article 6.2 or (ii) the Operator
encountering mechanical difficulties, uncontrolled
influx of subsurface water, abnormal pressures,
pressured or heaving shale, salt, granite or other
practicably impenetrable substances or other similar
conditions prevail in the hole that render further
drilling impracticable. If the Appraisal Well is
abandoned due to the conditions described under Section
11.1.4 (ii), then the Operator or any Participating
Party may propose a substitute well (with the associated
AFE and Well Plan), and each Participating Party in the
abandoned Appraisal Well will make an Election whether
to participate in the proposed substitute well. The
Operator (or substitute Operator) shall commence the
substitute well at the sole Cost and risk of the Parties
making an Election to participate. Costs of a Non-
Consent substitute well will be recouped in accordance
with Article 16 (Non-Consent Operations).
11.2 Subsequent Appraisal Operations at Objective Depth: After (i) the
Appraisal Operation has been drilled to its Objective Depth, (ii)
all operations in the controlling AFE and Well Plan have been
completed or terminated (except plug and abandon) and (iii) all logs
and test results have been distributed to the Participating Parties,
the Operator shall promptly notify the Participating Parties (and
Non-Participating Party(ies) in the case of a proposal under Section
11.2 (c) and (d), if applicable) of the Operator's proposal for one
of the following operations:
(a) conduct Additional Testing, Coring or Logging of the
formations encountered prior to setting production casing;
(b) Sidetrack the well bore to core the formations encountered;
(c) Sidetrack the well to another bottomhole location not deeper
than the stratigraphic equivalent of the original Objective
Depth;
(d) Deepen the well to a new Objective Depth;
(e) conduct production testing;
(f) complete the well at the Objective Depth in the objective zone
or formation;
(g) plug back the well and attempt a completion in a shallower
zone or formation;
(h) conduct on the well other operations not listed herein;
(i) temporarily abandoning the well; or
(j) permanently plug and abandon the well.
11.2.1 Response to Operator's Proposals: Within forty-eight
(48) hours (exclusive of Saturdays, Sundays and federal
holidays) after receipt of Operator's proposal to
conduct subsequent Appraisal Operations, or longer
period if such requesting Party agrees to bear one
hundred percent (100% ) of all standby charges for said
extended period, the Participating Parties shall
respond to the Operator's proposal by making its
Election to Operator's proposal or making a
counterproposal. Failure of a Participating Party to
respond to a proposal (except a proposal to plug and
abandon) shall be deemed an Election not to participate
in the Operator's proposal and to become a Non-
Participating Party from that point.
11.2.2 Counterproposals: If a Participating Party makes a
counterproposal for a subsequent Appraisal Operation,
the other Participating Parties shall have an additional
twenty-four (24) hours to respond to all
counterproposals. If conflicting proposals for
subsequent Appraisal Operations are made, preference for
voting shall be given first to operation (a) above, next
to operation (b) above, and so forth. If different
depths or locations are proposed for subsequent
Appraisal Operations, preference for voting shall be
given to the shallowest depth (or the location nearest
the existing well bore) and then other depths or
locations in descending (or more distant) order. After
a decision to conduct a subsequent Appraisal Operation
is made and the subsequent Appraisal Operation is
commenced, the remaining proposals for other types of
subsequent Appraisal Operations shall be deemed
withdrawn. At the completion of the subsequent
Appraisal Operation, the Operator shall again submit
proposal(s) for subsequent Appraisal Operations to the
Participating Parties, through the procedure provided
herein, until such time as the well is plugged and
abandoned.
11.2.3 Approval of Subsequent Appraisal Operations by All
Parties: If the proposed subsequent Appraisal Operation
is approved by all then Participating Parties, the
Operator (or substitute Operator) shall commence the
subsequent Appraisal Operation at the Cost(s) and risk
of the Participating Parties.
11.2.4 Approval of Subsequent Appraisal Operations by Fewer
Than All Parties: If a proposal for Subsequent
Appraisal Operations (except a proposal to plug and
abandon), is approved by the Election of at least
fifty percent (50%) interest of the then Participating
Parties' interest, but by fewer than all then
Participating Parties, then the Operator (or substitute
Operator) shall conduct the operation at the sole Cost
and risk of the Participating Parties. Any Non-
Participating Party in a Subsequent Appraisal Operation
shall be subject to Article 16 (Non-Consent Operations).
A Non-Participating Party in a Subsequent Appraisal
Operation shall be relieved of the Costs, risks and
obligations of the Subsequent Appraisal Operation,
except as to its share of the Costs of plugging and
abandoning the Appraisal Well in its then-current
condition. No operation shall be performed on the well
unless deemed by the Operator to be safe and the well
bore is in a condition to perform the proposed
operation.
11.2.5 Subsequent Appraisal Operations If Not Approved: If no
proposed Subsequent Appraisal Operation (except a
proposal to plug and abandon) receives sufficient
election to be approved by at least fifty percent (50%)
interest of the then participating Parties, then prior
to an Appraisal Well being plugged and abandoned,
Operator (or substitute Operator) shall conduct at the
sole Cost and risk of the Participating Parties, the
Subsequent Appraisal Operation receiving the largest
percentage of Participating interest approval, and in
the event of equal elections between two (2) or more of
such proposed Appraisal Operations, then preference
shall be given first to operation (a) then (b) and so
on, as set forth in Article 11.2 (Subsequent Appraisal
Operations at Objective Depth). Any Non-Participating
Party in such Subsequent Appraisal Operation shall be
subject to Article 16 (Non-Consent Operations). Such
Non-Participating Party shall be relieved of the Costs,
risk and obligation of the subsequent Appraisal
Operation, except as to its share of the Costs of
plugging and abandoning the Appraisal Well in its then-
current condition. No operation shall be performed on
the well unless deemed by the Operator to be safe and
the well bore is in a condition to perform the
operation.
11.3 Election by Non-Participating Parties in Deepening or Sidetracking
Appraisal Operations: If an Appraisal Well is drilled to its
initial Objective Depth and does not appear to result in a well that
will qualify as a Producible Well, and if any Participating Party
proposes to either (i) Deepen said Appraisal Well, or (ii) Sidetrack
said Appraisal Well, then, as provided in Article 11.2 (c) or (d),
the Operator shall notify each original Non-Participating Party of
the proposal. Each original Non-Participating Party may respond
with an Election regarding such a proposal to Deepen or Sidetrack by
notifying the Operator of its Election within forty-eight (48) hours
(exclusive of Saturdays, Sundays and federal holidays) after
receiving the Operator's notice, or longer period if such requesting
Party agrees to bear one hundred percent (100%) of all standby
charges for said extended period. Any original Non-Participating
Party making an Election to participate in the Deepening or
Sidetracking of an Appraisal Well shall be deemed to be
underinvested in an amount equal to its share of the Cost incurred
in such Non-Consent Well (including but not limited to drilling,
testing, logging or coring) prior to such Deepening or Sidetracking.
The Parties that participated in drilling to the initial Objective
Depth will be deemed overinvested in that amount, and all Costs for
operations under this Agreement that would otherwise be allocated
proportionately to such overinvested Parties shall be allocated to
the underinvested Parties until all overinvestments are eliminated.
Any original Non-Participating Party making an Election to
participate in the Deepening or Sidetracking of an Appraisal Well
shall remain a Non-Participating Party in the Appraisal Well to the
initial Objective Depth until the Costs recoverable under Article 16
(Non-Consent Operations), less any payments through a
Disproportionate Spending Settlement and/or Article 16.9
(Underinvestment of Costs), have been recouped by the original
Participating Parties.
11.4 Deeper Drilling: A proposal to drill an Appraisal Well to an
Objective Depth below the deepest Producible Reservoir penetrated by
a Producible Well shall require approval of the Parties having at
least a fifty percent (.50%) voting interest and shall be further
subject to the following provisions.
11.4.1 Limited Participation in Deeper Drilling: If a proposal
is approved pursuant to Article 11.4 above, any Party
may either; (a) make an Election to participate in the
proposed Deeper Drilling operation; (b) make an Election
not to participate in the proposed Deeper Drilling
operation; or (c) make an Election to limit its
participation to drilling to the base of the deepest
Producible Reservoir to be penetrated by the Deeper
Drilling operation.
A Party making an Election to limit its participation in
a Deeper Drilling Appraisal Well to the base of the
deepest Producible Reservoir shall bear its
Participating interest share of the Cost and risk of
drilling (including abandonment) to the base of the
deepest Producible Reservoir. If a Party makes an
Election not to participate in the proposed Deeper
Drilling, the proposed Deeper Drilling operations shall
be conducted pursuant to Article 16 (Non-Consent
Operations).
11.4.2 Multiple Completion Alternatives Above and Below the
Deepest Producible Reservoir: If a Non-Participating
Party in a Deeper Drilling operation below the deepest
Producible Reservoir considers the well to be capable of
producing at or above the deepest Producible Reservoir,
and has indicated a desire to complete the well at or
above the deepest Producible Reservoir, any further
Deeper Drilling operations shall be conducted subject
to the following provisions:
(a) Multiple Completions: If all the Participating Parties
in the well agree that a multiple well completion(s) are
possible and practicable involving (i) a completion at
or above the deepest Producible Reservoir and (ii) a
completion below the deepest Producible Reservoir, the
Participating Parties in the Deeper Drilling operation
shall bear 100% of the Costs of drilling to an Objective
Depth below the deepest Producible Reservoir that are in
excess of the original Costs to drill and complete the
well in the deepest Producible Reservoir.
(b) Single Completions: If all the Participating Parties in
the well do not agree that multiple well completions are
possible or practicable, the Non-Participating Party in
the Deeper Drilling operation shall be deemed
overinvested in the original well in an amount equal to
the Non-Participating Party's Share of the original
Costs of drilling the well to the deepest Producible
Reservoir. The Participating Parties in the Deeper
Drilling operation shall assume their proportionate
share of the Non-Participating Party's Share of the
Costs of other operations conducted under this Agreement
until all overinvestments are eliminated.
(c) Overinvestments for Single Completions: The
Participating Parties as to the depths below the deepest
Producible Reservoir shall be deemed overinvested in an
amount equal to the Non-Participating Party's Share of
the well's Cost down to the deepest Producible Reservoir
at the first occurrence of the following events:
(i) the well is not a Producible Well in the deeper
depths and the well is plugged back to a shallower
zone; or,
(ii) the well is completed as a Producible Well in the
deeper depths, but Hydrocarbon production from the
deeper zone is later depleted prior to Non-Consent
Recoupment (attributable to Deeper Drilling
operation) and the well is plugged back to a
shallower zone; or,
(iii) the well is completed as a Producible Well in the
deeper depths and the Participating Parties have
recovered the applicable Non-Consent Recoupment
(attributable to the Deeper Drilling operation)
from Hydrocarbon production from the deeper zone.
The overinvestment shall be depreciated at the rate of
one-half percent (.50%) per month from the date the Deeper
Drilling operation commences to the earlier of the date
of (i), (ii) and (iii) above, but such depreciation
shall not reduce the overinvestment below forty percent
(40.0%) of the original overinvestment. The Non-
Participating Parties in the Deeper Drilling operation
shall assume their proportionate share of the
Participating Party's Share of the Costs of other
operations conducted under this Agreement until all
overinvestments are eliminated.
11.4.3 Completion Attempts At or Above the Deepest Producible
Reservoir: If a well drilled below the deepest
Producible Reservoir is not completed for production in
the deeper depths, then the Participating Parties in
said well down to the deepest Producible Reservoir shall
have a right to utilize the well for completion in a
Producible Reservoir. The Participating Parties in
drilling below the deepest Producible Reservoir in said
well shall bear the Costs (including plugging back
Costs) necessary to place the well in proper condition
for completion in a Producible Reservoir. If a well
drilled below the deepest Producible Reservoir is
damaged to the extent that it is rendered incapable of
being completed and produced at or above the deepest
Producible Reservoir in that well, the Participating
Parties in the Deeper Drilling operation shall be
obligated, at their sole Cost and risk, to restore the
well to its condition prior to the Deeper Drilling
operations below the deepest Producible Reservoir. The
Participating Parties in the Deeper Drilling Operation
shall be obligated to pay for the entire Cost of
redrilling the well if the damage cannot be repaired.
Both the Participating Parties in the original drilling
operation and the Participating Parties in the Deeper
Drilling operation shall be Participating Parties in the
completion attempt in the shallower formation.
11.5 Plugging and Abandoning Costs: Upon the conclusion of all operations
set forth in an Appraisal Operations Well Plan and all Subsequent
Appraisal Operations on such well, or if the Operator encounters
mechanical difficulties or impenetrable conditions, which make
further drilling impracticable, then the Operator may propose to
plug and abandon the well. Upon approval of the well abandonment by
the Participating Parties having a voting interest of at least fifty
percent (50%) or failing approval, the Operator deems the well bore
not to be safe or in a condition to perform further operations, the
Operator shall commence the plugging and abandonment of the well.
The Participating Parties in the original operation shall pay all
Costs of plugging and abandoning the Appraisal Well (except any
increased plugging and abandoning Costs associated solely with a
Subsequent Appraisal Operation conducted as a Non-Consent
Operation). The Participating Parties in any Non-Consent Operation
shall be responsible for the increased plugging and abandoning Costs
attributable to the Non-Consent Operation.
ARTICLE 12
DEVELOPMENT PLAN
12.1 Phased Development Plans: The results of Exploratory and/or
Appraisal Operations may justify the development of one or more
Producible Reservoirs within a Designated Prospect. The Operator
shall prepare for the approval of the Parties a Development Plan in
order to pursue such development of a Designated Prospect. In order
to provide for the orderly preparation of the Development Plan,
unless otherwise mutually agreed by all the Parties, the Parties
shall form an Integrated Project Team subject to Article 12.2
(Proposal of Integrated Project Team) whose duties are more
specifically set forth in Exhibit "G" (Integrated Project Team and
Technology Sharing) and which shall be charged with assisting the
Operator in the preparation of a Development Plan and in design,
engineering, fabrication, transportation and installation of the
Initial Production System and Facilities. In view of the Costs and
scope of Development Operations for a Designated Prospect, the
Parties may agree to divide Development Operations into an initial
Development Phase and one or more subsequent Development Phases.
Each Development Phase shall be centered upon the installation of a
new or expanded Production System for a Designated Prospect. A
separate Development Plan shall be prepared for each Development
Phase, and each Development Plan shall be developed, approved and
implemented pursuant to this Article 12.
12.2 Proposal of Integrated Project Team: The Operator shall have the
exclusive right to submit a proposal for the formation of the
Integrated Project Team during the first six (6) month period
following rig release for an Exploratory Well on any of the
Designated Prospects. However, if an Appraisal Operation is
approved by the Parties prior to the proposal for the formation of
the Integrated Project Team, the Operator's exclusive proposal
period shall be extended until six (6) months after rig release of
the last approved Appraisal Operation on any of the Designated
Prospects. If Operator fails to propose the formation of the
Integrated Project Team during its exclusive proposal period(s),
then, after expiration of the Operator's exclusive proposal
period(s), any Party may propose the formation of the Integrated
Project Team.
12.3 Integrated Project Team Election: A proposal for the formation of
the Integrated Project Team shall not require the approval of the
Parties as a General Matter. Each Party shall have an Election as
to its participation in the AFE for the Integrated Project Team,
pursuant to Article 8.3.3 (Other AFE Related Operations). The
formation and administration of the Integrated Project Team shall be
handled in accordance with Exhibit "G" (Integrated Project Team and
Technology Sharing) with the Costs of the Integrated Project Team
being charged in accordance with Exhibit "C" (Accounting Procedure).
A Party which makes an Election not to participate in the Integrated
Project Team shall become a Non-Participating Party as to the costs
of the Integrated Project Team and shall be subject to the
provisions of Article 16.5.3 (Non-Consent Geophysical Operations,
Integrated Project Team and/or Final Design AFE). A Non-
Participating Party shall not have access to the data or studies
prepared by the Integrated Project Team until satisfaction of the
requirements of Article 16.5.3.
12.4 Proposal of a Development Plan: The Operator shall have the
exclusive right for a period of twelve (12) months from the
formation of the Integrated Project Team to submit a Development
Plan for the review and approval of the Parties, such proposed
Development Plan to be based upon the work and recommendations of
the Integrated Project Team. If Operator has begun preparation of a
Development Plan during the first six (6) months of the twelve (12)
month period, but the Development Plan will not be completed and
submitted by the end of the Operator's exclusive period, the
Operator may request an extension of the exclusive period to allow
completion of the work in progress. Any request for extension shall
include a report of the progress to date and specify a date for
submission of the Development Plan not more than three (3) months
from the expiration of the exclusive submission period. The Parties
may grant an extension by a General Matter vote. If the Parties
mutually agree not to form an Integrated Project Team, then the
Operator shall have the exclusive right to propose a Development
Plan for a period of twelve (12) months following completion of the
Exploratory Operations or Appraisal Operations, whichever is later.
12.4.1 Alternative Development Plans: If a Development Plan is
not timely submitted by the Operator or the Development
Plan submitted by the Operator is not approved pursuant
to Article 12.6 (Approval of a Development Plan) or
12.6.1 (Amended Approval Requirement for Development
Plans) below, then any Party shall have the option to
submit a Development Plan. Development Plans proposed
after expiration of the Operator's exclusive period
shall be considered for approval by the Parties in the
order in which the Development Plans are submitted.
12.5 Content of the Development Plan: Any Development Plan proposed
under this Agreement shall contain sufficient detail to allow the
Parties to adequately evaluate the scope, timing, Costs and capacity
of the proposed Development Plan and Production System. All
Development Plans submitted shall include at least the following
information:
(a) Initial Production System: Description of the Initial
Production System including:
(i) the type of Production System proposed (i.e., tension
leg well jacket, floating production system, etc.),
including the Production System's location,
configuration (i.e., number of well slots or subsea
tiebacks) and production capacity;
(ii) a description of the Facilities, including the gathering
and pipeline system necessary to transport the
Hydrocarbons from the well heads to shore;
(iii) a project execution plan which includes a time schedule
for designing, contracting, fabricating, constructing,
transporting, installing, commissioning, and start-up;
(iv) the estimated date of initial Hydrocarbon production and
the estimated daily rate of Hydrocarbon production
thereafter; and,
(v) the estimated Costs of the Production System not in the
form of an AFE;
(b) Producible Reservoirs: A description of the Hydrocarbon
bearing geological formations expected to be developed under
the Development Plan along with the general area and depth of
sands or reservoirs to be developed by the Production System,
and wellstream characteristics for use in designing the
Production System;
(c) Recoverable Reserves: An estimated range of recoverable
reserves for the proposed Development Plan;
(d) Predrilling Operations: A reasonable description of
predrilling operations, if any, planned in support of later
development, including an estimate of the timing, Cost and
location of each predrilling operation;
(e) Development Wells: A reasonable description of drilling and
completion plans for all Development Wells, including an
estimate of the timing, Cost and location of each well.
(f) Other Data: Provided such information is available, any other
information reasonably necessary to perform an evaluation of
the technical and economic feasibility of the Initial
Production System provided for in the Development Plan.
12.6 Approval of a Development Plan: The Operator shall have ninety (90)
days to obtain unanimous approval of the Parties for any Development
Plan proposal submitted by the Operator during its exclusive period.
If either (i) the Operator fails to gain the unanimous approval of
the Parties or (ii) the Operator fails to submit a Development Plan,
the Parties shall have a period of ninety (90) days commencing with
either the expiration of the Operator's exclusive period or the
failure to obtain approval in which either the Operator's
Development Plan or an alternate Development Plan may be unanimously
approved by the Parties.
12.6.1 Amended Approval Requirement for Development Plans: If
a Development Plan is not unanimously approved upon
conclusion of the ninety (90) day period provided in
Article 12.6 above, then the unanimous agreement
requirement, provided for under Article 12.6 shall be
amended to provide:
(i) during this amended approval process,
consideration for approval by the Parties shall be
given first and simultaneously to any previously
proposed Development Plan;
(ii) for a twelve (12) month period following
expiration of the two (2) separate ninety (90) day
plus ninety (90) day periods, approval of a
Development Plan shall be by the Parties as a
General Matter. No new alternative Development
Plan shall be submitted during the last six (6)
months of this twelve (12) month period; and
(iii) if a Development Plan is not approved, as a
General Matter, during the twelve (12) month
period, then the Development Plan shall be
approved according to the following:
(a) If there is only one Development Plan submitted and
such Development Plan receives an affirmative vote
of at least forty percent (40%) of the voting
interest, such Development Plan shall be deemed
approved by the Parties;
(b) If there are two (2) or more Development Plans
submitted and two (2) receive an affirmative vote
of at least forty percent (40%) of the voting
interest, then the Development Plan receiving the
largest affirmative vote shall be deemed approved by
the Parties.
(c) If there are two (2) or more Development Plans
submitted and one Development Plan receives an
affirmative vote of at least forty percent (40%) of
the voting interest, and the other Development
Plan(s) receives an affirmative vote of less than
forty percent (40%) of the voting interest, then the
Development Plan receiving the affirmative vote of
at least forty percent (40%) of the voting interest
shall be deemed approved by the Parties;
(d) If two (2) competing Development Plans each receive
an affirmative vote of forty percent (40%) voting
interest, the Parties will use reasonable efforts to
diligently pursue a compromise Development Plan,
failing which then the Development Plan submitted
first shall be deemed approved by the Parties.
12.7 Final Design AFE: No later than six (6) months from the date the
Development Plan is approved as provided in Article 12.6 above,
Operator shall submit to all Parties the Final Design AFE for the
Initial Production System for their Election. Such Final Design AFE
shall include a Cost estimate for design which shall include both
the Cost of Operator and Non-Operator staff time (including
Affiliate employees) and the Cost of contract labor and services for
the design and testing necessary to adequately define the system for
the bidding of fabrication. The Final Design AFE may also include
the Cost of long-delivery equipment items which must be purchased
before the start of fabrication and construction. Operator may
provide other additional documents as necessary to allow the Parties
to adequately evaluate the Final Design AFE.
12.7.1 Response to Final Design AFE: Each Party shall respond as
to its Election in the Final Design AFE proposal within the
time frame as described in Article 8 (Voting, Notices, and
Elections). If all the Parties make an Election to
participate in the Final Design AFE, then the Operator
shall proceed with the Final Design AFE for the Joint
Account of the Parties. If a Party makes an Election not to
participate in the Final Design AFE, then each of the
Participating Parties shall elect to either: (i) proceed
with the Final Design AFE with the interest of the Non-
Participating Party shared by the Participating Parties on
the basis of their respective Working Interests, unless
otherwise agreed in writing, or (ii) change its Election to
become a Non-Participating Party. All risk, Cost, and
expense shall be borne in proportion to the respective
interests of the Participating Parties. Any Non-
Participating Party shall be subject to the Non-Consent
provisions as set forth in Article 16.5.3 (Non-Consent
Geophysical Operations, Integrated Project Team/and/or
Final Design AFE).
12.8 Fabrication AFE: No later than six (6) months from the date of the
last Election for the Final Design AFE as provided in Article 12.7
above, unless such additional time is necessary due to circumstances
beyond Operator's control, Operator shall submit a Fabrication AFE
for the Initial Production System to all Parties for their Election.
The Fabrication AFE shall consist of separate AFEs for each major
component in the construction, fabrication and installation of the
Initial Production System identified in the approved Development
Plan and Final Design AFE. If the Operator does not timely submit
the Fabrication AFE, any Party may submit a Fabrication AFE for the
Development Plan. The Fabrication AFE shall consist of a separate
AFE for: (i) the structural components of the Initial Production
System, (ii) the equipment and Facilities to be located on the
Designated Prospect (or located off the Designated Prospect but
serving the Designated Prospect), and (iii) any pipelines or other
Facilities for handling Hydrocarbon production. The Election
regarding the Fabrication AFE shall be a single Election and not an
Election as to the individual AFEs comprising the Fabrication AFE.
12.8.1 Response to Fabrication AFE: The Parties shall make their
Election as to the Fabrication AFE within the time period
as described in Article 8.3.2 (Production System
Construction). Development Wells shall be subject to
separate AFEs and shall not be included within the
Fabrication AFE. If all the Parties make an Election to
participate in the Fabrication AFE, then the Operator shall
proceed to design, fabricate, construct, transport and
install the Initial Production System for the Joint Account
of the Parties. By making an Election to participate in the
Fabrication AFE, each Participating Party commits to pay
its Participating Interest share of the Costs, risks and
liabilities of the Initial Production System as set out in
the Fabrication AFE. Each Non-Operator Participating Party
shall have the option to attend regularly scheduled
meetings between the Operator and any contractors
constructing the Initial Production System or Facilities
specified in the Fabrication AFE as well as visits to the
construction sites. Any Non-Participating Party shall be
subject to Article 16.2 (Acreage Forfeiture Provisions) and
the Participating Parties shall elect to either: (i)
proceed with the Fabrication AFE with the interest of the
Non-Participating Party shared by the Participating Parties
on the basis of their respective Working Interests, unless
otherwise agreed, or (ii) change its Election to become a
Non-Participating Party. The Working Interest of the Non-
Participating Party shall be shared by the Participating
Parties in accordance with Article 16.2.2 (Initial
Production System).
12.9 Minor Modifications and Revisions to Development Plans: In
implementing the Development Plan, the Operator may make minor
modifications and revisions to the Development Plan subject to the
following:
12.9.1 Minor Modifications to Development Plans: The Operator
may, without the approval of the Participating Parties,
make minor modifications to a Development Plan if such
minor modifications are both necessary and reasonable to
accomplish the Development Plan. For purposes of this
paragraph, a minor modification shall mean a modification
which does not cause the estimated Cost of any separate AFE
submitted under the Fabrication AFE to increase by more
than twenty-five percent (25%) or Two Million Dollars
($2,000,000), whichever is less, and does not change the
type of Production System, the number of Development Wells,
the capacity of the Facilities or the Hydrocarbon
transmission system of the Development Plan. Such minor
modifications also shall not materially change the risk or
timing of the Development Plan nor any prior Elections of
the Parties.
12.9.2 Revisions to Development Plans : A Development Plan may be
revised as needed to accommodate new data, interpretations
or other changes not covered by Article 12.9.1 (Minor
Modifications to Development Plans) or by Article 12.10
(Major Modifications to Development Plans). Any such
revision pursuant to this Article 12.9.2 shall require
approval as a General Matter. The Operator shall provide a
copy of the revised Development Plan to all Parties, except
in the case when the Development Plan is automatically
revised as a result of a Development Operation not included
in the then current Development Plan being approved as a
General Matter as provided in Article 13.1 (Proposal of
Development Operations).
12.10 Major Modifications to Development Plans: The Operator shall
promptly notify the Participating Parties whenever a major
modification to a Development Plan is anticipated and shall furnish
to the Participating Parties the Operator's proposal to modify the
Development Plan (and associated AFE's) along with the basis for the
proposal and estimated Costs. Approval of major modifications shall
require the unanimous affirmative vote of all Participating Parties
in accordance with Article 12.6. A major modification shall be
deemed to have occurred when:
(i) the type of the Production System is materially changed or
the capacity is changed by ten percent (10%) or more; or
(ii) the number of well slots of the Production System is changed
by at least twenty-five percent (25%); or
(iii) the type of Hydrocarbon transmission system is changed (e.g.,
pipeline vs. barge, etc.).
If the major modification is approved by all the Participating
Parties, then the Operator shall immediately advise any Party who
made an Election not to participate in the Fabrication AFE for the
original approved Development Plan and provide the modified
Development Plan to such Non-Participating Party. Any Non-
Participating Party shall have the right for a period of forty-five
(45) days, after receipt of the modified Development Plan from the
Operator, in which to make an Election to participate in the
modified Development Plan. Any Non-Participating Party s Election
to participate in the modified Development Plan shall be subject to
a Disproportionate Spending Settlement in an amount equal to one
hundred percent (100%) of such Non-Participating Party's share of
the actual Costs incurred for the Development Plan. The Non-
Participating Party who makes an Election to participate in the
modified Development Plan shall be an underinvested Party until such
underinvestment is eliminated. The Participating Parties shall
deliver to the Non-Participating Party who makes an Election to
participate in the modified Development Plan an assignment of one
hundred percent (100%) of such Non-Participating Party's former
Working Interest in the Designated Prospect, the wells therein and
production therefrom within thirty (30) days after full payment is
received. If the major modification is approved, the Development
Plan (and any associated AFE's) shall be deemed modified and the
Operator shall carry out the modified Development Plan. In the
event a major modification is not approved by all Participating
Parties, the Operator shall continue to implement the approved
Development Plan.
12.11 Supplemental AFE for Cost Overruns on Fabrication AFE: Shall be as
provided for in Article 6.2.6 (Supplemental AFE for Cost Overruns on
Fabrication AFE).
12.12 Termination of a Development Plan: Any proposed termination of an
approved Development Plan may only be accomplished by unanimous
consent of the Participating Parties.
12.13 Timely Operations for Initial Production Systems: The Operator shall
commence, or cause to be commenced, the construction of the Initial
Production System in any Designated Prospect(s) within one (1) year
from the last Party's Election for the Fabrication AFE. Such
construction shall be deemed timely commenced on the date the major
fabrication contract for the Production System is awarded. If such
construction has not commenced in a timely manner, then the approved
Fabrication AFE shall be deemed withdrawn with the effect as if the
Fabrication AFE had never been submitted. The above
notwithstanding, if the MMS grants a "Suspension of Production" or a
"Suspension of Operations" (an "SOP/SOO") for an approved
Development Plan, any shorter time limits set forth as requirements
of the SOP/SOO shall supersede the corresponding longer time limit
set forth in this Agreement or the Development Plan.
12.14 Expansion, Modification, or Repair of an Initial Production System:
Subsequent to the installation of the Initial Production System
described and approved in the first Development Plan for a
Designated Prospect, any Party may propose the expansion,
modification or repair of any existing Production System in which it
has participated by written notice to the other Participating
Parties in such Production System. Such proposal shall be presented
in accordance with Articles 12.18 (Annual Operating Plan) and 8.3
(Response Time for General Matters and Elections) for approval as a
General Matter. If approved as a General Matter, it will be
binding on all Participating Parties in the Initial Production
System and Operator shall proceed with such project for the benefit
of the Joint Account and all Cost, risk and expense of such
operation shall be borne in proportion to the respective
Participating Parties' Working Interest in such Initial Production
System unless otherwise agreed. This Article 12.14 shall not
constitute a limit on a Party's right to install its own Facilities
under Article 15 (Disposition of Production). The provisions of
this Article 12.14 shall not apply to subsequent Development
Phase(s).
12.15 Subsequent Development Phases: At any time after the last Party's
Election under the Fabrication AFE for the Initial Development
System, any Participating Party may propose an additional
Development Phase(s) and the installation of a subsequent or
expanded Production System(s). Upon proposal of a Subsequent
Development Phase, the Operator shall propose the formation of an
Integrated Project Team to prepare a Development Plan for the
Subsequent Development Phase. The preparation and approval of the
Development Plan for a Subsequent Development Phase shall follow the
same procedures specified in this Article 12 for the preparation and
approval of the initial Development Plan.
12.16 Access to Existing Facilities: Development Operations in subsequent
Development Phases shall have reasonable access (on a space
available basis) to gathering, processing and transportation
Facilities installed for previous Development Phases.
12.17 Non-Consent Operations in Subsequent Development Phases: If fewer
than all Parties make an Election to participate in a Subsequent
Development Phase, the Operator (or substitute Operator) shall
conduct Development Operations in the Subsequent Development Phase
for the account of the Participating Parties and at their sole Cost
and risk. The Participating Parties shall conduct the Subsequent
Development Operations in the Subsequent Development Phase with the
benefit of the non-consent provisions specified in Article 16 (Non-
Consent Operations). A Non-Participating Party in a Subsequent
Development Phase shall not be entitled to any information or data
from any Development Operation associated with such Development
Phase, unless the Non-Participating Party makes an Election to
participate in such operations of the Subsequent Development
pursuant to Article 16.7 (Operations From a Subsequent Non-Consent
Production System). Any Non-Participating Party in a Subsequent
Development Phase may retain its Working Interest in the Designated
Prospect corresponding to a Development Phase in which it
participated. However, such a Non-Participating Party shall not
unreasonably interfere with Development Operations in the Subsequent
Development Phase (and shall not make any claim for drainage upon
the Participating Parties in the Subsequent Development Phase, so
long as the Subsequent Development Phase is conducted according to
prudent operating practices). In all events, the sequence and
conduct of Development Operations in a Subsequent Development Phase
shall be controlled by the Participating Parties in the Subsequent
Development Phase Operation. Hydrocarbon production volumes between
Phases shall be measured on the basis of well tests and operating
expenses between Phases allocated upon the basis of Hydrocarbon
production volume throughput.
12.18 Annual Operating Plan: Beginning in the year in which a Development
Plan is approved for a Designated Prospect, and each subsequent year
thereafter, the Operator shall develop an Annual Operating Plan.
The Annual Operating Plan process will be used (i) as a reporting
mechanism by which the Operator will inform the Non-Operating
Parties of results of the previous year's activities, (ii) to review
ongoing operations and (iii) to forecast activities, anticipated
Hydrocarbon production volumes, operating expenses and capital
expenditures for the remainder of the current year and the next
succeeding calendar year.
12.18.1 Development and Submission of the Annual Operating Plan:
Prior to May 1 of each year, the Operator will conduct a
meeting with the Non-Operating Parties to review the
results of the previous year. The Operator will also
provide the Non-Operating Parties with its anticipated
activities for the current and following year and solicit
input regarding these activities from the Non-Operating
Parties. After this meeting, the Operator will prepare and
submit its proposed draft for the Annual Operating Plan
prior to June 1 of each year.
12.18.2 Review of the Annual Operating Plan: The Non-Operating
Parties will provide suggested changes, additions or
deletions to the Annual Operating Plan to the Operator and
all other Parties prior to July 15 of each year. The
Operator will then make any changes it deems necessary and
submit the Annual Operating Plan no later than October 1 of
each year.
12.18.3 Content of Annual Operating Plan: The Annual Operating
Plan will include an estimated capital budget, expense
budget and Operator's anticipated forecast as follows:
12.18.3.1. Capital Budget: The Annual Operating Plan shall
contain an estimated capital budget that includes the
following:
(a) a list of proposed wells to be drilled including
their anticipated order, drilling time, depths,
locations, objective sands, type of well
(Development, Appraisal, etc.), purpose of well
(production, injection, etc.) and estimated Costs;
(b) capital workovers, which shall be defined as any
workover operation conducted to recomplete a well to
a new zone or install artificial lift, listed by
well, with their estimated Cost;
(c) other capital projects requiring a gross expenditure
greater than three million dollars ($3,000,000).
The term "capital project" shall include addition of
new equipment, expansion or upgrades of existing
equipment; and
(d) an estimated total amount (in aggregate) for capital
projects.
12.18.3.2 Expense Budget: The Annual Operating Plan shall
contain an estimated expense budget that includes the
following:
(a) expense workovers, which shall be defined as any
anticipated workover operation which is not a
capital workover (such as repair work or reworks
within the same zone), listed by well, with their
estimated Cost;
(b) all expense projects requiring a gross expenditure
greater than three million dollars ($3,000,000).
The term "expense project" shall include repair,
replacement, inspection and maintenance of existing
equipment;
(c) an estimated total amount (in aggregate) for expense
projects; and
(d) estimated Operations and Maintenance (O&M)
expenditures for the year may be shown in the
aggregate. O&M expenses shall include the ongoing,
everyday expenditures necessary to operate the
field.
12.18.3.3 Operator Forecasts and Informational Items: The Annual
Operating Plan shall contain the Operator's reasonable
forecasts and projections (but are recognized as
forecasts and projections only) including the following
information:
(a) production forecasts;
(b) injection forecasts;
(c) fuel and flare gas forecasts;
(d) scheduled or planned downtime exceeding three (3)
days;
(e) data collection programs; and
(f) other areas deemed of significance by the Operator.
12.18.4 Effect of the Annual Operating Plan: The Annual Operating
Plan shall be primarily for informational and planning
purposes and shall not obligate any Party to any
expenditures or constitute an Election to participate in or
a proposal of any specific operation. However, the Annual
Operating Plan is recognized as the Operator's effort to
forecast and plan for activities during the year while
providing for input from the Non-Operators. Pursuant to
the terms and conditions of this Agreement, any Party may
make proposals for operations which were not included in
the Annual Operating Plan. Approval of any such operation,
under the terms provided in Article 8 (Voting, Elections,
and Notices), shall be deemed a modification to the Annual
Operating Plan.
ARTICLE 13
DEVELOPMENT OPERATIONS
13.1 Proposal of Development Operations: It is the intent of the Parties
to proceed with development of the Contract Area in accordance with
the approved Development Plan. Any Party may propose to conduct
specific Development Operations which were included in the
Development Plan by giving notice of the proposal and the associated
Well Plan, which shall include at least the information set out in
Article 10.2.1 (Well Plan's Minimum Specifics), and AFE to all other
Parties. Each Development Operation included in an approved
Development Plan shall not require approval as a General Matter.
The Operator (or substitute Operator) shall commence the Development
Operation at the sole Cost and risk of the Parties making an
Election to participate. Costs of a non-consent Development
Operation will be recouped in accordance with Article 16 (Non-
Consent Operations). Any Participating Party may propose to
conduct specific Development Operations which were not included in
the Development Plan. However, such a proposal shall also specify
that it is not for an operation included in the Development Plan. A
proposal for a Development Operation not included in the Development
Plan shall require approval as a General Matter and, if approved,
such Development Operation not included in the Development Plan
shall automatically revise the Development Plan. However, the
provisions of this Article 13 (Development Operations) shall not
apply to the proposal for the Initial Production System in the
Designated Prospect. The Initial Production System shall be
proposed as a part of the Development Plan in accordance with
Article 12 (Development Plan) of this Agreement.
13.1.1 Operator's Counterproposal: If a Non-Operating Party makes
a proposal that was not included in the approved
Development Plan and such proposal is approved as a General
Matter with the Operator being the non-approving Party, the
Operator shall have the option to:
(a) make an Election to participate in the operation
proposed by the Non-Operating Party;
(b) become a Non-Participating Party pursuant to the
provisions of Article 16 (Non-Consent Operations); or,
(c) make a counterproposal within the applicable response
time that attempts to satisfy the same or similar
objectives (in terms of timing and development of the
Designated Prospect) as would the Non-Operating Party's
proposal.
The Operator's counterproposal, if approved as a General
Matter, shall have the effect of voiding the Non-Operating
Party's proposal. A Party making an Election not to
participate in the Operator's counterproposal shall become
a Non-Participating Party in the Operator's counterproposal
shall become a Non-Participating Party in the operation
subject to Article 16 (Non-Coinsent Operations). If the
Operator's counterproposal is not approved, Operator shall
make its Election and commence the originally proposed
operation in a timely manner.
13.1.2 AFE Overruns and Substitute Wells: The Operator shall
timely commence a Development Operation and continue the
drilling of such well with due diligence to its Objective
Depth or until (i) a supplemental AFE is required pursuant
to Article 6.2 (Authorization for Expenditure and
Supplemental Authorization for Expenditure)) or (ii) the
Operator encounters mechanical difficulties, uncontrolled
influx of subsurface water, abnormal pressures, pressured
or heaving shale, salt, granite or other practicably
impenetrable substances or other similar conditions prevail
in the hole that render further drilling impracticable. If
the Development Well is abandoned due to the conditions
described under Section 13.1.2 (ii), then the Operator or
any Participating Party may propose a substitute well (with
the associated AFE and Well Plan), and each Participating
Party in the abandoned Development Well shall make an
Election whether to participate in the proposed substitute
well. The Operator (or substitute Operator) shall commence
the substitute well at the sole Cost and risk of the
Parties making an Election to participate. Costs of a Non-
Consent substitute Development Well will be recouped in
accordance with Article 16 (Non-Consent Operations).
13.1.3 Timely Operations: A proposed Development Operation except
as provided in Article 12.13 (not requiring the
installation of a Production System) shall be commenced
within one hundred eighty (180) days from the date upon
which the last applicable Election to participate was made.
Except as a result of Force Majeure (Article 25.1), if
operations have not been timely commenced within one
hundred eighty (180) days from the last Election date, the
proposal and Elections shall be deemed withdrawn, with the
effect as if the proposal and Elections had never been
made. If a proposal is deemed withdrawn due to lack of
timely commencement of operations, any Costs incurred
during said one hundred eighty (180) day period which are
attributable to the proposed operation shall still be
chargeable to the Participating Parties. A Development
Operation for the drilling of a Development Well shall be
deemed to have commenced on the date the rig arrives on
location or, if the rig is already on location, the date
when actual drilling operations are begun.
13.2 Subsequent Development Operations at Objective Depth: After a
Development Well (or its substitute) has been drilled to its
Objective Depth as set forth in the Well Plan (and all logs and
evaluations have been distributed to the Participating Parties), the
Operator shall promptly notify the Participating Parties of the
Operator's proposal for one of the following operations:
(a) conduct Additional Testing, Coring or Logging of the
formations encountered prior to setting production casing;
(b) complete the well at the Objective Depth in the objective zone
or formation;
(c) Sidetrack the well to another bottomhole location not deeper
than the stratigraphic equivalent of the original Objective
Depth;
(d) plug back the well and attempt a completion in a shallower
zone or formation;
(e) Deepen the well to a new Objective Depth;
(f) conduct other operations on the well not listed;
(g) temporarily abandon the well; or
(h) permanently plug and abandon the well.
13.2.1 Response to Operator's Proposal: Within forty-eight (48)
hours (exclusive of Saturdays, Sundays and federal
holidays) after receipt of Operator's proposal to conduct
Subsequent Development Operations, or longer period if such
requesting Party agrees to bear one hundred percent (100%)
of all standby charges for said extended period, each
Participating Party shall respond to the Operator's
proposal by making its Election to participate in
Operator's proposal or by making a counterproposal.
Failure of a Participating Party to respond to a proposal
(except a proposal to plug and abandon) shall be deemed an
Election not to participate in the Operator's proposal and
to become a Non-Participating Party from that point.
13.2.2 Counterproposals: If a Participating Party makes a
counterproposal for Subsequent Development Operations, the
other Participating Parties shall have an additional
twenty-four (24) hours to respond thereto. If conflicting
proposals for Subsequent Development Operations are made,
preference for voting shall be given first to operation (a)
above, next to operation (b) above, and so forth. If
different depths or locations are proposed for Subsequent
Development Operations, preference shall be given to the
shallowest depth (or the location nearest the existing well
bore) and then other depths or locations in descending (or
more distant) order. After a decision to conduct a
Subsequent Development Operation is made and the Subsequent
Development Operation is commenced, the remaining proposals
for other types of Subsequent Development Operations shall
be deemed withdrawn. At the completion of the Subsequent
Development Operation, the Operator shall again submit
proposal(s) for Subsequent Development Operations to the
Participating Parties, through the procedure provided
herein, until such time as the well is plugged and
abandoned.
13.2.3 Approval of Subsequent Development Operations by All
Parties: If the proposed Subsequent Development Operation
is approved by all Parties, the Operator (or substitute
Operator) shall commence the Subsequent Development
Operation at the Cost(s) and risk of the Participating
Parties.
13.2.4 Approval of Subsequent Development Operations as a General
Matter by Fewer Than All Parties: If a proposal for
Subsequent Development Operations (except a proposal to
plug and abandon), is approved as a General Matter by fewer
than all Parties, then the Operator shall conduct the
operation at the sole Cost and risk of the Participating
Parties. Any Non-Participating Party in a Subsequent
Development Operation shall be subject to Article 16 (Non-
Consent Operations). A Non-Participating Party in a
Subsequent Development Operation shall be relieved of the
Costs, risks and obligations of the Subsequent Development
Operation, except as to its share of the Costs of plugging
and abandoning the Development Well in its then-current
condition. No operation shall be performed on the well
unless deemed by the Operator to be safe and the well bore
is in a condition to perform the proposed operation.
13.3 Election by Non-Participating Parties in Deepening or Sidetracking
Operations: If a Development Well is drilled to its initial
Objective Depth and does not appear to result in a well that will
qualify as a Producible Well, and if any Participating Party
proposes to either (i) Deepen said Development Well or (ii)
Sidetrack said Development Well, then as provided in Article 13.2
(c) or (e), the Operator shall notify each original Non-
Participating Party of the proposal. Each original Non-
Participating Party may respond with an Election regarding such a
proposal to Deepen or Sidetrack by notifying the Operator of its
Election within forty-eight (48) hours (exclusive of Saturdays,
Sundays and federal holidays) after receiving the Operator's notice,
or longer period if such requesting Party agrees to bear one hundred
percent (100%) of all standby rig charges for said extended period.
Any original Non-Participating Party making an Election to
participate in such Deepening or Sidetracking of a Development Well
shall be deemed to be underinvested in an amount equal to its share
of the Cost incurred in such Non-Consent Well (including but not
limited to drilling, testing, logging or coring) prior to the
Deepening or Sidetracking. The Parties that participated in
drilling to the initial Objective Depth will be deemed overinvested
in that amount, and all Costs for operations under this Agreement
that would otherwise be allocated to such overinvested Parties shall
be allocated to the underinvested Parties until all overinvestments
are eliminated. Any original Non-Participating Party making an
Election to participate in the Deepening or Sidetracking of a
Development Well shall remain a Non-Participating Party in the
Development Well to the Initial Objective Depth until the Costs
recoverable under Article 16 (Non-Consent Operations), less any
payments through a Disproportionate Spending Settlement and/or
Article 16.9 (Underinvestment of Costs), have been recouped by the
original Participating Parties.
13.4 Deeper Drilling: A proposal to drill a Development Well to an
Objective Depth below the deepest Producible Reservoir penetrated by
a Producible Well or to reenter and Deepen an existing Development
Well to an Objective Depth below the deepest Producible Reservoir
penetrated by a Producible Well shall require approval as a General
Matter and shall be further subject to the following provisions.
13.4.1 Limited Participation in Deeper Drilling: If a proposal is
approved pursuant to Article 13.4, any Party may either;
(a) make an Election to participate in the proposed Deeper
Drilling operation; (b) make an Election not to participate
in the proposed Deeper Drilling operation; or (c) make an
Election to limit its participation to drilling to the base
of the deepest Producible Reservoir to be penetrated by the
Deeper Drilling operation.
A Party making an Election to limit its participation in
a deeper Development Well to the base of the deepest
Producible Reservoir shall bear its Participating Interest
share of the Cost and risk of drilling (including
abandonment) to the base of the deepest Producible
Reservoir. If a Party makes an Election not to participate
in the proposed Deeper Drilling, the proposed Deeper
Drilling operations shall be conducted pursuant to Article
16 (Non-Consent Operations).
13.4.2 Multiple Completion Alternatives Above and Below the
Deepest Producible Reservoir: If a Non-Participating Party
in a Deeper Drilling operation below the deepest Producible
Reservoir considers the well to be capable of producing at
or above the deepest Producible Reservoir, and has indicated
a desire to complete the well at or above the deepest
Producible Reservoir, any further Deeper Drilling operations
shall be conducted subject to the following provisions:
(a) Multiple Completion: If all the Participating Parties
in the well agree that a multiple well completion(s) is
possible and practicable involving (i) a completion at
or above the deepest Producible Reservoir and (ii) a
completion below the deepest Producible Reservoir, the
Participating Parties in the Deeper Drilling operation
shall bear 100% of the Costs of drilling to an Objective
Depth below the deepest Producible Reservoir that are in
excess of the original Costs to drill and complete the
well in the deepest Producible Reservoir.
(b) Single Completions: If all the Participating Parties do
not agree that multiple well completions are possible or
practicable, the Non-Participating Party in the Deeper
Drilling operation shall be deemed overinvested in the
original well in an amount equal to the Non-
Participating Party's Share of the original Costs of
drilling the well to the deepest Producible Reservoir.
The Participating Parties in the Deeper Drilling
operation shall assume their proportionate share of the
Non-Participating Party's Share of the Costs of other
operations conducted under this Agreement until all
overinvestments are eliminated.
(c) Overinvestments for Single Completions: The
Participating Parties as to the depths below the deepest
Producible Reservoir shall be deemed overinvested in an
amount equal to the Non-Participating Party s Share of
the well s Cost down to the deepest Producible Reservoir
at the first of the following events:
(i) the well is not a Producible Well in the deeper
depths and the well is plugged back to a shallower
zone; or,
(ii) the well is completed as a Producible Well in the
deeper depths, but Hydrocarbon production from the
deeper zone is later depleted prior to Non-Consent
Recoupment (attributable to Deeper Drilling
operation) and the well is plugged back to a
shallower zone; or,
(iii) the well is completed as a Producible Well in the
deeper depths and the Participating Parties have
recovered the applicable Non-Consent Recoupment
(attributable to the Deeper Drilling operation) from
Hydrocarbon production from the deeper zone.
The overinvestment shall be depreciated at the rate of one-
half percent (.50%) per month from the date the Deeper
Drilling operation commences to the earlier of the date of
(i), (ii) and (iii) above, but such depreciation shall
not reduce the overinvestment below forty percent (40.0%)
of the original overinvestment. The Non-Participating
Parties in the Deeper Drilling operation shall assume their
proportionate share of the Participating Party's Share of
the Costs of other operations conducted under this
Agreement until all overinvestments are eliminated.
13.4.3 Completion Attempts At or Above the Deepest Producible
Reservoir: If a well drilled below the deepest Producible
Reservoir is not completed for production in the deeper
depths, then the Participating Parties in said well down to
the deepest Producible Reservoir shall have a right to
utilize the well for completion in a Producible Reservoir.
The Participating Parties in drilling below the deepest
Producible Reservoir in said well shall bear the Costs
(including plugging back Costs) necessary to place the well
in proper condition for completion in a Producible
Reservoir. If a well drilled below the deepest Producible
Reservoir is damaged to the extent that it is rendered
incapable of being completed and produced at or above the
deepest Producible Reservoir in that well, the
Participating Parties in the Deeper Drilling operation
shall be obligated, at their sole Cost and risk, to restore
the well to its condition prior to the Deeper Drilling
operations below the deepest Producible Reservoir. The
Participating Parties in the Deeper Drilling Operation
shall be obligated to pay for the entire Cost of redrilling
the well if the damage cannot be repaired. Both the
Participating Parties in the original drilling operation
and the Participating Parties in the Deeper Drilling
operation shall be Participating Parties in the completion
attempt in the shallower formation.
13.5 Plugging and Abandoning Costs: At the conclusion of all operations
set forth in a Development Well s Well Plan and all Subsequent
Development Operations on such well or if the Operator encounters
mechanical difficulties or impenetrable conditions, which make
further drilling impracticable, then the Operator may propose to
plug and abandon the well. Upon approval of the well abandonment as
a General Matter by the Participating Parties, the Operator shall
commence the plugging and abandonment of the well. The
Participating Parties in the original operations shall pay all Costs
of plugging and abandoning the Development Well (except any
increased plugging and abandoning Costs associated solely with a
Subsequent Development Operation conducted as a Non-Consent
Operation). The Participating Parties in any Non-Consent Operation
shall be responsible for the increased plugging and abandoning Costs
attributable to the Non-Consent Operation.
ARTICLE 14
USE OF/AND ADDITIONAL FACILITIES AND GATHERING SYSTEMS
14.1 Approval of Additional Facilities: Any Party may propose the
installation of additional Facilities by notice to the other Parties
together with information adequate to describe the proposed
Facilities and their estimated Costs. Except as provided in Article
15.1 (Facilities to Take In Kind), the installation of additional
Facilities shall require approval as a General Matter. Upon
approval as a General Matter, the Operator shall proceed to install
the Facilities as approved, provided, in the judgment of the
Operator, it does not interfere with continuing operations on the
Contract Area. The installation of any additional Facilities shall
be at the sole Cost and risk of the Participating Parties. Any Non-
Participating Party shall be subject to Article 16.5.5 (Non-Consent
Subsequent Production System and Facilities). This Article shall
only apply to Facilities which were not included in the approved
Development Plan.
14.2 Expansion, Modification or Repair of an Existing Production System:
Deleted. Refer to Article 12.14.
14.3 Use of Production System Located on a Designated Prospect: The
Participating Parties hereto with respect to a particular Production
System shall have priority use of the co-owned capacity for use in
operating and developing a Designated Prospect pursuant to an
approved Development Plan. Use of the Production System
attributable to a particular Designated Prospect for handling
production coming from outside such Designated Prospect may be
granted only if Production System Capacity as defined in Exhibit H
attached hereto is available beyond the requirements of an approved
Development Plan for developing a Designated Prospect. Use of
excess capacity from a Production System shall be subject to the
following priority of usage:
a. First priority to Hydrocarbon production from Leases that are
co-owned by the Participating Parties and that are located
inside the Designated Prospect(s) for which the Production System
was installed pursuant to an approved Development Plan..
b. Second priority to Hydrocarbon production from Lease(s) that
are co-owned by all of the Participating Parties in the
Production System and that are outside the Designated
Prospect(s) for which the Production System was installed
pursuant to an approved Development Plan, but from a Designated
Prospect within the Contract Area.
c. Third priority to Hydrocarbon production from Lease(s) that are
co-owned by less than all, but at least one, of the
Participating Parties in the Production System and that are
located outside the Designated Prospect(s) for which the
Production System was installed pursuant to an approved
Development Plan, but from a Designated Prospect(s) within the
Contract Area.
d. Fourth priority to hydrocarbon production from a lease in which
less than all Parties have an ownership interest and in which the
other Party(ies) was offered an interest but declined pursuant to
the AMI provisions of Article 23.3 (Area of Mutual Interest)
hereof.
e. Fifty priority to hydrocarbon production owned by a Participating
Party coming from outside the Contract Area.
f. Sixth priority to hydrocarbon production owned by third parties.
Priority "a", b , c , d and "e" shall require no further
approval by the Participating Parties. Priority "f" shall require
unanimous approval by all the Participating Parties in such
Production System. In the event that unanimous approval cannot be
reached by the Participating Parties under priority "f" each Party
shall be entitled to use its share of excess capacity as it deems
appropriate. Exhibit H attached hereto shall apply to the use of
excess capacity by one or more of the Parties or third parties.
14.4 Approval of Additional Facilities on a Designated Prospect: This
Article shall only apply to Facilities which are to be located on a
Designated Prospect and which were not included in the approved
Development Plan. Any Party may propose the installation of
additional or expanded Facilities for a Designated Prospect beyond
those specified in the Development Plan by giving notice to the
other Participating Parties together with information adequate to
describe the proposed Facilities and their estimated Costs. Except
as provided in Article 15.1 (Facilities to Take In Kind), the
installation of additional Facilities on the Production System
beyond the scope of the Development Plan shall require the approval
of the Participating Parties as a General Matter, and the
availability of sufficient deck space and buoyancy to support the
proposed additional Facilities. Upon approval, the Operator shall
proceed to install the additional Facilities for the benefit of the
Participating Parties provided that, in the judgment of the
Operator, the additional Facilities do not interfere with continuing
operations on a Designated Prospect. The installation of any
additional Facilities shall be at the sole Cost and risk of the
Participating Parties. Any Non-Participating Party shall be subject
to Article 16.5.5 (Non-Consent Subsequent Production System and
Facilities)
14.5 Contract Area Production: Notwithstanding any other provision of
this Agreement to the contrary, production from Leases co-owned by
the Participating Parties in any Designated Prospect shall at all
times have first preference to use all of the capacity of the
Production System (in whole or in its several parts) installed for
such Designated Prospect(s), over any production from outside the
Contract Area.
ARTICLE 15
DISPOSITION OF PRODUCTION
15.1 Facilities to Take in Kind: Any Party shall have the right at its
sole risk and expense to construct Facilities for taking its share
of production in kind, provided that such Facilities at the time of
installation do not interfere with continuing operations on the
Contract Area. During the construction and operation of such
Facilities, the Party responsible for the construction or operation
shall indemnify and defend the other Parties against any claims or
liabilities which may result from such construction or operation and
such Party shall be responsible for any damages or losses sustained
by the other Parties as a result of the construction or operation of
such Facilities.
15.2 Duty to Take in Kind: Each Party has the right and duty to take in
kind or separately dispose of its share of the oil and gas produced
and saved from the Leases and Contract Area.
15.3 Failure to Take in Kind: If any Party fails to take in kind or
dispose of its share of production, the following will apply:
15.3.1 Failure to Take Oil: If any Party fails to take in kind or
dispose of its share of oil, Operator shall either (a)
purchase the oil in accordance with 15.3.4 or (b) sell the
oil to others in accordance with 15.3.3.
15.3.2 Failure to Take Gas: If any Party fails to take in kind or
dispose of its share of gas, then Exhibit "D" shall apply.
15.3.3 Operator s Disposition of Oil for Non-Taking Party: All
contracts obtained by Operator for the sales of a non-
taking Party s share of oil to a third party shall be at a
price not less than the price Operator is receiving for its
own share of production for the contract period. A non-
taking Party receiving such price acknowledges that it
represents fair market value for the product sold.
15.3.4 Operator s Purchase of Oil of Non-Taking Party: If Operator
purchases the oil of a Party failing to take in kind or
dispose of its share, Operator will pay the average of the
following postings for oil of the same kind, gravity and
quality; Scurlock Permian Corporation South Louisiana
Eugene Island (Onshore), Texaco Trading & Transportation
Inc. s South Louisiana Sour (onshore), and EOTT Energy
Corp. South Louisiana Sour (Eugene Island Onshore), less
transportation, separation and storage fees incurred prior
to delivery to the posting point. If for any reason any of
these three postings is unavailable, the Parties will agree
on three postings for averaging.
If Operator contracts to sell a non-taking Party s share of
oil and/or condensate, such sales shall be only for such
reasonable periods of time as are consistent with the needs of
the industry, but in no event shall any contract for the sale
of oil and/or condensate be for a period in excess of three
(3) months.
Operator shall deduct transportation and other reasonable
marketing costs associated with a purchase or sale of a non-
taking Party s oil.
15.3.5 No Obligation to Market Share: Unless required by
governmental authority or by judicial process, no Party
shall be forced to share an available market with any other
Party.
15.4 Expenses of Delivery in Kind: Any cost incurred by Operator in
making delivery of any Party s share of oil, or disposing of same,
shall be borne by such Party.
ARTICLE 16
NON-CONSENT OPERATIONS
16.1 Conduct of Non-Consent Operations: If any Party makes or is deemed
to have made an Election to become a Non-Participating Party in an
operation, the proposed operation shall be conducted as a Non-
Consent Operation. If the Participating Parties timely commence the
Non-Consent Operation, then the Non-Participating Parties shall be
subject to either the acreage forfeiture provisions of Article 16.2
(Acreage Forfeiture Provisions) or 16.4 (Non-Consent Operations to
Maintain a Designated Prospect), or the Cost recoupment provisions
of Article 16.5 (Percentage Recoupment for Non-Consent Operations),
each reflecting the increased risks and Costs assumed by the
Participating Parties. Any operation that invokes the provisions of
this Article 16 must be proposed and conducted in good faith using
cost estimates and Objective Depths which are reasonable for the
Designated Prospect considering the geological and geophysical data
available at the time of the proposal. If any proposed operation
requires approval as a General Matter, such approval shall be
obtained prior to the Participating Parties proceeding with the Non-
Consent Operation. The Operator (or substitute Operator) shall
conduct any Non-Consent Operation at the sole risk and expense of
the Participating Parties in the Non-Consent Operation. Any Non-
Consent Operations shall not unreasonably jeopardize, hinder or
interfere with operations conducted by all Parties (unless the Non-
Consent Operation will maintain all or a portion of the Designated
Prospect under Article 16.4 (Non-Consent Operations to Maintain a
Designated Prospect)).
16.1.1 INDEMNITY AND WAIVER FOR NON-CONSENT OPERATIONS: THE
INDEMNITY AND WAIVER FOR NON-CONSENT OPERATIONS SHALL BE AS
PROVIDED FOR IN ARTICLES 22.6 (INDEMNIFICATION FOR NON-
CONSENT OPERATIONS) AND 22.7 (DAMAGE TO RESERVOIR, LOSS OF
RESERVES AND PROFITS).
16.1.2 Cost Information: The Costs of any Non-Consent Operation
shall be borne by the Participating Parties in the
proportion that their Participating Interests bear to the
sum of all Participating Interests in the Non-Consent
Operation (unless otherwise agreed by the Participating
Parties). The Costs of a Non-Consent Operation shall
include the Costs of maintaining the drilling equipment on
site during the notice period for an Election or vote
pursuant to Article 8 (Voting, Elections, and Notices)
including any response times and no part of such Costs
shall be borne by the Non-Participating Parties unless
otherwise provided. Within one hundred twenty (120) days
after completion of a Non-Consent Operation, the Operator
shall furnish all the Parties an itemized statement of the
Cost of the Non-Consent Operation and an inventory of the
equipment pertaining thereto. The Operator shall furnish
to the Parties a monthly statement showing operating,
maintenance and other expenses attributable to the Non-
Consent Operations, and the revenues from the sale of
Hydrocarbon production for the preceding month from
operations subject to recoupment under this Article 16
(Non-Consent Operations). The Non-Operating Parties shall
furnish the Operator any revenue or price information for
their take in kind production. In accounting for the
revenues from Non-Consent Operations, Hydrocarbon
production need not be separately metered, but may be
determined upon the basis of monthly well tests.
16.1.3 Non-Consent Operations in Producible Well: Once a
Producible Well has been completed and placed on
production, Non-Consent Operations shall not be conducted
in that well unless approved by all the Participating
Parties in such well, unless such well is not capable of
producing from its current completion(s).
16.1.4 Non-Consent Operations in Producible Reservoirs: Unless
otherwise agreed by all Parties, Non-Consent Operations for
a Development Well shall not be conducted in any
Producible Reservoir previously penetrated by a Producible
Well drilled from or producing through the same Production
System serving the proposed Non-Consent Well and the
Producible Well unless such Producible Reservoir shall have
been designated as an Objective Depth or completion zone in
the well proposal.
16.1.5 Multiple Completions: Non-Consent Operations shall not be
conducted in any existing well having multiple completions
unless:
(a) each of the multiple completions are owned by the same
Parties in the same proportion; or,
(b) none of the previous well completions are capable of
producing; or,
(c) all Participating Parties in the well containing the
multiple completions consent to such Non-Consent
Operation(s).
For the purposes of this Article 16, each completion shall be
considered as a separate well.
16.2 Acreage Forfeiture Provisions: In view of the significantly greater
risks associated with Exploratory Operations for each of the
remaining undrilled Designated Prospects(s), and the Fabrication AFE
for the Initial Production System, the Parties agree that upon
timely commencement of such operations, the Participating Parties
shall be entitled to an assignment of the Non-Participating Party's
right, title and interest (including operating rights) in all of the
Leases comprising a Designated Prospect. Within thirty (30) days of
the timely commencement of such Non-Consent Operation, the Non-
Participating Party(s) shall execute and deliver an assignment of
its interest to the Participating Parties, with no reimbursement by
and at no cost to the Participating Parties. If an assignment is
made pursuant to this Article 16.2, such assignment shall be free
and clear of the interests contemplated in Article 19.1 (Overriding
Royalties and Burdens on Production) and Article 6.8 (Carved-Out
Interests) and then each Participating Party shall accept its
Participating Interest share of the Non-Participating Party's
assigned interest, unless otherwise agreed. Except as otherwise
provided in Article 16.4.3 (Limitations on Acreage Forfeiture) and
Article 12.10 (Major Modifications to Development Plans), the Non-
Participating Party's Election not to participate in an Exploratory
Operation, or the Fabrication AFE for the Initial Production System
or a supplemental AFE pursuant to Article 6.2.6. (Supplemental AFE
for Cost Overruns on Fabrication AFE) shall require such Non-
Participating Party to relinquish and permanently assign to the
Participating Party(s) one hundred percent (100%) of Non-
Participating Party s right, title and interest in and to all of the
Leases comprising the Designated Prospect, any wells drilled thereon
and any Production System attributable thereto.
16.2.1 Exploratory Operations: If one or more Participating
Party(s) proceed with timely operations for the Exploratory
Well on a Designated Prospect as a Non-Consent Operation,
the Non-Participating Party(s) in either the Exploratory
Well or any supplemental AFE for that well, shall
relinquish and assign to the Participating Party(s) one
hundred percent (100%) of the Non-Participating Party's
right, title and interest in and to all of the Leases
comprising the Designated Prospect, and any wells drilled
thereon.
16.2.2 Initial Production System: If one or more Participating
Party(s) proceed with timely operations for the Initial
Production System as authorized in the Fabrication AFE as a
Non-Consent Operation, the Non-Participating Party(s) shall
relinquish and assign to the Participating Party(s) one
hundred percent (100%) of the Non-Participating Party's
right, title and interest in and to all of the Leases
comprising the Designated Prospect, and any wells drilled
thereon. If pursuant to Article 6.2.6 the Operator
submits a supplemental Fabrication AFE, a Participating
Party must submit its Election within the applicable
response time set out in Article 8.3.3 either to: (a)
approve the supplemental Fabrication AFE or (b) not consent
to the supplemental Fabrication AFE (and be subject to the
acreage forfeiture provisions of this Article 16.2 with no
reimbursement by and at no cost to the remaining
Participating Parties, as if that Party had not approved
the Fabrication AFE). If any Party fails to approve the
supplemental Fabrication AFE within the applicable response
time, such Party shall be deemed to have not consented to
the supplemental Fabrication AFE . Any such approval shall
not prejudice a Party s right to withdraw under the
provisions of Article 17.
16.2.3 Costs of Prior Operations: Any Non-Participating Party
subject to a non-consent provision shall remain liable for
its share of previously incurred Costs for operations where
it was a Participating Party and there shall be no re-
allocation of previously incurred Costs due to the Non-
Participating Party's election or assignment.
16.3 Notices and Orders: If the Operator is required by notice or order
(including SOPs and SOOs) from any government agency having
jurisdiction over the Contract Area to either drill or rework a
well, or conduct other operations to maintain all or a portion of a
Designated Prospect, the Operator shall immediately furnish each of
the Parties with a copy of such order or notice.
16.4 Non-Consent Operations to Maintain a Designated Prospect: The
following provisions are applicable if:
(a) an operation is required, pursuant to a governmental agency
order, notice, regulation, SOO or SOP requirement or Lease
obligation, to maintain all or any portion of a Designated
Prospect; or
(b) a proposal is made for an operation within the final eighteen
(18) months of the primary term of a Lease which has no
Producible Well and such Lease is not held by a unit, SOO or
SOP,
then such operation must be timely commenced and shall be conducted
pursuant to this Article 16.4. The response time for a proposal
made hereunder shall be the earlier of:
(c) the response time provided in Article 8 (Voting, Elections,
and Notices); or,
(d) one hundred eighty (180) days before the deadline under the
order, notice, regulation, SOO or SOP requirement or Lease
obligation, whichever is earlier.
If the proposal requires approval as a General Matter and such
approval is not obtained within the applicable response period, then
any Party who made an Election to participate in the Non-Consent
Operation may proceed with such operation after giving notice to the
other Parties. The other Parties will have fifteen (15) days after
receipt of the notice to make an Election.
16.4.1 Acreage Forfeiture in the Entire Designated Prospect: If
it is necessary to drill or rework a well or conduct other
operations to maintain the entire Designated Prospect, then
each Non-Participating Party in the Non-Consent Operation
shall relinquish and permanently assign to the
Participating Parties one hundred percent (100%) of the
Non-Participating Party's Working Interest in the entire
Designated Prospect within thirty (30) days after
commencement of such well or other operation.
16.4.2 Acreage Forfeiture in a Portion of the Designated Prospect:
If a well is drilled or reworked or other operations are
conducted in order to maintain a portion of the Designated
Prospect, then each Non-Participating Party in the Non-
Consent Operation shall relinquish and permanently assign
to the Participating Parties one hundred percent (100%) of
the Non-Participating Party's Working Interest in the
affected portion of the Designated Prospect within thirty
(30) days after commencement of such well or other
operation. If a Party forfeits its Working Interest
pursuant to this Article 16.4.2, then such Party shall have
no further rights under this Agreement as to the portion of
the Designated Prospect forfeited. All remaining Parties
shall amend this Agreement to provide for the change of
ownership on Exhibit A as to the forfeited portion of the
Designated Prospect and this Agreement shall apply
separately to such operational area.
16.4.3 Limitations on Acreage Forfeiture: Notwithstanding the
foregoing, if more than one well is drilled or more than
one operation is conducted, any of which would maintain the
entire Designated Prospect or the affected portion of the
Designated Prospect, an assignment shall not be required
from any Participating Party in any such well or other
operation. In addition, no Party shall be required to
relinquish or assign all or any portion of its Working
Interest in the Designated Prospect if the order, requiring
the well or other operation, is appealed and successfully
overturned.
16.5 Percentage Recoupment for Non-Consent Operations: Except as
provided in Articles 16.2 (Acreage Forfeiture Provisions) and 16.4
(Non-Consent Operations to Maintain a Designated Prospect), upon the
timely commencement of any Non-Consent Operation, each Non-
Participating Party's Working Interest in the Non-Consent Operation
along with the right to produce Hydrocarbon therefrom shall be owned
by and vested in each Participating Party in the proportion that
each Participating Party's Working Interest bears to the total
Working Interest of all Participating Parties (unless other
proportions are agreed in writing by the Participating Parties) for
as long as the Non-Consent Operation originally proposed is being
conducted or Hydrocarbon production is obtained from the Non-Consent
Operation subject to Non-Consent Articles 16.6.1 (Dry Hole
Reversion) and 16.6.2 (Deepening a Non-Consent Well). Subject to
Article 16.6 such Working Interest, and rights and title to
Hydrocarbon production shall revert to each Non-Participating Party
when all Participating Parties have recouped from the Non-
Participating Party's former Working Interest and proceeds
from production associated with that Working Interest an amount
equal to the product of such Participating Party s share of the
Costs of the Non-Consent Operation multiplied by the recoupment
percentage for each operation set out below. The Non-Participating
Party's Share of the Non-Consent Operation shall be reduced (to the
extent of the Non-Participating Party's prior Working Interest) by
any third-party cash contribution credited to the Non-Consent
Operation. Upon recoupment by the Participating Parties of the
recoupment percentage, the Working Interest forfeited by the
Non-Participating Parties in the Non-Consent Operation,, shall
revert to the former Non-Participating Party and the former
Non-Participating Party shall become a Participating Party in the
Non-Consent Operation.
16.5.1 Non-Consent Subsequent Exploratory Operations: The
recoupment amount for Non-Consent Subsequent Exploratory
Operations shall be the Non-Participating Party's share of
the Costs of the Subsequent Exploratory Operations
conducted including, but not limited to, evaluating,
Deepening, Sidetracking, completing, recompleting,
equipping, and plugging back of the Subsequent Exploratory
Operation multiplied by one thousand percent (1000%).
16.5.2 Non-Consent Appraisal Operations: The recoupment for Non-
Consent Appraisal Operations shall be the Non-Participating
Party's Share of the Costs of drilling, evaluating,
Deepening, Deeper Drilling, Sidetracking, completing,
recompleting, equipping, and plugging back and of the
Appraisal Operation multiplied by four hundred percent
(400%).
16.5.3 Non-Consent Geophysical Operations, Integrated Project Team
and/or Final Design AFE: A Party making an Election not to
participate in a Geophysical Operations, Integrated Project
Team and/or Final Design AFE will be an underinvested Party
in an amount equal to two hundred percent (200%) of the
amount such Party would have paid had it participated in
such AFE pursuant to Article 16.9 (Underinvestment of
Costs). As an underinvested Party, the Non-Participating
Party will be responsible for all Costs of subsequent
operations and/or AFE under this Agreement (in addition to
Costs associated with such Party's Working Interest) in
which the Non-Participating Party makes an Election to
participate, which would otherwise be the responsibility of
the Parties making an Election to participate in such
Geophysical Operations, Integrated Project Team and/or
Final Design AFE, until the underinvestment is eliminated.
16.5.4 Non-Consent Development Operations: The recoupment for
Non-Consent Development Operations (including workovers)
shall be the Non-Participating Party's Share of the Costs
of drilling, evaluating, Deepening, Deeper Drilling,
Sidetracking, completing, recompleting, equipping, and
plugging back the Development Operation multiplied by three
hundred percent (300%).
16.5.5 Non-Consent Subsequent Production System and Facilities:
The recoupment for any non-consent Subsequent Production
System or Facilities shall be the Non-Participating Party's
Share of the Cost of designing, fabricating and installing
the Subsequent Production System or Facilities, including
the Cost of an injection or disposal well, multiplied by
two hundred percent (200%).
16.5.6 Additional Production Recoupment: In addition to the
percentage recoupment set forth above for various Non-
Consent Operations, the Participating Parties shall be
entitled to recoup:
(a) two hundred percent (200%) of the Non-Participating
Party's Share of the Cost of Facilities necessary to
carry out the Non-Consent Operation; plus,
(b) one hundred percent (100%) of the Non-Participating
Party's Share of the Cost of using any Production System
already installed for the Designated Prospect for which
the Non-Participating Party has a Participating
Interest; plus,
(c) one hundred percent (100%) of the Non-Participating
Party's Share of the Cost of operating expenses,
maintenance Costs, royalties, and severance, gathering,
production taxes and other governmental fees based on
production.
16.5.7 Recoupment From Hydrocarbon Production: Recoupment for a
Non-Consent Operation which results in a discovery of a
Producible Reservoir or extension of an existing Producible
Reservoir shall be made from the following portions of the
Non-Participating Party's Share of Hydrocarbon production:
(a) Subsequent Exploratory Operations, Appraisal Wells, or
Development Wells: Recoupment shall be taken from one
hundred percent (100%) of the Non-Participating Party's
Share of all Hydrocarbon production from the Non-Consent
Operation (if the well is completed for Hydrocarbon
production), and from fifty percent (50%) of the Non-
Participating Party's Share of Hydrocarbon production
from all wells subsequently drilled and completed in the
Producible Reservoir discovered by said Non-Consent
Operations or the extended portion of an existing
Producible Reservoir discovered by said Non-Consent
Operation and in which the Non-Participating Party has a
Participating Interest.
(b) Non-Consent Subsequent Production Systems and
Facilities: Recoupment shall be taken from one hundred
percent (100%) of the Non-Participating Party's share of
Hydrocarbon production from all wells which are drilled
from and/or produced through the Subsequent Production
System or Facilities and/or wells benefited from
injection or disposal wells.
The interest shall revert to each Non-Participating Party only
after the Participating Parties have completely recouped, from
Hydrocarbon production, the amounts specified herein.
16.6 Reversion of Interests to Non-Participating Party: Subject to the
provisions of Article 16.5.7 (Recoupment from Hydrocarbon
Production), a Non-Participating Party's Working Interest which is
subject to recoupment from future Hydrocarbon production shall
revert to the Non-Participating Party upon the occurrence of the
first of the following events:
- the Non-Consent Operation results in a dry hole; or,
- hydrocarbon production ceases prior to complete recoupment by the
Participating Parties; or,
- the Participating Parties propose to Deepen below the original
Objective Depth if the original operation resulted in a dry hole;
or,
- upon complete recoupment.
16.6.1 Dry Hole Reversion: If a Non-Consent Operation, other than
a Non-Consent Operation under Articles 16.2 (Acreage
Forfeiture Provisions) and 16.4 (Operations to Maintain a
Designated Prospect), results in a dry hole and fails to
obtain Hydrocarbon production or, if Hydrocarbon production
ceases prior to complete recoupment by the Participating
Parties, then the Non-Participating Party's Working
Interest which has been relinquished shall revert to the
Non-Participating Party. However, all Non-Consent Wells,
Production Systems, any Facilities and rights to produce
from a Producible Reservoir under Article 16.5.7 shall
remain vested in the Participating Parties. Any salvage
value in excess of complete recoupment shall be credited to
all Parties according to their Working Interest and without
regard to their participation status.
16.6.2 Deepening a Non-Consent Well: If a Non-Participating Party
makes an Election to participate in the Deepening
operation, then the Participating Parties shall be deemed
overinvested to the extent of the Non-Participating Party's
Share of Costs in the original Non-Consent Operation (less
any amount recouped by the Participating Parties out of
production or through a Disproportionate Spending
Settlement). If the Participating Parties have recouped
the Cost of the well at the time they desire to Deepen the
well then the Non-Participating Party will not be an
underinvested Party in the Deepening of the well. However,
in such case, the Participating Parties in the original
well shall still be permitted complete recoupment from the
other wells in the Producible Reservoir, discovered or
extended by the original well as provided in Article
16.5.7(a) (Subsequent Exploratory Operations, Appraisal
Wells or Development Wells), until the total non-consent
amount to be recouped has been recovered from the
Producible Reservoir.
16.7 Operations From a Subsequent Non-Consent Production System: Any
Party who made an Election not to participate in a Subsequent
Production System may make an Election to participate in operations
from such Subsequent Production System. If a Non-Participating
Party makes an Election to participate in such operations, then the
Non-Participating Party may reduce the percentage recoupment amount
through a Disproportionate Spending Settlement in subsequent
Development Operations conducted from the Subsequent Production
System. Any Disproportionate Spending Settlement amounts shall be
subtracted from the recoupment entitled to the Participating Parties
in the Subsequent Production System pursuant to Article 16.5.5 (Non-
Consent Subsequent Production System and Facilities).
16.8 Allocation of Production System Costs to Non-Consent Operations: In
the event a Non-Consent Well is proposed to be drilled from or
produced through a Production System owned by all the Parties, the
rights of Participating Parties to use the Production System for the
proposed Non-Consent Well and the Costs therefore shall be based on
the following:
16.8.1 Investment Charges: If a Non-Consent Well will utilize
either a Production System and/or Subsea Production System
owned by all the Parties, the Non-Participating Parties in
such well shall be deemed to be the overinvested Parties in
such Production Systems to the extent the Participating
Parties in such well would have paid a charge for the right
to use the Production System and/or Subsea Production
System and its Facilities as follows:
(a) The Participating Parties in such well shall pay a one-
time slot usage fee covering its use of the Production
System in an amount equal to two percent (2%) of the
Cost of the Production System, the Subsea Production
System and its Facilities to the owners of the
Production System (to be shared in proportion to the
owner's Working Interest in the Production System). For
purposes of the slot usage fee, the total Cost of the
Production System shall be reduced by .41667% per month
commencing upon the first monthly anniversary date of
when the Production System was installed and every
monthly anniversary thereafter until the total Cost of
the Production System is reduced to twenty-five percent
(25%) of the original Cost. The Cost of additions to
the Production System shall be reduced in the same
manner commencing upon the first monthly anniversary
after the addition is installed. If the Non-Consent
Well is abandoned, the right of Participating Parties to
use that Production System slot shall terminate unless
such Parties commence drilling a substitute well from
the same slot within ninety (90) days after abandonment.
The slot usage fee shall not apply to a slot which is
deemed to be "surplus." A slot may be deemed surplus by
the unanimous consent of all Parties owning an interest
in the Production System.
(b) If Hydrocarbon production from the Non-Consent Well is
handled through Facilities owned by all Parties, the
Participating Parties shall pay to the owners of the
Facilities a sum equal to that portion of the total Cost
of such Facilities which one well bears to the total
number of wells which the Facilities are designed to
accommodate.
16.8.2 Operating and Maintenance Charges: The Participating
Parties in a non-consent well shall pay all Costs necessary
to connect their well to the Facilities and the Production
System. The expense of operating and maintaining the
Facilities and the Production System shall be allocated
equally per active completion among all active completions
served. Subsea Production System operating and maintenance
expenses shall be allocated equally per active subsea
completion among all active subsea well completions served
by such Subsea Production System.
16.8.3 Payments: The payment of sums pursuant to Article 16.8.1
(Investment Charges) shall not be a purchase of an
additional interest in the Production System or Facilities.
Such payments shall be included in the total amount which
the Participating Parties are entitled to recoup out of
Hydrocarbon production from the Non-Consent Well, but only
to the extent of actual Costs. Such charges shall be paid
by the Participating Parties in such well by allocating (in
addition to any other Costs allocated to them under this
Agreement) all Costs attributable to tangible, intangible
and other cost categories that would otherwise be allocated
to the Non-Participating Parties until all overinvestment
is eliminated.
16.9 Underinvestment of Costs: A Non-Participating Party shall not be
liable for settling any underinvestment of its share of the Costs of
a Non-Consent Operation unless, having the right to do so under this
Agreement, the Non-Participating Party makes a revised Election to
become a Participating Party. Unless otherwise provided in this
Agreement, a Non-Participating Party has the right to make a revised
Election to become a Participating Party under the following
Articles:
(a) Article 9.1.1 (Conduct of Propriety Geophysical Operations);
(b) Article 11.3 (Election by Non-Participating Parties in Deepening
or Sidetracking Appraisal Operations);
(c) Article 11.4 (Deeper Drilling in Appraisal Operations);
(d) Article 12.3 (Integrated Project Team Election);
(e) Article 12.7 (Final Design AFE);
(f) Article 12.10 (Major Modification to Development Plans);
(g) Article 13.3 (Election by Non-Participating Parties in Deepening
or in Development Sidetracking Operations); and
(h) Article 13.4 (Deeper Drilling in Development Operations).
16.9.1 Settlement of Underinvestments: Upon making a revised
Election, a Non-Participating Party shall settle any
underinvestment for its share of the Costs in a Non-Consent
Operation by either; (a) making a Disproportionate Spending
Settlement by bearing all Costs of all future operations
until the underinvestment is eliminated, (i.e. one hundred
percent (100%) of the Non-Participating Party's share of
the Costs of the original operation) or, (b) making an
immediate cash settlement to the original Participating
Parties in the full amount of the underinvestment. The
original Participating Parties in the Non-Consent Operation
shall select the manner of eliminating the under-
investment at their sole discretion as a General Matter.
16.9.2 Cash Settlement of Underinvestment: If there are no
further proposed or planned operations on the Designated
Prospect for which Costs would be allocated toward the
elimination of an underinvestment, the underinvested Party
shall pay any overinvested Party the remaining
underinvested amount in cash. If operations on the
Designated Prospect, for which Costs are being paid by the
underinvested Party and allocated to the underinvestment,
do not eliminate the underinvestment within two (2) years,
or any other shorter period specified in this Agreement,
from the date the underinvestment accrued, or upon final
settlement of this Agreement, whichever comes first, the
underinvested Party shall pay the overinvested Party the
remaining underinvestment in cash. Percentage recoupment
for Non-Consent Operations under Article 16.5 (Percentage
Recoupment for Non-Consent Operations) shall not be
considered an over/under investment.
ARTICLE 17
WITHDRAWAL
17.1 Withdrawal. If a Party wishes to withdraw from this Agreement in
any one or more or all Designated Prospects, it shall tender an
offer to withdraw to the non-withdrawing Parties ( Tender ). The
Tender shall include an offer to assign to the other Parties who do
not desire to withdraw, the following with respect to the Designated
Prospect(s) to which the withdrawal applies:
(a) marketable title to the Withdrawing Party's undivided
interest in the Production System fabricated for that
Designated Prospect(s) free of burdens or encumbrances,
including financing arrangements, at fair market value as
determined by an independent appraisal, as hereinafter
described; and,
(b) all of its interest in the Leases, wells, Facilities, and
platforms (except for the Production System) in the affected
Designated Prospect(s) without warranty but free of any
overriding royalty (except for overriding royalty burdens
listed in Exhibit A ), or other burdens or encumbrances,
including financing arrangements, at salvage value, less the
cost of plugging and abandonment.
If the Tender is accepted, the assignees, in proportion to the
respective interests so acquired, shall pay the assignor for its
interest, the fair market value of the undivided interest in the
Production System described in (a) above as determined by the mutual
agreement of the Parties hereto, provided, that if the Parties fail
to agree, then the fair market value shall be determined by an
independent appraisal. Independent appraisal shall mean an
appraisal mutually agreed to by two nationally recognized
independent appraisers, one of which appraisers shall be chosen by
withdrawing Party and one by majority vote of Non-withdrawing
Parties , or, if such appraisers cannot agree on such appraisal, an
appraisal arrived at by a third independent appraiser chosen by the
mutual consent of such two appraisers, provided that, if either
withdrawing Party or Non-withdrawing Parties shall fail to appoint
an appraiser within (15) days after a written request to do so by
the other, or if such two appraisers cannot agree on such appraisal
and fail to appoint a third appraiser within (20) days after the
date of the appointment of the second of such appraisers, then any
Party may apply to the American Arbitration Association to make such
appointment. In the event such third independent appraiser shall be
chosen to provide such appraisal, unless the Parties agreed
otherwise, such appraisal shall be required to be made within (20)
days of such appointment. An independent appraisal of the fair
market value of the Production System shall mean an appraisal which
assumes that the sale would be an arm s-length transaction between
an informed and willing buyer, under no compulsion to buy, and an
informed and willing seller, under no compulsion to sell. The fees
and expenses of appraisers for an independent appraisal, whenever
undertaken pursuant to this Agreement, shall be borne equally by all
the Parties and each Party shall separately bear any fees, costs and
expenses of its respective attorneys and experts (other than the
appraisers referred to above) incurred in connection with such
independent appraisal.
If the Tender is accepted, the assignees, in proportion to the
respective interests so acquired, shall pay the assignor for its
interest, the salvage value of the items identified in (b) above
less its share of the estimated cost of salvaging same, plugging and
abandoning of wells, and removal of all platforms and Facilities
(except for the Production System), as determined by the Parties.
If such withdrawing Party s interest in such salvage value is less
than such Party s share of the estimated costs, the withdrawing
Party shall pay the Operator, for the benefit of the Parties
succeeding to its interest, a sum equal to the deficiency. Within
sixty (60) days after the effective date of the assignment, Operator
shall render a final statement to the withdrawing Party for its
share of all expenses, including any deficiency in salvage value,
incurred as of the first day of the month following the date of
receipt of the notice. Provided all such expenses (including any
deficiency hereunder) due from the withdrawing Party have been paid
within thirty (30) days after rendering of such final statement, the
withdrawing Party shall thereafter be relieved from all further
obligations and liabilities with respect to the Designated
Prospect(s).
The Tender offer shall remain open for thirty (30) days after the
receipt by the non-withdrawing Parties of the independent appraisal.
If the Tender is not accepted in writing by the non-withdrawing
Parties within such time period, it shall be deemed to have been
rejected. If the Tender is accepted, the assignment of the
withdrawing Party s interest shall not relieve such Party from any
obligation or liability incurred prior to the first day of the month
following receipt of the assignment by assignees. The assigned
interest shall be owned by the assignees in the proportion that
their respective Participating Interests bear to the remaining
Participating Interest.
If the Tender is not accepted, the withdrawing Party shall retain
its interests in the property described in (a) and (b) above and
shall be free to sell such interests in accordance with Article 24,
except that Article 24.2 titled Preferential Right To Purchase shall
not apply to a sale, which consideration is for a price equal to
or greater than the fair market value as set out in this Article
17.1 of the Tender, and such sale is contracted for by the
withdrawing Party within 180 days after date of the non-withdrawing
Party s election not to purchase the withdrawing Party s interest.
If the withdrawing Party has not sold its interest within such time
period, it may sell subject to the Preferential Right to Purchase or
submit a new Tender to the non-withdrawing Parties in accordance
with this Article.
17.2 Limitations on Withdrawal:
17.2.1 During an Emergency: No Party shall be relieved of its
obligations hereunder during a blowout, a fire, or other
emergency, but may withdraw from this Agreement in
accordance with Article 18.1 (Abandonment of Wells) after
termination of such emergency, provided such Party shall
remain liable for its share of all costs associated with
the emergency.
17.2.2 Current Operations and Voting: Any Party withdrawing prior
to completion of any operations (pursuant to an AFE) in a
Designated Prospect in which it had previously made an
Election to participate shall remain fully liable for its
share of the AFE. After giving its notification of
withdrawal, the Withdrawing Party shall not be entitled to
make an Election to participate or vote on any General
Matter in the Designated Prospect involved, other than
General Matters for which the Withdrawing Party retains a
financial responsibility.
17.2.3 Prior Expenses: The Withdrawing Party(ies) shall remain
responsible for its Participating Interest share of any
Costs of operations, rentals, royalties, taxes, damages or
other liability or expense accruing or commencing prior to
the effective date of the withdrawal. Prior to the
effective date of the withdrawal, the Operator shall render
an estimate to the Withdrawing Party(ies) for its share of
all identifiable expenses incurred or expected to be
incurred prior to the effective date of withdrawal, along
with a statement of any deficiency in salvage value. Prior
to any withdrawal, a Withdrawing Party, at its sole
expense, shall satisfy or provide security satisfactory to
the remaining Party(ies) for all obligations and
liabilities it has incurred or are attributable to it prior
to the effective date of the withdrawal. Furthermore, any
liens, charges and other encumbrances which the Withdrawing
Party(ies) placed (or caused to be placed) on its Working
Interest prior to its withdrawal shall be fully satisfied
or released prior to its withdrawal (unless the Remaining
Parties are willing to accept the Working Interest subject
to such liens). Provided all such expenses (including any
deficiency in abandonment Costs) have been paid, the notice
of withdrawal and the assignments shall be effective upon
the specified effective date.
17.2.4 Confidentiality: A Withdrawing Party shall continue to be
bound by the confidentiality provisions of Article 7
(Confidentiality of Data) after the withdrawal, but, as of
the effective date of the withdrawal, shall have no further
access to technical information relating to operations
hereunder. The Remaining Party(ies) shall have no
obligation of confidentiality hereunder to the Withdrawing
Party.
ARTICLE 18
ABANDONMENT AND SALVAGE
18.1 Abandonment of Wells: Any Participating Party may propose the
abandonment of a well which has been drilled hereunder by notifying
the other Participating Parties. No well shall be abandoned without
the unanimous consent of the Participating Parties therein. Any
Party may propose the abandonment of such well by notifying the
Participating Parties in writing. The Participating Parties not
consenting to such abandonment shall pay the Parties desiring to
abandon their proportionate share of the value of the well s
salvageable material and equipment as determined pursuant to Exhibit
C (Accounting Procedure), less the current estimated costs (as
determined by the Parties) of salvaging same and of plugging and
abandoning the well.
Each Party desiring to abandon a well shall assign to the non-
abandoning Parties, in proportion to their Participating Interest,
its interest in such well and the equipment therein and its
ownership in the production from such well. Such assignment shall
be without warranty and free of any overriding royalties (except for
overriding royalty burdens listed on Exhibit "A" hereof) or any
other burdens or encumbrances. Any Party so assigning shall be
relieved from any further liability with respect to the well;
provided, however, such Party shall remain fully responsible for all
of its obligations incurred prior to the time of the assignment
provided for herein.
18.2 Facilities and Platform Salvage and Removal Costs: Except as
otherwise provided for herein regarding the disposition of the
Production System, when the Parties owning other Facilities or
another platform, agree that no further use will be made of such
Facilities or platform, they shall be disposed of by the Operator
for the Participating Parties at the highest bid or removed at the
risk and expense of such Parties. If a Party purchases Facilities
or a platform, it will be deemed the owner and assume all risks upon
acquiring ownership rights in such Facilities or platform.
18.3 Approval Not Required: The Operator may, without prior approval of
the Parties, dispose of any items of surplus or obsolete material
and equipment if the current price of new materials or equipment
similar thereto is less than One Hundred Thousand Dollars
($100,000.00).
18.4 Abandonment Operations Required by Governmental Authority: Any well
abandonment or platform/Production System removal required by a
governmental authority shall be accomplished by Operator with the
Costs, risks and net proceeds, if any, to be shared by the Parties
owning such well, platform or Production System in proportion to
their Participating Interest.
ARTICLE 19
RENTALS, ROYALTIES AND MINIMUM ROYALTIES
19.1 Overriding Royalties and Burdens on Production: If any Party has
previously created or hereafter creates any overriding royalty,
production payment, carried or reversionary working interest, net
profits interest or other type of burden on Hydrocarbon production
in addition to the lessor's royalty stipulated in the Lease(s)
except for overriding royalty interests set forth in Exhibit A
attached hereto (an "Overriding Royalty"), the Party creating the
Overriding Royalty shall assume and bear all obligations of the
Overriding Royalty regardless of that Party's participation status
notwithstanding that an assignment or relinquishment of all or a
portion of that Party's Working Interest is made to another Party
under this Agreement. The Party creating the Overriding Royalty
shall indemnify and hold all other Parties harmless from any and all
claims and demands for payment asserted by the owners of the
Overriding Royalty. Any such agreements creating these interests
shall contain provisions to effect this.
19.1.1 Subsequent Creation of Overriding Royalty: Notwithstanding
anything herein to the contrary, if subsequent to the
execution of this Agreement, any Party should create an
Overriding Royalty, such subsequently created Overriding
Royalty shall be made specifically subject to all the terms
and provisions of this Agreement and shall be subordinate
to the rights of the other Parties to this Agreement.
19.1.2 Subordination of Overriding Royalties: If the Party owning
the Working Interest from which the Overriding Royalty is
created: (a) fails to pay when due its share of Costs, or
(b) withdraws from this Agreement, then the Overriding
Royalty shall be chargeable with its pro rata portion of
all Costs (equal to its fractional interest in gross
production) and the security rights created in Article 6.3
(Security Provisions) shall be applicable against such
Overriding Royalty. The Operator shall have the right to
enforce the security rights (and all other rights granted
under this Agreement) against the owners of the Overriding
Royalty for the purpose of collecting Costs chargeable to
the Overriding Royalty.
19.2 Payment of Rentals and Royalties: The Operator shall make all
rental payments on behalf of the Parties for the Designated
Prospects which it operates. The Operator shall use reasonable care
to make proper and timely payment of all rentals, minimum royalties
or other similar payments accruing under the terms of the Leases
which are included within the applicable Designated Prospect. Upon
receipt of proper evidence of all such payments and the Operator's
invoice for its proportionate share of all such payments, each Non-
Operating Party shall reimburse the Operator for the Non-Operating
Party's Working Interest share of all such payments. In the event
Operator fails to make proper payment of any rental or minimum
royalty or similar payments accruing under the terms of the Lease(s)
through mistake or oversight where such payment is required to
continue a Lease in force, then Operator shall not be liable to the
other Parties for any resulting damages or any loss which results
from such nonpayment.
19.2.1 Non-Participation in Payments: If any Party elects not to
pay its share of any rental, minimum royalty or similar
payment, such Non-Participating Party shall notify the
other Parties of its intention not to pay its share of such
payment at least sixty (60) days prior to the date on which
such payment is due. Upon this occurrence, the Operator
shall make such payment solely for the benefit of all the
Participating Parties. The Non-Participating Party shall
assign to the Participating Parties all of its Working
Interest in the Designated Prospect or portion thereof,
maintained by such payment.
19.2.2 Royalty Payments: Each Party shall pay or cause to be paid
all royalty and other amounts payable out of Hydrocarbon
production actually taken from the Lease(s) for its
account. When necessary for calculating the recoupment of
a Non-Consent Well, any Non-Operating Party taking its
production shall advise the Operator (in writing on or
before the tenth day of the month following the month in
which the Hydrocarbon production is sold or used off the
premises) of the volumes of Hydrocarbons it took and the
prices received for such Hydrocarbon production.
19.2.3 Federal Environmental Tax: Each Party agrees to pay and
bear its proportionate share of the Federal Environmental
Tax payable on its share of Hydrocarbon production or any
other fees being required by the Oil Pollution Act of 1990
and any other statutes. However, should the oil owned by a
Party be reported to the MMS (or a successor regulatory
agency) by another Party in its reporting form, the
reporting Party shall pay the required fees on all volumes
reported and the non-reporting Party shall reimburse the
reporting Party for all fees paid on its behalf.
ARTICLE 20
TAXES
20.1 Internal Revenue Provision: Each Party elects to be excluded from
the application of all or any part of the provisions of Subchapter
K, Chapter 1, Subtitle A, Internal Revenue Code of 1986, as amended,
or similar provisions of applicable state laws.
20.2 Other Taxes and Assessments: The Operator for the Joint Account
shall file all tax returns and reports required by law and shall pay
all applicable taxes, other than income or other taxes provided in
Article 20.2.2 (Production and Severance Taxes) or assessments
levied with respect to operations conducted under this Agreement.
The Parties shall promptly furnish the Operator with copies of any
notices, assessments or tax statements received pertaining to taxes
to be paid by the Operator. The Operator shall charge each Party
its Working Interest share of all taxes and assessments paid and,
upon written request from a Non-Operating Party(ies), provide copies
of all tax returns, reports, tax statements and receipts for such
taxes. The Operator shall not allow any taxes to become delinquent,
unless such nonpayment is approved as a General Matter.
20.2.1 Property Taxes: The Operator shall render for ad valorem
property tax purposes all personal property and/or real
property covered by this Agreement as may be subject to
such taxation and shall pay such property taxes for the
benefit of each Party. The Operator shall timely and
diligently protest to a final determination any valuation
it deems unreasonable. Pending such determination, the
Operator may elect to pay under protest. Upon final
determination, the Operator shall pay the taxes and any
interest, penalty or cost accrued as a result of such
protest. The Operator shall charge each Party its Working
Interest share of such tax payments including interest,
penalties and all reasonable Costs in accordance with
Exhibit "C" (Accounting Procedure).
20.2.2 Production and Severance Taxes: Each Party shall pay, or
cause to be paid, all production, excise, severance and
other similar taxes due on any Hydrocarbon production which
it received pursuant to the terms of this Agreement. Any
Party responsible for such tax payment shall upon written
request from the Operator, provide evidence that such taxes
have been paid.
ARTICLE 21
INSURANCE AND BONDS
21.1 Insurance: The Operator shall maintain the insurance coverage
provided in Exhibit "B" (Offshore Insurance Provisions) attached
hereto and charge each Party its Working Interest share of the Cost
of such coverage.
21.2 Bonds: Operator shall obtain and maintain any and all bonds,
certificates of financial responsibility and permits required to be
carried by any applicable law, regulation or rule. Operator will
require all contractors to obtain and maintain all bonds required to
be carried by any applicable law, regulation or rule.
ARTICLE 22
LIABILITY, CLAIMS AND LAWSUITS
22.1 Individual Obligations: The obligations, duties and liabilities of
the Parties shall be several and not joint or collective; and
nothing contained herein shall ever be construed as creating a
partnership, joint venture, association or other character of
business entity recognizable in law for any purpose. Each Party
shall hold all the other Parties harmless from liens and
encumbrances on the Leases or in the Contract Area arising as a
result of its acts or omissions.
22.2 Notice of Claim or Lawsuit: If a claim is made against any Party or
if any Party is sued on account of any matter arising from
operations hereunder, or on any matter affecting the Leases or Con-
tract Area, or if any hearings are held pursuant to operations under
this Agreement, such Party shall give written notice of the lawsuit
or hearing to the other Parties as soon as reasonably practicable.
22.3 Settlements: The Operator may settle any single damage claim or
lawsuit involving operations hereunder if the expenditure does not
exceed Two Hundred and Fifty Thousand Dollars ($250,000) per
occurrence and if the payment is in complete settlement of such
claim or suit. If the amount required for settlement exceeds such
amount, the Parties shall determine the further handling of the
claim or suit pursuant to Article 22.4 (Defense of Claims and
Lawsuits) below.
22.4 Defense of Claims and Lawsuits. The defense of claims and lawsuits
arising from operations under this Agreement which are likely to
exceed Two Hundred and Fifty Thousand Dollars ($250,000.0) per
occurrence shall be handled by a committee of staff attorneys
representing the Participating Parties in the operation out of which
the claim arose, with Operator's attorney as Chairman. Suits may be
settled during litigation only with the mutual consent of all
Participating Parties. No charge shall be made for services
performed by the staff attorneys or travel expenses, but all other
expenses incurred in the defense of suits, together with the amount
paid to discharge any final judgment, shall be considered costs of
operation and shall be paid by the Parties in proportion to their
Participating Interest in the operation out of which the claim
arose. Outside counsel shall be employed only with the unanimous
approval of the affected Parties. If it is agreed that outside
counsel is to be employed, the fees and expenses shall be charged to
the affected Parties in proportion to their Participating Interest
in the operation out of which such claims arose.
22.5 Liability for Damages: To the extent allowed by law, liability for
losses, damages, Costs, expenses, claims, liabilities and lawsuits
arising from operations under this Agreement not covered by or in
excess of the insurance carried for the Joint Account shall be borne
by each Party in proportion to its Participating Interest in the
operations out of which such liability arises, except when such
liability results from the gross negligence or willful misconduct of
a Party(ies), in which case such Party(ies) shall be solely liable
for same.
22.6 INDEMNIFICATION FOR NON-CONSENT OPERATIONS: THE PARTICIPATING
PARTIES AGREE TO HOLD THE NON-PARTICIPATING PARTIES (AND THEIR
AFFILIATES, AGENTS, INSURERS, DIRECTORS, OFFICERS AND EMPLOYEES)
HARMLESS AND TO RELEASE, DEFEND, INDEMNIFY, AND PROTECT THEM
AGAINST ALL CLAIMS, DEMANDS, LIABILITIES, INCLUDING ENVIRONMENTAL
POLLUTION AND LIENS FOR PROPERTY DAMAGE OR PERSONAL INJURY,
INCLUDING SICKNESS AND DEATH, CAUSED BY OR OTHERWISE ARISING OUT OF
NON-CONSENT OPERATIONS, AND ANY LOSS AND COST INCLUDING LIENS AND
ENCUMBRANCES, SUFFERED BY ANY NON-PARTICIPATING PARTY AS AN INCIDENT
THEREOF, EXCEPT TO THE EXTENT THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF ANY SUCH NON-PARTICIPATING PARTY CONTRIBUTES TO THAT
LOSS OR COST. SHOULD ANY INDEMNITY CONTAINED HEREIN BE DETERMINED
TO BE IN VIOLATION OF LAW OR PUBLIC POLICY, THE PARTIES AGREE THAT
SAID INDEMNITY(IES) SHALL THEN BE ENFORCEABLE ONLY TO THE MAXIMUM
EXTENT ALLOWED BY LAW.
22.7 DAMAGE TO RESERVOIR, LOSS OF RESERVES AND PROFITS: NOTWITHSTANDING
ANYTHING TO THE CONTRARY CONTAINED HEREIN, NO PARTY TO THIS
AGREEMENT SHALL BE LIABLE TO ANY OTHER PARTY TO THIS AGREEMENT AND
EACH PARTY RELEASES THE OTHER PARTIES FROM CLAIMS FOR LOSS OF OR
DAMAGE TO A RESERVOIR(S), LOSS OF HYDROCARBONS, OR FOR LOSS OF
REVENUES OR PROFITS OR FOR OTHER CONSEQUENTIAL OR BUSINESS
INTERRUPTION DAMAGES ARISING OUT OF OR INCIDENTAL TO OR IN
CONNECTION WITH THIS AGREEMENT, OR ANY OPERATIONS HEREUNDER, HOWEVER
CAUSED, INCLUDING NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL FAULT
ON THE PART OF ANY PARTY TO THIS AGREEMENT.
22.8 NON-ESSENTIAL PERSONNEL: A PARTY HERETO WHO REQUESTS TRANSPORTATION
AND/OR ACCESS TO A PRODUCTION SYSTEM, VESSEL OR ANY OTHER FACILITY
UTILIZED FOR OPERATIONS AND WHO IS NOT DIRECTLY INVOLVED WITH THE
OPERATION UNDER THIS AGREEMENT, AGREES TO PROTECT AND INDEMNIFY THE
OTHER PARTIES HERETO AS TO ANY COST, LIABILITY OR JUDGMENT INCURRED
AS A RESULT OF A CLAIM, DEMAND, CAUSE OF ACTION OR SUIT BROUGHT BY
SUCH PERSON ARISING OUT OF SAID PERSON'S TRANSPORTATION AND/OR
ACCESS TO A PRODUCTION SYSTEM, VESSEL OR ANY FACILITY UTILIZED FOR
OPERATIONS. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, ANY
SUCH INDEMNIFICATION AND/OR PROTECTION PROVIDED HEREIN SHALL BE
INAPPLICABLE WHERE THE CLAIM DEMAND, CAUSE OF ACTION OR SUIT ARISES
OUT OF THE WILLFUL MISCONDUCT, INTENTIONAL ACT OR GROSS NEGLIGENCE
OF THE PARTY SO INDEMNIFIED AND/OR PROTECTED.
ARTICLE 23
FARM-INS AND CONTRIBUTIONS
23.1 Contributions From Third Parties: The Parties may seek to obtain
support from third parties for operations hereunder through
contributions of cash, acreage or data. Any Party may propose to
seek support for such operations on the Contract Area through
contributions from third parties. Each Party shall notify all other
Parties of any contribution offers received from third parties. Any
proposal or offer from third parties shall be subject to the General
Matter approval of the Parties prior to either accepting the offer
or making such a proposal. Upon General Matter approval, the
Operator, unless otherwise agreed, shall negotiate all contributions
on behalf of the Parties (with prior consultation of the Parties and
the prior agreement of the cash equivalent value for any non-cash
consideration offered or received). Upon receiving a response from
a third party to the Operator's proposal, the Operator shall notify
all of the Parties of the proposal and its terms. Within thirty
(30) days of receipt of the Operator's notice, the Party's shall
vote as a General Matter on the proposal. If a proposal is approved
as a General Matter, any Party shall have the right to decline
participation in a contribution and be relieved of any obligations
and benefits thereunder. The Participating Party(s) shall not be
required to obtain the consent of the Non-Participating Party
regarding any contribution or trade.
23.1.1 Cash Contributions : In the event a cash contribution is
accepted towards the drilling of a well, in which all
Parties are Participating Parties, said cash contribution
shall be turned over to the Operator, and the Operator
shall credit the amount of the cash contribution against
the Costs of the proposed operation in proportion to each
Party's Participating Interest. In the event the
Participating Parties accept a cash contribution toward the
drilling of a well where fewer than all Parties are
Participating Parties, the cash contribution shall be
credited among the Participating Parties in such well to
the extent that each Participating Party shall receive a
portion of the contribution equal to its Participating
Interest in the well. The cash contribution shall be
deducted from the cost of drilling and completing the well
prior to computation of the Recoupment Amount Participating
Parties shall be entitled to receive in accordance with
Article 16 (Non-Consent Operations).
23.1.2 Acreage Contributions: Any contribution of acreage toward
the drilling of a well hereunder shall be offered, without
warranty of title, to the Participating Parties in
proportion to their Participating Interests. If all of the
Parties to this Agreement participate in accepting their
share of the assignment of the acreage, the acreage shall
become a part of the Contract Area and subject to the terms
of this Agreement. Any acreage contribution in which less
than all Parties are Participating Parties shall, to the
extent possible, be subject to the terms of an Operating
Agreement substantially similar to this Agreement, and
shall apply separately to the acreage acquired by the
Participating Parties.
23.1.3 Data Contributions : Contributions of geoscience or
engineering data offered by third parties in support of
operations hereunder shall be handled pursuant to Article 7
(Confidentiality of Data), and may be accepted by the
Participating Parties so long as the confidentiality of any
data belonging to Non-Participating Parties is preserved.
No data owned by a Non-Participating Party may be included
in any data contribution without the consent of the Non-
Participating Party.
23.2 Restricted Bidding: If at any time during the term of this
Agreement, more than one of the Parties are on the list of
restricted joint bidders for OCS lease sales as issued by the
Minerals Management Service pursuant to 30 CFR 256.44, then the
Parties agree to comply with all statutes and regulations regarding
restricted joint bidders on the OCS in effect during the term of
this Agreement. In the case of multiple restricted bidders being
Parties to this Agreement, the provisions of this Agreement shall be
amended to delete those provisions which would otherwise require a
transfer of a leasehold interest prohibited by 30 CFR 256.44(c).
23.3 Area of Mutual Interest: The geographical confines of the area
described and outlined in Exhibit A-4 shall hereinafter be referred
to as the Area of Mutual Interest .
23.3.1 Notification Required: Subject to Articles 23.3.9 (Bidding
Agreement), if any Party hereto ( Acquiring Party )
acquires either an oil and gas lease (or any interest
therein) or any other mineral interest covering lands
and/or water bottoms and/or seabeds lying within the Area
of Mutual Interest, or if the Acquiring Party is offered
the opportunity to enter into any type of agreement by
which such an interest may be earned or otherwise acquired
by conducting drilling, seismic, or other operations on the
lands lying within the Area of Mutual Interest, then the
Acquiring Party shall promptly notify the other Parties of
such acquisition or such opportunity. Any interest
acquired by a Party hereto in lands outside of the Area of
Mutual Interest, however, shall not be subject to the terms
of this Article. The notification provided for in this
Article shall contain all available title information, and
copies of leases, agreements by which the interests maybe
acquired, and all other pertinent instruments. It shall
also describe in detail the cost and expense of such
acquisition and any other obligation which may be incurred
pursuant thereto.
23.3.2 Right of Participation: The Parties shall have the
opportunity to participate in any acquisition hereunder,
and in the following proportions:
Enserch Exploration, Inc. 40%
Mobil Oil Exploration & Producing Southeast Inc. 40%
Reading & Bates Development Co. 20%
23.3.3 Election Period If Operations Are Not Required: If
drilling, seismic, or other operations are not required to
acquire the interest, each Party hereto shall have fifteen
(15) days from receipt of notice thereof in which to elect
to participate in such acquisition. Failure to notify the
acquiring Party of its election within fifteen (15) days
shall be deemed and election not to participate.
23.3.4 Election Period If Operations Are Required: If the
acquisition requires drilling, seismic, or other operations
on the lands lying within the Area of Mutual Interest, the
election of a Party to participate in such operations shall
be deemed an election to participate in the agreement
governing such operations, to the extent necessary to
acquire the interest. No party shall be required to make
such election more than one hundred fifty (150) days nor
less than fifteen (15) days prior to commencement of
initial operations.
23.3.5 Assignments: To receive an assignment of its proportionate
share of the interest acquired as a result of conducting
drilling, seismic, or other operations on the Area of
Mutual Interest, a Party ( Participating Party ) must have:
(1) participated in all operations necessary for the
acquisition of the interest, including, but not limited to,
completion operations and also must have paid all costs and
expenses incurred in connection therewith; (2) participated
in any previous drilling, seismic, or other operations that
were necessary or were a condition precedent to the
operations resulting in the acquisition of the interest;
and (3) participated in accordance with the terms,
provisions, covenants, and conditions of the agreements
governing the acquisition of interest. The Acquiring Party
and the Participating Party shall share in the acquisition
in the proportion that each such Party s respective working
interest, as set forth in Article 23.3.2 above bears to the
sum of the working interests of the Acquiring Party and the
Participating Parties. On receipt of an invoice from the
Acquiring Party setting forth in detail the cost and
expense of the acquisition, each Participating Party shall
promptly reimburse the Acquiring Party for its
proportionate share thereof. The Acquiring Party shall
then promptly assign to the Participating Party its
proportionate interest in the acquisition.
23.3.6 Operating Agreement: If all Parties to this Agreement elect
to participate in any acquisition, then any such acquired
interest shall thereafter be subject to this Agreement and
the Parties shall amend Exhibits A-1", A-2", and A-3" to
reflect the newly acquired leases and Designated Prospects.
Future operations conducted on the newly acquired
Designated Prospects shall be governed by this Agreement.
Such amendment shall be effective with the award of a lease
or the effective date of any such transfer; and shall be
executed by the Parties within ninety (90) days from lease
issuance or the effective date of the transfer leases. If
less than all Parties elect to participate in an
acquisition, the Acquiring Parties will execute an
agreement substantially in the form of this Agreement.
In the event that the lease acquisition involves a third party
(not a Party to this Agreement), the Parties agree to utilize
this form of Agreement as the starting point for negotiation
of a mutually acceptable form of Operating Agreement with the
third party.
23.3.7 Term: The Area of Mutual Interest shall be in effect until
December 31, 2000.
23.3.8 Conflicting Agreements: The provisions of this Article
shall prevail over any conflicting provisions, if any, in
this Agreement.
23.3.9 Bidding Agreement: Attached hereto as Exhibit "K" is that
certain Bidding Agreement dated effective September 1,
1995, by and between Mobil Oil Exploration & Producing
Southeast Inc., Enserch Exploration, Inc., and Reading &
Bates Development Company (hereinafter referred to as the
Bidding Agreement ), which shall govern the acquisition of
leasehold interests within the Area of Mutual Interest and
which may be acquired at OCS Lease Sales. If there is a
conflict between the provisions of this Article 23.3 and
the Bidding Agreement, the provisions of the Bidding
Agreement shall control to the extent of such conflict. It
is the intent of the Parties that with respect to a lease
acquired as a result of a high bid for which a Party was a
Non-Participating Party under the Bidding Agreement, such
Non-Participating Party shall not be offered a second
opportunity to acquire an interest under the terms of this
Article. If a Party declines to participate in an
acquisition within the Area of Mutual Interest, it will
affect adversely that Party s priority for handling its
production from the affected area.
ARTICLE 24
SUCCESSORS, ASSIGNS, AND SALE OF INTEREST
24.1 Successors and Assigns: This Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors
and assigns and shall constitute a covenant running with the Leases.
Each Party shall incorporate in any assignment of an interest in the
Leases a provision that such interest and the assignment thereof is
subject to this Agreement.
Except as otherwise provided, for the purpose of maintaining
uniformity of ownership in each Designated Prospect, no Party shall
sell, encumber, transfer or make other disposition of its interest
in a Designated Prospect and in wells, Initial Production System,
Subsequent production System, Facilities, and production unless such
disposition covers either:
(a) the entire interest of the Party in a Designated Prospect and
any and all Leases, wells, equipment, Initial Production
System, Subsequent Production System, Facilities and
production attributable thereto; or
(b) an equal undivided interest in a Designated Prospect and any
and all Leases, wells, equipment, Initial Production System,
Subsequent Production System, Facilities and production
attributable thereto.
Notwithstanding the foregoing, upon notice to the Parties, a Party
may sell, assign, encumber or transfer its interest in the Initial
Production System or Subsequent Production System in connection with
any financing or leasing arrangement covering such Party's interest
therein. If a Party's interest in the Initial Production System or
Subsequent Production System takes the form of a right of use
pursuant to a lease, or some other contractual right, those rights
of use contained in the lease or other contractual rights shall be
transferred at the same time and in the same proportion as a
transfer of a Parties' interest in the Designated Prospect, wells,
equipment, Facilities and production. Any such financing, lease
arrangement or contractual service agreement will be made
specifically subject to the terms and provisions of this Agreement
and the rights of the Parties hereunder. The Parties agree to
cooperate with each other for the purpose of allowing each Party to
obtain satisfactory financing, lease arrangements or service
agreements covering its interest in the Production System.
24.2 Effective Date of Transfer: No sale, transfer or assignment of an
interest in a Designated Prospect permitted under the provisions of
this Agreement shall be effective hereunder until a duly executed
counterpart original or a certified copy of the filed instrument or
instruments evidencing such change in ownership has been delivered
to the Operator, together with a like counterpart original of an
instrument in a form acceptable to Operator in which the assignee
adopts and ratifies this Agreement. Any such transfer or assignment
shall be made effective as of the first day of a calendar month, or
if not so made effective, the instrument or instruments shall be
considered effective for all purposes hereof as of the first day of
the calendar month next following the date of such instrument or
instruments. Upon receipt of such instrument the Operator shall
recognize the change in interest and shall notify the Parties, but
the Operator shall not be responsible for effecting any retroactive
adjustment with respect to any matter between the affected Parties
arising from any prior accounting under this Agreement by Operator.
24.3 Transferee Bound: All such authorized sales, transfers, assignments
or conveyances of an interest in a Designated Prospect and this
Agreement, whether expressly so stated or not, shall operate to
impose upon any Party acquiring such interest its share of all costs
and other obligations chargeable hereunder to such interest and
shall likewise operate to give and grant to such Party acquiring
such interest its proportionate part of all benefits accruing
hereunder.
24.4 Assignments and Transfers of Working Interests: All of the Parties
to this Agreement agree to give prior written notice to the Operator
and the other Parties of any proposed assignment, transfer or other
disposition of all or a portion of a Party's Working Interest
covered by this Agreement. Any assignment of a Working Interest
covered by this Agreement shall be made to a financially responsible
assignee and shall be further subject to this Agreement and the
following provisions:
24.4.1 Exceptions to Prior Written Notice: Notwithstanding any
provision of this Agreement to the contrary, an assigning
Party shall not be required to provide prior written notice
with respect to any of the following:
(i) A Party seeking to mortgage, pledge, hypothecate or
grant a security interest in all or a portion of its
Working Interest in the Leases, any equipment or
Facilities or each Party's right to produce Hydrocarbons
from a Designated Prospect. However, except as
otherwise provided herein, any encumbrance arising from
the financing transaction shall be expressly
subordinated to the rights of the other Parties to this
Agreement, and the assigning Party shall ensure that any
mortgage or encumbrance shall be without prejudice to
the terms of this Agreement and promptly following the
creation of such encumbrance, the Party creating the
same shall deliver to the other Parties to this
Agreement a written acknowledgment by the holder of such
encumbrance, in form and substance satisfactory to such
Parties, confirming such subordination; or,
(ii) A Party assigning all or an undivided part of its
interest to an Affiliate.
24.4.2 Effective Date of Assignments: Except as otherwise
provided in this Agreement, the effective date for any
assignment shall be at least thirty (30) days but not more
than one hundred eighty (180) days after the date of the
written notice. No assignment, other than those allowed by
Article 24.4.1 (Exceptions to Prior Written Notice), shall
be binding upon the Parties unless and until (i) the
assignor or assignee provide all remaining Parties with a
photocopy of a fully executed assignment, and an executed
MMS Form 1123, "Designation of Operator" and (ii) evidence
of tender for approval by the Mineral Management Service.
The Parties shall promptly join in such reasonable actions
as may be necessary to secure such approvals and shall
execute and deliver any and all documents reasonably
necessary to effect any such assignment. Any costs
attributable to such an assignment shall be the sole
obligation of the assignor.
24.4.3 Minimum Transfer of Interest: Unless unanimously agreed
otherwise, any transfer to a third party shall be limited
to a minimum Working Interest of ten percent (10%) in an
entire Designated Prospect. No assignment or transfer of
any interest in this Agreement or any Lease or lands
subject to this Agreement shall be made that is not an
equal and undivided interest in and to all of a Party's
interest in a Designated Prospect and any and all Leases,
wells, Production Systems, Facilities and production
attributable thereto unless otherwise provided under this
Agreement. No assignment or transfer of any Working
Interest in this Agreement or any Lease or lands subject to
this Agreement shall be made that is not an undivided
Working Interest in all of a Party's Working Interest in a
Designated Prospect (unless otherwise provided under this
Agreement).
24.4.4 Form of Assignments: Any assignment of any interest in or
subject to this Agreement shall incorporate provisions that
the assignment is inferior to and made expressly subject to
this Agreement and providing for the assumption by the
assignee of the performance of all of assignor's
obligations under this Agreement. Any assignment not in
compliance with this provision shall be voidable by the
non-assigning Parties.
24.4.5 Limited Warranty: Any transfer of interest pursuant to
this Article 24 shall require that any assignment, vesting
or relinquishment of Working Interest between the Parties
under this Agreement shall be made without warranty of
title.
24.5 Preferential Right to Purchase: Subject to the provisions of this
Article, each Party shall have the right to freely transfer and
alienate its Working Interest. For the purposes of this Article
24, Working Interest as to each Designated Prospect covered by
this Agreement shall mean any right, title or interest of a Party in
and to any Lease, Production System, Facilities, Hydrocarbons,
platform, equipment or any other property, real or personal, or any
other right or interest covered by or created under this Agreement.
Any transfer of all or any portion of a Party's Working Interest,
directly or indirectly, shall be subject to the following
provisions:
24.5.1 Notice of Proposed Transaction: Should any Party (the
"Assignor") desire to dispose of all or any portion of its
Working Interest hereunder (whether offered as a single
property disposition or as part of a multi-property
disposition) and has received a bona fide offer (whether
from a Party to this Agreement or from a third party) which
the Assignor is willing to accept for the sale or other
disposition of its Working Interest in a Designated
Prospect, each of the remaining Parties to this Agreement
shall have a prior and preferential right to purchase of
such Working Interest. In such case, the Assignor shall
promptly give prior written notice of the proposed
transaction to the other Parties. The notice of the
proposed transaction shall provide full information
concerning the transaction including at least:
- the name and address of the prospective purchaser (who
must be ready, able and willing to acquire the interest),
- the purchase price or other consideration offered (which
shall include the monetary equivalent in U.S. Dollars
based upon the reasonable market value of any
consideration other than cash), and
- all other pertinent material terms of the offer.
24.5.2 Exercise of Preferential Right to Purchase For a period of
thirty (30) days from receipt of the notice, the remaining
Parties shall have the prior right and option, but not the
obligation to elect to acquire the Working Interest offered
(on the same terms and conditions, or on equivalent terms
for a non-cash transaction as stated in the notice) without
reservations or conditions. The Election to exercise the
preferential right shall be made by the exercising Party
giving the Assignor written notice of its Election to
purchase prior to the expiration of the thirty (30) day
period. If an Election to purchase preferentially is made,
the Assignor shall be required to transfer the Working
Interest to the Party at the price and on the terms
specified in the notice. The transaction shall be
concluded within a reasonable time, but no later than sixty
(60) days after receipt of the Election to purchase
preferentially (plus a reasonable time to secure all
necessary governmental approvals). If more than one Party
elects to acquire the Working Interest offered, then each
Party shall acquire a proportion of the Working Interest
offered equal to the ratio its own pre-acquisition Working
Interest bears to the total pre-acquisition Working
Interests of all acquiring Parties (unless the acquiring
Parties agree upon a different ratio). If only one Party
elects to acquire the Working Interest offered, it may
require the Assignor to transfer all of the Working
Interest offered, but may not require the transfer of less
than all Working Interest offered.
24.5.3 Transactions Not Affected by the Preferential Right to
Purchase: This preferential right to purchase shall not
exist or apply when a Party proposes to:
(a) mortgage, pledge or otherwise encumber its interest
(including assignments of proceeds from the sale of its
Hydrocarbon production executed as further security for
the debt secured by such mortgage); or
(b) dispose of its Working Interest by:
- merger, reorganization or consolidation;
- a sale or other transfer to an Affiliate.
24.5.4 Completion of the Transaction: If none of the remaining
Parties elect to exercise its preferential right to
purchase the Working Interest offered, the Assignor shall
be free to complete the proposed transaction on the terms
disclosed in the notice. However, if any proposed
transaction is not completed within one hundred twenty
(120) days from the expiration of the thirty (30) day
preferential right Election period (plus a reasonable time
to secure any necessary governmental approvals) or, if the
terms of the proposed transaction are amended in any way,
the proposed transaction shall be considered withdrawn and
the Working Interest offered shall again be subject to the
preferential right to purchase as if the originally
proposed transaction had never been proposed.
24.5.5 Special Circumstances Preferential Rights to Purchase:
Notwithstanding anything to the contrary contained in this
Article 24 or elsewhere in this Agreement, with respect to
any transfer of interest by Reading & Bates Development Co.
or its successors or assigns, to Enserch Exploration, Inc.
or its successors or assigns, made pursuant to the terms
and provisions of an agreement or agreements between
Reading & Bates Development Co. and Enserch Exploration,
Inc. executed either prior to or contemporaneously with
this Agreement, said interest will be either subject to
this Article 24.5 or will be promptly offered for sale by
Enserch Exploration, Inc. to the remaining Parties, and the
purchase price for any such transfer shall be determined in
the following manner. Enserch Exploration, Inc. shall
select a duly qualified appraiser, the Parties who maintain
a preferential right shall jointly select a second duly
qualified appraiser and the two (2) appraisers so selected
shall select a third duly qualified appraiser. The three
(3) appraisers shall, each independent of the other,
determine the fair market value of the interest proposed to
be transferred. The three (3) determinations shall be
averaged and the greater of the resulting average or the
amount paid, reimbursed or tendered by Enserch Exploration,
Inc. for the interest, shall be deemed for all purposes to
be the purchase price for the interest proposed to be
transferred hereunder.
ARTICLE 25
FORCE MAJEURE
25.1 Force Majeure: If as a result of Force Majeure any Party is
rendered unable, wholly or in part, to carry out its obligations
under this Agreement (except for the payment of money) then the
obligations of the Party giving such notice, so far as and to the
extent that the obligations are affected by such Force Majeure,
shall be suspended during the continuance of any inability so
caused, but for no longer period. In addition, if as a result of
Force Majeure, the condition that any Non-Consent Operation be
timely commenced cannot be met, then that condition shall be
suspended for the duration of the Force Majeure event, provided
notification of the Force Majeure event is given as hereafter
specified to the Non-Participating Parties by the Participating
Parties in the Non-Consent Operation (who would benefit from the
acreage forfeiture by or percentage recoupment of the costs against
the Non-Consenting Party pursuant to Article 16). For purposes of
this Agreement, "Force Majeure" shall be inclusive of but not
limited to the following events: flood, hurricane or other acts of
God; a fire, blowout, oil spill or other environmental catastrophe;
war, civil disturbance, labor dispute, strike, lockout, compliance
with any law, order, rule or regulation, governmental action or
delay in granting permits or permit approvals as needed; by
inability to secure materials or rig; or by any other cause, whether
similar or dissimilar, beyond the reasonable control of the said
Party. The Party claiming Force Majeure shall notify the other
Parties of the Force Majeure situation within a reasonable time (not
to exceed thirty (30) days) after the occurrence of the facts relied
on and shall keep all Parties informed of all significant
developments. The notice of Force Majeure shall give full details
of said Force Majeure, and also (if possible) estimate the period of
time which said Party will require to remedy the Force Majeure or to
resume performance of its obligations under this Agreement. The
affected Party shall use all reasonable diligence to remove or
overcome the Force Majeure situation, but shall not be obligated to
settle any labor dispute except on terms acceptable to it and all
such disputes shall be handled within the sole discretion of the
affected Party.
ARTICLE 26
ADMINISTRATIVE PROVISIONS
26.1 Term of Agreement: This Agreement shall become binding upon
execution by all Parties with an effective date as set forth in the
preamble to this Agreement. This Agreement shall remain in effect
from the effective date and for so long as any of the Leases in the
Contract Area shall remain in effect or until all assets and
operations have been turned over to a single Working Interest owner.
Termination of this Agreement shall not relieve any Party from any
Costs or liability accrued or incurred prior to the termination of
this Agreement, and the provisions of this Agreement shall continue
in force for such additional time as necessary until:
(a) all wells have been plugged and abandoned;
(b) all property and equipment in the Contract Area belonging to
the Parties are disposed of by the Operator and all claims or
lawsuits have been settled or otherwise disposed of; and,
(c) a final accounting and settlement has been made under this
Agreement (including settlement of any gas imbalances pursuant
to Exhibit "D").
The Operator shall have a reasonable period of time after the
occurrence of an event of termination in which to conclude the
administration of operations and to make a distribution of assets.
During this period of time, the Operator shall continue to have and
shall exercise all powers granted and meet all duties imposed by
this Agreement until all provisions of this Agreement are fully
executed.
26.2 Time Limits: Time is of the essence in this Agreement and all time
limits shall be strictly construed and enforced. The failure or
delay of any Party in the enforcement of the rights granted under
this Agreement shall not constitute a waiver of said rights nor
shall it be considered as a basis for estoppel. Such Party may
exercise its rights under this Agreement despite any delay or
failure to enforce the rights when the right or obligation arose.
26.3 Waiver of Right to Partition: Each Party for itself, its
successors and assigns waives the right to bring an action for
partition of its interest in the Leases and lands or personal
property held subject to this Agreement, and covenants that for a
period of fifteen years from the effective date hereof and for such
longer period of time as may be authorized by subsequently enacted
law it shall not resort at any time to any action at law or in
equity to partition any or all of Leases and lands or personal
property subject to this Agreement.
26.4 Compliance With Laws and Regulations: This Agreement, and all
operations conducted by the Parties pursuant to this Agreement, are
expressly subject to and shall comply with all laws, orders, rules
and regulations of any federal, state or local governmental
authority having jurisdiction over the Contract Area. No Party
shall suffer a forfeiture or be liable in damages for failure to
comply with any of the provisions of this Agreement if such
compliance is prevented by or if such failure results from
compliance with any applicable law, order, rule or regulation.
26.4.1 Applicable Law: THE PROVISIONS OF THIS AGREEMENT AND THE
RELATIONSHIP OF THE PARTIES SHALL BE GOVERNED AND INTERPRETED
ACCORDING TO FEDERAL LAWS AND THE LAWS OF THE STATE OF
LOUISIANA WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS
THAT WOULD REFER THE MATTER TO THE LAWS OF ANOTHER
JURISDICTION.
26.4.2 Severance of Invalid Provisions: In case of a conflict
between the provisions of this Agreement and the provisions
of any applicable laws or regulations, the provisions of the
laws or regulations shall govern over the provisions of this
Agreement. If, for any reason and for so long as, any clause
or provision of this Agreement is held by court of competent
jurisdiction to be illegal, or invalid, unenforceable or
unconscionable under any present or future law (or
interpretation thereof), the remainder of this Agreement
shall not be affected by such illegality or invalidity. Any
such invalid provision shall be modified to the extent
practical to conform with the intent of the Parties and
eliminate such illegality or invalidity or if such is not
possible, shall be deemed severed from this Agreement as if
this Agreement had been executed with the invalid provision
eliminated. The surviving provisions of this Agreement shall
remain in full force and effect unless the removal of the
invalid provision destroys the legitimate purposes of this
Agreement; in which event this Agreement shall be null and
void. The Parties shall negotiate in good faith for any
required modifications to this Agreement.
26.4.3 Fair and Equal Employment: Each of the Parties is an
Equal Opportunity Employer. To the extent that this Agreement
may be subject to Executive Order 11246, as amended, the equal
opportunity provisions (41 CFR 60-1) are incorporated herein
by reference. If the Non-Discrimination in the OCS provisions
of 30 CFR 270 apply to this Agreement and the operations
conducted under it, the provisions of 30 CFR 270 are also
incorporated by reference. To the extent required by
applicable laws and regulations, this Agreement also includes
and is subject to the affirmative action clauses concerning
disabled veterans and veterans of the Vietnam era (41 CFR
60-250) and the affirmative action clauses concerning
employment of the handicapped (41 CFR 60-741), which clauses
are incorporated herein by reference. In performing work
under this Agreement, the Parties agree to comply with
(and the Operator shall require each independent contractor
to comply with) the governmental requirements set forth in
Exhibit "E" attached hereto, pertaining to nonsegregated
facilities. This Agreement and the Parties are also subject
to any other applicable rules and regulation relating to
nondiscrimination that may be promulgated from time to time
by any governmental body having jurisdiction over the subject
matter of this Agreement.
26.5 Construction and Interpretation of This Agreement: The
interpretation and construction of the terms of this Agreement will
be governed by the following conventions:
26.5.1 Headings for Convenience: Except for the definition headings
contained in Article 2 (Definitions), all the table of
contents, captions, numbering sequences and paragraph headings
used in this Agreement are inserted for convenience only and
shall in no way define, limit or describe the scope or intent
of this Agreement or any part thereof; nor have any legal
effect other than to aid a reasonable interpretation of this
Agreement.
26.5.2 Gender and Number: The use of pronouns in whatever gender or
number shall be deemed to be a proper reference to the Parties
to this Agreement though the Parties may be individuals,
business entities or groups thereof. Any necessary
grammatical changes required to make the provisions of this
Agreement refer to the correct gender or number shall in all
instances be assumed as though each case was fully expressed.
26.5.3 Independent Representation: Each Party has had the benefit of
independent representation with respect to the subject matter
of this Agreement. This Agreement, though drawn by one Party,
shall be construed fairly and reasonably and not more strictly
against one Party than another.
26.6 Integrated Agreement: This Agreement and the exhibits attached
thereto, contain the final and entire Agreement of the Parties with
respect to the subject matter of this contract. This Agreement
shall not be modified or changed except by a written amendment
signed by all the Parties. This Agreement is entire as to all the
performances to be rendered under it and breach of any provision
shall constitute a breach of the entire Agreement.
26.7 Execution of Documents:
26.7.1 Binding Effect: This Agreement shall be binding upon and inure
to the benefit of the Parties and their respective successors
and assigns and shall constitute a covenant running with the
land and Leases which are the subject hereof and which are
covered hereby. This Agreement does not benefit or create any
rights or benefits in any person or entity not a Party to this
Agreement.
26.7.2 Corporate Authority: If any Party is a legal entity, including
but not limited to, an association, corporation, joint venture,
limited partnership, partnership or trust, such Party
represents to the other Parties that the execution and
delivery of this Agreement and the completion of transactions
contemplated herein have been duly authorized by all necessary
corporate proceedings or have received all necessary
management approvals.
26.7.3 Further Assurances: Each Party further agrees to take any and
all actions necessary and sign any and all documents
necessary to implement the terms of this Agreement. Any
necessary documents (e.g., a Designation of Operator, etc.)
shall be prepared and executed by all Parties within thirty
(30) days from the receipt of a written request for same from
any Party.
26.7.4 Multiple Counterparts: This Agreement may be executed by
signing the original or a counterpart thereof. If this
Agreement is executed in multiple counterparts, each counter-
part shall be deemed an original and all of which when taken
together shall constitute but one and the same Agreement with
the same effect as if all Parties had signed the same
instrument. This Agreement may also be ratified by separate
instrument referring to this Agreement and adopting by
reference all the provisions of this Agreement. A ratification
shall have the same effect as an execution of the original
Agreement.
IN WITNESS WHEREOF, each Party, through its duly authorized agent or
representative, has executed this Agreement effective as of the date first
above written.
ENSERCH EXPLORATION, INC. READING & BATES DEVELOPMENT CO.
By:______________________________ By:______________________________
Its: Senior Vice President Its: President
Date:____________________________ Date:____________________________
Witnesses: Witnesses:
_________________________________ _________________________________
_________________________________ _________________________________
MOBIL OIL CORPORATION MOBIL OIL EXPLORATION & PRODUCING
SOUTHEAST INC.
By:______________________________ By:______________________________
Its: Attorney-in-Fact Its: Attorney-in-Fact
Date:____________________________ Date:____________________________
Attest: Attest:
_________________________________ _________________________________
Assistant Secretary Assistant Secretary
Witnesses:
_________________________________ _________________________________
_________________________________ _________________________________
MOBIL EXPLORATION & PRODUCING U.S.
INC. ACKNOWLEDGING AND ACCEPTING ITS
RIGHTS AND OBLIGATIONS PURSUANT TO
ARTICLES 5.1, 8.9 AND 8.10.
By:________________________________
Its: Attorney-in-Fact
Date:______________________________
Attest:
___________________________________
Assistant Secretary
Witnesses:
___________________________________
___________________________________
* * * * *
STATE OF TEXAS
COUNTY OF DALLAS
This instrument was acknowledged before me on
____________________________________, 1995 by
__________________________________________________________________________
________ as ________________________ of
________________________________________________________, a _____________
corporation, on behalf of said corporation.
___________________________________________________
Notary Public, State of Texas
My Commission Expires:
STATE OF TEXAS
COUNTY OF DALLAS
This instrument was acknowledged before me on
____________________________________, 1995 by
__________________________________________________________________________
________ as ________________________ of
________________________________________________________, a _____________
corporation, on behalf of said corporation.
___________________________________________________
Notary Public, State of Texas
My Commission Expires:
on.
___________________________________________________
Notary Public, State of ____________________
My Commission Expires:
STATE OF __________
COUNTY OF ____________
This instrument was acknowledged before me on
____________________________________, 1995 by
__________________________________________________________________________
________ as ________________________ of
________________________________________________________, a _____________
corporation, on behalf of said corporation.
___________________________________________________
Notary Public, State of ____________________
My Commission Expires:
* * * * *
ACKNOWLEDGMENTS
STATE OF
COUNTY OF
On this _____ day of ______, 19__, before me, appeared _________________
to me personally known, who, being by me duly sworn, did say that he/she
is the ____________ of ______________________________ and that the
foregoing instrument was signed in behalf of that corporation by authority
of its Board of Directors and acknowledged the instrument to be the free
act and deed of that corporation.
___________________________________
NOTARY PUBLIC
My Commission expires: __________________
* * * * *
STATE OF
COUNTY OF
On this _____ day of ______, 19__, before me, appeared _________________
to me personally known, who, being by me duly sworn, did say that he/she
is the ____________ of ______________________________ and that the
foregoing instrument was signed in behalf of that corporation by authority
of its Board of Directors and acknowledged the instrument to be the free
act and deed of that corporation.
___________________________________
NOTARY PUBLIC
My Commission expires: __________________
* * * * *
STATE OF
COUNTY OF
On this _____ day of ______, 19__, before me, appeared _________________
to me personally known, who, being by me duly sworn, did say that he/she
is the ____________ of ______________________________ and that the
foregoing instrument was signed in behalf of that corporation by authority
of its Board of Directors and acknowledged the instrument to be the free
act and deed of that corporation.
___________________________________
NOTARY PUBLIC
My Commission expires: __________________
* * * * *
ACKNOWLEDGMENT
STATE OF
COUNTY OF
On this _____ day of ______, 19__, before me, appeared _________________
to me personally known, who, being by me duly sworn, did say that he/she
is the ____________ of ______________________________ and that the
foregoing instrument was signed in behalf of that corporation by authority
of its Board of Directors and acknowledged the instrument to be the free
act and deed of that corporation.
___________________________________
NOTARY PUBLIC
My Commission expires: __________________
* * * * *
STATE OF
COUNTY OF
On this _____ day of ______, 19__, before me, appeared _________________
to me personally known, who, being by me duly sworn, did say that he/she
is the ____________ of ______________________________ and that the
foregoing instrument was signed in behalf of that corporation by authority
of its Board of Directors and acknowledged the instrument to be the free
act and deed of that corporation.
___________________________________
NOTARY PUBLIC
My Commission expires: __________________
* * * * *
STATE OF
COUNTY OF
On this _____ day of ______, 19__, before me, appeared _________________
to me personally known, who, being by me duly sworn, did say that he/she
is the ____________ of ______________________________ and that the
foregoing instrument was signed in behalf of that corporation by authority
of its Board of Directors and acknowledged the instrument to be the free
act and deed of that corporation.
___________________________________
NOTARY PUBLIC
My Commission expires: __________________
* * * * *
ACKNOWLEDGMENT
STATE OF
COUNTY OF
On this _____ day of ______, 19__, before me, appeared _________________
to me personally known, who, being by me duly sworn, did say that he/she
is the ____________ of ______________________________ and that the
foregoing instrument was signed in behalf of that corporation by authority
of its Board of Directors and acknowledged the instrument to be the free
act and deed of that corporation.
___________________________________
NOTARY PUBLIC
My Commission expires: __________________
* * * * *
STATE OF
COUNTY OF
On this _____ day of ______, 19__, before me, appeared _________________
to me personally known, who, being by me duly sworn, did say that he/she
is the ____________ of ______________________________ and that the
foregoing instrument was signed in behalf of that corporation by authority
of its Board of Directors and acknowledged the instrument to be the free
act and deed of that corporation.
___________________________________
NOTARY PUBLIC
My Commission expires: __________________
* * * * *
STATE OF
COUNTY OF
On this _____ day of ______, 19__, before me, appeared _________________
to me personally known, who, being by me duly sworn, did say that he/she
is the ____________ of ______________________________ and that the
foregoing instrument was signed in behalf of that corporation by authority
of its Board of Directors and acknowledged the instrument to be the free
act and deed of that corporation.
___________________________________
NOTARY PUBLIC
My Commission expires: __________________
- -----------------------------------------------------------------------------
EXHIBIT "A"
ATTACHED TO AND MADE A PART OF THAT CERTAIN ALLEGHENY OPERATING AGREEMENT
EFFECTIVE MAY 1, 1995 BETWEEN ENSERCH EXPLORATION, INC., READING & BATES
DEVELOPMENT CO., MOBIL OIL CORPORATION AND MOBIL OIL EXPLORATION &
PRODUCING SOUTHEAST INC..
WORKING INTERESTS OF THE PARTIES AND REPRESENTATIVES
I. WORKING INTERESTS OF THE PARTIES:
GREEN CANYON BLOCK 120 (OCS-G 15548)
GREEN CANYON BLOCK 126 (OCS-G 15550)
GREEN CANYON BLOCK 250 (OCS-G 15566)
GREEN CANYON BLOCK 251 (OCS-G 15567)
GREEN CANYON BLOCK 257 (OCS-G 15568)
GREEN CANYON BLOCK 295 (OCS-G 15570)
GREEN CANYON BLOCK 299 (OCS-G 15571)
GREEN CANYON BLOCK 301 (OCS-G 15572)
GREEN CANYON BLOCK 302 (OCS-G 15573)
WORKING INTERESTS IN THE ABOVE BLOCKS ARE OWNED AS FOLLOWS:
ENSERCH EXPLORATION, INC.------------------------------------------- 40%
MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST INC.-------------------- 40%
READING & BATES DEVELOPMENT CO.------------------------------------- 20%
100%
AS TO THE FOLLOWING LISTED BLOCKS, WORKING INTERESTS ARE SET FORTH BELOW:
GREEN CANYON BLOCK 210 (OCS-G 13696)
GREEN CANYON BLOCK 213 (OCS-G 8000)
GREEN CANYON BLOCK 253 (OCS-G 8005)
GREEN CANYON BLOCK 254 (OCS-G 7049)
GREEN CANYON BLOCK 258 (OCS-G 8006)
GREEN CANYON BLOCK 297 (OCS-G 8876)
GREEN CANYON BLOCK 298 (OCS-G 8010)
GREEN CANYON BLOCK 341 (OCS-G 13171)
GREEN CANYON BLOCK 342 (OCS-G 8012)
ENSERCH EXPLORATION, INC.-------------------------------------------- 40%
MOBIL OIL CORPORATION------------------------------------------------ 40%
READING & BATES DEVELOPMENT CO.-------------------------------------- 20%
100%
AS TO GREEN CANYON 209 (OCS-G 8504) WORKING INTERESTS ARE OWNED AS
FOLLOWS:
AMOCO PRODUCTION COMPANY------------------------------------------ 33.33%
ENSERCH EXPLORATION, INC.----------------------------------------- 26.67%
MOBIL OIL CORPORATION--------------------------------------------- 26.67%
READING & BATES DEVELOPMENT CO.---------------------------------- 13.33%
100.00%
II. DESIGNATED REPRESENTATIVES OF THE PARTIES:
ENSERCH EXPLORATION, INC.
4849 GREENVILLE AVENUE, SUITE 1200
DALLAS, TEXAS 75206
ATTN: MR. C.R. ERWIN - REGIONAL DIRECTOR
TELEPHONE: (214) 987-7780
TELECOPIER: (214) 987-6673
MOBIL EXPLORATION & PRODUCING U.S. INC.
1250 POYDRAS BUILDING
NEW ORLEANS, LOUISIANA 70113
ATTN: MR. W.J. ENGLE - PROJECT MANAGER FOR JOINT VENTURE RELATIONS
TELEPHONE: (504) 566-5234
TELECOPIER: (504) 566-5365
READING & BATES DEVELOPMENT CO.
901 THREADNEEDLE, SUITE 200
HOUSTON, TEXAS 77079
ATTN: MR. D.C. TOALSON - PRESIDENT
TELEPHONE: (713) 496-5000
TELECOPIER: (713) 496-0186
- -----------------------------------------------------------------------------
EXHIBIT "A-1"
ATTACHED TO AND MADE A PART OF THAT CERTAIN ALLEGHENY OPERATING AGREEMENT
EFFECTIVE MAY 1, 1995 BETWEEN ENSERCH EXPLORATION, INC., READING & BATES
DEVELOPMENT CO., MOBIL OIL CORPORATION AND MOBIL OIL EXPLORATION &
PRODUCING SOUTHEAST INC..
CONTRACT AREA AND DESIGNATED PROSPECT OUTLINES
I. THE CONTRACT AREA SHALL BE COMPRISED OF THE FOLLOWING GREEN CANYON
LEASES: GREEN CANYON BLOCKS 120, 126, 209, 210, 213, 250, 251, 253,
254, 257, 258, 295, 297, 298, 299, 301, 302, 304, 341 AND 342.
II. DESIGNATED PROSPECTS
Prospect Blocks
Allegheny Green Canyon Blocks 209, 210,
253, 254, 297, 298, 299, 341 and
342
N.W. Bison Green Canyon Block 120
Thor Green Canyon Block 250, 251 and
295
Thebes Green Canyon 126
Isis Green Canyon 213, 257, 258, 301
and 302
- -----------------------------------------------------------------------------
EXHIBIT "A-2"
Attached to and made a part of that certain Allegheny Operating Agreement
dated effective May 1, 1995, between Enserch Exploration Inc., Reading &
Bates Development Co. and Mobil Oil Corporation.
DESCRIPTION OF LEASES
1. GREEN CANYON BLOCK 120
MMS Serial No. OCS-G-15548
Effective date of Lease: September 1, 1995
Lessor: United States of America
Lessee: Enserch Exploration, Inc. et al
Legal Description:
Block 120, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
2. GREEN CANYON BLOCK 126
MMS Serial No. OCS-G-15550
Effective date of Lease: July 1, 1995
Lessor: United States of America
Lessee: Enserch Exploration, Inc. et al
Legal Description:
Block 126, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
3. GREEN CANYON BLOCK 209
MMS Serial No. OCS-G-8504
Effective date of Lease: June 1, 1986
Lessor: United States of America
Lessee: Placid Oil Company, et al
Legal Description:
Block 209, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
4. GREEN CANYON BLOCK 210
MMS Serial No. OCS-G-13696
Effective date of Lease: July 1, 1992
Lessor: United States of America
Lessee: EP Operating Company, et al
Legal Description:
Block 210, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
5. GREEN CANYON BLOCK 213
MMS Serial No. OCS-G-8000
Effective date of Lease: July 1, 1985
Lessor: United States of America
Lessee: Placid Oil Company, et al
Legal Description:
Block 213, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
6. GREEN CANYON BLOCK 250
MMS Serial No. OCS-G-15566
Effective date of Lease: July 1, 1995
Lessor: United States of America
Lessee: Enserch Exploration, Inc. et al
Legal Description:
Block 250, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
7. GREEN CANYON BLOCK 251
MMS Serial No. OCS-G-15567
Effective date of Lease: July 1, 1995
Lessor: United States of America
Lessee: Enserch Exploration, Inc. et al
Legal Description:
Block 251, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
8. GREEN CANYON BLOCK 253
MMS Serial No. OCS-G-8005
Effective date of Lease: July 1, 1985
Lessor: United States of America
Lessee: Amerada Hess, et al
Legal Description:
Block 253, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
9. GREEN CANYON BLOCK 254
MMS Serial No. OCS-G-7049
Effective date of Lease: June 1, 1984
Lessor: United States of America
Lessee: Placid Oil Company, et al
Legal Description:
Block 254, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
10. GREEN CANYON BLOCK 257
MMS Serial No. OCS-G-15568
Effective date of Lease: July 1, 1985
Lessor: United States of America
Lessee: Placid Oil Company, et al
Legal Description:
Block 257, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
11. GREEN CANYON BLOCK 258
MMS Serial No. 8006
Effective date of Lease: July 1, 1985
Lessor: United States of America
Lessee: Placid Oil Company, et al
Legal Description:
Block 258, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
12. GREEN CANYON BLOCK 295
MMS Serial No. OCS-G-15570
Effective date of Lease: July 1, 1995
Lessor: United States of America
Lessee: Enserch Exploration, Inc. et al
Legal Description:
Block 295, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
13. GREEN CANYON BLOCK 297
MMS Serial No. OCS-G-8876
Effective date of Lease: June 1, 1987
Lessor: United States of America
Lessee: OPUBCO Resources, Inc. et al
Legal Description:
Block 297, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
14. GREEN CANYON BLOCK 298
MMS Serial No. OCS-G-8010
Effective date of Lease: July 1, 1985
Lessor: United States of America
Lessee: Placid Oil Company, et al
Legal Description:
Block 298, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
15. GREEN CANYON BLOCK 299
MMS Serial No. OCS-G-15571
Effective date of Lease: July 1, 1995
Lessor: United States of America
Lessee: Enserch Exploration, Inc. et al
Legal Description:
Block 299, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
16. GREEN CANYON BLOCK 301
MMS Serial No. OCS-G-15572
Effective date of Lease: July 1, 1995
Lessor: United States of America
Lessee: Enserch Exploration, Inc. et al
Legal Description:
Block 301, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
17. GREEN CANYON BLOCK 302
MMS Serial No. OCS-G-15573
Effective date of Lease: July 1, 1995
Lessor: United States of America
Lessee: Enserch Exploration, Inc. et al
Legal Description:
Block 302, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
18. GREEN CANYON BLOCK 341
MMS Serial No. OCS-G-13171
Effective date of Lease: May 1, 1991
Lessor: United States of America
Lessee: Exxon Company U.S.A.
Legal Description:
Block 341, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
19. GREEN CANYON BLOCK 342
MMS Serial No. 8012
Effective date of Lease: July 1, 1985
Lessor: United States of America
Lessee: Placid Oil Company, et al
Legal Description:
Block 342, Green Canyon Area, as shown on OCS Official Protraction
Diagram, NG-15-3, containing approximately 5,760 acres.
SUBJECT TO OVERRIDING ROYALTY RESERVATIONS
Green Canyon Block 253 is subject to reservations of overriding royalty or
other burdens and encumbrances as set forth in the following instruments:
DATE: Effective March 1, 1995
ASSIGNOR: Shell Offhsore, Inc., et al
ASSIGNEE: Enserch Exploration, Inc.
ASSIGNING: All of Assignor's right, title and interest subject to a 5% of
8/8ths overriding royalty.
Green Canyon Blocks 209, 254, 297, 298 and 342 are subject to reservations
of overriding royalty as set forth in the following instruments:
DATE: Effective July 11, 1991, 7:00 a.m.
ASSIGNOR: Hunt Petroleum Corporation
ASSIGNEE: Exxon Corporation
FILED: August 15, 1991
ASSIGNING: All of Assignor's right, title and interest subject to 1/9th of
8/8ths overriding royalty, proportionately reduced.
DATE: Effective May 31, 1993, 7:00 a.m.
ASSIGNOR: Hunt Petroleum Corporation
ASSIGNEE: Exxon Corporation
FILED: October 26, 1993
ASSIGNING: All of Assignor's right, title and interest subject to 1/9th of
8/8ths overriding royalty, proportionately reduced
- ----------------------------------------------------------------------------
EXHIBIT "A-3"
ATTACHED TO AND MADE A PART OF THAT CERTAIN ALLEGHENY OPERATING AGREEMENT
EFFECTIVE MAY 1, 1995 BETWEEN ENSERCH EXPLORATION, INC., READING & BATES
DEVELOPMENT CO., MOBIL OIL CORPORATION AND MOBIL OIL EXPLORATION &
PRODUCING SOUTHEAST INC..
OPERATOR DESIGNATIONS
Prospect Blocks Operator
Allegheny Green Canyon Blocks 209, ENSERCH EXPLORATION, INC.
210, 253, 254, 297, 298,
299, 341 and 342
N.W. Bison Green Canyon Block 120 ENSERCH EXPLORATION, INC.
Thor Green Canyon Block 250, ENSERCH EXPLORATION, INC.
251 and 295
Thebes Green Canyon 126 MOBIL OIL EXPLORATION &
PRODUCING SOUTHEAST INC.
Isis Green Canyon 213, 257, MOBIL OIL EXPLORATION &
258, 301 and 302 PRODUCING SOUTHEAST INC.
- -----------------------------------------------------------------------------
EXHIBIT B
Attached to and made a part of that certain Allegheny Operating Agreement
dated effective May 1, 1995, between Enserch Exploration, Inc., Reading &
Bates Development Co., Mobil Oil Corporation and Mobil Oil Exploration &
Producing Southeast Inc.
OFFSHORE INSURANCE PROVISIONS
I. Any and all times while operations are being conducted under this
Agreement, Operator shall carry or cause to be carried insurance for
the benefit of and at the expense of the Joint Account as follows:
1. Worker's Compensation Insurance to cover full liability under
the applicable State and Federal Worker's Compensation Laws.
Said insurance policy shall contain the following
endorsements:
a. Employee's Liability Insurance with a limit of
$1,000,000 for accidental injuries or deaths of one or
more employees as a result of one accident.
b. Coverage under U.S. Longshoremen's and Harbor Worker's
Compensation Act, including provisions of Outer
Continental Shelf Lands Act, if applicable.
c. Marine and Voluntary Compensation, including but not
limited to General Maritime Law, Jones Act,
Transportation, Wages, Maintenance and Cure, subject to
a limit of $50,000,000.
2. Such insurance shall be carried for the benefit of the Parties
hereto and its cost shall be charged to the Joint Account. If
under the laws of the jurisdiction in which operations are
conducted, Operator is authorized to be a self-insurer as to
the foregoing, Operator may elect to be a self-insurer under
such laws and, in such event, Operator shall charge to the
Joint Account, in lieu of any premiums for such insurance, a
premium equivalent in an amount determined by applying manual
insurance rates to the payroll.
II. It is specifically understood that Operator shall have no obligation
to carry any other insurance for the benefit of the Joint Account
unless mutually agreed in writing by all Parties. Any Party may
individually, at its own expense, acquire additional insurance as it
desires; however, any such additional insurance shall contain waiver
or subrogation rights in favor of the remaining Parties hereto.
III. Operator shall make a good faith effort to require third-party
contractors performing work on the Joint Property to carry such
insurance and in such amount as Operator shall deem necessary. It
is recognized in the industry that there are certain contractors and
service companies whose services are necessary to carry out
operations contemplated by the Parties, who, as a matter of policy
or legal interpretation refuse contractually to indemnify and/or
carry any insurance indemnifying lease owners. As to those
entities, Operator may waive any requirement of contractual
indemnity or insurance whatsoever.
IV. If Non-Consent Operations are conducted under the terms of this
Agreement, the cost of insurance requirements hereunder in regard to
such operations, as well as all losses, liabilities, and expenses
incurred as a result of such operations, shall be the burden of the
Parties participating therein.
V. With respect to insurance carried by Operator for the benefit of the
Joint Account hereunder, Operator shall cause the Non-Operators,
their respective parents, subsidiaries, Affiliates, insurers and
underwriters to be named as additional insureds thereunder and also
cause a waiver of subrogation to be granted by the insurance company
or underwriter in favor of the Non-Operators, their respective
parents, subsidiaries, Affiliates, insurers and underwriters with
respect to such insurance coverage.
- -----------------------------------------------------------------------------
ADDENDUM TO EXHIBIT "C"
COPAS ACCOUNTING PROCEDURES
ADDITIONS:
1) Salaries of First Level Supervisors employed for the benefit of the
Joint Property in the conduct of Joint Operations. First Level
Supervisors are individuals at the lowest level of the organization
who have supervision over the day to day operations of the Joint
Property. Designation of an individual as a First Level Supervisor
shall not be based on title or location but rather on the functions
performed. The inclusion of a First Level Supervisor as a direct
charge to the Joint Account reflects the cost of the immediate
supervisor responsible for the daily supervision of the Operator's
field employees and contract labor, which are directly employed on
the Joint Property in the conduct of Joint Operations.
2) In such event, Operator shall charge to the Joint Account,
in lieu of any premiums for such insurance, a premium equivalent
in an amount determined by applying manual insurance rates to
the payroll.
3) Costs incurred for the benefit of the Joint Property and
applicable to the Joint Operations which arise from compliance
with governmental or regulatory requirements or to protect the
Joint Property from potential environmental liability. Such
costs may include surveys of an ecological or archaeological
nature. Also, such costs may include expenditures to provide or
have available pollution containment and removal equipment, plus
the actual cost of control and clean up of hazardous spills as
required by applicable laws and regulations.
4) No costs incurred beyond the Shore Base Facility shall be
charged as direct charge unless such charges are specifically
covered by items 1 through 14 above. This exclusion does not
cover items covered by the Integrated Project Team Accounting
described in Addendum, Item No. 5.
Expenditures or services provided by Non-Operator(s) which are
of direct benefit the Joint Account and requested by the
Operator will be billed by the Non-Operator(s) to the Operator
on a 100% basis. Operator will bill back Non-Operator(s) for
their proportional share of these costs.
5) INTEGRATED PROJECT TEAM ACCOUNTING
a. Services Rendered by Employees of Participants
All salaries, wages, payroll burden and Personal Expenses
of management, supervisory, technical and other personnel
who are assigned to the Integrated Project Team (as
defined in Exhibit "G") ("IPT') and engaged in project
management, design, construction and installation shall be
charged direct regardless of location ("Qualified Costs").
A pro rata share of salaries, wages, payroll burden and
Personal Expenses of part-time technical personnel
assigned to the IPT may be charged direct as Qualified
Costs if the individual's time devoted to the project
totals at least one full day during a given month.
Qualified Costs incurred by Non-Operators will be billed
to the Operator on or before the 20th day of the month
following the month in which the costs were incurred. The
billing for such Qualified Costs shall include time
sheets, copies of expense reports and sufficient detail to
support the charge. Operator will remit payment to the
Non-Operators for these costs and charge the total amount
to the Joint Account.
A pro rata share of salaries will be charged to the Joint
Account as Qualified Costs based on actual days worked
only when such time totals at least one day or more per
month devoted to the project. Payroll burden and Personal
Expenses associated with this labor will be charged to the
Joint Account consistent with the provisions of Exhibit
"C", Section II, Paragraph 2, Direct Charges - Labor and
Paragraph 3, Direct Charges - Employee Benefits.
The defined term "Personal Expenses" shall include
reasonable travel, accommodation, per diem, meals, and
other reimbursable costs incurred by personnel whose
salaries are chargeable to the Joint Account. Personal
Expenses shall be subject to the approval of the Project
Manager. Relocation costs shall not be chargeable to the
Joint Account.
Each participant shall maintain auditable records to
support any charges made by it to the Joint Account and
shall be subject to the audit requirement provided in
Section I, Paragraph 5 of this Exhibit "C" as to such
charges. Auditable records shall include time sheets and
expense account reports for personnel charged to the Joint
Account, basis for calculation of payroll burden and
copies of third-party invoices.
b. Other Services Provided by Operator's or Non-Operators'
Employees or Affiliates
Support staff employed by the Operator or Non-Operator, or
Affiliate controlled by the Operator or Non-Operator, may
provide technical services for the benefit of the IPT.
Without limiting the foregoing, examples of such technical
services include computer assisted drafting and computer
services, prior to incurring such costs, the Project
Manager shall recommend the expenditure to the Owners'
Committee ("Recommendation"). The Recommendation shall be
in writing and shall include a description of the service
to be provided, the time period during which the service
will be rendered and the estimated cost. The
Recommendation shall include a comparison of the estimated
cost of the expenditure with the estimated cost of similar
services provided by third party vendors. If an all
inclusive standard rate is to be charged, such rate shall
not be greater than the rate customarily charged
internally by the provider of the service to its
Affiliates. Approval of the Recommendation shall require
the unanimous consent of the Owners Committee. If
unanimous consent is obtained, the costs covered by the
Recommendation shall be directly charged to the Joint
Account. If unanimous consent is not obtained, the
Project Manager shall withdraw the Recommendation and
acquire the service from third party vendors.
Affiliates shall maintain auditable records to support all
charges made by it to the Joint Account and as to such
charges shall be subject to the same audit requirements
provided for Operator's charges in Section I, Paragraph 5
of this Exhibit "C".
c. Third-Party Costs
All third party expenditures incurred by the Operator for
the direct benefit of the project regardless of location
will be direct charged to the Joint Account. Third party
expenditures shall include, but not be limited to:
- Contractors, consultants and service companies
- Fabrication, construction and installation
activities and associated cost
- Specialized equipment, materials, testing or other
services (including software and specialized
computer applications)
- Research and development, prototype studies, design
and development work
- Conceptual work/studies
- On-site construction representatives and inspectors
and associated cost
- Drilling design and development
d. Overhead Application
The Major Construction rates provided in Exhibit "C,"
Section III, 2. shall cover the cost of Operator's
personnel above the Project Manager level and Operator's
other administrative functions and associated costs
indirectly serving the project including, but not limited
to, the cost for accounting, services personnel, treasury,
administrative, senior management and other support
services provided by the Operator. Such rates shall be
applied to the total cost (gross) of the applicable fixed
asset which is the subject of the Major Construction and
which is charged to the Joint Account. Total cost shall
include the Qualified Costs of the IPT, insofar as such
costs are associated with such fixed asset.
If the Project Manager elects to locate the IPT at the
office of a Non Operating Party, the Project Manager and
Non-Operator shall agree upon a rental rate to charge for
providing a work location for the IPT. One hundred
percent (100%) of the rent will be invoiced by the Non-
Operator to the Operator. The Operator shall not be
entitled to charge overhead on Non-Operator's office
rental charges to the Joint Account.
6) The pricing of material transfers to and/or from the Joint
Property will be determined by utilizing the Computerized
Equipment Pricing System (CEPS), historical price multiplier,
pricing on application or fair market value. The pricing method
selected by the Operator will be applied consistently to all
material transfer transactions.
A "Direct Purchase" occurs when the Operator contracts with a
third party for the acquisition of materials for a specific well
site or location. Direct Purchases shall charged to the Joint
Account at the price paid by the Operator after deduction of all
discounts received. Material provided by the Operator under
"vendor stocking programs, where the initial use is for a joint
property and title of the material does not pass from the vendor
until usage, is considered a Direct Purchase. If material is
found to be defective or is returned to the vendor for any other
reason, the Joint Account shall be credited when adjustments
have been received by the Operator from the manufacturer,
distributor or agent.
"Tubular substitution" is defined where higher-than-specification
grade or size tubulars are charged to the Joint Account from
Operator's inventory. The Operator is entitled to charge the
Joint Account at an equivalent price of the well design specifi-
cation tubulars.
7) 1.Directed Inventories
With an interval of not less than 5 years, physical inventories
shall be performed by the Operator upon written notification of
a majority in working interest of the Non-Operators.
8) Prior to the Operator entering into new contracts with Third
Parties to acquire helicopter, ship transport or other ongoing
support services ("Services"), and prior to the Operator
contracting with Third Parties for Shore Base Facilities ("Shore
Base Facilities"), Operator or Non-Operator may propose sharing
their existing support Services or Shore Base Facilities
("Sharing Proposal"). The Sharing Proposal shall be made to the
Owners' Committee and shall include a description of the
Services or Shore Base Facilities to be provided, the duration
of the sharing arrangement and the estimated actual cost to
provide such Services or Shore Base Facilities. It is the
intention of this section that Sharing Proposals be based on a
reasonable estimate of the actual cost to provide the Service or
Shore Base Facilities for use by the Joint Account and that such
proposal not be based on the rate that a Third Party might
charge for comparable Services or Shore Base Facilities.
Approval of the proposal shall require the unanimous consent of
the Owners' Committee.
- -----------------------------------------------------------------------------
EXHIBIT "D"
GAS BALANCING AGREEMENT ("AGREEMENT')
ATTACHED TO AND MADE PART OF THAT CERTAIN
OPERATING AGREEMENT DATED EFFECTIVE MAY 1, 1995, BETWEEN
ENSERCH EXPLORATION, INC., READING & BATES DEVELOPMENT CO.,
MOBIL OIL CORPORATION AND MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST INC.
("OPERATING AGREEMENT")
1. DEFINITIONS
The following definitions shall apply to this Agreement:
1.01 "Arm's Length Agreement" shall mean any gas sales agreement
with a unaffiliated purchaser or any gas sales agreement with
an affiliated purchase where the sales price represents the
current value as published in an industry publication such as
Inside F.E.R.C. or such other future publication as maybe
applicable.
1.02 "Index Price" shall mean the average of spot sales prices for
gas during any specific month as published Inside F.E.R.C.
first of the month publication for the applicable downstream
pipeline(s) to which the gathering pipelines deliver.
1.03 "Balancing Area" shall mean all of the acreage and depths
subject to the Operating Agreement.
1.04 "Full Share of Current Production" shall mean the Percentage
Interest of each Party in the Gas actually produced from the
Balancing Area during each month.
1.05 "Gas" shall mean all hydrocarbons produced or producible from
the Balancing Area, whether from a well classified as an oil
well or gas well by the regulatory agency having jurisdiction
in such matters, which are or may be made available for sale
or separate disposition by the Parties, excluding oil,
condensate and other liquids recovered by field equipment
operated for the joint account. "Gas" does not include gas
used in joint operations, such as for fuel, recycling or
reinjection, or which is vented or lost prior to its sale or
delivery from the Balancing Area.
1.06 "Makeup Gas" shall mean any Gas taken by an Underproduced
Party from the Balancing Area in excess of its Full Share of
Current Production, whether pursuant to Section 3.3 or Section
4.1 hereof.
1.07 "Mcf" shall mean one thousand cubic feet. A cubic foot of Gas
shall mean the volume of gas contained in one cubic foot of
space at sixty degrees Fahrenheit, 14.73 pounds per square
inch absolute (PSIA) and having a specific gravity of 1.00.
1.08 "MMBtu" shall mean one million British Thermal Units. A
British Thermal Unit shall mean the quantity of heat required
to raise one pound avoirdupois of pure water from 58.5 degrees
Fahrenheit to 59.5 degrees Fahrenheit at a constant pressure
of 14.73 pounds per square inch absolute.
1.09 "Operator" shall mean the individual or entity designated
under the terms of the Operating Agreement or, in the event
this Agreement is not employed in connection with an operating
agreement, the individual or entity designated as the operator
of the well(s) located in the Balancing Area.
1.10 "Overproduced Party" shall mean any Party having taken a
greater quantity of Gas from the Balancing Area than the
Percentage Interest of such Party in the cumulative quantity
of all Gas produced from the Balancing Area.
1.11 "Overproduction" shall mean the cumulative quantity of Gas
taken by a Party in excess of its Percentage Interest in the
cumulative quantity of Gas produced from the Balancing Area.
1.12 "Party" shall mean those individuals or entities subject to
this Agreement, and their respective heirs, successors,
transferees and assigns.
1.13 "Percentage Interest" shall mean the percentage or decimal
interest of each Party in the Gas produced from the Balancing
Area pursuant to the Operating Agreement covering the
Balancing Area.
1.14 "Royalty" shall mean payments on production of Gas from the
Balancing Area to all owners of royalties, overriding
royalties, production payments or similar interests.
1.15 "Underproduced Party" shall mean any Party having taken a
lesser quantity of Gas from the Balancing Area than the
Percentage Interest of such Party in the cumulative quantity
of all Gas produced from the Balancing Area.
1.16 "Underproduction" shall mean the deficiency between the
cumulative quantity of Gas taken by a Party and its Percentage
Interest in the cumulative quantity of all Gas produced from
the Balancing Area.
1.17 "Winter Period" shall mean the months November and December in
one calendar year and the months of January and February in
the succeeding calendar year.
2. BALANCING AREA
2.1 If this Agreement covers more than one Balancing Area, it
shall be applied as if each Balancing Area were covered by
separate but identical agreements. All balancing hereunder
shall be on the basis of Gas taken from the Balancing Area
measured in MMBtus.
2.2 In the event that all or part of the Gas deliverable from a
Balancing Area is or becomes subject to one or more maximum
lawful prices, any Gas not subject to price controls shall
be considered as produced from a single Balancing Area and
Gas subject to each maximum lawful price category shall be
considered produced from a separate Balancing Area.
3. RIGHT OF PARTIES TO TAKE GAS
3.1 Each Party desiring to take Gas will notify the Operator of
the volume nominated, the name of the transporting pipeline
and the pipeline contract number (if available) and meter
station relating to such delivery, sufficiently in advance
for the Operator, acting with reasonable diligence, to meet
all nomination and other requirements. Operator is
authorized to deliver the volumes so nominated and confirmed
(if confirmation is required) to the transporting pipeline
in accordance with the terms of this Agreement.
3.2 Each Party shall make a reasonable good faith effort to take
its Full Share of Current Production each month to the
extent that such production is required to maintain leases
in effect, to protect the producing capacity of a well or
reservoir, to preserve correlative rights, or to maintain
oil production.
3.3 When a Party fails for any reason to take its Full Share of
Current Production (as such Share may be reduced by the
right of the other Parties to make up for Underproduction as
provided herein), the other Parties shall be entitled to
take any Gas which such Party fails to take. To the extent
practicable, such Gas shall be made available initially to
each Underproduced Party in the proportion that its
Percentage Interest in the Balancing Area bears to the total
Percentage Interest of all Underproduced Parties desiring to
take such Gas. If all such Gas is not taken by the
Underproduced Parties, the portion not taken shall then be
made available to the other Parties in the proportion that
their respective Percentage Interest in the Balancing Area
bears to the total Percentage Interest of such Parties.
3.4 All Gas taken by a Party in accordance with the provisions
of this Agreement, regardless of whether such Party is
underproduced or overproduced, shall be regarded as Gas
taken for its own account with title thereto being in such
taking Party.
3.5 Notwithstanding the provisions of Section 3.3 hereof, no
Overproduced Party shall be entitled in any month to take
any Gas in excess of three hundred percent (300%) of its
Percentage Interest of the Balancing Area's then-current
Maximum Monthly Availability; provided, however, that this
limitation shall not apply to the extent that it would
preclude production that is required to maintain leases in
effect, to protect the producing capacity of a well or
reservoir, to preserve correlative rights, or to maintain
oil production. "Maximum Monthly Availability" shall mean
the maximum average monthly rate of production at which Gas
can be delivered from the Balancing Area, as determined by
the Operator, considering the maximum efficient well rate
for each well within the Balancing Area, the maximum
allowable(s) set by the appropriate regulatory agency, mode
of operation, production facility capabilities and pipeline
pressures.
3.6 In the event that a Party fails to make arrangements to take
its Full Share of Current Production required to be produced
to maintain leases in effect, to protect the producing
capacity of a well or reservoir, to preserve correlative
rights, or to maintain oil production, the Operator may sell
any part of such Party's full share of Current Production
that such Party fails to take for the account of such Party
and render to such Party, on a current basis, the full
proceeds of the sale less any reasonable marketing,
compression, treating, gathering or transportation costs
incurred directly in connection with the sale of such Full
Share of Current Production. In making the sale
contemplated herein, the Operator shall be obligated only to
obtain such price and conditions for the sale as are
reasonable under the circumstances and shall not be
obligated to share any of its markets. Any such sale by
Operator under the terms hereof shall be only for such
reasonable periods of time as are consistent with the
minimum needs of the industry under the particular
circumstances, but in no event for a period in excess of one
year. Notwithstanding the provisions of Article 3.4 hereof,
Gas sold by Operator for a Party under the provisions hereof
shall be deemed to be Gas taken for the account of such
Party.
4. IN-KIND BALANCING
4.1 Effective the first day of any calendar month following at
least thirty (30) days' prior written notice to the
Operator, any Underproduced Party may begin taking, in
addition to its Full Share of Current Production and any
Makeup Gas taken pursuant to Section 3.3 of this Agreement,
a share of current production determined by multiplying
fifty percent (50%) of the Full Shares of Current Production
of all Overproduced Parties by a fraction, the numerator of
which is the Percentage Interest of such Underproduced Party
and the denominator of which is the total of the Percentage
Interests of all Underproduced Parties desiring to take
Makeup Gas. In no event will an Overproduced Party be
required to provide more than fifty percent (50%) of its
Full Share of Current Production for Makeup gas. The
Operator will promptly notify all Overproduced Parties of
the election of an Underproduced Party to begin taking
Makeup Gas. However, it is further provided that an
Underproduced Party shall not be entitled to take or sell
Make-up Gas during the Winter Period unless such
Underproduced Party shall have taken or sold during the
preceding eight months (unless excused by Force Majeure
events on the gathering pipeline from the Balancing Area) a
total amount of Gas that was not less than its full share of
the Gas produced during such period.
4.2 Notwithstanding the provisions of Section 4.1, no
Overproduced Party will be required to provide more than
twenty-five percent (25%) of its Full Share of Current
Production for Makeup Gas during the Winter Period.
4.3 Notwithstanding any other provision of this Agreement, at
such time and for so long as Operator, or (insofar as
concerns production by the Operator) any Underproduced
Party, determines in good faith that an Overproduced Party
has produced all of its share of the ultimately recoverable
reserves in the Balancing Area, such Overproduced Party may
be required to make available for Makeup Gas, upon the
demand of the Operator or any Underproduced Party, up to one
hundred percent (100%) of such Overproduced Party's Full
Share of Current Production.
5. STATEMENT OF GAS BALANCES
5.1 The Operator will maintain appropriate accounting on a
monthly and cumulative basis of the volumes of Gas that each
Party is entitled to receive and the volumes of Gas actually
taken or sold for each Party's account. Within forty-five
(45) days after the month of production, the Operator will
furnish a statement for such month showing (1) each Party's
Full Share of Current Production, (2) the total volume of
Gas actually taken or sold for each Party's account, (3) the
difference between the volume taken by each and that Party's
Full Share of Current Production, (4) the Overproduction or
Underproduction of each Party, and (5) other data as
recommended by the provisions of the Council of Petroleum
Accountants Societies Bulletin No. 24, as amended or
supplemented hereafter. Each Party taking Gas will promptly
provide to the Operator any data required by the Operator
for preparation of the statements required hereunder.
5.2 If any Party fails to provide the data required herein for
four (4) consecutive production months, the Operator, or
where the Operator has failed to provide data, another
Party, may give formal written notice of a demand for such
data. If the non-reporting Party fails or refuses to
provide such data within thirty (30) days of its receipt
of the demand, then the notifying Party shall have the
right to audit the production and Gas sales and
transportation volumes of the non-reporting Party. Such
audit shall be conducted only after reasonable notice and
during normal business hours in the office of the Party
whose records are being audited. All costs associated
with such audit will be charged to the account of the
Party failing to provide the required data.
6. PAYMENTS ON PRODUCTION
6.1 Each Party taking Gas shall pay or cause to be paid all
production and severance taxes due on all volumes of Gas
actually taken by such Party.
6.2 Each Party shall pay or cause to be paid Royalty due with
respect to Royalty owners to whom it is accountable based on
the volume of Gas actually taken for its account.
6.3 In the event that any governmental authority requires that
Royalty payments be made on any other basis than that
provided for in this Section 6, each Party agrees to make
such Royalty payments accordingly, commencing on the
effective date required by such governmental authority, and
the method provided for herein shall be thereby superseded.
7. CASH SETTLEMENTS
7.1 Upon the earlier of the plugging and abandonment of the
last producing interval in the Balancing Area, the
termination of the Operating Agreement or any pooling or
unit agreement covering the Balancing Area, or at any time
no Gas is taken from the Balancing Area for a period of
twelve (12) consecutive months, any Party may give written
notice calling for cash settlement of the Gas production
imbalances among the Parties. Such notice shall be given
to all Parties in the Balancing Area.
7.2 Within sixty (60) days after the notice calling for cash
settlement under Section 7.1, the Operator will distribute
to each Party a Final Gas Settlement Statement detailing
the quantity of Overproduction owed by each Overproduced
Party to each Underproduced Party and identifying the
month to which such Overproduction is attributed, pursuant
to the methodology set out in Section 7.4.
7.3 Within sixty (60) days after receipt of the Final Gas
Settlement Statement, each Overproduced Party will pay to
each Underproduced Party entitled to settlement the
appropriate cash settlement, accompanied by appropriate
accounting detail. At the time of payment, the
Overproduced Party will notify the Operator of the Gas
imbalance settled by the Overproduced Party's payment.
7.4 The amount of the cash settlement for Overproduction will
be based on the Index Price (without regard to proceeds
attributable to liquid hydrocarbons which may have been
extracted from the Overproduction) less appropriate
deductions listed in section 7.5 under an Arm's Length
Agreement for the Gas taken from time to time by the
Overproduced Party in excess of the Overproduced Party's
Full Share of Current Production. Any Makeup Gas taken by
the Underproduced Party prior to monetary settlement
hereunder will be applied to offset Overproduction
chronologically in the order of accrual.
7.5 The values used for calculating the cash settlement under
Section 7.4, triggered by the notice of 7.1, will be based
on the Index Price after deducting any production or
severance taxes paid and any Royalty actually paid by the
Overproduced Party to an Underproduced Party's Royalty
owner(s), to the extent said payment amounted to a
discharge of said Underproduced Party's Royalty
obligation, as well as any reasonable marketing,
compression, treating, gathering or transportation costs
incurred directly in connection with the sale of the
Overproduction.
7.6 To the extent the Overproduced Party did not sell all
Overproduction under an Arm's Length Agreement, or in the
event that no sales under Arm's Length Agreements were
made during any such month, the cash settlement for such
month will be based on the Index Price (without regard to
proceeds attributable to liquid hydrocarbons which have
been extracted from the Overproduction). In either event,
the amount of cash settlement will be based on the Index
Price after deducting any production or severance taxes
paid and any Royalty actually paid by the Overproduced
Party to an Underproduced Party's Royalty owner(s), to the
extent said payment amounted to a discharge of an
Underproduced Party's Royalty obligation and any
reasonable marketing, compression, treating, gathering or
transportation costs connected with the sale of the
Overproduction.
7.7 Interest compounded at the rate specified in Exhibit "C"
of the Operating Agreement to which this Gas Balancing
Agreement is attached or the maximum lawful rate of
interest applicable to the Balancing Area, whichever is
less, will accrue for all amounts due under Section 7.1,
beginning the first day following the date payment is due
pursuant to Section 7.3. Such interest shall be borne by
the Operator or any Overproduced Party in the proportion
that their respective delays beyond the deadlines set out
in Sections 7.2 and 7.3 contributed to the accrual of the
interest.
7.8 In lieu of the cash settlement required by Section 7.3, an
Overproduced Party may deliver to the Underproduced Party
an offer to settle its Overproduction in-kind and at such
rates, quantities, time and sources as may be agreed upon
by the Underproduced Party. If the Parties are unable to
agree upon the manner in which such in-kind settlement gas
will be furnished within sixty (60) days after the
Overproduced Party's offer to settle in-kind, which period
may be extended by agreement of said Parties, the
Overproduced Party shall make a cash settlement as
provided in Section 7.3. The making of an in-kind
settlement offer under this Section will not delay the
accrual of interest on the cash settlement should the
Parties fail to reach agreement on an in-kind settlement.
7.9 At any time during the term of this Agreement, any
Overproduced Party may, in its sole discretion, make cash
settlement(s) with the Underproduced Parties covering all
or part of its outstanding Gas imbalance, provided that
such settlements must be made with all Underproduced
Parties proportionately based on the relative imbalance of
the Under-produced Parties, and provided further that such
settlement may not be made more often than once every
twenty-four (24) months. Such settlements will be
calculated in the same manner provided above for final
cash settlements. The Overproduced Party will provide
Operator a detailed accounting of any such cash settlement
within thirty (30) days after the settlement is made.
8. TESTING
8.1 NOT APPLICABLE
9. OPERATING COSTS
Nothing in this Agreement shall change or affect any Party's
obligation to pay its proportionate share of all costs and
liabilities incurred in operations on or in connection with the
Balancing Area, as its share thereof is set forth in the
Operating Agreement, irrespective of whether any Party is at any
time selling and using Gas or whether such sales or use are in
proportion to its Percentage Interest in the Balancing Area.
10. LIQUIDS
The Parties shall share proportionately in and own all liquid
hydrocarbons recovered with Gas by field equipment operated for
the joint account in accordance with their Percentage Interests
in the Balancing Area.
11. AUDIT RIGHTS
Notwithstanding any provision in this Agreement or any other
agreement between the Parties hereto, and further
notwithstanding any termination or cancellation of this
Agreement, for a period of two (2) years from the end of the
calendar year in which any information to be furnished under
Section 5 or 7 hereof is supplied, any Party shall have the
right to audit the records of any other Party regarding
quantity, including but not limited to information regarding
Btu-content. Any Underproduced Party shall have the right for a
period of two (2) years from the end of the calendar year in
which any cash settlement is received pursuant to Section 7 to
audit the records of any Overproduced Party as to all matters
concerning values, including but not limited to information
regarding prices and disposition of Gas from the Balancing Area.
Any such audit shall be conducted at the expense of the Party or
Parties desiring such audit, and shall be conducted, after
reasonable notice, during normal business hours in the office of
the Party whose records are being audited. Each Party hereto
agrees to maintain records as to the volumes and prices of Gas
sold each month and the volumes of Gas used in its own
operations, along with the Royalty paid on any such Gas used by
a Party in its own operations. The audit rights provided for in
this Section 11 shall be in addition to those provided for in
Section 5.2 of this Agreement.
12. MISCELLANEOUS
12.1 As between the Parties, in the event of any conflict
between the provisions of this Agreement and the
provisions of any gas sales contract, or in the even of
any conflict between the provisions of this Agreement and
the provision of the Operating Agreement, the provisions
of this Agreement shall govern.
12.2 Each Party agrees to defend, indemnify and hold harmless
all other Parties from and against any and all liability
for any claims, which may be asserted by any third party
which now or hereafter stands in a contractual
relationship with such indemnifying Party and which arise
out of the operation of this Agreement or any activities
of such indemnifying Party under the provisions of this
Agreement, and does further agree to save the other
Parties harmless from all judgments or damages sustained
and costs incurred in connection therewith.
12.3 Except as otherwise provided in this Agreement, Operator
is authorized to administer the provisions of this
Agreement, but shall have no liability to the other
Parties for losses sustained or liability incurred which
arise out of or in connection with the performance of
Operator's duties hereunder, except such as may result
from Operator's gross negligence or willful misconduct.
Operator shall not be liable to any Underproduced Party
for the failure of any Overproduced Party (other than
Operator) to pay any amounts owed pursuant to the terms
hereof.
12.4 This Agreement shall remain in full force and effect for
as long as the Operating Agreement shall remain in force
and effect as to the Balancing Area, and thereafter until
the Gas accounts between the Parties are settled in full,
and shall inure to the benefit of and be binding upon the
Parties hereto, and their respective heirs, successors,
legal representatives and assigns, if any. The Parties
hereto agree to give notice of the existence of this
Agreement to any successor in interest of any such Party
and to provide that any such successor shall be bound by
this Agreement, and shall further make any transfer of any
interest subject to the Operating Agreement, or any part
thereof, also subject to the terms of this Agreement.
12.5 Unless the context clearly indicates otherwise, words used
in the singular include the plural, the plural includes
the singular, and the neuter gender includes the masculine
and the feminine.
12.6 This Agreement shall bind the Parties in accordance with
the provision hereof, nothing herein shall be construed or
interpreted as creating any right in any person or entity
not a signatory hereto, or as being a stipulation in favor
of any such person or entity.
12.7 If contemporaneously with this Agreement becoming
effective, or thereafter any Party requests that any other
Party execute an appropriate memorandum or notice of this
Agreement in order to give third parties notice of record
of same and submits same for execution in recordable form,
such memorandum or notice shall be duly executed by the
Party to which such request is made and delivered promptly
thereafter to the Party making the request. Upon receipt,
the Party making the request shall cause the memorandum or
notice to be duly recorded in the appropriate real
property or other records affecting the Balancing Area.
12.8 In the event Internal Revenue Service regulations require
a uniform method of computing taxable income by all
Parties, each Party agrees to compute and report income to
the Internal Revenue Service based on the quantity of Gas
taken for its account in accordance with such regulations,
insofar as same relate to sales method tax computations.
12.9 In the event pipeline penalties are assessed to any
Party(s) under this Agreement they will be settled under
the provisions as set forth in the Operating Agreement.
13. ASSIGNMENT AND RIGHTS UPON ASSIGNMENT
13.1 Subject to the provisions of Sections 13.2 and 13.3
hereof, and notwithstanding anything in this Agreement or
in the Operating Agreement to the contrary, if any Party
assigns (including any sale, exchange or other transfer)
any of its working interest in the Balancing Area when
such Party is an Underproduced or Overproduced Party, the
assignment or other act of transfer shall, insofar as the
Parties hereto are concerned, include all interest of the
assigning or transferring Party in the Gas, all rights to
receive or obligations to provide or take Makeup Gas and
all rights to receive or obligations to make any monetary
payment which may ultimately be due hereunder, as
applicable. Operator and each of the other Parties hereto
shall thereafter treat the assignment accordingly, and the
assigning or transferring Party shall look solely to its
assignee or other transferee for any interest in the Gas
or monetary payment that such Party may have or to which
it may be entitled and shall cause its assignee or other
transferee to assume its obligation hereunder.
13.2 Notwithstanding anything in this Agreement (including but
not limited to the provisions of Section 13.1 hereof) or
in the Operating Agreement to the contrary, and subject to
the provisions of Section 13.3 hereof, in the event an
Overproduced Party intends to sell, assign, exchange or
otherwise transfer any of its interest in a Balancing
Area, such Overproduced Party shall notify in writing the
other working interest owners who are Parties hereto in
such Balancing Area of such fact at least sixty (60) days
prior to closing the transaction. Thereafter, any
Underproduced Party may demand from such Overproduced
Party in writing, within thirty (30) days after receipt of
the Overproduced Party's notice, a cash settlement of its
Underproduction from the Balancing Area. The Operator
shall be notified of any such demand by an Underproduced
Party and of any cash settlement pursuant to this Section
13, and the Overproduction and Underproduction of each
Party shall be adjusted accordingly. Any cash settlement
pursuant to this Section 13 shall be paid by the
Overproduced Party on or before the earlier to occur (i)
of sixty (60) days after receipt of the Underproduced
Party's demand or (ii) at the closing of the transaction
in which the Overproduced Party sells, assigns, exchanges
or otherwise transfers its interest in a Balancing Area on
the same basis as otherwise set forth in Sections 7.3
through 7.6 hereof, and shall bear interest at the rate
set forth in Section 7.7 hereof, beginning sixty (60) days
after the Overproduced Party's sale, assignment, exchange
or transfer of its interest in the Balancing Area for any
amounts not paid. Provided, however, if any Underproduced
Party does not so demand such cash settlement of its
Underproduction from the Balancing Area, such
Underproduced Party shall look exclusively to the assignee
or other successor in interest of the Overproduced Party
giving notice hereunder for the satisfaction of such
Underproduced Party's Underproduction in accordance with
the provision of Section 13.1 hereof.
13.3 The provisions of this Section 13 shall not be applicable
in the event any Party mortgages its interest or disposes
of its interest by merger, reorganization, consolidation
or sale of substantially all of its assets to a subsidiary
or parent company, or to any company in which any parent
or subsidiary of such Party owns a majority of the stock
of such company.
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EXHIBIT "E"
Attached to and made a part of that certain Allegheny Operating Agreement
dated effective May 1, 1995, between Enserch Exploration, Inc., Reading &
Bates Development Co., Mobil Oil Corporation and Mobil Oil Exploration &
Producing Southeast Inc..
EQUAL EMPLOYMENT OPPORTUNITY PROVISION
During the performance of this contract, the Operator agrees as
follows:
1. The Operator will not discriminate against any employee or
applicant for employment because of race, color, religion, sex or national
origin. The Operator will take affirmative action to ensure that
applicants are employed and that employees are treated during employment,
without regard to their race, color, religion, sex or national origin.
Such action shall include, but not be limited to the following:
Employment, upgrading, demotion, or transfer, recruitment or recruitment
advertising; layoff or termination; rates of pay or other forms of
compensation; and selection for training, including apprenticeship. The
Operator agrees to post in conspicuous places, available to employees and
applicants for employment notices to be provided for the contracting
officer setting forth the provisions of this non-discrimination clause.
2. The Operator will, in all solicitations or advertisements for
employees placed by or on behalf of the Operator, state that all qualified
applicants will receive consideration for employment without regard to
race, color, religion, sex or national origin.
3. The Operator will send to each labor union or representative of
workers with which it has a collective bargaining agreement or other
contract or understanding, a notice to be provided by the agency
contracting officer, advising the labor union or workers' representative
of the Operator's commitments under Section 202 of Executive Order 11246
of September 24, 1965, and shall post copies of the notice in conspicuous
places available to employees and applicants for employment.
4. The Operator will comply with all provisions of Executive Order
11246 of September 24, 1965, and of the rules, regulations, and relevant
orders of the Secretary of Labor.
5. The Operator will furnish all information and reports required
by Executive Order 11246 of September 24, 1965, and by the rules,
regulations, and orders of the Secretary of Labor, or pursuant thereto,
and will permit access to its books, records, and accounts by the
contracting agency and the Secretary of Labor for purposes of
investigation to ascertain compliance with such rules, regulations, and
orders.
6. In the event of Operator's non-compliance with the non-
discrimination clauses of this contract or with any of such rules,
regulations, or orders, this contract may be canceled, terminated or
suspended in whole or in part and the Operator may be declared ineligible
for further Government contracts in accordance with procedures authorized
in Executive Order 11246 of September 24, 1965, and such other sanctions
may be imposed and remedies invoked as provided in Executive Order 11246
of September 24, 1965, or by rules, regulations, or order of the Secretary
of Labor, or as otherwise provided by law.
7. The Operator will include the provisions of paragraphs (1)
through (7) in every subcontract or purchase order unless exempted by
rules, regulations, or orders of the Secretary of Labor issued pursuant to
Section 204 of Executive Order 11246 of September 24, 1965, so that such
provisions will be binding upon each subcontractor or vendor. The
Operator will take such action with respect to any subcontract or purchase
order as the contracting agency may direct as a means of enforcing such
provisions including sanctions for non-compliance: Provided, however,
that in the event the Operator becomes involved in, or is threatened with,
litigation with a subcontractor or vendor as a result of such direction by
the contracting agency, the Operator may request the United States to
enter into such litigation to protect the interests of the United States.
Operator acknowledges that it may be required to file Standard Form
100 (EEO-1) promulgated jointly by the Office of Federal Contract
Compliance, the Equal Employment Opportunity Commission and Plans for
Progress with the appropriate agency within thirty (30) days of the date
of contract award if such report has not been filed for the current year
and otherwise comply with or file such other compliance reports as may be
required under Executive Order 11246, as amended and Rules and Regulations
adopted thereunder.
Operator further acknowledges that it may be required to develop a
written affirmative action compliance program as required by the Rules and
Regulations approved by the Secretary of Labor under authority of
Executive Order 11246 and supply Non-Operators with a copy of such program
if they so request.
CERTIFICATION OF NON-SEGREGATED FACILITIES
Operator assures Non-Operators that it does not and will not
maintain or provide for its employees any segregated facilities at any of
its establishments, and that it does not and will not permit its employees
to perform their services at any location, under its control, where
segregated facilities are maintained. For this purpose, it is understood
that the phrase "segregated facilities" includes facilities which are in
fact segregated on a basis of race, color, religion, or national origin,
because of habit, local custom or otherwise. It is further understood and
agreed that maintaining or providing segregated facilities for its
employees or permitting its employees to perform their services at any
location under its control where segregated facilities are maintained is a
violation of the equal opportunity clause required by Executive Order
11246 of September 24, 1965.
Operator further understands and agrees that a breach of the
assurance herein contained subjects it to the provisions of the Order at
41 CFR Chapter 60 of the Secretary of Labor dated May 21, 1968, and the
provisions of the equal opportunity clause enumerated contracts between
the United States of America and Non-Operators.
Whoever knowingly and willfully makes any false, fictitious or
fraudulent representation may be liable to criminal prosecution under 18
U.S.C. 1001.
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EXHIBIT "F"
Attached to and made a part of that certain Unit Operating Agreement dated
effective May 1, 1995, between Enserch Exploration, Inc., Reading & Bates
Development Co., Mobil Oil Corporation and Mobil Oil Exploration &
Producing Southeast Inc.
NEWS RELEASE GUIDELINES
The Parties hereby establish the following guidelines regarding the
issuing of a release to the news media concerning operations on any area
affected by the Agreement to which this Exhibit is attached.
Subject to Article 7.5 (News Releases) of the Agreement, no
release to the news media shall be made until all testing
(excluding flow testing) in a well is completed. Upon receipt
of all such final test results which indicates a commercial
discovery, Operator will prepare a release using the following
News Release Content Guidelines:
1. Name of Well
2. Location of Well by Area, Block and Adjacent State
3. Bonus Price and Sale Date
4. Tested lnterval(s), if appropriate
5. Test(s) results, if appropriate
6. Participants and Percentages
7. Acreage Controlled
Proposed releases will be wired to the Non-Operating Parties
within 72 hours (exclusive of Saturdays, Sundays, and holidays)
before being issued to the news media. Any Non-Operating Party
desiring its name to be excluded from the releases will so
advise Operator during this 72-hour period. Any Participating
Party may prepare its own release ("Preparing Party"), using the
Content Guidelines, following receipt of Operator's proposed
release. The Preparing Party shall send the other Parties a
copy of the proposed release by facsimile transmission. Any
Party may have its name excluded from the proposed release by
notifying the Preparing Party within seventy-two (72) hours
following its receipt of the proposed release. A Non-Operating
Party's news release shall not be issued in advance of the
Operators release.
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EXHIBIT "G"
Attached to and made a part of that certain Operating Agreement effective
May 1, 1995, by and between Enserch Exploration, Inc., Reading & Bates
Development Co., Mobil Oil Corporation and Mobil Oil Exploration &
Producing Southeast Inc.
INTEGRATED PROJECT TEAM
The Parties agree to the formation of an Integrated Project Team
which will assist the Operator in the continued operation, development and
exploitation drilling of Producible Reservoirs in accordance with this
Exhibit and the Agreement. In accordance with the foregoing, the Parties
desire to establish an understanding, relating to (i) the Costs and
expenses of the Integrated Project Team to be charged to the Parties and
the method in which such Costs shall be shared, (ii) the overall
operation, administration and management of the Integrated Project Team,
and (iii) the exchange, development and use of technology collected or
developed by or through this Integrated Project Team.
ARTICLE 1
DEFINITIONS
1.1 "Confidential Information" shall mean all information developed
hereunder or received from or on behalf of the other Parties hereunder,
and shall include information developed by the Integrated Project Team or
information the Cost of which is charged to the Joint Account, background
technology exchanged by the Parties, business and technical information
relating to the development of the Designated Prospect. The provisions of
this Exhibit shall not be applicable to "Confidential Data," as that term
is defined in the Agreement.
1.2 "Integrated Project Team." The designated employees of the
Parties or their respective Affiliates for the purpose of assisting the
Operator in the operation of the Designated Prospect.
1.3 "Operating Agreement." That certain Operating Agreement by and
between the Parties effective May 1, 1995, covering the Designated
Prospect.
1.4 "Project Managers." The representatives designated by the
Owners' Committee who will direct, supervise and oversee the work of the
Technical Units.
1.5 "Owners' Committee." A committee comprised of no more than two
(2) manager level representatives from each Party.
1.6 "Technical Units." A group of technical expert personnel
approved by the Owners' Committee to develop recommendations and plans.
1.7 Other terms. Except as defined in this Exhibit, other terms used
herein shall have the same meaning as defined in the Operating Agreement.
ARTICLE 2
OWNERS' COMMITTEE AND INTEGRATED PROJECT TEAM
2.1 Owners' Committee. The Owners' Committee shall; 1) except as
otherwise provided in Article 2.2 herein, vote on the formation of groups
of technical personnel ("Technical Units") within the Integrated Project
Team; 2) vote on the appointment of a Project Manager to each of the
Technical Units; 3) vote on the appointment of personnel to each of the
Technical Units; 4) vote on the recommendations and plans developed by the
Technical Units for the ongoing operation, development, evaluation,
drilling and exploitation of the Designated Prospect; and 5) direct,
coordinate and manage the work of the Technical Units through the Project
Managers as follows:
2.1.1. Duties and Functions. Within thirty (30) days of
execution of this Agreement each Party shall appoint its representative(s)
to the Owners' Committee. Among other duties set forth in this Exhibit,
the Owners Committee shall issue a document setting out the limits of
authority and other administrative matters (including, but not limited to
communications, accounting and reporting between the IPT members, and
purchasing and contracting responsibilities and approvals) in the
execution of the engineering, procurement, fabrication, construction and
installation of the Production System.
2.1.2. Meetings. The Owners' Committee shall meet on an as
needed basis, but not less than once per year. The Operator shall provide
notice of meetings not less than 10 days prior to such meeting. Other
Owners' Committee meetings may be called by any Party on five business (5)
days prior written notice to the other Parties. Notices of Owners'
Committee meetings shall specify the time and place of the meeting and
include an agenda for discussion at the meeting.
2.1.3 Voting. The Owners' Committee shall vote on matters
placed before it by the Parties, by a Project Manager or by a Technical
Unit. Each Party shall be entitled to vote its Working Interest. A vote
of one or more Parties representing greater than fifty percent (50%) of
the Voting Interest as defined in Article 8.2.1 of the Operating Agreement
shall be required for approval.
2.1.4 Owners' Committee Approval. Any and all plans and
recommendations approved by a Technical Unit of the Integrated Project
Team but not approved by a Party to the Owners' Committee will require a
presentation by the Party(s) that failed to approve the Technical
Committee's recommendation to the Party(s) that approved the Technical
Committee's recommendation. The presentation shall include the technical
and economic justification for not approving the plan or recommendation.
Each representative of the Owners' Committee may assign his
duties on a temporary basis to a designated alternate. Any
Party may change its representative by notifying the other
Parties in writing of the name of the alternate representative.
2.2 Composition of the Integrated Project Team. The Integrated
Project Team shall be composed of one or more Technical Units. Any Party
may request formation of a Technical Unit to coordinate the design,
construction and operation of production Facilities, to conduct geologic
and geophysical evaluation of the Designated Prospect, to recommend plans
for conducting additional drilling, or to perform such other work as
determined necessary by the Owners' Committee (collectively referred to
herein as "Study Plan"). The request shall contain specific instructions
regarding the areas to be studied and reported upon by such Technical
Unit. If the request for formation of a Technical Unit involves a project
or operation which is reasonably anticipated to cost less than
$10,000,000, the Owners' Committee may, in its discretion, create such
Technical Unit in accordance with the Study Plan request. If the request
for formation of a Technical Unit involves a project or operation which is
reasonably anticipated to cost more than $10,000,000, the Owners'
Committee shall create such Technical Unit in accordance with the Study
Plan request. The Owners' Committee shall direct that the Technical Unit
complete the Study Plan within a specified time period, as it may, in its
discretion, determine to be reasonable under the circumstances.
Technical Units may be eliminated by the Owners' Committee if
their services are no longer needed. The representatives on the Owners'
Committee shall nominate and vote on the individual to be the Project
Manager of each Technical Unit. An individual may be the Project Manager
of one or more Technical Units and a Project Manager may also have team
member responsibilities. The Parties shall nominate personnel to be
included as team members of each Technical Unit. The individuals
nominated for participation by the Parties must have experience
commensurate with the position to which they are being nominated, who
could be expected to meaningfully participate and contribute to the work
of the Technical Unit. Each Party shall have the right to have percentage
representation on the Integrated Project Team up to its respective Working
Interest share of the total number of engineering and technical personnel
to be assigned to the Integrated Project Team; this however, does not
preclude a Party from having more or less than its respective Working
Interest representation on the Integrated Project Team consistent with the
needs of the Integrated Project Team.
The Integrated Project Team may utilize employees of the
Parties, Affiliates, outside consultants and contractors to carry out the
work of the Integrated Project Team.
2.3 Status of Integrated Project Team Participants. Each non-
consultant member of the Integrated Project Team shall remain an employee
of its respective company and each company shall remain responsible for
their employees' salaries and benefits as well as maintaining workers'
compensation insurance on their employees. Accordingly, each Party will
continue to administer the compensation, benefits, allowances and staff
planning of its employees on the Integrated Project Team. However,
employees who participate on a Technical Unit will receive team
assignments and general supervision from the Project Manager in connection
with their day-to-day work and their Costs and shall be regulated pursuant
to Article 2.7 (Integrated Project Team Costs and Payment) below. An
individual selected to the Integrated Project Team shall, insofar as
possible, and consistent with the needs of the individual's employer,
serve on the Integrated Project Team for the duration of the Integrated
Project Team. A Project Manager may request that the Owners' Committee
replace a non-performing member of the Integrated Project Team.
2.4 Project Manager. Each Technical Unit shall operate under the
direction of a Project Manager, who shall be selected by the Owners'
Committee. The Project Manager shall be responsible for the overall
management and supervision of specific work tasks for the Technical Unit.
The Project Manager shall determine at whose offices the Technical Unit's
work is to be undertaken. Such assignments shall consider use of Non-
Operator facilities and inconveniences to the Participating Parties. The
Project Manager shall recommend the appointment of individual team members
to the Technical Unit from the nominations provided by Parties. The
Project Manager shall also be responsible for selecting outside
contractors to perform certain contract services, acquiring supplies as
needed by the Technical Unit and for instituting rules and procedures for
maintaining Confidential Information. The Project Manager shall also be
responsible for making presentations on the work of the Technical Unit to
the Owners' Committee.
2.5.1 Scope of Integrated Project Team Work. The objectives for
forming the Integrated Project Team is to pool the talents of the Parties
in assisting the Operator in the preparation of the Development Plan and
in the design, fabrication, installation and commissioning of the initial
Production System and in the planning of additional evaluation and
exploitation of the existing and potential Producible Reservoirs. The
Technical Units shall be responsible for generating plans, for approval by
the Owners' Committee, which will be used by the Parties in planning and
budgeting for ongoing operations including the exploitation drilling
program for the Designated Prospect. If a subsequent Producible Reservoir
is discovered, the Integrated Project Team will assist the Operator in
preparing plans for the evaluation, exploitation and development of such
reservoir.
The Integrated Project Team shall remain in place for the term
of the Operating Agreement. The composition and functions of the
Integrated Project Team may be changed by the Owners' Committee and
Technical Units may be created or eliminated during the term of the
Operating Agreement to correspond with changes in operations.
2.5.2 Owners Committee Approval. The Development Plan shall be submitted
to the Owners' Committee for approval. Upon approval, the Development
Plan shall be submitted to the Parties for planning, budgeting and
Election purposes as the plan of the Integrated Project Team for the
development of the affected reservoir.
2.6 Place of Integrated Project Team Meetings. The time and place
of the meetings of the Technical Units and the location for conducting
Technical Unit activities shall be determined by the Project Managers.
2.7 Integrated Project Team Costs and Payment. The Costs and
expenses for the Integrated Project Team and the Technical Units shall be
charged to the Joint Account pursuant to the Exhibit "C" (Accounting
Procedures) Addendum 5 of the Operating Agreement. Each Participating
Party shall be responsible for its proportionate share of the Integrated
Project Team expenses, regardless of its level of participation on the
Integrated Project Team.
ARTICLE 3
SECURITY PROVISIONS
3.1 Security Policy. All employees of the Parties or their
Affiliates which become associated with the Integrated Project Team shall
fully comply with the security policy of the Operator and all procedures
then in effect made available by the Project Managers for use by the
Integrated Project Team. A copy of the applicable confidentiality
requirements and any revisions thereto shall be made available to all such
employees by the Project Managers for their use during the project. The
Project Managers may, subject to approval of the Parties, also institute
reasonable additional provisions as may be appropriate under the
circumstances. Operator shall take reasonable steps to minimize the
exposure of Non-Operator's Integrated Project Team members to Operator's
proprietary and Confidential Information not related to the project. Any
incidental disclosure of a business or technical nature, whether or not
related to the Designated Prospect to which the Integrated Project Team
members are exposed by virtue of working in the facilities provided to the
Integrated Project Team shall be subject to security policy of the
Operator. This Article is not intended to restrict the access of
Integrated Project Team members to relevant and pertinent information
needed to accomplish their team's assignments.
ARTICLE 4
CONFIDENTIALITY
4.1 Obligation of Confidentiality and Restrictions on Use. Each
Party agrees to maintain confidentiality and not to disclose to any third
party or use the Confidential Information, except as expressly provided
hereunder, for a confidentiality period commencing on the date of
execution of the Operating Agreement and extending through the later of
(a) two (2) years following the termination of the Integrated Project Team
work pursuant to Article 8.3 (Termination) of this Exhibit or (b) seven
(7) years following the date of execution of the Operating Agreement.
After expiration of the confidentiality period the receiving Party's
obligations of confidentiality and restrictions on use shall cease. Each
Party agrees to treat the disclosure of the Confidential Information in
the same manner as it treats its own Confidential Information.
The Parties shall declare and list background technology and information
which will be utilized by the Integrated Project Team prior to establish-
ment of such Integrated Project Team. Such declared and listed back-
ground technology and information shall be subject to this Article 4
(Confidentiality).
4.2 Exceptions
(a) The provisions of Article 4.1 (Obligation of
Confidentiality and Restrictions or Use) above shall not apply to
Confidential Information which:
(1) was in the public knowledge or literature at the time of
development or receipt hereunder, or
(2) subsequent to the formation of the Integrated Project
Team, was not marked or identified as being confidential
at the time of disclosure, or
(3) was already in the receiving Party's possession (or its
Affiliate) without obligation of confidentiality, at the
time of development or receipt by the receiving Party.
(b) Provisions of Article 4.1 (Obligation of Confidentiality
and Restrictions or Use) above shall cease to apply to information which:
(1) becomes part of the public knowledge subsequent to its
development or receipt hereunder and without fault of the
receiving Party, or
(2) is disclosed to the receiving Party without obligation of
confidentiality by a third party having legal right to do
so, or
(3) is independently developed by or for the receiving Party.
4.3 Supporting Agreements. Upon request of a Project Manager, each
Party shall require those participating in the Integrated Project Team to
execute a confidentiality agreement having obligations of confidentiality
and restrictions on use of the Confidential Information at least as
restrictive as those set forth in this Exhibit and shall furnish a copy
thereof to the other Parties.
ARTICLE 5
LICENSE TO USE CONFIDENTIAL INFORMATION
5.1 Right to Release Joint Account Work Product. Each Party will be
entitled to review the full reports of all technical studies, detail
reports, general conclusions, numerical results and design drawings from
all engineering services that are charged to the Joint Account pursuant to
an AFE in which it is a Participating Party, whether those engineering
services are performed by a Party participating in the Integrated Project
Team, an Affiliate or by a third party. A Party may copy such material at
its sole cost.
5.2 Right to Confidential Information. Subject to the obligations
of confidentiality of Article 4 (Confidentiality) of this Exhibit and
subject to the patent rights of the Parties, each Party may use all
Confidential Information received or developed hereunder which is (1)
background technology exchanged by the Parties or (2) developed by the
Integrated Project Team under this Agreement or the Cost of which is
charged to the Joint Account, without otherwise accounting to the other
Party, including use by or for a joint venture or production sharing
arrangement in which a Party has ownership interest.
5.3 Right to Disclose. Subject to the foregoing, each of the
Parties may disclose Confidential Information during the period of
confidentiality set forth in Article 4.1 (Obligation of Confidentiality
and Restrictions or Use) of this Exhibit upon the following conditions:
(a) Each Party may extend all its rights under this Exhibit to
its Affiliates who agree to obligations of confidentiality
and restrictions on use at least as restrictive as those
set forth in this Exhibit.
(b) Each Party and its Affiliates may disclose the
Confidential Information of Article 5.2 (Right to
Confidential Information) to consultants and contractors
who agree to hold such Confidential Information in
confidence and to use it only for the benefit of a Party
or its Affiliates.
(c) Each Party and its Affiliates may disclose Confidential
Information of Article 5.2 above to governmental agencies
and insurance companies or as otherwise required by law or
regulation as such Parties or Affiliates deem necessary,
either in confidence or not in confidence if the Party or
its Affiliates has made a reasonable but unsuccessful
attempt to obtain a confidentiality agreement.
(d) Upon prior written consent of the non-disclosing Parties,
a Party and its Affiliates may disclose the Confidential
Information of Article 5.2 above to other members of joint
ventures or production sharing arrangements in which the
Party or Affiliate has an ownership interest provided the
other members agree to hold the Confidential Information
in confidence and to use it only for the benefit of that
joint venture or production sharing arrangement.
(e) Any Party may disclose Confidential Information under
Article 5.2 above which is specifically related to the
Designated Prospect to any potential purchaser of all or
any portion of such Party's interest therein, provided,
the potential purchaser agrees to hold the Confidential
Information in confidence and to use it only for the
purposes of determining its interest in acquiring an
interest in the Designated Prospect.
(f) Each Party may use such Confidential Information under
Article 5.2 as reasonably necessary or appropriate to file
patent applications pursuant to Article 6 (Patents and
Integrated Project Inventions). Prompt notice will be
provided to the other Parties of any such filing.
5.4 Rights Under Copyright and Following Expiration of
Confidentiality. Following the expiration of the period of
confidentiality set forth in Article 4.1 (Obligation of Confidentiality
and Restrictions or Use), each Party may freely use and disclose the
Confidential Information identified in Article 5.2 (Right to Confidential
Information) without accounting to any other Party, subject only to
whatever patent rights may apply to the technology and, where applicable,
to the obligations of Articles 5.5.1 and 5.5.2 below. Subject to the
obligations of confidentiality set forth herein, each Party has the right
to copy, display, publish, distribute and prepare derivative works of all
documents, drawings or other writings or materials created or conveyed
under this Exhibit, including the rights to license, sell or otherwise
transfer such rights.
5.5 Notice of Third-Party Limitations
5.5.1 Notwithstanding the provisions of Articles 5.2 (Right to
Confidential Information), 5.3 (Right to Disclose) and 5.4 (Rights Under
Copyright and Following Expiration of Confidentiality), the Parties
acknowledge that various background materials may have been received from
third parties under preexisting restrictions, e.g., that the Party may
disclose the third-party source information to a partner in a joint
venture only under obligations of confidentiality and under restriction to
use the information only in connection with the joint venture. Each Party
agrees to identify, in writing, any such restrictions in effect and secure
the receiving Party's acknowledgment prior to transmittal of such third-
party source information. The receiving Party's acknowledgment
constitutes its acceptance of such obligations and restrictions.
5.5.2 The Project Manager and each Party soliciting work from
third-party contractors and consultants (or from Affiliates) shall use its
best efforts to secure contract terms with such third party which contain
applicable confidentiality terms and which support rights to the Parties
consistent with this Agreement.
5.6 Software. A Party may be authorized to use various computer
software and programs which are identified as proprietary to one of the
other Parties during the duration of the Integrated Project Team, however,
such computer software and programs shall not be considered joint property
and its use may be limited under license to a single Party. Use of such
proprietary software and programs is not a grant of license of any rights
outside of this Agreement and the Parties retain all rights to such
property. Computer software and programs which are not proprietary to one
of the Parties, but which was developed jointly by the Integrated Project
Team, shall be considered co-owned property.
ARTICLE 6
PATENTS AND INTEGRATED PROJECT INVENTIONS
6.1 Patent Assignment With Right to License and Sublicense. Patents
on inventions which are (1) conceived solely by outside contractors or
consultants, or conceived jointly among the Parties (each including its
respective Affiliates) while working on the Integrated Project Team and
(2) from work which has been funded by the Joint Account, will be assigned
to the Operator. The Party holding such assignments hereby agrees to
grant each other Party an irrevocable, nonexclusive, worldwide, royalty-
free license to practice under all such patents, including the right to
grant sublicenses under such patents to any third party or Affiliate on
such other terms and conditions that such Party deems appropriate, without
accounting to any other Party.
6.2 Patent Assignment and License With Limited Right to Sublicense.
Patents on inventions not covered in Article 6.1 (Patent Assignment With
Right to License and Sublicense), which are conceived or first reduced to
practice (actual or constructive), by a Party or its Affiliate, either
alone or jointly with any outside contractors or consultants, and as a
direct result of work which has been funded by the Joint Account will be
owned by that Party. The Party owning any such patent agrees to grant
each other Party an irrevocable, nonexclusive, worldwide, royalty-free
license under all such patents to make, have made, use and have used such
invention for such other Party's own business, including any joint venture
or production-sharing arrangement in which such other Party has an
ownership interest. Further, each such other Party has the right to
extend these rights to its Affiliates.
6.3 No Other Commitment to License or Disclose. Except as expressly
set forth above, nothing in this Exhibit will be deemed to require any
Party or Affiliate to grant any licenses under any patents to anyone. The
scope and content of any background technology disclosed under this
Agreement will be determined in the sole discretion of the disclosing
Party.
ARTICLE 7
DISCLAIMER OF WARRANTY AND INDEMNITIES
7.1 Disclaimer of Warranties. ALL INFORMATION RECEIVED BY THE
PARTIES HEREUNDER SHALL BE PROVIDED ON AN "AS IS" BASIS WITHOUT ANY
WARRANTIES EITHER EXPRESS OR IMPLIED, AS TO THE ACCURACY, VALIDITY OR
UTILITY OF SUCH INFORMATION OR THAT IT CAN BE USED WITHOUT INFRINGING ANY
THIRD-PARTY PATENT, COPYRIGHT OR OTHER PROPRIETARY RIGHT. WITHOUT
LIMITING THE PRECEDING, ANY IMPLIED WARRANTY OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED FROM THIS
AGREEMENT. IN NO EVENT SHALL A PARTY CONVEYING INFORMATION BE LIABLE FOR
ANY INCIDENTAL, CONSEQUENTIAL OR OTHER DAMAGES ARISING OUT OF OR RESULTING
FROM THE USE OF INFORMATION CONVEYED UNDER THIS EXHIBIT.
7.2 Indemnities. Each Party agrees to defend, hold harmless and
indemnify the other Parties from and against any loss, damage, claim,
suit, liability, judgment and expense (including attorney fees and other
costs of litigation) related to or in connection with its use (including
use by others which it authorizes), outside of the Contract Area, of any
Confidential Information under or developed pursuant to this Exhibit.
ARTICLE 8
MISCELLANEOUS
8.1 Export Controls. Each Party agrees to abide by the United
States Department of Commerce regulations concerning the export or re-
export of United States source technical data, or the direct product
thereof, to unauthorized destinations and regulations in respect of
information supplied by or on behalf of any other Party hereunder.
8.2 Independent Research. Nothing herein shall in any way restrict
or impair the right of any Party to conduct its own independent research,
development or design activities even though such activities may parallel
or overlap the activities provided for herein. Any Party conducting such
independent activities shall have no obligation arising therefrom with
respect to the use or disposition of the results thereof, including but
not limited to all information and data resulting therefrom. Such
independent work shall not delay, disrupt or hinder the activities of the
Integrated Project Team or any contractor working under the direction of
the Integrated Project Team.
8.3 Termination. The work of the Integrated Project Team will
terminate upon expiration of the Operating Agreement.
All provisions of this Exhibit related to confidentiality and
use of information, patents and indemnity shall survive completion of
Integrated Project Team activities conducted hereunder. A withdrawing
Party shall have the rights specified in this Exhibit based on
developments and "changes prior to the effective date of Withdrawal and
shall continue to have all obligations with respect thereto as set forth
in this Exhibit relating to confidentiality, restrictions on use, patents,
indemnity and, as applicable, duties to license the other Parties.
8.4 Assignability. A new party not a Party to this Agreement who
acquires an interest in a Designated Prospect may join as a Party to the
Integrated Project Team upon the approval of the Parties as a General
Matter pursuant to Article 8 of the Operating Agreement. Approval shall
be based upon such factors as the depth of its generally relevant
technical expertise, offshore operating experience, the level of skill of
its potential Integrated Project Team members, the percentage of Working
Interest acquired in the Designated Prospect, the compatibility of
specific areas of technical expertise with the needs of the Integrated
Project Team and the financial support provided by the Party to the
development of the Designated Prospect pursuant to the Operating
Agreement. Approval to participate on the Integrated Project Team shall
not be unreasonably withheld. Project Managers shall recommend the
assignment of new members to the Technical Units in accordance with
Article 2 (Owners' Committee and Integrated Project Team) herein.
A new Party joining the Integrated Project Team must agree, in
writing, to undertake all obligations set forth for a Party thereunder.
Such new Party will have all rights, duties and obligations under Article
5 (License to Use Confidential Information) of this Exhibit for use of all
Confidential Information exchanged or developed prior to the date it joins
the Integrated Project Team and during its participation thereunder.
However, patent rights received by such new Party hereunder pursuant to
Article 6 (Patents and Integrated Project Inventions) of this Exhibit
shall be in accordance with the terms of this Agreement limited to patents
based on developments after the date such Party joins the Integrated
Project Team.
The licenses received by a Party under Articles 5 and 6 of this
Exhibit may be assigned by that Party only to an Affiliate of the Party,
to the successor of all or substantially all of the business of the Party
relating to offshore hydrocarbon developments, or as otherwise expressly
provided in this Agreement. However, a Party may transfer license rights
limited to a specific, fabricated embodiment which was made and used under
such license and the license will continue in effect as to that specific,
fabricated embodiment transferred.
In the event that a Party assigns its entire interest in the
Leases, the assigning Party shall have all the rights specified in this
Exhibit including patent rights and license rights thereunder, based on
developments and exchanges prior to the effective date of such assignment
and shall continue to have all obligations and duties with respect thereto
as set forth in this Exhibit relating to the confidentiality, restrictions
on use, patents, indemnity and as applicable, duties to license the other
Parties.
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EXHIBIT "H"
Attached to and made a part of that certain Operating Agreement dated
effective May 1, 1995, between Enserch Exploration, Inc., Reading & Bates
Development Co., Mobil Oil Corporation and Mobil Oil Exploration &
Producing Southeast Inc.
PRODUCTION HANDLING
1. Application.
If a Production System Component (as defined herein) has unused
capacity or uncommitted capacity, this exhibit shall control the
allocation of such excess capacity.
2. Definitions.
For purposes of this exhibit, the following definitions shall apply:
(a) "Barrel of Oil Equivalent" - The combined volume of oil and gas
expressed in barrels, converting each 5.626 thousand cubic feet of
gas to a barrel of oil.
(b) "Excess Capacity" - The ability of the Production System or any of
its components to process or transport production in excess of the
production committed to the Production System or any of its
components, all as determined in Article 3 hereof.
(c) "Party or Parties" - The owner or owners of Working Interests who
either own, lease or have service contract rights to the
Production System.
(d) "Production System." - Shall be as defined in the Operating
Agreement.
(e) "Production System Capacity." The anticipated maximum production
handling capacity of the entire Production System at the time of
the application of Article 14.
(f) "Production System Component Capacity." The anticipated maximum
production handling capacity of each component of the Production
System.
(g) "Non-Unit Production" - Hydrocarbon production not contemplated by
any approved Development Plan.
(h) "Unit Production" - Hydrocarbon production contemplated by the
current approved Development Plan for such Production System
component.
3. Determination of Excess Capacity and Priority of Its Use.
The ability to process or transport Non-Unit Production will be
determined by establishing the Excess Capacity available through each
Production System Component. The amount of Excess Capacity will be
calculated by deducting the total of (i) the estimated peak future
production volumes from the Designated Prospect(s) for which the
Production System was built or modified pursuant to an approved
Development Plan and (ii) the volume of Non-Unit Production contractually
committed to be processed or transported by the affected Production System
Component from the actual operating capacity of such Production System
Component. The final determination of the amount of Excess Capacity for
each Production System Component to be made available shall require the
mutual agreement of the Parties.
Excess Capacity from a Production System Component shall be subject to
the following priority usage:
a. First priority to Hydrocarbon production from Leases that are co-
owned by the Participating Parties and that are located inside
the Designated Prospect(s) for which the Production System was
installed pursuant to an approved Development Plan.
b. Second priority to Hydrocarbon production from Leases that are co-
owned by all of the Participating Parties in the Production System
and that are located outside the Designated Prospect(s) for which
the Production System was installed pursuant to an approved
Development Plan, but from a Designated Prospect(s) within the
Contract Area.
c. Third priority to Hydrocarbon production from Lease(s) that are
co-owned by less than all but at least one of the Participating
Parties in the Production System and that are located outside the
Designated Prospect(s) for which the Production System was
installed pursuant to an approved Development Plan, but from a
Designated Prospect(s) within the Contract Area.
d. Fourth priority to Hydrocarbon production from a lease in which
less than all Parties have an ownership interest and in which the
other Party(ies) was offered an interest but declined pursuant to
the AMI provisions of Article 23.3 (Area of Mutual Interest)
hereof.
e. Fifth priority to hydrocarbon production owned by a Participating
Party coming from outside the Contract Area.
f. Sixth priority to hydrocarbon production owned by third parties.
4. Non-Unit Production Handling Charges.
Monthly production handling fees ("Fee") will be charged on a dollar
per Barrel Oil Equivalent basis for production volumes utilizing any
Production System Component. Metering systems will be installed for
Non-Unit Production and shall conform to the requirements of the
Operator. The Fee to use Excess Capacity assigned to the sixth
priority in Section 3 f. above shall be negotiated between the Parties
and the third party producer at the time of the contracting for the
use of the affected component by such third party. Such Fee shall
reflect the cost and the fair market value of the services to be
provided. For each Production System Component, the Fee to use Excess
Capacity assigned to the priorities identified in Sections 3 a, b, c,
d & e above shall be the sum of the capital investment, interest,
depreciation expense and actual operating and maintenance expenses
calculated as follows:
A.Charges for Access
Non-Unit Production shall be charged an access fee ("Access Fee")
equivalent to the depreciation and interest for the capital
investment in the Production System Components utilized. The
Access Fee shall be equal to (a) the gross investment in the
Production System Component (adjusted for subsequent capital
expenditures) depreciated over twenty (20) years, on a straight
line basis and (b) the interest charged on the gross investment in
such Production System Component, less the accumulated
depreciation provided under (a) above, computed at the rate of ten
percent (10%). The cumulative sum of the annual depreciation (a)
and interest (b) charges divided by eighty-five percent (85%) of
the total Production System capacity, divided by twenty (20),
establishes the Access Fee to be charged for processing or
transporting the Non-Unit Production through the Production System
Component. The Access Fee depreciation and interest components
shall be increased to include capital expenditures incurred by the
Owners of the Production System in excess of $5,000,000.
B.Charges for Operating and Maintenance Expense
Non-Unit Production will be charged for its proportionate share of
the operating and maintenance expenses (including all marketing and
third party transportation fees) attributable to the Production
System Component utilized on a monthly basis. The actual volume of
Non-Unit Production throughput for that component will be divided
by the total of unit and non-unit throughput to determine the
portion of the total operating and maintenance expenses
attributable to Non-Unit Production. The result will be multiplied
times the monthly operating and maintenance expenses attributable
to the affected Unit Production System Component and included in
the Access Fee. The Access Fee will also include a fifteen percent
overhead charge on the operating and maintenance expenses
attributable to the affected Production System Component.
5. Capital Improvements.
Capital improvements required to accommodate Non-Unit Production
will be borne by the Party contracting to use the Production System
Component (hereafter the "Non-Unit Producer") to handle its Non-
Unit Production. Approval of engineering and design a actual
installation of the equipment will be the responsibility of the
Parties with costs borne by the Non-Unit Producer. Additional
capital investment requirements in Non-Unit Production handling
equipment and facilities to comply with safety, regulatory or
operation concerns shall be borne exclusively by the Non-Unit
Producer. Major capital investment required on the Unit Production
System in excess of five hundred thousand dollars which benefit
both the owners or lessees of the Production System and the Non-
Unit Parties will be allocated to all Parties on percentage basis
based upon the capacity allocated pursuant to the Production
Handling Agreement. The allocation of such cost will be made in
proportion to their respective rights to utilize the total capacity
of the affected Production System Component after the capital
investment is made. As between the parties to this Agreement, all
accounting, billing and overhead requirements for Non-Unit
Production will conform to the terms of Exhibit "C". The agreement
to process or transport Non-Unit Production will include a
provision where upon termination, the Parties will have the option
of removing the capital improvement made at the sole cost and risk
of the Non-Unit Producer or, the Parties may acquire the capital
improvements on an as is, where is, basis at no cost by assuming
abandonment and salvage responsibility.
6. Other Requirements for Non-Unit Production Handling Agreements.
a. Any such agreement will require unanimous approval by all
Parties.
b. All Parties will, in proportion to their ownership or leased
interest in affected Production System Component, share the
benefits and the risk and liability associated with an such
agreement.
c. No Party may separately enter into an agreement with any third
party involving the use of said Party's percentage ownership or
leasehold interest of the Production System.
d. Any such agreement will be a Service Agreement only and will not
involve any sale, lease or transfer of interest to a party who
is not a Party to this Agreement.
e. The payment of production downtime compensation associated with
accommodating Non-Unit Production with an e. priority in Section
3. above will be negotiated at the time of the execution of the
Non-Unit Production Handling Agreement.
Production downtime compensation associated with accommodating Non-
Unit production with a priority of c, d, or e in Section 3. above will be
equal to the fixed operating costs of the Production System Component
utilized for the downtime period plus the estimated loss in the present
value of revenue less expenses associated with production delayed during
the downtime period. No downtime compensation will be required for a
cumulative total of ten (10) days of lost revenue associated with the
initial tie-in of such production. Downtime compensation for third-party
production (Section 3 f. priority) will be negotiated.
f. Every Non-Unit Production Handling Agreement will terminate
before, or contemporaneously with, the end of the economic and
useful life of the applicable Production System, unless
otherwise agreed by the owners of such Production System.
g. Each Non-Unit Production Handling Agreement will identify the
ownership of the Production System Component and include a
description of the financing and leasing relationships
associated with the design, installation an construction of the
Production System Component.
h. Each Non-Unit Production Handling Agreement shall contain
quality specifications to insure that no decrease in value of
Unit production will occur as a result of commingling Unit and
Non-Unit Production.
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EXHIBIT "K"
ATTACHED TO AND MADE A PART OF THAT CERTAIN
ALLEGHENY OPERATING AGREEMENT EFFECTIVE MAY 1, 1995 BETWEEN ENSERCH
EXPLORATION, INC., READING & BATES DEVELOPMENT CO., MOBIL OIL CORPORATION
AND MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST INC.
JOINT BIDDING AGREEMENT
Agreement is made and entered into as of the 1st day of September, 1995,
by and between MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST INC. ("Mobil"),
ENSERCH EXPLORATION, INC. ("Enserch") and READING & BATES DEVELOPMENT CO.
("Reading & Bates"), each of such parties being hereinafter called a
"Party" and all of such parties together being hereinafter called the
"Parties."
W I T N E S S E T H:
WHEREAS, the United States Department of the Interior (the "DOI")
has heretofore announced tentative plans for OCS Lease Sales covering
certain areas of the Outer Continental Shelf in the Central Gulf of Mexico
to be made available for oil and gas leasing in the years 1996, 1997,
1998, 1999 and the year 2000 ; and
WHEREAS, the oil and gas exploration and development of these
areas involves unusually large technological and financial risks because
of (i) variable geologic conditions and the inexact nature of
technological measurements and interpretations involved in predicting the
occurrence of oil and gas, and hence the high probability of drilling dry
holes, in such areas and (ii) the expected high costs of acquiring leases
and of exploring for, discovering and developing oil and gas in these
areas; and
WHEREAS, in recognition of the magnitude of these risks and of
the concomitant need for increased domestic oil and gas supplies to serve
the national interest, the Parties deem it necessary to join together
herein to share such risks and thus minimize their own individual costs
and investments in the block(s) or tract(s) covered hereby in order to
maximize monies available for discovery and development of needed oil and
gas reserves from other blocks or tracts and areas.
NOW, THEREFORE, in consideration of the premises, and of the
mutual covenants and obligations of the Parties herein set forth, it is
agreed as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement:
1.1 "Subject Block" is a block, tract or bidding unit, as
described or referred to in Section 2.1 hereof, to which
the further provisions of this Agreement apply.
1.2 "Subject Sale," with respect to a Subject Block, is any
public offering of that block for oil and/or gas leasing
purposes during the term of this Agreement (whether or not
actually held on the date specified in the DOI notice of
sale).
1.3 "Joint Bid Hereunder" is a bid on a Subject Block
submitted or proposed for submission hereunder by at least
two Parties at a Subject Sale."
1.4 "Technical Information" is any geological, geophysical,
engineering, well or other similar information, materials
or data or interpretations thereof relevant to a Subject
Block.
1.5 "Affiliate" of a Party is any company which owns or
controls, is owned or controlled by, or is under common
ownership or control with, such Party. Control means the
ownership, directly or indirectly, of more than fifty
percent (50%) of the outstanding voting securities of a
corporation.
ARTICLE 2
SCOPE OF AGREEMENT
2.1 This Agreement shall apply only to the blocks and areas
described in the AMI attached to Operating Agreement as Exhibit "A-4"
attached hereto which are available for bid at a Subject Sale, hereinafter
referred to as "Contract Area", excepting any blocks which the Parties
may hereafter elect, pursuant to the provisions of Article 6.2.1 hereof,
to be excluded from this Agreement, provided that any blocks not now
subject to this Agreement may be added by unanimous agreement of the
Parties to amend said Exhibit "A-4".
ARTICLE 3
RIGHT OF PARTICIPATION
3.1 The Parties shall have the opportunity to participate in
any Joint Bid Hereunder, and in the ownership of any oil and/or gas lease
issued pursuant to such bid by reason of a Subject Sale, in the following
proportions:
Mobil 40.000%
Enserch 40.000%
Reading & Bates 20.000%
or in such other proportions as the Parties may hereafter agree upon; in
such case the Parties shall sign a memorandum recording the agreement
reached in the form of Exhibit "B".
3.2 If more than two parties are, or become, Parties to this
Agreement, and if one or more Parties thereafter withdraw from further
participation with respect to a Subject Block, as required or permitted
hereunder: (i) the remaining Parties, proceeding independently of such
non-participating Party(ies) but in full compliance with the requirements
and procedures applicable to considering, agreeing to and submitting a
Joint Bid Hereunder, may continue consideration of matters relating to
that Subject Block which are within the scope of this Agreement, and (ii)
the above stated interest of each such remaining Party shall be changed to
accord with the ratio that such interest bears to the total of the above
stated interests of all such remaining Parties (or as may otherwise be
mutually agreed upon by such remaining Parties).
ARTICLE 4
TECHNICAL MEETINGS
4.1 At the request of any Party a technical meeting may be
called prior to the dates set for bid meetings, at a time and place mutual
convenient, in order to systematically review data and to share
interpretations of such data so that a thorough review of the prospects
can be completed by the time bids are to be determined.
ARTICLE 5
BIDDING COMMITTEE
5.1 The meetings of the Parties provided in this Agreement
shall be conducted by and through a "Bidding Committee." The Bidding
Committee shall be formed and shall act in accordance with the provisions
hereinafter set forth.
5.2 Prior to the first meeting of the Parties, each Party
shall designate, by written notice to each other Party, its representative
to the Bidding Committee. A designated representative may appoint an
alternate to act in his place and stead at any particular meeting(s).
5.3 Each Party's representative and/or alternate and a maximum
of four assistants may be present at all meetings of the Bidding
Committee, but only a designated representative or (in his absence) his
appointed alternate may bind the Party he represents on any matter
requiring a decision, action or agreement of that Party hereunder. The
representative of Mobil shall be chairman of the Bidding Committee and he
(or his alternate) shall preside at each such meeting.
ARTICLE 6
MEETINGS AND DETERMINATION OF BIDS
6.1 In addition to holding the meeting required by Section 6.3
hereof, the Parties shall, at the request of any Party, with at least
forty-eight (48) hours advance notice, meet at such other time(s) as may
be appropriate to consider matters within the scope of this Agreement.
Each meeting hereunder shall be conducted in accordance with the
requirements and procedures set forth in this Agreement.
6.2 At the first and any subsequent meeting of Parties, each
Party shall inform each other Party of any Subject Block on which it is
then no longer interested in participating in a Joint Bid Hereunder.
6.2.1 If such information is disclosed and the Parties
determine that such Subject Block has no further
interest for joint bidding purposes hereunder prior
to suggestion of any amount for a Joint Bid
Hereunder, then (i) this Agreement shall
automatically terminate as to such Subject Block
(subject only to the provisions of Section 6.2.2)
and, if any confidential information relevant to
such block has been disclosed, subject to the
provisions of Article 7 hereof, and (ii) a
memorandum to that effect shall be signed by the
Parties. Otherwise, such block shall remain subject
to all further provisions hereof.
6.2.2 By mutual agreement of the Parties, a block as to
which this Agreement has terminated under Section
6.2.1 hereof may again be made subject to this
Agreement (in which event it shall again be
considered as a Subject Block and be subject to all
the provisions hereof). Appropriate memoranda
recording the actions taken shall thereupon be
signed by the Parties.
6.3 At a meeting to commence not later than 12 p.m. (C.D.T.)
on the 7th day immediately preceding the date announced for a Subject
Sale, each Party shall disclose to each other Party the highest bid in
which it is then willing to participate on each Subject Block. Following
such disclosure, each Party shall inform each other Party whether it
elects to participate in a Joint Bid Hereunder on each such Subject Block
at the highest amount suggested by any Party (the "Highest Suggested Bid
Amount"). In the event any Party ( "Non-Participating Party") elects not
to participate in any such bid, the other Party or Parties ("Participating
Party") may bid solely or jointly with others for a lease on such Subject
Block; and if the Participating Party or Parties (solely or with others)
bid no less than the Highest Suggested Bid Amount, and are awarded the
lease, the Non-Participating Party shall, with respect to such Subject
Block, have no further rights under this Agreement.
6.4 Whenever Parties have agreed to join in any Joint Bid
Hereunder, in accordance with the requirements and procedures set forth
herein, the Parties shall sign a memorandum recording the agreement
reached in the form of Exhibit "C". Whenever any Party cannot or does not
participate in any Joint Bid Hereunder at the highest amount theretofore
suggested, the Party shall: (I) sign a memorandum in the form of Exhibit
"D" setting forth such determination, the date, the name of each Non-
Participating Party and the amount at which that Party cannot or does not
agree to participate and (ii) such Non-Participating Party shall not be
entitled to participate in further discussions or meetings relating
thereto.
6.5 A record of all suggested Joint Bids Hereunder shall be
made; and no Party shall participate in any Joint Bid Hereunder on a
Subject Block that is less than the highest Joint Bid Hereunder suggested
by any Party for that block.
ARTICLE 7
DISCLOSURE AND CONFIDENTIAL OF INFORMATION
7.1 A Party that believes the disclosure of information
(including, but not limited to, Technical Information) it possesses would
be beneficial in arriving at a Joint Bid Hereunder may, subject to the
further provisions of this Article 7, disclose such information to each
other Party.
7.2 No information shall be disclosed, nor any discussion
held, relating to future hydrocarbon supply, demand or price.
7.3 A Party disclosing information, including, but not limited
to, Technical Information, (the "Disclosing Party") thereby represents it
has the right to make such disclosure to each other Party to whom such
information is disclosed (the "Examining Party").
7.4 Whenever Technical Information is disclosed, the Parties
shall sign a memorandum identifying such information and each Subject
Block to which it relates and setting forth (i) the date of the
disclosure, (ii) the name of each Disclosing Party and the name of each
Examining Party and (iii) whether such information is to be subject to the
confidentiality provisions of Section 7.5 hereof.
7.5 All Technical Information shall be held confidential by
each Examining Party and shall not be divulged by such Examining Party to
any other person or entity, except an Affiliate, for a period of two (2)
years from the date such confidential information is disclosed, unless the
Parties mutually agree to a lesser period of time or unless the Disclosing
Party indicates at the time of disclosure that the information is not to
be subject to this requirement of confidentiality. The foregoing
confidentiality provision shall not apply to any Examining Party to the
extent that the particular disclosed information (i) is now or hereafter
becomes part of the public domain other than as a result of a wrongful act
or omission by such Examining Party, or (ii) is already owned by or in the
possession of the Examining Party, or (iii) is hereafter disclosed to the
Examining Party by a third party without binder of confidentiality.
7.6 All other disclosed information relating to bids shall be
held confidential by the Parties and shall not be divulged to any other
person or entity except an Affiliate until after the opening of bids.
7.7 If any Examining Party discloses to an Affiliate any
information it is obligated to hold confidential hereunder, the Examining
Party shall ensure that such Affiliate shall likewise be fully bound by
the confidentiality provisions hereof.
ARTICLE 8
NON-RESTRICTION OF BIDDING
8.1 Nothing herein shall ever be construed as denying or
restricting the right of a Party to bid on any Subject Block (or any other
block); and the Parties hereby expressly confirm the right of any Party
(acting either solely or with others) to bid on any such block (including
any Subject Block on which a Joint Bid hereunder is proposed or submitted
hereunder) if, as and when it may desire. In order reasonably to protect
all Parties against the inequitable use of information obtained pursuant
to this Agreement, however, it is agreed that:
8.1.1 If a Party (an "Acquiring Party"), either solely or
jointly, should bid at a Subject Sale for, and thereby
acquire a leasehold interest in, any Subject Block for
which an unaccepted bid was made by one or more Parties at
the same sale pursuant to this Agreement and such
unaccepted bid was for an amount no less than the Highest
Suggested Bid Amount, then such Acquiring Party shall,
within thirty (30) days after such acquisition, give
written notice thereof (together with the details of such
acquisition) to each other Party that participated in such
unaccepted bid (an "Unsuccessful Bidding Party"). Each
Unsuccessful Bidding Party shall have thirty (30) days
after receipt of said notice in which to give the
Acquiring Party written notice of its election (if it so
elects) to purchase from the Acquiring Party the
hereinafter stated part of the Acquiring Party's interest
by reimbursing the Acquiring Party for said part of the
Acquiring Party's lease-acquisition costs and by assuming
said part of the Acquiring Party's leasehold obligations.
That part of the Acquiring Party's costs for which such
Unsuccessful Bidding Party is to reimburse the Acquiring
Party, that part of the Acquiring Party's leasehold
obligations which such Unsuccessful Bidding Party is to
assume and that part of the Acquiring Party's interest
which such Unsuccessful Bidding Party shall be entitled to
purchase is as follows:
(i) If the Acquiring Party participated in submitting
the above-described unaccepted bid: that part of the
Acquiring Party's interest which is equal to the
Unsuccessful Bidding Party's share of said
unaccepted bid.
(ii) If the Acquiring Party did not participate in
submitting said unaccepted bid: that part of the
Acquiring Party's interest which is equal to the
ratio that the Unsuccessful Bidding Party's Section
3.1 interest bears to the total of those Section 3.1
interests that are represented in both the accepted
and unaccepted bids.
8.1.2 If a Party, either solely or jointly, should acquire a
leasehold interest in any Subject Block as the result of a
bid at a Subject Sale for an amount less than the Highest
Suggested Bid Amount, such Acquiring Party shall, within
thirty (30) days after such acquisition, give written
notice thereof (together with the details of such
acquisition) to each other Party. Each such other Party
shall have the option for a period of thirty (30) days
after receipt of such notice in which to give such
Acquiring Party written notice of its election (if it so
elects) to purchase from such Acquiring Party the
hereinafter-stated part of such Acquiring Party's interest
by reimbursing the Acquiring Party for said part of the
Acquiring Party's leasehold acquisition costs and by
assuming said part of the Acquiring Party's leasehold
obligations. That part of the Acquiring Party's costs for
which each such other Party is to reimburse the Acquiring
Party, and that part of the Acquiring Party's leasehold
obligations which each such other Party is to assume, and
that part of the Acquiring Party's interest which each
such other Party shall be entitled to purchase, shall be
equal to the percentage interest for such other Party as
provided in Section 3.1 hereinabove.
8.2 The right of purchase from an Acquiring Party, as stated
in Sections 8.1.1 and 8.1.2 hereof, shall apply whether the original
leasehold interest was acquired by a Party to this Agreement or by an
Affiliate of such Party.
ARTICLE 9
RESPONSIBILITY FOR BIDS
9.1 Mobil shall prepare and file the bids for the blocks or
blocks in which all the Parties elect to participate in Joint Bids
Hereunder at the Subject Sale. Each Party participating in a Joint Bid
Hereunder shall be responsible for satisfying itself as to the correctness
of such bid and shall take whatever steps it deems desirable to ensure
that such bid is timely and properly prepared and submitted. Each Joint
Bid Hereunder shall disclose the identity of all Parties joining in such
bid, and comply with any other requirements promulgated by the MMS. Mobil
will advance all funds required to cover that part of the bonus(es) which
must be submitted with the bid(s) in which Mobil elects to participate.
As soon as Mobil determines when the Minerals Management Service will
deposit the bid check(s), Mobil will notify the other Participating
Parties by telephone of the date that the Party must wire its
proportionate share of immediately available funds to CitiBank N.A. -
American Bankers Association Routing Number 021000089 - (New York, NY) for
credit to Mobil Oil Corporation's account number 4064-0942. One day prior
to the date upon which the balance of the bonus and the first year rental
is due for an accepted Joint Bid Hereunder, Mobil shall pay the total then
due to the Minerals Management Service, and on the same date the other
Participating Parties agree to wire their proportionate share of
immediately available funds pursuant to the above wiring instructions.
9.2 In the event that a surety bond is required for any Joint
Bid Hereunder in which Mobil elects to participate, Mobil shall prepare
and file such surety bond, and shall maintain same until such time as the
Minerals Management Service deems the bond no longer necessary. Each
Party that participates in a Joint Bid Hereunder, for which Mobil prepares
and files a surety bond, shall be billed for its proportionate share of
any and all costs realized or incurred by Mobil in securing and
maintaining such bond.
ARTICLE 10
SELECTION OF OPERATOR AND OPERATING AGREEMENT
10.1 If the Parties submit a Joint Bid Hereunder, the Parties
agree that the Operator for any jointly acquired lease(s) under this
Agreement shall be either Mobil or Enserch (if a Party owns an interest in
such lease). Operatorship shall be determined within thirty (30) days
following issuance of all leases and shall be selected on a Designated
Prospect basis with each individual selection covering all blocks which
comprise said Designated Prospect.
10.2 The Party which generated the prospect for which the
lease(s) was acquired shall have the option to be designated Operator. If
a prospect acquired by two or more of the Parties was generated by two or
more Parties independently of one another, then the Party with the largest
interest in the prospect (with 33.33334% and 33.33333% considered as
equal) shall have the option to be designated Operator thereof.
10.3 In the event that: (i) a prospect was generated by two or
more Parties, (ii) no Party has a larger interest in the prospect such
that two or more of the Parties have an equal interest in the prospect and
(iii) such Parties do not reach agreement as to which Party shall be
designated Operator, the order of the right to elect to be designated
Operator of such Designated Prospect(s) shall be determined by lot between
such owners. As to those prospects which the same two Parties own in
equal proportions, each of said Parties will, from such drawing of lots,
receive an assigned selection number either 1 or 2. Prospect selections
win be made by each such Party in sequential order as follows: 1, 2, 2, 1,
1, 2, 2, 1, etc. As to those prospects which the same three Parties own
in equal proportions, each of said Parties will then, from such drawing of
lots, receive an assigned selection number either 1, 2 or 3. Prospect
selections will then be made by each such Party in sequential order as
follows: 1, 2, 3; 2, 3, 1; 3, 1, 2; 1, 2, 3; 2, 3, 1; 3, 1, 2; etc.).
ARTICLE 11
RELATIONSHIP OF THE PARTIES
11.1 It is expressly agreed that the relationship of the
Parties as created by this Agreement is not as members of any partnership,
joint venture or association; that the duties, obligations and liabilities
of the Parties are several and not joint; and that nothing contained
herein shall be construed to create or impose any partnership duty,
obligation or liability on any Party. Each Party hereby elects to be
excluded from the application of all or any part of the provisions of
Subchapter K, Chapter 1, Subtitle A, Internal Revenue Code of 1986, as
amended, or similar provisions of applicable state laws.
ARTICLE 12
APPLICABLE LAWS, RULES AND REGULATIONS
12.1 The provisions hereof shall be subject to all applicable
valid laws and all applicable valid rules, regulations and orders of any
governmental authority having jurisdiction; and in the event any provision
hereof shall be found to be contrary to, or inconsistent with, any such
law, rule, regulation or order, the latter shall prevail and this
Agreement shall be deemed modified to the extent, but only to the extent,
necessary for it to be consistent therewith, subject to the further
provisions of this Article 12.
12.2 In the event a Joint Bid Hereunder would be disqualified
under any provision of 30 CFR 256.44 or under any other applicable law,
rule, regulation or order, then no such bid shall be submitted, and this
Agreement shall thereupon terminate as to each Subject Block affected by
such disqualification (except that the obligations of the Parties under
Article 7 hereof shall remain in force and effect during the period of
time specified therein).
12.3 Each Party hereby represents that:
12.3.1 Such Party has heretofore filed with the
appropriate Minerals Management Service
("MMS") office(s) all statements, reports,
documents and other matters required by 30 CFR
256.41, DOI notice of sale and/or any other
applicable law, rule, regulation or order in
order for such Party to qualify to submit a
bid at a Subject Sale, to the extent same may
be so filed prior to the time of actually
submitting a bid; and
12.3.2 Such Party:
(a) is now and will remain during the term of this
Agreement, in full compliance with all
applicable joint bidding requirements of 30
CFR 256.41 (including, without limitation,
each Statement of Production required
thereby), of the DOI notice of sale and of any
other applicable law, rule, regulation or
order; and
(b) is not now, and will not, during the term of
this Agreement, become, a party to (i) any
pre-lease agreement described in 30 CFR
256.44 that would disqualify a Joint Bid
Hereunder at a Subject Sale or (ii) any other
agreement which would preclude such Party from
joining in and being fully bound by the
provisions of this Agreement; and
(c) can and will, in connection with any Joint Bid
Hereunder to which it is a Party, comply with
all requirements of 30 CFR 256.41 et seq.
applicable to a Subject Sale.
ARTICLE 13
ASSIGNABILITY
13.1 A Party's rights and obligations under this Agreement may
be assigned, in whole or in part, subject to the following:
13.1.1 No such assignment, other than an assignment
to an Affiliate, shall be made without the advance
written consent of each other Party; and any such
assignment not so consented to shall be void.
13.1.2 Any assignment permitted hereunder shall be made
expressly subject to the provisions of Agreement;
and the assignee(s) thereunder shall, to the extent
of such assignment, assume all of the obligations,
and be bound by all of the provisions, of this
Agreement.
ARTICLE 14
NOTICES
14.1 All notices required or permitted to be given to a Party
under this Agreement shall be given (i) by United States mail or telegram,
postage or charges prepaid, and addressed to that Party at its address as
shown opposite its name on the signature page hereof or (ii) by telephone
to that Party's representative or alternate, confirmed in writing as above
provided. Each Party shall have the right to change its address for
notice purposes at any time(s) by giving written notice thereof to each
other Party.
ARTICLE 15
TERM
15.1 Unless sooner terminated, in whole or in part, by reason
of some other provision hereof, or by mutual agreement of the Parties,
this Agreement, with respect to each Subject Block, shall terminate on
December 31, 2000; provided however;
15.1.1 The obligation of each Party with respect to
confidential Technical Information under Section 7.5
hereof shall remain in effect during the period(s) of
time specified therein; and
15.1.2 The provisions of Articles 8, 10 and of Sections
13.2 and 16.1 hereof shall remain in effect for any
additional period(s) of time as may be required in
order for such provisions to be complied with
following a Subject Sale.
15.2 Any Party may, with respect to a Subject Block, provided
that no Subject Sale has theretofore been held with respect to that
Subject Block, withdraw from further participation in this Agreement
(thereby terminating its further rights and obligations under this
Agreement) at any time during the term hereof but after six (6) months
from the date hereof, by giving written notice thereof to each other
Party; except that any Joint Bid Hereunder which has been submitted to the
MMS by the Parties may not be rescinded without the mutual consent of all
Parties participating in such joint bid; provided however:
15.2.1 The obligation of such withdrawing Party with respect
to confidential Technical Information under Sections
7.5, 7.6 and 7.7 shall remain in effect during the
period of time specified therein; and
15.2.2 If such withdrawing Party, either solely or jointly
with others, should, during the remaining term of this
Agreement, acquire an interest in such Subject Block,
then such Party shall, within thirty (30) days after
such acquisition, give written notice thereof to each
other Party. Such other Party shall have the option,
for a period of thirty (30) days after receipt of such
notice, to give such withdrawing Party written notice
of its election (if it so elects) to acquire its
prorata share (i.e., that share which is equal to its
participating interest under Section 3.1 hereof) of the
acquired interest by reimbursing such withdrawing Party
for such prorata share of the acquisition costs and by
assuming such prorata share of the withdrawing Party's
obligations relating thereto.
ARTICLE 16
SUBSEQUENT ACQUISITIONS
16.1 If a Party, including an Affiliate (an "Acquiring Party"),
either solely or jointly, should acquire (or obtain the right to acquire)
from others, within one (1) year after the Subject Sale, or December 31,
2000, whichever is the earlier, a leasehold interest in a Subject Block by
farmin, purchase or any means other than bidding at a Subject Sale and if
an unaccepted bid was previously made by one or more Parties on such
Subject Block at a Subject Sale pursuant to this Agreement, then such
Acquiring Party shall, within thirty (30) days after the acquisition of
such interest or right, give written notice thereof (together with the
details of such acquisition) to each other Party that participated in such
unaccepted bid (an "Unsuccessful Bidding Party"). An Unsuccessful Bidding
Party shall have thirty (30) days after receipt of said notice in which to
give the Acquiring Party written notice of its election (if it so elects)
to purchase from the Acquiring Party that portion of the Acquiring Party's
interest stated in Section 8.1.1 hereof by reimbursing the Acquiring Party
for said part of the Acquiring Party's acquisition costs and by assuming
the said part of the Acquiring Party's obligations.
ARTICLE 17
ENTIRE AGREEMENT
17.1 This Agreement supersedes and replaces any oral or written
communication heretofore made between the Parties relating to the subject
matter hereof, except for any prior written confidential agreements
between the Parties pertaining to data or information or blocks covered by
this Agreement. This Agreement may not be modified or changed except by
an instrument in writing signed by all Parties.
17.2 This Agreement may be executed in counterpart, any of
which shall be considered an original.
IN WITNESS WHEREOF, the Parties have executed this Agreement as
of the date first above stated.
WITNESS: MOBIL OIL EXPLORATION &
PRODUCING SOUTHEAST INC.
_____________________________
_____________________________ By: _____________________________
Attorney-in-Fact
WITNESS: ENSERCH EXPLORATION, INC.
_____________________________
______________________________ By: ______________________________
WITNESS: READING & BATES DEVELOPMENT CO.
_____________________________
______________________________ By: ______________________________
EXHIBIT "B"
Attached to and made a part of that certain Joint Bidding Agreement dated
September 1, 1995 by and between Mobil Oil Exploration & Producing Southeast
Inc., Enserch Exploration, Inc. and Reading & Bates Development Co.
AMENDMENT TO BIDDING AGREEMENT
In consideration of the covenants and agreements hereinafter expressed,
and for other valuable considerations received, the undersigned parties
agree that the names and percentages shown in Article 3 (RIGHT OF
PARTICIPATION) of that certain Joint Bidding Agreement, dated September 1,
1995, by and between Mobil Oil Exploration & Producing Southeast Inc.,
Enserch Exploration, Inc. and Reading & Bates Development Co., shall be
and is hereby amended insofar and only insofar as it covers the below
listed Area/Blocks(s) for OCS Sale No. ___ :
AREA BLOCK(S)
__________________________ __________________________
to read as follows:
MOBIL __________________ %
ENSERCH __________________ %
READING & BATES __________________ %
Except as amended hereby, all other terms and provision of the Agreement
shall remain in full force and effect as written.
Mobil Oil Exploration & Producing Southeast Inc.
By: ________________________ Executed & Effective: _____________________
Enserch Exploration, Inc.
By: ________________________ Executed & Effective: _____________________
Reading & Bates Production Co.
By: ________________________ Executed & Effective: _____________________
Exhibit "C"
Attached to and made a part of that certain Joint Bidding Agreement dated
September 1, 1995 by and between Mobil Oil Exploration & Producing Southeast
Inc., Enserch Exploration, Inc. and Reading & Bates Development Co.
MEMORANDUM
AGREEMENT TO PARTICIPATE IN JOINT BIDDING
Pursuant to Article 6 (MEETINGS AND DETERMINATION OF BIDS) of the that
certain Joint Bidding Agreement, dated September 1, 1995, by and between
Mobil Oil Exploration & Producing Southeast Inc., Enserch Exploration,
Inc. and Reading & Bates Development Co., the Parties signing below record
agreement to enter a joint bid for OCS Sale No. ___ as follows:
AREA BLOCK HIGHEST SUGGESTED BID
___________________ __________ ____________________________________
PARTICIPATION % Mobil Oil Exploration & Producing
Southeast Inc.
________________________ By: __________________________________
Enserch Exploration, Inc.
________________________ By: __________________________________
Reading & Bates Development Co.
________________________ By: __________________________________
Date Signed: ________________________
Exhibit "D"
Attached to and made a part of that certain Joint Bidding Agreement dated
September 1, 1995 by and between Mobil Oil Exploration & Producing Southeast
Inc., Enserch Exploration, Inc. and Reading & Bates Development Co.
MEMORANDUM
ELECTION REGARDING
PARTICIPATION IN JOINT BIDDING
Pursuant to Article 6 (MEETINGS AND DETERMINATION OF BIDS) of the that
certain Joint Bidding Agreement, dated September 1, 1995, by and between
Mobil Oil Exploration & Producing Southeast Inc., Enserch Exploration,
Inc. and Reading & Bates Development Co., the non-participating party (or
parties) has elected not to participate in the highest suggested bid shown
below for OCS Sale No. ____. The participating parties, if more than one,
agree to consider a joint bid at such highest suggested amount.
AREA BLOCK HIGHEST SUGGESTED BID
_____________________ _____________ _________________________________
PARTICIPATING PARTY:
By: _____________________________
NON-PARTICIPATING PARTY:
By: _____________________________
Date Signed: _____________________
EXHIBIT 10.126
STATE OF TEXAS )
)
COUNTY OF DALLAS )
OPTION AGREEMENT
THIS OPTION AGREEMENT is entered into and shall be effective as of
12:01 a.m., May 1, 1995 (hereinafter referred to as the "Effective Date"),
by and between READING & BATES DEVELOPMENT CO., a Delaware corporation,
federal taxpayer identification no. 73-0797067, whose mailing address is
901 Threadneedle, Suite 200, Houston, Texas 77079 ("Assignor") and ENSERCH
EXPLORATION, INC., a Texas corporation, federal taxpayer identification
no. 75-2556975, whose mailing address is 4849 Greenville Avenue, Suite
1500, Dallas, Texas 75206 ("Assignee").
In consideration of the payment of the sum of One Thousand
($1,000.00) Dollars and other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Assignor does hereby grant in
favor of Assignee the option to purchase, upon the occurrence of a Change
in Control of the Company, as hereinbelow defined, and on the terms and
conditions described hereinbelow, the undivided right, title and interest
reflected in Exhibit 1, Part (a) hereof, together with any and all right,
title and interest which may be hereinafter acquired by Assignor pursuant
to the terms of the Operating Agreement, dated effective May 1, 1995,
entered into by Assignor and Assignee and third parties (the "Operating
Agreement"), in and to the following described properties (the
"Property"):
(a) The oil, gas and mineral leases described on Exhibit 1, Part
(a) (the "Leases"), together with a like interest with respect
to the Leases in and to any and all (i) mineral interests,
(ii) overriding or landowners' royalty interests, (iii) surface
and subsurface interests and rights, (iv) beneficial,
convertible or reversionary interests, (v) interest owned,
claimed or acquired, or to be owned, claimed or acquired, by
agreement, (vi) production payments, (vii) contractual
interests owned pursuant to participation agreements, operating
agreements or similar agreements, and (viii) any and all like
or unlike interests, including without limitation those
specific items identified on Exhibit 1, Part (a). This shall
include any contractual rights providing for the acquisition or
earning of any of the foregoing, and Assignor's rights in
respect of any pooled, communitized or unitized acreage of
which any of the foregoing is a part. (All of the foregoing
shall be called collectively the "Leasehold Interests.")
(b) Any and all wells, wellbores, pipe, gathering lines,
compressors, facilities, equipment, platforms, pipelines and
any and all other personal, real, movable and immovable
property, fixtures or equipment which are located on or used
directly in connection with the production, treatment or
transportation of oil and gas from the Leasehold Interests,
including, without limitation, those items specifically
identified on Exhibit 1, Part (b) (the "Equipment").
(c) Any and all easements, rights-of-way, and subsurface and
surface rights associated or used in connection with any such
easements or rights-of-way, which easements, rights-of-way and
subsurface and surface rights have been obtained for use in
connection with the Leasehold Interests (the "Gathering
Facilities").
(d) To the extent the same are assignable or transferable by
Assignor and to the extent and only to the extent that the same
relate to the ownership or operation of the Leasehold
Interests, the Gathering Facilities or the Equipment on or
after the Effective Date, a like interest in and to all orders,
contracts, agreements (including without limitation all
operating agreements, transportation agreements, unit
agreements, participation agreements and processing
agreements), instruments, licenses, authorizations, permits,
audits, claims, liens, suits, settlements and demands, and
other rights, privileges, benefits and powers conferred upon
Assignor.
Assignor and Assignee have heretofore entered into a Purchase and
Sale Agreement, dated October 18, 1995 with Assignor, as Buyer, and
Assignee, as Seller, covering the Leases (the "Purchase and Sale
Agreement") and the Operating Agreement covering the Leases. In
connection with the obligations set forth in the Purchase and Sale
Agreement and Operating Agreement, Assignor and Assignee do hereby agree
that this Option Agreement shall be irrevocable until the occurrence of
(i) ten (10) years from the date hereof; or (ii) the termination date of
the Operating Agreement, as provided in Article 26 thereof, whichever
occurs first.
For purposes of this Option Agreement, a "Change in Control of the
Company" shall mean a change in control of a nature that would be required
to be reported in response to Item 1(a) of the Current Report on Form 8-K,
as in effect on the date hereof, pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended ("Exchange Act") or would have
been required to be so reported but for the fact that such event had been
"previously reported" as that term is defined in Rule 12b-2 of Regulation
12B of the Exchange Act; provided that, without limitation, such a change
in control shall be deemed to have occurred if (a) any Person is or
becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing
40% or more of the combined voting power of the Company's then outstanding
securities ordinarily (apart from rights accruing under special
circumstances) having the right to vote at elections of directors ("Voting
Securities"), or (b) individuals who constitute the Board on the Effective
Date hereof (the "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election
by the Company's shareholders, was approved by a vote of at least three-
quarters of the directors comprising the Incumbent Board (either by
specific vote or by approval of the proxy statement of the Company in
which such person is named as a nominee for director, without objection to
such nomination) shall be, for purposes of this clause (b), considered as
though such person were a member of the Incumbent Board, or (c) a
recapitalization of the Company occurs which results in either a decrease
by 33% or more in the aggregate percentage ownership of Voting Securities
held by Independent Shareholders (on a primary basis or on a fully diluted
basis after giving effect to the exercise of stock options and warrants)
or an increase in the aggregate percentage ownership of Voting Securities
held by non-Independent Shareholders (on a primary basis or on a fully
diluted basis after giving effect to the exercise of stock options and
warrants) to greater than 50%. For purposes of this Option Agreement,
"Company" shall be deemed to mean Assignor and the parent of Assignor
and/or any other entity controlling a majority of the voting stock of
Assignor. Furthermore, for purposes of this Option Agreement, the term
"Person" shall mean and include any individual, corporation, partnership,
group, association or other "person," as such term is used in Section
14(d) of the Exchange Act, other than the Company, a subsidiary of the
Company or any employee benefit plan(s) sponsored or maintained by the
Company or any subsidiary thereof, and the term "Independent Shareholder"
shall mean any shareholder of the Company except any employee(s) or
director(s) of the Company or any employee benefit plan(s) sponsored or
maintained by the Company or any subsidiary thereof. For purposes of this
Option Agreement, a "change in control of the Company" shall not be deemed
to occur solely as the result of a spin-off or other distribution of the
outstanding stock of the Buyer (or assignee or transferee of the Buyer to
which Seller has consented under the provisions of Article 8.14 of the
Operating Agreement, hereinafter a "permitted assignee") to the
stockholders of the ultimate parent corporation controlling a majority of
the voting stock of Buyer or any permitted assignee.
Upon the occurrence of a Change in Control of the Company, Assignor
shall give written notice to Assignee of such occurrence and Assignee
shall have sixty (60) days from receipt of such notice within which to
elect to acquire this interest. If Assignee elects to acquire the
Property, written notice will be sent to Assignor prior to the expiration
of ten (10) business days following the expiration of the aforenoted sixty
(60) day period.
The consideration for this conveyance shall be the sum of (i) that
portion of the Purchase Price, as defined in the Purchase and Sale
Agreement, heretofore paid by Assignor to Assignee, less and except any
interest paid, and (ii) actual out-of-pocket expenditures made by Assignor
with respect to the Property which were incurred and paid by Assignor
("Purchase Price"). The Purchase Price shall be paid in cash at the time
of the passing of the act of sale, which shall occur at the offices of the
Assignee within ten (10) business days of Assignor's receipt of
notification of Assignee's election to purchase.
Assignor shall convey the Property to Assignee, free and clear of any
and all liens, mortgages, claims, overriding royalty interests, production
payments or other burdens which may have been created by, through or under
Assignor.
Any notice provided or permitted to be given under this Option
Agreement shall be in writing, and may be served by personal delivery, by
depositing same in the mail, addressed to the party to be notified,
postage prepaid, and registered or certified with a return receipt
requested or by facsimile transmission. Notice deposited in the mail in
the manner hereinabove described shall be deemed to have been given and
received on the date of the delivery as shown on the return receipt.
Notice served in any other manner shall be deemed to have been given and
received only in and when actually received by the addressee. For
purposes of notice, the addresses of the parties shall be as follows:
Assignor's Mailing Address:
Reading & Bates Development Co.
901 Threadneedle, Suite 200
Houston, Texas 77079
Attention: Wayne K. Hillin, Esq.
Telephone: (713) 496-5000
Fax: (713) 496-0285
Assignee's Mailing Address:
Enserch Exploration, Inc.
4849 Greenville Avenue, Suite 1200
Dallas, Texas 75206
Attention: James K. Teringo, Jr., Esq.
Telephone: (214) 987-6651
Fax: (214) 987-6475
Each party shall have the right, upon giving ten (10) days prior notice to
the other in the manner hereinabove provided, to change its address for
purposes of notice.
IN WITNESS WHEREOF, this Assignment is executed in multiple originals
and in the presence of the undersigned witnesses on this 18th day of
October, 1995, but to be effective as of the Effective Date.
WITNESSES: ASSIGNOR:
READING & BATES DEVELOPMENT CO.
_____________________________________ By:_______________________________
D. C. Toalson
Name:________________________________ President
(Please Print)
______________________________________
Name:_________________________________
(Please Print)
ASSIGNEE:
ENSERCH EXPLORATION, INC.
_______________________________________ By:______________________________
R. L. Kincheloe
Name: James K. Teringo, Jr. Senior Vice President
Offshore and International
_______________________________________
Name:__________________________________
(Please Print)
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
D. C. TOALSON, to me personally known to be the person whose name is
subscribed to the foregoing instrument, who declared and acknowledged to
me, notary, in the presence of the undersigned competent witnesses, that
he executed the above and foregoing instrument in his capacity as
President of Reading & Bates Development Co., a Delaware corporation, on
behalf of said corporation with full authority, and that the said
instrument is the free act and deed of the said corporation, and was
executed for the uses, purposes and benefits therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of _________________________________ and
____________________________, competent witnesses, on the 18th day of
October, 1995.
WITNESSES:
__________________________________ ___________________________________
D. C. Toalson
__________________________________
___________________________________
Notary Public
in and for State of Texas
My Commission expires:______________
STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, duly commissioned and qualified
within and for the State and County aforesaid, personally came and
appeared:
R. L. KINCHELOE, to me personally known to be the person whose name
is subscribed to the foregoing instrument, who declared and acknowledged
to me, notary, in the presence of the undersigned competent witnesses,
that he executed the above and foregoing instrument in his capacity as
Senior Vice President, Offshore and International of Enserch Exploration,
Inc., a Texas corporation, on behalf of said corporation with full
authority, and that the said instrument is the free act and deed of the
said corporation, and was executed for the uses, purposes and benefits
therein expressed.
THUS DONE, READ AND SIGNED in the State and County aforesaid, in the
presence of James K. Teringo, Jr. and ___________________________,
competent witnesses, on the 18th day of October, 1995.
WITNESSES:
___________________________________ _________________________________
James K. Teringo, Jr. R. L. Kincheloe
__________________________________
______________________________________________
Notary Public
in and for State of Texas
My Commission expires:______________
EXHIBIT 1 TO OPTION AGREEMENT
PART (a)
LEASEHOLD INTERESTS
1. LEASE OCS-G 8504. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
June 1, 1986, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
8504 covering all of Block 209, Green Canyon, OCS Official
Protraction Diagram, NG 15-3.
Working Interest 13.333333%
Net Revenue Interest 11.616868%
2. LEASE OCS-G 7049. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
June 1, 1984, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
7049 covering all of Block 254, Green Canyon, OCS Official
Protraction Diagram, NG 15-3.
Working Interest 20.000000%
Net Revenue Interest 17.3506665%
3. LEASE OCS-G 8010. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
8010 covering all of Block 298, Green Canyon, OCS Official
Protraction Diagram, NG 15-3.
Working Interest 20.00000%
Net Revenue Interest 17.35066%
4. LEASE OCS-G 8012. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
8012 covering all of Block 342, Green Canyon, OCS Official
Protraction Diagram, NG 15-3.
Working Interest 20.00000%
Net Revenue Interest 17.35066%
5. LEASE OCS-G 8876. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
June 1, 1987, by and between the United States of America, as Lessor,
and Hunt Petroleum Corporation, et al., as Lessees, bearing Serial
No. OCS-G 8876 covering all of Block 297, Green Canyon, OCS Official
Protraction Diagram, NG 15-3.
Working Interest 20.000000%
Net Revenue Interest 16.833333%
6. LEASE OCS-G 13171. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
May 1, 1991, by and between the United States of America, as Lessor,
and Exxon Corporation, as Lessees, bearing Serial No. OCS-G 13171
covering all of Block 341, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 20.000000%
Net Revenue Interest 17.500000%
7. LEASE OCS-G 13696. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1992, by and between the United States of America, as Lessor,
and Exxon Corporation, as Lessees, bearing Serial No. OCS-G 13696
covering all of Block 210, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 20.000000%
Net Revenue Interest 17.500000%
8. LEASE OCS-G 8000. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
8000 covering all of Block 213, Green Canyon, OCS Official
Protraction Diagram, NG 15-3.
Working Interest 20.00000%
Net Revenue Interest 17.35066%
9. LEASE OCS-G 8006. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
and Placid Oil Company, et al., as Lessees, bearing Serial No. OCS-G
8006 covering all of Block 258, Green Canyon, OCS Official
Protraction Diagram, NG 15-3.
Working Interest 20.00000%
Net Revenue Interest 17.35066%
10. LEASE OCS-G 8005. That certain Oil and Gas Lease of Submerged Lands
under the Outer Continental Shelf Lands Act made and effective as of
July 1, 1985, by and between the United States of America, as Lessor,
and Amerada Hess, et al., as Lessees, bearing Serial No. OCS-G 8005
covering all of Block 253, Green Canyon, OCS Official Protraction
Diagram, NG 15-3.
Working Interest 20.000000%
Net Revenue Interest 16.500000%
PART (b)
EQUIPMENT
1. WELLS:
WORKING REVENUE
INTEREST INTEREST
A. OCS-G 7049 #3 20.00000% 17.350665%
B. OCS-G 7049 #4 20.00000% 17.350665%
C. 0CS-G 7049 #4ST1 20.00000% 17.350665%
D. OCS-G 7049 #5 20.00000% 17.350665%
2. TEMPLATE:
That certain three well drilling template acquired, inter alia, by
Seller for use in connection with the drilling of the OCS-G 7049 #5
Well.
EXHIBIT 11
READING & BATES CORPORATION
AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE, PRIMARY AND FULLY DILUTED
(in thousands except share and per share amounts)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
PRIMARY EARNINGS (LOSS) PER SHARE:
Weighted average number of common
shares outstanding 60,207,934 56,899,715 55,497,487
========== ========== ==========
Income (loss) before extraordinary gain $ 18,392 $ (17,146) $ 4,656
Adjustments:
Less dividends paid on $1.625
Convertible Preferred Stock (4,855) (4,859) (2,052)
---------- ---------- ----------
Adjusted income (loss) before
extraordinary gain 13,537 (22,005) 2,604
Extraordinary gain 3,430 - -
---------- ---------- ----------
Adjusted net income (loss) applicable
to common stockholders $ 16,967 $ (22,005) $ 2,604
========== ========== ==========
Earnings (loss) per common share:
Adjusted income (loss) before
extraordinary gain $ .22 $ (.39) $ .05
Extraordinary gain .06 - -
---------- ---------- ----------
Net earnings (loss) per common share $ .28 $ (.39) $ .05
========== ========== ==========
Years ended December 31,
----------------------------------
1995 1994 1993
---------- ---------- ----------
FULLY DILUTED EARNINGS (LOSS) PER SHARE:*
Weighted average number of common shares
outstanding 60,207,934 56,899,715 55,497,487
Assume conversion of securities:
8% Senior Subordinated Convertible
Debentures 783,686 743,497 703,270
8% Convertible Subordinated Debentures 16,661 16,661 16,661
1.625 Convertible Preferred Stock 8,663,125 8,668,010 3,704,684
---------- ---------- ----------
Adjusted common shares outstanding 69,671,406 66,327,883 59,922,102
========== ========== ==========
Adjusted net income (loss) applicable
to common stockholders $ 16,967 $ (22,005) $ 2,604
Adjustments:
Interest on 8% Senior Subordinated
Convertible Debentures 3,173 2,731 2,351
Interest on 8% Convertible
Subordinated Debentures 2,068 2,109 1,983
Dividends paid on $1.625 Convertible
Preferred Stock 4,855 4,859 2,052
---------- ---------- ----------
Adjusted net income (loss) applicable
to common stockholders-assuming
full dilution $ 27,063 $ (12,306) $ 8,990
========== ========== ==========
Net income (loss) per common share
- assuming full dilution $ .39 $ (.19) $ .15
========== ========== ==========
* This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although it is contrary to paragraph 40 Of APB Opinion No. 15
because it produces an anti-dilutive result.
</TABLE>
EXHIBIT 21
READING & BATES CORPORATION
AND SUBSIDIARIES
SCHEDULE OF CONSOLIDATED SUBSIDIARIES OF THE COMPANY
AS OF DECEMBER 31, 1995
The following table and text sets forth the subsidiaries of the
Company and of such subsidiaries:
State or
Jurisdiction of
Name Incorporation
SUBSIDIARIES WHOLLY OWNED BY READING & BATES CORPORATION
Reading & Bates Coal Co. Nevada
Reading & Bates Development Co. Delaware
Reading & Bates Drilling Co. Oklahoma
Reading & Bates Petroleum Co. Texas
Reading & Bates Management Services, Inc. Delaware
SUBSIDIARIES WHOLLY OWNED BY READING & BATES DRILLING CO.
RB Drilling Services, Inc. Oklahoma
Reading & Bates (U.K.) Limited United Kingdom
Onshore Services, Inc. Texas
RB Offshore, Inc. Nevada
HRB Rig Corporation Oklahoma
Reading and Bates Borneo Drilling Co., Ltd. Oklahoma
Cyber Quality Inc. Oklahoma
Reading & Bates Drilling Limited Oklahoma
Reading & Bates Enterprises Co. Texas
Reading & Bates Exploration Co. Oklahoma
Reading and Bates, Inc. Oklahoma
Reading & Bates International
Energy Services B.V. Netherlands
Reading & Bates Offshore, Limited Oklahoma
Rig Logistics, Inc. Nevada
Pembleton Limited Ireland
SUBSIDIARY WHOLLY OWNED BY READING AND BATES, INC.
Reading & Bates Energy Corporation N.V. Netherlands
Antilles
SUBSIDIARY WHOLLY OWNED BY READING & BATES DEVELOPMENT CO.
RB Drilling Co. Oklahoma
SUBSIDIARIES WHOLLY OWNED BY READING & BATES ENTERPRISES CO.
Shore Services, Inc. Texas
SUBSIDIARIES WHOLLY OWNED BY READING & BATES EXPLORATION CO.
Reading & Bates (A) Pty Ltd Australia
SUBSIDIARIES WHOLLY OWNED BY READING & BATES INTERNATIONAL ENERGY
SERVICES B.V.
Reading & Bates, B.V. Netherlands
SUBSIDIARIES WHOLLY OWNED BY READING & BATES COAL CO.
Appalachian Permit Co. Kentucky
Bismarck Coal Inc. Kentucky
Caymen Coal Inc. West Virginia
SUBSIDIARIES WHOLLY OWNED BY BISMARCK COAL INC.
Certicoals, Incorporated West Virginia
SUBSIDIARIES WHOLLY OWNED BY READING & BATES (U.K.) LIMITED
Reading & Bates (Caledonia) Limited United Kingdom
Reading & Bates Corporation owns approximately 74.4% of Arcade Drilling
AS, incorporated in Norway.
Reading & Bates Drilling Co. owns 25% of China Nanhai-Reading & Bates
Drilling Co., Ltd., incorporated in the People's Republic of China.
Reading and Bates Borneo Drilling Co., Ltd. owns 49.99% of Reading &
Bates (M) Sdn. Berhad, incorporated in Malaysia.
RB Drilling Services, Inc. owns 60% of NRB Drilling Services Limited,
incorporated in Nigeria.
Reading & Bates Drilling Co. and Reading & Bates Enterprises Co.
together own 100% of Reading & Bates-Demaga Perfuracoes Ltda., a civil
society with shares of limited responsibility organized under the laws of
the Federative Republic of Brazil.
All of the above companies are included in the consolidated financial
statements.
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated February 13, 1996, on the consolidated financial
statements of Reading & Bates Corporation and subsidiaries as of December
31, 1995 and 1994, and for the years ended December 31, 1995, 1994 and
1993 included in this Form 10-K, into the Company's previously filed
Registration Statements (file no.s 33-44237, 33-50828, 33-50565, 33-56029
and 33-62727).
Arthur Andersen LLP
Houston, Texas
March 8, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Reading & Bates Corporation for the year ended
December 31, 1995 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-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 36,171
<SECURITIES> 0
<RECEIVABLES> 47,262
<ALLOWANCES> 1,123
<INVENTORY> 8,911
<CURRENT-ASSETS> 95,788
<PP&E> 788,586
<DEPRECIATION> 282,981
<TOTAL-ASSETS> 605,780
<CURRENT-LIABILITIES> 54,490
<BONDS> 0
<COMMON> 3,095
2,985
0
<OTHER-SE> 350,971
<TOTAL-LIABILITY-AND-EQUITY> 605,780
<SALES> 0
<TOTAL-REVENUES> 212,795
<CGS> 0
<TOTAL-COSTS> 127,070
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 750
<INTEREST-EXPENSE> 15,303
<INCOME-PRETAX> 22,738
<INCOME-TAX> 2,824
<INCOME-CONTINUING> 18,392
<DISCONTINUED> 0
<EXTRAORDINARY> 3,430
<CHANGES> 0
<NET-INCOME> 21,822
<EPS-PRIMARY> .28
<EPS-DILUTED> .39
</TABLE>
